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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION REGISTRANT, STATE OF INCORPORATION IRS EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
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0-13813 AmeriSource Corporation 23-2353106
(a Delaware Corporation)
P.O. Box 959, Valley Forge,
Pennsylvania 19482
(610) 296-4480
33-27835-01 AmeriSource Distribution Corporation 23-2546940
(a Delaware Corporation)
P.O. Box 959, Valley Forge,
Pennsylvania 19482
(610) 296-4480
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
AMERISOURCE CORPORATION: NONE
AMERISOURCE DISTRIBUTION
CORPORATION: NONE
AMERISOURCE CORPORATION: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
AMERISOURCE DISTRIBUTION
CORPORATION: NONE
Indicate by check mark whether the registrants (1) have 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 period that the
registrants were required to file such reports), and (2) have 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 the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Non-affiliates of AmeriSource Distribution Corporation, as of December 1, 1994,
held 7,000 shares of voting stock. The original purchase price was $1.00 per
share, after giving effect to a stock split, on September 14, 1989. There is no
established public trading market for the voting stock of AmeriSource
Distribution Corporation. There is no voting stock of AmeriSource Corporation
held by non-affiliates of AmeriSource Corporation.
The number of shares of common stock of AmeriSource Corporation outstanding as
of December 1, 1994 was 1,000. The number of shares of common stock of
AmeriSource Distribution Corporation outstanding as of December 1, 1994 was:
Class A--160,512.5; Class B--3,854,162.5; Class C--500,000.
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AMERISOURCE CORPORATION
AMERISOURCE DISTRIBUTION CORPORATION
1994 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 10
Item 3. Legal Proceedings..................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................................... 10
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters................. 10
Item 6. Selected Financial Data............................................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11
Item 8. Financial Statements and Supplementary Data........................................... 25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.. 64
PART III
Item 10. Directors and Executive Officers of the Registrants................................... 64
Item 11. Executive Compensation................................................................ 66
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 72
Item 13. Certain Relationships and Related Transactions........................................ 73
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................... 74
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PART I
ITEM 1. BUSINESS
AmeriSource Distribution Corporation, formerly named Alco Health Distribution
Corporation, (the "Company"), through its direct wholly-owned subsidiary
AmeriSource Corporation, formerly named Alco Health Services Corporation
("AmeriSource ") is one of the five largest, full-service drug wholesalers in
the United States, currently operating 16 full-service drug wholesale
distribution facilities and one specialty products distribution facility.
Approximately 90% of fiscal 1994 revenues of $4.3 billion was attributable to
sales of ethical pharmaceuticals. The remainder was comprised of sales of
health and personal care products, cosmetics and fragrances, home health care
supplies and general merchandise. The Company services, often on a daily basis,
over 16,000 customers throughout the United States including hospitals,
independent community pharmacies, chain drug stores, nursing homes, clinics and
others. No single customer accounted for more than 10% of the Company's
revenues during fiscal 1994.
The Company has benefited from the dramatic growth of the full-service drug
wholesale industry in the United States. Industry sales grew at a compound rate
of approximately 14%, from $10.2 billion in 1982 to $47.5 billion in 1993. As
both manufacturers and customers increased their reliance on drug wholesalers
in order to improve distribution and inventory efficiencies, the percentage of
total pharmaceutical sales through wholesale drug distributors increased from
approximately 59% in 1981 to approximately 75.5% in 1992 and is projected to
increase to 85% by the year 2000. In addition to this increased reliance on
distributors, sales of pharmaceuticals have also increased due to the aging of
the population, the use of new and more expensive pharmaceuticals, and the use
of outpatient drug therapies instead of extended, expensive hospital stays.
The Company's business strategy is: (i) to increase its market share in
current customer segments including hospitals and managed care providers; (ii)
to improve operating efficiencies through additional facility consolidations
and enhancements of management information systems; (iii) to target growth
opportunities by pursuing new types of customers (including the Veterans'
Administration and other governmental entities) and new facility locations
(such as the facilities the Company recently opened in Dallas, Texas,
Springfield, Massachusetts and Portland, Oregon); and (iv) to improve working
capital and asset management.
The Company's operating strategy is to maintain its long-standing structure
as an organization of decentralized operating units. This structure provides
local management with the discretion to set operating policies and to respond
to customers' needs quickly and efficiently. In addition, the Company will
continue to offer its customers services that assist in pricing and inventory
management, and will maintain an above-industry-average number of inventory
items or stock keeping units ("SKUs") to facilitate a high order fill-rate and
faster product delivery.
Over the past five years, the Company has focused on improving operating
efficiencies. The Company undertook an extensive facility consolidation
program, which reduced the total number of facilities from 31 in fiscal 1989 to
17 (including the three new facilities) today, in order to reduce operating
expenses and working capital requirements, and it substantially upgraded its
regional management information systems. As a result of the consolidation
program, since fiscal 1989 the Company significantly increased revenues per
facility and reduced, as a percentage of revenues, operating expenses and its
investment in working capital. The Company has increased revenues per facility
from $91.9 million in fiscal 1989 to $287 million in fiscal 1994, while
reducing operating expenses as a percentage of revenues from 5.0% in fiscal
1989 to 3.4% in fiscal 1994. The Company believes its revenues per facility is
among the highest, and its operating expenses, as a percentage of revenues, is
among the lowest, in the drug wholesale industry.
The outstanding common stock of the Company is owned by 399 Venture Partners
Inc. ("VPI"), certain management employees (the "Management Investors"),
current and former directors and certain others, including purchasers of debt
incurred to finance the Acquisition (as defined herein). The Company was
incorporated in Delaware in November 1988. AmeriSource was incorporated in
Delaware in June 1985. The address of the principal executive office of the
Company (also defined herein as "Distribution") and AmeriSource is P.O. Box
959, Valley Forge, Pennsylvania 19482, and their telephone number is
(610) 296-4480.
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INDUSTRY OVERVIEW
The Company has benefited from the dramatic growth of the full-service drug
wholesale industry in the United States. Industry sales grew at a compound rate
of approximately 14%, from $10.2 billion in 1982 to $47.5 billion in 1993. The
factors causing this growth, and the sources of future growth for the industry,
include (i) favorable demographics, (ii) the expanding role of the wholesaler,
(iii) the introduction of new and more expensive pharmaceuticals, (iv) the use
of more outpatient drug therapies instead of extended, expensive hospital stays
or surgical procedures and (v) rising pharmaceutical prices that exceeds the
Consumer Price Index.
Favorable Demographics. The number of individuals over age 65 in the United
States has grown 23% from approximately 26 million in 1980 to approximately 32
million in 1990 and is projected to increase an additional 9% to more than 35
million by the year 2000. This age group suffers from a greater incidence of
chronic illnesses and disabilities than the rest of the population and is
estimated to account for approximately two-thirds of total health care
expenditures in the United States.
Expanding Role of Wholesale Drug Distributors. Over the past decade,
manufacturers of pharmaceuticals have significantly increased the distribution
of their products through wholesalers as the cost and complexity of maintaining
inventories and arranging for delivery of pharmaceutical products has risen.
The percentage of total pharmaceutical sales through wholesale drug
distributors increased from approximately 59% in 1981 to approximately 75.5% in
1992 and is projected to increase to 85% by the year 2000. By focusing on order
processing, inventory management and product delivery, wholesale drug
distributors have been able to service customers more efficiently than
pharmaceutical manufacturers. This allows manufacturers to allocate their
resources to research and development, manufacturing and marketing their
products. Customers have benefitted from this shift by having a single source
of supply for a full line of pharmaceutical products as well as lower inventory
costs, more timely and efficient delivery, and improved purchasing and
inventory information. Certain customers (particularly independent drug stores,
small chains and hospitals) have also benefitted from the range of value-added
programs developed by wholesale drug distributors which are targeted to the
specific needs of these customers.
Introduction of New Pharmaceuticals. Advances in traditional pharmaceutical
developments as well as the advent of new technologies, such as biotech drugs,
have generated new compounds that are more effective in treating diseases.
These developments have been responsible for significant increases in
pharmaceutical sales. The Company believes that ongoing research and
development expenditures by the leading pharmaceutical manufacturers will
contribute to continued growth of the industry.
Cost Containment Efforts. In response to rapidly rising health care costs,
governmental and private payors have adopted cost containment measures which
encourage, where appropriate, the use of efficient drug therapies to prevent or
treat diseases instead of expensive prolonged hospital stays and surgical
procedures. While national attention has been focused on the dramatic increase
in overall health care costs, the Company believes drug therapy has had a
beneficial impact on overall health care costs by reducing expensive surgeries
and hospital stays. Pharmaceuticals account for less than 8% of healthcare
costs, and manufacturers' emphasis on research and development is expected to
continue the introduction of cost effective drug therapies.
Pharmaceutical Manufacturing Price Increases. According to industry data,
between 1988 and 1991 the Consumer Price Index for prescription products grew
at a compound annual rate of 8.8%, outpacing the 4% annual rate for the overall
Consumer Price Index. The Company believes that this increase has been due in
large part to the relatively inelastic demand in the face of higher prices
charged for patented drugs (as manufacturers have attempted to recoup costs
associated with the development, clinical testing and Food and Drug
Administration ("FDA") approval of new products). The Company believes that
pharmaceutical price increases will continue to exceed increases in the overall
Consumer Price Index, although not at the rates experienced historically.
At the same time that sales through the wholesale drug industry have grown,
the number of pharmaceutical wholesalers has decreased 59%, from 145 in 1980 to
60 as of December 31, 1993. In addition,
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as a result of this concentration, the top ten wholesalers in 1993 distributed
approximately 88% of the industry's annual volume. Industry analysts expect
this consolidation trend to continue during the 1990s, with the industry's
largest companies increasing their percentage of total industry sales.
BUSINESS STRATEGY
The Company's business strategy is: (i) to increase its market share in
current customer segments including hospitals and managed care providers; (ii)
to improve operating efficiencies through additional facility consolidations
and enhancements of management information systems; (iii) to target growth
opportunities by pursuing new types of customers and new facility locations;
and (iv) to improve working capital and asset management.
Increase Market Share in Existing Markets. The Company believes that its
automated, high volume distribution facilities enable it to achieve an
economies of scale advantage and to extend its business in these current
markets. The Company intends to expand in the markets it currently serves by
focusing on existing customer segments, such as hospitals and managed care
providers, that are not fully serviced in its markets. The Company believes it
is one of the leaders in serving the hospital market and believes this market
offers substantial future growth opportunities. The Company believes that its
increased sales in the hospital market are in part responsible for the
improvements in the operating efficiencies and working capital management
discussed below.
Improve Operating Efficiencies. Over the past five years, the Company has
focused on improving operating efficiencies through consolidation of
facilities, reducing operating expenses as a percentage of revenues, lowering
investment in working capital as a percentage of revenues, improving regional
management information systems and divesting non-core businesses. Since fiscal
1989, the consolidation program has reduced the total number of facilities
within the Company from 31 to 17 (including the three newly opened facilities)
as of December 1, 1994. In conjunction with this reduction of facilities, the
Company continued to increase its revenues in each fiscal year since 1989.
During fiscal 1994, the Company's average revenue per facility was
approximately $287 million, compared to the calendar year 1993 industry average
of approximately $172.8 million. In addition, operating expenses as a
percentage of revenues were reduced from 5.0% in fiscal 1989 to 3.4% for fiscal
1994. In the opinion of management, the Company's revenue per facility is among
the highest, and the Company's operating expenses as a percentage of revenues
are among the lowest, in the drug wholesale industry. The Company expects
additional savings, as a percentage of revenues, to result from consolidations
completed within the past twelve months. Additional consolidation opportunities
are under review for implementation during the next two to three years.
Target Growth Opportunities. The Company plans to pursue new types of
customers, including government entities. Since 1993, the Company has been
awarded eleven prime vendor contracts by the Veterans' Administration to
provide pharmaceuticals to 184, or 80%, of the Veterans' Administration
facilities nationwide. In addition, the Company has been awarded contracts to
deliver pharmaceuticals to certain Department of Defense, Indian Health Service
and Bureau of Prisons facilities. These facilities were formerly serviced
directly by pharmaceutical manufacturers. By pursuing these opportunities, the
Company believes that expansion opportunities may become available within or
adjacent to markets currently served by the Company. The Company may take
advantage of these situations by opening new distribution facilities such as
the facilities the Company recently opened in Dallas, Texas, Springfield,
Massachusetts and Portland, Oregon. In addition, the Company believes that
industry consolidation pressure will continue, and that opportunities may arise
to make selected acquisitions of existing facilities. These expansion
opportunities could be used to fill gaps within the Company's current service
area or to expand geographically.
Improve Working Capital Management. Over the last five years, Amerisource has
reduced its overall investment in net working capital through facility
consolidations, by eliminating duplicate inventory investments, by limiting its
investment in inventory in advance of manufacturers' price increases, through
the use of computer-based purchasing systems, and through incentivizing
management to maximize return on net assets employed. As a result, from
September 30, 1989 to September 30, 1994, net working capital (on a FIFO basis)
as a percentage of prior twelve month's revenues decreased from 11% to 6.1%,
respectively.
3
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OPERATING STRATEGY
The Company's operating strategy is: (i) to maintain its long-standing
structure as an organization of decentralized operating units; (ii) to continue
to offer its customers services that assist in pricing and inventory management
and (iii) to maintain an above-industry-average number of inventory items or
SKUs to facilitate a high order fill-rate and faster product delivery.
Decentralized Structure. The Company intends to maintain its long-standing
structure as an organization of decentralized operating units. This structure
provides local management with the discretion to set operating policies and to
respond to customers' needs quickly and efficiently. Additionally, management
of each operating unit has fiscal responsibility for its unit, and the
operating unit's financial results affect management compensation. The Company
believes its decentralized operating philosophy has facilitated in attracting
and retaining experienced management at each of its facilities.
Customized Services. The Company believes that its broad range of services
assists in attracting new customers and developing customer loyalty. The
Company is continually enhancing its services and packaging these services into
programs designed to enable customers to improve sales and compete more
effectively. The Company's Family Pharmacy (R) program, for example, provides
independent pharmacies with many of the same services that chain drugstores
have, including merchandising and pricing, shelf labels, store operations
manuals, advertising and promotional campaigns, and monthly newsletters. The
Company also distributes private label vitamins and health and beauty aids to
member pharmacies under the Family Pharmacy (R) label, providing the retailer
with higher profit margins. Under the Company's Prime Vendor program for
hospitals, the Company services hospitals as a prime vendor distributor under
long-term supply contracts, and the Company's PrimeNet (R) program allows
hospital pharmacies to purchase as a group and to participate in the economies
of collective purchasing. In addition, the Company offers Income RePax, Income
Pax, Income Rx and Partner Pak programs to all of its customers. Under the
Income RePax program, the Company purchases bulk quantities of pharmaceuticals
from the manufacturer and repackages them into smaller dispensing units,
allowing pharmacies to participate in bulk discount purchasing. The Company's
Income Pax program provides customers with monthly promotional calendars
highlighting vendor promotional programs available through the Company, the
Income Rx program provides a wide range of reasonably priced generic
pharmaceuticals to the Company's retail pharmacy customers and the Partner Pak
program provides a quarterly promotional directory to the Company's pharmacy
customers.
Single Source Provider. The Company aims to become the single supplier of
pharmaceuticals to each of its customers. The Company's operating units offer
on average approximately 27,600 SKUs, higher than the 1993 industry average of
22,243. The Company's higher SKU count allows it to meet the needs of customers
who require a broad variety of products, as demonstrated by the Company's
consistently high order fill-rate, and positions it to pursue any customer
segment in the market. The Company has managed to maintain its higher SKU count
and high order fill-rates while maintaining an inventory turn ratio above the
industry average.
BUSINESS OPERATIONS
General. The Company currently operates 16 full-service drug wholesale
distribution facilities and one specialty products distribution facility,
organized into two groups, Eastern and Central, and seven regions across the
United States. Several operating units of the Company have over 100 years of
history in the business and are among the nation's first drug distribution
houses. Unlike its more centralized competitors, the Company is structured as
an organization of locally managed operating units. Each operating unit has
retained its historic identity in its local market but operates under the
AmeriSource name. Management of each operating unit has fiscal responsibility
for its unit, and each operating unit has an established executive, sales and
operations staff. The operating unit's results, including earnings and asset
management goals, have
4
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a direct impact on management compensation. The operating units utilize the
Company's corporate staff for marketing, financial, legal and executive
management resources and corporate coordination of asset and working capital
management.
Customers and Markets. The Company's customer base is diverse, consisting of
over 16,000 customers, including hospitals, independent community pharmacies
and chain drug stores. The table below summarizes how the Company's customer
sales mix has changed over time.
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FISCAL YEAR ENDED
SEPTEMBER 30,
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1991 1992 1993 1994
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(DOLLARS IN MILLIONS)
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Hospitals....................... $1,001 35% $1,253 38% $1,554 42% $1,968 46%
Independents(*)................. 1,203 43 1,356 41 1,397 37 1,450 34
Chains.......................... 623 22 721 21 768 21 884 20
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Total......................... $2,827 100% $3,330 100% $3,719 100% $4,302 100%
====== === ====== === ====== === ====== ===
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(*) Includes nursing homes and clinics.
No single customer represented more than 10% of the Company's total business
during fiscal 1994. The Company's top ten customers represented approximately
41% of total business during fiscal 1994. The Company believes it is less
dependent on any single customer than its four largest competitors. A profile
of each customer segment follows:
. Hospitals. The Company believes it is one of the leaders in serving the
hospital market segment, which is currently the fastest growing customer
segment in the industry. Because hospitals purchase large volumes of high
priced, easily handled pharmaceuticals, the Company benefits from quick
turnover of both inventory and receivables and lower than average
operating expenses. The contribution to overall AmeriSource sales from
the hospital segment increased from 35% in fiscal 1991 to 46% in fiscal
1994, growing at a compounded rate of 25.3% over this period.
. Independents. Independent community pharmacy owners represent the largest
segment of the industry and provide the greatest opportunity for the
Company's value-added services. In total, the Company currently has
approximately 7,000 independent customers. The Company's sales to
independent customers have risen at a compounded rate of 6.4% over the
three-year period from fiscal 1991 through fiscal 1994 due to the general
growth of this customer segment and to the success of the Company's
customized marketing programs, such as its Family Pharmacy(R) program.
. Chains. This category includes chain drug stores, food stores with
pharmacies and the deep discount drug store segment. The Company's sales
to chains have risen at a compounded rate of 12.4% over the three-year
period from fiscal 1991 through fiscal 1994. This growth rate reflects
the discontinuance of certain chain accounts, at the Company's election,
because of their minimal profit contribution, offset by the Company
entering into new contracts with several drug store chains. The Company
plans to target the smaller chain business for which the Company can
provide higher margin value-added services.
Products and Services. The Company provides services which improve operating
efficiencies of both its customers and suppliers. In addition, the Company
strives to be the primary source of supply for its customers. To achieve these
objectives, the Company is continually enhancing its services and packaging
these services into programs designed to address the special needs of its
various customer segments. These programs include a variety of management,
merchandising and information processing services and programs, that enable
customers to improve sales, operate more efficiently and compete more
effectively.
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The proportion of the Company's sales attributable to pharmaceutical products
is approximately 90% of sales in fiscal 1994. The Company believes this is due
to the increased number of pharmaceutical SKUs, the higher average cost per SKU
of pharmaceutical products, and the increase in pharmaceutical-only hospital
business. The Company's operating units offer on average approximately 27,600
SKUs, higher than the calendar 1993 industry average of 22,243. The Company's
higher SKU count allows it to provide full service to accounts requiring a
broad variety of products, as demonstrated by the consistently high order fill-
rate, and positions it to pursue any customer segment in the market. Each
facility maintains an assortment of products suited to its local market
requirements.
As with the industry, the Company has increased sales of generic and multi-
source pharmaceuticals over the past five years. Revenues attributable to the
sale of generic and multi-source pharmaceuticals have increased to
approximately $200 million today, more than twice what they were three years
ago. These products generate higher gross profit margins for wholesalers than
branded pharmaceuticals. It is estimated that sales of these products will
double by 1996 due to the number of brands losing patent protection as well as
third party payors' continuing emphasis on cost containment.
The Company provides its customers with an electronic order entry system,
which permits a customer to transmit orders daily from its place of business
over regular telephone lines. Orders are transmitted to a regional computer
through a hand-held data terminal provided by the Company to the customer. The
computer automatically prepares invoices, case labels and customized price
stickers and shelf labels. It also assures rapid order processing by generating
picking lists and packing slips for Company employees. As a result, the
customer can achieve better inventory balance and reduced inventory investment.
As an additional benefit, the computer records the reduction in the Company's
inventory quantities and compares the reduced quantities to a predetermined
service level. If needed, a warehouse replenishment order is automatically
generated which in many cases can be communicated electronically to a
manufacturer's computer. As a result of electronic order entry, the costs of
receiving and processing orders have not increased as rapidly as sales volume.
During the past several years, virtually all orders were generated by customers
using electronic order entry. The Company believes its electronic order entry
system strengthens relationships with its customers and facilitates providing
value-added services to customers as described below. The Company anticipates
developing additional customized systems in the future. Basic programs are
developed internally by the Company's in-house MIS professionals. These
programs are tested on a small scale with certain of the Company's customers
and then are introduced on a large scale once they have been tailored to the
customers' needs.
For its hospital and managed care customers, the Company has introduced
ECHO(R)--a software program that provides ordering and inventory management
assistance for pharmaceutical products. The ECHO(R) system, which is currently
utilized by approximately 2,000 customers, is an interactive computerized
method for reviewing pricing history, placing orders and tracing purchasing
effectiveness. By creating a master file for each customer, the system
automatically updates pricing data, monitors contract compliance, provides
generic and therapeutic equivalent alternative purchase information and
suggests order quantity information based on the customer's historical
purchasing.
The Company offers Prime Vendor and PrimeNet(R) programs to its hospital
customers. Under the Prime Vendor program, the Company services hospitals as a
prime vendor distributor under long-term supply contracts and provides its
hospital customers with specially designed inventory reports, 24 hour emergency
delivery services, and lower inventory management costs. Under the PrimeNet(R)
program, the Company serves as the purchasing agent and distribution center for
not-for-profit member hospitals, allowing them to participate in the economies
of collective purchasing.
The Family Pharmacy(R) program provides independent and small chain community
pharmacy customers with many of the same services that chain drugstore
competitors receive from their headquarter organizations. These services
include merchandising and pricing information, shelf labels and plan-o-grams,
readily identifiable logos, signs and store decor, store operations manuals,
advertising and promotional
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campaigns, and monthly newsletters. The Company also distributes private label
vitamins and health and beauty aids under the Family Pharmacy(R) label, which
provides higher profit margins both to the Company and the retailer. The Family
Pharmacy(R) program, initiated in 1982, had approximately 1,900 member stores
as of September 30, 1994, and in effect constitutes America's fourth largest
drug chain.
For all customer segments, the Company offers its Income RePax, Income Pax,
Income Rx and Partner Pak programs. The Income RePax drug repackaging program,
through which the Company purchases bulk quantities of certain pharmaceuticals
and repackages them into smaller dispensing units, enables pharmacists to
market pharmaceuticals at prices competitive with those of national drug chain
operations. The Company's repackaging facility, located in Louisville,
Kentucky, is licensed by the FDA and maintains rigid quality control standards.
Under the Income Pax program, the Company provides a monthly promotional
calendar consisting of special promotional programs from nationally recognized
suppliers. The Company's Income Rx generic program provides reasonably priced
generic drugs to chain retail and hospital pharmacists. The Company reviews the
market for generic values and incorporates them into the Income Rx program,
relieving the pharmacist from the task of searching the market for the best
value available. The Partner Pak program provides a quarterly promotional
directory to approximately 4,500 of the Company's pharmacy customers. The
directory chronicles current information relating to the Income Repax, Income
Pax, Income Rx and Family Pharmacy(R) programs, highlights special purchase
opportunities for selected products and supplies retail customers with
advertising materials for use in promoting the products and their pharmacies.
Sales and Marketing. The Company has an organization of over 200 sales
professionals. A specially trained group of telemarketing/customer service
representatives makes regular contact with customers regarding special offers.
Within the sales organization, there is also a field force of 50 hospital
representatives, including six regional hospital directors. The Company's
corporate marketing department works with manufacturer suppliers to develop
national programs and promotions. Tailored to specific customer classes, these
programs can be further customized at the operating unit level to adapt to
local market conditions. The marketing department gathers and disseminates
information to each operating unit's purchasing and sales organization in order
to enhance their competitive effectiveness.
Operations. Each of the Company's operating units carries an inventory line
necessary for its local market. The efficient distribution of small orders is
possible through the extensive use of computerization and modern warehouse
techniques. These include computerized warehouse product location, routing and
inventory replenishment systems, gravity-flow racking, mechanized order
selection and efficient truck loading and routing. The Company delivers its
products on a scheduled basis, including on a daily basis where required. It
utilizes a fleet of owned and leased vans and trucks and contract carriers.
Night picking operations in its distribution facilities have further reduced
delivery time. According to customer need, orders can be delivered in fewer
than 24 hours.
The Company's 16 full service distribution facilities and one specialty
products facility are organized into seven regions throughout the United
States. The following table presents certain information regarding the
Company's operating units.
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FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
1990 1991 1992 1993 1994
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(DOLLARS IN MILLIONS; SQUARE FEET IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue..................... $ 2,564.0 $ 2,827.2 $ 3,329.9 $ 3,719.0 $ 4,301.8
Number of facilities........ 19 19 18 16 15
Average revenue/facility.... $ 134.9 $ 148.8 $ 185.0 $ 232.4 $ 286.8
Total square feet........... 1,420.1 1,476.5 1,486.0 1,444.3 1,394.1
Average revenue/square foot. $ 1,806.0 $ 1,915.0 $ 2,241.0 $ 2,575.0 $ 3,086. 0
</TABLE>
7
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Beginning in fiscal 1989, the Company undertook an extensive consolidation
program, which reduced the total number of facilities within the Company from
31 to 17 as of December 1, 1994. During the course of this consolidation
program, the Company continued to increase its revenues in each fiscal year.
Today, the Company operates some of the largest and most efficient warehouse
facilities in the industry. During fiscal 1994, the Company's average revenue
per facility was approximately $287 million, compared to the calendar 1993
industry average of $172.8 million. Five facilities have annual volume of over
$400 million and an additional seven facilities have annual volume in excess of
$175 million, which provides the Company significant leverage of fixed overhead
and other costs. Average revenue per square foot for fiscal 1993 was $2,575,
which was higher than the 1993 industry average of $2,256. For fiscal 1994, the
Company's average revenue per square foot was $3,086.
Purchasing and Suppliers. Purchasing is centralized on a regional basis in
five major locations. Computerized inventory management systems and computer
linkups with many of its suppliers enable the Company to purchase and manage
its inventories more efficiently. This, in turn, enables the Company to provide
just-in-time inventory management to customers. Computerized inventory
management helps the Company minimize obsolete inventory and maximize inventory
return-on-investment.
The Company purchases pharmaceutical and other products from a number of
manufacturers, none of which account for more than approximately 7% of its
purchases. The five largest suppliers in fiscal 1994 accounted for
approximately 27% of total purchases. Historically, the Company has not
experienced difficulty in purchasing desired products from suppliers. The loss
of a contract with a principal supplier could adversely affect the Company's
business because many suppliers are the sole manufacturers of certain
pharmaceuticals under their exclusive patents. To continue serving its
customers, the Company would have to purchase these patented pharmaceuticals
from other distributors on less favorable terms. The Company has agreements
with many of its suppliers which generally require the Company to maintain an
adequate quantity of a supplier's products in inventory. The majority of
contracts with suppliers are terminable upon 30 days notice by either party.
The Company believes that its relationships with its suppliers are good.
The Company aims to become the single supplier of pharmaceuticals to each of
its customers. The Company's operating units offer on average approximately
27,600 SKUs, higher than the 1993 industry average of 22,243. The Company's
higher SKU count allows it to meet the needs of customers who require a broad
variety of products, as demonstrated by the Company's consistently high order
fill-rate and positions it to pursue any customer segment in the market. The
Company has managed to maintain its highest SKU count and high order fill-rates
while maintaining an inventory turn ratio above the industry average.
While each facility on average carries a broad range of items from
approximately 800 suppliers, purchases are concentrated among the top 25
manufacturers and about 250 items (SKUs). It is estimated that products from
these 25 manufacturers account for approximately half the total annual sales
volume of the Company.
Management Information Systems. Management information systems serve several
important functions in the Company's business. Due to the large volume of
transactions processed, the quality and reliability of the internal management
information systems and the accuracy and timeliness of the financial controls
they produce are important for maximizing profitability. The Company's
management information systems also provide for, among other things, electronic
order entry by customers, invoice preparation and purchasing and inventory
tracking. In addition, the Company's management information systems form the
basis for a number of the value-added services the Company provides to its
customers, including marketing data, inventory replenishment, single-source
billing, computer price updates and price labels.
Each region is responsible for maintaining its own management information
system. All of the Company's regions utilize IBM computer equipment and
complementary software packages. The Company believes that its management
information systems are capable of serving the Company's needs for the
foreseeable future. The Company has instituted programs to centralize selected
management information
8
<PAGE>
system functions, such as purchasing in advance of manufacturers' price
increases and inventory level monitoring. In addition, during fiscal 1993, the
Company installed a corporate clearinghouse computer that will act as a central
depository for information on sales, products, vendors, customers and
contracts. This has enhanced the information the Company provides to its large
hospital group and chain customers, which span regional boundaries, and has
increased the quality of information available to corporate and regional
management. The Company believes that the clearinghouse computer has increased
productivity by reducing the cost of making changes to application programs
common to each region, and will enable the Company to centralize selected
administrative functions that are currently performed regionally.
COMPETITION
The Company engages in the wholesale distribution of pharmaceuticals, health
and beauty aids and other products in a highly competitive environment. The
Company competes with numerous national and regional distributors, including
McKesson Corporation, Bergen Brunswig Corporation, Cardinal Health, Inc. and
FoxMeyer Corporation. In addition, the Company competes with local
distributors, direct-selling manufacturers and other specialty distributors.
Competitive factors include price, service and delivery, credit terms, breadth
of product line, customer support and marketing programs.
EMPLOYEES
As of September 30, 1994, the Company employed approximately 2,370 persons,
of which approximately 2,154 were full-time employees. Approximately 11% of
full and part-time employees are covered by collective bargaining agreements.
The Company believes that its relationship with its employees is good.
REGULATORY MATTERS
The United States Drug Enforcement Administration, the FDA and various state
boards of pharmacy regulate the distribution of pharmaceutical products and
controlled substances, requiring wholesale distributors of these substances to
register for permits and to meet various security and operating standards. As a
wholesale distributor of pharmaceuticals and certain medical/surgical products,
the Company is subject to these regulations. The Company has received all
necessary regulatory approvals and believes that it is in substantial
compliance with all applicable wholesale distribution requirements.
The Company has become aware that its former Charleston, South Carolina
distribution center was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and initiated
a groundwater study during fiscal 1994. The preliminary results of the
groundwater study indicate that there is lead in the groundwater at levels
requiring further investigation and response. A preliminary engineering
analysis was prepared by outside consultants and indicated that if both soil
and groundwater remediation are required, the most likely cost of remediation
efforts at the Charleston site is estimated to be $4.1 million. Accordingly, a
liability of $4.1 million was recorded during fiscal 1994 to cover future
consulting, legal and remediation and ongoing monitoring costs. The Company has
notified the appropriate state regulatory agency from whom approval must be
received before proceeding with any further tests or with the actual site
remediation. The approval process and remediation could take several years to
accomplish and the actual costs may differ from the liability that has been
recorded. The accrued liability, which is reflected in other long-term
liabilities on the Company's consolidated balance sheet, is based on an
estimate of the extent of contamination and choice of remedy, existing
technology and presently enacted laws and regulations. However, changes in
remediation standards, improvements in cleanup technology and discovery of
additional information concerning the site could affect the estimated liability
in the future. The Company is investigating the possibility of asserting claims
against responsible parties for recovery of these costs. Whether or not any
recovery may be forthcoming is unknown at this time, although the Company
intends to vigorously enforce its rights and remedies.
9
<PAGE>
ITEM 2. PROPERTIES
As of December 1, 1994, the Company conducted its business from office and
operating unit facilities at 26 locations throughout the United States. In the
aggregate, the Company's operating units occupy approximately 1.5 million
square feet of office and warehouse space, of which approximately 754,000
square feet is owned and the balance is leased under lease agreements with
expiration dates ranging from 1995 to 2009. The facilities range in size from
approximately 3,900 square feet to 151,000 square feet. Leased facilities are
located in the following states: Kentucky, Massachusetts, Minnesota, New
Jersey, Ohio, Oregon, Pennsylvania, Tennessee and Texas. Owned facilities are
located in the following states: Georgia, Indiana, Kentucky, Maryland,
Missouri, Ohio, Pennsylvania, Tennessee and Virginia.
ITEM 3. LEGAL PROCEEDINGS
AmeriSource has been named as a defendant in several lawsuits based upon
alleged injuries and deaths attributable to the product L-Tryptophan.
AmeriSource did not manufacture L-Tryptophan; however, prior to an FDA recall,
AmeriSource did distribute products containing L-Tryptophan from several of its
vendors. The Company believes that AmeriSource is entitled to full
indemnification by its suppliers and the manufacturer of L-Tryptophan with
respect to these lawsuits and any other lawsuits involving L-Tryptophan in
which AmeriSource may be named in the future. To date, the indemnity to
AmeriSource in such suits has not been in dispute and, although the Company
believes it is unlikely it will incur any loss as a result of such lawsuits,
the Company believes that its insurance coverage and supplier endorsements are
adequate to cover any losses should they occur.
In November 1993, the Company was named a defendant, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in
fourteen civil actions filed by independent retail pharmacies in the United
States District Court for the Southern District of New York. Plaintiffs seek to
establish these lawsuits and over thirty-four others (to which the Company is
not a party) filed by other pharmacies as class actions. In essence, these
lawsuits all claim that the manufacturer and wholesaler defendants have
combined, contracted and conspired to fix the prices charged to plaintiffs and
class members for prescription brand name pharmaceuticals. Specifically,
plaintiffs claim that the defendants use "chargeback agreements" to give some
institutional pharmacies discounts that are not made available to retail drug
stores. Plaintiffs seek injunctive relief, treble damages, attorneys' fees and
costs. These actions have been transferred to the United States District Court
for the Northern District of Illinois for consolidated and coordinated pretrial
proceedings. Effective October 26, 1994, the Company entered into a Judgment
Sharing Agreement with other wholesaler and pharmaceutical manufacturer
defendants. Under the Judgment Sharing Agreement: (a) the manufacturer
defendants agreed to reimburse the wholesaler defendants for litigation costs
incurred, up to an aggregate of $9 million; and (b) if a judgment is entered
into against both manufacturers and wholesalers, the total exposure for joint
and several liability of the Company is limited to the lesser of 1% of such
judgment or one million dollars. In addition, the Company has released any
claims which it might have had against the manufacturers for the claims
presented by the plaintiffs in these lawsuits. The Judgment Sharing Agreement
covers the federal court litigation as well as the cases which have been filed
in various state courts. The Company believes it has meritorious defenses to
the claims asserted in these lawsuits and intends to vigorously defend itself
in all of these cases.
AmeriSource is a party to various lawsuits arising in the ordinary course of
business. AmeriSource , however, does not believe that the outcome of these
lawsuits, individually or in the aggregate, will have a material adverse effect
on its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(No response to this Item is required.)
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Distribution is the only record holder of AmeriSource's common stock.
10
<PAGE>
There is no established public trading market for Distribution's Class A
Common Stock and Class B Common Stock. As of December 15, 1994, there were 24
record holders of Distribution's Class A Common Stock and 11 record holders of
Distribution's Class B Common Stock.
Distribution's Class C Common Stock was held by approximately 12 holders of
record as of September 30, 1994. The Class C Common Stock trades on a limited
basis in the over-the-counter market, and information concerning the historical
trading prices for the Class C Common Stock is not published by nationally-
recognized independent sources.
AmeriSource has not paid any dividends to Distribution and no cash dividends
have been declared on any class of Distribution's common stock. Restrictions
contained in AmeriSource's and Distribution's financial arrangements currently
materially limit their ability to pay dividends. The credit agreement with
AmeriSource's senior lenders currently limits Distribution's ability to pay
dividends, and the credit agreement and the indentures for AmeriSource's 14
1/2% Senior Subordinated Notes due 1999 and 14 1/2% Senior Subordinated Notes
due 1999, Series A (collectively, the "Notes") allow AmeriSource to pay only
limited dividends to Distribution for specified purposes, such as to allow
Distribution to make payments with respect to certain specified indebtedness,
to pay expenses and to repurchase securities pursuant to the terms of certain
management investment and incentive plans. The indentures for the Notes, in
addition, allow AmeriSource to make dividend payments if certain financial
tests are met; however, AmeriSource does not currently meet these financial
tests. On December 13, 1994, notices for redemption of the Notes were mailed to
noteholders that specified a redemption date of January 12, 1995.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data are derived from the audited
consolidated financial statements of AmeriSource and Distribution. This data
should be read in conjunction with the consolidated financial statements,
including the notes thereto, included elsewhere in this report.
<TABLE>
<CAPTION>
AMERISOURCE
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------- ------------- ------------- ------------- -------------
1994 1993 1992 1991 1990
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues................ $4,301,832 $3,718,960 $3,329,909 $2,827,161 $2,564,008
Net Income (Loss)....... (207,728) 1,190 683 (14,532) (20,549)
Total Assets............ 705,955 862,814 848,687 782,357 756,894
Long-Term Debt.......... 343,562 420,111 492,640 479,616 458,656
Per Share (1)
</TABLE>
- - - --------
(1) Income (loss) per share of AmeriSource is not presented, as all of
AmeriSource's common stock is owned by Distribution.
<TABLE>
<CAPTION>
DISTRIBUTION
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------- ------------- ------------- ------------- -------------
1994 1993 1992 1991 1990
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues................ $4,301,832 $3,719,025 $3,329,909 $2,827,161 $2,564,008
Net Income (Loss)....... (207,671) (18,618) (6,476) (23,319) (29,489)
Total Assets............ 711,644 867,944 848,474 783,145 756,932
Long-Term Debt.......... 487,575 549,220 587,983 570,939 539,682
Per Share
Primary Earnings
(Loss)................ (41.53) (3.72) (1.30) (4.66) (5.90)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following presents a separate discussion and analysis of financial
condition and results of operations for AmeriSource Corporation, the operating
company, and for AmeriSource Distribution Corporation, the operating company
consolidated with its parent.
11
<PAGE>
AMERISOURCE CORPORATION
The following discussion should be read in conjunction with the Consolidated
Financial Statements contained elsewhere herein.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Revenues............................ $4,301,832 $3,718,960 $3,329,909
Cost of goods sold.................. 4,066,641 3,509,587 3,130,186
---------- ---------- ----------
Gross profit...................... 235,191 209,373 199,723
Operating expenses:
Selling and administrative........ 142,393 129,908 125,672
Environmental remediation......... 4,075
Depreciation...................... 6,640 5,809 5,384
Amortization of intangibles....... 4,147 5,467 5,549
Write-off of excess of cost over
net assets acquired.............. 179,824
---------- ---------- ----------
Operating income (loss)........... (101,888) 68,189 63,118
Interest expense--in cash......... 43,734 42,561 49,757
Amortization of deferred financing
costs............................ 3,539 3,862 4,004
Non-recurring charges............. 2,223 2,244
---------- ---------- ----------
Income (loss) before taxes,
extraordinary items and cumulative
effects of accounting changes...... (149,161) 19,543 7,113
Taxes on income..................... 23,080 12,953 6,649
---------- ---------- ----------
Income (loss) before extraordinary
items and cumulative effects of
accounting changes................. (172,241) 6,590 464
Extraordinary charge--early
retirement of debt, net of income
tax benefit........................ (442) (5,884)
Extraordinary credit--reduction of
income tax provision from
carryforward of prior year
operating losses................... 484 219
Cumulative effect of change in
accounting for postretirement
benefits other than pensions....... (1,199)
Cumulative effect of change in
accounting for
income taxes....................... (33,846)
---------- ---------- ----------
Net income (loss)................. $ (207,728) $ 1,190 $ 683
========== ========== ==========
</TABLE>
YEAR ENDED SEPTEMBER 30, 1994 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1993
Revenues of $4.3 billion for the fiscal year ended September 30, 1994
represented an increase of 15.7% over the amount reported for the fiscal year
ended September 30, 1993, reflecting real volume growth as well as the pass
through to customers of price increases from manufacturers. Approximately one-
tenth of the revenue increase resulted from higher selling prices. As compared
with the prior fiscal year, sales to hospitals grew by 27%, sales to chain drug
stores, excluding brokerage business, increased by 8% and sales to independent
drug store customers increased by 4%. During 1994, sales to hospitals accounted
for 46% of total revenues, while sales to independent drug stores represented
34% and sales to chain drug stores, 20% of the total.
Gross profit of $235.2 million for 1994 increased by 12.3% over 1993,
primarily due to the increase in revenues. As a percentage of revenues, gross
profit declined to 5.47% in 1994 from 5.63% in 1993. The reduction in the gross
profit percentage resulted from continued industry price competition and
increased sales to larger volume, lower margin customers, such as hospitals.
12
<PAGE>
Selling and administrative expenses for 1994 were $142.4 million compared to
$129.9 million for 1993, an increase of 9.6%. The cost increases reflect
inflationary increases and increases in warehouse and delivery expenses which
are variable with the level of sales volume. Continued emphasis on cost
containment programs as well as the economies associated with the significant
revenue growth, reduced overall selling and administrative expenses as a
percentage of revenues to 3.3% in 1994 from 3.5% in 1993.
Operating expenses in 1994 include a provision of $4.1 million to cover the
expected environmental remediation costs with respect to the Company's former
Charleston, South Carolina distribution center. In addition, in the third
quarter of fiscal 1994, the Company completed a detailed evaluation of the
recovery of the recorded value of the excess of cost over net assets acquired
("goodwill") and concluded that projected operating results would not support
the future recovery of the remaining goodwill balance. Accordingly, the Company
wrote off the remaining goodwill balance of $179.8 million in the third quarter
of fiscal 1994.
Interest expense which is payable currently (cash interest), principally
related to the revolving credit facility and the senior subordinated notes, was
$43.7 million in 1994 as compared with $42.6 million in 1993, an increase of
2.8%. The increase was as a result of higher interest rates on the Company's
variable rate borrowings offset in part by lower variable rate borrowing levels
and the reduction in principal amount of the senior subordinated notes.
Interest expense in 1994 reflects reductions as a result of the purchase and
retirement of an aggregate principal amount of $8.9 million of senior
subordinated notes, which occurred during the fourth quarter of fiscal 1993 and
first quarter of fiscal 1994. Interest expense in 1994 includes $621,000 paid
to the holders of an aggregate of $165.7 million in principal amount of senior
subordinated notes (see Note 4 of "Notes to Consolidated Financial
Statements"). During 1994, the average outstanding debt level was $430 million
at an average interest rate of 10.0%. In 1993, the comparable average
outstanding debt level was $444 million at an average interest rate of 9.6%.
Interest expense in 1994 includes $3.5 million in amortization of financing
fees as compared with $3.9 million in 1993.
Income taxes provided have been determined as if the Company filed a tax
return on a separate entity basis. As noted below, the Company changed its
method of accounting for income taxes effective October 1, 1993. The
extraordinary charge of $679,000 in 1994, net of a tax benefit of $237,000,
relates to the purchase and retirement of an aggregate principal amount of $4.4
million of senior subordinated notes.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (Statement 106) and Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (Statement 109). The Company
recorded, as of October 1, 1993, a total of $35.0 million in non-cash charges
to net income for the effects of transition to these two new standards.
Statement 106 requires that the expected cost of providing postretirement
medical benefits be accrued during employees' working years rather than on a
pay-as-you-go basis as was previously permitted. The cumulative effect of this
change in accounting principle resulted in a non-cash charge to net income of
$1.2 million as of October 1, 1993. Statement 109 requires a change in the
method of accounting for income taxes from the deferred method to the liability
method. Under the liability method, deferred taxes result from differences
between the tax and financial reporting bases of assets and liabilities and are
adjusted for changes in tax rates and tax laws when changes are enacted. The
cumulative effect of this change in accounting principle resulted in a non-cash
charge to net income of $33.8 million as of October 1, 1993, principally
related to the provision of deferred income taxes to reflect the tax
consequences on future years of the difference between the tax and financial
reporting basis of merchandise inventories.
YEAR ENDED SEPTEMBER 30, 1993 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1992
Revenues for the fiscal year ended September 30, 1993 were $3.7 billion, an
increase of 11.7% over the $3.3 billion in revenues for 1992. The revenue
growth, which occurred for all customer groups, was attributable to the
addition of new accounts, increased sales to existing accounts through value
added services and price increases. Price increases accounted for approximately
one-fourth of the revenue increase in 1993. As compared with the prior fiscal
year, sales to hospitals increased by 24%, sales to independent drug store
13
<PAGE>
customers increased by 3% and sales to chain stores grew by 7%. Sales to
hospitals accounted for 42% of total revenues in 1993, while sales to
independent drug stores represented 37% and sales to chain drug stores, 21% of
the total.
As a percentage of revenues, gross profit declined to 5.6% in 1993 from 6.0%
in 1992. The decline in 1993 resulted from: increased sales to large volume,
lower margin and lower-cost-to-service customers, principally hospitals; price
competition within the industry; and a reduction in inventory purchasing gains
associated with the decline in the rate and frequency of manufacturer price
increases.
Selling and administrative expenses for the year ended September 30, 1993
were $129.9 million, or 3.5% of revenues, compared to $125.7 million, or 3.8%
of revenues for the prior year. Selling and administrative expenses, which
increased by $4.2 million, or 3.4% from the prior year, reflect the economies
associated with the revenue growth and reductions due to cost containment
measures and productivity improvements. The expense percentage improvement in
1993 also reflects the partial benefits of two distribution facility
consolidations completed during the latter part of 1993. Expenses in 1993
include $1 million in costs incurred with respect to the two completed facility
consolidations as well as an additional consolidation which was begun in late
1993 and is expected to be completed during the first quarter of fiscal 1994.
As a result of the above, operating income increased 8.0%, or $5.1 million,
to $68.2 million for the fiscal year ended September 30, 1993 in comparison to
the prior year, while operating income as a percentage of revenues was 1.83% in
1993 versus 1.90% in 1992.
Interest expense which is payable currently (cash interest), principally
related to the revolving credit facility and the senior subordinated notes, was
$42.6 million in 1993 as compared with $49.8 million in 1992, a decrease of
14.5%. The decrease is attributable to reduced borrowings and lower average
interest rates. During 1993, the average outstanding debt level was $444
million at an average interest rate of 9.6%. In 1992, the comparable average
outstanding debt level was $480 million at an average interest rate of 10.3%.
Interest expense in 1993 includes $3.9 million in amortization of financing
fees as compared with $4.0 million in 1992.
The non-recurring charges in 1993 consist of $1,254,000 in losses on the
disposal of three warehouses and charges of $969,000 for the write-down to net
realizable value of two additional warehouses no longer in operation which are
designated for sale. The non-recurring charges in 1992 consist of a loss of
$287,000 incurred on the sale of a warehouse no longer in operation and the
write-off of $1,957,000 in professional fees incurred in connection with a
public offering attempted during 1992 which was later abandoned due to market
conditions.
Income tax expense has been determined as if the Company filed a tax return
on a separate entity basis. Income tax expense in 1993 has been computed on a
regular tax basis. The effective tax rate in 1993 differed from the federal
statutory rate primarily as a result of the non-deductibility of the goodwill
amortization and the effect of timing differences for which no deferred tax
benefits were provided. Income tax expense in 1992 was computed based on the
alternative minimum tax system.
The extraordinary charge of $9.9 million, net of a tax benefit of $4.0
million relates to the write-off of unamortized financing fees relating to the
refinancings of the revolving credit facility and Distribution's debt and
premiums paid on the purchase and retirement of a portion of the senior
subordinated notes. The extraordinary credits in 1993 and 1992 represent the
utilization of net operating losses carried forward from earlier periods.
INFLATION
The Company uses the LIFO method of accounting in order to minimize the
effect of inflation on inventory value. Under this method, the effect of
suppliers' price increases is charged directly to cost of goods sold.
Concurrently, the Company increases selling prices, where possible, in order to
maintain its gross profit
14
<PAGE>
margin. The effect of price inflation, as measured by the excess of LIFO costs
over FIFO costs, was $5.3 million in 1994, $13.5 million in 1993 and $13.2
million in 1992.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operating results have generated sufficient cash
flows which, together with borrowings under the revolving credit facility and
credit terms from suppliers, have provided sufficient capital resources to
finance working capital and cash operating requirements, fund capital
expenditures and interest currently payable on outstanding debt. Future cash
flows are expected to be sufficient to fund capital expenditures and interest
currently payable over the near-term.
During the fiscal year ended September 30, 1994, operating activities
provided cash of $83.9 million, compared to a generation of $100.7 million in
cash during the fiscal year ended September 30, 1993. Accounts receivable and
merchandise inventories increased during fiscal 1994 by $24.9 million and $5.3
million, respectively, offset by an increase of $70.2 million in accounts
payable. The increases in accounts receivable and merchandise inventories are
commensurate with the Company's revenue growth. A portion of the increase in
merchandise inventories was the result of the opening of the Dallas, Texas
distribution facility, which occurred in the first quarter of fiscal 1994.
Operating cash uses during fiscal 1994 included $46.1 million in interest
payments and $3.9 million in income tax payments.
Capital expenditures required for the Company's business historically have
not been substantial. Capital expenditures for the fiscal year ended September
30, 1994 were $8.5 million and related principally to improvements in warehouse
distribution and management information systems. Capital expenditures for
fiscal 1995 are projected to approximate $9.5 million. Cash used in financing
activities during fiscal 1994 included $5.0 million in payments associated with
the redemption of an aggregate principal amount of $4.4 million of senior
subordinated notes. As a result of the cash generated during fiscal 1994,
borrowings under the Company's revolving credit facility were reduced to $175.9
million at September 30, 1994 from the $248.0 million outstanding at September
30, 1993.
The Company has become aware that its former Charleston, South Carolina
distribution center was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and initiated
a groundwater study during fiscal 1994. The preliminary results of the
groundwater study indicate that there is lead in the groundwater at levels
requiring further investigation and response. A preliminary engineering
analysis was prepared by outside consultants during the third quarter of fiscal
1994, and indicated that, if both soil and groundwater remediation are
required, the most likely cost of remediation efforts at the Charleston site is
estimated to be $4.1 million. Accordingly, a liability of $4.1 million was
recorded during the third quarter of fiscal 1994 to cover future consulting,
legal and remediation and ongoing monitoring costs. The Company has notified
the appropriate state regulatory agency from whom approval must be received
before proceeding with any further tests or with the actual site remediation.
The approval process and remediation could take several years to accomplish and
the actual costs may differ from the liability which has been recorded. The
accrued liability, which is reflected in other long-term liabilities on the
accompanying consolidated balance sheet, is based on an estimate of the extent
of contamination and choice of remedy, existing technology and presently
enacted laws and regulations, however, changes in remediation standards,
improvements in cleanup technology and discovery of additional information
concerning the site could affect the estimated liability in the future. The
Company is investigating the possibility of asserting claims against
responsible parties for recovery of these costs. Whether or not any recovery
may be forthcoming is unknown at this time, although the Company intends to
vigorously enforce its rights and remedies.
The Company's primary ongoing cash requirements will be to fund payment of
principal and interest on indebtedness, finance working capital and fund
capital expenditures. An increase in interest rates would adversely affect the
Company's operating results and the cash flow available after debt service to
fund
15
<PAGE>
operations and any expansion and, if permitted to do so under its revolving
credit facility and the indenture for the senior subordinated notes, to pay
dividends on its capital stock.
The goodwill was recorded at the time of the leveraged buyout transaction
("Acquisition") in 1988. Since the Acquisition, the Company has been unable to
achieve the operating results projected at the time of the Acquisition. The
projections at the time of the Acquisition were developed based on historical
experience, industry trends and management's estimates of future performance.
These projections assumed significant growth rates in revenues, stable gross
profit margins and cash flow from operations to reduce Acquisition indebtedness
and did not anticipate long-term losses or indicate an inability to recover the
value of goodwill. Due to persistent competitive pressures and a shift in the
customer mix to larger volume, lower margin customers, gross profit margins
have declined from 7.10% in fiscal 1989 to 5.63% in fiscal 1993 and 5.47% in
fiscal 1994, resulting in: operating results which are substantially below the
projections made at the time of the Acquisition; an increase in the Company's
indebtedness; and an accumulated deficit in Distribution's retained earnings at
June 30, 1994 before the goodwill write-off of $126.4 million.
During the period since the Acquisition, the Company has been affected by
price competition for market share within the industry, health care industry
consolidation and the impact of group purchasing organizations, managed care
and health care reform on drug prices. As a result of the negative impact of
these factors to date, and the Company's expectation that such factors will
continue to negatively impact operating results into the foreseeable future,
the Company initiated a detailed evaluation of the long-term expected effects
of these factors on the ability to recover the recorded value of goodwill over
its remaining estimated life. Based on current industry trends, interest rate
trends and the health care reform environment, in the third quarter of fiscal
1994, the Company has revised its operating projections and has concluded that
the projected operating results (the "Projection") would not support the future
recovery of the remaining goodwill balance.
The methodology employed to assess the recoverability of the Company's
goodwill was to project results of operations forward 36 years, which
approximates the remaining amortization period of the goodwill balance at June
30, 1994. The Company then evaluated the recoverability of goodwill on the
basis of the Projection.
The Company's Projection assumes that, based on current industry conditions
and competitive pressures, future revenue growth will approximate 12.6% in the
near-term gradually declining to approximately 5% over the longer-term. These
assumptions reflect expected benefits in the near-term from continued industry
consolidation, and an expectation that manufacturers will continue to increase
their reliance on wholesalers in their own cost control measures in the face of
healthcare reform. Over the next five to ten year period, growth in revenue is
expected to moderate as the industry consolidation trend is completed, and over
the long-term (next twenty years), stable growth of 5% is assumed. The gross
profit percentage is projected to gradually decline over the projected period
from the current rate to 3.60% in the fiscal year 2000 and to 2.68% in the
longer term. The short-term gross profit declines reflect the impact of the
worsened trends in 1994 caused by consolidation of certain major competitors
and deteriorated gross profit margins from existing contracts with certain
group purchasing organizations. The long-term decline in gross profit reflects
the Company's belief that continued industry wide competitive pricing pressures
will drive margins down, as the consolidated industry attempts to maintain
market share. Operating expenses are projected to increase 6% per year in the
near-term and 5% per year in the longer-term principally reflecting the
Company's expectations regarding inflation. Working capital levels (as a
percentage of revenues) are projected to improve as the Company aggressively
manages its investment in receivables and inventory over the projected period.
For purposes of the Projection, the Company has assumed that it will be able to
refinance its current revolving credit facility when it expires in 1996. For
purposes of the Projection, the Company has assumed that it will be able to
increase its variable rate borrowings to finance increasing working capital and
interest payment requirements. In order to meet the working capital and
interest payment requirements projected in fiscal year 2000, the revolving
credit facility will have to be increased to $460 million. Interest rates on
the variable rate revolving credit facility were assumed to increase to 9.75%
to reflect current expectations of future short-term borrowing rates. The
Projection also indicates that cash flow from operations will not be sufficient
to satisfy
16
<PAGE>
maturities of the Company's fixed rate debt obligations, which consist of the
14 1/2% senior subordinated notes due in fiscal 1998 and fiscal 1999 and the
11 1/4% senior debentures due in fiscal 2005. The Projection assumes that
these fixed rate debt obligations will be refinanced at the time of the
scheduled maturities at identical interest rates. Unless the Company is able
to develop successful strategic, operating or financing initiatives which
would change these assumptions, the projected future operating results based
on these assumptions is the best estimate of the Company's projected
performance given the Company's existing high leverage and industry trends.
The Projection reflects significant cumulative losses indicating that the
carrying value of goodwill is not recoverable. Accordingly, the Company wrote
off its remaining goodwill balance of $179.8 million in the third quarter of
fiscal 1994. More importantly, while the Company believes the reliability of
any projection over such an extended period is highly uncertain, the
Projection also indicates that the Company's long-term viability will require
modification of its current capital structure to reduce its indebtedness and
increase its equity in the near to mid-term future. While the Projection
indicates that in fiscal 1998 cash flow from operations will not be sufficient
to satisfy required interest and principal payments on its current debt
obligations, the Company believes and the Projection indicates, that cash flow
generated from operations in the near-term (fiscal years 1995 through 1997) is
sufficient to service its current debt obligations. No assurance can be given
that the Company will be successful in efforts to restructure or recapitalize
in order to be able to operate in a profitable manner for the long-term.
In December 1994, the Company sold substantially all of its trade accounts
and notes receivable (the "Receivables") to AmeriSource Receivables
Corporation ("ARC"), a special purpose wholly-owned subsidiary, pursuant to a
trade receivables securitization program (the "Receivables Program"). As
contemplated by the Receivables Program, the Company formed and capitalized
ARC through a contribution of $40 million. Contemporaneously, the Company
entered into a Receivables Purchase Agreement with ARC, whereby ARC agreed to
purchase on a continuous basis Receivables originated by the Company. Pursuant
to the Receivables Program, ARC will transfer such Receivables to a master
trust in exchange for, among other things, certain trade receivables-backed
certificates (the "Certificates") representing a right to receive a variable
principal amount. Contemporaneously, Certificates in an aggregate principal
amount of up to $230 million face amount were sold to investors. During the
five year term of the Receivables Program, the cash generated by collections
on the Receivables will be used to purchase, among other things, additional
Receivables originated by the Company. The Certificates bear interest at a
rate selected by the Company equal to (i) the higher of (a) the prime lending
rate and (b) the federal funds rate plus 50 basis points or (ii) LIBOR plus 50
basis points. In addition, during the first seventy five days of the
Receivables Program, the Company may select an interest rate equal to the
federal funds rate plus 125 basis points. The interest rates for the
Certificates are subject to step-ups to a maximum amount of an additional 100
basis points over the otherwise applicable rate.
At the same time that it entered into the Receivables Program, the Company
and its senior lenders amended its existing Credit Agreement. Among other
things, the Amended and Restated Credit Agreement: (i) extended the term of
the Credit Agreement until January 3, 2000; (ii) established the amount the
Company may borrow at $380 million; (iii) reduced the initial borrowing rate
to LIBOR plus 225 basis points and provided for further interest rate
stepdowns upon the occurrence of certain events; (iv) modified the borrowing
base availability from inventory and receivable based to inventory based; and
(v) increased the Company's ability to make acquisitions and pay dividends.
Contemporaneously with the consummation of the Receivables Program and the
execution of the Amended and Restated Credit Agreement, the Company called for
optional redemption all of the outstanding Notes and New Notes at a redemption
price of 106% of the principal amount plus accrued interest through the
redemption date of January 12, 1995.
17
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION
The following discussion should be read in conjunction with the Consolidated
Financial Statements contained elsewhere herein.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Revenues............................. $4,301,832 $3,719,025 $3,329,909
Cost of goods sold................... 4,066,641 3,509,587 3,130,186
---------- ---------- ----------
Gross profit....................... 235,191 209,438 199,723
Operating expenses:
Selling and administrative......... 142,497 130,338 125,696
Environmental remediation.......... 4,075
Depreciation....................... 6,640 5,809 5,384
Amortization of intangibles........ 4,147 5,467 5,549
Write-off of excess of cost over
net assets acquired............... 179,824
---------- ---------- ----------
Operating income (loss)............ (101,992) 67,824 63,094
Interest expense--in cash.......... 43,734 42,354 49,757
Interest expense--pay in kind...... 14,904 20,402 17,264
Amortization of deferred financing
costs............................. 3,973 3,940 4,004
Non-recurring charges.............. 2,223 2,244
---------- ---------- ----------
(Loss) before taxes, extraordinary
items and cumulative effects of
accounting changes ................. (164,603) (1,095) (10,175)
Taxes on income...................... 7,814 6,379 2,649
---------- ---------- ----------
(Loss) before extraordinary items
and cumulative effects of
accounting changes................ (172,417) (7,474) (12,824)
Extraordinary charge--early
retirement of debt, net of income
tax benefit......................... (656) (11,890)
Extraordinary credits:
Settlement of litigation........... 4,486
Reduction of income tax provision
from carryforward of prior year
operating losses.................. 746 1,862
Cumulative effect of change in
accounting for postretirement
benefits other than pensions........ (1,199)
Cumulative effect of change in
accounting for income taxes......... (33,399)
---------- ---------- ----------
Net (loss)......................... $ (207,671) $ (18,618) $ (6,476)
========== ========== ==========
</TABLE>
YEAR ENDED SEPTEMBER 30, 1994 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1993
Revenues of $4.3 billion for the fiscal year ended September 30, 1994
represented an increase of 15.7% over the amount reported for the fiscal year
ended September 30, 1993, reflecting real volume growth as well as the pass
through to customers of price increases from manufacturers. Approximately one-
tenth of the revenue increase resulted from higher selling prices. As compared
with the prior fiscal year, sales to hospitals grew by 27%, sales to chain drug
stores, excluding brokerage business, increased by 8% and sales to independent
drug store customers increased by 4%. During 1994, sales to hospitals accounted
for 46% of total revenues, while sales to independent drug stores represented
34% and sales to chain drug stores, 20% of the total.
18
<PAGE>
Gross profit of $235.2 million for 1994 increased by 12.3% over 1993,
primarily due to the increase in revenues. As a percentage of revenues, gross
profit declined to 5.47% in 1994 from 5.63% in 1993. The reduction in the gross
profit percentage resulted from continued industry price competition and
increased sales to larger volume, lower margin customers, such as hospitals.
Selling and administrative expenses for 1994 were $142.5 million compared to
$130.3 million for 1993, an increase of 9.3%. The cost increases reflect
inflationary increases and increases in warehouse and delivery expenses which
are variable with the level of sales volume. Continued emphasis on cost
containment programs as well as the economies associated with the significant
revenue growth, reduced overall selling and administrative expenses as a
percentage of revenues to 3.3% in 1994 from 3.5% in 1993.
Operating expenses in 1994 include a provision of $4.1 million to cover the
expected environmental remediation costs with respect to the Company's former
Charleston, South Carolina distribution center. In addition, in the third
quarter of fiscal 1994, the Company completed a detailed evaluation of the
recovery of the recorded value of the excess of cost over net assets acquired
("goodwill") and concluded that projected operating results would not support
the future recovery of the remaining goodwill balance. Accordingly, the Company
wrote off the remaining goodwill balance of $179.8 million in the third quarter
of fiscal 1994.
Interest expense which is payable currently (cash interest), principally
related to the revolving credit facility and the senior subordinated notes, was
$43.7 million in 1994 as compared with $42.4 million in 1993, an increase of
3.3%. The increase was as a result of higher interest rates on the Company's
variable rate borrowings offset in part by lower variable rate borrowing levels
and the reduction in principal amount of the senior subordinated notes.
Interest expense in 1994 reflects reductions as a result of the purchase and
retirement of an aggregate principal amount of $8.9 million of senior
subordinated notes, which occurred during the fourth quarter of fiscal 1993 and
first quarter of fiscal 1994. Interest expense in 1994 includes $621,000 paid
to the holders of an aggregate of $165.7 million in principal amount of senior
subordinated notes (see Note 4 of "Notes to Consolidated Financial
Statements"). During 1994, the average outstanding debt level was $430 million
at an average interest rate of 10.0%. In 1993, the comparable average
outstanding debt level was $441 million at an average interest rate of 9.6%.
The decrease in interest expense which is not currently payable (pay-in-kind
interest) of $5.5 million was due to the refinancing in July, 1993 of the 18%
senior subordinated debentures, 18 1/2% merger debentures and 19 1/2% junior
subordinated debentures with the 11 1/4% senior debentures. Interest expense in
1994 includes $4.0 million in amortization of financing fees as compared with
$3.9 million in 1993.
Income taxes provided in 1994 and 1993 have been determined based on the
alternative minimum tax system. As noted below, the Company changed its method
of accounting for income taxes effective October 1, 1993. The extraordinary
charge of $679,000, net of a tax benefit of $23,000, relates to the purchase
and retirement of an aggregate principal amount of $4.4 million of senior
subordinated notes.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (Statement 106) and Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (Statement 109). The Company
recorded, as of October 1, 1993, a total of $34.6 million in non-cash charges
to net income for the effects of transition to these two new standards.
Statement 106 requires that the expected cost of providing postretirement
medical benefits be accrued during employees' working years rather than on a
pay-as-you-go basis as was previously permitted. The cumulative effect of this
change in accounting principle resulted in a non-cash charge to net income of
$1.2 million as of October 1, 1993. Statement 109 requires a change in the
method of accounting for income taxes from the deferred method to the liability
method. Under the liability method, deferred taxes result from differences
between the tax and financial reporting bases of assets and liabilities and are
adjusted for changes in tax rates and tax laws when changes are enacted. The
cumulative effect of this change in accounting principle resulted in a non-cash
charge to net income of $33.4 million as
19
<PAGE>
of October 1, 1993, principally related to the provision of deferred income
taxes to reflect the tax consequences on future years of the difference between
the tax and financial reporting basis of merchandise inventories.
YEAR ENDED SEPTEMBER 30, 1993 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1992
Revenues for the fiscal year ended September 30, 1993 were $3.7 billion, an
increase of 11.7% over the $3.3 billion in revenues for 1992. The revenue
growth, which occurred for all customer groups, was attributable to the
addition of new accounts, increased sales to existing accounts through value
added services and price increases. Price increases accounted for approximately
one-fourth of the revenue increase in 1993. As compared with the prior fiscal
year, sales to hospitals increased by 24%, sales to independent drug store
customers increased by 3% and sales to chain stores grew by 7%. Sales to
hospitals accounted for 42% of total revenues in 1993, while sales to
independent drug stores represented 37% and sales to chain drug stores, 21% of
the total.
As a percentage of revenues, gross profit declined to 5.6% in 1993 from 6.0%
in 1992. The decline in 1993 resulted from: increased sales to large volume,
lower margin and lower-cost-to-service customers, principally hospitals; price
competition within the industry; and a reduction in inventory purchasing gains
associated with the decline in the rate and frequency of manufacturer price
increases.
Selling and administrative expenses for the year ended September 30, 1993
were $130.3 million, or 3.5% of revenues, compared to $125.7 million, or 3.8%
of revenues for the prior year. Selling and administrative expenses, which
increased by $4.6 million, or 3.7% from the prior year, reflect the economies
associated with the revenue growth and reductions due to cost containment
measures and productivity improvements. The expense percentage improvement in
1993 also reflects the partial benefits of two distribution facility
consolidations completed during the latter part of 1993. Expenses in 1993
include $1 million in costs incurred with respect to the two completed facility
consolidations as well as an additional consolidation which was begun in late
1993 and is expected to be completed during the first quarter of fiscal 1994.
As a result of the above, operating income increased 7.5%, or $4.7 million,
to $67.8 million for the fiscal year ended September 30, 1993 in comparison to
the prior year, while operating income as a percentage of revenues was 1.82% in
1993 versus 1.89% in 1992.
Interest expense which is payable currently (cash interest), principally
related to the revolving credit facility and the senior subordinated notes, was
$42.4 million in 1993 as compared with $49.8 million in 1992, a decrease of
14.9%. The decrease is attributable to reduced borrowings and lower average
interest rates. During 1993, the average outstanding debt level was $441
million at an average interest rate of 9.6%. In 1992, the comparable average
outstanding debt level was $480 million at an average interest rate of 10.3%.
Interest expense in 1993 includes $3.9 million in amortization of financing
fees as compared with $4.0 million in 1992. Interest on the senior debentures,
senior subordinated debentures, merger debentures and junior subordinated
debentures which, at the option of the Company, is not currently payable (pay
in kind interest), amounted to $20.4 million in 1993 as compared with $17.3
million in 1992.
The non-recurring charges in 1993 consist of $1,254,000 in losses on the
disposal of three warehouses and charges of $969,000 for the write-down to net
realizable value of two additional warehouses no longer in operation which are
designated for sale. The non-recurring charges in 1992 consist of a loss of
$287,000 incurred on the sale of a warehouse no longer in operation and the
write-off of $1,957,000 in professional fees incurred in connection with a
public offering attempted during 1992 which was later abandoned due to market
conditions.
Income tax expense in both 1993 and 1992 was computed based on the
alternative minimum tax system. The extraordinary charge of $16.7 million, net
of a tax benefit of $4.8 million, relates to the write-off of unamortized
financing fees relating to the refinancings of the revolving credit facility
and Distribution's debt and premiums paid on the purchase and retirement of a
portion of the senior subordinated notes. The
20
<PAGE>
extraordinary credits for income taxes in 1993 and 1992 represent the
utilization of net operating losses carried forward from earlier periods.
INFLATION
The Company uses the LIFO method of accounting in order to minimize the
effect of inflation on inventory value. Under this method, the effect of
suppliers' price increases is charged directly to cost of goods sold.
Concurrently, the Company increases selling prices, where possible, in order to
maintain its gross profit margin. The effect of price inflation, as measured by
the excess of LIFO costs over FIFO costs, was $5.3 million in 1994, $13.5
million in 1993 and $13.2 million in 1992.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operating results have generated sufficient cash
flows which, together with borrowings under the revolving credit facility and
credit terms from suppliers, have provided sufficient capital resources to
finance working capital and cash operating requirements, fund capital
expenditures and interest currently payable on outstanding debt. Future cash
flows are expected to be sufficient to fund capital expenditures and interest
currently payable over the near-term.
During the fiscal year ended September 30, 1994, operating activities
provided cash of $84.0 million, compared to a generation of $99.2 million in
cash during the fiscal year ended September 30, 1993. Accounts receivable and
merchandise inventories increased during fiscal 1994 by $24.9 million and $5.3
million, respectively, offset by an increase of $70.2 million in accounts
payable. The increases in accounts receivable and merchandise inventories are
commensurate with the Company's revenue growth. A portion of the increase in
merchandise inventories was the result of the opening of the Dallas, Texas
distribution facility, which occurred in the first quarter of fiscal 1994.
Operating cash uses during fiscal 1994 included $46.1 million in interest
payments and $3.9 million in income tax payments.
Capital expenditures required for the Company's business historically have
not been substantial. Capital expenditures for the fiscal year ended September
30, 1994 were $8.5 million and related principally to improvements in warehouse
distribution and management information systems. Capital expenditures for
fiscal 1995 are projected to approximate $9.5 million. Cash used in financing
activities during fiscal 1994 included $5.0 million in payments associated with
the redemption of an aggregate principal amount of $4.4 million of senior
subordinated notes. As a result of the cash generated during fiscal 1994,
borrowings under the Company's revolving credit facility were reduced to $175.9
million at September 30, 1994 from the $248.0 million outstanding at September
30, 1993.
The Company has become aware that its former Charleston, South Carolina
distribution center was previously owned by a fertilizer manufacturer and that
there is evidence of residual contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and initiated
a groundwater study during fiscal 1994. The preliminary results of the
groundwater study indicate that there is lead in the groundwater at levels
requiring further investigation and response. A preliminary engineering
analysis was prepared by outside consultants during the third quarter of fiscal
1994, and indicated that, if both soil and groundwater remediation are
required, the most likely cost of remediation efforts at the Charleston site is
estimated to be $4.1 million. Accordingly, a liability of $4.1 million was
recorded during the third quarter of fiscal 1994 to cover future consulting,
legal and remediation and ongoing monitoring costs. The Company has notified
the appropriate state regulatory agency from whom approval must be received
before proceeding with any further tests or with the actual site remediation.
The approval process and remediation could take several years to accomplish and
the actual costs may differ from the liability which has been recorded. The
accrued liability, which is reflected in other long-term liabilities on the
accompanying consolidated balance sheet, is based on an estimate of the extent
of contamination and choice of remedy, existing technology and presently
enacted laws and regulations, however, changes in remediation standards,
improvements in cleanup technology and
21
<PAGE>
discovery of additional information concerning the site could affect the
estimated liability in the future. The Company is investigating the possibility
of asserting claims against responsible parties for recovery of these costs.
Whether or not any recovery may be forthcoming is unknown at this time,
although the Company intends to vigorously enforce its rights and remedies.
The Company's primary ongoing cash requirements will be to fund payment of
principal and interest on indebtedness, finance working capital and fund
capital expenditures. An increase in interest rates would adversely affect the
Company's operating results and the cash flow available after debt service to
fund operations and any expansion and, if permitted to do so under its
revolving credit facility and the indenture for the senior subordinated notes,
to pay dividends on its capital stock.
The goodwill was recorded at the time of the leveraged buyout transaction
("Acquisition") in 1988. Since the Acquisition, the Company has been unable to
achieve the operating results projected at the time of the Acquisition. The
projections at the time of the Acquisition were developed based on historical
experience, industry trends and management's estimates of future performance.
These projections assumed significant growth rates in revenues, stable gross
profit margins and cash flow from operations to reduce Acquisition indebtedness
and did not anticipate long-term losses or indicate an inability to recover the
value of goodwill. Due to persistent competitive pressures and a shift in the
customer mix to larger volume, lower margin customers, gross profit margins
have declined from 7.10% in fiscal 1989 to 5.63% in fiscal 1993 and 5.47% in
fiscal 1994, resulting in: operating results which are substantially below the
projections made at the time of the Acquisition; an increase in the Company's
indebtedness; and an accumulated deficit in retained earnings at June 30, 1994
before the goodwill write-off of $126.4 million.
During the period since the Acquisition, the Company has been affected by
price competition for market share within the industry, health care industry
consolidation and the impact of group purchasing organizations, managed care
and health care reform on drug prices. As a result of the negative impact of
these factors to date, and the Company's expectation that such factors will
continue to negatively impact operating results into the foreseeable future,
the Company initiated a detailed evaluation of the long-term expected effects
of these factors on the ability to recover the recorded value of goodwill over
its remaining estimated life. Based on current industry trends, interest rate
trends and the health care reform environment, in the third quarter of fiscal
1994, the Company has revised its operating projections and has concluded that
the projected operating results (the "Projection") would not support the future
recovery of the remaining goodwill balance.
The methodology employed to assess the recoverability of the Company's
goodwill was to project results of operations forward 36 years, which
approximates the remaining amortization period of the goodwill balance at June
30, 1994. The Company then evaluated the recoverability of goodwill on the
basis of the Projection.
The Company's Projection assumes that, based on current industry conditions
and competitive pressures, future revenue growth will approximate 12.6% in the
near-term gradually declining to approximately 5% over the longer-term. These
assumptions reflect expected benefits in the near-term from continued industry
consolidation, and an expectation that manufacturers will continue to increase
their reliance on wholesalers in their own cost control measures in the face of
healthcare reform. Over the next five to ten year period, growth in revenue is
expected to moderate as the industry consolidation trend is completed, and over
the long-term (next twenty years), stable growth of 5% is assumed. The gross
profit percentage is projected to gradually decline over the projected period
from the current rate to 3.60% in the fiscal year 2000 and to 2.68% in the
longer term. The short-term gross profit declines reflect the impact of the
woresened trends in 1994 caused by consolidation of certain major competitors
and deteriorated gross profit margins from existing contracts with certain
group purchasing organizations. The long-term decline in gross profit reflects
the Company's belief that continued industry wide competitive pricing pressures
will drive margins down, as the consolidated industry attempts to maintain
market share. Operating expenses are projected to increase 6%
22
<PAGE>
per year in the near-term and 5% per year in the longer-term principally
reflecting the Company's expectations regarding inflation. Working capital
levels (as a percentage of revenues) are projected to improve as the Company
aggressively manages its investment in receivables and inventory over the
projected period. For purposes of the Projection, the Company has assumed that
it will be able to refinance its current revolving credit facility when it
expires in 1996. For purposes of the Projection, the Company has assumed that
it will be able to increase its variable rate borrowings to finance increasing
working capital and interest payment requirements. In order to meet the working
capital and interest payment requirements projected in fiscal year 2000, the
revolving credit facility will have to be increased to $460 million. Interest
rates on the variable rate revolving credit facility were assumed to increase
to 9.75% to reflect current expectations of future short-term borrowing rates.
The Projection also indicates that cash flow from operations will not be
sufficient to satisfy maturities of the Company's fixed rate debt obligations,
which consist of the 14 1/2% senior subordinated notes due in fiscal 1998 and
fiscal 1999 and the 11 1/4% senior debentures due in fiscal 2005. The
Projection assumes that these fixed rate debt obligations will be refinanced at
the time of the scheduled maturities at identical interest rates. Unless the
Company is able to develop successful strategic, operating or financing
initiatives which would change these assumptions, the projected future
operating results based on these assumptions is the best estimate of the
Company's projected performance given the Company's existing high leverage and
industry trends.
The Projection reflects significant cumulative losses indicating that the
carrying value of goodwill is not recoverable. Accordingly, the Company wrote
off its remaining goodwill balance of $179.8 million in the third quarter of
fiscal 1994. More importantly, while the Company believes the reliability of
any projection over such an extended period is highly uncertain, the Projection
also indicates that the Company's long-term viability will require modification
of its current capital structure to reduce its indebtedness and increase its
equity in the near to mid-term future. While the Projection indicates that in
fiscal 1998 cash flow from operations will not be sufficient to satisfy
required interest and principal payments on its current debt obligations, the
Company believes and the Projection indicates, that cash flow generated from
operations in the near-term (fiscal years 1995 through 1997) is sufficient to
service its current debt obligations. No assurance can be given that the
Company will be successful in efforts to restructure or recapitalize in order
to be able to operate in a profitable manner for the long-term.
In December 1994, the Company sold substantially all of its trade accounts
and notes receivable (the "Receivables") to AmeriSource Receivables Corporation
("ARC"), a special purpose wholly-owned subsidiary, pursuant to a trade
receivables securitization program (the "Receivables Program"). As contemplated
by the Receivables Program, the Company formed and capitalized ARC through a
contribution of $40 million. Contemporaneously, the Company entered into a
Receivables Purchase Agreement with ARC, whereby ARC agreed to purchase on a
continuous basis Receivables originated by the Company. Pursuant to the
Receivables Program, ARC will transfer such Receivables to a master trust in
exchange for, among other things, certain trade receivables-backed certificates
(the "Certificates") representing a right to receive a variable principal
amount. Contemporaneously, Certificates in an aggregate principal amount of up
to $230 million face amount were sold to investors. During the five year term
of the Receivables Program, the cash generated by collections on the
Receivables will be used to purchase, among other things, additional
Receivables originated by the Company. The Certificates bear interest at a rate
selected by the Company equal to (i) the higher of (a) the prime lending rate
and (b) the federal funds rate plus 50 basis points or (ii) LIBOR plus 50 basis
points. In addition, during the first seventy five days of the Receivables
Program, the Company may select an interest rate equal to the federal funds
rate plus 125 basis points. The interest rates for the Certificates are subject
to step-ups to a maximum amount of an additional 100 basis points over the
otherwise applicable rate.
At the same time that it entered into the Receivables Program, the Company
and its senior lenders amended its existing Credit Agreement. Among other
things, the Amended and Restated Credit Agreement: (i) extended the term of the
Credit Agreement until January 3, 2000; (ii) established the amount the Company
may borrow at $380 million; (iii) reduced the initial borrowing rate to LIBOR
plus 225 basis points and
23
<PAGE>
provided for further interest rate stepdowns upon the occurrence of certain
events; (iv) modified the borrowing base availability from inventory and
receivable based to inventory based; and (v) increased the Company's ability to
make acquisitions and pay dividends.
Contemporaneously with the consummation of the Receivables Program and the
execution of the Amended and Restated Credit Agreement, the Company called for
optional redemption all of the outstanding Notes and New Notes at a redemption
price of 106% of the principal amount plus accrued interest through the
redemption date of January 12, 1995.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Stockholder of
AmeriSource Corporation
We have audited the accompanying consolidated balance sheets of AmeriSource
Corporation (formerly Alco Health Services Corporation) and subsidiaries, as of
September 30, 1994 and 1993, and the related consolidated statements of
operations, changes in stockholder's equity, and cash flows for each of the
three years in the period ended September 30, 1994. Our audits also included
the financial statement schedules listed in the Index at Item 14(a).
AmeriSource Corporation is a wholly-owned subsidiary of AmeriSource
Distribution Corporation (formerly Alco Health Distribution Corporation). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedules presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AmeriSource Corporation and subsidiaries at September 30, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in the notes to the consolidated financial statements (Notes 3
and 5), in 1994 the Company changed its methods of accounting for
postretirement benefits other than pensions and income taxes.
Ernst & Young LLP
Philadelphia, Pennsylvania
November 2, 1994, except for Note 10,
as to which the date is December 13, 1994
25
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------- -------------
<S> <C> <C>
Current Assets
Cash............................................. $ 25,273 $ 27,098
Accounts receivable less allowance for doubtful
accounts: 1994-$9,370; 1993-$7,681.............. 272,281 251,999
Merchandise inventories.......................... 351,676 346,371
Prepaid expenses................................. 2,442 1,977
-------- --------
Total current assets........................... 651,672 627,445
Property and Equipment, at cost.................... 67,598 57,282
Less accumulated depreciation.................... 26,416 21,176
-------- --------
41,182 36,106
Other Assets
Excess of cost over net assets acquired.......... 183,810
Deferred financing costs and other, less
accumulated amortization: 1994-$6,727; 1993-
$3,703.......................................... 13,101 15,453
-------- --------
13,101 199,263
-------- --------
$705,955 $862,814
======== ========
</TABLE>
26
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------- -------------
<S> <C> <C>
Current Liabilities
Current portion of other debt.................... $ 133 $ 122
Accounts payable................................. 449,991 379,826
Accrued expenses................................. 22,047 24,507
Accrued income taxes............................. 19,542 7,899
Deferred income taxes............................ 32,366
-------- --------
Total current liabilities...................... 524,079 412,354
Long-Term Debt
Revolving credit facility........................ 175,897 248,000
Senior subordinated notes........................ 166,134 170,562
Other debt....................................... 1,293 1,311
Convertible subordinated debentures.............. 238 238
-------- --------
343,562 420,111
Other Liabilities
Deferred compensation............................ 522 701
Other............................................ 9,264 740
-------- --------
9,786 1,441
Stockholder's Equity
Common stock, $.01 par value: 1,000 shares autho-
rized and issued................................ 1 1
Capital in excess of par value................... 85,398 78,050
Retained earnings (deficit)...................... (256,871) (49,143)
-------- --------
(171,472) 28,908
-------- --------
$705,955 $862,814
======== ========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $4,301,832 $3,718,960 $3,329,909
Costs and Expenses
Cost of goods sold....................... 4,066,641 3,509,587 3,130,186
Selling and administrative............... 146,540 135,375 131,221
Environmental remediation................ 4,075
Depreciation............................. 6,640 5,809 5,384
Write-off of excess of cost over net
assets acquired......................... 179,824
Interest................................. 47,273 46,423 53,761
Non-recurring charges.................... 2,223 2,244
---------- ---------- ----------
4,450,993 3,699,417 3,322,796
---------- ---------- ----------
Income (Loss) Before Taxes, Extraordinary
Items and Cumulative Effects of Accounting
Changes................................... (149,161) 19,543 7,113
Taxes on Income............................ 23,080 12,953 6,649
---------- ---------- ----------
Income (Loss) Before Extraordinary Items
and Cumulative Effects of Accounting
Changes................................. (172,241) 6,590 464
Extraordinary Charge--early retirement of
debt, net of income tax benefit........... (442) (5,884)
Extraordinary Credit--reduction of income
tax provision from carryforward of prior
year operating losses..................... 484 219
Cumulative effect of change in accounting
for postretirement benefits other than
pensions.................................. (1,199)
Cumulative effect of change in accounting
for income taxes.......................... (33,846)
---------- ---------- ----------
Net Income (Loss)........................ $ (207,728) $ 1,190 $ 683
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL IN RETAINED
EXCESS OF EARNINGS
COMMON STOCK PAR VALUE (DEFICIT) TOTAL
------------ ---------- --------- ---------
<S> <C> <C> <C> <C>
September 30, 1991............... $ 1 $79,529 $ (51,016) $ 28,514
Net income..................... 683 683
Capital transactions with
Distribution:
Income tax benefit........... 1,839 1,839
Settlements of appraisal
action...................... (8,723) (8,723)
--- ------- --------- ---------
September 30, 1992............... 1 72,645 (50,333) 22,313
Net income..................... 1,190 1,190
Capital transactions with
Distribution:
Conversion of convertible
subordinated debentures..... 278 278
Income tax benefit........... 5,127 5,127
--- ------- --------- ---------
September 30, 1993............... 1 78,050 (49,143) 28,908
Net (loss)..................... (207,728) (207,728)
Capital transactions with
Distribution:
Income tax benefit........... 7,348 7,348
--- ------- --------- ---------
September 30, 1994............... $ 1 $85,398 $(256,871) $(171,472)
=== ======= ========= =========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................... $ (207,728) $ 1,190 $ 683
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation............................. 6,640 5,809 5,384
Amortization............................. 7,686 9,329 11,510
Provision for losses on accounts
receivable.............................. 4,612 3,186 3,443
Loss on disposal of property and
equipment............................... 185 2,267 332
Write-off of excess of cost over net
assets acquired......................... 179,824
Provision for deferred income taxes...... 1,890
Loss on early retirement of debt......... 679 9,871
Cumulative effects of changes in
accounting principles .................. 35,045
Changes in operating assets and
liabilities:
Accounts receivable..................... (24,894) (6,115) (31,130)
Merchandise inventories................. (5,305) (10,346) (65,048)
Prepaid expenses........................ (465) (33) 377
Accounts payable, accrued expenses and
income taxes........................... 84,770 85,249 62,697
Payments to settle litigation........... (5,250)
Other long-term liabilities............. 4,075
Miscellaneous............................. (3,083) 319 (1,005)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES.............................. 83,931 100,726 (18,007)
INVESTING ACTIVITIES
Capital expenditures...................... (8,483) (7,571) (8,297)
Proceeds from sales of property and
equipment................................ 457 1,500 642
---------- ---------- ----------
NET CASH (USED IN) INVESTING ACTIVITIES.. (8,026) (6,071) (7,655)
FINANCING ACTIVITIES
Long-term debt borrowings................. 854,661 902,364 882,000
Long-term debt repayments................. (931,857) (975,169) (873,197)
Deferred financing costs.................. (534) (8,520) (3,131)
---------- ---------- ----------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES.............................. (77,730) (81,325) 5,672
---------- ---------- ----------
(DECREASE) INCREASE IN CASH................ (1,825) 13,330 (19,990)
Cash at beginning of year.................. 27,098 13,768 33,758
---------- ---------- ----------
CASH AT END OF YEAR........................ $ 25,273 $ 27,098 $ 13,768
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying financial statements present the consolidated financial
position, results of operations and cash flows of AmeriSource Corporation
(formerly Alco Health Services Corporation) ("AmeriSource" or the "Company").
All material intercompany accounts and transactions of AmeriSource have been
eliminated in consolidation. AmeriSource is a wholly-owned subsidiary of
AmeriSource Distribution Corporation (formerly Alco Health Distribution
Corporation) ("Distribution").
Business
The Company is a wholesale distributor of pharmaceuticals and related health
care products.
Concentrations of Credit Risk
The Company sells its merchandise inventories to a large number of customers
in the health care industry including independent drug stores, chain drug
stores, hospitals, mass merchandisers, clinics and nursing homes. The Company's
trade accounts receivable are exposed to credit risk, however, the risk is
limited due to the diversity of the customer base and the customer base's wide
geographic dispersion. The Company performs ongoing credit evaluations of its
customers' financial conditions. The Company maintains reserves for potential
bad debt losses and such bad debt losses have been historically within the
Company's expectations.
Merchandise Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method, which results in a matching of
current costs and revenues. On a supplemental basis, if the first-in, first-out
(FIFO) method of valuation had been used for determining costs, inventories
would have been approximately $88,327,000 and $83,022,000 higher than the
amounts reported at September 30, 1994 and 1993, respectively.
Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets by the straight-line method.
Deferred Financing Costs
Deferred financing fees and related expenses are being amortized over 3 to 10
years.
Pension Plans
Pension costs, which are primarily computed using the projected unit credit
cost method, are funded based on the minimum required contribution under the
Employee Retirement Income Security Act of 1974.
Revenue Recognition
The Company recognizes revenues at the point at which product is shipped.
Earnings Per Share
Earnings (loss) per share are not presented, as all of the Company's issued
and outstanding common stock is owned by Distribution.
31
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired ("goodwill") was recorded at the
time of the leveraged buyout transaction ("Acquisition") in 1988. Since the
Acquisition, the Company has been unable to achieve the operating results
projected at the time of the Acquisition. The projections at the time of the
Acquisition were developed based on historical experience, industry trends and
management's estimates of future performance. These projections assumed
significant growth rates in revenues, stable gross profit margins and cash flow
from operations to reduce Acquisition indebtedness and did not anticipate long-
term losses or indicate an inability to recover the value of goodwill. Due to
persistent competitive pressures and a shift in the customer mix to larger
volume, lower margin customers, gross profit margins have declined from 7.10%
in fiscal 1989 to 5.63% in fiscal 1993 and 5.47% in fiscal 1994, resulting in:
operating results which are substantially below the projections made at the
time of the Acquisition; an increase in the Company's indebtedness; and an
accumulated deficit in Distribution's retained earnings at June 30, 1994 before
the goodwill write-off of $126.4 million.
During the period since the Acquisition, the Company has been affected by
price competition for market share within the industry, health care industry
consolidation and the impact of group purchasing organizations, managed care
and health care reform on drug prices. Until fiscal 1994, the Company believed
the results since the Acquisition were not indicative of long-term market
conditions affecting pricing within the industry. In fiscal 1994, the Company
determined its poor operating results since the Acquisition and its
expectations for future operating results were being significantly affected by
fundamental changes in the market place in which the Company operates. As these
factors became clear and in conjunction with the increases in interest rates, a
detailed comprehensive evaluation of the Company's future prospects was
prepared. The evaluation determined the Company's financial losses were and
continue to be significantly affected by price sensitivity, aggressive pricing
by better capitalized competitors, consolidations in the wholesale drug
distribution industry and the impact of large buying groups. Based on current
industry trends, interest rate trends and the health care reform environment,
in the third quarter of fiscal 1994, the Company concluded that the projected
operating results (the "Projection") would not support the future recovery of
the remaining goodwill balance.
The methodology employed to assess the recoverability of the Company's
goodwill was to project results of operations forward 36 years, which
approximated the remaining amortization period of the goodwill balance at June
30, 1994. The Company then evaluated the recoverability of goodwill on the
basis of the Projection.
The Projection reflects significant cumulative losses indicating that the
carrying value of goodwill is not recoverable. Unless the Company is able to
develop successful strategic, operating or financing initiatives which would
change the assumptions used in the Projection, the projected future operating
results based on these assumptions is the best estimate of the Company's
projected performance given the Company's existing high leverage and industry
trends. As a result, the Company concluded that the carrying value of goodwill
could not be recovered from expected future operations. Accordingly, the
Company wrote off its remaining goodwill balance of $179.8 million in the third
quarter of fiscal 1994. More importantly, while the Company believes the
reliability of any projection over such an extended period is highly uncertain,
the Projection also indicates that the Company's long-term viability will
require modification of its current capital structure to reduce its
indebtedness and increase its equity in the near to mid-term future. While the
Projection indicates that in fiscal 1998 cash flow from operations will not be
sufficient to satisfy required interest and principal payments on its current
debt obligations, the Company believes and the Projection indicates, that cash
flow generated from operations in the near-term (fiscal years 1995 through
1997) is sufficient to service its current debt obligations. No assurance can
be given that the Company will be successful in efforts to restructure or
recapitalize in order to be able to operate in a profitable manner for the
long-term.
32
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--TAXES ON INCOME
AmeriSource is included in the consolidated federal income tax return of
Distribution. The income tax provision for the years ended September 30, 1994,
1993 and 1992, computed on a separate entity basis, is as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
--------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Current provision
Federal....................................... $20,337 $ 11,207 $6,574
State and local............................... 853 1,746 75
---------- ---------- ---------
21,190 12,953 6,649
---------- ---------- ---------
Deferred provision
Federal....................................... 1,451
State and local............................... 439
---------- ---------- ---------
1,890 -- --
---------- ---------- ---------
Provision for income taxes...................... $23,080 $ 12,953 $6,649
========== ========== =========
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate........... 35.0% 34.8% 34.0%
State and local income tax rate, net of
federal tax benefit........................ (.4) 5.8 .7
Effect of change in prior year loss
carryback.................................. 11.7
Amortization of difference in book and tax
bases of net assets acquired............... (43.1) 9.4 29.0
Alternative minimum tax..................... 10.4
Net effect of timing differences not
recognized................................. (2.7) 10.2
Other....................................... (4.3) 6.1 7.7
---------- --------- ---------
Effective income tax rate................... (15.5)% 66.3% 93.5%
========== ========= =========
</TABLE>
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement 109),
which requires a change in the method of accounting for income taxes from the
deferred method to the liability method. In accordance with Statement 109, the
Company recorded an adjustment of $33.8 million for the cumulative effect of
adopting Statement 109 as of October 1, 1993. As permitted under Statement 109,
prior period financial statements have not been restated. The cumulative effect
adjustment relates principally to the provision of deferred income taxes to
reflect the tax consequences on future years of the difference between the tax
and financial reporting basis of merchandise inventories.
33
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--TAXES ON INCOME--(CONTINUED)
Deferred income taxes reflect the future tax consequences of differences
between the tax bases of assets and liabilities and their financial reporting
amounts. Significant components of the Company's deferred tax liabilities
(assets) as of September 30, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
Inventory.............................................................. $35,712
Fixed assets........................................................... 4,654
Other.................................................................. 351
-------
Gross deferred tax liabilities....................................... 40,717
-------
Net operating losses................................................... (1,994)
Allowance for doubtful accounts........................................ (3,748)
Accrued expenses....................................................... (3,524)
Other postretirement benefits.......................................... (497)
Other.................................................................. (3,173)
-------
Gross deferred tax assets............................................ (12,936)
-------
Valuation allowance for deferred tax assets............................ 7,931
-------
Net deferred tax liabilities......................................... $35,712
=======
</TABLE>
The valuation allowance for deferred tax assets was $5.5 million at October
1, 1993. For the fiscal years ended September 30, 1993 and 1992, the deferred
income tax provision (benefit) resulted from timing differences in the
recognition of certain expenses for tax and financial reporting purposes. Due
to limitations on the utilization of tax losses, the Company did not recognize
any deferred income tax (benefit) in 1993 or 1992. The principal components of
deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30
-------------------
1993 1992
--------- --------
<S> <C> <C>
Bad debts.................................................. $ (254) $ 360
Deferred compensation...................................... (15) (31)
Inventory.................................................. (725) (492)
Insurance.................................................. 113 (207)
Fixed assets............................................... (970) (108)
Other...................................................... (138) (41)
Amount not recognized...................................... 1,989 519
--------- --------
$ -- $ --
========= ========
</TABLE>
The Company was subject to the alternative minimum tax for the fiscal year
ended September 30, 1992. The alternative minimum tax is imposed at a 20% rate
on the Company's alternative minimum taxable income which is determined by
making statutory adjustments to the Company's regular taxable income. Net
operating loss carryforwards were used to offset 90% of the Company's 1992
alternative minimum taxable income, the effect of which is represented for
financial reporting purposes as an extraordinary credit.
Income tax refunds net of payments amounted to $3,457,000, $4,732,000 and
$1,089,000 in the years ended September 30, 1994, 1993 and 1992, respectively.
Refunds include $7,348,000, $5,127,000 and $1,839,000 in the years ended
September 30, 1994, 1993 and 1992, respectively, attributed to losses generated
by Distribution, which were contributed to the capital of the Company.
34
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT
Substantially all of AmeriSource's indebtedness was incurred in connection
with its acquisition by Distribution. Distribution incurred additional
indebtedness, the proceeds of which were contributed to AmeriSource's capital
in fiscal 1989 and 1990. Because Distribution is a holding company and its
operations will be conducted entirely through its subsidiaries, the ability of
Distribution to satisfy its obligations will be dependent upon the future
performance of AmeriSource and its subsidiaries, which will be subject to
financial, business and other factors affecting the operations of AmeriSource
and its subsidiaries, including factors beyond the control of Distribution or
AmeriSource as well as prevailing economic conditions. In addition, the ability
of Distribution to service its indebtedness will be dependent upon its ability
to receive funds from AmeriSource. AmeriSource's indebtedness, described
herein, will significantly restrict the ability to make cash distributions to
Distribution.
On March 30, 1993, the Company entered into a credit agreement (the "Credit
Agreement") with a syndicate of financial institutions providing senior secured
facilities of up to $425 million. The Credit Agreement provides for initial
borrowings based on commitments of $380 million, consisting of a term loan of
$20 million and a revolving credit loan of up to $360 million. The maximum
amount that may be borrowed under the Credit Agreement is limited to the extent
of a sufficient borrowing base, which is essentially 85% of eligible accounts
receivable and 60% of eligible inventory. Under the terms of the Credit
Agreement, the Company has pledged substantially all its assets to secure its
borrowings under the Credit Agreement and the Company's parent, Distribution,
has pledged the common stock of the Company. The term loan matures, and the
commitment of the syndicate to make revolving credit loans expires, on April 1,
1996.
The term loan and the revolving credit loan bear interest at a rate per annum
equal to, at the Company's option, LIBOR plus 3% or the prime rate plus 1 1/2%.
The Company has entered into a two-year interest rate cap of 12% with respect
to $100 million in borrowings under the revolving credit loan for the purpose
of limiting the Company's exposure to an increase in interest rates. In
addition, the Company is required to pay a fee of 1/2% per annum on the average
unused portion of the revolving credit loan commitment plus a $200,000 annual
administration fee. The Credit Agreement, as amended, contains certain
restrictive covenants and requires the Company, among other things, to maintain
minimum defined net worth levels, satisfy certain financial ratios and places
certain limitations on investments, capital expenditures, additional debts,
changes in capital structure and dividend payments.
At September 30, 1994, the $20 million outstanding under the term loan and
the $156 million outstanding under the revolving credit loan bore interest at
the rate of 8.10% per annum. Initial borrowings under the Credit Agreement were
used to extinguish the obligations outstanding under the Company's former
revolving credit facility, which was due to expire in December 1993. An
extraordinary loss of $3.3 million, net of a tax benefit of $1.3 million, was
recorded during the fiscal year ended September 30, 1993 representing the
write-off of the unamortized financing fees relating to the former revolving
credit facility. In connection with the Credit Agreement, the Company incurred
approximately $7.7 million in financing fees which have been deferred and are
being amortized on a straight-line basis over the three year term of the
indebtedness.
The 14 1/2% Senior Subordinated Notes (the "Notes") were sold on September
15, 1989 in a public offering and are due September 15, 1999. The Notes are
unsecured obligations and are subordinated to the Credit Agreement and certain
other indebtedness, and may be redeemed at the option of the Company at a
premium, together with accrued and unpaid interest to the redemption date, at
any time on or after September 15, 1994. If, for the twelve-month period ending
on each of August 31, 1996 and 1997, the Company's consolidated fixed charge
ratio (as defined) exceeds 1.5 to 1, the Company shall be required to redeem or
otherwise repurchase in the open market and retire 5% and 10%, respectively, of
the principal amount of the Notes. The Company shall not be required to make
such redemption or repurchase until such time, and
35
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
to the extent, funds become available under the Credit Agreement or any
successor or replacement facility. In addition, the Company is required to
redeem on August 31, 1998, 50% of the aggregate principal amount of the Notes
originally issued, reduced by any prior redemptions or repurchases. During the
fiscal year ended September 30, 1993, the Company purchased and retired $4.4
million of the Notes. Premiums on the fiscal 1993 purchases resulted in an
extraordinary loss of $549,000, net of a tax benefit of $222,000. During the
fiscal year ended September 30, 1994, the Company purchased and retired an
additional $4.4 million of Notes, resulting in an extraordinary charge of
$679,000, net of a tax benefit of $237,000, consisting of the write-off of
related unamortized financing fees and premiums paid on redemption.
During the fiscal year ended September 30, 1994, the Company completed an
exchange of $40,329,000 principal amount of 14 1/2% Senior Subordinated Notes
due 1999, Series A (the "New Notes") and $101,000 in cash for $40,329,000
principal amount of its Notes. The only material difference between the terms
of the New Notes and the terms of the Notes is that the indenture of the New
Notes does not have the minimum consolidated net worth provisions set forth in
the indenture of the Notes. The indenture of the Notes requires the Company to
maintain a consolidated net worth (as defined) of $80 million. If the Company's
consolidated net worth, as defined in the indenture of the Notes, is less than
$80 million at the end of each of any two consecutive fiscal quarters, the
Company is required to offer to purchase (the "Offer") an amount of Notes equal
to 20% of the principal amount of Notes outstanding at the time the Offer is
made. The purchase price in any Offer is equal to 100% of the principal amount
purchased plus accrued interest to the date of purchase. The Offer required
could be triggered if the Company generated losses from operations, had charges
or expenses relating to a restructuring or recapitalization, or reductions in
the book value of tangible or intangible assets, if in each case the losses or
charges are of a sufficient magnitude. As a result of the elimination of the
minimum consolidated net worth provision in the indenture of the New Notes, the
Company would not be required to make an Offer to holders of the New Notes,
even in the event of a material decrease in the Company's consolidated net
worth. In addition to the exchange noted above, the Company paid the holders of
an aggregate of $125,388,000 in principal amount of Notes cash consideration of
$520,000 in exchange for each holder's agreement not to tender any of the Notes
as a result of any required Company Offer or to exercise any rights they have
or may have with respect to the consolidated net worth provision of the
indenture of the Notes. The total cash consideration of $621,000 noted above as
well as related fees and expenses of $600,000 were recognized as interest
expense during the fiscal year ended September 30, 1994.
The indentures governing the Credit Agreement, the Notes, the New Notes and
the indebtedness of Distribution contain restrictions and covenants, as
amended, which include limitations on incurrence of additional indebtedness,
prohibition of indebtedness senior to the Notes and New Notes and junior to the
Credit Agreement, restrictions on distributions and dividends to stockholders,
including Distribution, transactions with affiliates and certain corporate acts
such as mergers, consolidations and the sale of substantially all assets.
Additional covenants require compliance with financial tests, including current
ratio, leverage, interest coverage ratio, fixed charge coverage and maintenance
of minimum net worth.
Interest paid on the above indebtedness during the fiscal years ended
September 30, 1994, 1993 and 1992 amounted to $46.1 million, $39.7 million and
$52.2 million, respectively.
Financing fees and expenses incurred with respect to the above indebtedness
have been capitalized and are being amortized over the terms of the related
indebtedness. Total amortization of these fees and expenses (included in
interest expense) for the fiscal years ended September 30, 1994, 1993 and 1992
was $3.5 million, $3.9 million and $4.0 million, respectively.
36
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
On July 26, 1993, Distribution issued $126.5 million principal amount of 11
1/4% Senior Debentures ("Senior Debentures") due 2005 in a public offering.
Interest on the Senior Debentures will be payable semi-annually on January 15
and July 15 of each year, commencing January 15, 1994. Through and including
the semi-annual interest payment due July 15, 1998, Distribution may elect, at
its option, to issue additional Senior Debentures in satisfaction of its
interest payment obligations. The Senior Debentures are senior unsecured
obligations of Distribution and rank pari passu in right of payment with all
senior borrowings of Distribution and senior in right of payment to all
subordinated indebtedness of Distribution. As indebtedness of Distribution, the
Senior Debentures are structurally subordinated to all indebtedness and other
obligations of AmeriSource. Substantially all the net proceeds of the offering
(approximately $122 million) were applied to redeem the 18% Senior Subordinated
Debentures, 18 1/2% Merger Debentures and 19 1/2% Junior Subordinated
Debentures of Distribution at a redemption price of 100% of the principal
amount thereof, plus accrued and unpaid interest thereon to the date of
redemption. The indenture relating to the Senior Debentures contains
restrictions relating to, among other things, the payment of dividends, the
repurchase of stock and the making of certain other restricted payments, the
incurrence of additional indebtedness and issuance of preferred stock, the
creation of certain liens, certain asset sales, transactions with subsidiaries
and other affiliates, dividends and other payment restrictions affecting
subsidiaries, and mergers and consolidations. The debt refinancing resulted in
an extraordinary charge to AmeriSource of $6.0 million during the fiscal year
ended September 30, 1993 relating to the write-off of deferred financing costs,
net of a tax benefit of $2.4 million.
The carrying amount of the Company's revolving credit facility approximates
fair value. The combined fair value of the Notes and New Notes is approximately
$176 million and is based on quoted market prices. It was not practicable to
estimate the fair value of the other debt or convertible subordinated
debentures.
NOTE 5--PENSION AND OTHER BENEFIT PLANS
The Company provides a benefit for the majority of its employees under
noncontributory defined benefit pension plans. For each employee, the benefits
are based on years of service and average compensation.
A summary of the components of net periodic pension cost charged to expense
for the company-sponsored defined benefit pension plans together with
contributions charged to expense for a multi-employer union administered
defined benefit pension plan the Company participates in follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service cost............................... $ 2,198 $ 1,912 $ 1,669
Interest cost on projected benefit
obligation................................ 2,165 2,034 1,879
Actual return on plan assets............... (13) (2,842) (3,090)
Net amortization and deferral.............. (2,038) 979 1,490
---------- ---------- ----------
Net pension cost of defined benefit plans.. 2,312 2,083 1,948
Net pension cost of multi-employer plan.... 142 110 91
---------- ---------- ----------
Total pension expense...................... $ 2,454 $ 2,193 $ 2,039
========== ========== ==========
</TABLE>
37
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--PENSION AND OTHER BENEFIT PLANS--(CONTINUED)
The following table sets forth (in thousands) the funded status and amount
recognized in the consolidated balance sheets for the company-sponsored defined
benefit pension plans:
<TABLE>
<CAPTION>
1994 1993
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Plan assets at fair value...... $24,457 $ 333 $24,155 $ 280
Actuarial present value of
benefit obligations:
Vested....................... 22,420 1,168 20,898 603
Accumulated, not vested...... 421 210 576 171
------- ------- ------- -----
Accumulated benefit
obligations................... 22,841 1,378 21,474 774
Effect of future pay
increases................... 8,559 17 7,987 113
------- ------- ------- -----
Projected benefit obligation... 31,400 1,395 29,461 887
------- ------- ------- -----
Plan assets (less than)
projected benefit obligation.. (6,943) (1,062) (5,306) (607)
Unrecognized net transition
asset......................... (996) (1,167)
Unrecognized prior service
cost.......................... 3,380 733 3,680 357
Adjustment to recognize minimum
liability..................... (813) (372)
Unrecognized net loss related
to assumptions................ 4,013 149 2,117 128
------- ------- ------- -----
Pension (liability) recognized
in balance sheet.............. $ (546) $ (993) $ (676) $(494)
======= ======= ======= =====
</TABLE>
Assumptions used in computing the funded status of the plans were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Discount rate.......................................... 7.75% 7.25% 8.0%
Rate of increase in compensation levels................ 6.25% 5.75% 6.5%
Expected long-term rate of return on assets............ 10.00% 10.00% 10.0%
</TABLE>
Plan assets at September 30, 1994 are invested principally in listed stocks,
corporate and government bonds and cash equivalents.
Additionally, the Company sponsors the Employee Investment Plan, a defined
contribution 401(k) plan, which covers salaried and certain hourly employees.
Eligible participants may contribute to the plan up to 2% to 6% of their
regular compensation before taxes. The Company matches the employee
contributions in an amount equal to 50% of the participants' contributions. An
additional discretionary Company contribution in an amount not to exceed 50% of
the participants' contributions may also be made depending upon the Company's
performance. All contributions are invested at the direction of the employee in
one or more funds. Employer contributions vest over a five-year period
depending upon an employee's years of service. Costs of the plan charged to
expense for the fiscal years ended September 30, 1994, 1993 and 1992 amounted
to $1,093,000, $792,000 and $926,000, respectively.
Distribution adopted the AmeriSource Distribution Corporation and
Subsidiaries Employee Stock Purchase Plan (the "Distribution Plan") to enable
key members of management of the Company to participate in the equity ownership
of Distribution. As of September 30, 1994, there were options outstanding to
acquire 519,187 1/2 shares of Distribution Class A common stock at an exercise
price of $1.00 per share under the Distribution Plan.
38
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--PENSION AND OTHER BENEFIT PLANS--(CONTINUED)
Distribution adopted the AmeriSource Distribution Corporation Partners Stock
Option Plan (the "Partners Plan") to enable other employees of the Company to
participate in the equity ownership of Distribution. As of September 30, 1994,
there were options outstanding to acquire 115,200 shares of Distribution Class
A common stock at an exercise price of $1.00 per share under the Partners Plan.
Distribution adopted the AmeriSource Distribution Corporation 1991 Stock
Option Plan (the "1991 Option Plan") for the granting of non-qualified stock
options to acquire up to an aggregate of 362,500 shares of Distribution Class A
common stock. The options granted to certain members of the Company's
management under the 1991 Stock Option Plan represented the shares unallocated
under the Distribution Plan and options never granted under a performance stock
option plan originally announced by Distribution in 1989 and reflect
achievement in the Company's operating performance through fiscal year ended
September 30, 1991. As of September 30, 1994, there were 352,500 options
outstanding at an exercise price of $1.00 per share under the 1991 Option Plan.
As a result of special termination benefit packages previously offered, the
Company provides medical, dental and life insurance benefits to certain
retirees and their dependents. These benefit plans are unfunded. Prior to
October 1, 1993, the Company recognized the expenses for these plans on the
cash basis. Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (Statement 106), which requires
that the cost of postretirement health care benefits be recognized on the
accrual basis as employees render service to earn the benefit instead of on the
cash basis when the benefits are paid. As of October 1, 1993, the Company
adopted Statement 106 by recognizing the accumulated obligation related to
these benefits. The cumulative effect of this change in accounting principle
resulted in a non-cash charge to net income of $1.2 million. In addition to the
cumulative effect adjustment, the expense for postretirement benefits other
than pensions for the fiscal year ended September 30, 1994, was $80,000,
approximately equal to the cash payments. The cash payments for such benefit in
fiscal years 1993 and 1992, respectively, were approximately the same as fiscal
1994. Since the plans are unfunded and relate only to certain retirees, the
fiscal 1994 expense accrual for these benefits consisted solely of an interest
cost component. The accumulated postretirement benefit obligation was $1.1
million as of September 30, 1994. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 7.25% and
7.75% at October 1, 1993 and September 30, 1994, respectively. A health care
cost trend rate of 11.4% was assumed for fiscal 1995, gradually declining to an
ultimate level of 5.5% over 15 years. Increasing the assumed health care cost
trend rates by 1% in each year and holding all other assumptions constant,
would increase the accumulated postretirement benefit obligation as of
September 30, 1994 by $77,500 and increase the postretirement benefit cost in
fiscal 1994 by $7,000.
NOTE 6--LEASES
The costs of capital leases are included in property and equipment and the
obligations therefor in other debt. Related amortization is included in
depreciation. At September 30, 1994, future minimum payments totaling
$21,346,000 under noncancelable operating leases with remaining terms of more
than one year were due as follows: 1995--$6,214,000; 1996--$5,197,000; 1997--
$3,390,000; 1998--$1,885,000; 1999--$1,281,000; thereafter (through 2004)--
$3,379,000. In the normal course of business, operating leases are generally
renewed or replaced by other leases.
Total rental expense was $6,168,000 in 1994, $6,034,000 in 1993 and
$5,647,000 in 1992.
39
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEGAL MATTERS AND CONTINGENCIES
In the ordinary course of its business, the Company becomes involved in
lawsuits, administrative proceedings and governmental investigations, including
antitrust, environmental, product liability and regulatory agency matters. In
some of these proceedings, plaintiffs may seek to recover large and sometimes
unspecified amounts and the matters may remain unresolved for several years.
The Company does not believe that these matters, individually or in the
aggregate, will have a material adverse effect on its business or financial
condition.
In November 1993, the Company was named a defendant, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in
fourteen civil actions filed by independent retail pharmacies in the United
States District Court for the Southern District of New York. Plaintiffs seek to
establish these lawsuits and over thirty-four others (to which the Company is
not a party) filed by other pharmacies as class actions. In essence, these
lawsuits all claim that the manufacturer and wholesaler defendants have
combined, contracted and conspired to fix the prices charged to plaintiffs and
class members for prescription brand name pharmaceuticals. Specifically,
plaintiffs claim that the defendants use "chargeback agreements" to give some
institutional pharmacies discounts that are not made available to retail drug
stores. Plaintiffs seek injunctive relief, treble damages, attorneys' fees and
costs. These actions have been transferred to the United States District Court
for the Northern District of Illinois for consolidated and coordinated pretrial
proceedings. Effective October 26, 1994, the Company entered into a Judgment
Sharing Agreement with other wholesaler and pharmaceutical manufacturer
defendants. Under the Judgment Sharing Agreement: (a) the manufacturer
defendants agreed to reimburse the wholesaler defendants for litigation costs
incurred, up to an aggregate of $9 million; and (b) if a judgment is entered
into against both manufacturers and wholesalers, the total exposure for joint
and several liability of the Company is limited to the lesser of 1% of such
judgment or one million dollars. In addition, the Company has released any
claims which it might have had against the manufacturers for the claims
presented by the plaintiffs in these lawsuits. The Judgment Sharing Agreement
covers the federal court litigation as well as the cases which have been filed
in various state courts. The Company believes it has meritorious defenses to
the claims asserted in these lawsuits and intends to vigorously defend itself
in all of these cases.
The Company has become aware that its former Charleston, South Carolina
distribution center was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and initiated
a groundwater study during fiscal 1994. The preliminary results of the
groundwater study indicate that there is lead in the groundwater at levels
requiring further investigation and response. A preliminary engineering
analysis was prepared by outside consultants during the third quarter of fiscal
1994, and indicated that, if both soil and groundwater remediation are
required, the most likely cost of remediation efforts at the Charleston site is
estimated to be $4.1 million. Accordingly, a liability of $4.1 million was
recorded during the third quarter of fiscal 1994 to cover future consulting,
legal and remediation and ongoing monitoring costs. The Company has notified
the appropriate state regulatory agency from whom approval must be received
before proceeding with any further tests or with the actual site remediation.
The approval process and remediation could take several years to accomplish and
the actual costs may differ from the liability which has been recorded. The
accrued liability, which is reflected in other long-term liabilities on the
accompanying consolidated balance sheet, is based on an estimate of the extent
of contamination and choice of remedy, existing technology and presently
enacted laws and regulations, however, changes in remediation standards,
improvements in cleanup technology and discovery of additional information
concerning the site could affect the estimated liability in the future. The
Company is investigating the possibility of asserting claims against
responsible parties for recovery of these costs. Whether or not any recovery
may be forthcoming is unknown at this time, although the Company intends to
vigorously enforce its rights and remedies.
40
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEGAL MATTERS AND CONTINGENCIES--(CONTINUED)
The Company has been named as a defendant in several lawsuits based upon
alleged injuries and deaths attributable to the product L-Tryptophan. The
Company did not manufacture L-Tryptophan; however, prior to an FDA recall, the
Company did distribute products containing L-Tryptophan from several of its
vendors. The Company believes that it is entitled to full indemnification by
its suppliers and the manufacturer of L-Tryptophan with respect to these
lawsuits and any other lawsuits involving L-Tryptophan in which the Company may
be named in the future. To date, the indemnity to the Company in such suits has
not been in dispute and, although the Company believes it is unlikely it will
incur any loss as a result of such lawsuits, the Company believes that its
insurance coverage and supplier endorsements are adequate to cover any losses
should they occur.
The Company has received Notices of Proposed Adjustment from the Internal
Revenue Service in connection with an audit of the Company's federal income tax
returns for the taxable years 1987 through 1991. The proposed adjustments
indicate a net increase to taxable income for these years of approximately $23
million and relate principally to the deductibility of costs incurred with
respect to the Acquisition. The Company has analyzed these matters with tax
counsel, believes it has meritorious defenses to the adjustments proposed by
the Internal Revenue Service and any amounts assessed will not have a material
effect on the financial condition of the Company.
At September 30, 1994, there were contingent liabilities with respect to
taxes, guarantees of borrowings by certain customers, lawsuits and
environmental and other matters occurring in the ordinary course of business.
On the basis of information furnished by counsel and others, management
believes that none of these contingencies will materially affect the Company.
On December 3, 1991, AmeriSource entered into a settlement agreement with
Bear Stearns & Co., Inc. ("Bear Stearns") resolving a civil action that had
been filed on August 14, 1989 and Bear Stearns' interest in an appraisal action
arising from the acquisition of the Company. The Company paid Bear Stearns
$7,235,000 in 1992 and will pay $2,500,000 in November 2001, without interest
and subject in certain circumstances to earlier payment. The present value of
the payments to Bear Stearns reduced Distribution's investment in the Company
and was recorded as a reduction in capital in excess of par value. The Delaware
Chancery Court approved the settlement of Bear Stearns' interest in the
appraisal action and the settlement of the remaining claims (representing less
than 5% of the shares in the original action) on similar terms. Payments of
$600,000 were made during fiscal 1992 in settlement of a portion of the
remaining claims and were recorded as a reduction in capital in excess of par
value.
NOTE 8--NON-RECURRING CHARGES
The non-recurring charges in 1993 consisted of $1,254,000 in losses on the
disposal of three warehouses and charges of $969,000 for the write-down to net
realizable value of two additional warehouses no longer in operation which were
designated for sale. The non-recurring charges in 1992 consisted of a loss of
$287,000 incurred on the sale of a warehouse no longer in operation and the
write off of $1,957,000 in professional fees incurred in connection with a
public offering attempted during 1992 which was later abandoned due to market
conditions.
NOTE 9--RELATED PARTY TRANSACTIONS
On October 21, 1991, an involuntary bankruptcy petition under Chapter 7 of
the United States Bankruptcy Code was filed against RDS Acquisition Corp.
("RDS"), which was a customer of the Company. Affiliates of 399 Venture
Partners Inc. ("VPI," the primary stockholder of Distribution) had substantial
equity and debt interests in RDS and related entities. VPI indemnified the
Company for $5,800,000 of the amounts owed by RDS to the Company on October 25,
1991, for which the Company did not otherwise recover the amount owed.
41
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--SUBSEQUENT EVENTS
In December 1994, the Company sold substantially all of its trade accounts
and notes receivable (the "Receivables") to AmeriSource Receivables Corporation
("ARC"), a special purpose wholly-owned subsidiary, pursuant to a trade
receivables securitization program (the "Receivables Program"). As contemplated
by the Receivables Program, the Company formed and capitalized ARC through a
contribution of $40 million. Contemporaneously, the Company entered into a
Receivables Purchase Agreement with ARC, whereby ARC agreed to purchase on a
continuous basis Receivables originated by the Company. Pursuant to the
Receivables Program, ARC will transfer such Receivables to a master trust in
exchange for, among other things, certain trade receivables-backed certificates
(the "Certificates") representing a right to receive a variable principal
amount. Contemporaneously, Certificates in an aggregate principal amount of up
to $230 million face amount were sold to investors. During the five year term
of the Receivables Program, the cash generated by collections on the
Receivables will be used to purchase, among other things, additional
Receivables originated by the Company. The Certificates bear interest at a rate
selected by the Company equal to (i) the higher of (a) the prime lending rate
and (b) the federal funds rate plus 50 basis points or (ii) LIBOR plus 50 basis
points. In addition, during the first seventy five days of the Receivables
Program, the Company may select an interest rate equal to the federal funds
rate plus 125 basis points. The interest rates for the Certificates are subject
to step-ups to a maximum amount of an additional 100 basis points over the
otherwise applicable rate.
At the same time that it entered into the Receivables Program, the Company
and its senior lenders amended its existing Credit Agreement. Among other
things, the Amended and Restated Credit Agreement: (i) extended the term of the
Credit Agreement until January 3, 2000; (ii) established the amount the Company
may borrow at $380 million; (iii) reduced the initial borrowing rate to LIBOR
plus 225 basis points and provided for further interest rate stepdowns upon the
occurrence of certain events; (iv) modified the borrowing base availability
from inventory and receivable based to inventory based; and (v) increased the
Company's ability to make acquisitions and pay dividends.
Contemporaneously with the consummation of the Receivables Program and the
execution of the Amended and Restated Credit Agreement, the Company called for
optional redemption all of the outstanding Notes and New Notes at a redemption
price of 106% of the principal amount plus accrued interest through the
redemption date of January 12, 1995.
42
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--OTHER INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED(1)
--------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1993 1994 1994 1994
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues.................... $1,045,776 $1,067,112 $1,079,302 $1,109,642
Gross Profit................ 53,999 58,480 57,455 65,257
Income (Loss) Before
Extraordinary Item and
Cumulative Effects of
Accounting Changes......... 3,622 4,438 (177,953) (2,348)
Extraordinary Item.......... (442)
Cumulative Effects of
Accounting Changes......... (35,045)
Net Income (Loss)........... (31,865) 4,438 (177,953) (2,348)
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1992 1993 1993 1993
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues.................... $ 917,681 $ 920,195 $ 918,499 $ 962,585
Gross Profit................ 51,378 53,385 50,302 54,308
Income Before Extraordinary
Items...................... 969 2,726 1,771 1,124
Extraordinary Items......... (2,635) (2,765)
Net Income (Loss)........... 969 91 1,771 (1,641)
</TABLE>
- - - --------
(1) December 31, 1993 amounts reflect the cumulative effect of the accounting
changes for postretirement benefits other than pensions and income taxes.
June 30, 1994 amounts reflect the write-off of goodwill discussed in Note
2.
43
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
AmeriSource Distribution Corporation
We have audited the accompanying consolidated balance sheets of AmeriSource
Distribution Corporation (formerly Alco Health Distribution Corporation) and
subsidiaries as of September 30, 1994 and 1993 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
each of the three years in the period ended September 30, 1994. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedules presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AmeriSource Distribution Corporation and subsidiaries at September 30, 1994
and 1993, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended September 30, 1994, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in the notes to the consolidated financial statements (Notes 3
and 6), in 1994 the Company changed its methods of accounting for
postretirement benefits other than pensions and income taxes.
Ernst & Young LLP
Philadelphia, Pennsylvania
November 2, 1994, except for Note
11, as to which the date is
December 13, 1994
44
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------- -------------
<S> <C> <C>
Current Assets
Cash............................................. $ 25,311 $ 27,136
Accounts receivable less allowance for doubtful
accounts: 1994-$9,370; 1993-$7,681.............. 272,281 251,999
Merchandise inventories.......................... 351,676 346,371
Prepaid expenses................................. 2,442 1,977
-------- --------
Total current assets........................... 651,710 627,483
Property and Equipment, at cost.................... 67,598 57,282
Less accumulated depreciation.................... 26,416 21,176
-------- --------
41,182 36,106
Other Assets
Excess of cost over net assets acquired.......... 183,810
Deferred financing costs and other, less
accumulated amortization: 1994-$7,239; 1993-
$3,781.......................................... 18,752 20,545
-------- --------
18,752 204,355
-------- --------
$711,644 $867,944
======== ========
</TABLE>
45
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------- -------------
<S> <C> <C>
Current Liabilities
Current portion of other debt.................... $ 133 $ 122
Accounts payable................................. 449,991 379,826
Accrued expenses................................. 27,485 29,771
Accrued income taxes............................. 11,488 604
Deferred income taxes............................ 29,258
-------- --------
Total current liabilities...................... 518,355 410,323
Long-Term Debt
Revolving credit facility........................ 175,897 248,000
Senior subordinated notes........................ 166,134 170,562
Other debt....................................... 1,293 1,311
Convertible subordinated debentures.............. 238 238
Senior debentures................................ 144,013 129,109
-------- --------
487,575 549,220
Other Liabilities
Deferred compensation............................ 522 701
Other............................................ 5,918 740
-------- --------
6,440 1,441
Stockholders' Equity
Preferred stock, $.01 par value: 5,000,000 shares
authorized; none issued
Common stock, $.01 par value:
Class A (Voting and convertible): 30,000,000
shares authorized; 180,387 1/2 shares issued.. 2 2
Class B (Non-voting and convertible):
30,000,000 shares authorized; 4,400,300 shares
issued........................................ 44 44
Class C (Non-voting and convertible): 2,000,000
shares authorized; 500,000 shares issued...... 5 5
Capital in excess of par value................... 4,775 4,775
Retained earnings (deficit)...................... (304,984) (97,313)
Cost of common stock in treasury................. (568) (553)
-------- --------
(300,726) (93,040)
-------- --------
$711,644 $867,944
======== ========
</TABLE>
See notes to consolidated financial statements.
46
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $4,301,832 $3,719,025 $3,329,909
Costs and Expenses
Cost of goods sold....................... 4,066,641 3,509,587 3,130,186
Selling and administrative............... 146,644 135,805 131,245
Environmental remediation................ 4,075
Depreciation............................. 6,640 5,809 5,384
Write-off of excess of cost over net
assets acquired......................... 179,824
Interest................................. 62,611 66,696 71,025
Non-recurring charges.................... 2,223 2,244
---------- ---------- ----------
4,466,435 3,720,120 3,340,084
---------- ---------- ----------
(Loss) Before Taxes, Extraordinary Items
and Cumulative Effects of Accounting
Changes................................... (164,603) (1,095) (10,175)
Taxes on Income ........................... 7,814 6,379 2,649
---------- ---------- ----------
(Loss) Before Extraordinary Items and
Cumulative Effects of Accounting
Changes................................. (172,417) (7,474) (12,824)
Extraordinary Charge--early retirement of
debt, net of income tax benefit......... (656) (11,890)
Extraordinary Credits:
Settlement of litigation................. 4,486
Reduction of income tax provision from
carryforward of prior year operating
losses.................................. 746 1,862
Cumulative effect of change in accounting
for postretirement benefits other than
pensions.................................. (1,199)
Cumulative effect of change in accounting
for income taxes.......................... (33,399)
---------- ---------- ----------
Net (Loss)............................. $ (207,671) $ (18,618) $ (6,476)
========== ========== ==========
(Loss) per share
(Loss) Before Extraordinary Items and
Cumulative Effects of Accounting
Changes............................... $ (34.48) $ (1.49) $ (2.56)
Extraordinary Items.................... (.13) (2.23) 1.26
Cumulative effect of change in
accounting for postretirement benefits
other than pensions................... (.24)
Cumulative effect of change in
accounting for
income taxes.......................... (6.68)
---------- ---------- ----------
Net (Loss)........................... $ (41.53) $ (3.72) $ (1.30)
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
47
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN RETAINED COMMON
----------------------- EXCESS OF EARNINGS STOCK IN
CLASS A CLASS B CLASS C PAR VALUE (DEFICIT) TREASURY TOTAL
------- ------- ------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
September 30, 1991...... $2 $44 $5 $4,447 $ (72,219) $(550) $ (68,271)
Net (loss)............. (6,476) (6,476)
--- --- --- ------ --------- ----- ---------
September 30, 1992...... 2 44 5 4,447 (78,695) (550) (74,747)
Net (loss)............. (18,618) (18,618)
Repurchase of stock
options............... (18) (18)
Purchase of 1,187 1/2
shares of Class A
Common Stock.......... (3) (3)
Capital contribution... 346 346
--- --- --- ------ --------- ----- ---------
September 30, 1993...... 2 44 5 4,775 (97,313) (553) (93,040)
Net (loss)............. (207,671) (207,671)
Purchase of 15,000
shares of Class A
Common Stock.......... (15) (15)
--- --- --- ------ --------- ----- ---------
September 30, 1994...... $2 $44 $5 $4,775 $(304,984) $(568) $(300,726)
=== === === ====== ========= ===== =========
</TABLE>
See notes to consolidated financial statements.
48
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------
1994 1993 1992
--------- ----------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss)................................. $(207,671) $ (18,618) $ (6,476)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating
activities:
Depreciation.............................. 6,640 5,809 5,384
Amortization.............................. 8,120 9,407 11,510
Provision for losses on accounts
receivable............................... 4,612 3,186 3,443
Loss on disposal of property and
equipment................................ 185 2,267 332
Write-off of excess of cost over net
assets acquired.......................... 179,824
Provision for deferred income taxes....... (5,055)
Loss on early retirement of debt.......... 679 16,658
Gain on settlement of litigation.......... (4,486)
Cumulative effects of accounting changes.. 34,598
Changes in operating assets and
liabilities:
Accounts receivable...................... (24,894) (6,115) (31,130)
Merchandise inventories.................. (5,305) (10,346) (65,048)
Prepaid expenses......................... (465) (33) 377
Accounts payable, accrued expenses and
income taxes............................ 76,847 77,102 57,080
Payments to settle litigation............ (5,250)
Debentures issued in lieu of payment of
interest................................ 14,904 20,378 17,231
Other long-term liabilities.............. 4,075
Miscellaneous.............................. (3,083) (520) (974)
--------- ----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... 84,011 99,175 (18,007)
INVESTING ACTIVITIES
Capital expenditures....................... (8,483) (7,571) (8,297)
Proceeds from sales of property and
equipment................................. 457 1,500 642
--------- ----------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES... (8,026) (6,071) (7,655)
FINANCING ACTIVITIES
Long-term debt borrowings.................. 854,661 993,864 882,000
Long-term debt repayments.................. (931,857) (1,060,303) (873,197)
Deferred financing costs................... (589) (13,660) (3,131)
Capital contribution....................... 346
Repurchase of stock options................ (10) (18)
Purchases of treasury stock................ (15) (3)
--------- ----------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES............................... (77,810) (79,774) 5,672
--------- ----------- ---------
(DECREASE) INCREASE IN CASH................. (1,825) 13,330 (19,990)
Cash at beginning of year................... 27,136 13,806 33,796
--------- ----------- ---------
CASH AT END OF YEAR......................... $ 25,311 $ 27,136 $ 13,806
========= =========== =========
</TABLE>
See notes to consolidated financial statements.
49
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
AmeriSource Distribution Corporation (formerly Alco Health Distribution
Corporation) ("Distribution") is a Delaware corporation organized by an
affiliate of 399 Venture Partners Inc. ("VPI"), and other investors, including
members of management of AmeriSource Corporation ("AmeriSource") (formerly Alco
Health Services Corporation). Distribution was formed in November 1988 to
acquire AmeriSource in a leveraged buyout transaction (the "Acquisition"). The
accompanying financial statements present the consolidated financial position,
results of operations and cash flows of Distribution and its wholly-owned
subsidiary, AmeriSource Corporation (collectively, the "Company") as of the
dates and for the periods indicated. All material intercompany accounts and
transactions have been eliminated in consolidation.
Business
The Company is a wholesale distributor of pharmaceuticals and related health
care products.
Concentrations of Credit Risk
The Company sells its merchandise inventories to a large number of customers
in the health care industry including independent drug stores, chain drug
stores, hospitals, mass merchandisers, clinics and nursing homes. The Company's
trade accounts receivable are exposed to credit risk, however, the risk is
limited due to the diversity of the customer base and the customer base's wide
geographic dispersion. The Company performs ongoing credit evaluations of its
customers' financial conditions. The Company maintains reserves for potential
bad debt losses and such bad debt losses have been historically within the
Company's expectations.
Merchandise Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method, which results in a matching of
current costs and revenues. On a supplemental basis, if the first-in, first-out
(FIFO) method of valuation had been used for determining costs, inventories
would have been approximately $88,327,000 and $83,022,000 higher than the
amounts reported at September 30, 1994 and 1993, respectively.
Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets by the straight-line method.
Deferred Financing Costs
Deferred financing fees and related expenses are being amortized over 3 to 12
years.
Pension Plans
Pension costs, which are primarily computed using the projected unit credit
cost method, are funded based on the minimum required contribution under the
Employee Retirement Income Security Act of 1974.
Revenue Recognition
The Company recognizes revenues at the point at which product is shipped.
Earnings Per Share
Earnings per share are based on 5,000,000 shares, representing the weighted
average shares outstanding during the periods presented including the effect of
the Distribution Plan and the 1991 Option Plan stock options (Note 6), since
all of the options outstanding under these plans will be satisfied with shares
purchased or to be purchased from VPI at $1.00 per share, pursuant to a prior
agreement.
50
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired ("goodwill") was recorded at the
time of the Acquisition in 1988. Since the Acquisition, the Company has been
unable to achieve the operating results projected at the time of the
Acquisition. The projections at the time of the Acquisition were developed
based on historical experience, industry trends and management's estimates of
future performance. These projections assumed significant growth rates in
revenues, stable gross profit margins and cash flow from operations to reduce
Acquisition indebtedness and did not anticipate long-term losses or indicate an
inability to recover the value of goodwill. Due to persistent competitive
pressures and a shift in the customer mix to larger volume, lower margin
customers, gross profit margins have declined from 7.10% in fiscal 1989 to
5.63% in fiscal 1993 and 5.47% in fiscal 1994, resulting in: operating results
which are substantially below the projections made at the time of the
Acquisition; an increase in the Company's indebtedness; and an accumulated
deficit in retained earnings at June 30, 1994 before the goodwill write-off of
$126.4 million.
During the period since the Acquisition, the Company has been affected by
price competition for market share within the industry, health care industry
consolidation and the impact of group purchasing organizations, managed care
and health care reform on drug prices. Until fiscal 1994, the Company believed
the results since the Acquisition were not indicative of long-term market
conditions affecting pricing within the industry. In fiscal 1994, the Company
determined its poor operating results since the Acquisition and its
expectations for future operating results were being significantly affected by
fundamental changes in the market place in which the Company operates. As these
factors became clear and in conjunction with the increases in interest rates, a
detailed comprehensive evaluation of the Company's future prospects was
prepared. The evaluation determined the Company's financial losses were and
continue to be significantly affected by price sensitivity, aggressive pricing
by better capitalized competitors, consolidations in the wholesale drug
distribution industry and the impact of larger buying groups. Based on current
industry trends, interest rate trends and the health care reform environment,
in the third quarter of fiscal 1994, the Company concluded that the projected
operating results (the "Projection") would not support the future recovery of
the remaining goodwill balance.
The methodology employed to assess the recoverability of the Company's
goodwill was to project results of operations forward 36 years, which
approximated the remaining amortization period of the goodwill balance at June
30, 1994. The Company then evaluated the recoverability of goodwill on the
basis of the Projection.
The Projection reflects significant cumulative losses indicating that the
carrying value of goodwill is not recoverable. Unless the Company is able to
develop successful strategic, operating or financing initiatives which would
change the assumptions used in the Projection, the projected future operating
results based on these assumptions is the best estimate of the Company's
projected performance given the Company's existing high leverage and industry
trends. As a result, the Company concluded that the carrying value of goodwill
could not be recovered from expected future operations. Accordingly, the
Company wrote off its remaining goodwill balance of $179.8 million in the third
quarter of fiscal 1994. More importantly, while the Company believes the
reliability of any projection over such an extended period is highly uncertain,
the Projection also indicates that the Company's long-term viability will
require modification of its current capital structure to reduce its
indebtedness and increase its equity in the near to mid-term future. While the
Projection indicates that in fiscal 1998 cash flow from operations will not be
sufficient to satisfy required interest and principal payments on its current
debt obligations, the Company believes and the Projection indicates, that cash
flow generated from operations in the near-term (fiscal years 1995 through
1997) is sufficient to service its current debt obligations. No assurance can
be given that the Company will be successful in efforts to restructure or
recapitalize in order to be able to operate in a profitable manner for the
long-term.
51
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--TAXES ON INCOME
The income tax provision (benefit) is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
--------------------------------
1994 1993 1992
---------- --------------------
<S> <C> <C> <C>
Current provision
Federal...................................... $12,147 $4,633 $ 2,574
State and local.............................. 853 1,746 75
---------- --------- ---------
13,000 6,379 2,649
---------- --------- ---------
Deferred provision (benefit)
Federal...................................... (5,625)
State and local.............................. 439
---------- --------- ---------
(5,186) -- --
---------- --------- ---------
Provision for income taxes..................... $ 7,814 $6,379 $ 2,649
========== ========= =========
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate.......... 35.0% 34.8% 34.0%
State and local income tax rate, net of
federal tax benefit....................... (.3) (104.1) (.5)
Tax effect of operating loss carryover..... 6.1 (13.5)
Amortization of difference in book and tax
bases of net assets acquired.............. (39.2) (168.6) (20.3)
Alternative minimum tax.................... (274.2) (20.3)
Other...................................... (6.3) (70.5) (5.4)
--------- ---------- ---------
Effective income tax rate.................. (4.7)% (582.6)% (26.0)%
========= ========== =========
</TABLE>
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (Statement 109),
which requires a change in the method of accounting for income taxes from the
deferred method to the liability method. In accordance with Statement 109, the
Company recorded an adjustment of $33.4 million for the cumulative effect of
adopting Statement 109 as of October 1, 1993. As permitted under Statement 109,
prior period financial statements have not been restated. The cumulative effect
adjustment relates principally to the provision of deferred income taxes to
reflect the tax consequences on future years of the difference between the tax
and financial reporting basis of merchandise inventories.
52
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--TAXES ON INCOME--(CONTINUED)
Deferred income taxes reflect the future tax consequences of differences
between the tax bases of assets and liabilities and their financial reporting
amounts. Significant components of the Company's deferred tax liabilities
(assets) as of September 30, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
Inventory............................................................. $ 35,712
Fixed assets.......................................................... 4,654
Other................................................................. 351
--------
Gross deferred tax liabilities...................................... 40,717
--------
Net operating losses and tax credit carryovers........................ (11,554)
Allowance for doubtful accounts....................................... (3,748)
Accrued expenses...................................................... (3,524)
Other postretirement benefits......................................... (497)
Other................................................................. (3,173)
--------
Gross deferred tax assets........................................... (22,496)
--------
Valuation allowance for deferred tax assets........................... 10,350
--------
Net deferred tax liabilities........................................ $ 28,571
========
</TABLE>
The valuation allowance for deferred tax assets was $17.6 million at October
1, 1993. For the fiscal years ended September 30, 1993 and 1992, the deferred
income tax provision (benefit) resulted from timing differences in the
recognition of certain expenses for tax and financial reporting purposes. Due
to limitations on the utilization of tax losses, the Company did not recognize
any deferred income tax (benefit) in 1993 or 1992. The principal components of
deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
SEPTEMBER 30
--------------
1993 1992
------ ------
<S> <C> <C>
Bad debts....................................................... $ (254) $ 360
Deferred compensation........................................... 164 (31)
Interest........................................................ (491)
Inventory....................................................... (725) (492)
Insurance....................................................... 113 (207)
Fixed assets.................................................... (970)
Other........................................................... (138) (149)
Amount not recognized........................................... 1,810 1,010
------ ------
$ -- $ --
====== ======
</TABLE>
An unused tax net operating loss carry-over of $6,910,000 expiring in 2008,
is available to offset future taxable income.
The Company was subject to the alternative minimum tax for the fiscal years
ended September 30, 1994 and September 30, 1992. The alternative minimum tax is
imposed at a 20% rate on the Company's alternative minimum taxable income which
is determined by making statutory adjustments to the Company's regular taxable
income. Net operating loss carryforwards were used to offset up to 90% of the
Company's alternative minimum taxable income. For 1992, the effect of utilizing
the net operating loss carryforward is represented for financial reporting
purposes as an extraordinary credit. The alternative minimum tax paid is
allowed as an indefinite credit carryover against the Company's regular tax
liability in the future when the Company's
53
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--TAXES ON INCOME--(CONTINUED)
regular tax liability exceeds the alternative minimum tax liability. As of
September 30, 1994, the Company has a $7,142,000 alternative minimum tax credit
carryforward.
Income tax payments (refunds) amounted to $3,891,000, $395,000 and
$(1,089,000) in the years ended September 30, 1994, 1993 and 1992,
respectively.
NOTE 4--LONG-TERM DEBT
On March 30, 1993, AmeriSource entered into a credit agreement (the "Credit
Agreement") with a syndicate of financial institutions providing senior secured
facilities of up to $425 million. The Credit Agreement provides for initial
borrowings based on commitments of $380 million, consisting of a term loan of
$20 million and a revolving credit loan of up to $360 million. The maximum
amount that may be borrowed under the Credit Agreement is limited to the extent
of a sufficient borrowing base, which is essentially 85% of eligible accounts
receivable and 60% of eligible inventory. Under the terms of the Credit
Agreement, AmeriSource has pledged substantially all its assets to secure its
borrowings under the Credit Agreement and AmeriSource's parent, Distribution,
has pledged the common stock of AmeriSource. The term loan matures, and the
commitment of the syndicate to make revolving credit loans expires, on April 1,
1996.
The term loan and the revolving credit loan bear interest at a rate per annum
equal to, at AmeriSource's option, LIBOR plus 3% or the prime rate plus 1 1/2%.
AmeriSource has entered into a two-year interest rate cap of 12% with respect
to $100 million in borrowings under the revolving credit loan for the purpose
of limiting AmeriSource's exposure to an increase in interest rates. In
addition, AmeriSource is required to pay a fee of 1/2% per annum on the average
unused portion of the revolving credit loan commitment plus a $200,000 annual
administration fee. The Credit Agreement, as amended, contains certain
restrictive covenants and requires AmeriSource, among other things, to maintain
minimum defined net worth levels, satisfy certain financial ratios and places
certain limitations on investments, capital expenditures, additional debts,
changes in capital structure and dividend payments.
At September 30, 1994, the $20 million outstanding under the term loan and
the $156 million outstanding under the revolving credit loan bore interest at
the rate of 8.10% per annum. Initial borrowings under the Credit Agreement were
used to extinguish the obligations outstanding under AmeriSource's former
revolving credit facility, which was due to expire in December, 1993. An
extraordinary loss of $3.3 million, net of a tax benefit of $1.3 million, was
recorded during the fiscal year ended September 30, 1993 representing the
write-off of the unamortized financing fees relating to the former revolving
credit facility. In connection with the Credit Agreement, the Company incurred
approximately $7.7 million in financing fees which have been deferred and are
being amortized on a straight-line basis over the three year term of the
indebtedness.
The 14 1/2% Senior Subordinated Notes (the "Notes") were sold on September
15, 1989 in a public offering and are due September 15, 1999. The Notes are
unsecured obligations and are subordinated to the Credit Agreement and certain
other indebtedness, and may be redeemed at the option of the Company at a
premium, together with accrued and unpaid interest to the redemption date, at
any time on or after September 15, 1994. If, for the twelve-month period ending
on each of August 31, 1996 and 1997, the Company's consolidated fixed charge
ratio (as defined) exceeds 1.5 to 1, the Company shall be required to redeem or
otherwise repurchase in the open market and retire 5% and 10%, respectively, of
the principal amount of the Notes. The Company shall not be required to make
such redemption or repurchase until such time, and to the extent, funds become
available under the Credit Agreement or any successor or replacement facility.
In addition, the Company is required to redeem on August 31, 1998, 50% of the
aggregate principal amount of the Notes originally issued, reduced by any prior
redemptions or repurchases. During the fiscal year ended
54
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
September 30, 1993, the Company purchased and retired $4.4 million of the
Notes. Premiums on the fiscal 1993 purchases resulted in an extraordinary loss
of $549,000, net of a tax benefit of $222,000. During the fiscal year ended
September 30, 1994, the Company purchased and retired an additional $4.4
million of Notes, resulting in an extraordinary charge of $679,000, net of a
tax benefit of $23,000, consisting of the write-off of related unamortized
financing fees and premiums paid on redemption.
During the fiscal year ended September 30, 1994, the Company completed an
exchange of $40,329,000 principal amount of 14 1/2% Senior Subordinated Notes
due 1999, Series A (the "New Notes") and $101,000 in cash for $40,329,000
principal amount of its Notes. The only material difference between the terms
of the New Notes and the terms of the Notes is that the indenture of the New
Notes does not have the minimum consolidated net worth provisions set forth in
the indenture of the Notes. The indenture of the Notes requires the Company to
maintain a consolidated net worth (as defined) of $80 million. If the Company's
consolidated net worth, as defined in the indenture of the Notes, is less than
$80 million at the end of each of any two consecutive fiscal quarters, the
Company is required to offer to purchase (the "Offer") an amount of Notes equal
to 20% of the principal amount of Notes outstanding at the time the Offer is
made. The purchase price in any Offer is equal to 100% of the principal amount
purchased plus accrued interest to the date of purchase. The Offer required
could be triggered if the Company generated losses from operations, had charges
or expenses relating to a restructuring or recapitalization, or reductions in
the book value of tangible or intangible assets, if in each case the losses or
charges are of a sufficient magnitude. As a result of the elimination of the
minimum consolidated net worth provision in the indenture of the New Notes, the
Company would not be required to make an Offer to holders of the New Notes,
even in the event of a material decrease in the Company's consolidated net
worth. In addition to the exchange noted above, the Company paid the holders of
an aggregate of $125,388,000 in principal amount of Notes cash consideration of
$520,000 in exchange for each holder's agreement not to tender any of the Notes
as a result of any required Company Offer or to exercise any rights they have
or may have with respect to the consolidated net worth provision of the
indenture of the Notes. The total cash consideration of $621,000 noted above as
well as related fees and expenses of $600,000 were recognized as interest
expense during the fiscal year ended September 30, 1994.
On July 26, 1993, Distribution issued $126.5 million principal amount of 11
1/4% Senior Debentures ("Senior Debentures") due 2005 in a public offering.
Interest on the Senior Debentures will be payable semi-annually on January 15
and July 15 of each year, commencing January 15, 1994. Through and including
the semi-annual interest payment due July 15, 1998, Distribution may elect, at
its option, to issue additional Senior Debentures in satisfaction of its
interest payment obligations. The Senior Debentures are senior unsecured
obligations of Distribution and rank pari passu in right of payment with all
senior borrowings of Distribution and senior in right of payment to all
subordinated indebtedness of Distribution. As indebtedness of Distribution, the
Senior Debentures are structurally subordinated to all indebtedness and other
obligations of AmeriSource. Substantially all the net proceeds of the offering
(approximately $122 million) were applied to redeem the 18% Senior Subordinated
Debentures, 18 1/2% Merger Debentures and 19 1/2% Junior Subordinated
Debentures of Distribution at a redemption price of 100% of the principal
amount thereof, plus accrued and unpaid interest thereon to the date of
redemption. The indenture relating to the Senior Debentures contains
restrictions relating to, among other things, the payment of dividends, the
repurchase of stock and the making of certain other restricted payments, the
incurrence of additional indebtedness and the issuance of preferred stock, the
creation of certain liens, certain asset sales, transactions with subsidiaries
and other affiliates, dividends and other payment restrictions affecting
subsidiaries, and mergers and consolidations. The debt refinancing resulted in
an extraordinary charge of $12.8 million during the fiscal year ended September
30, 1993 relating to the redemption of the Merger Debentures and the write-off
of
55
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
deferred financing costs, net of a tax benefit of $3.2 million. In connection
with the Senior Debentures, the Company incurred approximately $5.1 million in
financing fees which have been deferred and are being amortized on a straight-
line basis over the twelve year life of the indebtedness.
The indentures governing the Credit Agreement, the Notes, the New Notes and
the Senior Debentures contain restrictions and covenants, as amended, which
include limitations on incurrence of additional indebtedness, prohibition of
indebtedness senior to the Notes and New Notes and junior to the Credit
Agreement, restrictions on distributions and dividends to stockholders,
including Distribution, transactions with affiliates and certain corporate acts
such as mergers, consolidations and the sale of substantially all assets.
Additional covenants require compliance with financial tests, including current
ratio, leverage, interest coverage ratio, fixed charge coverage and maintenance
of minimum net worth.
Interest paid on the above indebtedness during the fiscal years ended
September 30, 1994, 1993 and 1992 amounted to $46.1 million, $39.7 million and
$52.2 million, respectively.
Financing fees and expenses incurred with respect to the above indebtedness
have been capitalized and are being amortized over the terms of the related
indebtedness. Total amortization of these fees and expenses (included in
interest expense) for the fiscal years ended September 30, 1994, 1993 and 1992
was $4.0 million, $3.9 million and $4.0 million, respectively.
The carrying amount of the Company's revolving credit facility approximates
fair value. The combined fair value of the Notes and New Notes is approximately
$176 million and is based on quoted market prices. The fair value of the Senior
Debentures is approximately $145 million and is based on quotes from brokers.
It was not practicable to estimate the fair value of the other debt or
convertible subordinated debentures.
NOTE 5--COMMON STOCK
The holders of the Class A common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders of Distribution. Except as
otherwise required by law, holders of the Class B common stock and Class C
common stock generally do not possess the right to vote on any matters to be
voted upon by the stockholders of Distribution.
The holders of the Class A common stock may elect at any time to convert any
or all such shares into the Class B common stock on a share-for-share basis.
Holders of the Class B common stock may elect at any time to convert any or all
of such shares into the Class A common stock, on a share-for-share basis, to
the extent the holder thereof is not prohibited from owning additional voting
securities by virtue of regulatory restrictions.
The Class C common stock is subject to substantial restrictions on transfer
and has certain registration and "take-along" rights. A share of Class C common
stock will automatically be converted into a share of Class A common stock (a)
immediately prior to its sale in a subsequent public offering or (b) at such
time as such share of Class C common stock has been sold publicly after a
subsequent public offering in a transaction that complies with any maximum
quantity limitations applicable to such sale. Once a share of Class C common
stock has been converted into Class A common stock it will no longer be subject
to any restrictions on transfer nor will it be entitled to the benefits of
registration and take-along rights.
During fiscal 1992, the Company increased the number of shares of Class A
common stock and Class B common stock authorized to be issued from 10,000,000
each to 30,000,000 each and increased the number of shares of Class C common
stock authorized to be issued from 500,000 to 2,000,000. During fiscal 1993,
1,187 1/2 shares of Class A common stock were purchased as treasury stock.
During fiscal 1994, 15,000 shares of Class A common stock were purchased as
treasury stock.
56
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--PENSION AND OTHER BENEFIT PLANS
AmeriSource provides a benefit for the majority of its employees under
noncontributory defined benefit pension plans. For each employee, the benefits
are based on years of service and average compensation.
A summary of the components of net periodic pension cost charged to expense
for the company-sponsored defined benefit pension plans together with
contributions charged to expense for a multi-employer union administered
defined benefit pension plan the Company participates in follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service cost............................... $ 2,198 $ 1,912 $ 1,669
Interest cost on projected benefit
obligation................................ 2,165 2,034 1,879
Actual return on plan assets............... (13) (2,842) (3,090)
Net amortization and deferral.............. (2,038) 979 1,490
---------- ---------- ----------
Net pension cost of defined benefit plans.. 2,312 2,083 1,948
Net pension cost of multi-employer plan.... 142 110 91
---------- ---------- ----------
Total pension expense...................... $ 2,454 $ 2,193 $ 2,039
========== ========== ==========
</TABLE>
The following table sets forth (in thousands) the funded status and amount
recognized in the consolidated balance sheets for the company-sponsored defined
benefit pension plans:
<TABLE>
<CAPTION>
1994 1993
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Plan assets at fair value...... $24,457 $ 333 $24,155 $ 280
Actuarial present value of
benefit obligations:
Vested....................... 22,420 1,168 20,898 603
Accumulated, not vested...... 421 210 576 171
------- ------- ------- -----
Accumulated benefit
obligations................... 22,841 1,378 21,474 774
Effect of future pay
increases................... 8,559 17 7,987 113
------- ------- ------- -----
Projected benefit obligation... 31,400 1,395 29,461 887
------- ------- ------- -----
Plan assets (less than)
projected benefit obligation.. (6,943) (1,062) (5,306) (607)
Unrecognized net transition
asset......................... (996) (1,167)
Unrecognized prior service
cost.......................... 3,380 733 3,680 357
Adjustment to recognize minimum
liability..................... (813) (372)
Unrecognized net loss related
to assumptions................ 4,013 149 2,117 128
------- ------- ------- -----
Pension (liability) recognized
in balance sheet.............. $ (546) $ (993) $ (676) $(494)
======= ======= ======= =====
</TABLE>
Assumptions used in computing the funded status of the plans were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Discount rate............................................ 7.75% 7.25% 8.0%
Rate of increase in compensation levels.................. 6.25% 5.75% 6.5%
Expected long-term rate of return on assets.............. 10.00% 10.00% 10.0%
</TABLE>
57
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--PENSION AND OTHER BENEFIT PLANS--(CONTINUED)
Plan assets at September 30, 1994 are invested principally in listed stocks,
corporate and government bonds and cash equivalents.
Additionally, the Company sponsors the Employee Investment Plan, a defined
contribution 401(k) plan, which covers salaried and certain hourly employees.
Eligible participants may contribute to the plan up to 2% to 6% of their
regular compensation before taxes. The Company matches the employee
contributions in an amount equal to 50% of the participants' contributions. An
additional discretionary Company contribution in an amount not to exceed 50% of
the participants' contributions may also be made depending upon the Company's
performance. All contributions are invested at the direction of the employee in
one or more funds. Employer contributions vest over a five-year period
depending upon an employee's years of service. Costs of the plan charged to
expense for the fiscal years ended September 30, 1994, 1993 and 1992 amounted
to $1,093,000, $792,000 and $926,000, respectively.
Distribution adopted the AmeriSource Distribution Corporation and
Subsidiaries Employee Stock Purchase Plan (the "Distribution Plan") to enable
key members of management of AmeriSource to participate in the equity ownership
of Distribution. The securities subject to the Distribution Plan are
Distribution's Class A common stock. The purchase price for shares of
Distribution was $1.00 per share. Eligible management participants with prior
AmeriSource options were required to defer the purchase of some or all of the
Distribution Class A common stock allocated to them. Pursuant to the
Distribution Plan, management investors, on November 3, 1989, purchased options
on 581,812 1/2 shares of Distribution's Class A common stock which became
exercisable in 20% annual increments commencing on January 1, 1990 and expire
five years after the date of grant, or if Distribution has not gone public or
been sold within that five-year period, at the earlier of (i) 10 years from the
date of grant, (ii) the date Distribution is sold or (iii) 90 days after the
date Distribution goes public. During fiscal 1991 and 1993, respectively,
21,312 1/2 and 41,312 1/2 options purchased by management investors in fiscal
1990 were extinguished. No options were exercised during fiscal 1994 or 1993
and no additional options will be issued under the Distribution Plan. As of
September 30, 1994, there were 519,187 1/2 options outstanding under the
Distribution Plan, all of which were exercisable.
Distribution adopted the AmeriSource Distribution Corporation Partners Stock
Option Plan (the "Partners Plan") to enable other employees of AmeriSource to
participate in the equity ownership of Distribution. On March 2, 1991, options
to acquire 124,800 shares of Distribution Class A common stock were granted at
an exercise price of $1.00 per share. The options under the Partners Plan
became exercisable when they vested on September 30, 1994 and expire on
December 31, 1994. If an option terminates or expires without having been
exercised, no new options may be granted covering the shares subject to such
option, and such shares shall cease to be reserved for future issuance under
the Partners Plan. No additional options will be granted under the Partners
Plan. During fiscal 1991, 3,200 options were canceled and during fiscal 1992 an
additional 6,400 options were canceled, leaving 115,200 options outstanding
under the Partners Plan as of September 30, 1994.
Distribution adopted the AmeriSource Distribution Corporation 1991 Stock
Option Plan (the "1991 Option Plan") for the granting of non-qualified stock
options to acquire up to an aggregate of 362,500 shares of Distribution Class A
common stock. The options granted to certain members of the Company's
management under the 1991 Stock Option Plan represented the shares unallocated
under the Distribution Plan and options never granted under a performance stock
option plan originally announced by Distribution in 1989 and reflect
achievement in the Company's operating performance through fiscal year ended
September 30, 1991. The options granted under the 1991 Option Plan are not
subject to forfeiture, exercisable at the rate of 50% per year on each of
January 1, 1993 and January 1, 1994 and expire on November 3, 1994, or if prior
to November 3,1994, Distribution has not gone public or been sold, then at the
earlier of (i) November
58
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--PENSION AND OTHER BENEFIT PLANS--(CONTINUED)
3, 1999, (ii) the date Distribution is sold or (iii) 90 days after the date
Distribution goes public. During fiscal 1994, 10,000 options were extinguished,
leaving 352,500 options outstanding at an exercise price of $1.00 per share
under the 1991 Option Plan as of September 30, 1994.
The Company's 1992 Stock Option Plan (the "1992 Option Plan"), which was
adopted by the Board of Directors on March 31, 1992 and approved by the
stockholders on April 7, 1992, provides for the granting over time of non-
qualified stock options to acquire up to approximately 1.7 million shares of
Distribution Class A common stock to employees of the Company. Such options
will be granted based upon performance and with vesting schedules to be
determined at the time of grant. Under the 1992 Option Plan, the exercise price
of options will not be less than the fair market value of the Class A common
stock on the date of the grant. Options granted to employees will not be
exercisable after the expiration of six years from the date of the grant or
such sooner date as determined. No options have been granted under the 1992
Option Plan.
As a result of special termination benefit packages previously offered, the
Company provides medical, dental and life insurance benefits to certain
retirees and their dependents. These benefit plans are unfunded. Prior to
October 1, 1993, the Company recognized the expenses for these plans on the
cash basis. Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (Statement 106), which requires
that the cost of postretirement health care benefits be recognized on the
accrual basis as employees render service to earn the benefit instead of on the
cash basis when the benefits are paid. As of October 1, 1993, the Company
adopted Statement 106 by recognizing the accumulated obligation related to
these benefits. The cumulative effect of this change in accounting principle
resulted in a non-cash charge to net income of $1.2 million. In addition to the
cumulative effect adjustment, the expense for postretirement benefits other
than pensions for the fiscal year ended September 30, 1994, was $80,000,
approximately equal to the cash payments. The cash payments for such benefits
in fiscal years 1993 and 1992, respectively, were approximately the same as
fiscal 1994. Since the plans are unfunded and relate only to certain retirees,
the fiscal 1994 expense accrual for these benefits consisted solely of an
interest cost component. The accumulated postretirement benefit obligation was
$1.1 million as of September 30, 1994. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation was 7.25% and
7.75% at October 1, 1993 and September 30, 1994, respectively. A health care
cost trend rate of 11.4% was assumed for fiscal 1995, gradually declining to an
ultimate level of 5.5% over 15 years. Increasing the assumed health care cost
trend rates by 1% in each year and holding all other assumptions constant,
would increase the accumulated postretirement benefit obligation as of
September 30, 1994 by $77,500 and increase the postretirement benefit cost in
fiscal 1994 by $7,000.
NOTE 7--LEASES
The costs of capital leases are included in property and equipment and the
obligations therefor in other debt. Related amortization is included in
depreciation. At September 30, 1994, future minimum payments totaling
$21,346,000 under noncancelable operating leases with remaining terms of more
than one year were due as follows: 1995--$6,214,000; 1996--$5,197,000; 1997--
$3,390,000; 1998--$1,885,000; 1999--$1,281,000; thereafter (through 2004) --
$3,379,000. In the normal course of business, operating leases are generally
renewed or replaced by other leases.
Total rental expense was $6,168,000 in 1994, $6,034,000 in 1993 and
$5,647,000 in 1992.
59
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEGAL MATTERS AND CONTINGENCIES
In the ordinary course of its business, the Company becomes involved in
lawsuits, administrative proceedings and governmental investigations, including
antitrust, environmental, product liability and regulatory agency matters. In
some of these proceedings, plaintiffs may seek to recover large and sometimes
unspecified amounts and the matters may remain unresolved for several years.
The Company does not believe that these matters, individually or in the
aggregate, will have a material adverse effect on its business or financial
condition.
In November 1993, the Company was named a defendant, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in
fourteen civil actions filed by independent retail pharmacies in the United
States District Court for the Southern District of New York. Plaintiffs seek to
establish these lawsuits and over thirty-four others (to which the Company is
not a party) filed by other pharmacies as class actions. In essence, these
lawsuits all claim that the manufacturer and wholesaler defendants have
combined, contracted and conspired to fix the prices charged to plaintiffs and
class members for prescription brand name pharmaceuticals. Specifically,
plaintiffs claim that the defendants use "chargeback agreements" to give some
institutional pharmacies discounts that are not made available to retail drug
stores. Plaintiffs seek injunctive relief, treble damages, attorneys' fees and
costs. These actions have been transferred to the United States District Court
for the Northern District of Illinois for consolidated and coordinated pretrial
proceedings. Effective October 26, 1994, the Company entered into a Judgment
Sharing Agreement with other wholesaler and pharmaceutical manufacturer
defendants. Under the Judgment Sharing Agreement: (a) the manufacturer
defendants agreed to reimburse the wholesaler defendants for litigation costs
incurred, up to an aggregate of $9 million; and (b) if a judgment is entered
into against both manufacturers and wholesalers, the total exposure for joint
and several liability of the Company is limited to the lesser of 1% of such
judgment or one million dollars. In addition, the Company has released any
claims which it might have had against the manufacturers for the claims
presented by the plaintiffs in these lawsuits. The Judgment Sharing Agreement
covers the federal court litigation as well as the cases which have been filed
in various state courts. The Company believes it has meritorious defenses to
the claims asserted in these lawsuits and intends to vigorously defend itself
in all of these cases.
The Company has become aware that its former Charleston, South Carolina
distribution center was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and initiated
a groundwater study during fiscal 1994. The preliminary results of the
groundwater study indicate that there is lead in the groundwater at levels
requiring further investigation and response. A preliminary engineering
analysis was prepared by outside consultants during the third quarter of fiscal
1994, and indicated that, if both soil and groundwater remediation are
required, the most likely cost of remediation efforts at the Charleston site is
estimated to be $4.1 million. Accordingly, a liability of $4.1 million was
recorded during the third quarter of fiscal 1994 to cover future consulting,
legal and remediation and ongoing monitoring costs. The Company has notified
the appropriate state regulatory agency from whom approval must be received
before proceeding with any further tests or with the actual site remediation.
The approval process and remediation could take several years to accomplish and
the actual costs may differ from the liability which has been recorded. The
accrued liability, which is reflected in other long-term liabilities on the
accompanying consolidated balance sheet, is based on an estimate of the extent
of contamination and choice of remedy, existing technology and presently
enacted laws and regulations, however, changes in remediation standards,
improvements in cleanup technology and discovery of additional information
concerning the site could affect the estimated liability in the future. The
Company is investigating the possibility of asserting claims against
responsible parties for recovery of these costs. Whether or not any recovery
may be forthcoming is unknown at this time, although the Company intends to
vigorously enforce its rights and remedies.
60
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--LEGAL MATTERS AND CONTINGENCIES--(CONTINUED)
The Company has been named as a defendant in several lawsuits based upon
alleged injuries and deaths attributable to the product L-Tryptophan. The
Company did not manufacture L-Tryptophan; however, prior to an FDA recall, the
Company did distribute products containing L-Tryptophan from several of its
vendors. The Company believes that it is entitled to full indemnification by
its suppliers and the manufacturer of L-Tryptophan with respect to these
lawsuits and any other lawsuits involving L-Tryptophan in which the Company may
be named in the future. To date, the indemnity to the Company in such suits has
not been in dispute and, although the Company believes it is unlikely it will
incur any loss as a result of such lawsuits, the Company believes that its
insurance coverage and supplier endorsements are adequate to cover any losses
should they occur.
The Company has received Notices of Proposed Adjustment from the Internal
Revenue Service in connection with an audit of the Company's federal income tax
returns for the taxable years 1987 through 1991. The proposed adjustments
indicate a net increase to taxable income for these years of approximately $23
million and relate principally to the deductibility of costs incurred with
respect to the Acquisition. The Company has analyzed these matters with tax
counsel, believes it has meritorious defenses to the adjustments proposed by
the Internal Revenue Service and any amounts assessed will not have a material
effect on the financial condition of the Company.
At September 30, 1994, there were contingent liabilities with respect to
taxes, guarantees of borrowings by certain customers, lawsuits and
environmental and other matters occurring in the ordinary course of business.
On the basis of information furnished by counsel and others, management
believes that none of these contingencies will materially affect the Company.
On December 3, 1991, AmeriSource entered into a settlement agreement with
Bear Stearns & Co., Inc. ("Bear Stearns") resolving a civil action that had
been filed on August 14, 1989 and Bear Stearns' interest in an appraisal action
arising from the Acquisition. AmeriSource paid Bear Stearns $7,235,000 in 1992
and will pay $2,500,000 in November 2001, without interest and subject in
certain circumstances to earlier payment. The Delaware Chancery Court approved
the settlement of Bear Stearns' interest in the appraisal action and the
settlement of the remaining claims (representing less than 5% of the shares in
the original action) on similar terms. Payments of $600,000 were made during
fiscal 1992 in settlement of a portion of the remaining claims. These
settlements with Bear Stearns and the other dissenters resulted in an
extraordinary gain in 1992 of $4,486,000 from the extinguishment of the
associated debt.
NOTE 9--NON-RECURRING CHARGES
The non-recurring charges in 1993 consisted of $1,254,000 in losses on the
disposal of three warehouses and charges of $969,000 for the write-down to net
realizable value of two additional warehouses no longer in operation which were
designated for sale. The non-recurring charges in 1992 consisted of a loss of
$287,000 incurred on the sale of a warehouse no longer in operation and the
write off of $1,957,000 in professional fees incurred in connection with a
public offering attempted during 1992 which was later abandoned due to market
conditions.
NOTE 10--RELATED PARTY TRANSACTIONS
On October 21, 1991, an involuntary bankruptcy petition under Chapter 7 of
the United States Bankruptcy Code was filed against RDS Acquisition Corp.
("RDS"), which was a customer of the Company. Affiliates of VPI had substantial
equity and debt interests in RDS and related entities. VPI indemnified
AmeriSource for $5,800,000 of the amounts owed by RDS to AmeriSource on October
25, 1991, for which AmeriSource did not otherwise recover the amount owed.
61
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--SUBSEQUENT EVENTS
In December 1994, the Company sold substantially all of its trade accounts
and notes receivable (the "Receivables") to AmeriSource Receivables Corporation
("ARC"), a special purpose wholly-owned subsidiary, pursuant to a trade
receivables securitization program (the "Receivables Program"). As contemplated
by the Receivables Program, the Company formed and capitalized ARC through a
contribution of $40 million. Contemporaneously, the Company entered into a
Receivables Purchase Agreement with ARC, whereby ARC agreed to purchase on a
continuous basis Receivables originated by the Company. Pursuant to the
Receivables Program, ARC will transfer such Receivables to a master trust in
exchange for, among other things, certain trade receivables-backed certificates
(the "Certificates") representing a right to receive a variable principal
amount. Contemporaneously, Certificates in an aggregate principal amount of up
to $230 million face amount were sold to investors. During the five year term
of the Receivables Program, the cash generated by collections on the
Receivables will be used to purchase, among other things, additional
Receivables originated by the Company. The Certificates bear interest at a rate
selected by the Company equal to (i) the higher of (a) the prime lending rate
and (b) the federal funds rate plus 50 basis points or (ii) LIBOR plus 50 basis
points. In addition, during the first seventy five days of the Receivables
Program, the Company may select an interest rate equal to the federal funds
rate plus 125 basis points. The interest rates for the Certificates are subject
to step-ups to a maximum amount of an additional 100 basis points over the
otherwise applicable rate.
At the same time that it entered into the Receivables Program, the Company
and its senior lenders amended its existing Credit Agreement. Among other
things, the Amended and Restated Credit Agreement: (i) extended the term of the
Credit Agreement until January 3, 2000; (ii) established the amount the Company
may borrow at $380 million; (iii) reduced the initial borrowing rate to LIBOR
plus 225 basis points and provided for further interest rate stepdowns upon the
occurrence of certain events; (iv) modified the borrowing base availability
from inventory and receivable based to inventory based; and (v) increased the
Company's ability to make acquisitions and pay dividends.
Contemporaneously with the consummation of the Receivables Program and the
execution of the Amended and Restated Credit Agreement, the Company called for
optional redemption all of the outstanding Notes and New Notes at a redemption
price of 106% of the principal amount plus accrued interest through the
redemption date of January 12, 1995.
62
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--OTHER INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED(1)
--------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1993 1994 1994 1994
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues.................... $1,045,776 $1,067,112 $1,079,302 $1,109,642
Gross Profit................ 53,999 58,480 57,455 65,257
Income (Loss) Before
Extraordinary Items and
Cumulative Effects of
Accounting Changes......... 2,579 3,822 (180,057) 1,239
Extraordinary Charge-Early
Retirement of Debt......... (656)
Cumulative Effects of
Accounting Changes......... (34,598)
Net Income (Loss)........... (32,675) 3,822 (180,057) 1,239
Per Share:
Income (Loss) Before
Extraordinary Items and
Cumulative Effects of
Accounting Changes......... .51 .77 (36.01) .25
Extraordinary Items......... (.13)
Cumulative Effects of
Accounting Changes......... (6.92)
Net Income (Loss)........... (6.54) .77 (36.01) .25
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1992 1993 1993 1993
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues.................... $917,681 $920,195 $918,499 $962,650
Gross Profit................ 51,378 53,385 50,302 54,373
(Loss) Before Extraordinary
Items...................... (2,895) (1,308) (2,257) (1,014)
Extraordinary Charge-Early
Retirement of Debt......... (2,635) (9,255)
Extraordinary Credit-Income
Taxes...................... 100 150 60 436
Net (Loss).................. (2,795) (3,793) (2,197) (9,833)
Per Share:
(Loss) Before Extraordinary
Items...................... (.58) (.26) (.45) (.20)
Extraordinary Items......... .02 (.50) .01 (1.76)
Net (Loss).................. (.56) (.76) (.44) (1.96)
</TABLE>
- - - --------
(1) December 31, 1993 amounts reflect the cumulative effect of the accounting
changes for postretirement benefits other than pensions and income taxes.
June 30, 1994 amounts reflect the write-off of goodwill discussed in Note
2.
63
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(No response to this Item is required.)
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
The following table sets forth information concerning the directors,
executive officers and officers of Distribution and AmeriSource and key
employees of AmeriSource.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
- - - --------------------------------
John F. McNamara(1)(2)............ 59 Chairman, President and Chief Executive
Officer
David M. Flowers.................. 47 Group President--Eastern Region
R. David Yost..................... 47 Group President--Central Region
OFFICERS
- - - --------
Teresa T. Ciccotelli.............. 43 Vice President, Legal Counsel and Secretary
Robert D. Gregory................. 65 Vice President, Human Resources and
Assistant Secretary
Kurt J. Hilzinger................. 34 Vice President, Finance and Treasurer
42 Vice President, Controller and Assistant
John A. Kurcik.................... Treasurer
Robert E. McHugh.................. 53 Vice President, Marketing
J. Michael McNamara............... 38 Senior Vice President, Sales
KEY EMPLOYEES
- - - -------------
David C. Carter................... 57 President--Rita Ann Distributors division
of AmeriSource
Gary M. Davis..................... 56 Regional Vice President--South Central
Region of AmeriSource and General Manager,
Paducah Division of AmeriSource
W. Phil Gibson.................... 49 Regional Vice President--West Central
Region of AmeriSource
Robert W. Meyer................... 55 Regional Vice President--North Central
Region of AmeriSource
Greg Zurlage...................... 47 Regional Vice President--Mid Central Region
of AmeriSource and General Manager,
Columbus Division of AmeriSource
OTHER DIRECTORS
- - - ---------------
Bruce C. Bruckmann(1)............. 41 Director
Richard C. Gozon(3)............... 56 Director
Lawrence C. Karlson(2)............ 51 Director
Harold O. Rosser(2)............... 46 Director
George H. Strong(3)............... 68 Director
Barton J. Winokur(1).............. 54 Director
</TABLE>
- - - --------
(1) Member of Compensation Committee.
(2) Member of Acquisition Committee.
(3) Member of Audit Committee.
John F. McNamara. Mr. McNamara has been Chairman, President and Chief
Executive Officer of the Company and AmeriSource since 1989 and has been
President of AmeriSource since 1987. Prior to holding these positions, he was
Chief Operating Officer of AmeriSource from 1986 to 1989 and Executive Vice
President of AmeriSource from 1985 to 1987. He also served as Chairman, from
1986 to 1990, and President, from 1981 to 1986, of the Kauffman-Lattimer
division of AmeriSource.
64
<PAGE>
David M. Flowers. Mr. Flowers has been Group President of the Eastern Region
since 1989. Prior to that he was President of the AmeriSource Southeast Region
from 1988 to 1989 and President of the Duff Brothers Division of AmeriSource
from 1984 to 1987.
R. David Yost. Mr. Yost has been Group President of the Central Region since
1989. Before serving in these positions he was President, from 1986 to 1989,
and Executive Vice President and General Manager, from 1984 to 1986, of the
Kauffman-Lattimer Division of AmeriSource.
Teresa T. Ciccotelli. Ms. Ciccotelli has served as Vice President, Legal
Counsel and Secretary since 1989. Prior to that, from 1985 to 1989, she was an
attorney with Alco Standard Corporation.
Robert D. Gregory. Mr. Gregory has been Vice President, Human Resources and
Assistant Secretary of the Company since 1989 and Vice President, Human
Resources of AmeriSource since 1986. Prior to that, from 1984 to 1986, he
served as Manager, Employee Relations for Alco Standard Corporation.
Kurt J. Hilzinger. Mr. Hilzinger has served as Vice President, Finance and
Treasurer since October 1993. Prior to that, since March 1991, he served as
Vice President, Financial Planning. Before joining the Company, he was a Vice
President in the Corporate Advisory Division of Citicorp, from 1986 to 1991.
John A. Kurcik. Mr. Kurcik has been Vice President, Controller and Assistant
Treasurer of the Company since 1989. Mr. Kurcik was Controller, from 1987, and
Director of Accounting, from 1985 to 1987, of AmeriSource.
Robert E. McHugh. Mr. McHugh joined the Company as Vice President, Marketing
in August 1991. Prior to that he was President of J.E. Goold from 1990 to 1991
and Vice President, Industry Affairs of the National Wholesale Druggists'
Association from 1983 to 1990.
David C. Carter. Mr. Carter has served as President of the Company's RitaAnn
Distributors specialty products division since 1992. Until 1994 he also served
as Senior Vice President, Industry and Corporate Affairs of AmeriSource. Prior
to 1989, he served as President of the Northeastern Region of AmeriSource
(formerly known as The Drug House) from 1979 to 1989.
Gary M. Davis. Mr. Davis has been Regional Vice President of the South
Central Region of AmeriSource and General Manager of AmeriSource's Paducah
Division since 1989. Prior to that he was Executive Vice President of the
Columbus Division of AmeriSource from 1988 to 1989, and Vice President General
Manager of Toledo Division of AmeriSource from 1984 to 1988.
W. Phil Gibson. Mr. Gibson has served as Regional Vice President, West
Central Region since 1994. Mr. Gibson served as Regional Vice President,
Atlantic Coast Region of AmeriSource between 1988 and 1994. Prior to that he
was Regional Vice President, Greensboro Division of AmeriSource from 1987 to
1989.
J. Michael McNamara. Mr. McNamara has served as Senior Vice President--Sales
of the Company since November, 1994. Previously he served as Regional Vice
President of the West Central Region of AmeriSource since April 1991. Prior to
that he was Vice President, Sales and Marketing of the Company from 1990 to
1991, Vice President and General Manager of the Toledo Division of AmeriSource
from 1988 to 1990, and Director of Marketing of the Columbus Division of
AmeriSource from 1984 to 1988.
Robert W. Meyer. Mr. Meyer has been Regional Vice President, North Central
Region of AmeriSource since 1990. Prior to that he served as President of the
Tiffin Division of AmeriSource (formerly known as Meyers & Son Co.) from 1985
to 1990.
Greg Zurlage. Mr. Zurlage has served as Regional Vice President of the Mid
Central Region of AmeriSource and General Manager of AmeriSource's Columbus
Division since 1989. Prior to that he served as Vice President and Division
Manager of the Louisville Division of AmeriSource from 1982 to 1989.
65
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Bruce C. Bruckmann. Mr. Bruckmann has been a director since August 1992. Mr.
Bruckmann previously was a director of Distribution since 1989 and of
AmeriSource since 1988. Mr. Bruckmann resigned as a director of both companies
in December 1991. Mr. Bruckmann is a Managing Director of Citicorp Venture
Capital Ltd. and of Court Square Capital Limited and serves as a director of
Cort Furniture Rental Corporation, New Cort Holdings Corporation, Mohawk
Industries, Inc., Hancor Holding Corp., Fair Markets, Inc., FF Holdings
Corporation and Farm Fresh, Inc.
Harold O. Rosser. Mr. Rosser has been a director since December 1992. Mr.
Rosser previously was a director of both companies since 1988. Mr. Rosser
resigned as a director in June 1990. Mr. Rosser is a Managing Director of
Citicorp Venture Capital Ltd. and of Court Square Capital Limited and serves
as a director of Corral America Holdings, Davco Restaurants, Inc., FF Holdings
Corporation, Farm Fresh, Inc. and Rax Restaurants, Inc.
Barton J. Winokur. Mr. Winokur has been a director since 1990. Mr. Winokur
is a partner of Dechert Price & Rhoads and serves as a director of CDI
Corporation, FF Holdings Corporation, Farm Fresh, Inc., Davco Restaurants,
Inc. and The Bibb Company.
George H. Strong. Mr. Strong was elected to the board of directors in 1994.
Mr. Strong is a private investor and serves as a director of Corefunds, Health
South Corp. and Integrated HealthCorp.
Richard C. Gozon. Mr. Gozon was elected to the board of directors in 1994.
Mr. Gozon is Executive Vice President of Weyerhaeuser Company and serves as a
director of UGI Corp. and Nocopi Technologies.
Lawrence C. Karlson. Mr. Karlson was elected to the board of directors in
1994. Mr. Karlson is Chairman of Karlson Corporation and serves as a director
of Meridian Bank Corp. and CDI Corporation.
The directors were appointed to the boards of Distribution and AmeriSource
to serve until their successors are elected and qualified. Each director is a
citizen of the United States. Officers are elected annually by the Board of
Directors to serve for the ensuing year and until their respective successors
are elected. There are no arrangements or understandings between any of the
officers and any other person pursuant to which he or she was elected an
officer. J. Michael McNamara, Senior Vice President--Sales is the son of John
F. McNamara, Chairman, President and Chief Executive Officer of the Company
and AmeriSource.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth, for fiscal years ending September 30, 1992,
1993 and 1994, certain information regarding the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for those
years, to each of the executive officers of the Company, in all capacities in
which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
(E) (I)
(A) (B) (C) (D) OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION COMPENSATION(2)
--------------------------- ---- ------- -------- ------------ ---------------
[$] [$] [$] [$]
<S> <C> <C> <C> <C> <C>
JOHN F. MCNAMARA 1994 396,609 200,000 8,468(/3/)
Chairman, President and 1993 380,340 150,000 110 7,434(/3/)
Chief Executive Officer 1992 340,340 185,000 -- --
DAVID M. FLOWERS 1994 169,430 100,000 8,822(/4/)
Group President--Eastern
Region 1993 159,980 75,000 -- 8,428(/4/)
1992 149,480 65,000 -- --
R. DAVID YOST 1994 179,790 100,000 8,704(/5/)
Group President--Central
Region 1993 170,340 75,000 -- 9,079(/5/)
1992 156,840 75,000 -- --
</TABLE>
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<PAGE>
- - - --------
(1) The amounts shown consist of cash bonuses earned in the fiscal year
identified but paid in the subsequent fiscal year.
(2) In accordance with SEC provisions, amounts of All Other Compensation are
excluded for the Company's 1992 fiscal year.
(3) "All Other Compensation" for Mr. McNamara in 1994 and 1993 respectively
includes the following: (i) $966 and $782 in club dues, (ii) $1,450 and
$1,200 in tax return preparation fees, (iii) $4,497 and $5,237 in
contributions under AmeriSource's Employee Investment Plan, (iv) for fiscal
1994, $1,554 for spousal travel expenses and (v) for fiscal 1993, $215 in
miscellaneous items.
(4) "All Other Compensation" for Mr. Flowers in 1994 and 1993 respectively
includes the following: (i) $4,175 and $3,191 in club dues, (ii) for fiscal
1994, $150 for spousal travel expenses, and (iii) $4,497 and $5,237 in
contributions under AmeriSource's Employee Investment Plan.
(5) "All Other Compensation" for Mr. Yost in 1994 and 1993 respectively
includes the following: (i) $2,311 and $1,692 in club dues, (ii) $1,850 and
$2,150 in tax return preparation fees, (iii) for fiscal 1994, $45.85 for
spousal travel expenses, and (iv) $4,497 and $5,237 in contributions under
AmeriSource's Employee Investment Plan.
STOCK OPTIONS
Distribution Stock Purchase Plan. As of October 31, 1989, the Company adopted
the AmeriSource Distribution Corporation and Subsidiaries Employee Stock
Purchase Plan (the "Distribution Plan") to enable certain management level
employees (the "Management Investors") to participate in the equity ownership
of the Company. The Management Investors include Messrs. Flowers, John McNamara
and Yost, other current officers of the Company and additional members of
management of the Company and its subsidiaries. The securities of the Company
subject to the Distribution Plan originally included (a) up to 750,000 shares
of the Company's Class A Common Stock and (b) $750,000 aggregate principal
amount of the Company's 19.5% Junior Subordinated Debentures due 2001 (the
"Junior Subordinated Debentures").
The Management Investors have been subject to restrictions on the sale or
transfer of their Class A Common Stock. Before January 1, 1994, a Management
Investor could not transfer his or her securities except with the consent of
the Company or in connection with specified events, such as the sale of the
Company. If a Management Investor's employment with the Company was terminated,
the Company had the right to repurchase the Class A Common Stock owned or
subject to options. VPI is required, under certain circumstances, to allow the
Management Investors to participate if it proposes to sell shares of the
Company's Class A Common Stock or Class B Common Stock.
As of September 30, 1994, Management Investors had purchased 77,000 shares of
the Company's Class A Common Stock, held options to purchase 519,187.5 shares
of the Company's Class A Common Stock. Of the 519,187.5 shares subject to
options, 116,362.5 shares will be repurchased from VPI by the Company for $1.00
per share before being issued pursuant to such options. No further awards will
be granted under the Distribution Plan.
1991 Stock Option Plan. The Company's 1991 Stock Option Plan (the "1991
Option Plan"), which was adopted by the Board of Directors on February 19, 1992
and approved by the stockholders on April 7, 1992, provides for the granting of
non-qualified stock options to acquire up to an aggregate of 362,500 shares of
Class A Common Stock to the Management Investors and certain other members of
the Company's management.
The options once granted to the recipient are not subject to forfeiture and
have an exercise price of $1.00 per share and were exercisable at a rate of 50%
per year on each of January 1, 1993 and January 1, 1994. The options granted,
which represent the shares unallocated under the Distribution Plan and options
never granted under a performance stock option plan originally announced by the
Company in 1989, reflect achievements in operating performance through fiscal
1991. Of the shares subject to options, 337,500 shares will be repurchased from
VPI by the Company for $1.00 per share pursuant to a prior agreement.
67
<PAGE>
Options granted to employees must be exercised by November 3, 1994, or, if
the Company has not had a public offering or been sold by that date, then by
the earlier of November 3, 1999, the date the Company is sold or 90 days after
the date of a public offering. Employees whose employment terminates for
reasons other than death, disability or retirement must hold the shares
acquired upon exercise for a period of three years. The 1991 Option Plan
permits, with the consent of the administering committee and if permitted by
the restrictions in the Company's and AmeriSource's financing agreements, the
exercise of options by delivery of shares of Class A Common Stock owned by the
optionee, by withholding of such shares of Class A Common Stock upon exercise
of the option in lieu of or in addition to cash or by financing made available
by the Company.
The 1991 Option Plan will continue to be administered by the Board of
Directors of the Company until the Company registers the Class A Common Stock
under Section 12 of the Exchange Act, whereupon, the 1991 Option Plan will be
administered by a committee of Disinterested Persons as defined in the 1991
Option Plan. The Committee will have the power and authority to determine the
extent to which exceptions to the exercisability of options may be granted, to
determine the effect of certain dispositions or a change in control of the
Company on outstanding options, to establish procedures, loans or financing
arrangements to assist in the exercise of options and the satisfaction of tax
withholding obligations, to adopt regulations to carry out the 1991 Option
Plan and to amend options granted under the plan to carry out the purpose of
the 1991 Option Plan.
1992 Stock Option Plan. The Company's 1992 Stock Option Plan (the "1992
Option Plan"), which was adopted by the Board of Directors on March 31, 1992
and approved by the stockholders on April 7, 1992, provides for the granting
over time of non-qualified stock options to acquire up to approximately 1.7
million shares of Class A Common Stock to employees of the Company. Such
options will be granted based upon performance and with vesting schedules to
be determined at the time of grant.
The 1992 Option Plan will be administered by a committee of Disinterested
Persons as defined in the 1992 Option Plan, which will have the power and
authority to determine the employees to whom awards are granted, the number of
shares of Class A Common Stock with respect to such awards, and the terms of
such awards, including the exercise price of the stock options and any vesting
periods.
Under the 1992 Option Plan, the exercise price of options will not be less
than the fair market value of the Class A Common Stock on the date of the
grant. Options granted to employees will not be exercisable after the
expiration of six years from the date of the grant or such sooner date
determined by the committee. The 1992 Option Plan permits, with the consent of
the committee and if permitted by the restrictions in the Company's and
AmeriSource's financing agreements, the exercise of options by delivery of
shares of Class A Common Stock owned by the optionee, by withholding of such
shares of Class A Common Stock upon exercise of the option in lieu of or in
addition to cash or by financing made available by the Company. The 1992
Option Plan permits the committee to accelerate vesting upon a change of
control and to adjust the number and kind of shares subject to options in the
event of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares. As of
December 1, 1994, no options had been granted under the 1992 Option Plan.
Partners Plan. On December 11, 1990, the Company adopted the AmeriSource
Health Distribution Corporation Partners Stock Option Plan (the "Partners
Plan") to enable employees of AmeriSource other than the Management Investors
to participate in the equity ownership of the Company. An aggregate of 263,158
shares of the Company's Class A Common Stock was originally available under
the Partners Plan. On March 2, 1991, options ("Partners Options") for an
aggregate of 124,800 shares of Class A Common Stock were granted to 39
optionees, each of whom received options for 3,200 shares. There are currently
115,200 shares subject to options under the Partners Plan held by 36
optionees. Each Partners Option became 100% exercisable on September 30, 1994
at an exercise price of $1.00 per share and must be exercised by December 31,
1994. If a holder of a Partners Option exercises, then he or she must hold the
Class A Common Stock so acquired for two years. Certain exceptions to the
limits on exercisability and the holding period may
68
<PAGE>
be granted in the event of the sale of the Company, the death of the optionee,
or a public offering. No further awards will be granted under the Partners
Plan. Upon exercise of the Partners Plan options, the holders are subject to
tax liability based upon the difference between the exercise price and the
estimated $35 per share market value of Distribution Class A Common Stock. To
assist holders of Partner Plan options with such tax liability, Distribution
has offered to repurchase from such option holders up to 35% of their shares of
Class A Common Stock obtained through exercise of their options.
VALUE OF UNEXERCISED OPTIONS AS OF SEPTEMBER 30, 1994
The following table sets forth information regarding the number and value of
unexercised options held by the named executive officers of the Company as of
September 30, 1994. None of the named executive officers were granted or
exercised any stock options in fiscal 1994.
NUMBER OF SHARES COVERED BY
OUTSTANDING OPTIONS AND OPTION
VALUES AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
(C)
(B) VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END FISCAL YEAR END
------------------------- -------------------------
(A)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
[#] [$]
<S> <C> <C> <C> <C>
John F. McNamara
Chairman, President and
Chief Executive Officer.... 246,000 0 * *
David M. Flowers
Group President--Eastern
Region.................... 72,000 0 * *
R. David Yost
Group President--Central
Region.................... 81,000 0 * *
</TABLE>
- - - --------
* As of September 30, 1994, there were less than 65 holders of record of
Distribution's common stock. The stock is not actively traded. As a result,
there are not any reliable indications of value for the common stock.
Although there is no reliable independent indicator of value of the common
stock, assuming a $35 per share value of the common stock, Messrs. McNamara,
Flowers and Yost would have in-the-money options of $8,580,000, $2,510,000
and $2,825,000, respectively, as of September 30, 1994.
PENSION PLANS
AmeriSource Corporation Participating Companies Pension Plan. AmeriSource has
a pension plan providing for continuation of pension benefit coverage for
salaried sales and office employees of AmeriSource previously covered under
Alco Standard's Participating Companies Pension Plan. The pension plan also
covers other salaried, sales, and office employees of AmeriSource who meet the
plan's eligibility requirements. Under AmeriSource's pension plan, the
executive officers compensated by AmeriSource are entitled to annual pension
benefits at age 65 equal to the number of years of credited service multiplied
by 1% of average annual compensation earned during the consecutive three years
within the last ten years of participation in the pension plan which yield the
highest average.
All pension plan costs are paid by AmeriSource and the pension plan, and
benefits are funded on an actuarial basis. Compensation earned by executive
officers for purposes of the plan includes salaries and bonuses set forth in
the cash compensation table under "Executive Compensation" above, except that
compensation recognized under the plan may not exceed $200,000, with
adjustments for inflation, as required by the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code, as
amended (the "Code"). For 1993, the compensation limit was $235,840.
69
<PAGE>
The years of credited service (with AmeriSource, predecessor companies or
Alco Standard) as of October 1, 1994 for each of the current officers of the
Company were John F. McNamara--13 years; Robert D. Gregory--14 years; David M.
Flowers--18.75 years; R. David Yost--20.08 years; Teresa T. Ciccotelli--9.25
years; John A. Kurcik--16 years; J. Michael McNamara--10 years; Robert E.
McHugh--3.25 years; and Kurt J. Hilzinger--3.58 years.
As required by ERISA and the Code, the pension plan limits the maximum
annual benefits payable at Social Security retirement age as a single life
annuity to the lesser of $90,000, with cost-of-living adjustments, or 100% of
a plan participant's average total taxable earnings during his highest three
consecutive calendar years of participation, subject to certain exceptions for
benefits which accrued prior to September 30, 1988. For 1993, the annual
benefit limit was $115,641.
Supplemental Retirement Plan. AmeriSource also has a Supplemental Retirement
Plan (the "Supplemental Plan"). Coverage under the Supplemental Plan is
limited to participants in AmeriSource's pension plan whose benefits under the
pension plan are limited due to (a) restrictions imposed by the Code on the
amount of benefits to be paid from a tax-qualified plan, (b) restrictions
imposed by the Code on the amount of an employee's compensation that may be
taken into account in calculating benefits to be paid from a tax-qualified
plan, or (c) any reductions in the amount of compensation taken into account
under the pension plan due to an employee's participation in certain deferred
compensation plans sponsored by AmeriSource or one of its subsidiaries. The
Supplemental Plan provides for a supplement to the annual pension paid under
AmeriSource's pension plan to participants who attain early or normal
retirement under such pension plan or who suffer a total and permanent
disability while employed by AmeriSource or one of its subsidiaries and to the
pre-retirement death benefits payable under the pension plan on behalf of such
participants who die with a vested interest in AmeriSource's pension plan. The
amount of the supplement will be the difference, if any, between the pension
or pre-retirement death benefit paid under AmeriSource's pension plan and that
which would otherwise have been payable but for the restrictions imposed by
the Code and any reduction in the participant's compensation for purposes of
AmeriSource's pension plan due to his participation in certain deferred
compensation plans of AmeriSource or one of its subsidiaries.
The following table shows estimated annual retirement benefits that would be
payable to participants under AmeriSource's pension plan and, if applicable,
the Supplemental Plan, upon normal retirement at age 65 under various
assumptions as to final average annual compensation and years of credited
service and on the assumption that benefits will be paid in the form of a
single life annuity. The benefit amounts listed are not subject to any
deduction for Social Security benefits.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
-------------------------------
FINAL AVERAGE
COMPENSATION 10 20 30 35
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 50,000........................................ $ 5,000 $10,000 $15,000 $17,500
100,000........................................ 10,000 20,000 30,000 35,000
150,000........................................ 15,000 30,000 45,000 52,500
200,000........................................ 20,000 40,000 60,000 70,000
250,000........................................ 25,000 50,000 75,000 87,500
300,000........................................ 30,000 60,000 90,000 105,000
500,000........................................ 50,000 100,000 150,000 175,000
600,000........................................ 60,000 120,000 180,000 210,000
700,000........................................ 70,000 140,000 210,000 245,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee of the Board of Directors during fiscal
1994 was composed of John F. McNamara, Bruce C. Bruckmann and Barton J.
Winokur. Mr. McNamara is Chairman, President
70
<PAGE>
and Chief Executive Officer of the Company and AmeriSource. Mr. Winokur is a
partner of Dechert Price & Rhoads which performed legal services for the
Company and AmeriSource during fiscal 1994.
OTHER FORMS OF COMPENSATION
Employee Investment Plan. In fiscal year 1986, AmeriSource adopted a stock
participation plan pursuant to Section 401(k) of the Code, which plan was
amended and restated as a 401(k) Employee Investment Plan (the "EIP") effective
January 1, 1989. Participation in the EIP is generally available to salaried,
office, sales and certain hourly employees of AmeriSource. As of December 31,
1993, participation in the EIP was available to approximately 1,922 employees,
of whom approximately 1,360 were participants. A participant may contribute to
the EIP between 2% and 6% of his or her salary on a "before-tax" basis,
entitling the participant to contributions by his or her employer in an amount
equal to one-half of the participant's contributions. Highly compensated
employees, as defined by the Code, may receive matching employer contributions
of less than one-half of their participant contributions made after April 1,
1993. An additional employer matching contribution, in an amount to be
determined by AmeriSource but not to exceed one-half of the participant's
contributions, may be made to the EIP. The combined amount of employer matching
contributions for the plan year ending December 31, 1993 was 50% of each
participant's contribution. For calendar years 1992 and 1993, a participant's
contributions could not exceed $8,728 and $8,994 per year, respectively. The
cost of the matching employer contributions is ultimately charged to the
division or subsidiary of AmeriSource employing the participant. Matching
employer contributions to the EIP are held in trust and vest to the benefit of
the participant over a period of five years, measured from the date the
participant's employment commenced (as long as the participant continues as an
employee). The EIP is administered by trustees who have selected six mutual
funds managed by Fidelity Investments among which participants may direct the
investment of their entire account balances.
Deferred Compensation Plan. In September 1985, AmeriSource adopted a deferred
compensation plan (the "1985 Deferred Compensation Plan") which permitted
eligible employees of AmeriSource to defer a portion of their compensation
during a period of up to 48 months after October 1, 1985 and, in return, to
receive retirement or survivor benefits, and in certain circumstances,
disability insurability. The amount of the benefits the participant will be
entitled to receive is based on the total number of years the participant
remains employed by AmeriSource or an affiliated company. A participant's
interest in the benefits vests over a period of five years. Mr. McNamara is a
participant in the 1985 Deferred Compensation Plan. Assuming Mr. McNamara
retired from employment with AmeriSource at or after age 65, his monthly
retirement benefits under the 1985 Deferred Compensation Plan would be $2,901,
payable over a 15-year period.
71
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
All of the shares of common stock of AmeriSource are owned by the Company.
The following table sets forth as of December 15, 1994 certain information
regarding the ownership of the Company's voting stock (assuming exercise of
options exercisable currently or within 60 days of December 15, 1994, all of
the Company's common stock (assuming exercise of options exercisable currently
or within 60 days of December 15, 1994), and all of the Company's common stock
(assuming exercise of all options), by each of the Company's directors, all
directors and officers as a group, all members of management as a group and
each person who is known by the Company to beneficially own five percent or
more of the Company's voting stock (assuming the exercise of options
exercisable currently or within 60 days of December 15, 1994).
<TABLE>
<CAPTION>
NUMBER OF
VOTING PERCENT NUMBER OF PERCENT
SHARES OF SHARES OF
BENEFICIALLY VOTING BENEFICIALLY ALL
OWNED SHARES OWNED SHARES
------------ ------- ------------ -------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
David M. Flowers(1).................. 72,000 6.3% 72,000 1.4%
John F. McNamara(1).................. 246,000 21.4 246,000 4.9
Barton J. Winokur.................... 5,000 * 5,000 *
R. David Yost(1)..................... 81,000 7.1 81,000 1.6
Bruce C. Bruckmann(2)................ 570 * 23,496 *
Harold O. Rosser, II(2).............. 267 * 11,013 *
All directors and executive officers
as a group
(6 persons)(3)...................... 404,837 35.3 438,509 8.7
Management Investors(4).............. 1,006,600 87.7 1,006,600 19.9
OTHER VOTING 5% STOCKHOLDERS:
399 Venture Partners Inc. ("VPI")(5). 79,636 6.7% 3,396,974 67.3%
</TABLE>
- - - --------
* Less than 1%.
(1) Pursuant to the AmeriSource Distribution Corporation and Subsidiaries
Employee Stock Purchase Plan ("Distribution Plan"), Messrs. Flowers,
McNamara and Yost received options, with limitations on exercise, to
acquire 50,000, 150,000 and 50,000 shares, respectively, of the Company's
voting stock. Pursuant to the AmeriSource Distribution Corporation 1991
Stock Option Plan ("1991 Option Plan"), Messrs. Flowers, McNamara and Yost
received options, with limitations on exercise, to acquire 22,000, 96,000
and 31,000 shares, respectively, of the Company's voting stock. Of these
amounts, Messrs. Flowers, McNamara and Yost have the right to exercise,
currently or within 60 days of December 15, 1994, options to acquire
72,000, 246,000 and 81,000 shares, respectively.
(2) Messrs. Bruckmann and Rosser disclaim beneficial ownership relating to the
79,636 shares of voting stock and 3,396,974 shares of non-voting stock held
by VPI.
(3) These figures include 5,837 shares of Company's voting stock and 33,672
shares of Company's non-voting stock owned currently by directors and
officers. Pursuant to the Distribution Plan and the 1991 Option Plan,
officers received options, with limitations on exercise, to acquire 250,000
shares and 149,000 shares, respectively, of Company's voting stock, all of
which are exercisable currently.
(4) These figures include 60,812.5 shares of the Company's voting stock owned
currently by Management Investors. Pursuant to the Distribution Plan, the
1991 Option Plan, and the AmeriSource Distribution Corporation Partners
Stock Option Plan ("Partners Plan"), Management Investors received options,
with limitations on exercise, to acquire 511,687.5 shares, 328,500 shares
and 105,600 shares, respectively, of the Company's voting stock. Of these
amounts, Management Investors have the right to exercise, currently or
within 60 days of December 15, 1994, options to acquire 511,687.5 shares,
328,500 shares and 105,600 shares pursuant to the Distribution Plan, the
1991 Option Plan and the Partners Plan, respectively.
72
<PAGE>
(5) VPI disclaims beneficial ownership as to 2,064 shares of voting stock and
82,962 shares of non-voting stock held by investors currently or previously
affiliated with VPI. VPI's address is 1209 Orange Street, Wilmington,
Delaware 19801. VPI is a wholly-owned, indirect subsidiary of Citicorp.
Pursuant to a prior agreement, the Company will repurchase for $1.00 per
share, 116,362.5 shares and 337,500 shares from VPI upon exercise of
options pursuant to the Distribution Plan and the 1991 Option Plan,
respectively, for reissuance to management investors in connection with
their exercise of options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 26, 1993, Distribution issued $126.5 million principal amount of 11
1/4% Senior Debentures due 2005 (the "Senior Debentures") in a public offering.
Substantially all the net proceeds of the offering (approximately $122 million)
were applied to redeem debt of Distribution issued in connection with the
acquisition of AmeriSource by Distribution in 1988 at a redemption price of
100% of the principal amount thereof, plus accrued and unpaid interest thereon
through the date of redemption.
On July 26, 1993, Distribution redeemed the Senior Subordinated Debentures
and the Junior Subordinated Dentures. As of July 26, 1993, the Company had
outstanding $21.7 million principal amount of Senior Subordinated Debentures
and $39.2 million principal amount of Junior Subordinated Debentures. On the
date of redemption, VPI owned approximately $21.3 million principal amount of
Senior Subordinated Debentures and $37.9 million principal amount of Junior
Subordinated Debentures, certain investors currently or previously affiliated
with VPI owned $0.4 million principal amount of Senior Subordinated Debentures
and $0.8 million principal amount of Junior Subordinated Debentures and the
Management Investors owned $0.5 million principal amount of Junior Subordinated
Debentures. All the amounts set forth above include accrued and unpaid
interest. As a result of the redemption of the Senior Subordinated Debentures
and the Junior Subordinated Debentures, VPI, certain investors currently or
previously affiliated with VPI and the Management Investors were paid $59.2
million, $1.2 million and $0.5 milliion, respectively.
In the first quarter of fiscal 1995, the Company sold substantially all of
its trade accounts and notes receivable (the "Receivables") to AmeriSource
Receivables Corporation ("ARC"), a special purpose wholly-owned subsidiary,
pursuant to a trade receivables securitization program (the "Receivables
Program"). As contemplated by the Receivables Program, the Company formed and
capitalized ARC through a contribution of $40 million. Contemporaneously, the
Company entered into a Receivables Purchase Agreement with ARC, whereby ARC
agreed to purchase on a continuous basis Receivables originated by the Company.
Pursuant to the Receivables Program, ARC will transfer such Receivables to a
master trust in exchange for, among other things, certain trade receivables-
backed certificates (the "Certificates") representing a right to receive a
variable principal amount. Contemporaneously, Certificates in an aggregate
principal amount of up to $230 million face amount were sold to investors.
During the five year term of the Trade Receivables Program, the cash generated
by collections on the Receivables will be used to purchase, among other things,
additional Receivables originated by the Company. The Certificates bear
interest at a rate selected by the Company equal to (i) the higher of (a) the
prime lending rate of Bankers Trust Company and (b) the federal funds rate plus
50 basis points or (ii) LIBOR plus 50 basis points. In addition, during the
first seventy five days of the Receivables Program, the Company may select an
interest rate equal to the federal funds rate plus 125 basis points. The
interest rates for the Certificates are subject to step-ups to a maximum amount
of an additional 100 basis points over the otherwise applicable rate.
At the same time that it entered into the Trade Receivables Transaction, the
Company and its senior lenders amended its existing Revolving Credit Agreement.
Among other things, the Amended and Restated Credit Agreement: (i) extended the
term of the Credit Agreement until January 3, 2000; (ii) established the amount
the Company may borrow at $380 million; (iii) reduced the initial borrowing
rate to LIBOR plus 225 basis points and provided interest rate stepdowns upon
the occurrence of certain events; (iv) modified the borrowing base availability
from inventory and receivable based to inventory based; and (v) increased the
Company's and Distribution's ability to make acquisitions and pay dividends.
73
<PAGE>
Contemporaneously with the consummation of the Trade Receivables Transaction
and the execution of the Amended and Restated Credit Agreement, the Company
called for optional redemption all of the outstanding Notes at a redemption
price of 106% of the principal amount plus accrued interest through the
redemption date of January 12, 1995.
During fiscal years 1992, 1993 and 1994, Dechert Price & Rhoads performed,
and currently does perform, legal services for the Company and AmeriSource.
Barton J. Winokur, a partner of Dechert Price & Rhoads and a director of the
Company and AmeriSource, owns 5,000 shares of the Class A Common Stock of the
Company.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)(1) AND (2) LIST OF FINANCIAL STATEMENTS AND SCHEDULES.
Financial Statements: The following consolidated financial statements are
submitted in response to Item 14(a)(1):
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Amerisource Corporation and Subsidiaries
Report of Ernst & Young LLP, independent auditors......................... 25
Consolidated Balance Sheets as of September 30, 1994 and 1993............. 26
Consolidated Statements of Operations for the fiscal years ended September
30, 1994, 1993 and 1992.................................................. 28
Consolidated Statements of Changes in Stockholder's Equity for the fiscal
years ended September 30, 1994, 1993 and 1992............................ 29
Consolidated Statements of Cash Flows for the fiscal years ended September
30, 1994, 1993 and 1992.................................................. 30
Notes to Consolidated Financial Statements................................ 31
AmeriSource Distribution Corporation and Subsidiaries (parent of
AmeriSource Corporation) Report of Ernst & Young LLP, independent
auditors.................................................................. 44
Consolidated Balance Sheets as of September 30, 1994 and 1993............. 45
Consolidated Statements of Operations for the fiscal years ended September
30, 1994, 1993 and 1992.................................................. 47
Consolidated Statements of Changes in Stockholders' Equity for the fiscal
years ended September 30, 1994, 1993 and 1992............................ 48
Consolidated Statements of Cash Flows for the fiscal years ended September
30, 1994, 1993 and 1992.................................................. 49
Notes to Consolidated Financial Statements................................ 50
</TABLE>
Financial Statement Schedules: The following financial statement schedules
are submitted in response to Item 14(a)(2) and Item 14(d):
<TABLE>
<S> <C>
AmeriSource Corporation and Subsidiaries
Schedule VIII--Valuation and Qualifying Accounts.......................... S-1
AmeriSource Distribution Corporation and Subsidiaries (parent of
AmeriSource Corporation)
Schedule III--Condensed Financial Information of Distribution as of and
for the fiscal years ended September 30, 1994 and 1993....... S-2
Schedule VIII--Valuation and Qualifying Accounts.......................... S-4
</TABLE>
74
<PAGE>
All other schedules for which provision is made in the applicable accounting
regulations of the SEC are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(a)(3) List of Exhibits.*
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Certificate of Incorporation of Distribution, as amended.
3.2 By-Laws of Distribution (incorporated by reference to Exhibit 3.2 to
Distribution's Registration Statement on Form S-1, Amendment No. 1,
Registration No. 33-44244).
3.3 Certificate of Incorporation of AmeriSource, as amended.
3.4 By-laws of AmeriSource (incorporated by reference to Exhibit 3.4 to
Distribution's and AmeriSource's Annual Report on Form 10-K for the
fiscal year ended September 30, 1989).
4.1 Form of Indenture, dated as of September 25, 1989, between the former
AmeriSource Distribution Corporation, previously known as AHSC
Acquisition Corp. ("Acquisition") and Mellon Bank, N.A., as trustee
relating to the Senior Subordinated Notes due 1999 of Acquisition (the
"Senior Subordinated Notes") including the form of Senior Subordinated
Note (incorporated by reference to Exhibit 4.6 to Amendment No. 4,
filed September 15, 1989, to the Registration Statement on Form S-1,
Registration No. 33-27835).
4.2 Indenture, dated as of May 30, 1986, between AmeriSource and Bankers
Trust Company, as trustee relating to the 6 1/4% Convertible
Subordinated Debentures due 2001 of AmeriSource (the "Convertible
Debentures") including the form of Convertible Debenture (incorporated
by reference to Exhibit 4 to AmeriSource's Current Report, dated July
1, 1986, on Form 8-K).
4.3 First Supplemental Indenture, dated as of October 30, 1989, to
Indenture, dated as of September 25, 1989 (incorporated by reference
to Exhibit 4.21 to Distribution's and AmeriSource's Annual Report on
Form 10-K for the fiscal year ended September 30, 1989).
4.4 Second Supplemental Indenture, dated as of October 31, 1989, to
Indenture, dated as of September 25, 1989 (incorporated by reference
to Exhibit 4.22 to Distribution's and AmeriSource's Annual Report on
Form 10-K for the fiscal year ended September 30, 1989).
4.5 First Supplemental Indenture, dated as of October 31, 1989, to
Indenture, dated as of May 30, 1986 (incorporated by reference to
Exhibit 4.23 to Distribution's and AmeriSource's Annual Report on Form
10-K for the fiscal year ended September 30, 1989).
4.6 Second Supplemental Indenture, dated as of October 31, 1989, to
Indenture, dated as of May 30, 1986 (incorporated by reference to
Exhibit 4.24 to Distribution's and AmeriSource's Annual Report on Form
10-K for the fiscal year ended September 30, 1989).
4.7 Indenture dated July 15, 1993 between Distribution and Security Trust
Company, N.A., as trustee relating to the 11 1/4% Senior Debentures
due 2005 (the "Senior Debentures") of Distribution including the form
of the Senior Debentures (incorporated by reference to Exhibit 4 to
Distribution's and AmeriSource's Form 10-Q for the quarter ended June
30, 1993).
4.8 Indenture, dated as of March 31, 1994, between AmeriSource and Bankers
Trust Company, as Trustee relating to the 41 1/2% Senior Subordinated
Notes due 1999, Series A (incorporated by reference to Exhibit 4 to
Distribution's and AmeriSource's Form 10-Q for the quarter ended March
31, 1994).
4.9 Agreement, dated as of April 28, 1994 by and among AmeriSource W. R.
Huff Asset Management Co., L.P. and certain holders of AmeriSource's
14 1/2% Senior Subordinated Notes due 1999 (incorporated by reference
to Exhibit 4 to Distribution's and AmeriSource's Form 10-Q for the
quarter ended March 31, 1994).
4.10 Amended and Restated Credit Agreement, dated as of December 13, 1994
among AmeriSource, General Electric Capital Corporation individually
and as agent, Bankers Trust Company, as co-agent, and the banks and
other financial institutions named therein.
4.11 Receivables Purchase Agreement, dated as of December 13, 1994 between
AmeriSource Corporation, as Seller and AmeriSource Receivables
Corporation, as Purchaser.
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.12 AmeriSource Receivables Master Trust Pooling and Servicing Agreement,
dated as of December 13, 1994 among AmeriSource Receivables
Corporation, as transferor, AmeriSource Corporation, as the initial
Servicer, and Manufacturers and Traders Trust Company, as Trustee.
4.13 Revolving Certificate Purchase Agreement, dated as of December 13,
1994 among AmeriSource Receivables Corporation, AmeriSource
Corporation, The Revolving Purchasers and Bankers Trust Company, as
Agent and Revolving Purchaser.
4.14 Series 1994-1 Supplement to Pooling and Servicing Agreement, dated as
of December 13, 1994 among AmeriSource Receivables Corporation, as
transferor, AmeriSource Corporation, as initial Servicer, and
Manufacturers and Traders Trust Company, as Trustee.
10.1 Stock Purchase and Stockholders' Agreement, dated December 29, 1988,
among Drexel Burnham Lambert Incorporated, the other purchasers named
therein, Distribution and Citicorp Venture Capital Ltd. (incorporated
by reference to Exhibit 10.3 to the Registration Statement on Form S-
1, Registration No. 33-27835, filed March 29, 1989).
10.2 Stock Purchase Agreement, dated as of December 29, 1988, among
Distribution, Anthony C. Howkins, The NTC Group, Inc., Barton J.
Winokur and Citicorp Venture Capital Ltd. (incorporated by reference
to Exhibit 10.4 to the Registration Statement on Form S-1,
Registration No. 33-27835, filed March 29, 1989).
10.3 AmeriSource Master Pension Plan (incorporated by reference to Exhibit
10.9 to the Registration Statement on Form S-1, Registration No. 33-
27835, filed March 29, 1989).
10.4 AmeriSource 1988 Supplemental Retirement Plan (incorporated by
reference to Exhibit 10.10 to the Registration Statement on Form S-1,
Registration No. 33-27835, filed March 29, 1989).
10.5 AmeriSource 1985 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.1 to AmeriSource's Annual Report on Form 10-K for the
fiscal year ended September 30, 1985).
10.6 Distribution and Subsidiaries Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.13 to Amendment No. 1, filed
August 15, 1989, to the Registration Statement on Form S-1,
Registration No. 33-27835).
10.7 Form of Securities Purchase and Holders Agreement among Distribution,
Citicorp Venture Capital Ltd. and a Management Investor (incorporated
by reference to Exhibit 10.14 to Amendment No. 1, filed August 15,
1989, to the Registration Statement on Form S-1, Registration No. 33-
27835).
10.8 Form of Subordinated Debt Purchase Agreement between Distribution and
a Management Investor (incorporated by reference to Exhibit (c)(5) to
Amendment No. 1, filed August 15, 1989, to the Schedule 13E-3).
10.9 Form of Non-qualified Stock Option Plan Agreement between Distribution
and a Management Investor (incorporated by reference to Exhibit (c)(4)
to Amendment No. 1, filed August 15, 1989, to the Schedule 13E-3).
10.10 Form of Take-Along and Registration Rights Agreement between
Distribution and Citicorp Venture Capital Ltd. (incorporated by
reference to Exhibit 4.19 to Amendment No. 2, filed September 7, 1989,
to the Registration Statement on Form S-1, Registration No. 33-27835).
10.11 Distribution 1991 Stock Option Plan (incorporated by reference to
Exhibit 10.33 to Distribution's Registration Statement on Form S-1,
Amendment No. 1, Registration No. 33-44244).
10.12 Distribution 1992 Stock Option Plan (incorporated by reference to
Exhibit 10.34 to Distribution's Registration Statement on Form S-1,
Amendment No. 1, Registration No. 33-44244).
10.13 Agreement, dated October 14, 1994, among certain manufacturers and
wholesalers of prescription products, including AmeriSource
Corporation.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
16 Not Applicable.
18 Not Applicable.
19 Not Applicable.
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
21 Subsidiaries of AmeriSource and Distribution.
23 Not Applicable.
24 Not Applicable.
28 Not Applicable.
29 Not Applicable.
</TABLE>
- - - --------
* Copies of the exhibits will be furnished to any security holder of
AmeriSource or Distribution upon payment of the reasonable cost of
reproduction.
(b) Reports on Form 8-K.
Neither AmeriSource nor Distribution filed a Current Report on Form 8-K
during the fiscal quarter ended September 30, 1994.
77
<PAGE>
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.
AmeriSource Corporation
Date: December 22, 1994 By: /s/ John A. Kurcik
---------------------------------
(JOHN A. KURCIK)
VICE PRESIDENT
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON DECEMBER 22, 1994 BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
/s/ John F. McNamara Chairman, President
- - - ------------------------------------- and Chief Executive
(JOHN F. MCNAMARA) Officer (Principal
Executive Officer
and Principal
Financial Officer)
Director
- - - -------------------------------------
(BRUCE C. BRUCKMANN)
/s/ Richard C. Gozon Director
- - - -------------------------------------
(RICHARD C. GOZON)
/s/ Lawrence C. Karlson Director
- - - -------------------------------------
(LAWRENCE C. KARLSON)
/s/ Harold O. Rosser Director
- - - -------------------------------------
(HAROLD O. ROSSER)
/s/ George Strong Director
- - - -------------------------------------
(GEORGE STRONG)
/s/ Barton J. Winokur Director
- - - -------------------------------------
(BARTON J. WINOKUR)
<PAGE>
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.
AmeriSource Distribution Corporation
Date: December 22, 1994 By: /s/ John A. Kurcik
---------------------------------
(JOHN A. KURCIK)
VICE PRESIDENT
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON DECEMBER 22, 1994 BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
/s/ John F. McNamara Chairman, President
- - - ------------------------------------- and Chief Executive
(JOHN F. MCNAMARA) Officer (Principal
Executive Officer
and Principal
Financial Officer)
Director
- - - -------------------------------------
(BRUCE C. BRUCKMANN)
/s/ Richard C. Gozon Director
- - - -------------------------------------
(RICHARD C. GOZON)
/s/ Lawrence C. Karlson Director
- - - -------------------------------------
(LAWRENCE C. KARLSON)
/s/ Harold O. Rosser Director
- - - -------------------------------------
(HAROLD O. ROSSER)
/s/ George Strong Director
- - - -------------------------------------
(GEORGE STRONG)
/s/ Barton J. Winokur Director
- - - -------------------------------------
(BARTON J. WINOKUR)
<PAGE>
AMERISOURCE CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - - -------------------------------------------------------------------------------------
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES -DESCRIBE DESCRIBE(1) PERIOD
- - - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMERISOURCE CORPORATION
AND SUBSIDIARIES
- - - ------------------------
YEAR ENDED SEPTEMBER 30,
1994
Allowance for doubtful
accounts.............. $7,681,000 $4,612,000 $2,923,000 $9,370,000
========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30,
1993
Allowance for doubtful
accounts.............. $6,952,000 $3,186,000 $2,457,000 $7,681,000
========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30,
1992
Allowance for doubtful
accounts.............. $7,627,000 $3,443,000 $4,118,000 $6,952,000
========== ========== ========== ==========
</TABLE>
- - - --------
(1) Accounts written off during year, net of recoveries.
S-1
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERISOURCE DISTRIBUTION CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
ASSETS
<S> <C> <C>
Cash..................................... $ 38 $ 38
Receivable from AmeriSource Corporation.. 15,300 7,373
Deferred financing costs and other....... 4,964 5,343
Investment at equity in AmeriSource Cor-
poration (accumulated losses of
AmeriSource in excess of investment).... (171,472) 28,908
--------- --------
$(151,170) $ 41,662
========= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Accrued Expenses......................... $ 5,543 $ 5,593
Long-Term Debt
Senior debentures...................... 144,013 129,109
Stockholders' Equity
Common Stock, $.01 par value
Class A (Voting and convertible):
30,000,000 shares authorized;
180,387 1/2 shares issued........... 2 2
Class B (Non-voting and convertible):
30,000,000 shares authorized;
4,400,300 shares issued............. 44 44
Class C (Non-voting and convertible):
2,000,000 shares authorized; 500,000
shares issued....................... 5 5
Capital in excess of par value......... 4,775 4,775
Retained earnings (deficit)............ (304,984) (97,313)
Cost of common stock in treasury....... (568) (553)
--------- --------
(300,726) (93,040)
--------- --------
$(151,170) $ 41,662
========= ========
</TABLE>
S-2
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERISOURCE DISTRIBUTION CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
<S> <C> <C>
Revenues................................. $ $ 65
Administrative expenses.................. 104 430
Interest expense......................... 15,338 20,273
--------- --------
(Loss) Before Taxes, Extraordinary Items,
Cumulative Effects of Accounting Changes
and Equity in Net Income (Loss) of
Subsidiary.............................. (15,442) (20,638)
Equity in net income (loss) of subsidiary
before extraordinary items and
cumulative effects of accounting
changes................................. (172,241) 6,590
Income tax (benefit)..................... (15,266) (6,574)
--------- --------
(Loss) Before Extraordinary Items and
Cumulative Effects of Accounting
Changes................................. (172,417) (7,474)
Extraordinary Charge--early retirement of
debt, net of income tax benefit......... (656) (11,890)
Extraordinary Credits:
Reduction of income tax provision of
subsidiary from carryforward of prior
year operating losses.................. 484
Reduction of income tax provision of
Distribution from carryforward of
prior year operating losses............ 262
Cumulative effect of change in accounting
for postretirement benefits other than
pensions................................ (1,199)
Cumulative effect of change in accounting
for income taxes........................ (33,399)
--------- --------
Net (Loss)............................ $(207,671) $(18,618)
========= ========
(Loss) Per Share
(Loss) Before Extraordinary Items and
Cumulative Effects of Accounting
Changes................................ $ (34.48) $ (1.49)
Extraordinary Items..................... (.13) (2.23)
Cumulative Effect of Change in
Accounting for Postretirement Benefits
Other Than Pensions.................... (.24)
Cumulative Effect of Change in
Accounting for Income Taxes............ (6.68)
--------- --------
Net (Loss)............................ $ (41.53) $ (3.72)
========= ========
</TABLE>
----------------
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss).............................. $(207,671) $ (18,618)
Adjustments to reconcile net (loss) to
net cash provided by (used in)
operating activities:
Amortization.......................... 434 78
Equity in net (income) loss of
subsidiary........................... 207,728 (1,190)
Loss on early retirement of debt...... 6,787
Debentures issued in lieu of payment
of interest.......................... 14,904 20,378
Income tax benefit invested in
AmeriSource Corporation.............. (7,348) (5,127)
Changes in operating assets and
liabilities:
Receivable from AmeriSource
Corporation........................ (7,927) (3,083)
Accrued expenses.................... (50) 63
Deferred compensation............... (539)
Miscellaneous....................... 10 (300)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES............... 80 (1,551)
FINANCING ACTIVITIES
Long-term debt borrowings............... 126,500
Long-term debt repayments............... (120,134)
Deferred financing costs................ (55) (5,140)
Capital contribution.................... 346
Repurchase of stock options............. (10) (18)
Purchases of treasury stock............. (15) (3)
--------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES............... (80) 1,551
INCREASE IN CASH......................... -0- -0-
Cash at beginning of year................ 38 38
--------- ---------
CASH AT END OF YEAR...................... $ 38 $ 38
========= =========
</TABLE>
S-3
<PAGE>
AMERISOURCE DISTRIBUTION CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - - -------------------------------------------------------------------------------------
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES -DESCRIBE DESCRIBE(1) PERIOD
- - - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMERISOURCE DISTRIBUTION
CORPORATION AND
SUBSIDIARIES (PARENT OF
AMERISOURCE CORPORATION)
- - - ------------------------
YEAR ENDED SEPTEMBER 30,
1994
Allowance for doubtful
accounts.............. $7,681,000 $4,612,000 $2,923,000 $9,370,000
========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30,
1993
Allowance for doubtful
accounts.............. $6,952,000 $3,186,000 $2,457,000 $7,681,000
========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30,
1992
Allowance for doubtful
accounts.............. $7,627,000 $3,443,000 $4,118,000 $6,952,000
========== ========== ========== ==========
</TABLE>
- - - --------
(1) Accounts written off during year, net of recoveries.
S-4
<PAGE>
(ART)
AMERISOURCE CORPORATION
AmeriSource Distribution Corporation
P.O. Box 959 Valley Forge, PA 19482
610.296.4480
Cover Printed on Recycled Paper
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
AMERISOURCE DISTRIBUTION CORPORATION
1. Name. The name of the corporation is AmeriSource Distribution
----
Corporation (the "Corporation").
2. Registered Office and Agent. The address of its registered office
---------------------------
in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its registered agent
at such address is The Corporation Trust Company.
3. Purpose. The purposes for which the Corporation is formed are to
-------
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware and to possess and exercise all of
the powers and privileges granted by such law and other law of Delaware.
4. Authorized Capital. The aggregate number of shares of stock which
------------------
the Corporation shall have authority to issue is 67,000,000 shares, divided into
four (4) classes consisting of 5,000,000 shares of Preferred Stock, par value
$.01 per share ("Preferred Stock"); 30,000,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"); 30,000,000 shares of Class B
Common Stock, par value $.01 per share ("Class B Common Stock"); and 2,000,000
shares of Class C Common Stock, par value $.01 per share ("Class C Common
Stock"). Class A Common Stock, Class B Common Stock and Class C Common Stock are
collectively referred to herein as "Common Stock".
The following is a statement of the designations, preferences,
qualifications, limitations, restrictions and the special or relative rights
granted to or imposed upon the shares of each such class.
(a) PREFERRED STOCK
(i) Issue in Series. Preferred Stock may be issued from time to
---------------
time in one or more series, each such series to have the terms stated herein and
in the resolution of the Board of Directors of the Corporation providing for its
issue. All shares of any one series of Preferred Stock will be identical, but
shares of different series of Preferred Stock need not be identical or rank
equally except insofar as provided by law or herein.
<PAGE>
(ii) Creation of Series. The Board of Directors will
have authority by resolution to cause to be created one or more series of
Preferred Stock, and to determine and fix with respect to each series prior
to the issuance of any shares of the series to which such resolution relates:
(A) The distinctive designation of the series and the
number of shares which will constitute the series, which number may be increased
or decreased (but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors;
(B) The dividend rate and the times of payment of dividends
on the shares of the series, whether dividends will be cumulative, and if so,
from what date or dates;
(C) The price or prices at which, and the terms and
conditions on which, the shares of the series may be redeemed at the option of
the Corporation;
(D) Whether or not the shares of the series will be
entitled to the benefit of a retirement or sinking fund to be applied to the
purchase or redemption of such shares and, if so entitled, the amount of such
fund and the terms and provisions relative to the operation thereof;
(E) Whether or not the shares of the series will be
convertible into, or exchangeable for, any other shares of stock of the
Corporation or other securities, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and any adjustments
thereof, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(F) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(G) Whether or not the shares of the series will have
priority over or be on a parity with or be junior to the shares of any other
series or class in any respect or will be entitled to the benefit of limitations
restricting the issuance of shares of any other series or class having priority
over or being on a parity with the shares of such series in any respect, or
restricting the payment of dividends on or the making of other distributions in
respect of shares of any other series or class ranking junior to the shares of
the series as to dividends or assets, or restricting the purchase or redemption
of the shares of any such junior series or class, and the terms of any such
restriction;
(H) Whether the series will have voting rights, in addition
to any voting rights provided by law, and, if so, the terms of such voting
rights; and
- 2 -
<PAGE>
(I) Any other preferences, qualifications, privileges,
options and other relative, participating, optional or other special rights and
limitations or restrictions of that series.
(iii) Dividends. Holders of Preferred Stock shall be entitled
---------
to receive, when and as declared by the Board of Directors, out of funds legally
available for the payment thereof, dividends at the rates fixed by the Board of
Directors for the respective series, and no more, before any dividends shall be
declared and paid, or set apart for payment, on Common Stock with respect to the
same dividend period.
(iv) Preference on Liquidation. In the event of the voluntary or
-------------------------
involuntary liquidation, dissolution or winding up of the Corporation, holders
of each series of Preferred Stock will be entitled to receive the amount fixed
for such series plus, in the case of any series on which dividends will have
been determined by the Board of Directors to be cumulative, an amount equal to
all dividends accumulated and unpaid thereon to the date of final distribution
whether or not earned or declared before any distribution shall be paid, or set
aside for payment, to holders of Common Stock. If the assets of the Corporation
are not sufficient to pay such amounts in full, holders of all shares of
Preferred Stock will participate in the distribution of assets ratably in
proportion to the full amounts to which they are entitled or in such order or
priority, if any, as will have been fixed in the resolution or resolutions
providing for the issue of the series of Preferred Stock. Neither the merger nor
consolidation of the Corporation into or with any other corporation, nor a sale,
transfer or lease of all or part of its assets, will be deemed a liquidation,
dissolution or winding up of the corporation within the meaning of this
paragraph except to the extent specifically provided for herein.
(v) Redemption. The Corporation, at the option of the Board of
----------
Directors, may redeem all or part of the shares of any series of Preferred Stock
on the terms and conditions fixed for such series.
(vi) Voting Rights. Except as otherwise required by law, as
-------------
otherwise provided herein or as otherwise determined by the Board of Directors
as to the shares of any series of Preferred Stock prior to the issuance of any
such shares, the holders of Preferred Stock shall have no voting rights and
shall not be entitled to a notice of meeting of stockholders.
(b) CLASS A, CLASS B AND CLASS C COMMON STOCK
Except as otherwise provided herein, all shares of Class A Common
Stock, Class B Common Stock and Class C Common Stock will be identical and will
entitle the holders thereof to the same rights and privileges.
(i) Certain Definitions. As used herein, the following terms will
-------------------
have the meanings set forth below:
- 3 -
<PAGE>
(A) "Accredited Investor" shall have the meaning set forth
for such term in Rule 501 of Regulation D promulgated under the Securities Act,
as such Regulation may be amended from time to time.
(B) "Brokers' Transactions" shall mean a sale of shares of
Common Stock which are effected pursuant to a transaction by a broker in which
such broker (i) does no more than execute the order or orders to sell the shares
as agent for the person for whose account the shares are sold, and receives no
more than the usual and customary broker's commission; and (ii) neither solicits
nor arranges for the solicitation of customers' orders to buy the shares in
anticipation of or in connection with the transaction; provided, that the
foregoing shall not preclude (a) inquiries by the broker of other brokers or
dealers who have indicated an interest in the shares within the preceding 60
days, (b) inquiries by the broker of his customers who have indicated an
unsolicited bona fide interest in the shares within the preceding 10 business
days; or (c) the publication by the broker of bid and ask quotations for the
shares in an inter-dealer quotation system provided that such quotations are
incident to the maintenance of a bona fide inter-dealer market for the shares
for the broker's own account and that the broker has published bona fide bid and
ask quotations for the shares in an inter-dealer quotation system on each of at
least twelve days within the preceding thirty calendar days with no more than
four business days in succession without such two-way quotations.
(C) "Convertible Securities" shall mean evidences of
indebtedness, shares of stock, options, warrants or other securities which are
convertible into or exchangeable or exercisable for, with or without payment of
additional consideration of cash or property, shares of Common Stock.
(D) "Holdback Period" shall mean the period beginning on the
day a registration statement filed under the Securities Act and relating to a
Subsequent Public Offering is declared effective by the Securities and Exchange
Commission (or its successor agency) and ending on the 90th day after the
closing of the sale of shares pursuant to such Subsequent Public Offering.
(E) "Public Sale" shall mean a sale of shares of Common
Stock which meets all of the following requirements: (i) the securities shall be
sold in Brokers' Transactions or in transactions directly with a "market maker,"
as that term is defined in Section 3(a)(38) of the Securities
- 4 -
<PAGE>
Exchange Act of 1934, as amended; (ii) the person selling the shares shall not
(1) solicit or arrange for the solicitation of orders to buy the shares in
anticipation of or in connection with such transactions or (2) make any payment
in connection with the offer or sale of the shares to any person other than the
broker who executed the order to sell the shares; and (iii) the terms of the
sale of such shares to the purchaser thereof have not been privately
negotiation.
(F) "Securities Act" shall mean the Securities Act of 1933,
as amended.
(G) "Subsequent Public Offering" shall mean the closing of
a sale in an underwritten offering, whether primary or secondary, of any shares
of Common Stock or Convertible Securities, pursuant to an effective registration
statement under the Securities Act (other than a Unit Offering, a registration
statement on Forms S-8 or S-4 or any successor forms or any other registration
statement relating to a special offering to employees or security holders),
unless such Common Stock or Convertible Securities that are the subject of such
registration statement are subject to restrictions substantially similar to the
restrictions with respect to Class C Common Stock set forth herein.
(H) "Transfer" shall mean the transfer, sale, assignment,
pledge, hypothecation or other disposition or encumbrance of shares of Common
Stock.
(I) "Transfer Restriction Termination Date" means the 90th
day after the closing of the first Subsequent Public Offering to occur after the
completion of the public offering of Class C Common Stock contemplated by the
Corporation's Registration Statement No. 33-27835 filed with the Securities and
Exchange Commission under the Securities Act.
(J) "Unit Offering" shall mean a public offering of a
combination of debt and equity securities of the Corporation and/or its
subsidiaries in which not more than 10% of the gross proceeds received by the
Corporation and its subsidiaries from the sale of such securities is
attributable to such equity securities, provided that after giving effect to
such offering, the Corporation does not have a class of equity securities
required to be registered under the Securities Exchange Act of 1934, as amended.
- 5 -
<PAGE>
(ii) Dividends. Holders of Common Stock will be entitled to
---------
receive such dividends as may be declared by the Board of Directors, provided
--------
that if dividends are declared which are payable in shares of Class A Common
Stock, Class B Common Stock or Class C Common Stock, dividends will be declared
which are payable at the same rate on each other class of Common Stock and the
dividends payable in shares of Class A Common Stock will be payable to holders
of Class A Common Stock, the dividends payable in shares of Class B Common
Stock, and the dividends payable in shares of Class C Common Stock will be
payable to holders of Class C Common Stock.
(iii) Conversion.
----------
(A) Class A Common Stock and Class B Common Stock. Each
---------------------------------------------
record holder of Class A Common Stock will be entitled to convert any or all of
such holder's Class A Common Stock into the same number of shares of Class B
Common Stock and each record holder of Class B Common Stock will be entitled to
convert any or all of the shares of such holder's Class B Common Stock into the
same number of shares of Class A Common Stock; provided, however, that at the
-------- -------
time of conversion of shares of Class B Common Stock into shares of Class A
Common Stock such holder would be permitted, pursuant to applicable law, to hold
the total number of shares of Class A Common Stock which he would hold after
giving effect to such conversion.
Each conversion of shares of Class A Common Stock into
shares of Class B Common Stock, or shares of Class B Common Stock into shares of
Class A Common Stock, as the case may be, will be effected by the surrender of
the certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such shares stating the number
of shares that any such holder desires to convert into the other class of Common
Stock. Such conversion will be deemed to have been effected as of the close of
business on the date on which such certificate or certificates have been
surrendered and such notice has been received by the Corporation, and at such
time the rights of any such holder with respect to the converted class of Common
Stock will cease and the person or persons in whose name or names the
certificate or certificates for shares of the other class of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of such other class of Common Stock represented
thereby. Promptly after such surrender
- 6 -
<PAGE>
and the receipt by the Corporation of the written notice from the holder
hereinbefore referred to, the Corporation will issue and deliver in accordance
with the surrendering holder's instructions the certificate or certificates for
the other class of Common Stock issuable upon such conversion and a certificate
representing any shares of Common Stock which were represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but which were not converted. The issuance of Certificates for the
other class of Common Stock upon conversion will be made without charge to the
holder or holders of such shares for any issuance tax (except stock transfer
taxes) in respect thereof or other cost incurred by the Corporation in
connection with such conversion.
(B) Class C Common Stock. A share of Class C Common Stock
--------------------
will automatically be converted into a share of Class A Common Stock (i)
immediately prior to its sale in a Subsequent Public Offering, or (ii) at such
time as such share of Class C Common Stock has been sold in a Public Sale after
a Subsequent Public Offering, and in compliance with the maximum quantity
limitations as set forth in paragraph 4(b)(iv)(C) hereof, if such maximum
quantity limitations remain in effect. On the date of such automatic conversion,
all rights with respect to the Class C Common Stock so converted will terminate,
except for the rights of the holders thereof, upon surrender of their
certificate or certificates therefor, to receive certificates for an equal
number of shares of Class A Common Stock.
As soon as practical after the date of such automatic
conversion, the holder of shares of Class C Common Stock so converted shall
surrender to the Corporation the certificate or certificates representing the
shares so converted, and thereafter the Corporation shall cause to be issued and
delivered to such holder a certificate for the number of shares of Class A
Common Stock issuable upon such conversion in accordance with the provisions
hereof. All certificates evidencing shares of Class C Common Stock which are
automatically converted into Class A Common Stock in accordance with the
provisions hereof shall, from and after the dates such certificates are so
converted, be deemed to have been retired and cancelled and the shares of Class
C Common Stock represented thereby converted into Class A Common Stock for all
purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates to the Corporation. The Corporation may thereafter
take such appropriate action as may be necessary to reduce the authorized shares
of Class C Common Stock accordingly. Upon such automatic conversion of a share
of Class
-7-
<PAGE>
C Common Stock into a share of Class A Common Stock, such share will no longer
be subject to any of the restrictions on transfer described herein.
(iv) Restrictions on Transfer.
------------------------
(A) Restrictions Prior to Transfer Restriction Termination Date
-----------------------------------------------------------
and During Holdback Period. Except as provided in paragraph 4(b)(iv)(B)
- - - --------------------------
hereof, prior to and on the Transfer Restriction Termination Date, and during
any Holdback Period, a holder of shares of Class C Common Stock may not effect a
Transfer of such shares, unless (1) the transferee is an Accredited Investor,
(2) the Transfer under consideration is a privately negotiated transaction and
(3) the number of shares of Class C Common Stock subject to the transfer is not
less than 2,500 shares. The minimum number of shares set forth in the previous
sentence shall be appropriately adjusted in the event of a stock split, reverse
stock split, stock dividend or similar transaction by the Corporation.
(B) Certain Exceptions. A Transfer of shares of Class C Common
------------------
Stock may be effected without regard to the provisions of paragraph 4(b)(iv)(A)
hereof under the following circumstances:
(1) If the holder of shares of Class C Common Stock is a
natural person, pursuant to will or the laws of descent and distribution;
(2) If the holder of shares of Class C Common Stock is not
a natural person, pursuant to a merger of such holder into, consolidation of
such holder with, or sale of all or substantially all of the assets of such
holder to, another entity;
(3) If the holder of shares of Class C Common Stock is not
a natural person, pursuant to the liquidation or dissolution (voluntary or
involuntary) or winding up of such holder; or
(4) In order to enable the holder to exchange or transfer
shares of Class C Common Stock in connection with a merger of the Corporation
into, or the consolidation of the Corporation with, a corporation (other than a
subsidiary of the Corporation) where such other corporation survives the merger.
- 8 -
<PAGE>
(C) Restrictions After Transfer Restriction Termination Date. Except
--------------------------------------------------------
during a Holdback Period, after the Transfer Restriction Termination Date, a
holder of shares of Class C Common Stock may transfer such shares free of any
restrictions on transfer contained herein, provided that, for a period of 270
days after the Transfer Restriction Termination Date, the number of shares of
Class C Common Stock sold publicly in brokers' transactions (within the meaning
of Section 4(4) of the Securities Act) by such holder and its affiliates,
together with the number of shares of Common Stock sold publicly in such
brokers' transactions by such holder and its affiliates within the preceding
three months, shall not exceed the greater of (i) one percent of the shares of
Common Stock outstanding as shown by the most recent report or statement
published by the Corporation, or (ii) the average weekly reported volume of
trading in Common Stock on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding the date of such transfer. The
calculation of the number of shares set forth in the preceding sentence shall be
made as if a paragraph (e)(3)(i) through paragraph (e)(3)(v) of Rule 144 under
the Securities Act (as in effect on September 14, 1989) were applicable.
(D) Effect of Restrictions; Legends.
--------------------------------
(1) Any purported Transfer in violation of the terms set forth
herein shall be null and void and of no force and effect, and the purported
transferee shall have no rights or privileges in or with respect to the
Corporation. Before the Corporation registers a Transfer of Class C Common
Stock on its stock record books, it may require proof, satisfactory to the
Corporation, that the Transfer complies with the restrictions on Transfer
contained herein. The Corporation shall, in its sole discretion, be entitled to
resolve any and all disputes relating to compliance with the restrictions on
Transfer set forth herein, including, but not limited to, the conversion of
shares of Class C Common Stock into shares of Class A Common Stock under
paragraph 4(b)(iii)(B) hereof.
(2) Certificates representing shares of Class C Common will bear
a legend indicating that such shares are subject to the restrictions on transfer
set forth herein.
(v) Transfers. The Corporation will not close its books against the
---------
transfer of any share of Common Stock, or of any share of Common Stock issued or
issuable upon conversion
- 9 -
<PAGE>
of shares of the other Class of Common Stock, in any manner that would interfere
with the timely conversion of such shares of Common Stock.
(vi) Subdivision and Combinations of Shares. If the Corporation in any
--------------------------------------
manner subdivides or combines the outstanding shares of any class of Common
Stock, the outstanding shares of the other classes of Common Stock will be
proportionately subdivided or combined.
(vii) Reservation of Shares for Conversion. So long as any shares of
------------------------------------
any class of Common Stock are outstanding, the Corporation will at all times
reserve and keep available out of its authorized but unissued shares of Class A
Common Stock and Class B Common Stock (or any shares of Class A Common Stock or
Class B Common Stock which are held as treasury shares), the number of shares
sufficient for issuance upon conversion.
(viii) Distribution of Assets. In the event of the voluntary or
----------------------
involuntary liquidation, dissolution or winding up of the Corporation, holders
of Common Stock will be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders after all
amounts to which the holders of Preferred Stock are entitled have been paid or
set aside in cash for payment.
(ix) Voting Rights. The holders of Class A Common Stock shall have the
-------------
general right to vote for all purposes, including the election of directors, as
provided by law. Each holder of Class A Common Stock shall be entitled to one
vote for each share thereof held. Except as otherwise required by law, the
holders of Class B Common Stock and Class C Common Stock shall have no voting
rights.
(x) Merger, etc. In connection with any merger, consolidation, or
-----------
recapitalization in which holders of Class A Common Stock generally receive, or
are given, the opportunity to receive, consideration for their shares (a) all
holders of Class B Common Stock and Class C Common Stock shall be given the
opportunity to receive the same form of consideration for their shares as is
received by holders of Class A Common Stock and (b) holders of Class B Common
Stock and Class C Common Stock shall be entitled to receive the same amount of
consideration per share as received by holders of Class A Common Stock.
- 10 -
<PAGE>
5. Incorporator. The name and mailing address of the incorporator are as
------------
follows:
Name Mailing Address
---- ---------------
Cathyann Bixby 3400 Centre Square West
1500 Market Street
Philadelphia, PA 19102
6. Term. The corporation is to have perpetual existence.
----
7. Bylaws. The bylaws of the Corporation may be altered, amended or
------
repealed by the vote of a majority of all of the directors or by the vote of
holders of a majority of the outstanding stock entitled to vote.
8. Election of Directors. Election of directors need not be by written
---------------------
ballot unless the bylaws of the Corporation shall so provide.
9. Right to Amend. The Corporation reserves the right to amend the
--------------
provisions in this certificate and in any certificate amendatory hereof in the
manner now or hereafter prescribed by law, and all rights conferred on
stockholders or others hereunder or thereunder are granted subject to such
reservation.
10. Unanimous Written Consent Required. If any action is to be taken by
----------------------------------
stockholders without a meeting, such action must be authorized by unanimous
written consent signed by all of the holders of outstanding voting stock.
11. Limitation on Liability. The directors of the Corporation shall be
-----------------------
entitled to the benefits of all limitations on the liability of directors
generally that are now or hereafter become available under the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
no director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Any repeal or
modification of this Section 10 shall be prospective only, and shall not affect,
to the detriment of any director, any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed the
Certificate of Incorporation this 10th day of November, 1988.
/s/Cathyann Bixby
----------------------------
Cathyann Bixby, Incorporator
- 12 -
<PAGE>
Exhibit 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERISOURCE CORPORATION
AMERISOURCE CORPORATION (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies as follows:
A. The name of the corporation is AMERISOURCE CORPORATION. The
Corporation was originally incorporated under the same name and the date of
filing its original Certificate of Incorporation with the Secretary of State of
the State of Delaware was June 24, 1985.
B. This Restated Certificate of Incorporation restates and integrates and
does not further amend the provisions of the Certificate of Incorporation of
this Corporation as heretofore amended or supplemented and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
C. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors of the Corporation in accordance with Section 245 of the
General Corporation Law of the State of Delaware.
D. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read in its entirety as follows:
1. Name. The name of the Corporation is AmeriSource Corporation.
----
2. Registered Office and Agent. The address of the Corporation's
---------------------------
registered office in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
3. Purpose. The purposes for which the Corporation is formed are to
-------
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware and to possess and exercise all of
the powers and privileges granted by such law and any other law of Delaware.
4. Authorized Capital. The aggregate number of shares of stock which
------------------
the Corporation shall have authority to issue is One Thousand (1,000) shares,
all of which are of one class and are designated as Common Stock and each of
which has a par value of $.01.
<PAGE>
-2-
5. Bylaws. The board of directors of the Corporation is authorized to
------
adopt, amend or repeal the bylaws of the Corporation, except as otherwise
specifically provided therein.
6. Election of Directors. Election of directors need not be by written
---------------------
ballot unless the bylaws of the Corporation shall so provide.
7. Right to Amend. The Corporation reserves the right to amend any
--------------
provision contained in this Certificate as the same may from time to time be in
effect in the manner now or hereafter prescribed by law, and all rights
conferred on stockholders or others hereunder are subject to such reservation.
8. Limitation on Liability. The directors of the Corporation shall be
-----------------------
entitled to the benefits of all limitations on the liability of directors
generally that are now or hereafter become available under the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
no director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Any repeal or
modification of this Section 8 shall be prospective only, and shall not affect,
to the detriment of any director, any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned corporation has caused this Restated
Certificate of Incorporation to be executed in its name by its duly authorized
representatives this 28th day of August, 1990.
AMERISOURCE CORPORATION
By:/s/ Donald E. Steinbacher
-------------------------
Donald E. Steinbacher
Vice President, Administration
[Corporate Seal]
ATTEST:
By:/s/ Teresa T. Ciccotelli
------------------------
Teresa T. Ciccotelli
Secretary
<PAGE>
Exhibit 4.8
AMENDED AND RESTATED
CREDIT AGREEMENT
U.S. $380,000,000
Dated as of December 13, 1994
among
AMERISOURCE CORPORATION,
as Borrower,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and in its capacities as
the Administrative Agent and a Managing Agent,
and
BANKERS TRUST COMPANY,
individually and in its capacities as
the Issuing Lender and a Managing Agent,
and
BANKAMERICA BUSINESS CREDIT, INC.
and HELLER FINANCIAL, INC.,
as Co-Agents,
and
THE BANKS AND OTHER
FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- - - ------- ----
<S> <C>
1. DEFINITIONS AND RULES OF CONSTRUCTION........................... 2
-------------------------------------
1.1 Definitions............................................... 2
-----------
1.2 Rules of Construction..................................... 43
---------------------
2. AMOUNT AND TERMS OF CREDIT...................................... 44
--------------------------
2.1 Advances.................................................. 44
--------
2.2 Making the Loans........................................... 47
----------------
2.3 Letters of Credit.......................................... 48
-----------------
2.4 Mandatory Prepayment...................................... 55
--------------------
2.5 Optional Reduction of Maximum Loan or Advance
---------------------------------------------
Rate...................................................... 55
----
2.6 Use of Proceeds........................................... 56
---------------
2.7 Single Loan............................................... 56
-----------
2.8 Interest on Loans......................................... 56
-----------------
2.9 Special Provisions Governing LIBOR Rate Loans............. 59
---------------------------------------------
2.10 Eligible Inventory........................................ 63
------------------
2.11 Fees...................................................... 64
----
2.12 Cash Management System.................................... 65
----------------------
2.13 Receipt of Payments....................................... 66
-------------------
2.14 Application and Allocation of Payments.................... 66
--------------------------------------
2.15 Accounting................................................ 68
----------
2.16 Indemnity................................................. 68
---------
2.17 Access.................................................... 69
------
2.18 Taxes..................................................... 70
-----
2.19 Indemnification in Certain Events......................... 74
---------------------------------
2.20 Replacement of Commitments................................ 75
--------------------------
3. CONDITIONS PRECEDENT............................................ 76
--------------------
3.1 Conditions to Effectiveness of this Agreement............. 76
---------------------------------------------
3.2 Further Conditions........................................ 78
------------------
4. REPRESENTATIONS AND WARRANTIES.................................. 79
------------------------------
4.1 Corporate Existence; Compliance with Law.................. 79
----------------------------------------
4.2 Executive Offices......................................... 80
-----------------
4.3 Subsidiaries.............................................. 80
------------
4.4 Corporate Power; Authorization; Enforceable
-------------------------------------------
Obligations............................................... 80
-----------
4.5 Solvency.................................................. 81
--------
4.6 Financial Statements...................................... 81
--------------------
4.7 Projections............................................... 82
-----------
4.8 Ownership of Property; Liens.............................. 83
----------------------------
4.9 No Default................................................ 84
----------
4.10 Burdensome Restrictions................................... 84
-----------------------
4.11 Labor Matters.............................................. 84
-------------
4.12 Other Ventures............................................ 85
--------------
4.13 Investment Company Act.................................... 85
----------------------
4.14 Margin Regulations........................................ 85
------------------
4.15 Taxes..................................................... 85
-----
4.16 ERISA..................................................... 86
-----
4.17 No Litigation............................................. 88
-------------
4.18 Brokers................................................... 89
-------
4.19 Ancillary Agreements...................................... 89
--------------------
4.20 Outstanding Stock; Options; Warrants, Etc................. 89
-----------------------------------------
4.21 Employment and Labor Agreements........................... 89
-------------------------------
4.22 Patents, Trademarks, Copyrights and Licenses.............. 89
--------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.23 Full Disclosure........................................... 90
---------------
4.24 Liens..................................................... 90
-----
4.25 Hazardous Materials....................................... 90
-------------------
4.26 Insurance Policies........................................ 91
------------------
4.27 Bank Accounts............................................. 92
-------------
4.28 Inventory................................................. 92
---------
4.29 Indebtedness.............................................. 93
------------
5. FINANCIAL STATEMENTS AND INFORMATION............................ 93
------------------------------------
5.1 Reports and Notices....................................... 93
-------------------
5.2 Additional Reports and Notices............................ 97
------------------------------
5.3 Communication with Accountants............................ 97
------------------------------
6. AFFIRMATIVE COVENANTS........................................... 98
---------------------
6.1 Maintenance of Existence and Conduct of Business.......... 98
------------------------------------------------
6.2 Payment of Obligations.................................... 99
----------------------
6.3 Agent's and Lenders' Fees................................. 99
-------------------------
6.4 Books and Records......................................... 99
-----------------
6.5 Litigation................................................100
----------
6.6 Insurance.................................................100
---------
6.7 Compliance with Laws......................................101
--------------------
6.8 Agreements................................................101
----------
6.9 Supplemental Disclosure...................................101
-----------------------
6.10 Employee Plans............................................102
--------------
6.11 Environmental Matters.....................................102
---------------------
6.12 Landlord's Agreements.....................................103
---------------------
6.13 Subsidiary................................................103
----------
6.14 Interest Rate Contracts....................................103
-----------------------
6.15 Minimum Tangible Net Worth................................103
--------------------------
6.16 Interest Coverage Ratio...................................104
-----------------------
6.17 Current Ratio.............................................104
-------------
6.18 Stock Changes.............................................104
-------------
6.19 Private Label Programs....................................104
----------------------
6.20 Receivables Securitization Facility........................105
-----------------------------------
7. NEGATIVE COVENANTS..............................................106
------------------
7.1 Mergers and Acquisitions..................................106
------------------------
7.2 Investments; Loans and Advances...........................107
-------------------------------
7.3 Indebtedness..............................................108
------------
7.4 Employee Loans............................................108
--------------
7.5 Capital Structure.........................................109
-----------------
7.6 Maintenance of Business...................................110
-----------------------
7.7 Transactions with Affiliates..............................110
----------------------------
7.8 Guaranteed Indebtedness...................................111
-----------------------
7.9 Liens.....................................................111
-----
7.10 Sales of Assets...........................................111
---------------
7.11 Cancellation of Indebtedness..............................112
----------------------------
7.12 Events of Default.........................................112
-----------------
7.13 Speculative Transactions..................................112
------------------------
7.14 Restricted Payments; Dividends............................113
------------------------------
7.15 Payment or Modification of Obligations....................114
--------------------------------------
7.16 Compensation..............................................114
------------
7.17 Real Property Leases......................................114
--------------------
7.18 ERISA.....................................................114
-----
7.19 Hazardous Materials.......................................115
-------------------
7.20 Capital Expenditures......................................116
--------------------
7.21 Operating Leases..........................................116
----------------
7.22 Fiscal Year...............................................116
-----------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.23 Tax Sharing...............................................117
-----------
7.24 Amendments to Other Documents.............................117
-----------------------------
8. TERM............................................................118
----
8.1 Termination...............................................118
-----------
8.2 Survival of Obligations Upon Termination of
-------------------------------------------
Financing Arrangement.....................................118
---------------------
8.3 Events Prior to Restatement Closing Date..................119
----------------------------------------
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES..........................119
--------------------------------------
9.1 Events of Default........................................119
-----------------
9.2 Remedies.................................................123
--------
9.3 Waivers by Borrower......................................124
-------------------
9.4 Right of Setoff..........................................124
---------------
10. AGENCY..........................................................125
------
10.1 Appointment...............................................125
-----------
10.2 Delegation of Duties......................................126
--------------------
10.3 Limitation of Liability...................................126
-----------------------
10.4 Reliance by Agent.........................................126
-----------------
10.5 Notice of Default.........................................127
-----------------
10.6 Non-Reliance on Agent and the Other Lenders...............128
-------------------------------------------
10.7 Indemnification...........................................128
---------------
10.8 Payments..................................................129
--------
10.9 Agent in Its Individual Capacity..........................129
--------------------------------
10.10 Successor Agent...........................................129
---------------
10.11 Adjustment................................................130
----------
10.12 Applicability of Section to Borrower......................130
------------------------------------
11. ASSIGNMENTS AND PARTICIPATIONS..................................130
------------------------------
11.1 Successors and Assigns....................................130
----------------------
11.2 Assignments...............................................131
-----------
11.3 Participations............................................132
--------------
11.4 Disclosure................................................133
----------
11.5 Assignments and Participations as Units...................134
---------------------------------------
12. MISCELLANEOUS...................................................134
-------------
12.1 Complete Agreement; Modification of Agreement.............134
---------------------------------------------
12.2 Fees and Expenses.........................................135
-----------------
12.3 No Waiver.................................................136
---------
12.4 Remedies..................................................137
--------
12.5 Severability..............................................137
------------
12.6 Parties...................................................137
-------
12.7 Conflict of Terms.........................................137
-----------------
12.8 Authorized Signature......................................137
--------------------
12.9 GOVERNING LAW..............................................137
-------------
12.10 Notices...................................................138
-------
12.11 Survival..................................................140
--------
12.12 Section Titles............................................140
--------------
12.13 Counterparts..............................................140
------------
12.14 BTCo......................................................140
----
12.15 Designation of Senior Debt...............................141
--------------------------
12.16 MUTUAL WAIVER OF JURY TRIAL...............................141
---------------------------
</TABLE>
iii
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
<TABLE>
<C> <S> <C>
Exhibit A - Form of Notice of Advance [Section 2.1]
Exhibit B - Form of Borrowing Base
Certificate [Definitions]
Exhibit C - Form of Assignment and Acceptance [Definitions]
Exhibit D - Form of Landlord's Agreement [Definitions]
Exhibit E - Form of Note [Definitions]
Exhibit F - Form of Confidentiality Agreement [Section 11.4]
Exhibit G - Form of Notice of LIBOR Advance [Section 2.8]
Exhibit H - Form of Accountant's Letter [Section 5.2]
Exhibit I - Form of Letter of Credit Request [Section 2.3]
Schedule A - Lenders and Lenders'
Proportionate Shares [Definitions]
Schedule B - Schedule of Documents [Definitions]
Schedule C - Quarterly Rate Adjustment Matrix [Definitions]
Schedule D - L/C Guaranty Alternative [Section 2.3]
Schedule E - Receivables Pooling Agreement
Defined Terms [Section 7.24]
Schedule 4.2 - Executive Offices
Schedule 4.3 - Subsidiaries
Schedule 4.6 - Material Events
Schedule 4.8 - Real Estate and Leases
Schedule 4.12 - Joint Ventures
Schedule 4.15 - Tax Matters
Schedule 4.16 - ERISA Plans
Schedule 4.17 - Litigation
Schedule 4.20 - Stock Ownership of Borrower and Parent
Schedule 4.21 - Employment Matters
Schedule 4.22 - Patents, Trademarks, Copyrights and Other
Intellectual Property Rights
Schedule 4.25 - Environmental Liabilities
Schedule 4.26 - Insurance Policies
Schedule 4.27 - Bank Accounts
Schedule 6.1 - Names
Schedule 6.11 - Environmental Remediation Plan
Schedule 7.2 - Existing Advances
Schedule 7.3 - Indebtedness
Schedule 7.7 - Permitted Affiliate Transactions
Schedule 7.9 - Liens
Schedule 7.10 - Sales of Assets
Schedule 7.16 - Management Incentive Program
Schedule 12.8 - Authorized Signatures
</TABLE>
iv
<PAGE>
This AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is
entered into as of December 13, 1994, among AMERISOURCE CORPORATION, a Delaware
corporation, formerly known as Alco Health Services Corporation ("Borrower"),
GENERAL ELECTRIC CAPITAL CORPORATION, a corporation organized under the banking
laws of the State of New York ("GE Capital"), individually and in its capacities
as the administrative agent (in such capacity, "Agent") and a managing agent for
each of the Lenders (as defined below) hereunder, BANKERS TRUST COMPANY, a
corporation organized under the banking laws of the State of New York ("BTCo"),
individually and in its capacities as the issuing lender and a managing agent
for each of the Lenders hereunder, BankAmerica Business Credit, Inc., and Heller
Financial, Inc., as co-agents, and the other banks and other financial
institutions named herein and whose signatures appear on the signature pages
hereto (GE Capital, BTCo, BankAmerica Business Credit, Inc., Heller Financial,
Inc., and such other banks and other financial institutions and their respective
successors and assigns, individually, a "Lender" and collectively, "Lenders").
RECITALS
--------
A. Reference is made to that certain Credit Agreement dated as of
March 30, 1993 by and among Borrower, Agent, Security Pacific Business Credit
Inc., as co-agent, and each of the lenders party thereto, pursuant to which
certain senior secured loans and other financial accommodations were made to and
for the benefit of Borrower. The Credit Agreement dated as of March 30, 1993 was
subsequently amended and modified by that certain First Amendment to Credit
Agreement dated as of December 3, 1993 and that certain Amended and Restated
Second Amendment to Credit Agreement dated as of March 31, 1994 (collectively,
the "Original Credit Agreement").
B. Borrower has notified Agent and Lenders of its intention to
restructure its outstanding indebtedness effective as of the date hereof,
including, but not limited to, an amendment and restatement of its obligations
under the Original Credit Agreement and consummation of an accounts receivable
securitization program, each as hereinafter set forth.
C. As part of such restructuring, Borrower has requested that
Lenders provide to it a senior secured credit facility in the maximum principal
amount of $380,000,000.
D. Lenders are willing to extend such loans and other financial
accommodations in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree as follows:
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
1.1 Definitions. Capitalized terms used in this Agreement shall
-----------
have (unless otherwise provided elsewhere in this Agreement) the following
respective meanings when used herein:
"Accounts" shall mean all "accounts," as such term is defined
in the Code, now owned or hereafter acquired by any Person and, in any event,
including: (i) all accounts receivable, other receivables, book debts and
1
<PAGE>
other forms of obligations (other than forms of obligations evidenced by chattel
paper, documents or instruments) now owned or hereafter received or acquired by
or belonging or owing to such Person whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligation which may be characterized as an account or contract right under the
Code); (ii) all of such Person's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or services; (iii) all
of such Person's rights to any goods represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods);
(iv) all monies due or to become due to such Person under all purchase orders
and contracts for the sale of goods or the performance of services or both by
such Person or in connection with any other transaction (whether or not yet
earned by performance on the part of such Person) now in existence or hereafter
occurring, including the right to receive the proceeds of said purchase orders
and contracts; and (v) all collateral security, letters of credit, and
guaranties of any kind, now or hereafter in existence, given by any other Person
with respect to any of the foregoing.
"Acquisition Purchase Price" shall mean: (i) in the case of an
asset acquisition, the sum of (x) all cash consideration paid or payable by or
on behalf of the buyer to seller or on behalf of seller, plus (y) the fair
----
market value of any non-cash consideration made or payable by or on behalf of
the buyer to seller or on behalf of seller, plus (z) the amount of all
----
Indebtedness (including Guaranteed Indebtedness) and other liabilities assumed
or forgiven by or on behalf of the buyer that would be required to be reflected
on the consolidated balance sheet of the Person assuming or forgiving such
liabilities pursuant to GAAP; and (ii) in the case of a stock acquisition, the
sum of (a) all cash consideration paid or payable by or on behalf of the buyer
to seller or on behalf of seller, plus (b) the fair market value of any non-cash
----
consideration made or payable by or on behalf of the buyer to seller or on
behalf of seller, plus (c) in the case of any acquisition through a merger or
----
a transaction after which the acquired Person would be a Subsidiary of the
buyer, the amount of all Indebtedness (including Guaranteed Indebtedness) and
other liabilities of the acquired Person guaranteed or assumed by Borrower.
"Adjusted LIBOR Rate" shall mean, for any Interest Period, the
per annum rate (rounded to the nearest one-sixteenth of one percent (0.0625%)),
determined as the sum of: (i) the LIBOR Assessment Rate at the time, plus (ii)
----
the quotient of: (a) the LIBOR Rate divided by (b) (I) one hundred percent
------- --
(100%) minus (II) the LIBOR Reserve Percentage.
-----
"Advance" shall have the meaning assigned to it in
SECTION 2.1(A).
"Affected Interest Period" shall have the meaning assigned to
it in SECTION 2.9(B).
"Affected Lender" shall mean any Lender affected by any of the
events described in SECTION 2.9(B) or SECTION 2.9(C).
"Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such Person,
(ii) each Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person or (iii) each of such
2
<PAGE>
Person's officers, directors, joint venturers and partners. For the purpose of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" shall have the meaning assigned to it in the preamble
to this Agreement.
"Agreement" shall mean this Amended and Restated Credit
Agreement and any appendices, exhibits or schedules hereto, which Amended and
Restated Credit Agreement amends and restates the Original Credit Agreement, and
shall refer to this Agreement as the same may be in effect at the time such
reference is operative.
"Ancillary Agreements" shall mean those agreements, documents,
and instruments (other than this Agreement) identified in the Schedule of
Documents and any other supplemental agreement, undertaking, instrument,
document or other writing executed by Borrower or Parent as a condition to
advances or funding under this Agreement or otherwise in connection herewith,
including the Subordinated Parent Notes, the Receivables Facility Documents, the
Loan Documents, and all amendments, modifications or supplements thereto
effected in accordance with this Agreement.
"Applicable Letter of Credit Fee Rate" shall mean two percent
(2.00%); provided, that the Applicable Letter of Credit Fee Rate is subject to
--------
periodic adjustments, based on the following criteria:
(i) based on the Interest Coverage Ratio calculated from Borrower's
financial statements that are required to be delivered to Agent and
Lenders in accordance with SECTION 5.1(C) or SECTION 5.1(D) (with respect
to financial statements to be delivered at the end of any Fiscal Year), as
the case may be, for the last Fiscal Quarter in the most recent Testing
Period, the Applicable Letter of Credit Fee Rate shall be adjusted to be
as follows:
<TABLE>
<CAPTION>
Then Applicable
If Interest Coverage Ratio Letter of Credit
is Greater Than or Equal to Fee Rate is
--------------------------- ----------------
<S> <C>
3.75 to 1.00 but less than 1.75%
4.50 to 1.00
4.50 to 1.00 but less than 1.50%
5.50 to 1.00
5.50 to 1.00 but less than 1.25%
6.50 to 1.00
6.50 to 1.00 1.00%
</TABLE>
The adjustments set forth in this subparagraph (i), if and
when applicable, shall be made to the Applicable Letter of Credit Fee Rate
for the Fiscal Quarter immediately following the date that is three (3)
Business Days after Borrower shall have delivered to Agent the required
financial statements showing the requisite Interest Coverage Ratio for the
relevant Testing Period. The Quarterly Rate Adjustment
3
<PAGE>
Matrix illustrates the timing of the effectiveness of the adjustments
described in the preceding sentence.
(ii) at any time after Borrower shall have received at least
$100,000,000 of aggregate gross cash proceeds (before customary fees and
expenses) from the sale of common equity of Borrower or Parent, based on
the Total Debt to EBITDA Ratio calculated from the financial statements
that are required to be delivered to Agent and Lenders in accordance with
SECTION 5.1(C) or SECTION 5.1(D) (with respect to financial statements to
be delivered at the end of any Fiscal Year), as the case may be, for the
most recent Rolling Period (with the initial Rolling Period to be that
ending with the last Fiscal Quarter ending immediately prior to the
consummation of such equity sale), the Applicable Letter of Credit Fee
Rate shall be adjusted to be as follows:
<TABLE>
<CAPTION>
Then Applicable
If Total Debt to Letter of Credit
EBITDA Ratio is Less Than Fee Rate is
-------------------------- ----------------
<S> <C>
4.50 to 1.00 but greater than or 1.50%
equal to 4.00 to 1.00
4.00 to 1.00 1.00%
</TABLE>
The initial adjustment set forth in this subparagraph (ii), if
and when applicable, shall be made to the Applicable Letter of Credit Fee
Rate for the period (a) commencing on the first day of the calendar month
following the receipt of the above-described equity proceeds (or, if
later, the first day of the calendar month following the date that is
three (3) Business Days after Borrower shall have delivered to Agent the
required financial statements showing the requisite Total Debt to EBITDA
Ratio for the relevant Rolling Period) and (b) ending on the last day of
the Fiscal Quarter following the Fiscal Quarter in which the above-
described equity proceeds are received. All subsequent adjustments set
forth in this subparagraph (ii), if and when applicable, shall be made to
the Applicable Letter of Credit Fee Rate for the second Fiscal Quarter
following the end of the relevant Rolling Period, and the Quarterly Rate
Adjustment Matrix illustrates the timing of the effectiveness of such
subsequent adjustments.
(iii) If more than one such adjustment described in subparagraphs
(i) and (ii) above shall be applicable to the Applicable Letter of Credit
Fee Rate for the same Fiscal Quarter, then only the lower (or, if equal,
only one) Applicable Letter of Credit Fee Rate shall apply.
"Applicable Margin" for any Prime Rate Loan shall be one
percent (1.00%) and for any LIBOR Rate Loan shall be two and one-quarter percent
(2.25%); provided, that the Applicable Margins are subject to periodic
--------
adjustments, based on the following criteria:
(i) with respect to Prime Rate Loans:
(a) based on the Interest Coverage Ratio calculated from
Borrower's financial statements that are required to be delivered to Agent
and Lenders in accordance with SECTION 5.1(C) or SECTION 5.1(D) (with
respect to financial statements to be delivered at the end of any Fiscal
Year), as the case may be, for the last Fiscal Quarter in the
4
<PAGE>
most recent Testing Period, the Applicable Margin shall be adjusted to be
as follows:
<TABLE>
<CAPTION>
If Interest Coverage Ratio Then Applicable
is Greater Than or Equal to Margin is
--------------------------- ---------------
<S> <C>
3.75 to 1.00 but less than 0.75%
4.50 to 1.00
4.50 to 1.00 but less than 0.50%
5.50 to 1.00
5.50 to 1.00 but less than 0.25%
6.50 to 1.00
6.50 to 1.00 0.00%
</TABLE>
The adjustments set forth in this subparagraph (a), if and
when applicable, shall be made to the Applicable Margin for the Fiscal
Quarter immediately following the date that is three (3) Business Days
after Borrower shall have delivered to Agent the required financial
statements showing the requisite Interest Coverage Ratio for the relevant
Testing Period. The Quarterly Rate Adjustment Matrix illustrates the
timing of the effectiveness of the adjustments described in the preceding
sentence.
(b) at any time after Borrower shall have received at least
$100,000,000 of aggregate gross cash proceeds (before customary fees and
expenses) from the sale of common equity of Borrower or Parent, based on
the Total Debt to EBITDA Ratio calculated from the financial statements
that are required to be delivered to Agent and Lenders in accordance with
SECTION 5.1(C) or SECTION 5.1(D) (with respect to financial statements to
be delivered at the end of any Fiscal Year), as the case may be, for the
most recent Rolling Period (with the initial Rolling Period to be that
ending with the last Fiscal Quarter ending immediately prior to the
consummation of such equity sale), the Applicable Margin shall be adjusted
to be as follows:
<TABLE>
<CAPTION>
If Total Debt to Then Applicable
EBITDA Ratio is Less Than Margin is
------------------------------ ---------------
<S> <C>
4.50 to 1.00 but greater than or 0.50%
equal to 4.00 to 1.00
4.00 to 1.00 0.00%
</TABLE>
The initial adjustment set forth in this subparagraph (b), if
and when applicable, shall be made to the Applicable Margin for the period
(I) commencing on the first day of the calendar month following the
receipt of the above-described equity proceeds (or, if later, the first
day of the calendar month following the date that is three (3) Business
Days after Borrower shall have delivered to Agent the required financial
statements showing the requisite Total Debt to EBITDA Ratio for the
relevant Rolling Period) and (II) ending on the last day of the Fiscal
Quarter following the Fiscal Quarter in which the above-described equity
proceeds are received. All subsequent adjustments set forth in
5
<PAGE>
this subparagraph (b), if and when applicable, shall be made to the
Applicable Margin for the second Fiscal Quarter following the end of the
relevant Rolling Period, and the Quarterly Rate Adjustment Matrix
illustrates the timing of the effectiveness of such subsequent
adjustments.
(c) If more than one such adjustment described in
subparagraphs (a) and (b) above shall be applicable to the Applicable
Margin with respect to the Prime Rate Loans for the same Fiscal Quarter,
then only the lower (or, if equal, only one) Applicable Margin shall
apply.
(ii) with respect to LIBOR Rate Loans:
(x) based on the Interest Coverage Ratio calculated from
Borrower's financial statements that are required to be delivered to Agent
and Lenders in accordance with SECTION 5.1(C) or SECTION 5.1(D) (with
respect to financial statements to be delivered at the end of any Fiscal
Year), as the case may be, for the last Fiscal Quarter in the most recent
Testing Period, the Applicable Margin shall be adjusted to be as follows:
<TABLE>
<CAPTION>
If Interest Coverage Ratio Then Applicable
is Greater Than or Equal to Margin is
--------------------------- ---------------
<S> <C>
3.75 to 1.00 but less than 2.00%
4.50 to 1.00
4.50 to 1.00 but less than 1.75%
5.50 to 1.00
5.50 to 1.00 but less than 1.50%
6.50 to 1.00
6.50 to 1.00 1.25%
</TABLE>
The adjustments set forth in this subparagraph (x), if and
when applicable, shall be made to the Applicable Margin for the Fiscal
Quarter immediately following the date that is three (3) Business Days
after Borrower shall have delivered to Agent the required financial
statements showing the requisite Interest Coverage Ratio for the relevant
Testing Period. The Quarterly Rate Adjustment Matrix illustrates the
timing of the effectiveness of the adjustments described in the preceding
sentence.
(y) at any time after Borrower shall have received at least
$100,000,000 of aggregate gross cash proceeds (before customary fees and
expenses) from the sale of common equity of Borrower or Parent, based on
the Total Debt to EBITDA Ratio calculated from the financial statements
that are required to be delivered to Agent and Lenders in accordance with
SECTION 5.1(C) or SECTION 5.1(D) (with respect to financial statements to
be delivered at the end of any Fiscal Year), as the case may be, for the
most recent Rolling Period (with the initial Rolling Period to be that
ending with the last Fiscal Quarter ending immediately prior to the
consummation of such equity sale), the Applicable Margin shall be adjusted
to be as follows:
6
<PAGE>
<TABLE>
<CAPTION>
If Total Debt to Then Applicable
EBITDA Ratio is Less Than Margin is
------------------------- ---------------
<S> <C>
4.50 to 1.00 but greater than or 1.75%
equal to 4.00 to 1.00
4.00 to 1.00 1.25%
</TABLE>
The initial adjustment set forth in this subparagraph (y), if
and when applicable, shall be made to the Applicable Margin for the period
(I) commencing on the first day of the calendar month following the
receipt of the above-described equity proceeds (or, if later, the first
day of the calendar month following the date that is three (3) Business
Days after Borrower shall have delivered to Agent the required financial
statements showing the requisite Total Debt to EBITDA Ratio for the
relevant Rolling Period) and (II) ending on the last day of the Fiscal
Quarter following the Fiscal Quarter in which the above-described equity
proceeds are received. All subsequent adjustments set forth in this
subparagraph (y), if and when applicable, shall be made to the Applicable
Margin for the second Fiscal Quarter following the end of the relevant
Rolling Period, and the Quarterly Rate Adjustment Matrix illustrates the
timing of the effectiveness of such subsequent adjustments.
(z) If more than one such adjustment described in
subparagraphs (x) and (y) above shall be applicable to the Applicable
Margin with respect to the LIBOR Rate Loans for the same Fiscal Quarter,
then only the lower (or, if equal, only one) Applicable Margin shall
apply.
"Applicable Unused Line Fee Rate" shall mean one-half of one
percent (0.50%); provided, that the Applicable Unused Line Fee Rate is subject
--------
to periodic adjustments, based on the following criteria:
(i) based on the Interest Coverage Ratio calculated from
Borrower's financial statements that are required to be delivered to Agent
and Lenders in accordance with SECTION 5.1(C) or SECTION 5.1(D) (with
respect to financial statements to be delivered at the end of any Fiscal
Year), as the case may be, for the last Fiscal Quarter in the most recent
Testing Period, the Applicable Unused Line Fee Rate shall be adjusted to
be as follows:
<TABLE>
<CAPTION>
Then Applicable
If Interest Coverage Ratio Unused Line
is Greater Than Fee Rate is
-------------------------- ---------------
<S> <C>
4.50 to 1.00 but less than or 0.375%
equal to 5.50 to 1.00
5.50 to 1.00 0.250%
</TABLE>
The adjustments set forth in this subparagraph (i), if
and when applicable, shall be made to the Applicable Unused Line Fee Rate
for the Fiscal Quarter immediately following the date that is three (3)
Business Days after Borrower shall have delivered to Agent the required
financial statements showing the requisite Interest Coverage
Ratio for the relevant Testing Period. The Quarterly Rate Adjustment
Matrix
7
<PAGE>
illustrates the timing of the effectiveness of the adjustments described
in the preceding sentence.
(ii) at any time after Borrower shall have received at least
$100,000,000 of aggregate gross cash proceeds (before customary fees and
expenses) from the sale of common equity of Borrower or Parent, based on
the Total Debt to EBITDA Ratio calculated from the financial statements
that are required to be delivered to Agent and Lenders in accordance with
SECTION 5.1(C) or SECTION 5.1(D) (with respect to financial statements to
be delivered at the end of any Fiscal Year), as the case may be, for the
most recent Rolling Period (with the initial Rolling Period to be that
ending with the last Fiscal Quarter ending immediately prior to the
consummation of such equity sale), the Applicable Unused Line Fee Rate
shall be adjusted to be as follows:
<TABLE>
<CAPTION>
Then Applicable
If Total Debt to Unused Line
EBITDA Ratio is Less Than Fee Rate is
------------------------------ ---------------
<S> <C>
4.50 to 1.00 but greater than or 0.375%
equal to 4.00 to 1.00
4.0 to 1.0 0.250%
</TABLE>
The initial adjustment set forth in this subparagraph (ii), if
and when applicable, shall be made to the Applicable Unused Line Fee Rate
for the period (a) commencing on the first day of the calendar month
following the receipt of the above-described equity proceeds (or, if
later, the first day of the calendar month following the date that is
three (3) Business Days after Borrower shall have delivered to Agent the
required financial statements showing the requisite Total Debt to EBITDA
Ratio for the relevant Rolling Period) and (b) ending on the last day of
the Fiscal Quarter following the Fiscal Quarter in which the above-
described equity proceeds are received. All subsequent adjustments set
forth in this subparagraph (ii), if and when applicable, shall be made to
the Applicable Unused Line Fee Rate for the second Fiscal Quarter
following the end of the relevant Rolling Period, and the Quarterly Rate
Adjustment Matrix illustrates the timing of the effectiveness of such
subsequent adjustments.
(iii) If more than one such adjustment described in
subparagraphs (i) and (ii) above shall be applicable to the Applicable
Unused Line Fee Rate for the same Fiscal Quarter, then only the lower (or,
if equal, only one) Applicable Unused Line Fee Rate shall apply.
"Assignment and Acceptance" shall mean the assignment,
substantially in the form of EXHIBIT C, between the transferor Lender and the
---------
proposed transferee, regarding the sale, assignment, transfer or other
disposition (other than the sale of a participation) of all or any amount of
such Lender's Proportionate Share of the Loans and its Commitment, together with
all modifications, amendments, restatements or supplements thereto.
"Auditors" shall mean a nationally-recognized firm of public
accountants selected by Borrower and reasonably satisfactory to Agent. For
purposes of this Agreement, Borrower's current firm of independent certified
public accountants, Ernst & Young, shall be deemed to be satisfactory to Agent
as of the Restatement Closing Date.
8
<PAGE>
"Average Total Debt" shall mean, as of any date, the sum of
(i) the average daily balance of the Advances during the most recent Rolling
Period, (ii) the average daily balance of the Indebtedness under the Receivables
Facility during the most recent Rolling Period, (iii) the average of the
aggregate principal amounts of the Subordinated Parent Notes outstanding on the
last day of each Fiscal Quarter during the most recent Rolling Period, (iv) the
average of the aggregate principal amounts of any other Funded Debt of Borrower
outstanding on the last day of each Fiscal Quarter during the most recent
Rolling Period, (v) the average of the aggregate principal amounts of any other
Funded Debt of Parent outstanding on the last day of each Fiscal Quarter during
the most recent Rolling Period, and (vi) the average of the aggregate principal
amounts of Funded Debt of any Subsidiaries outstanding on the last day of each
Fiscal Quarter during the most recent Rolling Period (but excluding any Funded
Debt of New Subsidiaries to the extent not guaranteed or assumed by Borrower).
"Bankruptcy Code" shall mean title 11 of the United States
Code.
"Borrower" shall have the meaning assigned to it in the
preamble to this Agreement.
"Borrowing Base" shall mean, subject to SECTION 2.5(C), an
amount equal to (i) sixty-five percent (65%) of Eligible Inventory during the
Fiscal Year ending on September 30, 1995, (ii) sixty-two and one-half percent
(62.5%) of Eligible Inventory during the Fiscal Year ending on September 30,
1996, and (iii) sixty percent (60%) of Eligible Inventory in each subsequent
Fiscal Year, in each case reduced, to the extent applicable, by the Subordinated
Borrower Notes Payoff Amount or the Subordinated Parent Notes Redemption Amount,
and such other reserves as Agent, in its reasonable business judgment, after
using diligent efforts to attempt to consult with the Managing Agents (but
without any liability whatsoever for a failure or inability to do so), may deem
necessary from time to time; provided, that in each Fiscal Year, for a
--------
period of up to 120 consecutive days (such period (x) to be irrevocably
designated by Borrower through written notice given to Agent, Managing Agents
and Lenders at least 30 Business Days prior to the commencement of such period,
and (y) not to commence sooner than 90 days after the end of the prior increased
advance rate period for the preceding Fiscal Year), the then prevailing advance
rates set forth in clauses (i), (ii) and (iii) will increase to seventy percent
(70%), sixty-seven and one-half percent (67.5%), and sixty-five percent (65%),
respectively; and provided further, that such period during
--- -------- -------
the Fiscal Year ending on September 30, 1995 shall commence on the Restatement
Closing Date and end on March 30, 1995. For purposes of this Agreement, Eligible
Inventory shall be valued on a LIFO basis (at the lower of cost or market),
adjusted by adding the Inventory LIFO Reserve.
"Borrowing Base Certificate" shall mean a certificate in the
form of EXHIBIT B.
---------
"BTCo" shall have the meaning assigned to it in the preamble
to this Agreement.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which commercial banks are required or permitted to be closed
in the State of New York. When used in connection with the LIBOR Rate, this
definition will also exclude any day on which commercial banks are not open for
dealing in Dollar deposits in the London interbank market.
9
<PAGE>
"Capital Expenditures" shall mean all payments for the
acquisition of any fixed assets or improvements (including by way of Capital
Lease Obligation) or for replacements, substitutions or additions thereto, that
have a useful life of more than one year and that are required to be capitalized
under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as a capital lease in a note to such balance sheet, other than, in
the case of Borrower, any such lease under which Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed as a Capital Lease in a note to
such balance sheet.
"Cash Collateral Account" shall have the meaning assigned to
it in SECTION 2.3(I).
"Cash Equivalents" shall mean (i) securities issued,
guaranteed or insured by the United States of America or any of its agencies
with maturities of not more than one year from the date acquired, (ii)
certificates of deposit with maturities of not more than one year from the date
acquired that have been issued by a United States Federal or state chartered
commercial bank of recognized standing, which bank has capital and unimpaired
surplus in excess of $200,000,000, based on its most recent publicly available
financial statements, and which bank or its holding company has a short-term
commercial paper rating of at least A-2 or the equivalent by Standard & Poor's
Corporation or at least P-2 or the equivalent by Moody's Investors Services,
Inc., (iii) reverse repurchase agreements with terms of not more than seven days
from the date acquired, for securities of the type described in (i) above and
entered into only with commercial banks having the qualifications described in
(ii) above, (iv) commercial paper or finance company paper issued by any Person
incorporated under the laws of the United States of America or any state thereof
and having a rating of at least A-1 or the equivalent from Standard & Poor's
Corporation or at least P-1 or the equivalent by Moody's Investors Service,
Inc., in each case with maturities of not more than 30 days from the date
acquired, and (v) investments in money market funds registered under the
Investment Company Act of 1940, which have net assets of at least $200,000,000
and at least eighty-five percent (85%) of whose assets consist of securities and
other obligations of the type described in clauses (i) through (iv) above.
"Change of Control Date" shall mean the date on which either
of the following occurs:
(i) Parent shall fail to own and control, beneficially and
of record, one hundred percent (100%) of the issued and outstanding Stock
of Borrower; provided, that (a) if such failure occurs due to a Qualified
--------
Borrower Public Offering, then such failure shall not constitute a Change
of Control Date if and for so long as (I) Parent owns and controls,
beneficially and of record, not less than thirty percent (30%) of the
issued and outstanding Stock of Borrower, and (II) no Person or "group"
(as defined under Section 13d-3 and Regulation
10
<PAGE>
13D of the Exchange Act) becomes the beneficial owner, directly or
indirectly, of shares of Voting Stock of Borrower, the voting power of
which is greater than the voting power of the Stock of Borrower held at
that time by Parent, and (b) if such failure occurs due to a Qualified
Borrower Equity Sale, then such failure shall not constitute a Change of
Control Date if and for so long as Parent and VPI own and control,
directly or indirectly, an aggregate of more than fifty percent (50%) of
the issued and outstanding Voting Stock of Borrower; or
(ii) VPI, its employees, its Affiliates, and employees of
Borrower shall fail to own and control, beneficially and of record, an
aggregate of more than fifty percent (50%) of the issued and outstanding
Stock of Parent; provided, that (x) if such failure occurs following a
--------
Qualified Parent Public Offering from which Parent obtains net offering
proceeds, after deduction of all fees, commissions, and other costs and
expenses in connection therewith, of not less than $100,000,000, then such
failure shall not constitute a Change of Control Date if and for so long
as a majority of the Board of Directors of Parent shall consist of
Independent Directors except that a Change of Control Date under this
clause (x) shall not be deemed to have occurred as a result of the death
or resignation of an Independent Director unless such vacancy is not
filled by an Independent Director within 45 days of such vacancy, and (y)
if such failure occurs due to a Qualified Parent Public Offering from
which Parent obtains net offering proceeds, after deduction of all fees,
commissions and other costs and expenses in connection therewith, of less
than $100,000,000 or a Qualified Parent Equity Sale or following a
Qualified Parent Equity Sale due to the termination of an employee of VPI
or Borrower, then such failure shall not constitute a Change of Control
Date if and for so long as (I) VPI, its employees, its Affiliates, and
employees of Borrower own and control, directly or indirectly, an
aggregate of more than thirty percent (30%) of the issued and outstanding
Voting Stock of Parent, and (II) no Person or "group" (as defined under
Section 13d-3 and Regulation 13D of the Exchange Act) becomes the
beneficial owner, directly or indirectly, of shares of Voting Stock of
Parent, the voting power of which is greater than the voting power of the
Stock of Parent held at that time by VPI, its employees, its Affiliates,
and employees of Borrower; or
(iii) so long as any of the Subordinated Parent Notes are
outstanding, a "Change in Control" (as defined in the Subordinated Parent
Note Indenture), which is not otherwise described in clauses (i) or (ii)
of this definition of "Change of Control Date," has occurred and is not
cured or waived within 30 days of such occurrence.
"Charges" shall mean all Federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes owed to
either (A) PBGC or (B) DEA, FDA or any other Federal, state or local
governmental agency in connection with the sale of pharmaceutical or health care
products) at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the employees, payroll, income or gross receipts of Borrower,
(iv) Borrower's ownership or use of any of its assets, or (v) any other aspect
of Borrower's business.
"Co-Agent" shall mean BankAmerica Business Credit, Inc. and
Heller Financial, Inc., each in its capacity as co-agent for Lenders hereunder,
or any successor to any such co-agent.
11
<PAGE>
"Code" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of New York; provided, that in the
--------
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Lender's
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, the term "Code"
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions of the Agreement relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"Collateral" shall mean the property covered by the Collateral
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
Lien in favor of Agent, for the benefit of Lenders, to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, the
Parent Guaranty, the Patent, Trademark and Copyright Assignment, the Amended and
Restated Pledge Agreement between Borrower, as pledgor, and Agent, as pledgee,
and the Real Property Collateral Documents.
"Collection Account" shall mean that certain account of Agent,
account number 50-232-854 in the name of "GECC/CAF Depository, Attention:
AmeriSource" at Bankers Trust Company, One Bankers Trust Plaza, New York, New
York 10006, ABA number 021 001 033, or such other account as may be designated
by Agent.
"Commitment" of any Lender shall mean the amount set forth
opposite such Lender's name on SCHEDULE A, as such schedule may be amended from
----------
time to time, under the heading "Commitment."
"Commitment Termination Date" shall mean the earliest of (i)
January 3, 2000, (ii) the date of termination of Lenders' obligation to advance
funds or permit existing advances to remain outstanding pursuant to SECTION 9.2,
and (iii) the date of prepayment in full by Borrower of the Loans in accordance
with the provisions of SECTION 2.5(A).
"Conduit Financing Arrangement" shall mean a financing
arrangement in which a Lender is participating as a conduit entity within the
meaning of Section 7701(l) of the IRC and proposed Regulations (S)(S) 1.881
through 1.883 or any successor provision thereto.
"Consolidated" when used with respect to any of the terms
defined in this Agreement refers to such terms as reflected in a consolidation
of Borrower and its Subsidiaries in conformity with GAAP.
"Consolidated Borrower Group" shall mean Borrower and its
Subsidiaries (excluding New Subsidiaries).
"Conversion" shall mean the conversion of the interest rate on
all or any portion of the Loans from the Stated Prime Rate to the Stated LIBOR
Rate, in accordance with the provisions of SECTION 2.8(E).
"Covered Taxes" shall have the meaning assigned to it in
SECTION 2.18(A).
12
<PAGE>
"Current Assets" shall mean, as at any date of determination,
the total assets of the Consolidated Borrower Group that are properly classified
as current assets in conformity with GAAP, but excluding, if applicable, any of
the assets of Receivables Corporation under the Receivables Pooling Agreement
(provided, that such term shall include cash, Cash Equivalents and marketable
---------
securities only to the extent that they do not exceed $30,000,000 in the
aggregate at any time), plus the Inventory LIFO Reserve.
----
"Current Liabilities" shall mean, as at any date of
determination, the total liabilities of the Consolidated Borrower Group that are
properly classified as current liabilities in conformity with GAAP, but
excluding, if applicable, any of the Obligations or the liabilities of
Receivables Corporation under the Receivables Pooling Agreement.
"DEA" shall mean the Federal Drug Enforcement Agency.
"Default" shall mean any event that, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in
SECTION 2.8(F).
"Defaulting Lender" shall have the meaning assigned to it in
SECTION 2.2(A).
"Disbursement Account" shall have the meaning assigned to it
in SECTION 2.12(E).
"Dividend/Acquisition Basket" shall mean the sum of the
following amounts:
(i) the net cash proceeds received by Borrower from (a)
sales of the common Stock of Borrower or Parent or
(b) capital contributions to Borrower's equity
account in the form of cash, which are not used to
permanently repay Indebtedness of Borrower in
accordance with its terms;
PLUS
----
(ii) the product of (a) the cumulative amount of
Borrower's Excess Cash Flow since January 1, 1995,
multiplied by (b) the percentage that
---------- --
corresponds to the applicable Interest Coverage
Ratio (as set forth below), in each case based on
Borrower's financial statements required to be
delivered pursuant to SECTION 5.1 for the most
recent Testing Period, for the applicable Testing
Period:
13
<PAGE>
<TABLE>
<CAPTION>
If Interest Then Applicable
Coverage Ratio is Percentage is
----------------- ---------------
<S> <C>
less than or equal to 50%
3.75 to 1.00
less than or equal to 4.50 to 1.00 65%
but greater than 3.75 to 1.00
less than or equal to 5.50 to 1.00 75%
but greater than 4.50 to 1.00
less than or equal to 6.50 to 1.00 85%
but greater than 5.50 to 1.00
greater than 6.50 to 1.00 100%
</TABLE>
MINUS
-----
(iii) (a) the amount of all dividends to Parent (other
than dividends to Parent permitted under SECTION
7.14 that are used for (I) Taxes due and payable
by Parent and (II) the reasonable legal,
accounting and operational expenses of Parent
incurred in the ordinary course of its business,
so long as the aggregate amount of dividends
described in this subclause (II) does not exceed
$350,000 in any Fiscal Year) and (b) the aggregate
Acquisition Purchase Price of all acquisitions
permitted under SECTION 7.1 to the extent
aggregating in excess of $20,000,000;
MINUS
-----
(iv) the amount, if any, by which (a) the amount of all
investments made by Borrower in any Person
acquired through an acquisition of Stock
subsequent to such acquisition exceeds (b) the
amount of cash transfers made to Borrower by such
Person subsequent to such acquisition that is not
reflected in the calculation of EBITDA.
"Dollars" and "$" shall mean United States of America dollars
or such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts in the
United States of America.
"EBITDA" shall mean, for any period, (i) Net Income for such
period (excluding, without duplication, the amortization of financing costs
payable in connection with the transactions contemplated by this Agreement and
the Receivables Facility Documents and the premiums paid in connection with the
redemption of the Subordinated Borrower Notes and the effect of extraordinary
items for such period), plus (ii) the amount of (A) all Interest Expense for
----
such period, plus (B) all interest expense under the Receivables Pooling
----
Agreement, whether incurred by Receivables Corporation or Receivables Trust,
plus (iii) income Tax Expense for such period, plus (iv) depreciation and
- - - ---- ----
amortization for the Consolidated Borrower Group for such period, plus
----
14
<PAGE>
(v) any other non-cash charges which have been subtracted in calculating Net
Income for the Consolidated Borrower Group for such period, plus (vi) any LIFO
----
expense for such period, plus (vii) any cash dividends of net income of New
----
Subsidiaries actually received by Borrower for such period (to the extent
such cash dividends are not also included in clause (i)), plus (viii) any non-
----
cash restructuring charges taken after the Restatement Closing Date (to the
extent deducted in determining Net Income), minus (ix) any other non-cash
-----
credits which have been added in calculating Net Income for the Consolidated
Borrower Group for such period, minus (x) any LIFO income for such period, minus
----- -----
(xi) any cash payments or expenditures relating to restructuring charges taken
after the Restatement Closing Date (to the extent not deducted in determining
Net Income), all determined in accordance with GAAP.
"Eligible Inventory" shall have the meaning assigned to it in
SECTION 2.10.
"Environmental Laws" shall mean all Federal, state and local
laws, statutes, ordinances and regulations, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable real estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws
include the Comprehensive Environmental Response, Compensation, and Liability
Act (42 U.S.C. (S)(S) 9601 et seq.); the Hazardous Material
-- ----
Transportation Act (49 U.S.C. (S)(S) 1801 et seq.); the Federal Insecticide,
-- ----
Fungicide and Rodenticide Act (7 U.S.C. (S)(S) 136 et seq.); the Resource
-- ----
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.); the Toxic
-- ----
Substances Control Act (15 U.S.C. (S)(S) 2601 et seq.); the Clean Air Act (42
-- ----
U.S.C. (S)(S) 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
-- ----
(S)(S) 1251 et seq.); the Occupational Safety and Health Act (29 U.S. C. (S)(S)
-- ----
651 et seq.); and the Safe Drinking Water Act (42 U.S.C. (S)(S) 300(f) et seq.);
-- ---- -- ----
and any and all regulations promulgated thereunder, and all analogous state and
local counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law
(including any thereof arising under any Environmental Law, permit, order or
agreement with any Governmental Authority) and which relate to any health or
safety condition regulated under any Environmental Law or in connection with any
other environmental matter or Release or the presence of a Hazardous Material or
threatened Release or presence of a Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and all currently effective final or temporary regulations promulgated
thereunder, and all generally applicable rulings entitled to precedential
effect.
"ERISA Affiliate" shall mean any entity required to be
aggregated with Borrower or any Subsidiary under Sections 414(b), (c), (m) or
(o) of the
15
<PAGE>
IRC at the time as of which any provision of this Agreement is to be applied or
at the time to which such provision specifically refers.
"ERISA Event" shall mean, with respect to Borrower or any
ERISA Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan, (ii) a withdrawal from a Title IV Plan subject to Section
4063 of ERISA during a plan year, (iii) a complete or partial withdrawal from
any Multiemployer Plan, (iv) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA, (v) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC, (vi) the failure to make required
contributions to a Qualified Plan, which failure is not corrected within 30
days, or (vii) any other event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in
SECTION 9.1.
"Excess Cash Flow" shall mean, measured for the period from
January 1, 1995 through the date of measurement: (i) EBITDA for such period,
minus (to the extent not already deducted in the calculation of EBITDA) (ii)
- - - -----
the total of (a) the sum of (I) Interest Expense (excluding amortization of
financing costs payable in connection with Indebtedness of Borrower) for such
period plus (II) the interest expense under the Receivables Pooling
----
Agreement, whether incurred by Receivables Corporation or Receivables Trust, (b)
cash taxes paid during such period, (c) the total amount of Capital Expenditures
for such period, and (d) amortization payments during such period on any
Indebtedness of Borrower, plus (iii) the net cash proceeds from the sale of
----
Unoccupied Property and other fixed assets of Borrower.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Existing Advances" shall have the meaning assigned to it in
SECTION 7.2.
"Existing Lender" shall have the meaning assigned to it in
SECTION 3.1(K).
"Existing Subordinated Borrower Notes" shall mean those
certain 14-1/2% Senior Subordinated Notes due September 15, 1999, issued by
Borrower pursuant to that certain Indenture, dated as of September 25, 1989,
among Borrower, as issuer, and Mellon Bank, N.A., as indenture trustee.
"Existing Subsidiary" shall mean each of Health Services Plus,
Inc., a Delaware corporation, and Health Services Capital Corporation, a
Delaware corporation.
"FDA" shall mean the Federal Food and Drug Administration.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Funds Rate" shall mean for any period, a fluctuating
per annum interest rate equal, for each day during such period, to the weighted
16
<PAGE>
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve Board arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by Agent from three Federal Funds brokers of
recognized standing selected by it.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Fee Letter" shall mean (i) the letter of even date herewith
between Managing Agents and Borrower providing for certain fees to be paid in
connection with this Agreement, and (ii) any other letter with respect to fees
to be paid in connection with this Agreement.
"Fees" shall mean (i) the Unused Line Fee, the Letter of
Credit Fee, and the Issuing Lender Fees, (ii) fees to be paid pursuant to the
Fee Letter, and (iii) any other fees or charges due to Agent, Managing Agents,
Issuing Lender, or any or all of Lenders pursuant to the Loan Documents.
"FIFO" shall mean first-in, first-out.
"Financial Covenants" shall mean the covenants set forth in
SECTIONS 6.15 through 6.17 and SECTIONS 7.20 and 7.21.
"Financials" shall mean the financial statements referred to
in SECTION 4.6(A) and SECTION 4.6(B).
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of Borrower ending December 31, March 31, June 30 and September 30 of
each Fiscal Year.
"Fiscal Year" shall mean the 12-Fiscal Month period of
Borrower ending September 30 of each year. Subsequent changes of the fiscal year
of Borrower shall not change the term "Fiscal Year," unless Agent and Requisite
Lenders shall consent in writing to such change.
"Foreign Lender" shall mean a Lender organized under the laws
of a jurisdiction outside the United States of America.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from, or is directly or
indirectly renewable or extendible at the option of such Person under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from, the date of creation thereof,
and shall include current maturities of long-term debt, revolving credit, and
short-term debt extendible beyond one year at the option of such Person, but,
with respect to Borrower, including the Obligations to the extent that they
would otherwise be excluded from the definition of Funded Debt due to the
Obligations' stated maturity.
17
<PAGE>
"Funding Bank" shall have the meaning assigned to it in
SECTION 2.19.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time; provided, that for
--------
purposes of calculating any Financial Covenant, Interest Coverage Ratio, Total
Debt to EBITDA Ratio or Excess Cash Flow, or any component to be used in the
calculation of any Financial Covenant, Interest Coverage Ratio, Total Debt to
EBITDA Ratio or Excess Cash Flow, "GAAP" shall mean generally accepted
accounting principles in the United States of America as adopted by Borrower on
September 30, 1994.
"GE Capital" shall have the meaning assigned to it in the
preamble to this Agreement.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including the DEA and
FDA, state boards of pharmacy and all other governmental agencies having
jurisdiction over the purchase, storage, sale or other distribution by Borrower
of controlled substances and other pharmaceutical and health care products.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
(i) to purchase or repurchase any such primary obligation, (ii) to advance or
supply funds (a) for the purchase or payment of any such primary obligation or
(b) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (iv) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guarantor" shall mean each of Parent, the Existing
Subsidiaries and each Person that hereafter executes a guaranty or a support,
put or other similar agreement in favor of Agent, for the benefit of Lenders, in
connection with the transactions contemplated by the Agreement.
"Guaranty" shall mean the Amended and Restated Continuing
Guaranty or other agreement to perform, on behalf of Borrower, the Obligations,
made by any Guarantor (other than Parent) in favor of Agent, for the benefit of
Lenders, in form and substance satisfactory to Agent.
"Hazardous Material" shall mean any substance, material or
waste, the generation, handling, storage, treatment or disposal of which is
regulated by or form the basis of liability, now or hereafter, under any local
or state Governmental Authority in any jurisdiction in which Borrower has owned,
leased or operated real property or disposed of hazardous materials, or by any
Federal Governmental Authority, including any material or substance which is (i)
defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste" or other
similar term or phrase under any Environmental Laws, (ii) petroleum or any
fraction or by-product thereof, asbestos,
18
<PAGE>
polychlorinated biphenyls, (iii) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. (S) 1251 et seq. (33 U.S.C.
-- ----
(S) 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.
(S) 1317), (iv) defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C.
-- ----
(S) 6903), or (v) defined as a "hazardous substance" pursuant to Section 101 of
the Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. (S) 9601 et seq. (42 U.S.C. (S) 9601).
-- ----
"Indebtedness" of any Person shall mean (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising
under any conditional sale or other title retention agreements with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all Capital Lease Obligations, (v)
all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause (i),
(ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, and (vii) to the extent not covered by clauses
(i), (ii), (iii) (iv), (v) or (vi) above, with respect to Borrower, the
Obligations and, with respect to Receivables Corporation, the obligations owed
by Receivables Trust under the Receivables Facility.
"Indemnified Person" shall have the meaning assigned to it in
SECTION 2.16.
"Independent Director" shall mean any Person who is not (i) a
direct, indirect or beneficial holder of five percent (5%) or more of the
outstanding Stock of Borrower or Parent, (ii) an Affiliate, designee or
appointee of any Person described in clause (i) above, or (iii) an officer of
Parent, Borrower or Borrower's Subsidiaries.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement dated as of December 13, 1994, by and between Agent, for the benefit
of Lenders, Borrower, Receivables Corporation, and Manufacturers and Traders
Trust Company, a New York banking corporation, as trustee under the Receivables
Pooling Agreement.
"Interest Coverage Ratio" shall mean the ratio of (i) EBITDA
minus Capital Expenditures of the Consolidated Borrower Group, to (ii) the
- - - -----
sum of (x) Interest Expense (excluding, to the extent otherwise included in
Interest Expense, (I) amortization of financing costs payable in connection with
the transactions contemplated by this Agreement and the Receivables Facility
Documents, (II) any accelerated amortization of deferred financing fees in
connection with the Original Credit Agreement and Subordinated Borrower Notes,
and (III) premiums paid in connection with the redemption of the Subordinated
Borrower Notes), plus (y) the interest expense under the Receivables Pooling
----
Agreement, whether incurred by Receivables Corporation or Receivables Trust, in
each case based on the financial statements required to be delivered pursuant to
SECTION 5.1 over the relevant period.
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<PAGE>
"Interest Determination Date" shall have the meaning assigned
to it in SECTION 2.8(E)(II).
"Interest Election Date" shall have the meaning assigned to it
in SECTION 2.8(E)(II).
"Interest Expense" shall mean the interest expense of the
Consolidated Borrower Group in respect of Indebtedness, determined in accordance
with GAAP, including amortization of original issue discount on any Indebtedness
and of all fees payable in connection with the incurrence of such Indebtedness
(to the extent included in interest expense), the interest portion of any
deferred payment obligation, the interest component of any Capital Lease
Obligation, and the net costs under any Interest Rate Contracts.
"Interest Period" shall mean, with respect to the portion of
the Loans bearing interest at the Stated LIBOR Rate, the period commencing on
the date selected by Borrower pursuant to SECTION 2.8(E) and ending on the last
day of the period selected by Borrower. The duration of each such Interest
Period shall be 30, 60, 90 or 180 days, in each case as Borrower may select in
accordance with the provisions of SECTION 2.8(E).
"Interest Rate Contracts" shall mean interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements,
interest rate insurance and other agreements or arrangements designed to provide
protection against fluctuations in interest rates.
"Inventory" shall mean all "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any Person, wherever
located, and, in any event, including all pharmaceutical, health care products
and sundry items, inventory, merchandise, goods and other personal property
which are held by or on behalf of such Person for sale or lease or are furnished
or are to be furnished under a contract of service or which constitute raw
materials, work in process or materials used or consumed or to be used or
consumed in such Person's business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including such inventory as is on
consignment to third parties, leased to customers of such Person, or otherwise
temporarily out of the custody or possession of such Person, but does not
include inventory, merchandise, goods and other personal property held by such
Person pursuant to a true and enforceable consignment arrangement pursuant to
which such consignor (i) has given written notice of the consignment to Agent,
and (ii) has complied with the filing and any applicable notice provisions of
Section 9-114 of the Code.
"Inventory LIFO Reserve" shall mean the excess (or shortfall)
of Inventory value determined by using the FIFO method compared to the Inventory
value determined by using the LIFO method, all in accordance with GAAP.
"IRC" shall mean the Internal Revenue Code of 1986.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Issuing Lender" shall mean BTCo or any other Lender that is
acceptable to Agent that has agreed to issue a Letter of Credit for the account
of Borrower under this Agreement.
20
<PAGE>
"Issuing Lender Fees" shall have the meaning assigned to it in
SECTION 2.3(J).
"Landlord's Agreement" shall mean an agreement substantially
in the form of EXHIBIT D.
---------
"L/C Guaranty Agreement" shall have the meaning assigned to it
in SCHEDULE D.
----------
"Leases" shall mean all of those leasehold estates in real
property now owned or hereafter acquired by Borrower, as lessee.
"Lender" and "Lenders" shall have the respective meanings set
forth in the preamble to this Agreement.
"Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Lending Office" on the signature pages
hereto or in the Assignment and Acceptance pursuant to which it became a Lender,
or such other office as such Lender may from time to time specify to Borrower
and Agent pursuant to SECTION 12.10.
"Letter of Credit Advance" shall mean an Advance, the proceeds
of which are to be paid to Issuing Lender with respect to a drawing under a
Letter of Credit.
"Letter of Credit Fee" shall have the meaning assigned to it
in SECTION 2.3(J).
"Letter of Credit Obligations" means, at any time, the sum of
(i) the aggregate undrawn amount of all Letters of Credit outstanding at such
time, plus (ii) the aggregate amount of all drawings under Letters of Credit
----
for which the Issuing Lender has not at such time been reimbursed by Borrower,
plus (iii) without duplication, the aggregate amount of all payments made by
- - - ----
each Lender to the Issuing Lender with respect to such Lender's participation in
Letters of Credit as provided in SECTION 2.3(C) for which Borrower has not at
such time reimbursed Lenders, whether by way of an Advance or otherwise.
"Letter of Credit Request" shall have the meaning assigned to
it in SECTION 2.3(D).
"Letters of Credit" shall mean all standby letters of credit
issued by Issuing Lender pursuant to SECTION 2.3 at the request and for the
account of Borrower, and all amendments, renewals, extensions or replacements
thereof.
"LIBOR Assessment Rate" shall mean, at the time any
determination thereof is to be made, the per annum rate (rounded to the nearest
one-sixteenth of one percent (0.0625%)), most recently determined by Agent
(which determination shall be conclusive in the absence of manifest error) to be
the then current net annual assessment rate payable by Lenders to the FDIC (or
any successor) for its insurance of Dollar deposits in the London interbank
market dealing with Dollar deposits.
"LIBOR Rate" shall mean, for any Interest Determination Date,
the per annum rate offered for Dollar deposits for the Interest Period selected,
as quoted by Telerate News Service on page 3750 recorded as of 11:00 A.M. London
setting time (or, if page 3750 of the Telerate News Service is
21
<PAGE>
unavailable, the comparable reference on the Reuters Screen LIBOR Page)
on such date; provided, that if two or more of such offered rates appear on
--------
Telerate (or on the Reuters Screen LIBOR Page, as the case may be), the "LIBOR
Rate" shall be the arithmetic average of such offered rates rounded upwards, if
necessary, to the nearest one-sixteenth of one percent (0.0625%).
"LIBOR Rate Loans" shall mean Advances made by Lenders bearing
interest at rates determined by reference to the LIBOR Rate as provided in
SECTION 2.8(C).
"LIBOR Reserve Percentage" shall mean, at the time any
determination thereof is to be made, the maximum percentage (rounded to the
nearest one-sixteenth of one percent (0.0625%)), as determined by Agent (which
determination shall be conclusive in the absence of manifest error), which is in
effect on such date as prescribed by the Federal Reserve Board for determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"eurocurrency liabilities") of a member bank in the Federal Reserve System.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, collateral assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"LIFO" shall mean last-in, first-out.
"Liquidation Event" shall have the meaning assigned to it in
section 9.01 of the Receivables Pooling Agreement.
"Loan" shall mean the aggregate amount of Advances and Letter
of Credit Obligations, whether or not then due and payable, outstanding at any
time.
"Loan Documents" shall mean this Agreement, the Notes, the
Collateral Documents, the Guaranties, the Intercreditor Agreement, those other
Ancillary Agreements as to which Agent or any Lender is a party or a beneficiary
on the Restatement Closing Date, and all other agreements, instruments,
documents and certificates identified in the Schedule of Documents in favor of
any or all Lenders, all as amended and restated through the effective date of
any reference thereto, and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of Borrower or any of its
Affiliates, and delivered to any Lender in connection with this Agreement or the
financing transactions contemplated hereby.
"Lock Box Account" shall have the meaning assigned to it in
SECTION 2.12(A).
"Lock Box Bank" shall have the meaning assigned to it in
SECTION 2.12(A).
22
<PAGE>
"Management Incentive Programs" shall have the meaning
assigned to it in SECTION 7.16.
"Managing Agent" shall mean each of GE Capital and BTCo.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the financial condition, operations, assets, or business or financial
prospects of Borrower, (ii) Borrower's ability to pay the Obligations in
accordance with the terms thereof, (iii) the value of the Collateral taken as a
whole or Liens on the Collateral taken as a whole in favor of Agent, for the
benefit of each Lender, or the priority of any such Lien, or (iv) the practical
realization of the benefits of Lenders' rights and remedies under this Agreement
and the other Loan Documents taken as a whole.
"Maximum Lawful Rate" shall have the meaning assigned to it in
SECTION 2.8(G).
"Maximum Loan" shall mean, at any particular time, the lesser
of (i) the Total Commitments and (ii) $380,000,000, in each case reduced, to the
extent applicable, by the Subordinated Borrower Notes Payoff Amount or the
Subordinated Parent Notes Redemption Amount.
"Multiemployer Plan" shall mean a Plan that is a
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income of the
Consolidated Borrower Group reflected on the financial statements for such
period.
"Net Worth" shall mean, as of any date, (i) the total assets
of Borrower, on a Consolidated basis, but excluding, if applicable, any of the
assets of Receivables Corporation under the Receivables Pooling Agreement,
minus (ii) the total liabilities of Borrower, on a Consolidated basis, but
- - - -----
excluding, if applicable, any of the liabilities of Receivables Corporation
under the Receivables Pooling Agreement, minus (iii) any increase after
-----
September 30, 1994 in the net amount of loans or advances to Parent from
Borrower and its Subsidiaries, in each instance determined in accordance with
GAAP, excluding the effects after the Restatement Closing Date of (a) any
compensation expense resulting from the grant or exercise of stock options or
other stock-based forms of compensation under the Management Incentive Programs,
and (b) any losses on sales of fixed assets, in an aggregate amount not
exceeding $5,000,000.
"New Subordinated Borrower Notes" shall mean those certain 14-
1/2% Senior Subordinated Notes due September 15, 1999, Series A, issued by
Borrower pursuant to that certain Indenture, dated as of March 31, 1994, between
Borrower, as issuer, and Bankers Trust Company, as indenture trustee.
"New Subsidiary" shall mean any Subsidiary of Borrower, other
than Existing Subsidiaries and Receivables Corporation, created in accordance
with the provisions of SECTION 6.13 and SECTION 7.1.
"Note" shall mean a promissory note of Borrower payable to the
order of any Lender, in substantially the form of EXHIBIT E, evidencing the
---------
aggregate indebtedness of Borrower to such Lender resulting from the Advances
made and the Letter of Credit Obligations incurred by such Lender or acquired by
such Lender from another Lender pursuant to SECTION 11.2.
23
<PAGE>
"Notice of Advance" shall have the meaning assigned to it in
SECTION 2.1(A).
"Notice of LIBOR Advance" shall have the meaning assigned to
it in SECTION 2.8(E)(II).
"Obligations" shall mean all loans, advances, debts,
liabilities, and obligations, for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or amounts are liquidated or determinable) owing by
Borrower to Agent or Lenders, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, arising out of, under, or in
connection with, this Agreement or any of the other Loan Documents. This term
includes all principal, interest, Fees, charges, expenses, attorneys' fees,
amounts owing with respect to Letter of Credit Obligations, and any other sum
chargeable to Borrower under any of the Loan Documents (including all interest
and other amounts that would accrue and become due but for the filing of a
petition in bankruptcy or the operation of the automatic stay under Section
362(a) of the Bankruptcy Code).
"Original Closing Date" shall mean March 30, 1993.
"Original Credit Agreement" shall have the meaning assigned to
it in Recital A.
"Original Loan Documents" shall mean the "Loan Documents," as
such term is defined in the Original Credit Agreement.
"Other Taxes" shall have the meaning assigned to it in SECTION
2.18(B).
"Parent" shall mean AmeriSource Distribution Corporation, a
Delaware corporation, formerly known as Alco Health Distribution Corporation.
"Parent Guaranty" shall mean the Amended and Restated Guaranty
and Pledge Agreement of even date herewith executed by Parent in favor of Agent,
for the benefit of Lenders.
"Patent, Trademark and Copyright Assignment" shall mean the
Amended and Restated Assignment for Security of Patents, Trademarks and
Copyrights made on or about the Restatement Closing Date by Borrower in favor of
Agent, for the benefit of Lenders.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" shall mean a Plan that is an "employee pension
benefit plan," as defined in Section 3(2) of ERISA (other than a Multiemployer
Plan), which is not an "individual account plan," as defined in Section 3(34) of
ERISA.
"Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other governmental Charges,
either not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of SECTION 6.2(B); (ii) pledges or deposits securing
obligations under workmen's compensation, unemployment insurance, social
security, old age
24
<PAGE>
pension or public liability laws or similar legislation, or under unemployment
or other insurance not to exceed an aggregate amount of $1,000,000 outstanding
at any time; (iii) inchoate and unperfected workers', mechanics', suppliers' or
similar Liens arising by operation of law in the ordinary course of business;
(iv) Liens of warehousemen, mechanics, materialmen, workers, vendors, repairmen,
fillers, packagers, processors, common carriers, landlords and other similar
possessory Liens arising by operation of law or otherwise, not waived in
connection herewith, for amounts that are not yet due and payable or which are
being diligently contested in good faith by Borrower by appropriate proceedings;
provided, that in any such case an adequate Reserve is being maintained by
- - - --------
Borrower; (v) Liens on property consisting of equipment or real property
existing at the time such property is acquired by Borrower or any of its
Subsidiaries, which Liens are not created in contemplation of or in connection
with such acquisition and are limited to the property acquired and any proceeds
thereof; (vi) deposits or pledges securing, or in lieu of, bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety, appeal or customs bonds in proceedings to which Borrower is
a party, and other obligations of like nature made in the ordinary course of
business not to exceed an aggregate of $5,000,000 outstanding at any one time;
(vii) attachment or judgment Liens, individually or in the aggregate not in
excess of $1,000,000 (exclusive of (a) any amounts that are duly bonded to the
satisfaction of Agent in its commercially reasonable judgment, or (b) any amount
adequately covered by insurance as to which the insurance company has assumed
the defense without denying coverage); (viii) zoning restrictions, easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto, so long as the same
do not materially impair the use, value, or marketability of such real property,
leases or leasehold estates; (ix) Cash Equivalents described in clause (iii) of
the definition thereof; (x) leases and subleases of property to others entered
into in the ordinary course of business or existing on property acquired in the
ordinary course of business; (xi) Liens on property owned by Borrower or any
Subsidiary constituting leasehold improvements to the extent such property is
affixed to the real estate in such a manner as to be subjected to Liens on the
real estate to which it is affixed; (xii) provisions subordinating the interest
of Borrower or any Subsidiary, as a lessee, to an underlying lease or to a
security interest in the leased property granted or to be granted by the lessor;
(xiii) restrictions on the assignability of the lessee's interest in any lease
where Borrower or any Subsidiary is a lessee; (xiv) pledges of or Liens on stock
or securities of customers held as a Permitted Investment; (xv) Liens referred
to in clauses (ii) and (iv) of the definition of Permitted Indebtedness
subject to the respective limits set forth in such clauses; (xvi) Liens granted
by Receivables Corporation on receivables generated by Borrower and related
assets that are sold by Borrower to Receivables Corporation pursuant to the
terms of the Receivables Facility Documents and subject to the terms of the
Intercreditor Agreement; (xvii) the Liens set forth on SCHEDULE 7.9; and (xviii)
------------
extensions, renewals and replacements of the Liens referred to in clauses (i)
through (xvii) of this definition; provided, that any such extension, renewal or
--------
replacement Lien shall be limited to the property or assets covered by the Lien
extended, renewed or replaced and that the obligations secured by any such
extension, renewal or replacement Lien shall be in an amount not greater than
the then outstanding amount of the obligations secured by the Lien extended,
renewed or replaced.
"Permitted Indebtedness" shall mean: (i) trade payables, trade
debt and expense accruals incurred in the ordinary course of Borrower's
business, all consistent with past practices; (ii) Indebtedness secured by
Purchase Money Liens not to exceed $1,000,000 in the aggregate outstanding at
25
<PAGE>
any one time; (iii) Indebtedness arising under this Agreement and the other Loan
Documents; (iv) Capitalized Lease Obligations not to exceed $7,500,000 in the
aggregate; (v) Indebtedness described on SCHEDULE 7.3 and any refinancing of
------------
such Indebtedness; provided, that the aggregate principal amount of
--------
such Indebtedness after such refinancing is not increased, and such refinancing
is on terms and conditions no more restrictive than the terms and conditions of
the Indebtedness being refinanced; (vi) Indebtedness of Borrower to Parent or
any wholly-owned Subsidiary of Borrower and Indebtedness of any wholly-owned
Subsidiary of Borrower to Borrower or to any of Borrower's other wholly-owned
Subsidiaries that is subordinated in right of payment to the indefeasible
payment in full of the Obligations pursuant to the terms of the applicable
promissory notes or an intercompany subordination agreement satisfactory to
Agent; (vii) guarantees of loans made to customers, so long as the aggregate
amount of such guarantees outstanding at any time is not in excess of
$7,000,000; (viii) subject to the limitations set forth in SECTION 7.21,
Indebtedness in respect of rental obligations incurred in the ordinary course of
business; and (ix) additional Indebtedness of Borrower and its Subsidiaries in
an aggregate principal amount not to exceed $2,500,000 outstanding at any time.
"Permitted Investments" shall mean: (i) Cash Equivalents; (ii)
interest-bearing demand or time deposits (including certificates of deposit)
which are insured by the FDIC or a similar Federal insurance program; provided,
--------
that Borrower may, in the ordinary course of its business, maintain, from time
to time, amounts in excess of then applicable FDIC or other program insurance
limits; (iii) advances for reimbursable expenses in the ordinary course of
business to employees of Borrower and its Subsidiaries; (iv) Interest Rate
Contracts permitted pursuant to SECTION 6.14; (v) loans (which shall not include
amounts payable arising from Borrower's sale of Inventory or rendering of
services in the ordinary course of its business) made in the ordinary course of
business by Borrower and its Subsidiaries to customers, so long as the aggregate
outstanding principal amount of such loans and the guarantees pursuant to clause
(vii) of the definition of Permitted Indebtedness is not at any time in excess
of $20,000,000; (vi) loans made in the ordinary course of business to employees
of Borrower and its Subsidiaries with maturities not in excess of three (3)
years and in an aggregate principal amount not in excess of $5,000,000 at any
time; (vii) in the case of Borrower or any of its Subsidiaries, loans or
advances to Parent equal to (a) the reasonable legal, accounting and operational
expenses of Parent incurred in the ordinary course of business, so long as the
aggregate amount of such loans or advances in any Fiscal Year, plus the
----
aggregate amount of any dividends that Borrower pays to Parent in such Fiscal
Year (which dividends shall be subject to the provisions of SECTION 7.14), does
not exceed $350,000, and (b) franchise taxes payable by Parent to the State of
Delaware; (viii) notes receivable for Borrower's Inventory sold or services
rendered in the ordinary course of business in an aggregate amount not in excess
of $7,500,000 at any time; (ix) investments representing Indebtedness of any
Person having a maturity not in excess of 60 months owing as a result of the
sale by Borrower or a Subsidiary of Borrower of property that is no longer
required and is no longer used or useful in Borrower's core business; provided,
--------
that the aggregate amount of such Indebtedness shall not exceed $7,500,000 at
any time; (x) stock or obligations issued to Borrower or a Subsidiary of
Borrower by any Person (or the representative of such Person) in respect of the
Indebtedness of such Person in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; (xi) contingent liabilities represented by
endorsements of negotiable instruments for collection or deposit in the ordinary
course of
26
<PAGE>
business; (xii) other Investments in an outstanding amount not to exceed
$2,500,000 in the aggregate at any time; (xiii) an account maintained by
Borrower for the payment of sales Taxes in an aggregate amount not to exceed the
lesser of (A) $4,000,000, or (B) the aggregate amount of sales Taxes payable by
Borrower for 60 days of its operations; (xiv) investments permitted pursuant to
SECTION 7.1 and SECTION 7.2; (xv) investments permitted pursuant to SECTION
7.14(E); and (xvi) such other investments as Agent may approve in writing.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
entity or government (whether Federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean an employee benefit plan, as defined in
Section 3(3) of ERISA, that any Person specified in any provision of this
Agreement maintains, contributes to, or has an obligation to contribute to at
any time specified in this Agreement (explicitly or implicitly), but only if
either (i) such employee benefit plan is a defined benefit plan, as defined in
Section 414(j) of the IRC or an "excess benefit plan" within the meaning of
Section 3(36) of ERISA, or any unfunded plan of deferred compensation under
Section 201(2) of ERISA, or (ii) Borrower's contributions in any calendar year
to such employee benefit plan are reasonably expected to exceed $100,000, or in
the case of any plan that is exempt from certain annual reporting requirements
under 29 C.F.R. 2520.104-44, are reasonably expected to exceed $1,000,000.
"Potential Withdrawal Liability" shall mean the aggregate
amount of liability that would be incurred by Borrower and all ERISA Affiliates
under Section 4201 of ERISA if Borrower and all ERISA Affiliates withdrew from
all Multiemployer Plans.
"Prime Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, as in effect from time to time. The
prime lending rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. BTCo may make commercial
loans or other loans at rates of interest at, above or below the prime lending
rate.
"Prime Rate Loans" shall mean Advances made by Lenders bearing
interest at rates determined by reference to the Prime Rate as provided in
SECTION 2.8(C).
"Projections" shall have the meaning assigned to it in
SECTION 4.7.
"Proportionate Share" shall mean, with respect to any Lender,
the following: (i) for the purpose of repayment of principal, interest and Fees
with respect to the Loan, a fraction (expressed as a percentage), the numerator
of which shall be the aggregate principal amount of the Loans held by such
Lender, and the denominator of which shall be the aggregate principal amount of
the Loans held by all Lenders; and (ii) for all other purposes, the fraction
(expressed as a percentage), the numerator of which shall be the Commitment of
such Lender, and the denominator of which shall be the aggregate Commitments
held by all Lenders.
27
<PAGE>
"Purchase Money Liens" shall mean Liens on any item of real or
personal property (except Inventory) of Borrower or its Subsidiaries acquired
after the date of this Agreement, provided that: (i) each such Lien shall attach
only to the property to be acquired; (ii) a description of the property so
acquired is furnished to Agent; and (iii) the debt incurred in connection with
such acquisitions shall not exceed the lesser of (a) the amount of the purchase
price of such property then being financed and (b) $1,000,000 in the aggregate
outstanding at any one time.
"Qualified Borrower Equity Sale" shall mean either (i) a
public offering of the Stock of Borrower, made in compliance with all applicable
laws and regulations, other than a Qualified Borrower Public Offering, or (ii)
the sale of Borrower's Stock in a private equity sale, made in compliance with
all applicable laws and regulations, so long as, in either case, (a) the
aggregate amount of all Stock sold through such private and public sales does
not constitute, and shall not be convertible into, more than twenty percent
(20%) of Borrower's Voting Stock, (b) such private or public sale is not, at the
time of such sale, prohibited under the terms of the Subordinated Parent Note
Indenture, and (c) any Voting Stock issued through such private and public sales
is pledged to Agent, for the benefit of each Lender.
"Qualified Borrower Public Offering" shall mean one or more
public offering or offerings of the Stock of Borrower pursuant to an effective
registration statement or statements filed in accordance with the Securities Act
and in compliance with all applicable laws and regulations, which (i) is not, at
the time of any such offering, prohibited under the terms of the Subordinated
Parent Note Indenture, and (ii) is underwritten pursuant to a firm commitment
underwriting by a nationally recognized underwriter or investment banking firm,
pursuant to which the beneficial ownership of such Stock is initially
distributed to 50 or more Persons (with respect to such requirement, Borrower
may rely upon the representations of the underwriters handling such
distribution), from which Borrower obtains aggregate net offering proceeds,
after deduction of all fees, commissions, and other costs and expenses in
connection therewith, of not less than $50,000,000.
"Qualified Parent Equity Sale" shall mean either (i) a public
offering of the Stock of Parent, made in compliance with all applicable laws and
regulations, other than a Qualified Parent Public Offering, or (ii) a private
sale of the Stock of Parent, made in compliance with all applicable laws and
regulations.
"Qualified Parent Public Offering" shall mean one or more
public offering or offerings of the Stock of Parent pursuant to an effective
registration statement or statements filed in accordance with the Securities Act
and in compliance with all applicable laws and regulations, that is underwritten
pursuant to a firm commitment underwriting by a nationally recognized
underwriter or investment banking firm, pursuant to which the beneficial
ownership of such Stock is initially distributed to 50 or more Persons (with
respect to such requirement, Parent may rely upon the representations of the
underwriters handling such distribution), from which Parent obtains aggregate
net offering proceeds, after deduction of all fees, commissions, and other costs
and expenses in connection therewith, of not less than $50,000,000.
"Qualified Plan" shall mean a Plan that is an "employee
pension benefit plan," as defined in Section 3(2) of ERISA, which is intended to
be tax-qualified under Section 401(a) of the IRC.
28
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"Quarterly Rate Adjustment Matrix" shall refer to the matrix
set forth on SCHEDULE C.
----------
"Real Property Collateral" shall mean Borrower's real property
identified as such in SCHEDULE 4.8.
------------
"Real Property Collateral Documents" shall mean the mortgages,
deeds of trust or security deeds executed by Borrower on or about the Original
Closing Date in favor of Agent, for the benefit of Lenders, as amended by
modification agreements executed by Borrower on or about the Restatement Closing
Date, and by which Borrower has granted and conveyed to Agent, for the benefit
of Lenders, as security for the Obligations, Liens upon the Real Property
Collateral.
"Receivables Corporation" shall mean AmeriSource Receivables
Corporation, a Delaware corporation.
"Receivables Corporation Bank Account" shall have the meaning
assigned to it in SECTION 6.20(A).
"Receivables Facility" shall mean the receivables
securitization facility established pursuant to the Receivables Facility
Documents.
"Receivables Facility Documents" shall mean the Receivables
Pooling Agreement, the Receivables Purchase Agreement, any other "Transaction
Documents" (as defined in Appendix A to the Receivables Pooling Agreement and
the Receivables Purchase Agreement), and any other instruments, supplements,
agreements and documents executed in connection with the Receivables Facility as
existing on the Restatement Closing Date.
"Receivables Pooling Agreement" shall mean that certain
AmeriSource Receivables Master Trust Pooling and Servicing Agreement, dated as
of December 13, 1994, by and among Receivables Corporation, Borrower and the
trustee for the Receivables Trust, as existing on the Restatement Closing Date.
"Receivables Purchase Agreement" shall mean that certain
Receivables Purchase Agreement dated as of December 13, 1994, by and among
Borrower, as seller, and Receivables Corporation, as purchaser, as existing on
the Restatement Closing Date.
"Receivables Trust" shall mean AmeriSource Receivables Master
Trust.
"Reduced Rate" shall have the meaning assigned to it in
SECTION 2.18(F).
"Release" shall mean, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or outdoor
environment by such Person, including the movement of Hazardous Materials
through or in the air, soil, surface water, ground water or property.
"Reportable Event" shall mean any of the events described in
Section 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
29
<PAGE>
"Requisite Lenders" shall mean Lenders holding greater than
fifty percent (50%) of the Total Commitments; provided, that, for purposes of
--------
such calculation, the Commitment of any Defaulting Lender shall be deemed to be
Zero Dollars ($0).
"Reserves" shall mean reserves, including reserves for
doubtful accounts, returns, allowances and the like, as may be established by
Borrower or as may otherwise be required in accordance with GAAP.
"Restatement Closing Date" shall mean December 13, 1994.
"Restatement Closing Date Advance Balance" shall have the
meaning assigned to it in SECTION 2.20(A).
"Restricted Payment" shall mean (i) the declaration or payment
of any dividend or the occurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Borrower's Stock,
(ii) any payment on account of the purchase, redemption or other retirement of
Borrower's Stock or any other payment or distribution made in respect thereof,
either directly or indirectly, or (iii) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder except (in the case
of this clause (iii) only) for reasonably equivalent value or as permitted under
SECTION 7.7.
"Retiree Welfare Plan" shall refer to any Welfare Plan
providing for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
or under Pub. L. No. 103-3.
"Revolving Credit Commitment" shall have the meaning assigned
to it in the Original Credit Agreement.
"Revolving Credit Note" shall have the meaning assigned to it
in the Original Credit Agreement.
"Rolling Period" shall mean, as of the end of any Fiscal
Quarter, the immediately preceding four (4) Fiscal Quarters, including the
Fiscal Quarter then ending.
"Schedule of Documents" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with this Agreement and the Loan
Documents and the financing transaction contemplated hereunder and thereunder,
substantially in the form of SCHEDULE B.
----------
"Schedule of Inventory" shall mean the schedules of Inventory
of Borrower to be delivered by Borrower to Agent and Lenders pursuant to SECTION
2.10 and SECTION 5.1(A).
"Securities Act" shall mean the Securities Act of 1933.
"Security Agreement" shall mean the Amended and Restated
Security Agreement of even date herewith entered into among Agent (for the
benefit of Lenders), Borrower, Parent, and each of Borrower's Subsidiaries
(other than Receivables Corporation).
30
<PAGE>
"Settlement Period" shall have the meaning assigned to it in
SECTION 2.1(B)(I).
"Solvent" shall mean, when used with respect to any Person, as
of any date, that:
(i) the present fair salable value of such Person's assets
is in excess of the total amount of such Person's liabilities;
(ii) such Person is able to pay its debts as they become due;
and
(iii) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all
businesses in which such Person is about to engage.
"Stated LIBOR Rate" shall have the meaning assigned to it in
SECTION 2.8(C).
"Stated Prime Rate" shall have the meaning assigned to it in
SECTION 2.8(C).
"Stock" shall mean all shares, options, warrants, membership
interests in limited liability companies, general or limited partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation, partnership or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Exchange Act).
"Stockholder" shall mean each holder of Stock of any Person.
"Subject Property" shall have the meaning assigned to it in
SECTION 2.16.
"Subordinated Borrower Notes" shall mean each of the Existing
Subordinated Borrower Notes and the New Subordinated Borrower Notes.
"Subordinated Borrower Notes Payoff Amount" shall mean, so
long as any of the Subordinated Borrower Notes are outstanding, the maximum
amount required to be paid by Borrower to redeem all of the Subordinated
Borrower Notes pursuant to their terms, including accrued and unpaid interest
through the date of redemption and premiums thereon and penalties or other
charges with respect thereto; provided, that immediately prior to advancing such
--------
amount for the purpose of redeeming all of the Subordinated Borrower Notes and
thereafter, the Subordinated Borrower Notes Payoff Amount shall be deemed to be
Zero Dollars ($0).
"Subordinated Parent Note Indenture" shall mean the Indenture
dated as of July 15, 1993 between Parent, as issuer, and Security Trust Company,
National Association, as trustee.
"Subordinated Parent Notes Redemption Amount" shall mean the
amount, which is identified in a written notice from Borrower to Agent, of
proceeds received by Parent in a Qualified Parent Public Offering that Parent
will contribute to Borrower, the proceeds of which will be used by Borrower to
repay all or a portion of the Loan and will subsequently be distributed in the
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form of advances or dividends from Borrower to Parent for the sole purpose of
redeeming a portion of the Subordinated Parent Notes pursuant to their terms,
including accrued and unpaid interest through the date of redemption and
premiums thereon and penalties or other charges with respect thereto; provided,
--------
that (i) prior to Borrower's receipt of proceeds from a Qualified Parent Public
Offering, and (ii) after Borrower's receipt of proceeds from a Qualified Parent
Public Offering, but immediately prior to advancing such amount for the purpose
of redeeming such portion of the Subordinated Parent Notes and thereafter, the
Subordinated Parent Notes Redemption Amount shall be deemed to be Zero Dollars
($0).
"Subordinated Parent Notes" shall mean the 11 1/4% Senior
Subordinated Debentures due July 15, 2005, issued by Parent, as the same may be
modified, amended, extended, restated or supplemented, from time to time in
accordance with this Agreement, and any successor Indebtedness arising from the
refinancing thereof.
"Subsidiary" shall mean, with respect to any Person, (i) any
corporation of which an aggregate of fifty percent (50%) or more of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (ii) any
partnership or limited liability company in which such Person or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of fifty percent
(50%) or more or of which any such Person is a general partner or may exercise
the powers of a general partner.
"Tangible Net Worth" shall mean, as at any date of
determination, the total of (i) Net Worth, plus (ii) the Inventory LIFO Reserve,
----
minus (iii) intangible assets of Borrower, on a Consolidated basis, including
- - - -----
goodwill, patents, trademarks, trade names, organization expense, treasury
stock, unamortized debt discount and expense, deferred charges, research and
development expense and other like intangibles, in accordance with GAAP.
"Tax Advisors" shall mean Borrower's tax advisors, other than
the Auditors and Borrower's legal counsel.
"Tax Expense" shall mean the Tax expense of Borrower
determined, on a Consolidated basis, in accordance with GAAP.
"Tax Transferee" shall have the meaning assigned to it in
SECTION 2.18(A).
"Taxes" shall have the meaning assigned to it in SECTION
2.18(A).
"Term Loan Commitment" shall have the meaning assigned to it
in the Original Credit Agreement.
"Term Note" shall have the meaning assigned to it in the
Original Credit Agreement.
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<PAGE>
"Termination Date" shall mean the date on which the Loan and
all other Obligations hereunder have been completely discharged, the Commitment
Termination Date shall have occurred and Borrower shall have no further right to
borrow any monies hereunder.
"Testing Period" shall mean, with respect to any calculation
used in determining the Applicable Letter of Credit Fee Rate, the Applicable
Margin, the Applicable Unused Line Fee Rate, the Average Total Debt, or the
Dividend/Acquisition Basket, a Rolling Period; provided, that (i) the first
--------
Testing Period shall end on June 30, 1995 and shall consist of the two
consecutive Fiscal Quarter period ending on June 30, 1995, and (ii) the second
Testing Period shall end on September 30, 1995 and shall consist of the three
consecutive Fiscal Quarter period ending on September 30, 1995.
"Title IV Plan" shall mean a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"Total Commitments" shall mean the aggregate of the
Commitments of all of the Lenders then in effect.
"Total Debt to EBITDA Ratio" shall mean, as of any date, the
ratio of (i) the Average Total Debt on such date, to (ii) EBITDA for the most
recent Rolling Period; provided, that, only for the purpose of the initial
--------
adjustments to be made to the Applicable Margin, Applicable Letter of Credit Fee
Rate and Applicable Unused Line Fee Rate after the receipt of at least
$100,000,000 in gross cash proceeds (before customary fees and expenses) from
the sales of common Stock of Borrower or Parent or capital contributions to
Borrower's equity account in the form of cash, the calculation of Average Total
Debt in clause (i) of this definition shall give pro forma effect to the
application of such proceeds of such sales or contributions as if such sales or
contributions occurred on the first day of the relevant Rolling Period.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (i) the amount by which the present
value of all accrued vested benefits under each Title IV Plan exceeds the fair
market value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, (ii) for a period of five (5) years following a
transaction reasonably likely to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided as a result of such
transaction and (iii) the amount of Potential Withdrawal Liability.
"Unoccupied Property" shall mean Borrower's real property
identified as such in SCHEDULE 4.8.
------------
"Unused Line Fee" shall have the meaning assigned to it in
SECTION 2.11(A).
"Voting Stock" shall mean, with respect to any Person, shares
of its Stock having the right to vote for the election of directors of such
Person under ordinary circumstances.
"VPI" shall mean 399 Venture Partners Inc.; provided, that if
--------
VPI transfers to Citicorp Venture Capital, Ltd. or its Affiliates all Stock of
Parent held by VPI, then, upon and after the date of such transfer, the term
"VPI" shall mean Citicorp Venture Capital, Ltd. or such Affiliates.
33
<PAGE>
"Welfare Plan" shall mean any Plan that is an "employee
welfare benefit plan" as defined in Section 3(1) of ERISA.
1.2 Rules of Construction. Except as otherwise expressly provided in
---------------------
this Agreement, any accounting term used in this Agreement or the other Loan
Documents shall have, unless otherwise specifically provided herein or therein,
the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder or thereunder shall be computed, unless
otherwise specifically provided herein or therein, in accordance with GAAP
consistently applied. That certain items or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. All other undefined terms contained in this Agreement or the
other Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein. The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented,
and not to any particular section, subsection or clause contained in this
Agreement.
For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply, unless specifically
indicated to the contrary: (a) wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular and
the plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, the feminine and the neuter; (b) the term "or" is
not exclusive; (c) the term "including" (or any form thereof) shall not be
limiting or exclusive; (d) all references to statutes and related regulations
shall include any amendments of same and any successor statutes and regulations;
(e) except when used with respect to payment of interest, Fees and other amounts
owed solely to Lenders, all references to "for the benefit of Lenders" shall be
deemed to also include Issuing Lender, Managing Agents and Agent; and (f) all
references to any of the Loan Documents shall include any and all modifications
or amendments thereto (including any amendment and restatement) and any and all
extensions or renewals thereof in accordance with the terms of such Loan
Documents.
34
<PAGE>
2.1 Advances.
--------
1. Upon and subject to the terms and conditions hereof, Lenders
severally agree to make available, from time to time, until the Commitment
Termination Date, for Borrower's use and upon the request of Borrower therefor,
advances (each, an "Advance") against Eligible Inventory in an aggregate amount
outstanding which, together with all Letter of Credit Obligations, shall not at
any given time exceed their respective Proportionate Share of the lesser of (i)
the Maximum Loan, and (ii) the Borrowing Base. Until all amounts outstanding in
respect of the Loan shall become due and payable on the Commitment Termination
Date, Borrower may from time to time borrow, repay and reborrow under this
SECTION 2.1(A). Each Advance, other than Advances made pursuant to SECTION
2.1(D), shall be made on notice given by Borrower to Agent no later than 12:00
noon (New York time) on the Business Day of the proposed Advance. Each such
notice (a "Notice of Advance") shall be by telephone, at 203/840-4500, to
Agent's account executive responsible for Borrower, confirmed immediately in
writing, or in writing (by facsimile to 203/840-4560), substantially in the form
of EXHIBIT A, or to such other telephone or facsimile number as Agent may
---------
designate, specifying therein the requested date, the amount of such Advance,
and such other information as may be required by Agent. Other than as provided
in SECTION 2.1(B), Agent shall deliver a copy of the Notice of Advance to the
other Lenders at or before 1:00 P.M. (New York time) on the date of the proposed
Advance, and each of the other Lenders shall wire transfer its Proportionate
Share of such Advance to the Collection Account at or before 3:00 P.M. (New York
time) on the same date. At or before 4:00 P.M. (New York time) on the date of
the proposed Advance, upon Agent's satisfaction with Borrower's fulfillment of
the applicable conditions set forth in SECTION 3, Agent shall wire transfer such
Advance to a bank designated by Borrower and reasonably acceptable to Agent or,
if Agent determines that Borrower has not fulfilled the applicable conditions
and the Advance is not wire transferred to such bank, then Agent shall return
the amounts so received to the respective Lenders by wire transfer.
2. In order to administer the Loan in an efficient manner and to
minimize the transfer of funds between Agent and Lenders, so long as the
conditions precedent set forth in SECTION 3.1 and SECTION 3.2, as the case may
be, remain satisfied, Agent may, in its sole discretion, subject to the
following clauses (i), (ii) and (iii), make available, on behalf of Lenders, the
full amount of the Advances requested or deemed requested by Borrower pursuant
to SECTION 2.1(A), SECTION 2.1(D) and SECTION 2.3(E), without notice to Lenders
of the proposed Advance pursuant to SECTION 2.1(A).
35
<PAGE>
a. If Agent shall have made one or more Advances on behalf
of Lenders, as provided in this SECTION 2.1(B), the amount of each
Lender's Proportionate Share of the outstanding Advances shall be computed
weekly rather than daily and shall be adjusted upward or downward on the
basis of the amount of the outstanding Advances as of 5:00 P.M. (New York
time) on the Business Day immediately preceding the date of each
computation; provided, that Agent retains the absolute right at any time
--------
or from time to time to make the aforedescribed adjustments at intervals
more frequent than weekly. Agent shall deliver to each of the Lenders
after the end of each week, or such lesser period or periods as Agent
shall determine, a summary statement of the amount of outstanding Advances
for such period (such week or lesser period or periods being hereafter
referred to as a "Settlement Period"). If the summary statement is sent by
Agent and received by a Lender prior to 12:00 Noon (New York time), then
such Lender shall make the transfers described in the next succeeding
sentence no later than 3:00 P.M. (New York time) on the day such summary
statement was sent, and if such summary statement is sent by Agent and
received by a Lender after 12:00 Noon (New York time), such Lender shall
make such transfers no later than 3:00 P.M. (New York time) on the next
succeeding Business Day. If, in any Settlement Period, the amount of a
Lender's Proportionate Share of the outstanding Advances is more than such
Lender's Proportionate Share of the outstanding Advances for the previous
Settlement Period, then such Lender shall forthwith (but in no event later
than the time set forth in the next preceding sentence) transfer to Agent
by wire transfer in immediately available funds the amount of the
increase; and, on the other hand, if the amount of a Lender's
Proportionate Share of the outstanding Advances in any Settlement Period
is less than the amount of such Lender's Proportionate Share of the
outstanding Advances for the previous Settlement Period, Agent shall
forthwith transfer to such Lender by wire transfer in immediately
available funds the amount of the decrease. The obligation of each of the
Lenders to transfer such funds shall be irrevocable and unconditional and
without recourse to or warranty by Agent. Each of Agent and Lenders agrees
to mark its books and records at the end of each Settlement Period to show
at all times the Dollar amount of its Proportionate Shares of the
outstanding Advances.
b. To the extent that Agent has made any such amounts
available and the settlement described above shall not yet have occurred,
upon repayment of the Loan by Borrower, Agent may apply such amounts repaid
directly to any amounts made available by Agent pursuant to SECTION 2.2(A).
c. Because Agent, on behalf of Lenders, may be advancing or
may be repaid Advances prior to the time when Lenders will actually advance
or be repaid Advances, interest with respect to the outstanding Advances
shall be allocated by Agent to each Lender (including Agent) in accordance
with the amount of the outstanding Advances actually advanced by and repaid
to each Lender (including Agent) during each Settlement Period and shall
accrue from and including the date such Advances are advanced by Agent to
but excluding the date such Advances are repaid by Borrower in accordance
with SECTION 2.4 or actually settled by the applicable Lender as described
in this SECTION 2.1.
3. The Loan made by Lenders shall be evidenced by the Notes to
be executed and delivered by Borrower as of the Restatement Closing Date. The
36
<PAGE>
previously outstanding promissory notes will be canceled in accordance with
SECTION 2.20. The Notes shall represent the obligation of Borrower to pay the
amount of the Maximum Loan or, if less, the aggregate unpaid principal amount of
all Advances made by Lenders to Borrower with interest thereon as prescribed in
SECTION 2.8. The date and amount of each Advance and each payment of principal
with respect thereto shall be recorded on the books and records of Agent, which
books and records shall constitute prima facie evidence of the accuracy of the
----- -----
information therein recorded. The entire unpaid balance of the Loan shall be due
and payable on the Commitment Termination Date.
4. To the extent any amounts are due and owing from Borrower on
account of the Obligations, Agent may make Advances for Borrower's account,
pursuant to SECTION 2.14(A).
2.2 Making the Loans.
----------------
1. If the amounts requested by Borrower in any proposed Advance
are not in fact made available to Agent by a Lender in the time and manner
required under this Agreement (such Lender being hereinafter referred to as a
"Defaulting Lender") and Agent has made such amount available to Borrower, then
Agent shall be entitled to recover such corresponding amount on demand from such
Defaulting Lender. If such Defaulting Lender does not pay such corresponding
amount forthwith upon Agent's demand therefor, Agent shall promptly notify
Borrower and Borrower shall immediately (but in no event later than five (5)
Business Days after such demand) pay such corresponding amount to Agent. Agent
shall also be entitled to recover, from such Defaulting Lender and Borrower,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by Agent to Borrower to the date such
corresponding amount is recovered by Agent, at a per annum rate equal to either
(i) if paid by such Defaulting Lender, (A) the Federal Funds Rate for three (3)
Business Days and thereafter at the Prime Rate, plus (B) an amount equal to any
----
costs (including reasonable legal expenses) and losses incurred as a result of
the failure of such Defaulting Lender to provide such amount as provided in this
Agreement, or (ii) if paid by Borrower, the then applicable rate of interest,
calculated in accordance with SECTION 2.8. Nothing herein shall be deemed to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights which Borrower may have against any Lender as a result
of any default by such Lender hereunder, including the right of Borrower to seek
reimbursement from any Defaulting Lender for any amounts paid by Borrower on
account of such Defaulting Lender's default. Notwithstanding the foregoing,
Borrower shall not be liable pursuant to this clause (a) for any interest in
excess of such interest that would have accrued absent such Defaulting Lender's
default.
2. The failure of any Lender to make its Proportionate Share of
any Advance to be made by it shall not relieve any other Lender of its
obligation, if any, hereunder to make its respective Proportionate Share of such
Advance on the date of such Borrowing, but no Lender shall be responsible for
the failure of any other Lender to make its Proportionate Share of the Advance
to be made by such other Lender on such date.
37
<PAGE>
2.3 Letters of Credit.
-----------------
1. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrower set forth herein,
Issuing Lender shall issue Letters of Credit hereunder at the request of
Borrower and for its account, as more specifically described below. Issuing
Lender shall not be obligated to issue any Letter of Credit for the account of
Borrower if at the time of such requested issuance:
a. the face amount of such requested Letter of Credit when
added to the Letter of Credit Obligations then outstanding, would cause
the Letter of Credit Obligations (A) to exceed $25,000,000 or (B) when
added to the aggregate amount of the Advances then outstanding, to exceed
the lesser of (x) the Maximum Loan and (y) the Borrowing Base then in
effect;
b. any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or restrain
Issuing Lender from issuing such Letter of Credit or any requirement of
law applicable to Issuing Lender or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over Issuing Lender shall prohibit, or request Issuing Lender
to refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon Issuing Lender with
respect to such Letter of Credit any restriction or reserve or capital
requirement (for which Issuing Lender is not otherwise compensated) not in
effect as of the Restatement Closing Date, or any unreimbursed loss, cost
or expense which was not applicable, in effect or known to Issuing Lender
as of the Restatement Closing Date and which Issuing Lender deems in good
faith to be material to it and which decision Issuing Lender shall have
made with respect to other similarly situated account parties; or
c. a default of any Lender's obligations to fund under
SECTION 2.3(F) exists, or any Lender is a Defaulting Lender under SECTION
2.2(A), unless Agent and Issuing Lender have entered into satisfactory
arrangements with Borrower to eliminate Issuing Lender's risk with respect
to such Lender, including cash collateralization of such Lender's
Proportionate Share of the Letter of Credit Obligations.
2. The Letters of Credit shall be in a form customarily used by
Issuing Lender or in such other form as has been approved by Issuing Lender. At
the time of issuance, the amount and the terms and conditions of each Letter of
Credit shall be subject to the approval of Agent and Borrower. In no event may
the term of any Letter of Credit issued hereunder exceed 365 days (except that
such Letters of Credit may provide for annual renewal) and all Letters of Credit
issued hereunder shall expire no later than December 23, 1999. Any Letter of
Credit containing an automatic renewal provision shall also contain a provision
pursuant to which, notwithstanding any other provisions thereof, it shall expire
no later than the date that is five (5) Business Days prior to the Commitment
Termination Date.
3. Immediately upon issuance or amendment by Issuing Lender of
any Letter of Credit in accordance with the procedures set forth in SECTION
2.3(A), each Lender shall be deemed and hereby agrees to have irrevocably and
unconditionally purchased and received from Issuing Lender, without recourse or
warranty, an undivided interest and participation (to the extent of such
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Lender's Proportionate Share) in the liability with respect to such Letter of
Credit (including all obligations of Borrower with respect thereto, other than
amounts owing to Issuing Lender consisting of Issuing Lender Fees) and any
security therefor or guaranty pertaining thereto. After a Letter of Credit is
issued, Agent shall notify each Lender of such issuance, the amount of each
Lender's respective participation therein (determined in accordance with this
SECTION 2.3(C)), the expiration date thereof and whether the Letter of Credit
may be automatically extended.
4. Whenever Borrower desires the issuance of a Letter of Credit,
Borrower shall deliver to Agent and Issuing Lender written notice no later than
1:00 P.M. (New York time) at least five (5) Business Days (or such shorter
period as may be agreed to by Issuing Lender) in advance of the proposed date of
issuance of a letter of credit request in substantially the form of EXHIBIT I (a
---------
"Letter of Credit Request"). The transmittal by Borrower of each Letter of
Credit Request shall be deemed to be a representation and warranty by Borrower
that the Letter of Credit may be issued in accordance with and will not violate
any of the requirements of this SECTION 2.3. Prior to the date of the issuance
of each Letter of Credit, Borrower shall provide to Issuing Lender a precise
description of the documents and the verbatim text of any certificate to be
presented by the beneficiary of such Letter of Credit which if presented by such
beneficiary on or prior to the expiration date of the Letter of Credit would
require Issuing Lender to make payment under the Letter of Credit. Issuing
Lender, in its reasonable judgment, may require changes in any such documents
and certificates. Each Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same Business Day on which such
draft is presented. A Letter of Credit Request may be given in writing or
electronically and, if requested by Agent or Issuing Lender, with prompt
confirmation in writing. Any electronic Letter of Credit Request shall be deemed
to have been prepared by, or under the supervision of, the chief financial
officer of Borrower.
5. In the event of any request for drawing under any Letter of
Credit by the beneficiary thereof, Issuing Lender shall notify Agent and
Borrower of such request not later than 11:00 A.M. (New York Time) on the
Business Day immediately prior to the date on which Issuing Lender intends to
honor such drawing. Borrower shall give notice to be received by Agent and
Issuing Lender not later than 11:00 A.M. (New York Time) on the Business Day
immediately prior to the date on which Issuing Lender intends to honor such
drawing if Borrower intends to reimburse Issuing Lender for the amount of such
drawing, in whole or in part, with funds other than the proceeds of a Letter of
Credit Advance. Such notice from Borrower shall be irrevocable and, if given,
Borrower shall reimburse Issuing Lender not later than 2:00 P.M. (New York time)
on the day on which such drawing is honored in an amount in same day funds equal
to the amount of such drawing. If Agent shall not have timely received such
notice (i) Borrower shall be deemed to have timely given a Notice of Advance to
Agent to make a Letter of Credit Advance on the date on which such drawing is
honored in an amount equal to the amount of such drawing, and (ii) subject to
satisfaction or waiver of the conditions specified in SECTION 3.1 or SECTION
3.2, as the case may be, and the other terms and conditions of Advances
contained herein, Lenders shall, on the date of such drawing, make a Letter of
Credit Advance in the amount of such drawing, the proceeds of which shall be
applied directly by Agent to reimburse Issuing Lender for the amount of such
drawing or payment. If for any reason, proceeds of a Letter of Credit Advance
are not received by Issuing Lender on such date in an amount equal to the amount
of such drawing, Borrower shall be obligated to and shall reimburse Issuing
Lender, on the Business Day
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immediately following the date of such drawing, in
an amount in same day funds equal to the excess of the amount of such drawing
over the amount of such Loans, if any, which are so received, plus accrued
interest on such amount at the rate set forth in SECTION 2.8.
6. In the event that Borrower does not reimburse Issuing Lender
for the amount of any drawing pursuant to SECTION 2.3(E), Agent shall promptly
notify each Lender of the unreimbursed amount of such drawing and of such
Lender's respective Proportionate Share. Each Lender shall make available to
Issuing Lender an amount equal to its respective Proportionate Share in same day
funds, at the office of Issuing Lender specified in such notice, not later than
3:00 P.M. (New York time) on the Business Day after the date notified by Agent.
In the event that any Lender fails to make available to Issuing Lender the
amount of such Lender's participation in such Letter of Credit as provided in
this SECTION 2.3(F), Issuing Lender shall be entitled to recover such amount on
demand from such Lender together with interest at the Federal Funds Rate for
three (3) Business Days and thereafter at the Prime Rate. Agent shall distribute
to each other Lender which has paid all amounts payable by it under this SECTION
2.3(F) with respect to any Letter of Credit issued by Issuing Lender such other
Lender's Proportionate Share of all payments subsequently received by Agent from
Borrower in reimbursement of drawings honored by Issuing Lender under such
Letter of Credit when such payments are received.
7. In determining whether to pay under any Letter of Credit,
Issuing Lender shall be responsible only to determine that the documents and
certificates required to be delivered under that Letter of Credit have been
delivered and that they appear on their face to be in accordance with the terms
and conditions of that Letter of Credit. As between Borrower, Issuing Lender and
each other Lender, Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, neither Issuing Lender nor any of the other Lenders shall be
responsible (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effects of any documents submitted by any party in connection with the
application for and issuance of or any drawing honored under such Letters of
Credit even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (except for honoring a draw on a
Letter of Credit that does not appear on its face to be in accordance with the
terms and conditions of such Letter of Credit), (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit, or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason, (iii) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit (except for honoring a draw on a Letter of
Credit that does not appear on its face to be in accordance with the terms and
conditions of such Letter of Credit), (iv) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex, facsimile or otherwise, whether or not they are in cipher, (v)
for errors in interpretation of technical terms, (vi) for any loss or delay in
the transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit, or of the proceeds thereof, (vii) for
the misapplication by the beneficiary of any such Letter of Credit, of the
proceeds of any drawing honored under such Letter of Credit, and (viii) for any
consequences arising from causes beyond the control of Issuing Lender or the
other Lenders. None of the above shall affect,
40
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impair, or prevent the vesting of any of Issuing Lender's rights or powers
hereunder. In furtherance and extension and not in limitation of the specific
provisions set forth in the immediately preceding sentence and notwithstanding
any other provision of this Agreement, any action taken or omitted by Issuing
Lender (except for honoring a draw on a Letter of Credit that does not appear on
its face to be in accordance with the terms and conditions of such Letter of
Credit) or any other Lender under or in connection with the Letters of Credit
purchased or deemed purchased by it, or the related certificates, if taken or
omitted without gross negligence or willful misconduct as finally judicially
determined, shall not subject Issuing Lender or any Lender to any resulting
liability to, or create any defense in favor of, Borrower.
8. The obligations of Borrower to reimburse Issuing Lender for
drawings honored under the Letters of Credit issued by it and the obligations of
Lenders under Section 2.3(f) shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following circumstances:
a. any lack of validity or enforceability of any Letter of
Credit;
b. the existence of any claim, set-off, defense or other
right which Borrower or any Affiliate of Borrower may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such beneficiary or transferee may be
acting), Issuing Lender, any Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or
any unrelated transaction;
c. any draft, demand, certificate or any other documents
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
d. the failure to perfect any Lien, or the release,
surrender or impairment of any security for the performance or observance
of any of the terms of any of the Loan Documents;
e. payment by Issuing Lender under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit (unless it
does not appear on its face to be in accordance with the terms and
conditions of such Letter of Credit);
f. failure of any drawing under a Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of
any drawing;
g. the fact that a Default or Event of Default shall have
occurred and be continuing;
h. any other similar circumstance or happening whatsoever,
that is similar to any of the foregoing;
provided, that Borrower shall have no obligation to reimburse Issuing Lender,
- - - --------
and Lenders shall have no obligation under SECTION 2.3(F) in the event that
Issuing Lender honors a draw under a Letter of Credit when the documents
41
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presented under the Letter of Credit do not appear on their face to be in
accordance with the terms and conditions of such Letter of Credit.
9. In the event that any Letter of Credit Obligation, whether or
not then due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrower will thereupon either (i) cause the underlying Letter
of Credit to be returned and canceled and Lenders' Letter of Credit Obligation
to be terminated, or (ii) pay cash, or deliver to Agent a letter of credit in
favor of Lenders which is acceptable to Agent, in an amount equal to the maximum
amount then available to be drawn under the Letter of Credit. Any such funds
delivered to Agent shall be held by Agent in a cash collateral account (the
"Cash Collateral Account"). The Cash Collateral Account shall be in the name of
Agent, for the benefit of each Lender (as a cash collateral account), and shall
be under the sole dominion and control of Agent and subject to the terms of this
SECTION 2.3. Borrower agrees to execute and deliver to Agent such documentation
with respect to the Cash Collateral Account as Agent may reasonably request and
Borrower hereby pledges, and grants to Agent, for the benefit of each Lender,
a security interest in, all such funds held in the Cash Collateral Account from
time to time and all proceeds thereof, as security for the payment of all
amounts due in respect of the Letter of Credit Obligations, whether or not then
due.
10. In the event that Lenders shall incur any Letter of Credit
Obligations pursuant hereto at the request or on behalf of Borrower hereunder,
Borrower agrees to pay to Agent (i) all fees, charges, costs and expenses paid
by Agent or any Lender on account of such Letter of Credit Obligations to
Issuing Lender (the "Issuing Lender Fees"), and (ii) a fee (the "Letter of
Credit Fee") in an amount equal to the quotient of (A) an amount equal to (I)
the sum of the daily outstanding amount of all such Letter of Credit Obligations
on each day during the previous calendar month, multiplied by (II) the
---------- --
Applicable Letter of Credit Fee Rate, divided by (B) 360. The Letter of Credit
Fee shall be paid to Agent, for the benefit of each Lender, (x) monthly in
arrears commencing on December 1, 1994, and on the first day of each subsequent
calendar month, (y) on the Commitment Termination Date, and (z) if any Letter of
Credit Fee remains payable after the Commitment Termination Date, or during the
continuance of an Event of Default, upon demand by Agent or any Lender. The
Letter of Credit Fee shall be allocated among Lenders in accordance with each
Lender's respective Proportionate Share. So long as any Event of Default shall
have occurred and be continuing, Agent may, subject to SECTION 10.5, increase
the Applicable Letter of Credit Fee Rate set forth in clause (ii)(A)(II) of the
first sentence of this SECTION 2.3(J) by two percent (2%) per annum above the
rate otherwise applicable.
11. Borrower agrees to pay to Issuing Lender, for its sole
benefit, with respect to the issuance, amendment or transfer of each Letter of
Credit and each payment made thereunder, processing and administrative charges
in accordance with Issuing Lender's standard schedule for such charges in effect
at the time of such issuance, amendment, transfer or payment.
12. In the event that Issuing Lender elects not to issue a Letter
of Credit requested by Borrower, Agent may elect to execute an L/C Guaranty
Agreement in favor of a Person who is not a Lender, and in such event (i) the
terms and provisions of SCHEDULE D shall apply, and (ii) the term "Letter of
----------
Credit" shall include such L/C Guaranty Agreement and Agent shall be deemed to
be the Issuing Lender with respect to any such Letter of Credit.
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13. As of the Restatement Closing Date, each issued and undrawn
letter of credit under the Original Credit Agreement shall be replaced by a
Letter of Credit issued under this Agreement by BTCo, as Issuing Lender.
2.4 Mandatory Prepayment.
--------------------
1. In the event that the outstanding balance of the Loan shall,
at any time, exceed the lesser of (i) the Maximum Loan, and (ii) the Borrowing
Base then in effect, Borrower shall immediately repay the Loan in the amount of
such excess.
2. No prepayment fee shall be payable in respect of any
mandatory prepayment under this SECTION 2.4.
2.5 Optional Reduction of Maximum Loan or Advance Rate.
--------------------------------------------------
1. Borrower shall have the right at any time, on not less than
five (5) Business Days prior written notice to Agent, to voluntarily prepay the
entire Loan and terminate this Agreement, without premium or penalty, and upon
such prepayment and reduction Borrower's right to receive Advances or Letters of
Credit shall simultaneously terminate. Each prepayment shall be accompanied by
the payment of all accrued and unpaid interest and all Fees, the breakage fees
and other costs described in SECTION 2.9(E), if any, and all other remaining
Obligations.
2. Borrower shall have the right at any time, on not less than
five (5) Business Days prior written notice to Agent, to permanently reduce the
amount of the Maximum Loan in an amount of not less than $5,000,000 and integral
multiples of $1,000,000 in excess of $5,000,000; provided, that any amount of
--------
the Obligations in excess of the so reduced Maximum Loan is concurrently paid.
The amount of each Lender's Commitment shall be reduced by such Lender's
Proportionate Share of the reduction in the Maximum Loan and EXHIBIT A shall be
---------
amended to reflect such reduction.
3. Borrower shall have the right at any time, on not less than
five (5) Business Days prior written notice to Agent, to decrease the then
applicable borrowing percentage for Eligible Inventory set forth in the
definition of Borrowing Base for a period of not less than 60 days; provided,
--------
that in no event shall the borrowing percentage for Eligible Inventory be
reduced to less than fifty percent (50%). Any notice provided by Borrower
pursuant to this SECTION 2.5(C) shall be irrevocable.
2.6 Use of Proceeds. Borrower shall utilize the proceeds of the Advances
---------------
for (a) the general corporate purposes of Borrower, including the financing of
Borrower's ordinary working capital needs, (b) to refinance all of the
Subordinated Borrower Notes, including accrued and unpaid interest and premiums
thereon, (c) to pay the costs and expenses incurred in connection with the
closing of the financing transactions contemplated by this Agreement, (d) to
make capital contributions to Receivables Corporation to be used to make
payments of the "Purchase Price" (as defined in section 2.1(b) of the
Receivables Purchase Agreement), as contemplated by section 1.2 of the
Receivables Purchase Agreement, and (e) as otherwise permitted by this
Agreement.
2.7 Single Loan. The Loan, all Advances, and all of the other
-----------
Obligations of Borrower arising under this
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Agreement and the other Loan Documents shall constitute one general obligation
of Borrower secured, until the Termination Date, by all of the Collateral.
2.8 Interest on Loans.
-----------------
1. Borrower shall pay interest to Agent, for the benefit of each
Lender:
a. with respect to the Advances bearing interest at the
Stated Prime Rate, (A) monthly in arrears commencing on December 1, 1994,
and on the first Business Day of each subsequent calendar month, (B) on
the Commitment Termination Date, and (C) if any interest accrues or
remains payable after the Commitment Termination Date, or during the
continuance of an Event of Default, upon demand by Agent or Requisite
Lenders; and
b. with respect to the Advances bearing interest at the
Stated LIBOR Rate, (A) on the last day of the applicable Interest Period
in the case of an Advance with an Interest Period of 30, 60 or 90 days,
(B) on the 90th day and the last day of the applicable Interest Period in
the case of an Advance with an Interest Period of 180 days, (C) on the
Commitment Termination Date, and (D) if any interest accrues or remains
payable after the Commitment Termination Date, or during the continuance
of an Event of Default, upon demand by Agent or Requisite Lenders.
2. If any interest or other payment on the Loans becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
3. Borrower shall be obligated to pay interest to Agent, for the
benefit of each Lender, on the Advances at a floating rate equal to the Prime
Rate plus the Applicable Margin for Prime Rate Loans (the "Stated Prime Rate");
provided, that if Borrower so elects pursuant to SECTION 2.8(E), then the
- - - --------
interest on any Advance shall be calculated at all times during the Interest
Period selected by Borrower at a rate equal to the Adjusted LIBOR Rate on the
Interest Determination Date plus the Applicable Margin for LIBOR Rate Loans (the
"Stated LIBOR Rate"), subject to the provisions of SECTION 2.8(E). Any election
by Borrower pursuant to SECTION 2.8(E) shall be irrevocable by Borrower during
the Interest Period selected by Borrower, and all Advances subject to such
election during such Interest Period shall bear interest during such Interest
Period at the Stated LIBOR Rate.
4. All computations of interest shall be made by Agent on the
basis of a three hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is payable. The
Prime Rate shall be determined on a daily basis for use in calculating the
interest that is payable for such day, and any change in the Prime Rate shall
become effective on the day such change occurs. Each determination by Agent of
an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error or bad faith.
5. (i) The Advances automatically will bear interest at the
Stated Prime Rate, unless Borrower elects to convert the interest rate
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to the Stated LIBOR Rate for the Interest Period selected by Borrower in
accordance with the provisions of this SECTION 2.8(E).
a. Borrower may on any Business Day, upon written notice
given by Borrower to Agent, in the form of EXHIBIT G hereto (the "Notice
---------
of LIBOR Advance"), not later than 12:00 Noon (New York time) on the third
Business Day prior to the date of the proposed Conversion (the "Interest
Election Date"), convert the interest rate on any or all of the Advances
from the Stated Prime Rate to the Stated LIBOR Rate; provided, that (A)
--------
Advances bearing interest based on the Stated LIBOR Rate shall be in
minimum amounts of $5,000,000 and integral multiples of $1,000,000 in
excess of $5,000,000, and (B) at any time, not more than six (6) tranches
of the Loan shall bear interest based on the Stated LIBOR Rate. Agent
shall deliver a copy of the Notice of LIBOR Advance to the other Lenders
at or before 5:00 P.M. (New York time) on the Interest Election Date, and
the Stated LIBOR Rate for the new Interest Period shall be determined as
of the second Business Day prior to the date of the proposed Conversion
(the "Interest Determination Date"). Unless a new Conversion to a Stated
LIBOR Rate for a new Interest Period has been timely elected and selected
by Borrower pursuant to this SECTION 2.8(E), the interest rate for any
Advance will automatically, commencing on the day after the last day of
the then existing Interest Period therefor, convert to the Stated Prime
Rate.
b. No Interest Period shall end on a date which is later
than January 3, 2000.
6. So long as any Event of Default shall have occurred and be
continuing, Agent may, subject to SECTION 10.5, increase the interest rates
applicable to the Loans by two percent (2%) per annum above the rates otherwise
applicable (the "Default Rate").
7. Notwithstanding anything to the contrary set forth in this
SECTION 2.8, if, at any time until payment in full of all of the Obligations,
the rate of interest payable hereunder exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable hereunder shall be equal to the Maximum Lawful Rate;
provided, that if at any time thereafter the rate of interest payable hereunder
- - - --------
is less than the Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total interest
received by Lenders from the making of advances hereunder is equal to the total
interest which Lenders would have received had the interest rate payable
hereunder been (but for the operation of this paragraph) the interest rate
payable since the Original Closing Date. Thereafter, the interest rate payable
hereunder shall be the rate of interest charged by Lenders, unless and until the
rate of interest again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by
Lenders pursuant to the terms hereof exceed the amount which Lenders could
lawfully have received had the interest due hereunder been calculated for the
full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful
Rate is calculated pursuant to this SECTION 2.8(G), such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. In the event that
a court of competent jurisdiction, notwithstanding the provisions of this
SECTION 2.8(G), shall make a final determination that
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<PAGE>
Lenders have received interest hereunder or under any of the Loan Documents in
excess of the Maximum Lawful Rate, Lenders shall, to the extent permitted by
applicable law, promptly apply such excess first to any interest due and not yet
paid under the Loans, then to the outstanding principal of the Loan (without
premium or penalty), then to Fees and any other unpaid Obligations, and
thereafter shall refund any excess to Borrower or as a court of competent
jurisdiction may otherwise order.
2.9 Special Provisions Governing LIBOR Rate Loans. Notwithstanding any
---------------------------------------------
other provision of this Agreement to the contrary, the following provisions
shall govern with respect to LIBOR Rate Loans as to the matters covered:
1. As soon as practicable after 10:00 A.M. (New York time) on
any Interest Determination Date, Agent shall determine (which determination
shall, absent manifest error, be final, conclusive and binding upon all parties)
the interest rate which shall apply to the LIBOR Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower and to each Lender.
2. In the event that on any Interest Determination Date any
Lender (including Agent) shall have determined (which determination shall be
final, conclusive and binding upon all parties but, with respect to the
following clauses (i) and (ii)(b), shall be made only after consultation with
Borrower and Agent) that:
a. by reason of any changes arising after the date of this
Agreement affecting the LIBOR market, or affecting the position of that
Lender in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to the LIBOR Rate
with respect to the LIBOR Rate Loans as to which an interest rate
determination is then being made; or
b. by reason of (a) any change (including any change
proposed prior to the date hereof) after the date hereof in any applicable
law or any governmental rule, regulation or order (or any interpretation or
administration thereof and including the introduction of any new law or
government rule, regulation or order (including any thereof proposed prior
to the date hereof)) or (b) other circumstances affecting that Lender or
the LIBOR market, or the position of that Lender in such market, the LIBOR
Rate shall not represent the effective pricing to that Lender for Dollar
deposits of comparable amounts for the relevant period;
then, and in any such event, such Lender shall be an Affected Lender and it
shall promptly (and in any event as soon as possible after being notified of an
Advance) give notice (by telephone confirmed in writing) to Borrower and Agent
(which notice Agent shall promptly transmit to each other Lender) of such
determination. Thereafter, Borrower shall pay to the Affected Lender with
respect to Borrower's LIBOR Rate Loans, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as the Affected Lender in its sole
discretion shall in good faith determine) as shall be required to cause the
Affected Lender to receive interest with respect to such Affected Lender's LIBOR
Rate Loans for the Interest Period following that Interest Determination Date
(such Interest Period being an "Affected Interest Period") at a per annum rate
equal to the Applicable Margin with respect to the LIBOR Rate Loans plus
----
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the effective pricing to the Affected Lender for Dollar deposits to make or
maintain its LIBOR Rate Loans. A certificate as to additional amounts owed the
Affected Lender, showing in reasonable detail the basis for the calculation
thereof, submitted in good faith to Borrower and Agent by the Affected Lender
shall, absent manifest error, be final and conclusive and binding upon all of
the parties hereto. Notwithstanding the foregoing, in no circumstances under
this SECTION 2.9 shall Agent or any Lender treat Borrower any differently than
Agent or such Lender generally treats its other similarly situated borrowers.
3. In the event that on any date any Lender shall have
reasonably determined (which determination shall be final, conclusive and
binding upon all parties) that the making or continuation of any of its LIBOR
Rate Loans (i) has become unlawful or would be inconsistent with compliance by
that Lender in good faith with any law, governmental rule, regulation or order
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful), or (ii) has become impracticable as a result of a
contingency occurring after the date of this Agreement which materially and
adversely affects the LIBOR market, then, and in any such event, that Lender
shall be an Affected Lender and it shall promptly give notice (by telephone
confirmed in writing) to Borrower and Agent (which notice Agent shall promptly
transmit to each Lender) of that determination. The obligation of the Affected
Lender to make such LIBOR Rate Loans during any such period shall be terminated
at the earlier of the termination of the Interest Period then in effect or when
required by law and, subject to the prior withdrawal of a Notice of Advance or
Notice of LIBOR Advance, as the case may be, as contemplated by SECTION 2.9(D),
Borrower shall, no later than the termination of the Interest Period in effect
at the time any such determination pursuant to this SECTION 2.9(C) is made
(unless otherwise required by law), repay such LIBOR Rate Loans of the Affected
Lender, together with all interest accrued thereon. Notwithstanding the
foregoing, in no circumstances under this SECTION 2.9 shall Agent or any Lender
treat Borrower any differently than Agent or such Lender generally treats its
other similarly situated borrowers.
4. In lieu of paying an Affected Lender such additional amounts
as are required by SECTION 2.9(B) or the prepayment of an Affected Lender
required by SECTION 2.9(C), Borrower may exercise any one of the following
options:
(i) if the determination by an Affected Lender relates to
LIBOR Rate Loans then being requested pursuant to a Notice of LIBOR
Advance, Borrower may by giving notice (by telephone confirmed in writing)
to Agent (who shall promptly give similar notice to each Lender) no later
than the date immediately prior to the date on which such LIBOR Rate Loans
are to be made, withdraw as to the Affected Lender such Notice of LIBOR
Advance; or
(ii) upon written notice to the Affected Lender and Agent
(who will in turn promptly notify each other Lender), Borrower may
terminate the obligations of the Affected Lender to make Loans as LIBOR
Rate Loans and to convert Prime Rate Loans to LIBOR Rate Loans and in such
event, Borrower shall, prior to the time any payment pursuant to SECTION
2.9(C) is required to be made, convert all of the LIBOR Rate Loans of the
Affected Lender into Prime Rate Loans.
5. Borrower shall compensate each Lender, upon written request
by such Lender (which request shall set forth in reasonable detail the basis
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for requesting such amounts), for all reasonable losses, expenses and
liabilities (including any interest paid by such Lender to lenders of funds
borrowed by it to make or carry its LIBOR Rate Loans and any loss sustained by
such Lender in connection with the reemployment of such funds) which such Lender
may sustain with respect to Borrower's LIBOR Rate Loans: (i) if for any reason
(other than a default or error by such Lender) a borrowing of any LIBOR Rate
Loan does not occur on a date specified therefor in a Notice of LIBOR Advance or
a telephonic request for borrowing in accordance with this Agreement; (ii) if
any prepayment or conversion of any of such Lender's LIBOR Rate Loans occurs on
a date which is not the last day of the Interest Period applicable to that LIBOR
Rate Loan; (iii) if any prepayment of any such Lender's LIBOR Rate Loans is not
made on any date specified in a notice of prepayment given by Borrower; or (iv)
as a consequence of any other default by Borrower to repay such Lender's LIBOR
Rate Loans when required by the terms of this Agreement; provided, that, with
--------
respect to this SECTION 2.9(E), Agent and Lenders shall treat Borrower as Agent
and Lenders generally treat all of their other similarly situated borrowers. Any
Lender's calculation of losses, expenses and liabilities hereunder shall be
calculated on a basis similar to that afforded to such Lender's other similarly
situated borrowers.
6. Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a condition that
would cause it to be an Affected Lender under SECTION 2.9(B) or SECTION 2.9(C),
it will, to the extent not inconsistent with such Lender's internal policies,
use its best efforts to make, fund or maintain the affected Loans of such Lender
through another lending office of such Lender if as a result thereof the
additional amounts which would otherwise be required to be paid in respect of
such Loans pursuant to SECTION 2.9(B) would be materially reduced or the
illegality or other adverse circumstances that would otherwise require
prepayment of such Loans pursuant to SECTION 2.9(C) would cease to exist and if
such Lender determines, in its sole discretion, the making, funding or
maintaining of such Loans through such other lending office would not otherwise
materially adversely affect such Loans or such Lender.
7. Except as provided in SECTION 2.9(B) with respect to certain
determinations on Interest Determination Dates, if, by reason of (I) after the
date hereof, the introduction of or any change (including any change by way of
imposition or increase of reserve requirements) in or in the interpretation of
any law or regulation, or (II) the compliance with any guideline or request from
any central bank or other Governmental Authority or quasi-governmental authority
exercising control over banks or financial institutions generally (whether or
not having the force of law):
(A) any Lender (or its applicable lending office) shall be
subject to any tax, duty or other charge with respect to its LIBOR Rate
Loans or its obligation to make LIBOR Rate Loans or shall change the basis
of taxation of payments to any Lender of the principal of or interest on
its LIBOR Rate Loans or its obligation to make LIBOR Rate Loans (except
for changes in the rate of tax on the overall net income of such Lender or
its applicable lending office imposed by the jurisdiction in which such
Lender is incorporated or organized or in which such Lender's principal
executive office or applicable lending office is located); or
(B) any reserve (including any imposed by the Federal
Reserve Board), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any
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Lender's applicable lending office shall be imposed or deemed applicable
or any other condition affecting its LIBOR Rate Loans or its obligation to
make LIBOR Rate Loans shall be imposed on any Lender or its applicable
lending office or the London interbank market;
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Rate Loans (except
to the extent already included in the determination of the applicable LIBOR
Rate) or there shall be a reduction in the amount received or receivable by such
Lender or its applicable lending office, then Borrower shall from time to time,
upon written notice from and demand by such Lender (which shall be promptly
furnished to Borrower upon such Lender being made subject thereto, with notice
to Agent setting forth the amount and period for which such amount is being
billed), pay to Agent for the account of such Lender within ten (10) Business
Days after the date specified in such notice and demand, additional amounts
sufficient to indemnify such Lender against such increased cost. A certificate
in reasonable detail as to such increased cost, submitted to Borrower and Agent
by such Lender, shall, except for manifest error, be final, conclusive and
binding upon all parties for all purposes.
8. Unless the Requisite Lenders shall otherwise agree, after the
occurrence of and during the continuance of (i) a Default resulting from the
failure to timely make any payments due hereunder, or (ii) an Event of Default,
Borrower may not elect to have a LIBOR Rate Loan made or have any LIBOR Rate
Loan continued or have any Prime Rate Loan converted into a LIBOR Rate Loan in
accordance with SECTION 2.8(E)(II).
2.10 Eligible Inventory. Eligible Inventory shall mean the gross amount
------------------
of Borrower's Inventory, as reflected on the most recent Schedule of Inventory
delivered by Borrower to Agent and Lenders and on other information available to
Agent, that conform to the warranties listed herein and conform to the criteria
listed below, less the aggregate amount of all reserves, limits and deductions
----
provided in the definition of "Borrowing Base" in SECTION 1.1. No Inventory of
Borrower shall be deemed to be Eligible Inventory unless:
1. Such Inventory is owned by Borrower;
2. Such Inventory consists of legal pharmaceutical, health care
products or sundry items;
3. Such Inventory is merchantable, meets all standards imposed
by any Person having regulatory authority over such goods, their use or sale, is
not obsolete, and is currently saleable in the normal course of Borrower's
business ;
4. Borrower has made the representations and warranties set
forth in SECTION 4.28, which representations and warranties have been reaffirmed
with respect thereto at the time the most recent Schedule of Inventory was
provided to Agent and Lenders;
5. Such Inventory is located on the premises listed on Schedule
III of the Security Agreement;
6. Such Inventory has not been consigned to any Person;
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7. If such Inventory has been returned from customers or account
debtors, then such Inventory shall have been returned to regular stock at one of
the locations listed on Schedule III of the Security Agreement;
8. Such Inventory (including all of Borrower's Accounts and
other Proceeds derived from such Inventory except to the extent actually sold to
Receivables Corporation pursuant to the Receivables Purchase Agreement and in
compliance with the terms and provisions of the Intercreditor Agreement) is
subject to Agent's duly perfected, first priority Lien and no other Lien other
than the Permitted Encumbrances;
9. Such Inventory does not constitute "morgue," "slow-moving,"
"discontinued," or "close out" Inventory; and
10. Such Inventory is determined by Agent, in its reasonable
business judgment, after using diligent efforts to attempt to consult with the
Managing Agents (but without any liability whatsoever for a failure or inability
to do so), to constitute adequate collateral to support the Advance requested by
Borrower.
2.11 Fees.
----
1. As compensation for Lenders' costs and risks in making the
Loan available to Borrower, Borrower agrees to pay to Agent, for the benefit of
each Lender, a fee for Borrower's non-use of the full amount of the Maximum Loan
(the "Unused Line Fee") in an amount equal to (i) the Applicable Unused Line Fee
Rate, multiplied by (ii) the difference between the respective daily averages of
---------- --
(A) the Maximum Loan, and (B) the Loan during the period for which the Unused
Line Fee is due, calculated on the basis of a 360-day year. The Unused Line Fee
shall be paid (I) monthly in arrears commencing on December 1, 1994, and on the
first day of each subsequent calendar month, (II) on the Commitment Termination
Date, and (III) if any Unused Line Fee remains payable after the Commitment
Termination Date, upon demand by Agent or any Lender. The Unused Line Fee shall
be allocated among Lenders in accordance with each Lender's respective
Proportionate Share.
2. Borrower shall pay a Letter of Credit Fee to Agent, for the
benefit of each Lender, in accordance with the terms of SECTION 2.3(J). In
addition, Borrower shall pay, as and when incurred by Agent or any Lender, the
Issuing Lender Fees in accordance with the terms of SECTION 2.3(J).
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2.12 Cash Management System.
----------------------
1. Commencing on the Restatement Closing Date and for so long as
any Obligations are outstanding, Borrower shall deposit on the date of receipt
or, if requested by Agent, cause to be deposited directly all remittances
received by Borrower on account of any Collateral (including chargebacks
received by Borrower in the form of cash), excluding any remittances on account
of Borrower's Accounts and related assets theretofore sold to Receivables
Corporation pursuant to the Receivables Facility Documents, but including (i)
the proceeds of any sale of Borrower's Accounts and related assets sold by
Borrower to Receivables Corporation pursuant to the Receivables Facility
Documents and all other amounts payable by Receivables Corporation to Borrower,
and (ii) amounts payable to Borrower pursuant to the Intercreditor Agreement,
into one or more lock box accounts in Borrower's name, including, subject to
SECTION 2.12(C), any additional or replacement account (the "Lock Box Account"),
which is maintained at the bank indicated on SCHEDULE 4.27 (the "Lock Box
-------------
Bank").
2. On or before the Restatement Closing Date, the Lock Box Bank
shall have entered into a tri-party blocked account agreement with Agent and
Borrower, in form and substance acceptable to Agent, which shall immediately
become operative at the Lock Box Bank. Such blocked account agreement shall
provide, among other things, that the Lock Box Bank has no rights of setoff or
recoupment or any other claim against the Lock Box Account, other than for
payment of its service fees and other charges directly related to the
administration of such account, and the Lock Box Bank agrees to forward
immediately all amounts in the Lock Box Account to the Collection Account
through sweeps from the Lock Box Account into the Collection Account on each
Business Day. If and for so long as there are no outstanding Advances or
unreimbursed draws under outstanding Letters of Credit and no Event of Default
has occurred and is continuing, Agent may, in its discretion, instruct the Lock
Box Bank to forward all amounts in the Lock Box Account to the Disbursement
Account through daily sweeps until otherwise notified by Agent.
3. So long as no Default has occurred, Borrower may amend
SCHEDULE 4.27 to replace the Lock Box Account or add a Lock Box Account;
- - - -------------
provided, that (i) Agent shall have consented to the opening of such account
- - - --------
with the relevant bank, and (ii) at the time of the opening of such account,
Borrower and such bank shall have executed and delivered to Agent a tri-party
blocked account agreement, in form and substance satisfactory to Agent. The Lock
Box Account shall be a cash collateral account, with all cash, checks and other
similar items of payment in such accounts securing payment of the Obligations,
and in which Borrower shall have granted a Lien to Agent, for the benefit of
Lenders.
4. All amounts deposited in the Collection Account shall be
deemed received by Agent in accordance with SECTION 2.13 and shall be applied
(and allocated) by Agent in accordance with SECTION 2.14. In no event shall any
amount be so applied by Agent unless and until such amount shall have been
credited in immediately available funds to the Collection Account. If and for so
long as there are no outstanding Advances or unreimbursed draws under
outstanding Letters of Credit and no Event of Default has occurred and is
continuing, Agent may, in its discretion, give instructions that allow any funds
deposited in the Collection Account in excess of the Obligations then
outstanding to be transferred from the Collection Account to the Disbursement
Account.
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5. Borrower may maintain, in its name, an account (the
"Disbursement Account") at a bank acceptable to Agent into which Agent shall,
from time to time, deposit proceeds of Advances made available to Agent pursuant
to SECTION 2.1 and other amounts deposited pursuant to SECTION 2.12(D) for use
solely in accordance with the provisions of SECTION 2.6. The Disbursement
Account shall be a cash collateral account, with all cash, checks and other
similar items of payment in such account securing payment of the Obligations,
and in which Borrower shall have granted a Lien to Agent, for the benefit of
Lenders.
2.13 Receipt of Payments. Borrower shall make each payment under this
-------------------
Agreement not later than 2:00 P.M. (New York time) on the day when due in lawful
money of the United States of America in immediately available funds to the
Collection Account. For purposes of computing interest and fees and determining
the amount of funds available for borrowing by Borrower pursuant to SECTION
2.1(A), (a) all payments (including cash sweeps) consisting of cash, wire, or
electronic transfers in immediately available funds shall be deemed received by
Agent upon deposit in the Collection Account, and (b) all payments consisting of
checks, drafts, or similar non-cash items shall be deemed received by Agent upon
the deposit, in immediately available funds, of such payment in the Collection
Account.
2.14 Application and Allocation of Payments.
--------------------------------------
1. In the absence of an Event of Default, any payment at any
time or times hereafter received by Agent, whether through deposit in the
Collection Account or otherwise, from or on behalf of Borrower, shall be applied
in the following order: (i) to settle any outstanding amounts pursuant to
SECTION 2.1(B)(II); (ii) then due and payable Fees (other than the Unused Line
Fee and the Letter of Credit Fee) and reimbursable expenses; (iii) then due and
payable interest payments on the Loans together with the Unused Line Fee and
Letter of Credit Fee; (iv) Obligations other than Fees, expenses and interest
and principal payments; and (v) then due and payable principal payments on the
Loan. Agent, for the benefit of each Lender, is authorized to, and at its option
may, make advances on behalf of Borrower for payment of all Fees, expenses,
charges, costs, principal, interest, or other Obligations owing by Borrower
under this Agreement or any of the Loan Documents if and to the extent Borrower
fails to promptly pay any such amounts as and when due. At Agent's option and to
the extent permitted by law, any advances so made may be deemed Advances
constituting part of the Loan hereunder.
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2. If (i) an Event of Default has occurred and is continuing,
and (ii) either (A) the Obligations have been accelerated, as provided under
SECTION 9.2(B), or (B) Agent has given notice to the other Lenders of the
termination of the obligation of Lenders to make further Advances, as provided
under SECTION 9.2(B)(II), then all proceeds of Collateral received by Lenders
shall be applied first to fund the Cash Collateral Account in an amount equal to
all outstanding Letter of Credit Obligations and, if the Cash Collateral Account
has been fully funded, then such proceeds shall be applied in the following
order: (v) any outstanding amounts under SECTION 2.1(B)(II); (w) then due and
payable Fees (other than the Unused Line Fee and the Letter of Credit Fee) and
reimbursable expenses; (x) then due and payable interest payments on the Loans,
together with the Unused Line Fee and the Letter of Credit Fee; (y) Obligations
other than Fees, expenses and interest and principal payments; and (z) then due
and payable principal payments on the Loans.
3. Agent shall allocate among Lenders payments received pursuant
to SECTION 2.14(A) or SECTION 2.14(B), as applicable, in the following manner:
a. payments of Fees, expenses, and Obligations (other than
Fees, expenses and interest and principal payments) shall be allocated to
the respective Lender or Lenders to whom such amounts are due and owing;
provided, that if such payments are insufficient to cover the full amount
--------
of such Obligations, then the payments shall be allocated among Lenders in
accordance with their Proportionate Shares;
b. payments of interest on account of the Loan shall be
allocated among Lenders in accordance with each Lender's respective
Proportionate Share; and
c. payments of principal on account of the Loan shall be
allocated among Lenders in accordance with each Lender's respective
Proportionate Share; provided, that if any Lender's unpaid balance of the
--------
aggregate outstanding principal amount under the Loan is greater than such
Lender's Proportionate Share, then principal payments shall be allocated
to such Lender until its unpaid balance of the Loan is equal to such
Lender's Proportionate Share of the Loan.
2.15 Accounting. After the end of each Fiscal Month, Agent will
----------
provide a monthly accounting of transactions under the Loan to Borrower. Each
and every such accounting shall (absent manifest error) be deemed final, binding
and conclusive upon Borrower in all respects as to all matters reflected
therein, unless Borrower, within 30 days after the date any such accounting is
rendered, shall notify Agent in writing of any objection which Borrower may have
to any such accounting, describing the basis for such objection with
specificity. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed by Borrower.
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2.16 Indemnity.
---------
1. Borrower shall indemnify and hold Agent, Managing Agents,
Issuing Lender, Co-Agents and Lenders and all of their respective Affiliates,
officers, directors, employees, attorneys and agents (each, an "Indemnified
Person"), harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and reasonable expenses (including
attorneys' fees and disbursements (including allocated costs of internal
counsel) and other reasonable costs of investigations or defense, including
those incurred upon any appeal) which may be instituted or asserted against or
incurred by such Indemnified Person as the result of credit having been extended
under this Agreement and the other Loan Documents or in connection with or
arising out of the financing transactions contemplated hereunder and thereunder,
including any claim, action, suit, proceeding, loss, cost, damage, liability,
deficiency, fine, penalty, punitive damage or reasonable expense (including
attorneys' and consultants' fees, investigation and laboratory fees, court costs
and litigation expenses), that directly or indirectly results from, arises out
of, or is based upon (i) the presence, Release, threatened Release, use,
manufacture, installation, generation, discharge, storage or disposal, at any
time, of any Hazardous Materials on, under, in or about, or the transportation
of any such materials to or from, any real property owned, leased or operated by
Borrower or any Affiliate of Borrower (the "Subject Property"), (ii) the
violation or alleged violation by Borrower or any Affiliate of Borrower of any
law, statute, ordinance, order, rule, regulation, permit, judgment or license
relating to the use, generation, manufacture, installation, Release, threatened
Release, discharge, storage or disposal of Hazardous Materials to or from the
Subject Property; which indemnity shall include (A) any damage, liability, fine,
penalty, punitive damage, reasonable cost or expense arising from or out of any
claim, action, suit or proceeding for personal injury (including sickness,
disease, death, pain or suffering), tangible or intangible property damage,
compensation for lost wages, business income, profits or other economic loss,
damage to the natural resources or the environment, nuisance, pollution,
contamination, Release, threatened Release, or other adverse effect on the
environment, and (B) the cost of any required or necessary repair, cleanup,
investigation, treatment, remediation or detoxification of the Subject Property
and the preparation and implementation of any closure, disposal, remedial or
other required actions in connection with the Subject Property, and (iii) any
other Environmental Liability and Costs with respect to any other matter
affecting the Subject Property within the jurisdiction of any federal, state, or
municipal official administering the Environmental Laws; provided, that, as to
--------
clauses (i), (ii), and (iii) of this Section, Borrower shall not be liable for
any indemnification to such Indemnified Person to the extent that any such
claim, damage, loss, liability or expense is determined by a court of competent
jurisdiction in a final decision to have resulted from such Indemnified Person's
gross negligence or willful misconduct. Notwithstanding any contrary provision
of this Agreement, the obligation of Borrower under this SECTION 2.16(A) shall
survive the payment in full of the Obligations and the termination of this
Agreement. NEITHER AGENT, ANY MANAGING AGENT, ISSUING LENDER, CO-AGENTS, ANY
LENDER, NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS.
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2. Borrower hereby acknowledges and agrees that neither Agent,
any Managing Agent, Issuing Lender, Co-Agents, nor any Lender, either acting
individually or collectively with any other Lenders, (i) is now, or has ever
been, in control of the Subject Property or Borrower's affairs, or (ii) has the
capacity through the provisions of the Loan Documents to influence Borrower's
conduct with respect to the ownership, operation or management of the Subject
Property.
2.17 Access. Borrower shall provide access to Agent and any of its
------
officers, employees and agents, or cause to be provided access to Agent and any
of its officers, employees or agents, exercisable as frequently as Agent
determines to be appropriate, upon reasonable advance notice (unless a Default
shall have occurred and be continuing, in which event no notice shall be
required and Agent shall have access at any and all times), during normal
business hours (or at such other times as may reasonably be requested by Agent),
to inspect the properties and facilities of Borrower and to inspect, audit and
make extracts from all of Borrower's records, files and books of account.
Borrower shall make available to Agent and its counsel, as quickly as
practicable under the circumstances, originals or copies of all books, records,
board minutes, contracts, insurance policies, environmental audits, business
plans, files, financial statements (actual and pro forma), filings with Federal,
state and local regulatory agencies, and other instruments and documents which
Agent may request. Borrower shall deliver any document or instrument reasonably
necessary for Agent, as it may from time to time request, to obtain records from
any service bureau maintaining records for Borrower, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by Borrower. Borrower shall instruct its banking and other
financial institutions to make available to Agent such information and records
as Agent may reasonably request.
2.18 Taxes.
-----
1. Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this SECTION 2.18, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, Charges or withholdings, and all liabilities with respect thereto
("Taxes"), excluding (i) Taxes imposed on or measured by the net income of any
Lender or franchise taxes imposed on any Lender by the jurisdiction under the
laws of which such Lender is organized or any political subdivision thereof, or
by the jurisdiction of such Lender's applicable lending office or any political
subdivision thereof, (ii) any other Taxes, including United States of America
withholding taxes or payments to a Lender that is a foreign Person, that are in
effect and to the extent that they would apply to a payment to a Lender as of
the Restatement Closing Date, and (iii) if any Person acquires any interest in
this Agreement or any Note, or a Foreign Lender changes the office in which its
Advances are made, accounted for or booked (any such Person or such Foreign
Lender, in that event, being referred to as a "Tax Transferee"), any Taxes to
the extent that they are in effect and would apply to a payment to such Tax
Transferee as of the date of the acquisition of such interest or change in
office, as the case may be (all such non-excluded taxes, levies, imposts,
deductions, Charges, withholdings and liabilities being hereinafter referred to
as "Covered Taxes"). If Borrower shall be required by law to deduct any Covered
Taxes from or in respect of any sum payable to any Lender under this Agreement
or any Note, after any Lender for which a deduction is required notifies Agent
and Borrower in writing of the amount of the required deductions, then (x) the
sum payable
55
<PAGE>
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this SECTION 2.18) such Lender receives an amount equal to the sum it would have
received had no such deductions been made, (y) Borrower shall make such
deductions, and (z) Borrower shall pay the full amount deducted to the relevant
taxing or other authority in accordance with applicable law.
2. In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise, mortgage recording or property
taxes, Charges or similar levies that arise from any payment made under this
Agreement or the Notes, or from the execution, delivery or registration of this
Agreement, the Notes, the Loan Documents or any other agreements and instruments
contemplated hereby or thereby (hereinafter referred to as "Other Taxes").
3. Borrower shall indemnify each Lender for the full amount of
Covered Taxes or Other Taxes (including any Covered Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this SECTION 2.18) paid by such
Lender and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto attributable to Borrower's failure to pay such
Taxes in a timely manner. This indemnification shall be paid within 30 days from
the date such Lender makes written demand therefor.
4. Within 30 days after having received a receipt of Covered
Taxes or Other Taxes, Borrower shall furnish to Agent and the applicable Lender,
at its address referred to in SECTION 12.10, the original or a certified copy of
a receipt evidencing payment thereof.
5. If a Lender is able to apply for or otherwise take advantage
of any tax credit, tax deduction or similar benefit by reason of any deduction
for or withholding of a Covered Tax in respect of a payment made to Lender, then
such Lender will use reasonable efforts to obtain such credit, deduction or
benefit and upon receipt thereof will pay to Borrower such amount (if any) not
exceeding the increased amount paid by Borrower as equals the net after-tax
value to such Lender of such part of such credit, deduction or benefit as Lender
considers is allocable to such withholding or deduction having regard to all its
dealings giving rise to similar credits, deductions and benefits in relation to
the same tax period and to the cost of obtaining the same. Notwithstanding
anything to the contrary in this SECTION 2.18(E), each Lender shall have the
sole right to determine whether or not to pursue any such credits, deductions or
benefits and if any are received, the portion allocable to the Loans shall be
determined solely by such Lender.
6. On or before the Restatement Closing Date, each Foreign
Lender shall deliver to Agent and Borrower (i) two valid, duly completed copies
of IRS Form 1001 or 4224 or successor applicable form, as the case may be, and
any other required form, certifying in each case that such Foreign Lender is
entitled to receive payments under this Agreement or the Notes payable to it
without deduction or withholding of any United States of America federal income
taxes or with such withholding imposed at a reduced rate (the "Reduced Rate"),
and (ii) a valid, duly completed IRS Form W-8 or W-9 or successor applicable
form, as the case may be, to establish an exemption from United States of
America backup withholding tax. Each such Foreign Lender shall also deliver to
Agent and Borrower two further copies of said Form 1001 or 4224 and W-8 or W-9,
or successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be
56
<PAGE>
resubmitted as a condition to obtaining an exemption from a required withholding
of United States of America federal income tax or entitlement to having such
withholding imposed at the Reduced Rate or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to
Borrower and Agent, and such extensions or renewals thereof as may reasonably be
requested by Borrower and Agent, certifying (x) in the case of a Form 1001 or
4224 that such Foreign Lender is entitled to receive payments under this
Agreement or the Notes payable to it without deduction or withholding of any
United States of America federal income taxes, unless in any such case any
change in a tax treaty to which the United States of America is a party, or any
change in law or regulation of the United States of America or official
interpretation thereof has occurred after the Restatement Closing Date and prior
to the date on which any such delivery would otherwise be required that renders
all such forms inapplicable or that would prevent such Foreign Lender from duly
completing and delivering any such form with respect to it, and such Foreign
Lender advises Borrower and Agent that it is not capable of receiving payments
without any deduction or withholding at the Reduced Rate, or (y) in the case of
a Form W-8 or W-9, establishing an exemption from United States of America
backup withholding tax.
7. If a Tax Transferee that is organized under the laws of a
jurisdiction outside of the United States of America acquires an interest in
this Agreement or any Note, or a Foreign Lender changes the office through which
its Advances are made, accounted for or booked, the transferor, or the
applicable Foreign Lender, in the case of a change of office, shall cause such
Tax Transferee to agree that, on or prior to the effective date of such
acquisition or change, as the case may be, it will deliver to Borrower and Agent
(i) two valid, duly completed copies of IRS Form 1001 or 4224 or successor
applicable form, as the case may be, and any other required form, certifying in
each case that such Tax Transferee is entitled to receive payments under this
Agreement and the Notes payable to it without deduction or withholding of United
States of America federal income tax or with such withholding imposed at a
Reduced Rate; and (iii) a valid, duly completed IRS Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States of America backup withholding tax. Each Tax Transferee that delivers to
Borrower and Agent a Form 1001 or 4224, and Form W-8 or W-9 and any other
required form, pursuant to the next preceding sentence, further undertakes to
deliver two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from a required withholding of United States of America federal
income tax or entitlement to having such withholding imposed at the Reduced Rate
or after the occurrence of any event requiring a change in the most recent form
previously delivered by it to Borrower and Agent, and such extensions or
renewals thereof as may reasonably be requested by Borrower and Agent,
certifying (i) in the case of a Form 1001 or 4224 that such Tax Transferee is
entitled to receive payments under this Agreement without deduction or
withholding of any United States of America federal income taxes or with such
withholding imposed at the Reduced Rate, unless any change in treaty, law or
regulation or official interpretation thereof has occurred after the effective
date of such acquisition or change and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Tax Transferee from duly completing and delivering any
such form with respect to it, and such Tax Transferee advises Borrower and Agent
that it is not capable of receiving payments (a) without any deduction or
withholding of United States of America federal income tax or (b) with such
withholding at
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the Reduced Rate, as the case may be, or (ii) in the case of a Form W-8 or W-9,
establishing an exemption from United States of America backup withholding tax.
8. If any Taxes for which Borrower would be required to make
payment under this SECTION 2.18 are imposed, the Lender involved or Agent shall
use its best efforts to avoid or reduce such Taxes by taking any appropriate
action (including assigning its rights hereunder to a related entity or a
different office) which would not in the sole opinion of such Lender or Agent be
otherwise disadvantageous to such Lender or Agent, as the case may be.
9. Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
SECTION 2.18 shall survive the Termination Date and payment in full of principal
and interest under this Agreement and the Notes; provided, that all agreements
--------
and obligations shall cease as of the date four years following payment in full
of the Obligations with respect to amounts for which Borrower has not received
notice as of that date.
10. A copy of all notices and demands to be delivered to Borrower
under this SECTION 2.18 shall be delivered to the attention of Borrower's Tax
Manager at the address specified in SECTION 12.10.
11. Notwithstanding anything to the contrary in this SECTION
2.18, if the IRS determines that a Lender is a conduit entity participating in a
Conduit Financing Arrangement then (i) any additional Taxes that Borrower is
required to withhold from payments to such Lender by virtue of such Conduit
Financing Arrangement shall be excluded from the definition of "Covered Taxes,"
and (ii) such Lender shall indemnify Borrower in full for any and all additional
Taxes for which Borrower is held directly liable under Section 1461 of the IRC
by virtue of such Conduit Financing Arrangement. In addition to other rights and
remedies that Borrower may have, Borrower may, to the fullest extent permitted
by law, set off and apply any and all amounts that a Lender is required to
indemnify Borrower under this SECTION 2.18(K) against amounts otherwise payable
to such Lender under the Loans. Each Lender represents and warrants that it is
not participating in a Conduit Financing Arrangement.
2.19 Indemnification in Certain Events. If, after the Restatement
---------------------------------
Closing Date, either (a) any change in or in the interpretation of any law or
regulation (other than changes in the rate of tax on the overall income of any
Lender or its applicable Lending Office) is introduced, including with respect
to reserve requirements applicable to any banking or financial institution from
whom any Lender borrows funds or obtains credit (a "Funding Bank") or any
Lender, (b) a Funding Bank or any Lender (which, for purposes of this SECTION
2.19, shall include Issuing Lender) complies with any future guideline or
request from any central bank or other governmental authority whose guidelines
or requests are customarily honored by such Funding Bank or Lender, or (c) a
Funding Bank or any Lender determines that the adoption of any applicable law,
treaty, rule, guideline, regulation or order regarding capital adequacy or
capital maintenance, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof has
or would have the effect described below, or a Funding Bank or any Lender
complies with any request or directive regarding capital adequacy or capital
maintenance (whether or not having the force of
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law) of any such authority, central bank or comparable agency, and in the case
of any event set forth in this clause (c), such adoption, change or compliance
has or would have the direct or indirect effect of increasing the amount of
capital required to be maintained by such Lender or reducing the rate of return
on any Lender's capital as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such adoption, change
or compliance (taking into consideration the Funding Bank's or Lender's policies
with respect to capital adequacy and capital maintenance) by an amount deemed by
such Lender to be material, and the effect of any of the foregoing events
described in clauses (a), (b) or (c) is or results in an increase in the cost to
Agent, Issuing Lender, or any Lender of (i) funding or maintaining the Loans,
(ii) issuing, making or maintaining any Letter of Credit or of purchasing or
maintaining any participation therein, or is or results in a reduction of the
amount receivable in respect thereof by Agent or any Lender, then Borrower shall
from time to time upon demand by Agent, pay to Agent, for the account of each
applicable Lender, additional amounts sufficient to indemnify such Lender
against such increased cost or reduced receipt; provided, that with respect to
--------
this SECTION 2.19, Agent and Lenders shall be required to treat Borrower as they
treat all of their other similarly situated borrowers. A certificate as to the
amount of such increased cost and setting forth in reasonable detail the
calculation thereof shall be submitted to Borrower by Agent, or the applicable
Lender, and shall be conclusive absent manifest error.
2.20 Replacement of Commitments. On the Restatement Closing Date, each
--------------------------
Existing Lender's Revolving Credit Commitment and Term Loan Commitment shall
automatically be canceled and replaced by the Commitments as set forth on
SCHEDULE A, and Agent shall cancel each Revolving Credit Note or Term Note
- - - ----------
issued to such Existing Lender with respect to such Existing Lender's Revolving
Credit Commitment or Term Loan Commitment, as the case may be, upon Agent's
receipt or delivery, as the case may be, of each of the following amounts:
(a) Receipt by Agent from each Lender who is not an Existing Lender
of payment, in immediately available funds received no later than 2:00 P.M. on
the Restatement Closing Date, in the amount equal to such Lender's Proportionate
Share of the Advances outstanding on the Restatement Closing Date after giving
effect to any Advances made or to be made on the Restatement Closing Date to pay
any amounts required to be paid by Borrower pursuant to SECTION 3.1(J) (the
total amount of the Advances outstanding as of the Restatement Closing Date,
after giving effect to such payments to be made on the Restatement Closing Date,
is referred to herein as the "Restatement Closing Date Advance Balance");
(b) Receipt by Agent from each Lender who is an Existing Lender of
payment, in immediately available funds received no later than 2:00 P.M. on the
Restatement Closing Date, in the amount, if any, by which (i) such Lender's
Proportionate Share of the Restatement Closing Date Advance Balance, exceeds
(ii) its actual outstanding Advances under the Original Credit Agreement as of
the Restatement Closing Date;
(c) Delivery by Agent to each Lender who is an Existing Lender of
payment, in immediately available funds received no later than 3:00 P.M. on the
Restatement Closing Date, in the amount, if any, by which (i) such Lender's
actual outstanding Advances under the Original Credit Agreement as of the
Restatement Closing Date, exceeds (ii) its Proportionate Share of the
Restatement Closing Date Advance Balance;
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(d) Delivery by Agent to each Existing Lender who is not a Lender
of payment, in immediately available funds received no later than 3:00 P.M. on
the Restatement Closing Date, of the amount of such Existing Lender's actual
outstanding Advances under the Original Credit Agreement as of the Restatement
Closing Date; and
(e) Delivery by Agent to each Existing Lender of payment, in
immediately available funds received no later than 3:00 P.M. on the Restatement
Closing Date, of such Existing Lender's respective portion of the amounts
payable on the Restatement Closing Date pursuant to SECTION 3.1(J)(II) and
SECTION 3.1(J)(III).
3. CONDITIONS PRECEDENT
--------------------
3.1 Conditions to Effectiveness of this Agreement. Notwithstanding any
---------------------------------------------
other provision of this Agreement and without affecting in any manner the rights
of Lenders hereunder, Borrower shall have no rights under this Agreement (but
shall have all applicable obligations hereunder), and this Agreement and the
other Loan Documents shall not become effective, until the following conditions
have been satisfied or otherwise provided for in a manner acceptable to each
Lender and Agent:
1. This Agreement or counterparts thereof shall have been duly
executed by, and delivered to, Borrower, Agent, Issuing Lender and each Lender;
2. Lenders shall have given their Total Commitments in an
aggregate amount of $380,000,000;
3. Agent shall have received such documents, instruments and
agreements as any Lender shall request in connection with the financing
transaction contemplated by this Agreement, including all documents,
instruments, agreements, and schedules listed in the Schedule of Documents, each
in form and substance satisfactory to Agent;
4. Evidence satisfactory to Agent that Borrower has obtained
consents, acknowledgments, registrations, licenses and approvals of all Persons
from whom consents, acknowledgments, registrations, licenses and approvals may
be required, including all requisite Governmental Authorities to the terms and
execution of this Agreement, the Loan Documents and the consummation of the
financing transaction contemplated hereby and thereby;
5. Evidence that the insurance policies provided for in SECTION
4.26 are in full force and effect, certified by the insurer thereof, together
with appropriate evidence showing a loss payable clause in favor of Agent, for
the benefit of each Lender;
6. Agent shall have received a fully executed lock box account
agreement, in form and substance satisfactory to Agent, from the Lock Box Bank;
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7. The Liens on the Collateral in favor of Agent, for the benefit
of Lenders, shall continue to be duly perfected and shall constitute first
priority Liens, subject only to the Permitted Encumbrances;
8. The absence of any pending or, to the best knowledge of
Borrower, threatened litigation, proceeding, inquiry or other action seeking an
injunction or other restraining order, damages or other relief with respect to
the transactions contemplated by this Agreement (including the making of any
Advance and the issuance of any Letter of Credit) and the Receivables Facility
Documents;
9. Consummation of the Receivables Facility and receipt by
Borrower from the initial funding thereunder of not less than $185,000,000 in
cash pursuant to the terms of the Receivables Facility Documents and on other
terms and conditions acceptable to Managing Agents and Lenders;
10. Payment by Borrower of (i) the Fees that are due and payable on
the Closing Date, (ii) all interest, letter of credit fees and unused line fees
under the Original Credit Agreement accrued through, but not including, the
Restatement Closing Date, plus any and all reimbursable expenses or other
charges payable by Borrower under the Original Credit Agreement accrued through
the Restatement Closing Date, whether or not then due and payable, (iii) any
LIBOR breakage fees or related costs incurred by any of the Existing Lenders,
and (iv) all fees and expenses that are reimbursable pursuant to SECTION 12.2,
including those of (A) GE Capital's outside counsel, Murphy, Weir & Butler, (B)
BTCo's outside counsel, Dorsey & Whitney, and (C) all special loan counsel
retained by Managing Agents in connection with any of the Loan Documents and the
financing transaction contemplated thereby;
11. Each Person who holds either a Revolving Credit Commitment or a
Term Loan Commitment immediately prior to the Restatement Closing Date
(individually, an "Existing Lender" and collectively, "Existing Lenders") shall
have (i) delivered to Agent each Revolving Credit Note or Term Note issued to
such Existing Lender with respect to such Existing Lender's Revolving Credit
Commitment or Term Loan Commitment, as the case may be, and (ii) either (A)
executed this Agreement to become a Lender hereunder, or (B) executed and
delivered to Agent an agreement, in form and substance satisfactory to Agent,
under which such Existing Lender agrees that its Revolving Credit Commitment or
Term Loan Commitment, as the case may be, shall automatically be canceled upon
receipt by such Existing Lender of the applicable amounts specified in SECTION
2.20(D) and SECTION 2.20(E); and
12. Evidence that Borrower has irrevocably instructed the
applicable trustee to mail irrevocable notice to the holders of the Subordinated
Borrower Notes in accordance with the terms thereof that it will be redeeming
all of the Subordinated Borrower Notes on and as of January 12, 1995 in
accordance with the terms thereof.
13. Each issued and undrawn letter of credit under the Original
Credit Agreement shall have been delivered to Agent and replaced by a Letter of
Credit issued under this Agreement by BTCo, as Issuing Lender.
14. Each of the conditions set forth in SECTION 3.2(A) through
SECTION 3.2(C) shall have been satisfied by Borrower as of such date.
The execution of this Agreement by each Lender shall be an
acknowledgement by such Lender that the conditions set forth in this SECTION
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3.1 have been satisfied or provided for in a manner satisfactory to such Lender.
3.2 Further Conditions. It shall be a further condition to the making of
------------------
each Advance funded on or after the Restatement Closing Date and the issuance of
any Letter of Credit on or after the Restatement Closing Date that the following
statements shall be true on the date of each such funding of any Advance or the
issuance of any Letter of Credit:
1. All of Borrower's representations and warranties contained
herein or in any of the Loan Documents shall be true and correct on and as of
the Restatement Closing Date and the date of each such Advance or the date of
the incurrence of such Letter of Credit Obligation as though made on and as of
such date, except to the extent that any such representation or warranty
expressly relates to an earlier date and for changes therein permitted or
contemplated by this Agreement.
2. No event shall have occurred and be continuing, or would result
from the funding of such Advance or incurrence of such Letter of Credit
Obligation, which constitutes or would constitute a Default or Event of Default,
unless the Requisite Lenders shall vote to continue making Advances or incurring
Letter of Credit Obligations, as the case may be.
3. After giving effect to such Advance or such Letter of Credit
Obligation, the aggregate principal amount of the Loan shall not exceed the
lesser of (i) the Maximum Loan and (ii) the Borrowing Base.
4. Each of the conditions set forth in SECTION 3.1(A) through
SECTION 3.1(H) shall continue to be satisfied by Borrower as of such date.
The acceptance by Borrower of any Letter of Credit or the proceeds of any
Advance shall be deemed to constitute, as of the date of such acceptance, (i) a
representation and warranty by Borrower that the conditions in this SECTION 3.2
have been satisfied, and (ii) a confirmation by Borrower of the granting and
continuance of the Liens granted to Agent, for the benefit of each Lender,
pursuant to the Collateral Documents.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lenders to amend and restate the Original Credit Agreement
and continue to make the Loans, as herein provided for, Borrower makes the
following representations and warranties to Lenders, each and all of which shall
be true and correct as of the date of execution and delivery of this Agreement,
and shall survive the execution and delivery of this Agreement:
4.1 Corporate Existence; Compliance with Law. Borrower (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware; (ii) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification (except
for jurisdictions in which such failure to so qualify or to be in good standing
would not have a Material Adverse Effect); (iii) has
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the requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iv) has or, by the Restatement Closing Date and at
all times thereafter, will have all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
material notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct; (v) is in compliance
with its certificate of incorporation and by-laws; (vi) is in compliance with
all applicable provisions of Federal, state and local laws and regulations,
including those relating to environmental, licensing, FDA, DEA, ERISA and labor
matters, except where the failure to comply would not have a Material Adverse
Effect; and (vii) since the Original Closing Date, except as disclosed to Agent
in writing, has not been assessed any fines or other penalties for controlled
substances-related violations, has not received any letters of admonition or
entered into any memorandum of understanding with the DEA, and has not been
contacted by the United States Attorney's Office or any other Governmental
Authority on any matter related to Borrower's compliance with the Controlled
Substances Act (21 U.S.C. (S) (S) 801 et seq.).
-- ----
4.2 Executive Offices. The current location of Borrower's executive
-----------------
offices and principal place of business is set forth in SCHEDULE 4.2.
------------
4.3 Subsidiaries. SCHEDULE 4.3 sets forth all Subsidiaries of Borrower,
------------ ------------
together with their respective jurisdictions of organization, the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by Borrower or a Subsidiary of Borrower
or any other Person, or to be so owned by the Restatement Closing Date. There
are no options, warrants, rights to purchase or similar rights covering capital
Stock for any such Subsidiary.
4.4 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Borrower of the Loan Documents, Ancillary
Agreements and all instruments and documents to be delivered by Borrower, to the
extent that it is a party thereto, hereunder and thereunder and the creation of
all Liens provided for herein and therein: (i) are within Borrower's corporate
power; (ii) have been duly authorized by all necessary or proper corporate
action; (iii) are not in contravention of any provision of Borrower's
certificate of incorporation or by-laws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality,
the violation of which would result in a Material Adverse Effect; (v) will not
contravene or result in the breach or termination of, constitute a default under
or accelerate any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which Borrower is a party or by
which Borrower or any of its property is bound, the contravention or result of
which would result in a Material Adverse Effect; (vi) will not result in the
creation or imposition of any Lien upon any of the property of Borrower other
than (A) Liens in favor of Agent, for the benefit of Lenders, all pursuant to
the Loan Documents, and (B) Liens granted pursuant to the Receivables Facility
Documents; and (vii) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in SECTION 3.1(D), all
of which will have been duly obtained, made or complied with prior to the
Restatement Closing Date. At or prior to the Restatement Closing Date, each of
the Loan Documents
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shall have been duly executed and delivered for the benefit of or on behalf of
Borrower and each shall then constitute a legal, valid and binding obligation of
Borrower, to the extent it is a party thereto (assuming due authorization,
execution and delivery by all other parties thereto), enforceable against it in
accordance with its terms.
4.5 Solvency. Borrower is Solvent as of the Restatement Closing Date and
--------
will be Solvent as of the date of and after giving effect to the redemption of
the Subordinated Borrower Notes and the payment of all estimated legal,
accounting and other fees related hereto and thereto. As of the date of any
acquisition permitted under SECTION 7.1, each of Borrower and its Subsidiaries
(including any newly created or acquired Subsidiary) will be Solvent.
4.6 Financial Statements.
--------------------
1. The pro forma balance sheet of Borrower as of the Restatement
Closing Date, a copy of which has been furnished to Lenders prior to the date of
this Agreement, has been prepared in accordance with GAAP and based on the
unaudited balance sheet of Borrower as of September 30, 1994, adjusted as if the
redemption of the Subordinated Borrower Notes and the financing and servicing
transactions contemplated by this Agreement and the Receivables Facility
Documents had occurred as of the date of such balance sheet and presents fairly
in all material respects on a pro forma basis the financial position of Borrower
at such date assuming the financing and servicing transactions had actually
occurred on such date.
2. All of the following balance sheets and statements of income,
retained earnings and cash flows of Borrower, copies of which have been
furnished to Lenders prior to the date of this Agreement, have been, except as
noted therein, prepared in conformity with GAAP consistently applied throughout
the periods involved and present fairly in all material respects the financial
position of Borrower as at the date thereof, and the results of operations and
cash flows for the periods then ended (as to the unaudited interim financial
statements, subject to inclusion of footnotes and normal year-end audit
adjustments):
a. the unaudited balance sheet of Borrower as at September
30, 1994, and the related statements of income and cash flows for the
portion of the Fiscal Year then elapsed, certified by Borrower's chief
financial officer as having been prepared in conformity with GAAP
consistently applied throughout the periods involved and present fairly in
all material respects the financial position of Borrower as at the date
thereof; and
b. the audited balance sheet of Borrower as of September 30,
1993, and the related statements of income, retained earnings and cash
flows for the year then ended, with the opinion thereon of the Auditors.
3. As of the Restatement Closing Date, since September 30,
1993: (i) Borrower has not incurred any obligations, contingent liabilities, or
liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the pro forma balance sheet of Borrower
and which would, alone or in the aggregate, have a Material Adverse Effect;
provided, that (x) adverse changes in the value of Collateral, and (y) adverse
- - - --------
changes in the financial condition of Borrower that affect or will affect the
calculations made under the Financial Covenants, but do not create and would
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not reasonably be expected to create a breach or default under any of the
Financial Covenants, shall not be deemed to have had a Material Adverse Effect;
(ii) there has been no change in the business, assets, operations, prospects or
financial or other condition of Borrower taken as a whole which would have a
Material Adverse Effect; and (iii) no dividends, advances or other such
distributions have been declared, paid or made upon any shares of capital Stock
of Borrower, and no shares of capital Stock of Borrower have been redeemed,
retired, purchased or otherwise acquired for value by Borrower; except as set
forth on SCHEDULE 4.6.
------------
4.7 Projections. The projections of Borrower's annual operating budgets,
-----------
balance sheets and cash flow statements, which include projected tax payments
and reconciliations of tax payments for the preceding calendar year, (a) for the
Fiscal Year ending September 30, 1995 on a monthly basis and (b) for the Fiscal
Years ending September 30, 1996, September 30, 1997, September 30, 1998,
September 30, 1999 and September 30, 2000 on an annual basis (the
"Projections"), copies of which have been delivered to Lenders, disclose all
material assumptions, other than general economic conditions. As of the
Restatement Closing Date, no material facts exist which would result in any
material adverse change in any of such Projections, other than general economic
conditions. The Projections are based upon reasonable estimates and assumptions,
all of which are fair in light of conditions as of the Restatement Closing Date,
have been prepared on the basis of the assumptions stated therein, and reflect
the reasonable estimate of Borrower of the results of operations and other
information projected therein.
4.8 Ownership of Property; Liens.
----------------------------
1. Borrower owns good and marketable fee simple title to all of
its real estate, valid and marketable leasehold interests in all of its Leases,
and good and marketable title to, or valid leasehold interests in, all of its
other properties and assets, and none of the properties and assets of Borrower
are subject to any Liens, except (i) Permitted Encumbrances and (ii) the Liens
in favor of Agent, for the benefit of Lenders, pursuant to the Collateral
Documents; and Borrower has received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and duly effected all recordings, filings and other actions necessary
to establish, protect and perfect Borrower's right, title and interest in and to
all such property except where the failure to have received such documents or
effected such actions will not, in the aggregate, have a Material Adverse
Effect.
2. All real property owned or leased by Borrower is set forth on
SCHEDULE 4.8. Borrower does not own any other real property, and Borrower is
- - - ------------
not the lessee or lessor under any Leases, other than as set forth on SCHEDULE
--------
4.8. Neither Borrower nor any other party to any such Lease (i) is in default
- - - ---
of its obligations thereunder or (ii) has delivered or received any notice of
default under any such Lease, and no event has occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such Lease, except, in each case, for any default which would not have a
Material Adverse Effect.
3. As of the Restatement Closing Date, Borrower does not own or
hold, and is not obligated under or a party to, any option, right of first
refusal or any other contractual right to purchase, acquire, sell, assign or
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dispose of any real property owned or leased by Borrower except as set forth in
SCHEDULE 4.8.
- - - ------------
4. All material permits required to have been issued or appropriate
to enable the real property owned or leased by Borrower, other than the
Unoccupied Property, to be lawfully occupied and used for all of the purposes
for which they are currently occupied and used, have been lawfully issued and
are, as of the Restatement Closing Date, in full force and effect.
5. Except as disclosed in writing to Agent, Borrower has not received
any notice, and does not have any knowledge, of any pending, threatened or
contemplated condemnation proceeding affecting any real property owned or leased
by Borrower or any part thereof, other than the Unoccupied Property, or of any
sale or other disposition of any real property owned or leased by Borrower or
any part thereof, other than the Unoccupied Property, in lieu of condemnation.
6. No portion of any real property owned or leased by Borrower, other
than the Unoccupied Property, has suffered any material damage by fire or other
casualty loss which has not heretofore been completely repaired and restored to
its original condition or is being remedied, except as set forth in SCHEDULE
--------
4.8. No portion of any real property owned or leased by Borrower is located in
- - - ---
a special flood hazard area as designated by any Federal or other Governmental
Authority.
4.9 No Default. To Borrower's knowledge, Parent is not in default (not
----------
otherwise cured or waived) under the Subordinated Parent Notes. To Borrower's
knowledge, no Liquidation Event has occurred under the Receivables Facility
Documents. Borrower is not in default in any material respect, and to
Borrower's knowledge no third party is in default in any material respect, under
or with respect to any material contract, agreement, lease, or other instrument
to which Borrower is a party. No Event of Default has occurred and is
continuing.
4.10 Burdensome Restrictions. No contract, lease, agreement or other
-----------------------
instrument to which Borrower is a party or is bound and no provision of
applicable law or governmental regulation has a Material Adverse Effect, or
insofar as Borrower can reasonably foresee may have a Material Adverse Effect.
4.11 Labor Matters. There are no strikes or other labor disputes against
-------------
Borrower that are pending or, to Borrower's knowledge, threatened, which would
have a Material Adverse Effect. Hours worked by and payment made to employees
of Borrower have not been in violation of the Fair Labor Standards Act or any
other applicable law dealing with such matters which would have a Material
Adverse Effect. All payments due from Borrower on account of employee health
and welfare insurance which would have a Material Adverse Effect if not paid
have been paid or accrued as a liability on the books of Borrower. As of the
Restatement Closing Date, there is no organizing activity involving Borrower
pending or threatened by any labor union or group of employees. As of the
Restatement Closing Date, there are no representation proceedings pending or
threatened with the National Labor Relations Board, and no labor organization or
group of employees of Borrower has made a pending demand for recognition. As of
the Restatement Closing Date, there are no complaints or charges against
Borrower pending or, to Borrower's knowledge, threatened to be filed with any
Federal, state, local or foreign court, governmental agency or arbitrator based
on, arising out of, in connection with, or otherwise relating to the employment
or termination of
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employment by Borrower of any individual, which would have a Material Adverse
Effect. Borrower is in compliance in all material respects with all applicable
affirmative action laws and similar requirements.
4.12 Other Ventures. Except as disclosed on SCHEDULE 4.12, Borrower is not
-------------- -------------
engaged in any joint venture (other than joint ventures permitted by SECTION 7.1
that are disclosed to Agent and Lenders in writing) or partnership with any
other Person.
4.13 Investment Company Act. Borrower is not an "investment company" or an
----------------------
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. The making of the Loans by Lenders, the application of the
proceeds and repayment thereof by Borrower and the consummation of the financing
and servicing transactions contemplated by this Agreement, the other Loan
Documents and the Ancillary Agreements will not violate any provision of such
Act or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
4.14 Margin Regulations. Borrower does not own any "margin security", as
------------------
that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans will be used only for the purposes contemplated
hereunder. The Loans will not be used, directly or indirectly, for the purpose
of purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security, or for any other purpose which might cause any Loan to be
considered a "purpose credit" within the meaning of Regulation G, T, U or X of
the Federal Reserve Board. Borrower will not take or permit any agent acting on
its behalf to take any action which might cause this Agreement or any document
or instrument delivered pursuant hereto to violate any regulation of the Federal
Reserve Board.
4.15 Taxes. All Federal, state, local and foreign tax returns, reports and
-----
statements required to be filed by Borrower, its Subsidiaries and Parent have
been filed with the appropriate Governmental Authority and all Charges and other
impositions shown thereon to be due and payable have been paid prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof, or any such fine, penalty, interest, late charge or loss has
been paid. Each of Borrower, its Subsidiaries and Parent has paid when due and
payable all Charges required to be paid by it, except for amounts that are being
contested in good faith and for which an adequate Reserve has been established.
Proper and accurate amounts have been withheld by Borrower, its Subsidiaries and
Parent from their respective employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions
of applicable Federal, state, local and foreign law and such withholdings have
been timely paid to the respective governmental agencies, except for such
amounts as would not have a Material Adverse Effect. SCHEDULE 4.15 sets forth
-------------
those taxable years for which Borrower's or Parent's tax returns are currently
being audited by the IRS or any other applicable Governmental Authority. Except
as disclosed on SCHEDULE 4.15, Borrower has not executed or filed with the IR
-------------
or any other Governmental Authority any agreement or other document that has a
continuing effect on Borrower, extending, or having the effect of extending, the
period for assessment or collection of any Charges or any taxes owed by Borrower
with respect to its corporate income. Borrower has not filed a
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consent pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2)
apply to any dispositions of subsection (f) assets (as such term is defined in
IRC Section 341(f)(4)). None of the property owned by Borrower is property which
Borrower is required to treat as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as in
effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of IRC Section 168(h). Except as
disclosed on SCHEDULE 4.15, Borrower has not agreed or been requested to make
-------------
any adjustment under IRC Section 481(a) that has a continuing effect on
Borrower, by reason of a change in accounting method or otherwise. Borrower
does not have any obligation under any tax sharing agreement.
4.16 ERISA.
-----
1. SCHEDULE 4.16 lists all Plans of Borrower and all Title IV Plans,
-------------
Qualified Plans, and Multiemployer Plans of Borrower's ERISA Affiliates, and
separately identifies the Title IV Plans, Qualified Plans, Multiemployer Plans,
any multiple employer plans subject to Section 4064 of ERISA, unfunded Pension
Plans, Welfare Plans, and Retiree Welfare Plans.
2. With respect to each Qualified Plan of Borrower that was adopted
before January 1, 1988, either (i) the IRS has issued a favorable determination
letter indicating the IRS's opinion that such Qualified Plan qualifies under
Section 401(a) of the IRC, or (b) a determination letter application has been
properly and timely submitted to the IRS and such submission is being processed
by the IRS, and Borrower has no reason to believe that an adverse determination
may be made by the IRS in connection with such submission. In the case of any
Qualified Plan adopted by Borrower on or after January 1, 1988, either (i) a
favorable determination letter has been received from the
IRS with respect to the qualification of such Qualified Plan under Section
401(a) of the IRC, or (ii) such a determination letter has been properly and
timely applied for and Borrower has no reason to believe that an adverse
determination will be issued by the IRS in connection with such submission, or
(iii) the deadline for timely submitting such Qualified Plan to the IRS for a
favorable determination letter on its initial qualification has not yet passed
and Borrower has no reason to believe that such Qualified Plan will not be
timely submitted for such a determination.
3. Each Plan of Borrower is in compliance in all material respects
with the applicable provisions of ERISA and the IRC, including the filing of
reports required under the IRC or ERISA which are true and correct in all
material respects as of the date filed, and with respect to each Plan of
Borrower, other than a Qualified Plan of Borrower, all required contributions
and benefits have been paid in material compliance with the provisions of each
such Plan of Borrower.
4. Neither Borrower nor any ERISA Affiliate, with respect to any
Qualified Plan, has failed to make any contribution or pay any amount due as
required by Section 412 of the IRC or Section 302 of ERISA or the terms of any
such plan, which failure was not corrected within 30 days.
5. As of the Restatement Closing Date, the Potential Withdrawal
Liability of Borrower and its ERISA Affiliates, in the aggregate, would not have
a Material Adverse Effect if incurred on such date.
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6. Borrower's annual contribution obligation associated with each
Retiree Welfare Plan does not have, and would not reasonably be expected to have
during the term of this Agreement, a Material Adverse Effect.
7. Except as set forth on SCHEDULE 4.16, no ERISA Event or event
-------------
described in Section 4062(e) of ERISA with respect to any Title IV Plan of
Borrower or any ERISA Affiliate has occurred that could reasonably be expected
to have a Material Adverse Effect.
8. There are no pending or, to the knowledge of Borrower, threatened
claims, actions or lawsuits (other than claims for benefits in the normal
course), asserted or instituted against (i) any Plan of Borrower or any ERISA
Affiliate or its assets, (ii) any fiduciary with respect to any Plan of Borrower
or any ERISA Affiliate, or (iii) Borrower or any ERISA Affiliate with respect to
any Plan of Borrower or any ERISA Affiliate, which, in any such case, if decided
adversely to Borrower or any ERISA Affiliate, would have a Material Adverse
Effect.
9. Except as set forth on SCHEDULE 4.16, neither Borrower nor any
-------------
ERISA Affiliate has incurred or reasonably expects to incur any withdrawal
liability in an amount that would have a Material Adverse Effect (and no event
has occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal from a Multiemployer Plan.
10. Except as set forth in SCHEDULE 4.16, within the last five years
-------------
neither Borrower nor any ERISA Affiliate has engaged in a transaction which
resulted in a Title IV Plan with Unfunded Pension Liabilities being transferred
outside of the "controlled group" (within the meaning of Section 4001(a)(14) of
ERISA) of any such entity, except where the amount of such Unfunded Pension
Liabilities would not result in a Material Adverse Effect if Borrower or any
ERISA Affiliate were required to fund such liabilities.
11. Except as set forth on SCHEDULE 4.16, no Retiree Welfare Plan of
-------------
Borrower or any ERISA Affiliate provides for continuing benefits or coverage for
any participant or any beneficiary of a participant after such participant's
termination of employment which would result in a liability in an amount which
would have a Material Adverse Effect. Borrower has complied with the notice and
continuation coverage requirements of Section 4980B of the IRC and the
regulations thereunder except where the failure to comply would not result in
any Material Adverse Effect.
12. Borrower has not engaged in a prohibited transaction, as defined
in Section 4975 of the IRC or Section 406 of ERISA, in connection with any of
its Plans, which would subject Borrower (after giving effect to any exemption)
to a tax on prohibited transactions imposed by Section 4975 of the IRC or any
other liability that would have a Material Adverse Effect.
13. The aggregate amount of all existing liabilities under all pension
plans within the meaning of Section 3(2) of ERISA that are or were intended to
be qualified under Section 401(a) of the IRC that are currently or were formerly
sponsored by Borrower or any ERISA Affiliate and that are funded or were
satisfied with general account obligations of insurance companies whose general
account obligations are rated lower than AA by Standard & Poor's Corporation
does not exceed $30,000,000, and of that amount, the portion rated lower than
BBB by Standard & Poor's Corporation does not exceed $10,000,000.
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4.17 No Litigation. Except as set forth on SCHEDULE 4.17, no action, claim
------------- -------------
or proceeding is now pending or, to the knowledge of Borrower, threatened
against Borrower, at law, in equity or otherwise, before any court, board,
commission, agency
or instrumentality of any Federal, state, or local government or of any agency
or subdivision thereof, or before any arbitrator or panel of arbitrators, which
is likely to have a Material Adverse Effect if adversely determined. None of
the matters set forth in SCHEDULE 4.17 questions the validity of any of the Loan
-------------
Documents or other Ancillary Agreements or any action taken or to be taken
pursuant thereto, or would have either individually or in the aggregate a
Material Adverse Effect.
4.18 Brokers. No broker or finder acting on behalf of Borrower brought
-------
about the obtaining, making or closing of the loans made pursuant to this
Agreement or the financing transaction contemplated by the Loan Documents and
the Ancillary Agreements and Borrower has no obligation to any Person in respect
of any finder's or brokerage fees in connection therewith.
4.19 Ancillary Agreements. A true and complete copy of each of the
--------------------
Ancillary Agreements (including all exhibits, schedules and amendments thereto)
will be delivered to Agent on the Restatement Closing Date. Borrower is not in
default under the Ancillary Agreements or under any instrument or document to be
delivered in connection therewith. The representations and warranties made in
the Ancillary Agreements by Borrower or its Affiliates which are parties thereto
will be true and correct in all material respects (except for changes expressly
provided for therein or herein) on and as of the Restatement Closing Date as
though made on and as of such date.
4.20 Outstanding Stock; Options; Warrants, Etc. The Stock of Borrower
------------------------------------------
owned by Parent at the Restatement Closing Date constitutes all of the issued
and outstanding Stock of Borrower. As of the Restatement Closing Date, the
Stockholders of Parent named in SCHEDULE 4.20 own all of the issued and
-------------
outstanding Stock of Parent. Except as set forth in SCHEDULE 4.20 and except as
-------------
permitted under this Agreement, there are no outstanding rights to purchase,
options, warrants or similar rights or agreements pursuant to which Borrower or
Parent may be required to issue or sell any such Stock or other equity security.
4.21 Employment and Labor Agreements. As of the Restatement Closing Date,
-------------------------------
except as set forth on SCHEDULE 4.21, there are no (i) employment, consulting or
-------------
management agreements covering management of Borrower, (ii) management
agreements between Borrower and VPI, and (iii) collective bargaining agreements
or other labor agreements covering any employees of Borrower. A true and
complete copy of each agreement listed on SCHEDULE 4.21 has been furnished to
-------------
Agent.
4.22 Patents, Trademarks, Copyrights and Licenses. Borrower owns all
--------------------------------------------
material licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications, and trade names necessary to continue to
conduct its business as heretofore conducted by it, now conducted by it and
proposed to be conducted by it, each of which is listed, together with Patent
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and Trademark Office application or registration numbers, where applicable, on
SCHEDULE 4.22. Borrower conducts its business without infringement or claim of
- - - -------------
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement would not have a Material Adverse
Effect. There is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of Borrower, except where such
infringement or claim of infringement would not have a Material Adverse Effect.
4.23 Full Disclosure. No information contained in this Agreement and the
---------------
other Loan Documents, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which made. The
written statements delivered by Borrower to Agent and Managing Agents in
connection with Agent's and Managing Agents' due diligence and audit
investigations do not contain any untrue statement of material fact.
4.24 Liens. The Liens granted to Agent, for the benefit of Lenders,
-----
pursuant to the Collateral Documents will, at the Restatement Closing Date, be
fully perfected first priority Liens in and to the Collateral described therein,
except for Permitted Encumbrances and as provided in the Collateral Documents.
4.25 Hazardous Materials. Except as set forth on SCHEDULE 4.25, to
------------------- -------------
Borrower's knowledge without independent investigation, all Subject Property is
free of contamination from any Hazardous Material which has in the past caused
or constituted, or reasonably could be expected at any time in the future to
cause or constitute, a health, safety, or environmental hazard to any Person or
property or which could subject Borrower to any Environmental Liabilities and
Costs in excess of $2,000,000 in any one instance or $6,000,000 in the
aggregate. In addition, SCHEDULE 4.25 discloses potential environmental
-------------
liabilities of Borrower of which Borrower has knowledge (i) not related to
noncompliance with the Environmental Laws or (ii) associated with properties not
owned, leased, subleased or operated by Borrower, which liabilities would have a
Material Adverse Effect. Except as disclosed on SCHEDULE 4.25, Borrower has not
-------------
caused or, to Borrower's knowledge, suffered to occur any Release or threatened
Release of Hazardous Materials in violation of, or which could form the basis of
liabilities under, the Environmental Laws at, under, or within any Subject
Property, where such violation or liabilities would have a Material Adverse
Effect. Except as disclosed on SCHEDULE 4.25, Borrower has remedied those items
-------------
of noncompliance with the Environmental Laws identified in the Preliminary Site
Evaluation reports prepared by Haley & Aldrich Inc. for Borrower and dated
December 1992. Borrower is not involved in operations which could lead to the
imposition of any liability or Lien on it, or any owner of any premises which it
occupies, under the Environmental Laws, which liability or Lien would have a
Material Adverse Effect, and Borrower has not permitted any tenant or occupant
of such premises to engage in any such activity. As of the Restatement Closing
Date, except as disclosed on SCHEDULE 4.25, and after the Restatement Closing
-------------
Date, except as disclosed in writing to Agent, Borrower has not received any
written notice, complaint or order from any Governmental Authority
or any written complaint from any third party relating to Hazardous
Materials or environmental problems, impairments or
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liabilities with respect to the operation or management of the Subject Property.
4.26 Insurance Policies. SCHEDULE 4.26 lists all insurance of any nature
------------------ -------------
maintained for current occurrences by Borrower, as well as a summary of the
terms of such insurance. The insurance policies maintained by Borrower provide
for, among other things, the following insurance coverage:
1. "All Risk" physical damage insurance on Borrower's tangible real
and personal property and assets, including Borrower's Inventory, fixtures and
equipment, wherever located, covering fire and extended coverage, flood,
earthquake, environmental, theft, burglary, explosion, collapse, and all other
hazards and risks ordinarily insured against by companies engaged in the
pharmaceutical distribution business. Each policy of insurance on such real and
personal property contains an endorsement, in form and substance acceptable to
Agent, showing loss payable to Agent, for the benefit of Lenders (Form 438 BFU),
and extra expense and business interruption endorsements. Such endorsement, or
an independent instrument furnished to Agent, provides that the insurance
companies will give Agent at least thirty (30) days prior written notice before
any such policy or policies of insurance shall be altered, canceled or not
renewed and that no act or default of Borrower or any other Person shall affect
the right of Lenders to recover under such policy or policies of insurance in
case of loss or damage;
2. comprehensive general liability insurance on an "occurrence basis"
against claims for personal injury, bodily injury and property damage with a
minimum limit of $1,000,000 per occurrence and $2,000,000 in the aggregate.
Such coverage includes premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent
contractors, broad form property coverage, products and completed operations
liability;
3. statutory limits of worker's compensation insurance which includes
employee's occupational disease and employer's liability in the amount of
$500,000 for each accident or occurrence;
4. automobile liability insurance for all owned, non-owned or hired
automobiles against claims for personal injury, bodily injury and property
damage with a minimum combined single limit of $1,000,000 per occurrence; and
5. umbrella insurance of $20,000,000 per occurrence and $20,000,000
in the aggregate.
All of such policies are in full force and effect and with insurers that satisfy
the provisions of SECTION 6.6. Each insurance policy contains a clause which
provides that the interest of Agent, for the benefit of Lenders, under such
policy shall not be invalidated by any act or omission to act of, or any breach
of warranty by, the insured, or by any change in the title, ownership or
possession of the insured property, or by the use of the property for purposes
more hazardous than is permitted in such policy. Each policy of liability
insurance described above contains an endorsement, in form and substance
acceptable to Agent, naming Agent as additional insured with respect to the
properties and operations of Borrower. Borrower has delivered to Agent a
certificate of insurance that evidences the existence of each policy of
insurance, along with evidence of payment of all premiums therefor.
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4.27 Bank Accounts. SCHEDULE 4.27 lists all banks and other financial
------------- -------------
institutions at which Borrower, any of its Subsidiaries (including Receivables
Corporation) or Receivables Trust maintains deposits or other accounts,
including the Lock Box Account, and such Schedule correctly identifies the name,
address and telephone number of the bank or other financial institution at which
each such account is held, the name in which the account is held, a description
of the purpose of the account, and the complete account number.
4.28 Inventory. Except as specifically disclosed on any Schedule of
---------
Inventory provided to Agent and Lenders by Borrower under this Agreement or
otherwise disclosed to and acknowledged by Agent and Lenders in writing with
respect to Inventory of Borrower:
1. Agent and Lenders may rely upon all statements, warranties, or
representations made in any Schedule of Inventory
in determining which items of Inventory listed on such Schedule of Inventory are
to be deemed Eligible Inventory;
2. All Inventory is located on the premises listed on Schedule III
of the Security Agreement;
3. No Inventory is subject to any lien or security interest
whatsoever, except for Liens in favor of Agent, for the benefit of each Lender,
granted under the Collateral Documents, and Permitted Encumbrances;
4. Except as specified on Schedule III of the Security Agreement or
as notified in writing to Agent, no Inventory is stored with a bailee,
warehouseman, or similar party; and
5. No Inventory has been consigned to any Person.
4.29 Indebtedness. Borrower has no Indebtedness, except for Permitted
------------
Indebtedness and as permitted by SECTION 7.3.
To the extent that Borrower acquires or forms any New Subsidiary in
accordance with the provisions of this Agreement, Borrower shall make, from and
after the date of such acquisition or formation, each of the representations and
warranties set forth in this SECTION 4 with respect to such New Subsidiary.
5. FINANCIAL STATEMENTS AND INFORMATION
------------------------------------
5.1 Reports and Notices. Borrower covenants and agrees that from and
-------------------
after the Restatement Closing Date and until the Commitment Termination Date, it
shall deliver to each Lender and Agent:
1. Within 30 days after the end of each Fiscal Month, a Borrowing
Base Certificate together with a copy of a Schedule of Inventory as of the end
of such Fiscal Month; provided, that if at any time the amount by which the
--------
Borrowing Base exceeds the sum of the outstanding Advances and Letter of Credit
Obligations is less than $40,000,000, Agent may require that
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Borrower provide a current Borrowing Base Certificate as frequently as Agent may
request.
2. Within 30 days after the end of each Fiscal Month (i) a copy of
the unaudited balance sheets of Borrower, on a Consolidated and consolidating
basis, and the Consolidated Borrower Group as of the end of such Fiscal Month
and the related unaudited statements of income and cash flow for that portion of
the Fiscal Year ending as of the end of such Fiscal Month, and (ii) a copy of
the unaudited statements of income and cash flow of Borrower, on a Consolidated
and consolidating basis, and the Consolidated Borrower Group for such Fiscal
Month, each prepared in accordance with Borrower's past practices for internal
reporting and consistent with the form used for the Projections, setting forth
in comparative form in each case (A) the previously projected figures for such
period and (B) the figures from the same period for the immediately prior Fiscal
Year, and accompanied by the certification of the chief executive officer, chief
accounting officer, or chief financial officer of Borrower that all such
financial statements are, to his or her knowledge, after due inquiry, complete
and correct and present fairly in accordance with Borrower's past practices for
internal reporting and consistent with the form used for the Projections, the
financial position and the results of operations of Borrower, on a Consolidated
and consolidating basis, and the Consolidated Borrower Group as at the end of
such Fiscal Month and for the period then ended.
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3. Within 45 days after the end of each Fiscal Quarter (other than,
at any time after there has been a public offering of Borrower's Stock, for any
Fiscal Quarter ending September 30), (i) a copy of the unaudited balance sheets
of Borrower, on a Consolidated and consolidating basis, the Consolidated
Borrower Group, and Parent and its Subsidiaries, on a consolidated basis, as of
the end of such Fiscal Quarter and the related statements of income and cash
flow for that portion of the Fiscal Year ending as of the end of such Fiscal
Quarter, (ii) a copy of the unaudited statements of income and cash flow of
Borrower, on a Consolidated and consolidating basis, the Consolidated Borrower
Group, and Parent and its Subsidiaries, on a consolidated basis, for such Fiscal
Quarter, and a management letter, each prepared in accordance with GAAP (subject
to normal year end adjustments and the inclusion of footnotes), setting forth in
comparative form in each case (A) the previously projected figures for such
period and (B) the figures from the same period for the immediately prior Fiscal
Year, accompanied by (I) a statement in reasonable detail showing (x) the
calculations used in determining Borrower's compliance with the Financial
Covenants and calculations of the Interest Coverage Ratio and Total Debt to
EBITDA Ratio, and (y) the calculations used in determining the amounts added to
the Dividend/Acquisition Basket, together with a summary of each transaction
(including the Acquisition Purchase Price for such transaction), in which
amounts from the Dividend/Acquisition Basket were utilized, and (II) the
certification of the chief executive officer, chief accounting officer, or chief
financial officer of Borrower that all such financial statements are, to his or
her knowledge, after due inquiry, complete and correct and present fairly in
accordance with GAAP (subject to normal year end adjustments and the inclusion
of footnotes), the financial position and the results of operations of Borrower,
on a Consolidated and consolidating basis, and the Consolidated Borrower Group
as at the end of such Fiscal Quarter and for the period then ended, and
specifying whether, to his or her knowledge, after due inquiry, there was any
Default or Event of Default in existence as of such time, (iii) if the generally
accepted accounting principles in the United States of America as adopted by
Borrower at any time differ from the generally accepted accounting principles in
the United States of America as adopted by Borrower on September 30, 1994, then
a written statement from the chief executive officer, chief accounting officer,
or chief financial officer of Borrower setting forth the changes, if any, that
would have resulted to the calculations described in clause (ii)(B)(I) of this
SECTION 5.1(C) if the financial statements described in this SECTION 5.1(C) had
been prepared without giving effect to such accounting change, and (iv) a
statement reconciling Borrower's internally-prepared monthly financial
statements with the quarterly reports filed by Borrower with the Securities and
Exchange Commission.
(d) Within 90 days after the close of each Fiscal Year, a copy of the
annual audited financial statements of each of Borrower, on a Consolidated and
consolidating basis, the Consolidated Borrower Group, and Parent and its
Subsidiaries, on a consolidated basis, respectively, consisting of balance sheet
and statements of income, retained earnings and cash flow, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
financial statements shall be prepared in accordance with GAAP, certified
without qualification by the Auditors and accompanied by (i) a statement in
reasonable detail showing the calculations used in determining Borrower's
compliance with the Financial Covenants and calculations of the Interest
Coverage Ratio and Total Debt to EBITDA Ratio, (ii) a report from the Auditors
to the effect that in connection with their audit examination, nothing has come
to their attention to cause them to believe that a Default or Event of Default
had occurred, (iii) a certification of the chief executive
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officer, chief accounting officer, or chief financial officer of Borrower that,
to his or her knowledge, after due inquiry, all such financial statements are
complete and correct and present fairly in accordance with GAAP the financial
position, the results of operations and the changes in financial position of
Borrower, on a Consolidated and consolidating basis, and the Consolidated
Borrower Group as at the end of such Fiscal Year and for the period then ended
and specifying whether, to his or her knowledge, after due inquiry, there was
any Default or Event of Default in existence as of such time, and (iv) if the
generally accepted accounting principles in the United States of America as
adopted by Borrower at any time differ from the generally accepted accounting
principles in the United States of America as adopted by Borrower on September
30, 1994, then a written statement from the chief executive officer, chief
accounting officer, or chief financial officer of Borrower setting forth the
changes, if any, that would have resulted to the calculations described in
clause (i) of this SECTION 5.1(D) if the financial statements described in this
SECTION 5.1(D) had been prepared without giving effect to such accounting
change.
5. Within 45 days after the end of any Fiscal Quarter ending
September 30 (at any time after there has been a public offering of Borrower's
Stock), a statement in reasonable detail showing the calculations used in
determining the amounts added to the Dividend/Acquisition Basket, together with
a summary of each transaction (including the Acquisition Purchase Price for such
transaction), in which amounts from the Dividend Acquisition were utilized and,
if the generally accepted accounting principles in the United States of America
as adopted by Borrower at any time differ from the generally accepted accounting
principles in the United States of America as adopted by Borrower on September
30, 1994, a written statement from the chief executive officer, chief accounting
officer, or chief financial officer of Borrower setting forth the changes, if
any, that would have resulted to the calculations described in this SECTION
5.1(E) if the financial statement described in this SECTION 5.1(E) had been
prepared without giving effect to such accounting change.
6. Not later than 45 days after the beginning of each Fiscal Year,
an operating plan for Borrower for such Fiscal Year, reviewed by Borrower's
board of directors which includes the following:
(a) projected balance sheet of Borrower for such Fiscal Year, on
a monthly basis;
(b) projected cash flow statements of Borrower, including
summary details of cash disbursements, including for Capital Expenditures
for such Fiscal Year, on a monthly basis; and
(c) projected income statements of Borrower for such Fiscal
Year, on a monthly basis;
together with a description of major assumptions used in generating such balance
sheet, cash flow and income statements, and operating plan, and other
appropriate supporting details as requested by Agent.
7. As soon as practicable, but in any event within five (5) Business
Days after Borrower becomes aware of (i) the existence of any Default or Event
of Default, or (ii) any development or other information which is likely to have
a Material Adverse Effect, written notice specifying
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the nature of such Default, Event of Default, development, or information and
describing the anticipated effect thereof.
8. Promptly after the filing thereof, copies of any regular, periodic
and special material reports and any initial and final registration statements
which are filed by Borrower or Parent with the Securities and Exchange
Commission or any Governmental Authority which may be substituted therefor, or
any national securities exchange.
9. Such other information respecting the Collateral and Borrower's
business, financial condition or prospects as Agent may, from time to time,
reasonably request.
5.2 Additional Reports and Notices. In addition to the reports and
------------------------------
notices described in SECTION 5.1(A) to be sent to each Lender and Agent,
Borrower covenants and agrees that from and after the Restatement Closing Date
and until the Commitment Termination Date:
1. If Agent so requests, Borrower shall make available for review or
inspection by an agent, designee or other representative of Agent, at Borrower's
expense, copies of any Federal, state, local or foreign tax return or report in
respect of income or other taxes on or measured by income (excluding sales, use
or like taxes) filed by Borrower;
2. Upon becoming aware of any material adverse change, in the
aggregate, in the payment or credit terms provided to Borrower by any of the 15
largest suppliers of Inventory to Borrower (measured by the Dollar amount of
Borrower's purchases during the immediately preceding Fiscal Quarter), Borrower
shall deliver to Agent notice of such change; and
3. Borrower shall deliver to Agent such other information respecting
the Collateral, and Borrower's business, financial condition, or prospects as
Agent may, from time to time, reasonably request.
5.3 Communication with Accountants. Borrower authorizes Agent to
------------------------------
communicate directly with its Auditors and Tax Advisors and authorizes the
Auditors and Tax Advisors to disclose to Agent any and all financial statements
and other supporting financial documents and schedules, including copies of any
management letter with respect to the business, financial condition and other
affairs of Borrower. At or before the Restatement Closing Date, Borrower and
Parent shall deliver a letter addressed to the Auditors and Tax Advisors in the
form of EXHIBIT H, which letter shall provide that (a) the Auditors are
---------
authorized and directed to disclose to Agent, Lenders and their respective
representatives any and all financial statements and other supporting documents
and schedules, and (b) Agent and Lenders will be relying on the financial
statements of Borrower and Parent certified by the Auditors for the Fiscal Year
ending September 30, 1995. On or before the end of each Fiscal Year after the
Fiscal Year ending September 30, 1995, Borrower shall deliver a letter addressed
to the Auditors in the form of EXHIBIT H, which letter shall provide, among
---------
other items, that the Auditors authorize Agent and Lenders to rely on the
financial statements of Borrower and Parent certified by the Auditors for such
Fiscal Year, and promptly upon the engagement of new Auditors, Borrower shall
deliver a letter addressed to such new Auditors satisfying the requirements of
clauses (a) and (b) above. Borrower shall (x) at or before the time of its
engagement of the Auditors for
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its Fiscal Year ending September 30, 1995, and at or before the time of its
engagement of the Auditors for each subsequent Fiscal Year, obtain and deliver
to Agent a letter from such Auditors authorizing Agent and Lenders to rely on
the financial statements of Borrower and Parent certified by such Auditors for
such Fiscal Year, and (y) cooperate with Agent and comply with Agent's requests
to cause such Auditors to meet with Agent to discuss such financial statements
and matters relating thereto.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, unless the Requisite Lenders shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
6.1 Maintenance of Existence and Conduct of Business. Borrower shall, and
------------------------------------------------
shall cause each of its Subsidiaries and Parent to: (a) do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its trademarks and trade names, and
preserve all the remainder of its property, to the extent useful in the conduct
of its business, and keep the same in good repair, working order and condition
(taking into consideration ordinary wear and tear), and from time to time make,
or cause to be made, all needful and proper repairs, renewals and replacements,
betterments and improvements thereto consistent with industry practices, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; and (d) with respect to Borrower,
transact business only in such names set forth on SCHEDULE 6.1, or such other
------------
names as Borrower shall specify to Agent in writing not less than 30 days prior
to the first date such name is used by Borrower.
6.2 Payment of Obligations.
----------------------
1. Borrower shall: (i) pay and discharge or cause to be paid and
discharged all its Indebtedness in accordance with the terms thereof, including
all the Obligations; and (ii) subject to SECTION 6.2(B), pay and discharge or
cause to be paid and discharged promptly all (A) Charges imposed upon it, its
income and profits, or any of its property (real, personal or mixed), and (B)
lawful claims for labor, materials, supplies and services or otherwise before
any thereof shall become in default.
2. Borrower may in good faith contest, by proper legal actions or
proceedings, the validity or amount of any Charges or claims arising under
SECTION 6.2(A)(II); provided, that at the time of commencement of any such
--------
action or proceeding, and during the pendency thereof (i) no Default or Event of
Default shall have occurred and be continuing, (ii) adequate Reserves with
respect thereto are maintained on the books of Borrower, in accordance with
GAAP, (iii) such contest operates to suspend collection of the contested Charges
or claims and is maintained and prosecuted continuously with diligence, (iv)
Borrower shall promptly pay or discharge such contested Charges and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence acceptable to Agent of such compliance, payment or discharge,
if such contest is terminated or discontinued adversely
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<PAGE>
to Borrower, and (v) if such action or proceeding involves an amount in excess
of $1,000,000, Borrower has provided notice to Agent of such action or
proceeding, and Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof would have a Material Adverse
Effect.
3. Notwithstanding anything to the contrary contained in SECTION
6.2(B) above, Borrower shall have the right to pay the Charges or claims arising
under SECTION 6.2(A)(II) and in good faith contest, by proper legal actions or
proceedings, the validity or amount of such Charges or claims.
6.3 Agent's and Lenders' Fees. Other than as provided for in SECTION
-------------------------
3.1(H), Borrower shall pay to Agent, Managing Agents, Issuing Lender or any
Lender, as the case may be, within 10 Business Days after receipt of an invoice
therefor, which shall be conclusive absent manifest error, any and all fees,
costs or expenses reimbursable to Agent, Managing Agents, Issuing Lender or such
Lender under this Agreement or the other Loan Documents.
6.4 Books and Records. Borrower shall keep, and shall cause each of its
-----------------
Subsidiaries and Parent to keep, adequate records and books of account with
respect to its business activities, in which proper entries, reflecting all of
its financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financials referred to in SECTION 4.6(B), except as may be
required by changes in GAAP after the date of such Financials.
6.5 Litigation. Borrower shall notify Agent in writing, promptly upon
----------
learning thereof, of any litigation commenced or threatened against Borrower,
its Subsidiaries or Parent, and of the institution against it of any suit or
administrative proceeding that (a) involves an amount claimed in excess of
$1,000,000, or (b) is likely to have a Material Adverse Effect if adversely
determined.
6.6 Insurance.
---------
1. Borrower shall, at its sole cost and expense, maintain the
policies of insurance described in SECTION 4.26 with insurers with an A.M. Best
rating of "A-" or better, and all such policies shall be in such amounts and in
form as may be reasonably satisfactory to Agent. In addition, Borrower shall
notify Agent promptly of any occurrence causing a material loss or decline in
value of any real or personal property and the estimated (or actual, if
available) amount of such loss or decline. Borrower hereby directs all present
and future insurers under its "All Risk" policies of insurance, upon the
occurrence and during the continuance of an Event of Default, to pay all
proceeds payable thereunder directly to Agent, subject to the rights, if any, of
any holders of Permitted Encumbrances with respect to such proceeds. Borrower
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent) as Borrower's true and lawful agent and attorney-
in-fact for the purpose, upon the occurrence and during the continuance of an
Event of Default, of making, settling and adjusting claims under the "All Risk"
policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such "All Risk" policies
of insurance, and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain any
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<PAGE>
of the policies of insurance required above or to pay any premium in whole or in
part relating thereto, Agent, without waiving or releasing any Obligations or
Default or Event of Default hereunder, may upon prior written notice to
Borrower, at any time or times thereafter (but shall not be obligated to) obtain
and maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Agent deems advisable. All sums so disbursed
by Agent, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be payable, on demand, by Borrower to Agent and
shall be additional Obligations hereunder secured by the Collateral.
2. Borrower shall, if so requested by Agent, deliver to Agent, as
often as Agent may request, (i) a standard report of a reputable insurance
broker, satisfactory to Agent with respect to Borrower's insurance policies, and
(ii) copies of Borrower's then-current insurance policies.
6.7 Compliance with Laws. Borrower shall comply, and shall cause each of
--------------------
its Subsidiaries and Parent to comply, with all Federal, state and local laws
and regulations applicable to it, including those relating to the registration,
licensing and regulation of the pharmaceutical and health care supply industry,
those relating to the collection, payment and deposit of sales, employees'
income, unemployment and Social Security taxes, and those relating to
environmental, consumer credit, truth-in-lending, ERISA and labor matters,
except where such noncompliance would not have a Material Adverse Effect.
6.8 Agreements. Borrower shall perform, and shall cause each of its
----------
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement to which it is a party, including (i) the
Subordinated Borrower Notes, until such time as they are redeemed in accordance
with their terms, and (ii) any leases and customer contracts to which it is a
party where the failure to so perform and enforce would have a Material Adverse
Effect. Borrower shall not terminate or modify any provision of any agreement
to which it is a party which termination or modification could have a Material
Adverse Effect.
6.9 Supplemental Disclosure. From time to time as may be necessary (in
-----------------------
the event that such information is not otherwise delivered by Borrower to any
Lender pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, Borrower will supplement each schedule or representation herein with
respect to any matter hereafter arising which, if existing or occurring as of
the Restatement Closing Date, would have been required to be set forth or
described in such schedule or as an exception to such representation or which is
necessary to correct any information in such schedule or representation which
has been rendered inaccurate thereby; provided, that such supplement to such
--------
schedule or representation shall not be deemed an amendment thereto unless Agent
has consented thereto or (a) with respect to amendments to SCHEDULE 4.2,
------------
Borrower has provided Agent with not less than 30 days prior written notice and
Borrower has executed and delivered to Agent all documents requested by Agent to
maintain the perfection and priority of Agent's Liens on the Collateral, (b)
with respect to amendments to SCHEDULE 4.26 or SCHEDULE 4.27, Borrower has
------------- -------------
provided Agent with not less than 30 days prior written notice (except that with
respect to additions, deletions or other modifications to the "Trust Accounts"
designated on SCHEDULE 4.27, such modifications to SCHEDULE 4.27 shall be made
------------- -------------
within five (5) Business Days of
80
<PAGE>
Borrower's receipt of notice of any such additions, deletions or modifications
by the Trustee under the Receivables Pooling Agreement), and (c) with respect to
amendments to SCHEDULE 4.3 or SCHEDULE 4.12, consistent with actions by Borrower
------------ -------------
permitted under SECTION 6.13 or SECTION 7.1.
6.10 Employee Plans.
--------------
1. Borrower shall notify Agent of any and all claims (other than
claims for benefits in the normal course), actions, or lawsuits instituted, and
of any known threatened litigation or claims, against Borrower, or any ERISA
Affiliate, in connection with any Plan of such entities or against any such Plan
itself, or against any fiduciary of or service provider to any such Plan which,
if adversely determined, would have a Material Adverse Effect.
2. Borrower shall notify Agent of the occurrence of any Reportable
Event with respect to any Pension Plan of Borrower or any ERISA Affiliate that
could reasonably be expected to have a Material Adverse Effect.
6.11 Environmental Matters. Borrower shall, and shall cause each of its
---------------------
Subsidiaries and Parent to (i) comply in all material respects with the
Environmental Laws applicable to it, (ii) notify Agent promptly after knowledge
in the event of any Release or threatened Release, which Borrower, its
Subsidiaries or Parent is required to report under any applicable Environmental
Laws, (iii) promptly forward to Agent a copy of any order, notice, permit,
application, or any other written communication or report received by Borrower
from any Governmental Authority or any other Person or sent by or for Borrower
to any Governmental Authority in connection with any such Release or threatened
Release or any other matter relating to the Environmental Laws that may affect
such premises; provided, that after the initial report of any such matter,
--------
Borrower will forward only such communications that reflect substantive
developments or changes in such matter, (iv) on or before March 1, 1995,
initiate a response to those items of noncompliance identified in SCHEDULE 6.11,
-------------
(v) on or before September 1, 1995, remedy those items of noncompliance
identified in SCHEDULE 6.11, other than those items of noncompliance which are
-------------
not remedied as a result of the failure of Governmental Authorities to respond
to or approve of Borrower's proposed course of action, and (vi) provide Agent,
upon Agent's request and at Borrower's expense, such environmental assessment
reports, certificates, engineering studies or other written material or data as
Agent may require so as to satisfy Agent that Subject Property is free from any
material Environmental Liabilities and Costs; provided, that so long as no Event
--------
of Default has occurred, Borrower shall only be required to provide to Agent
such written material or data (a) once during the term of this Agreement for
each parcel of Subject Property that is owned, leased or operated by Borrower or
any Affiliate of Borrower as of the Restatement Closing Date, and (b) twice
during the term of this Agreement for each parcel of Subject Property that is
acquired (through purchase or lease) by Borrower or any Affiliate of Borrower
subsequent to the Restatement Closing Date. The provisions of this SECTION 6.11
shall apply whether or not the Environmental Protection Agency, any other
Federal agency or any state or local environmental agency has taken or
threatened any action in connection with the presence of any Releases or
threatened Releases of Hazardous Materials.
6.12 Landlord's Agreements. Borrower shall, unless Agent shall have
---------------------
otherwise consented in writing,
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<PAGE>
obtain a Landlord's Agreement from the lessor of each leased premises currently
being used by Borrower and the lessor of any new leased premises.
6.13 Subsidiary. Except as permitted by SECTION 7.1, prior to forming any
----------
Subsidiary, Borrower shall (a) provide not less than 30 days prior written
notice to Agent, and (b) receive the prior written consent of Agent and
Requisite Lenders.
6.14 Interest Rate Contracts. Unless certificates with fixed interest
-----------------------
rates in the amount of $150,000,000 or more are issued by the Receivables Trust,
within 60 days after the Restatement Closing Date, Borrower shall enter into
Interest Rate Contracts in form and substance satisfactory to Agent, for an
aggregate amount of not less than $150,000,000 of variable rate Indebtedness,
and such Interest Rate Contracts shall (a) be for a term of not less than one
year, and (b) remain in effect until a date not earlier than the second
anniversary of the Restatement Closing Date; provided, that such $150,000,000
--------
amount shall be reduced by the amount of the net cash proceeds received by
Borrower from one or more public offerings of the Stock of Borrower or Parent.
6.15 Minimum Tangible Net Worth. The Consolidated Borrower Group shall
--------------------------
maintain, as of the end of each Fiscal Quarter, Tangible Net Worth of not less
than <$210,000,000> as of the Restatement Closing Date, increased by (a)
seventy-five percent (75%) of the cumulative increases in retained earnings for
the Fiscal Quarters subsequent to September 30, 1994, and (b) seventy-five
percent (75%) of the net proceeds of any capital or equity infusion received by
Borrower in the form of (i) an equity infusion from Parent to Borrower, (ii) a
Qualified Borrower Public Offering, or (iii) a Qualified Borrower Equity Sale.
6.16 Interest Coverage Ratio. The Consolidated Borrower Group shall
-----------------------
maintain, for each Rolling Period, an Interest Coverage Ratio of not less than
the following, as of the end of the Rolling Period corresponding thereto:
<TABLE>
<CAPTION>
Minimum Interest
Rolling Period Ended At Coverage Ratio
----------------------- ------------------
<S> <C>
9/30/94 1.65 to 1.00
12/31/94 1.65 to 1.00
3/31/95 1.75 to 1.00
6/30/95 1.85 to 1.00
9/30/95 2.05 to 1.00
12/31/95 2.05 to 1.00
3/31/96 2.05 to 1.00
6/30/96 2.05 to 1.00
9/30/96 2.30 to 1.00
Each Fiscal Quarter 2.30 to 1.00
ending
thereafter
</TABLE>
6.17 Current Ratio. The Consolidated Borrower Group shall maintain (a) as
-------------
of the end of each Fiscal Quarter ending from September 30, 1994 through June
30, 1996, a ratio of Current Assets to Current Liabilities of not less than 0.70
to 1.00, and (b) as of the end of the Fiscal Quarter ending September 30, 1996
and for each
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<PAGE>
Fiscal Quarter ending thereafter, a ratio of Current Assets to Current
Liabilities of not less than 0.65 to 1.00.
6.18 Stock Changes. If, after the Restatement Closing Date, Borrower
-------------
becomes aware that (a) any Person or "group" (as defined under Section 13d-3 and
Regulation 13D of the Exchange Act) has become the beneficial owner, directly or
indirectly, of five percent (5%) or more of the shares of any class of Stock of
Parent or Borrower, or (b) any Person or "group" (as defined under Section 13d-3
and Regulation 13D of the Exchange Act) that is the beneficial owner, directly
or indirectly, of five percent (5%) or more of the shares of any class of Stock
of Parent or Borrower has acquired or disposed of its beneficial ownership of
Stock in an amount equal to one percent (1%) or more of such class of Stock,
then Borrower shall immediately notify Agent of such occurrence.
6.19 Private Label Programs. If the aggregate amount of existing Inventory
----------------------
of Borrower packaged under third party private labels for the benefit of
Borrower's customers exceeds $3,000,000 at any time, then Borrower shall
promptly notify Agent of such occurrence.
6.20 Receivables Securitization Facility.
-----------------------------------
1. So long as there are any outstanding Obligations, Borrower, as the
sole shareholder of Receivables Corporation, shall cause Receivables
Corporation, subject to customary corporate procedures, to instruct the trustee
under the Receivables Pooling Agreement to pay all amounts payable to
Receivables Corporation under the Receivables Facility Documents directly into a
bank account in Receivables Corporation's name (the "Receivables Corporation
Bank Account") at a bank acceptable to Agent, and all amounts received in such
account shall be disbursed only directly to the Lock Box Account to the extent
such amounts are payable to Borrower by Receivables Corporation in respect of
the purchase price for "Receivables" (as defined in Appendix A to the
Receivables Purchase Agreement and Receivables Pooling Agreement), as payments
under the "ARC Note" (as defined in section 3.2 of the Receivables Purchase
Agreement), or as dividends or advances from Receivables Corporation to
Borrower. The instructions from Receivables Corporation to the trustee under
the Receivables Pooling Agreement referenced in the preceding sentence shall not
be modified without the prior written consent of Agent.
2. So long as there are any outstanding Obligations, Borrower, as the
sole shareholder of Receivables Corporation, shall cause Receivables
Corporation, subject to customary corporate procedures, (i) to pay (including
through the purchase of receivables) or distribute to Borrower on each Business
Day, by payment directly from the Receivables Corporation Bank Account to the
Lock Box Account, all amounts on deposit therein, and (ii) to the maximum extent
permitted by the Receivables Facility Documents, to distribute its net income to
Borrower in the form of dividends not less than once during each Fiscal Quarter.
3. Borrower shall deliver to Agent, or shall cause any other Person
who is acting as the "Servicer," under and as defined in the Receivables
Facility Documents, to deliver to Agent each of the following reports or notices
required to be delivered under the Receivables Facility Documents:
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a. on the date that it is required to be delivered under the
Receivables Purchase Agreement, the notice referenced in section 6.2(c) of
the Receivables Purchase Agreement;
b. on the date that each is required to be delivered under the
Intercreditor Agreement, originals or copies, as the case may be, of each
report or notice required or permitted to be delivered by Borrower or the
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<PAGE>
"Servicer" (as defined in Appendix A to the Receivables Pooling Agreement and
the Receivables Purchase Agreement) to the Seller Agent under the Receivables
Facility Documents and the Intercreditor Agreement; and
(iii) within three (3) Business Days after the date that such
notice is required to be delivered under the Receivables Facility
Documents, a copy of each "Daily Report," as defined in the Receivables
Pooling Agreement, and each notice referenced under sections 3.05(d),
3.05(e) and 3.06 of the Receivables Pooling Agreement and each notice
referenced under section 6.2(d) of the Receivables Purchase Agreement.
4. Borrower shall deliver to Agent copies of any amendments,
supplements or other modifications to any of the provisions of the Receivables
Facility Documents promptly after execution thereof.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, without the prior written consent
of the Requisite Lenders (except as otherwise provided in this SECTION 7), from
and after the date hereof and until the Termination Date:
7.1 Mergers and Acquisitions.
------------------------
1. Borrower shall not, and shall cause each of its Subsidiaries and
Parent not to, directly or indirectly, by operation of law or otherwise, merge
with, consolidate with, acquire all or substantially all of the assets or
capital Stock of, or otherwise combine with, any Person or form any New
Subsidiary; provided, that subject to subparagraph (b) hereof, Borrower shall be
--------
permitted to make acquisitions of the assets or Stock of any Person or Persons,
so long as, after giving effect to any such acquisition, the aggregate
Acquisition Purchase Price for all acquisitions made during the term of this
Agreement pursuant to this SECTION 7.1(A) does not exceed the sum of (i)
$20,000,000 and (ii) the available amount under the Dividend/Acquisition Basket.
2. Borrower shall not make any such acquisition unless:
(i) immediately before and after giving effect thereto, (A) any
New Subsidiaries acquired or created in connection with such acquisition
shall be in compliance with all warranties and representations and
affirmative and negative covenants under this Agreement, and (B) there
shall exist no Default or Event of Default and no Default or Event of
Default would be created;
(ii) in the event of an asset acquisition, any acquired asset,
that is of the type that would be required to be pledged as "Collateral" if
it were owned by Borrower on the Closing Date, is pledged to Agent, for the
benefit of Lenders;
(iii) in the event of a stock acquisition, (A) Borrower shall
pledge to Agent, for the benefit of Lenders, the Stock of any newly created
or acquired Subsidiary or any equity interest acquired by Borrower in an
entity that is not a Subsidiary, and (B) the newly created or acquired
Subsidiary and each of its Subsidiaries, if any,
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<PAGE>
shall each execute a Guaranty that will be secured by all of its respective
assets;
(iv) any such acquisition shall be in health care-related
entities, businesses or assets;
(v) in the case of any acquisition for which the Acquisition
Purchase Price is in excess of $10,000,000, (A) Borrower shall have given
to Managing Agents 30 days advance written notice of such acquisition,
including a brief description of the property being acquired, the
Acquisition Purchase Price (or range) thereof, and the Person from whom
such property is being acquired, and (B) on the date of such acquisition, a
certification, in a form acceptable to Agent, from the chief executive
officer, chief accounting officer or treasurer of Borrower stating that
Borrower has complied with clause (b)(i) of this SECTION 7.1; and
(vi) any such acquisition shall not be in the form of a
partnership or other similar structure in which Borrower or any of its
Subsidiaries, including the newly created or acquired Subsidiary is a
general partner or has liability similar to that of a general partner;
provided, that any liabilities that are assumed by any newly created or acquired
- - - --------
Subsidiary (including accounts payable) shall not be assumed by Borrower unless
any such liability is in a quantifiable amount (or, if not in a quantifiable
amount, a maximum amount that can be definitely ascertained by Borrower) and the
liability assumed is not greater than the unused amount of the
Dividend/Acquisition Basket.
7.2 Investments; Loans and Advances. Except as otherwise permitted by
-------------------------------
SECTION 7.1 or SECTION 7.4, Borrower shall not make any investment in, or make
or accrue loans or advances of money to any Person, through the direct or
indirect holding of securities or otherwise; provided, that Borrower may make
--------
and own investments in the following: (a) Permitted Investments; (b) advances or
loans, other than loans and advances made to employees of Borrower and its
Subsidiaries, made by Borrower in the ordinary course of its business not to
exceed $2,500,000 outstanding at any one time to any one Person and $2,500,000
in the aggregate outstanding at any one time; (c) the loans, investments, and
advances between Borrower and its Subsidiaries in existence as of the date
hereof and described on SCHEDULE 7.2 (the "Existing Advances"); (d) loans,
------------
investments, and advances from Borrower to any of its Subsidiaries (other than
Receivables Corporation), in an aggregate amount of not more than $50,000, for
the purpose of liquidating or winding up such Subsidiaries; and (e) loans,
advances and investments from Borrower to Receivables Corporation that are
contemplated under the Receivables Facility Documents. Upon the occurrence and
continuance of a Default or Event of Default, Borrower shall liquidate that
portion of the Permitted Investments described in clause (a) hereof that
constitutes Cash Equivalents within two Business Days after the written request
of Agent, and the proceeds of such liquidated investments shall be immediately
remitted to Agent, for the benefit of each Lender, to reduce the Obligations.
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<PAGE>
7.3 Indebtedness.
------------
1. Except as otherwise expressly permitted by this SECTION 7.3 or by
any other section of this Agreement (including SECTION 6.14 to the extent that
Interest Rate Contracts constitute Indebtedness), Borrower shall not create,
incur, assume or permit to exist any Indebtedness, except (i) Indebtedness
secured by Liens permitted under SECTION 7.9, (ii) the Loans, and (iii)
Permitted Indebtedness.
2. Borrower shall not enter into any arrangement, directly or
indirectly, with any Person whereby Borrower, Parent or any Subsidiary of
Borrower shall sell or transfer, either with or without recourse, any real or
personal property used or useful in its business, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property which
Borrower, Parent or such Subsidiary of Borrower intends to use for substantially
the same purpose or purposes as the property being sold or transferred without
the prior written consent of Agent.
7.4 Employee Loans. Except to the extent otherwise permitted in this
--------------
Agreement (including SECTION 7.1, SECTION 7.2 and SECTION 7.7), Borrower shall
not enter into, and shall cause its Subsidiaries and Parent not to enter into,
any commercial or borrowing transaction with any of its employees, directors,
Subsidiaries, Affiliates or related parties, including upstreaming and
downstreaming of cash and intercompany advances, without the prior written
consent of Agent.
7.5 Capital Structure.
-----------------
1. Except as otherwise permitted in this Agreement with respect to
dividends of Stock, Borrower shall not, and shall cause its Subsidiaries not to,
issue or agree to issue any of its respective authorized but not outstanding
shares of Stock (including treasury shares); provided, that Borrower may issue
--------
shares of Stock in connection with a Qualified Borrower Public Offering or a
Qualified Borrower Equity Sale, so long as a Change of Control Date does not
occur as a result of such issuance.
2. Except as specifically permitted in SECTION 7.1, SECTION 7.14 and
SECTION 7.15, Borrower shall not, and shall cause its Subsidiaries not to, make
any material changes in its capital structure (including the issuance of any
shares of Stock, warrants, or other securities convertible into Stock or any
revision of the terms of its outstanding Stock), amend its certificate of
incorporation or by-laws, or make any changes in any of its business objectives,
purposes, or operations; provided, that (i) Borrower may issue shares of Stock
--------
in connection with a Qualified Borrower Public Offering or a Qualified Borrower
Equity Sale, so long as a Change of Control Date does not occur as a result of
such issuance, (ii) Borrower may amend its certificate of incorporation in
connection with the transaction described in clause (i) to change the number of
authorized shares of Borrower's Stock to permit a stock split, reverse stock
split or stock dividend or, with the consent of Agent, for any other purpose,
which consent shall not be withheld unless Agent has determined that the change
would be adverse to the interests of Lenders, and (iii) Borrower may amend its
certificate of incorporation to provide for indemnification of directors in
accordance with state law.
3. Except as specifically permitted in SECTION 7.15(A), Borrower
shall cause Parent not to make any material changes in its capital structure
(including the issuance of any shares of Stock, warrants, or other
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<PAGE>
securities convertible into Stock or any revision of the terms of its
outstanding Stock), amend its certificate of incorporation or by-laws, or make
any changes in any of its business objectives, purposes, or operations;
provided, that (i) Parent may issue shares of Stock in connection with a
- - - --------
Qualified Parent Public Offering or a Qualified Parent Equity Sale, so long as a
Change of Control Date does not occur as a result of such issuance, (ii) Parent
may issue shares of Stock in connection with (A) the Management Incentive
Programs, and (B) debt refinancing, (iii) Parent may amend its certificate of
incorporation in connection with the transaction described in clause (i) to
change the number of authorized shares of Borrower's Stock to permit a stock
split, reverse stock split or stock dividend, or with the consent of Agent, for
any other purpose, which consent shall not be withheld unless Agent has
determined that the change would be adverse to the interests of Lenders, and
(iv) Parent may amend its certificate of incorporation to provide for
indemnification of directors in accordance with state law.
7.6 Maintenance of Business. Borrower shall not engage, and shall cause
-----------------------
its Subsidiaries (except Receivables Corporation) and Parent not to engage, in
any business other than health care-related businesses. Receivables Corporation
shall not engage in any business other than the business contemplated by the
Receivables Facility Documents.
7.7 Transactions with Affiliates.
----------------------------
1. Except for the financing and servicing transactions contemplated
by the Receivables Facility Documents and the transactions permitted under
SECTION 7.2(A) through SECTION 7.2(E) or SECTION 7.14 or listed on SCHEDULE 7.7,
------------
Borrower shall not enter into or be a party to any transaction with any
Affiliate of Borrower unless such transaction is conducted in the ordinary
course of and pursuant to the reasonable requirements of Borrower's business,
and upon fair and reasonable terms that are fully disclosed to Agent as soon as
Borrower becomes aware of the Affiliate relationship and are no less favorable
to Borrower than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate of Borrower; provided, that Borrower shall not, in any
--------
transaction subject to this SECTION 7.7(A), acquire any New Subsidiary for which
the Acquisition Purchase Price exceeds $5,000,000 in each case and $10,000,000
in the aggregate, without having given to Agent 30 days advance written notice
of the proposed acquisition, including a brief description thereof.
2. Except for (i) employee bonus and compensation programs entered
into in the ordinary course of Borrower's business and (ii) any management
agreement hereafter entered into between VPI and Borrower (so long as the only
compensation thereunder is customary indemnification and such indemnification is
subordinated to the Obligations), and except to the extent permitted under
SECTION 7.7(A), Borrower shall not enter into any agreement or transaction (x)
to pay to any Person any management, consulting, advisory or similar fee based
on or related to Borrower's operating performance or income or any percentage
thereof, or (y) to pay to any Affiliate any management, consulting, advisory, or
similar fee.
7.8 Guaranteed Indebtedness. Borrower shall not incur any Guaranteed
-----------------------
Indebtedness, except (a) by endorsement of instruments or items of payment for
deposit to the general account of Borrower, (b) for Guaranteed Indebtedness
incurred for the
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<PAGE>
benefit of Borrower if the primary obligation is permitted by this Agreement to
be a direct obligation of Borrower, and (c) indemnification obligations
undertaken in connection with sales of assets of Borrower, to the extent that
Borrower has primary liability for the obligation for which such indemnification
is provided.
7.9 Liens. Borrower shall not create or permit any Lien on any of its
-----
properties or assets, or the properties or assets of its Subsidiaries, except:
1. presently existing or hereafter created Liens in favor of Agent,
for the benefit of Lenders;
2. Liens created pursuant to the Receivables Facility Documents; and
3. Permitted Encumbrances, including the Liens set forth on SCHEDULE
--------
7.9.
- - - ---
7.10 Sales of Assets. Borrower shall not, and shall cause its Subsidiaries
---------------
and Parent not to, sell, transfer, convey, assign or otherwise dispose of any of
its assets or properties; provided, that the foregoing shall not prohibit the
--------
following:
1. the sale or other disposition of Borrower's Inventory in the
ordinary course of business;
2. so long as no Event of Default has occurred and is continuing,
(i) the sale, lease or transfer by any Existing Subsidiary of any of its assets
or properties (other than Stock of a Subsidiary of Borrower) to Borrower or any
other Existing Subsidiary, (ii) the sale, lease or transfer by any New
Subsidiary of its receivables to Receivables Corporation in accordance with the
terms and provisions of the Receivables Facility Documents, (iii) the sale,
lease or transfer by Borrower or any Existing Subsidiary of any of its assets or
properties (other than Stock of a Subsidiary of Borrower or a Subsidiary of an
Existing Subsidiary) to any New Subsidiary so long as such sale, lease or
transfer actually complies with the provisions of SECTION 7.1, SECTION 7.2 and
SECTION 7.7, or (iv) the sale, lease or transfer by any New Subsidiary of any of
its assets or properties to Borrower so long as such sale, lease or transfer
actually complies with the provisions of SECTION 7.1 and SECTION 7.7;
3. the sale of any Unoccupied Property and the improvements and
fixtures located thereon;
4. the sale of any of the assets listed on SCHEDULE 7.10;
-------------
5. so long as no Event of Default has occurred and is continuing,
sales, leases, assignments or transfers of obsolete equipment, the proceeds
received or receivable by Borrower or any Subsidiary of Borrower in respect of
which do not in the aggregate exceed $2,000,000 in any Fiscal Year;
6. if at the time of such transaction and immediately after giving
effect thereto no Default or Event of Default has occurred and is continuing,
(i) any Existing Subsidiary may merge into Borrower in a transaction in which
the surviving corporation is Borrower, (ii) any Existing Subsidiary may merge
into any other Existing Subsidiary in a transaction in
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which the surviving entity is an Existing Subsidiary and no Person other than
Borrower or an Existing Subsidiary receives any consideration, and (iii) any New
Subsidiary may merge into any other New Subsidiary in a transaction in which the
surviving entity is a New Subsidiary and no person other than Borrower or a
wholly owned Subsidiary of Borrower receives any consideration;
7. transfers resulting from any casualty or condemnation of assets
or properties; and
8. sales of Borrower's Accounts and related assets pursuant to, and
in accordance with the terms of, the Receivables Facility Documents.
7.11 Cancellation of Indebtedness. Borrower shall not cancel, and shall
----------------------------
cause its Subsidiaries and Parent not to cancel, any claim or debt owing to it,
except for reasonable consideration and in the ordinary course of business.
7.12 Events of Default. Borrower shall not omit to take any action, and
-----------------
shall cause its Subsidiaries and Parent not to omit to take any action, which
act or omission would constitute: (a) a default or an event of default pursuant
to, or noncompliance with any of, the terms of any of the Loan Documents; or (b)
a default or an event of default pursuant to, or noncompliance with, any other
contract, lease, mortgage, deed of trust or instrument to which it is a party or
by which it or any of its property is bound, or any document creating a Lien,
the occurrence or existence of which would constitute a Material Adverse Effect.
7.13 Speculative Transactions. Except as permitted by SECTION 6.14 and
------------------------
SECTION 7.2, Borrower shall not engage in any speculative commodities purchase
or any speculative monetary transaction.
7.14 Restricted Payments; Dividends. Borrower shall not make any
------------------------------
Restricted Payment, other than, if no Default or Event of Default has occurred
and is continuing and no Default or Event of Default would occur as a result of
such payments, the following: (a) to pay dividends or make advances to Parent
(i) to enable Parent to pay current cash interest to the holders of the
Subordinated Parent Notes, (ii) to allow Parent to redeem Subordinated Parent
Notes or repurchase Subordinated Parent Notes on the open market, and (iii) to
enable Parent to make distributions to its Stockholders; provided, that (x) for
--------
any Testing Period the Interest Coverage Ratio (adjusted to include payment of
the proposed dividend as if that dividend were an interest expense), exceeds 2.5
to 1.0, and (y) the amount of such dividends that is permitted shall be limited
to the then available Dividend/Acquisition Basket; and provided further, that
--- -------- -------
notwithstanding the foregoing, (I) Borrower shall not, in any event, permit
Parent to use such dividends to make distributions to Parent's Stockholders
unless a Qualified Borrower Public Offering or Qualified Parent Public Offering
has been completed, and (II) the aggregate amount of the dividends to Parent's
Stockholders shall not, in any event, exceed 20% of the available amount under
the Dividend/Acquisition Basket; (b) to pay dividends or make advances to Parent
on or after January 14, 1999 in an amount equal to the regularly scheduled
interest payments on the Subordinated Parent Notes; (c) to pay dividends or make
advances to Parent of the Subordinated Parent Notes Redemption Amount solely for
the purpose of Parent's redemption of the Subordinated Parent Notes; (d) to pay
dividends or make advances from any of Borrower's Subsidiaries to Borrower; (e)
to pay dividends on Borrower's common
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Stock or make advances equal to amounts required to be paid by Parent to
repurchase or redeem Stock pursuant to the Management Incentive Programs with
respect to current or former officers or employees of Borrower or any of its
Subsidiaries, to the extent actually paid, so long as (1) the aggregate amount
of all such dividends paid and advances made after the Restatement Closing Date
to any current employee, director or officer of Borrower shall not exceed
$500,000, and (2) the aggregate amount of all such dividends paid and advances
made after the Restatement Closing Date to current or former officers or
employees of Borrower shall not exceed the sum of $5,000,000, plus the proceeds
of any resale of Stock by Parent to other or new employees, directors or
officers of Borrower or any of its Subsidiaries made prior to or within 180 days
after such repurchases or redemptions; (f) to pay reasonable legal, accounting
and operational expenses of Parent incurred in the ordinary course; provided,
--------
that, during any Fiscal Year, the sum of the payments described in this clause
(e) and any net increase in the amount of the loans and advances described in
clause (vii) of the definition of "Permitted Investments" shall not exceed
$350,000 in any Fiscal Year (excluding payments related to franchise taxes
payable by Parent to the State of Delaware); (g) dividends payable solely in
additional shares of Borrower's common Stock and stock splits with respect to
Borrower's common Stock; and (h) to repay short-term cash advances made after
the Restatement Closing Date by Parent to Borrower.
7.15 Payment or Modification of Obligations. Borrower shall cause Parent
--------------------------------------
not to amend, supplement or otherwise modify any of the provisions of the
Subordinated Parent Notes except on terms no less favorable in the aggregate to
Parent and no less favorable in the aggregate to Parent, Borrower and Borrower's
Subsidiaries; provided, that Parent would be permitted to amend the Subordinated
--------
Parent Notes to (i) repurchase the Subordinated Parent Notes, or (ii) refinance
the Subordinated Parent Notes, so long as (A) the terms of such refinancing are
(I) no less favorable in the aggregate to Parent and (II) no less favorable in
the aggregate to Parent, Borrower and Borrower's Subsidiaries than those in
effect prior to the refinancing, (B) the aggregate interest payments under all
of the Subordinated Parent Notes, after giving effect to the refinancing, in any
Fiscal Year does not exceed the interest payments required to be paid in such
Fiscal Year under the Subordinated Parent Notes, as in effect on the Restatement
Closing Date, (C) the Indebtedness after such refinancing is subordinated to the
Indebtedness under the Parent Guaranty to at least the same extent as the
Subordinated Parent Notes being refinanced, and (D) the aggregate cash payments
under all of the Subordinated Parent Notes, after giving effect to the
refinancing, in any Fiscal Year does not exceed the cash payments required to be
paid in such Fiscal Year under the Subordinated Parent Notes, as in effect on
the Restatement Closing Date.
7.16 Compensation. Without prior written notice to Agent, Borrower shall
------------
not materially amend, supplement or modify the terms of Borrower's Management
Incentive Programs (the "Management Incentive Programs"), a description of each
of which is set forth in SCHEDULE 7.16.
-------------
7.17 Real Property Leases. Borrower shall not, and shall cause its
--------------------
Subsidiaries and Parent not to, enter into or renew any lease of real property
or similar agreements (and all amendments thereto) if the aggregate amount of
rentals payable during any Fiscal Year under all real property leases and
agreements would be in excess of $15,000,000.
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<PAGE>
7.18 ERISA. Neither Borrower nor any ERISA Affiliate shall, without
-----
Agent's prior written consent, acquire any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either an
"accumulated funding deficiency," as defined in Section 302 of ERISA, or any
"unfunded vested benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in
the case of any plan other than a Multiemployer Plan and in Section 4211 of
ERISA in the case of a Multiemployer Plan, if such "accumulated funding
deficiency" or "unfunded vested benefits," or any contribution obligations
associated therewith, would, in the aggregate, have a Material Adverse Effect.
Additionally, neither Borrower nor any ERISA Affiliate shall, without Agent's
prior written consent:
1. terminate any Pension Plan that is subject to Title IV of ERISA
where such termination could reasonably be anticipated to result in any
liability that would have a Material Adverse Effect;
2. permit any accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, to be incurred with respect to any Pension Plan which would
result in a Material Adverse Effect;
3. fail to make any contributions or fail to pay any amounts due and
owing as required by the terms of any Plan before such contributions or amounts
become delinquent if the consequence of such delinquencies could, in the
aggregate, reasonably be expected to have a Material Adverse Effect;
4. make a complete or partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan that could reasonably be
anticipated to result in the imposition of any withdrawal liability under
Section 4201 of ERISA that would have a Material Adverse Effect;
5. at any time fail to provide Agent with copies of any documents or
governmental reports or filings relating to any Plan within 30 days of a
reasonable request therefor by Agent;
6. amend any Title IV Plan, establish any new Title IV Plan, or
enter into any labor agreement the effect of which is to increase Unfunded
Pension Liability in an amount that would, in the aggregate, have, or that would
give rise to contribution obligations that would have, a Material Adverse
Effect; or
7. enter into any agreement under which it assumes any liability
under Section 4204 of ERISA that would have a Material Adverse Effect.
7.19 Hazardous Materials. Except as set forth in SCHEDULE 4.25 (which
------------------- -------------
matters shall be dealt with in accordance with the provisions of SECTION 6.11),
Borrower shall not, and shall not permit any other Person within the control of
Borrower to, cause or permit the presence, use, generation, manufacture,
installation, Release, discharge, storage or disposal of any Hazardous Materials
on, under, in or about any of the Subject Property or the transportation of any
Hazardous Materials to or from any Subject Property where such presence, use,
generation, manufacture, installation, Release, discharge, storage or disposal
would violate or form the basis of liability under any Environmental Laws, which
violation or liability would have a Material Adverse Effect. Borrower shall not,
and shall not permit any other Person within the control of Borrower to, use the
Subject Property as a treatment, storage or disposal facility requiring a permit
under
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the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the
-- ----
regulations thereunder or any similar state statute or regulation.
7.20 Capital Expenditures. The Consolidated Borrower Group shall not make
--------------------
aggregate Capital Expenditures in excess of the amounts set forth below for the
Fiscal Year corresponding thereto:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1995 $11,500,000
1996 $13,000,000
1997 $14,000,000
1998 $16,000,000
1999 $18,000,000
</TABLE>
provided, as a carry-forward, Capital Expenditures for any Fiscal Year may be
- - - --------
increased by the lesser of (a) one-half of the amount listed above for the
immediately preceding Fiscal Year, and (b) the amount not expended for such
preceding Fiscal Year and without giving effect to any increase to the amount
permitted during such preceding Fiscal Year pursuant to this Section; and
---
provided further, that for purposes of this proviso, Capital Expenditures shall
- - - -------- -------
not include the cost of repair or replacement of any fixed assets or
improvements as a result of a casualty loss, to the extent paid or reimbursed
from insurance or from any other Person. The parties to this Agreement
acknowledge that, during the Fiscal Year ending September 30, 1995, Borrower is
entitled to a carry-forward of $3,300,000 relating to the Fiscal Year ending
September 30, 1994 and that such amount is otherwise subject to the terms of
this SECTION 7.20.
7.21 Operating Leases. Borrower shall not, and shall not permit its
----------------
Subsidiaries or Parent to, become a lessee under any operating lease (other than
a lease under which such Person is lessor) of personal property if the aggregate
amount of rentals payable during any Fiscal Year would be in excess of
$15,000,000.
7.22 Fiscal Year. Borrower shall not, and shall cause its Subsidiaries and
-----------
Parent not to, change its Fiscal Quarters or Fiscal Year, and Borrower shall not
permit any of its Subsidiaries to have a fiscal year calendar different from
that of Borrower.
7.23 Tax Sharing. Borrower shall not advance amounts to Parent, or make
-----------
amounts available to Parent with respect to the tax liability of Parent on a
Consolidated basis, in excess of the amount actually paid by Parent with respect
to that liability.
7.24 Amendments to Other Documents. (a) Unless the Agent shall otherwise
-----------------------------
agree in writing:
(i) The scheduled maturities of Investor Certificates and
Purchased Interests issued pursuant to the Take Out Facility shall not
be sooner than the Commitment Termination Date (without giving effect
to any extension of the Scheduled Termination Date in respect
thereof); provided, that if the Maximum Take Out Funding exceeds the
--------
Maximum Bridge Funding, then Investor Certificates and Purchased
Interests (in an aggregate principal amount or Stated
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<PAGE>
Amount, as applicable, of up to such excess) may have shorter
maturities.
(ii) Sections 1.2, 2.1, 2.2, 5.1(o) and 8.2 of the Receivables
Purchase Agreement shall not be amended, waived or otherwise modified.
(iii) Sections 4.03(f), 4.03(g), 4.03(h), 5.02(a) and 5.02(b) of
the Receivables Pooling Agreement and the definition of ARC Revolving
Amount shall not be waived, amended or otherwise modified in a way
that changes the priority, amount or timing of payments made in
respect of the ARC Revolving Amount. Section 4.03(e) of the Pooling
Agreement shall not be amended or modified in a way that increases the
percentage of Charged-Off Amounts, or reduces the percentage of Net
Recoveries, allocable to the ARC Revolving Amount.
(iv) Sections 4.03(d), 4.03(c)(ii) and 6.11(b) of the Receivables
Pooling Agreement, and the defined terms used in the Receivables
Pooling Agreement, shall not be amended or modified at any time in a
way that causes a reduction (as calculated as a ratio (expressed as a
percentage) where the numerator is the amount of such reduction and
the denominator is the Base Amount, each as determined on the date on
which the amendment or modification causing such reduction shall have
become effective) in the then outstanding ARC Revolving Amount or the
portion of Collections then allocable to the ARC Revolving
Certificate, in each case without a corresponding cash payment to ARC
in the amount of such reduction unless, at the time such amendment or
modification becomes effective, (A) the Seller Outstandings are less
than the Borrowing Base and (B) such reduction when added to all other
reductions occurring during (x) the two year period immediately
preceding such reduction, does not exceed five percent (5%) in the
aggregate or (y) the period since the Restatement Closing Date, does
not exceed ten percent (10%) in the aggregate.
(v) Exhibits O-I, O-II and Exhibit G to the Receivables Pooling
Agreement shall not be waived, amended, or otherwise modified.
(vi) The definitions in Appendix A to the Receivables Purchase
Agreement and Receivables Pooling Agreement that are listed in
Schedule E hereto (the "Restricted Terms") shall not be waived,
-------- -
amended or otherwise modified; provided, that if any other term
--------
defined in such Appendix A to the Receivables Pooling Agreement is
used in the definition of a Restricted Term, this SECTION 7.24 will
not prohibit (or require consent of Agent for) any waiver, amendment
or modification to such other term; and provided further, that if any
--- -------- -------
Restricted Term is defined by reference to a Section of a Receivables
Facility Document, such Section may not be waived, amended or modified
to the extent that such waiver, amendment or modification would change
the substance of such Restricted Term.
(b) Except as otherwise set forth herein, any other provisions of the
Receivables Facility Documents may be waived, amended or otherwise modified
without the consent of the Agent or any Lender.
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<PAGE>
(c) Except as otherwise defined in this Agreement, capitalized terms
used in this Section shall have the meanings set forth in Annex I to the
Intercreditor Agreement.
8. TERM
----
8.1 Termination. Subject to the provisions of SECTION 2, the financing
-----------
arrangement contemplated hereby in respect of the Loans shall be in effect until
the Commitment Termination Date.
8.2 Survival of Obligations Upon Termination of Financing Arrangement.
-----------------------------------------------------------------
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities (including any indemnification obligations) of
Borrower or the rights of any Lender relating to any contingent or unliquidated
Obligation, any transaction or event occurring prior to such termination, or any
transaction or event, the performance of which is not required until after the
Commitment Termination Date. Except as otherwise expressly provided herein or in
any other Loan Document, all undertakings, agreements, covenants, warranties and
representations contained in the Loan Documents shall survive such termination
or cancellation and shall continue in full force and effect until such time as
all of the Obligations have been paid in full in accordance with the terms of
the agreements creating such Obligations, at which time the same shall
terminate.
8.3 Events Prior to Restatement Closing Date. Borrower hereby covenants
----------------------------------------
and agrees with Lenders that Borrower will:
(a) use its best efforts to satisfy, and to cause to be
satisfied, fully and promptly each of the conditions set forth in SECTION
3.1 and SECTION 3.2 and to consummate the financing transactions
contemplated by this Agreement; and
(b) refrain from taking, or permitting to be taken, any action,
of any nature whatsoever, which shall impede, preclude or otherwise
interfere with the satisfaction of any such condition.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
9.1 Events of Default. The occurrence of any one or more of the following
-----------------
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
1. Borrower shall fail to make any payment of (i) principal of or
interest on the Loans, or (ii) the Letter of Credit Fee or the Unused Line Fee,
when due and payable or declared due and payable.
2. Borrower shall fail to make any payment of any of the
Obligations, other than payments referred to in clause (a) above, payable to
Agent, Managing Agents, Issuing Lender or Lenders under any Loan Document, and
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such failure shall have remained unremedied for a period of five (5) days after
Borrower has received notice of such failure from Agent.
3. Borrower, its Subsidiaries or Parent shall fail or neglect to
perform, keep or observe any of the provisions of the Financial Covenants or
SECTION 2.6, SECTION 2.12(A), SECTION 6.20, SECTION 7.14 or SECTION 7.24 of this
Agreement.
4. Borrower, its Subsidiaries or Parent shall fail or neglect to
perform, keep or observe any other provision of this Agreement or of any of the
other Loan Documents, and the same shall remain unremedied for a period ending
on the first to occur of 30 days after Borrower shall receive written notice of
any such failure from Agent or 30 days after Borrower shall become aware
thereof.
5. A Liquidation Event shall occur or a default shall occur under
any other agreement, document or instrument to which Borrower, its Subsidiaries
or Parent is a party or by which Borrower, its Subsidiaries or Parent or the
property of Borrower, its Subsidiaries or Parent is bound, including the
Subordinated Parent Notes (so long as a default under the Subordinated Parent
Notes, if any, has not been cured or waived), and such default causes, or
permits any holder of such Indebtedness or a trustee to cause, such
Indebtedness, or a portion thereof in an aggregate amount exceeding $5,000,000,
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment.
6. Any representation or warranty set forth in SECTIONS 4.1, 4.4,
4.5, 4.6, 4.14, and 4.28(A), (C), (D), OR (E) shall be untrue or incorrect, as
of the date when made or deemed made (including those made or deemed made
pursuant to SECTION 3.2).
7. Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, report, financial statement
or certificate made or delivered to any Lender by Borrower, its Subsidiaries or
Parent shall be untrue or incorrect, as of the date when made or deemed made
(including those made or deemed made pursuant to SECTION 3.2) and, other than
the representations and warranties set forth in SECTIONS 4.1, 4.4, 4.5, 4.6,
4.14, and 4.28(A), (C), (D), or (e), the same shall remain untrue or incorrect
for a period ending on the first to occur of 30 days after Borrower shall
receive notice of any such fact from Agent or 30 days after Borrower shall
become aware thereof.
8. Any of the assets of Borrower, its Subsidiaries or Parent shall
be attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of such Person and shall remain unstayed or undismissed
for 30 consecutive days; or any Person other than Borrower, its Subsidiaries or
Parent shall apply for the appointment of a receiver, trustee or custodian for
any of the assets of Borrower, its Subsidiaries or Parent and such proceeding is
not timely controverted or dismissed within 30 days; or Borrower, its
Subsidiaries or Parent shall have concealed, removed or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them or made or suffered a transfer of any of
its property or the incurring of an obligation which would be considered
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
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9. A case or proceeding shall have been commenced against Borrower,
its Subsidiaries or Parent in a court having competent jurisdiction seeking a
decree or order (i) under the Bankruptcy Code, as now constituted or hereafter
amended, or any other applicable Federal, state or foreign bankruptcy or other
similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Borrower, its Subsidiaries or
Parent or of any substantial part of its properties, or (iii) ordering the
winding-up or liquidation of the affairs of Borrower, its Subsidiaries or
Parent, and such case or proceeding shall remain undismissed or unstayed for 30
consecutive days or such court shall enter a decree or order granting the relief
sought in such case or proceeding; provided, that any Lender may require that
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Borrower obtain an order of the court having jurisdiction over the proceeding
(in form and substance satisfactory to such Lender) prior to making any further
Advances within such 30 day period.
10. Borrower, its Subsidiaries or Parent shall (i) file a petition
seeking relief under the Bankruptcy Code, as now constituted or hereafter
amended, or any other applicable Federal, state or foreign bankruptcy or other
similar law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of Borrower, its Subsidiaries or Parent or of any substantial part of
its properties, or (iii) fail generally to pay its debts as such debts become
due.
11. Final judgment or judgments (after the expiration of all times
to appeal therefrom) for the payment of money in excess of $1,000,000 in the
aggregate shall be rendered against Borrower and the same shall not be (i) fully
covered by insurance (subject to applicable deductibles) in accordance with
SECTION 6.6, or (ii) vacated, stayed, bonded, paid or discharged for a period of
30 consecutive days.
12. Any other event shall have occurred which would have a Material
Adverse Effect; provided, that (i) adverse changes in the value of Collateral
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and (ii) adverse changes in the financial condition of Borrower that affect or
will affect the calculations made under the Financial Covenants, but do not
create or would not reasonably be expected to create a breach or default under
any of the Financial Covenants, shall not be deemed to have had a Material
Adverse Effect.
13. Parent shall grant or cause or allow to exist any Lien against
any shares of the Stock of Borrower, other than the Lien in favor of Agent, for
the benefit of Lenders.
14. (i) With respect to any Plan of Borrower, a prohibited
transaction within the meaning of Section 4975 of the IRC or Section 406 of
ERISA occurs which in the reasonable determination of Agent could result in
direct or indirect liability to Borrower, (ii) with respect to any Title IV Plan
of Borrower or any ERISA Affiliate, a notice to voluntarily terminate any such
Plan in a distress termination is filed, (iii) with respect to any Multiemployer
Plan, Borrower or any ERISA Affiliate shall incur any withdrawal liability under
Section 4201 of ERISA, (iv) with respect to any Qualified Plan, Borrower or any
ERISA Affiliate shall incur an accumulated funding deficiency or request a
funding waiver from the IRS, or (v) with respect to any Title IV Plan of
Borrower or any ERISA Affiliate or Multiemployer Plan of Borrower or any ERISA
Affiliate which has an ERISA Event not described in clauses (ii) through (iv)
hereof, in the reasonable determination of Agent
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there is a reasonable likelihood for termination of any such Plan by the PBGC;
provided, that the events listed in clauses (i) through (v) hereof shall
- - - --------
constitute Events of Default only if the liability, deficiency or waiver request
of Borrower or any ERISA Affiliate, whether or not assessed, would have a
Material Adverse Effect.
15. Any provision of any Collateral Document, after delivery thereof
pursuant to SECTION 3.1, shall for any reason cease to be valid, binding and
enforceable in accordance with its terms, and as a result the remedies available
to Agent and Lenders are inadequate for the practical realization of the
benefits of Agent's and Lenders' rights and remedies under this Agreement and
the Collateral Documents, or any security interest created under any Collateral
Document shall cease to be a valid and perfected first priority security
interest or Lien (except as otherwise stated herein or therein) in any of the
Collateral purported to be covered thereby.
16. Any miscalculation by Borrower or the "Servicer" (as defined in
the Receivables Facility Documents) with respect to the calculation of the
"Shortfall" or the "End-of-the-Day Seller Excess Borrowing Base" (each as
defined in the Intercreditor Agreement), which miscalculation is materially
adverse to the interests of Agent, Lenders, Managing Agents or Issuing Lender;
or any representation or warranty made or deemed made by Borrower or the
Servicer under the Intercreditor Agreement or any report or notice delivered
pursuant thereto shall be untrue or incorrect in any material respect as of the
date made or deemed made; or the Servicer shall record any sale, contribution,
transfer, conveyance or assignment of any "Transferred Assets" (as defined in
the Receivables Purchase Agreement) to Receivables Corporation after the
Restatement Closing Date either (i) at any time prior to the effectiveness
thereof under section 1.2 of the Receivables Purchase Agreement, or (ii) in any
other material respect, other than in accordance with section 1.2 of the
Receivables Purchase Agreement.
17. A Change of Control Date shall have occurred.
9.2 Remedies.
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1. If any Default or Event of Default shall have occurred and be
continuing, Agent may, subject to SECTION 10.5, without notice take any one or
more of the following actions: (i) take and require Borrower to take such
actions as Agent may deem necessary or advisable to perfect or protect its Liens
in any Collateral consisting of certificated vehicles or Unoccupied Property,
including, at Agent's request, the delivery to Agent of original certificates of
title and the execution by Borrower of documentation to cause Agent's Lien to be
noted thereon, and the execution by Borrower of documentation to grant Agent's
Lien in the Unoccupied Property; or (ii) exercise the following rights and
remedies: (y) the right to demand a current Borrowing Base Certificate as
frequently as Agent may request; and (z) the right to refuse to incur new Letter
of Credit Obligations.
2. If any Event of Default shall have occurred and be continuing,
Agent may, subject to SECTION 10.5, without notice (except as otherwise provided
by clause (v) of this SECTION 9.2(B)) take any one or more of the following
actions: (i) increase the rate of interest applicable to the Loans to the
Default Rate, as provided in SECTION 2.8(F), or increase the rate applicable to
the Letter of Credit Obligations, as provided in SECTION 2.3(J); (ii) terminate
this facility with respect to further Advances, whereupon no Advances may be
made hereunder; (iii) contact any of the Governmental
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Authorities with any jurisdiction over Borrower or any of its Subsidiaries,
including the DEA or any state board of pharmacy, with respect to the
possibility that Lenders may take over the business of Borrower or any of its
Subsidiaries, or the possibility that Lenders may take possession of or
liquidate any or all of the Collateral; (iv) exercise any of the rights and
remedies provided under the Loan Documents; or (v) subject to the terms of the
Intercreditor Agreement, cause Borrower, upon written notice from Agent, to
terminate transfers of receivables under the Receivables Facility Documents (and
Agent's lien on such receivables shall not be released) during any period that
such Event of Default is continuing. If any Event of Default shall have occurred
and be continuing, Agent may, without notice, declare all Obligations to be
forthwith due and payable, whereupon all Obligations shall become and be due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are expressly waived by Borrower; provided, that upon the occurrence
--------
of an Event of Default specified in SECTIONS 9.1(H), (I) or (J), the Obligations
shall become due and payable without declaration, notice or demand by Agent.
9.3 Waivers by Borrower. Except as otherwise provided for in this
-------------------
Agreement and applicable law, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent or any Lender on which Borrower may in any way be
liable and hereby ratifies and confirms whatever Agent or any Lender may do in
this regard, (ii) all rights to notice and a hearing prior to Agent's or any
Lender's taking possession or control of, or to Agent's or any Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Agent or such Lender to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Borrower acknowledges that it has been advised by its counsel with
respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
9.4 Right of Setoff. Upon the occurrence and during the continuance of
---------------
any Event of Default, other than an Event of Default described in SECTIONS
9.1(H), (I) or (J), any Lender may, to the fullest extent permitted by law, set
off and apply any and all deposits (general or special) or indebtedness at any
time owing by such Lender to or for the credit or the account of Borrower
against any and all of the Obligations, regardless of whether such Lender shall
have made any demand under this Agreement or its Note and whether such
Obligations may be unmatured. The rights of each Lender under this SECTION 9.4
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have and are subject to the provisions of SECTION 10.11.
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10. AGENCY
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10.1 Appointment.
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1. Each Lender, each Managing Agent and Issuing Lender hereby (i)
irrevocably appoints GE Capital as the administrative agent of such Lender under
this Agreement and the other Loan Documents, and (ii) irrevocably authorizes
Agent to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding anything to the contrary herein, Agent shall have no
duties, responsibilities or fiduciary relationships with any Lender, except
those expressly set forth in this Agreement and the other Loan Documents, and no
implied covenants, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or the other Loan Documents or otherwise exist against
Agent.
2. Each Lender, each Managing Agent and Issuing Lender hereby
irrevocably authorizes Agent, and hereby irrevocably appoints Agent as its
attorney-in-fact, (i) to execute the Intercreditor Agreement on its behalf, and
(ii) to take such action on its behalf under the provisions of the Intercreditor
Agreement and to exercise such rights, powers and remedies and perform such
duties as are expressly delegated to Agent by the terms of the Intercreditor
Agreement, together with such other powers as are reasonably incidental thereto.
Each Lender, each Managing Agent and Issuing Lender hereby acknowledges and
agrees that it is bound by the terms of the Intercreditor Agreement and Agent's
actions with respect thereto (including the giving of any "Confirmation Notice"
or "Stop Date Notice," each as defined in Appendix A to the Receivables Pooling
Agreement, as provided in the Intercreditor Agreement), as if it were a party to
the Intercreditor Agreement; provided, that (i) Agent shall not enter into any
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material amendment to the Intercreditor Agreement without the written consent of
Requisite Lenders, and (ii) Agent shall act in accordance with the last sentence
of SECTION 10.5. Notwithstanding anything to the contrary herein, (x) the
provisions of this SECTION 10.1(B) shall not be amended or modified without the
consent of the trustee for Receivables Trust, and (y) each Lender acknowledges
and agrees that each of Receivables Corporation, the "Investors" and the
"Purchasers," each as defined in Appendix A to the Receivables Pooling
Agreement, and the trustee for Receivables Trust, is relying on this SECTION
10.1(B) and is a third party beneficiary of this SECTION 10.1(B).
10.2 Delegation of Duties. Agent may exercise any of its powers and
--------------------
discretion, including imposition of the Default Rate, or execute any of its
duties under this Agreement and the other Loan Documents by or through one or
more agents or attorneys-in-fact, and shall be entitled to take, and to rely on,
advice of counsel concerning all matters pertaining to such rights and duties.
Agent may utilize the services of such agents and attorneys-in-fact (including a
paying agent responsible for disbursements of Advances, and a paying agent or
agents responsible for disbursing payments to particular Lenders reasonably
requesting the appointment of such agent or agents) as Agent in its sole
discretion reasonably determines, and all reasonable fees and expenses of such
agents and attorneys-in-fact shall be paid by Borrower on demand. Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys-
in-fact selected by Agent with reasonable care.
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10.3 Limitation of Liability. Neither Agent nor its officers, directors,
-----------------------
employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any
waiver, consent or approval given or any action taken or omitted to be given or
taken by them or by such Person under or in connection with this Agreement or
the other Loan Documents, or (b) responsible for the consequences of any
oversight or error in judgment by them or such Person whatsoever, except, in the
case of either clause (a) or (b) above, for their or such Person's own gross
negligence or willful misconduct. Agent shall not be responsible for (v) the
execution, validity, enforceability, effectiveness or genuineness of this
Agreement or the other Loan Documents, (w) the collectibility of any amounts
owing under this Agreement or the other Loan Documents, (x) the value,
sufficiency, enforceability or collectibility of any collateral security
therefor, (y) the failure by Borrower to perform its obligations hereunder, or
(z) the truth, accuracy and completeness of the recitals, statements,
representations or warranties made by Borrower or any officer or agent thereof
contained in this Agreement or the other Loan Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by Agent in connection with, this Agreement or the other Loan Documents.
10.4 Reliance by Agent. Agent shall not have any obligation (a) to
-----------------
ascertain or to inquire as to the observance or performance of any of the
conditions, covenants or agreements in this Agreement or the other Loan
Documents or in any document, instrument or agreement at any time constituting,
or intended to constitute, collateral security therefor, (b) to ascertain or
inquire as to whether any notice, consent, waiver or request delivered to them
shall have been duly authorized or is genuine, accurate or complete, or (c) to
inspect the properties, books or records of Borrower; provided, if any Lender
--------
reasonably requests that Agent ascertain any fact or make any inquiry or
inspection, Agent shall take such action with respect to such request as Agent
reasonably deems to be appropriate under the circumstances, but Agent shall have
no ongoing obligation to take any action with respect to such request. Agent
shall be entitled to rely, and shall be fully protected in relying, (x) upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile, telex or teletype message, statement, order or
other document, instrument or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
or (y) upon advice and statements of legal counsel (including counsel to
Borrower), independent accountants and other experts selected by Agent. Agent
may deem and treat Lenders party hereto or to any Assignment and Acceptance as a
Lender for all purposes unless a written notice of the assignment, negotiation
or transfer of any such Lender's Proportionate Share of the Loans and its
Commitment, in accordance with the provisions of this Agreement, shall have been
delivered to Agent identifying the name of any successor or assignee Lender.
Agent shall be entitled to fail or refuse, and shall be fully protected in
failing or refusing, to take any action under this Agreement or the other Loan
Documents unless (a) it first shall receive such advice or concurrence of
Lenders as it deems appropriate, or (b) it first shall be indemnified to its
satisfaction by Lenders against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. In all
cases Agent shall be fully protected in acting, or in refraining from acting,
under this Agreement or the other Loan Documents in accordance with a request of
all Lenders, or the Requisite Lenders, as appropriate, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all
Lenders and all future Lenders .
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10.5 Notice of Default. Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default unless Agent has
received notice from another Lender or Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"Notice of Default." If Agent receives such a notice or if the officers of
Agent administering the Loans have actual knowledge of the occurrence of a
Default or an Event of Default, Agent promptly shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be directed by the Requisite Lenders; provided, that unless and
--------
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as Agent, in its discretion, deems advisable
in the best interests of Lenders.
10.6 Non-Reliance on Agent and the Other Lenders. Each Lender expressly
-------------------------------------------
acknowledges that neither Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it. Agent shall have no obligation or liability to any of the
Lenders regarding the credit worthiness or financial condition of Borrower. No
act by Agent hereinafter taken, including any review of Borrower, shall be
deemed to constitute any representation or warranty by Agent to any Lender.
Each Lender represents to Agent and each other Lender that, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it has deemed appropriate, it has made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and credit worthiness of Borrower and has made its own decision to
make its Loans hereunder and to enter into this Agreement. Each Lender also
represents that, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it deems appropriate at
the time, it shall continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and the other Loan
Documents and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
credit worthiness of Borrower. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
have no obligation or liability to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or credit worthiness of Borrower which may come into the possession of
either of Agent or any of its officers, directors, employees, agents, attorneys-
in-fact or affiliates; provided, that, if requested by any Lender, Agent shall
--------
provide such Lender with copies of its most recent periodic field audit reports.
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10.7 Indemnification. Each of the Lenders shall indemnify, defend and hold
---------------
harmless Agent in its capacity as such (to the extent not reimbursed by Borrower
and without limiting the obligation of Borrower to do so), ratably according to
their respective Proportionate Shares, from and against any and all claims,
demands, lawsuits, costs, expenses, fees, liabilities, obligations, losses,
damages, actions, recoveries, judgments, suits, costs, expenses or disbursements
of any kind whatsoever, including interest, penalties and reasonable attorneys'
fees and costs, whether direct, indirect, consequential or incidental, which at
any time (including at any time following the payment of the Obligations) may be
imposed on, incurred by or asserted against Agent in any way relating to,
resulting from or arising out of this Agreement or the other Loan Documents, the
financing transaction contemplated hereby or any action taken or omitted by
Agent under or in connection with any of the foregoing; provided, that no Lender
--------
shall be liable for the payment of any portion of such claims, demands,
lawsuits, costs, expenses, fees, liabilities, obligations, losses, damages,
actions, remedies, judgments, suits, costs, expenses or disbursements to the
extent such result from Agent's gross negligence or willful misconduct. The
agreements in this SECTION 10.7 shall survive the payment of the Obligations and
shall be in addition to and not in lieu of any other indemnification agreements
set forth in the Loan Documents.
10.8 Payments. If, in the opinion of Agent, the distribution of any amount
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received by Agent in such capacity under this Agreement or the other Loan
Documents might result in liability for Agent, Agent may refrain from making the
distribution thereof until Agent's right to make such distribution shall have
been adjudicated by a court of competent jurisdiction. If Agent so refrains
from making any distribution, the amount thereof shall be held in an interest
bearing account for the benefit of the Person or Persons ultimately determined
to be entitled to such distribution. If a court of competent jurisdiction shall
adjudge that any amount received from and distributed by Agent in such capacity
as Agent is to be repaid, each Person to whom any such distribution shall have
been made either (a) shall repay to Agent its proportionate share of the amount
so adjudged to be repaid, or (b) shall repay the same in such manner and to such
Persons as shall be determined by such court.
10.9 Agent in Its Individual Capacity. Agent in its individual capacity,
--------------------------------
and its Affiliates, may make loans and other financial accommodations to, accept
deposits from and generally engage in any kind of business with Borrower as
though Agent was not Agent hereunder. With respect to the portion of the Loans
made by it and its Note, Agent, in its individual capacity, shall have the same
benefits, rights, powers and privileges under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not Agent,
and the terms "Lender" and "Lenders" shall include Agent, in its individual
capacity.
10.10 Successor Agent. Agent may resign as such upon 15 Business Days
---------------
prior written notice to Lenders. If Agent shall resign as such under this
Agreement, then the Requisite Lenders shall appoint from among Lenders a
successor agent for Lenders. Upon acceptance of its appointment as successor
agent, (a) such successor agent shall succeed to the rights, powers, privileges
and duties of Agent, (b) the retiring Agent shall be discharged of all its
obligations and liabilities in such capacity under this Agreement and the other
Loan Documents, (c) the term "Agent" shall mean such successor agent effective
upon its appointment, and (d) the retiring Agent's rights, powers and duties as
Agent shall be terminated, without any
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other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this SECTION 10 shall continue to inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
10.11 Adjustment. If any Lender (a "benefitted Lender") shall obtain any
----------
payment, whether voluntarily or involuntarily, by setoff or otherwise, on
account of the Loans made by it, or receive any collateral therefor, in an
amount that exceeds that portion of all payments or collateral obtained by all
Lenders on account of the Loans to which such Lender would be entitled if all
such payments and collateral were allocated among Lenders in accordance with the
provisions of this Agreement, then such benefitted Lender shall purchase for
cash from the other Lenders such portion of the Loans made by them, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Lenders in accordance with the Proportionate Shares; provided, that if
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all or any portion of such excess payment or benefits thereafter is recovered
from such benefitted Lender, such purchase shall be rescinded and the purchase
price and benefit returned to the extent of such recovery, but without interest.
Each Lender so purchasing a portion of another Lender's Loans may exercise all
rights of payment (including rights of setoff) with respect to such portion as
fully as if such Lender were the direct holder of such portion.
10.12 Applicability of Section to Borrower. Notwithstanding any other
------------------------------------
provision contained in this SECTION 10, the rights and obligations of Borrower
under this Agreement shall not be affected by any provision otherwise included
in this SECTION 10. Borrower shall be permitted to rely on communications from
Agent which it reasonably believes are made on behalf of Agent and, if specified
therein, Lenders or the Requisite Lenders, and except as otherwise set forth
specifically herein, all notices and payments to be made by Borrower hereunder
shall be made to Agent. Further, if any Lender shall be in default hereunder,
such default shall not affect the right and obligations of Borrower hereunder.
11. ASSIGNMENTS AND PARTICIPATIONS
------------------------------
11.1 Successors and Assigns. This Agreement and the other Loan Documents
----------------------
shall be binding on and shall inure to the benefit of Borrower, Agent, Managing
Agents, Issuing Lender, Lenders and their respective successors and assigns,
except as otherwise provided herein or therein. Borrower may not assign,
transfer, hypothecate or otherwise convey its rights, benefits, obligations or
duties hereunder or thereunder without the prior express written consent of all
Lenders. Any purported assignment, transfer, hypothecation or other conveyance
by Borrower without the prior express written consent of all Lenders shall be
void. Neither Agent, Managing Agents, Issuing Lender nor any of the Lenders may
sell, assign, transfer, grant a participation in, or otherwise dispose of all or
any portion of its interest in this Agreement, any Note in favor of it, or the
other Loan Documents, except as expressly provided herein.
11.2 Assignments.
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(a) Each Lender may assign all or a portion of its Proportionate Share
of the Loans and its Commitment and its right, title and interest under this
Agreement and the other Loan Documents (including all or a portion of the Loans
at the time owing to it) to one or more banks or other financial institutions,
provided that each of the following conditions is satisfied: (i) the assignee
shall be a bank or trust company organized under the laws of the United States
of America or any state thereof having a combined capital and surplus of not
less than $100,000,000 or other financial institution reasonably acceptable to
Agent and Borrower; (ii) the assignee has executed and delivered to Agent an
Assignment and Acceptance, together with any Notes subject to such assignment
and a processing and recordation fee of $2,500; (iii) the proposed assignment is
for a Commitment in an integral multiple of $1,000,000, unless such Lender is
transferring its remaining Commitment amount and the remaining amount of such
Lender's Commitment is not in an integral multiple of $1,000,000; (iv) if the
proposed assignee is not already a Lender hereunder, then Agent and Borrower
have given their prior approval of such assignment, which approval shall not be
unreasonably withheld; and (v) after giving effect to such assignment, the
assignee will hold a Commitment of not less than $10,000,000 and the assignor
Lender, if it continues to be a Lender hereunder, will continue to hold a
Commitment of not less than $10,000,000. Each Assignment and Acceptance shall
include the proposed assignee's agreement, for the benefit of the trustee of
Receivables Trust, Receivables Corporation, the "Investors" and the
"Purchasers," each as defined in Appendix A to the Receivables Pooling
Agreement, to be bound by the terms of the Intercreditor Agreement as if the
proposed assignee were a party thereto.
(b) Upon the sale, assignment, transfer or other disposition (other
than the sale of a participation) of any of a Lender's right, title and interest
under this Agreement and the other Loan Documents to any assignee in accordance
with this SECTION 11.2, then upon the execution, delivery and acceptance of the
Assignment and Acceptance, from and after the effective date specified therein,
(i) the transferor Lender no longer shall be a party to this Agreement and the
other Loan Documents, or have the rights, benefits and obligations under this
Agreement or the other Loan Documents to the extent of the interest transferred
(except for such rights, benefits and obligations that such Lender would retain
under this Agreement or the other Loan Documents upon payment in full of the
Obligations), and (ii) the assignee shall become a Lender, shall succeed to the
rights and benefits and assume the obligations of such transferor Lender
hereunder and thereunder to the extent of the interest transferred.
(c) Borrower shall (i) execute and deliver, at the request of Agent,
any amendment to any Loan Document to effectuate the provisions of SECTION
11.2(B), and (ii) use its best efforts to assist and cooperate with each Lender
in any manner reasonably requested by such Lender to effect the sale of
participations in or assignments of any of the Loan Documents or of any portion
thereof or interest therein, including assistance in the preparation of
appropriate disclosure documents or placement memoranda and provision of
complete and correct information describing Borrower and its affairs to
potential participants and assignees; provided, that Borrower shall have no
--------
liability or responsibility for the accuracy or completeness of such documents,
memoranda or information except to the extent the information contained therein
is either (y) contained in this Agreement or any Exhibit or Schedule hereto, or
(z) otherwise required to be provided pursuant to this Agreement or any of the
Loan Documents.
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(d) Upon the request of Agent, Borrower will make its senior
management available to participate in meetings with Agent and Lenders from time
to time at a location and at such time as may be agreed to by Borrower and
Agent.
11.3 Participations. Any Lender may grant one or more participations in
--------------
its interests in the Loan; provided, that (a) such Lender shall remain a
--------
"Lender" for all purposes under this Agreement and such participant, to the
extent of such participation, shall not be a "Lender" for any purpose under this
Agreement, (b) if the proposed participant is not already a Lender hereunder,
then such participant shall be a bank or trust company organized under the laws
of the United States of America or any state thereof having a combined capital
and surplus of not less than $100,000,000 or other financial institution
reasonably acceptable to Agent and Borrower, (c) any such grant of a
participation shall be made in compliance with all applicable state or Federal
laws, rules, and regulations, (d) any such participation shall be divided pro
rata between such Lender's share of the Advances and Letter of Credit
Obligations, (e) if the proposed assignee is not already a Lender hereunder,
then the proposed participation shall be for a Commitment of not less than
$10,000,000, and (f) no Lender shall grant any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or the Loan Documents, except to the extent such amendment or waiver
would: (i) extend the final maturity date for payment of the Loans in which such
participant is participating; (ii) reduce the interest rate or the amount of
principal or fees applicable to the Loans in which such participant is
participating; (iii) release any Guarantor or terminate any Guaranty or the
Parent Guaranty except as expressly provided herein or in any Guaranty or the
Parent Guaranty; or (iv) release all or substantially all of the Collateral,
except as expressly provided herein. In those cases in which a Lender grants
rights to its participants to approve any amendment to or waiver of this
Agreement or the other Loan Documents respecting the matters described in
clauses (i) through (iv) of this SECTION 11.3, the relevant participation
agreements shall provide for a voting mechanism whereby a majority of the amount
of such Lender's portion of the Loans (irrespective of whether held by such
Lender or participated) shall control the vote for all of such Lender's portion
of the Loans. In the case of any participation, the participant shall not have
any rights under this Agreement or any of the other Loan Documents entered into
in connection herewith (the participant's right against such Lender in respect
of such participation to be those set forth in the participation or other
agreement executed by such Lender and the participant relating thereto) and all
amounts payable to any Lender hereunder shall be determined as if such Lender
had not sold such participation. In no event shall any participant grant a
participation in its participation interest in the Loans without the prior
written consent of Borrower and Agent, which approval shall not be unreasonably
withheld.
11.4 Disclosure. In connection with any assignments, participations or
----------
offers therefor pursuant to this SECTION 11, each Lender shall be entitled to
provide to any assignee or participant or prospective assignee or participant
such information pertaining to Borrower as such Lender may deem appropriate or
such assignee or participant or prospective assignee or participant may request;
provided, that each such assignee or participant or prospective assignee or
- - - --------
participant shall execute a confidentiality agreement, substantially in the form
of EXHIBIT F.
---------
106
<PAGE>
11.5 Assignments and Participations as Units. Notwithstanding anything to
---------------------------------------
the contrary contained in this Agreement or the other Loan Documents, no Lender
or participant shall assign or sell any participation in its Proportionate Share
of the Loans, except in the form of units consisting of a pro rata interest in
the Advances and Letter of Credit Obligations.
12. MISCELLANEOUS
-------------
12.1 Complete Agreement; Modification of Agreement.
----------------------------------------------
(a) This Agreement and the other Loan Documents constitute the
complete agreement between the parties with respect to the subject matter hereof
and may not be modified, altered or amended except by an agreement in writing
signed by Borrower and the Requisite Lenders, except as provided below.
(b) Except to the extent otherwise provided below, this Agreement
amends, restates, and supersedes the Original Credit Agreement but does not
constitute an accord and satisfaction or a novation of the obligations of
Borrower under the Original Credit Agreement. Without limiting the generality
of the foregoing, upon the satisfaction or written waiver by Agent and each
Lender of each of the conditions set forth in SECTION 3.1, all rights and
obligations of Borrower and Lenders under the Original Credit Agreement shall be
automatically replaced with the rights and obligations set forth herein. If for
any reason, each of the conditions set forth in SECTION 3.1 are not either
satisfied or waived on or before December 31, 1994, then (i) this Agreement
shall terminate and be of no force and effect, (ii) all of the rights and
obligations of Borrower, Agent and Existing Lenders shall be as provided under
the Original Credit Agreement and the Original Loan Documents, and (iii) Lenders
that were not Existing Lenders shall have no further obligations.
(c) Except as specifically set forth in this Agreement, no amendment
or waiver of any provision of this Agreement, the Notes, or any other Loan
Document, nor consent to any departure by Borrower therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Requisite
Lenders; provided, that (i) to the extent such amendment or waiver would: (A)
--------
extend the maturity date or required payment date for any payment of the Loan;
(B) reduce the interest rate or the amount of principal or fees applicable to
the Loan; (C) except in connection with a Qualified Borrower Public Offering,
release any Guarantor or terminate any Guaranty or the Parent Guaranty, except
as expressly provided herein or in any Guaranty or the Parent Guaranty; (D)
change the definition of the Maximum Loan; (E) increase the borrowing percentage
for Eligible Inventory set forth in the definition of Borrowing Base; (F)
release all or substantially all of the Collateral; or (G) modify any provision
of this SECTION 12.1 or any other provision which expressly requires the consent
of all Lenders, it shall not be effective unless signed by all Lenders, (ii) the
consent of Agent, the respective Managing Agent, or Issuing Lender, as the case
may be, shall be required to modify any of their respective rights or duties,
and (iii) no amendment that would increase or decrease the Commitment or
Proportionate Share of any Lender shall be effective against such Lender without
its consent, except (x) for any amendment that decreases the Commitments or
107
<PAGE>
Proportionate Shares on a pro rata basis, or (y) as contemplated by SECTION
2.5(B).
12.2 Fees and Expenses. Borrower shall reimburse (x) Agent and each
-----------------
Managing Agent for all reasonable out-of-pocket expenses incurred by such Person
in connection with the preparation of the Loan Documents (including the
reasonable fees and expenses of all of its counsel and advisors retained in
connection with this Agreement and the other Loan Documents and the financing
transaction contemplated hereby and thereby and advice in connection herewith
and therewith), and (y) Agent for all reasonable out-of-pocket expenses incurred
by Agent in connection with any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents. If, at any time or times,
regardless of the existence of a Default or Event of Default, Agent shall employ
counsel or other professional advisors, including environmental and management
consultants, for advice or other representation or shall incur reasonable legal,
appraisal, accounting, consulting or other costs and expenses in connection
with:
(a) any notice, amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights hereunder or
thereunder; or
(b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Managing Agent, Issuing Lender, any Lender,
Borrower or any other Person) in any way relating to the Collateral, any of the
Loan Documents or any other agreements to be executed or delivered in connection
therewith or herewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against Borrower or any other Person that may be obligated
to Agent, any Managing Agent, Issuing Lender or any Lender by virtue of the Loan
Documents, including any litigation, contest, dispute, suit, case, proceeding or
action (and any appeal or review) in connection with a case under the Bankruptcy
Code, as now constituted or hereafter amended, or any other applicable Federal,
state or foreign bankruptcy or other similar insolvency law; provided, that
--------
Borrower shall not be liable under this SECTION 12.2(B) for any costs or
expenses which are determined by a court of competent jurisdiction in a final
non-appealable decision to have resulted from such Person's own gross negligence
or willful misconduct; or
(c) any attempt to enforce any rights of Agent, any Managing Agent,
Issuing Lender or any Lender against Borrower or any other Person that may be
obligated to Agent, any Managing Agent, Issuing Lender or any Lender by virtue
of any of the Loan Documents; or
(d) any attempt to (i) monitor the Loan, (ii) evaluate, observe,
assess Borrower or its affairs, and (iii) verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise dispose of the Collateral;
then, in such event, the reasonable attorneys' and other professional and
service providers' fees arising from such services, including those of any
appellate proceedings, and all reasonable expenses, costs, charges and other
fees incurred by such counsel and others in any way or respect arising in
connection with or relating to any of the events or actions described in this
SECTION 12.2, shall be payable, in accordance with SECTION 6.3, by Borrower to
the respective Person or Persons entitled to reimbursement hereunder, and
108
<PAGE>
shall be additional Obligations secured under this Agreement and the other Loan
Documents. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: paralegal fees, costs and expenses;
accountants', environmental advisors', appraisers' and investment bankers' fees,
costs and expenses; management and other consultants' fees, costs and expenses;
court costs and expenses; photocopying and duplicating expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express charges;
telegram charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
12.3 No Waiver. The failure of Agent, Managing Agents, Issuing Lender, or
---------
Requisite Lenders, at any time or times, to require strict performance by
Borrower of any provision of this Agreement and any of the other Loan Documents
shall not waive, affect or diminish any right of Agent, Managing Agents, Issuing
Lender, or Lenders thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Requisite Lenders of an Event of Default
by Borrower under the Loan Documents shall not suspend, waive or affect any
other Event of Default by Borrower under this Agreement and any of the other
Loan Documents whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Default or Event of Default
by Borrower under this Agreement and no defaults by Borrower under any of the
other Loan Documents shall be deemed to have been suspended or waived by
Lenders, unless such suspension or waiver is by an instrument in writing signed
by an officer of Agent, at the direction of Requisite Lenders, or, if required
by SECTION 12.1(C)(I), at the direction of all Lenders, and directed to Borrower
specifying such suspension or waiver.
12.4 Remedies. The rights and remedies of Agent or Lenders under this
--------
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Agent or any Lender may have under any other agreement, including the Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required.
12.5 Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.6 Parties. This Agreement and the other Loan Documents shall be
-------
binding upon, and inure to the benefit of, the successors of Borrower, Agent,
Managing Agents, Issuing Lender, each Lender and the assigns, transferees and
endorsees of Agent, Managing Agents, Issuing Lender and each Lender.
12.7 Conflict of Terms. Except as otherwise provided in this Agreement or
-----------------
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
109
<PAGE>
12.8 Authorized Signature. Unless Agent has previously been notified in
--------------------
writing by Borrower to the contrary, the signature of an officer of Borrower
listed in SCHEDULE 12.8 upon any document or instrument delivered pursuant to
-------------
this Agreement or the other Loan Documents shall bind Borrower and be deemed to
be the act of Borrower affixed pursuant to and in accordance with resolutions
duly adopted by Borrower's Board of Directors.
12.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
-------------
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE COURTS OF THE STATE OF NEW
YORK, SITUATED IN THE COUNTY OF NEW YORK, OR, AT AGENT'S OPTION, THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE NON-
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
BORROWER AND LENDERS PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT
OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
----- --- ----------
CONSENTS TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
SECTION 12.10 OF THIS AGREEMENT, TOGETHER WITH A FACSIMILE TRANSMISSION OF SUCH
SUMMONS, COMPLAINT OR OTHER PROCESS TO THE FACSIMILE NUMBERS FOR BORROWER AND
ITS COUNSEL SET FORTH IN SECTION 12.10, SENT AT THE TIME SUCH SERVICE IS
COMMENCED, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT, MANAGING AGENTS, ISSUING LENDER, ANY LENDER OR
BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
12.10 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
sent by facsimile transmission, with receipt confirmed, addressed as follows:
110
<PAGE>
(a) If to GE Capital, in its capacity as Agent or Managing
Agent, at:
General Electric Capital Corporation
501 Merritt Seven, Third Floor
Norwalk, Connecticut 06851
Attention: Mr. Charles D. Chiodo
Facsimile No.: (203) 840-4560
With copies to:
General Electric Capital Corporation
501 Merritt Seven, Third Floor
Norwalk, Connecticut 06851
Attention: Legal Counsel
Facsimile No.: (203) 840-4520
and
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile No.: (415) 421-7879
(b) If to BTCo, in its capacity as Managing Agent or Issuing
Lender, at:
Bankers Trust Company
14 Wall Street
New York, New York 10005
Attention: Mr. Jeffcott Ogden
Facsimile No.: (212) 618-2630
With copies to:
Dorsey & Whitney
350 Park Avenue
New York, New York 10022
Attention: Joel M. Simon, Esq.
Facsimile No.: (212) 888-8814
(c) If to Borrower, at:
AmeriSource Corporation
300 Chesterfield Parkway
Malvern, Pennsylvania 19355
Attention: Mr. Kurt J. Hilzinger
Vice President and Treasurer
Facsimile No.: (215) 647-0141
111
<PAGE>
With copies to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103-2793
Attention: Craig L. Godshall, Esq.
Facsimile No.: (215) 994-2222
(d) If to any Lender, at the Lending Office of such Lender,
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered
(with receipt acknowledged), sent by facsimile transmission (with receipt
confirmed), or three (3) Business Days after the same shall have been deposited
in the United States mail. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
12.11 Survival. The representations and warranties of Borrower in this
--------
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the financing transaction described herein or
related hereto.
12.12 Section Titles. The Section titles and Table of Contents contained
--------------
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
12.13 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall, collectively constitute one
agreement.
12.14 BTCo. Each of Agent, Lenders and Borrower acknowledge that BTCo will
----
be acting both as a Lender under this Agreement and as a lender under the first
supplement to the Receivables Pooling Agreement. Borrower may request from time
to time that Lenders (a) consent to certain actions, (b) waive or amend certain
provisions of the Loan Documents, or (c) take or refrain from taking other
similar actions to permit or facilitate certain events in connection with the
Receivables Facility Documents, all of the foregoing being subject to the
requisite approval of the Lenders or Requisite Lenders, as the case may be. In
connection with any vote of Lenders in respect of matters addressed by the
previous sentence, for so long as BTCo is a lender under the first supplement to
the Receivables Pooling Agreement, (x) BTCo shall refrain from voting, and (y)
the Commitment and Loans of BTCo shall be excluded from the Total Commitments
and the amount of Obligations outstanding. BTCo shall not be liable to Agent,
any Lender or Borrower as a result of the operation of this SECTION 12.14.
12.15 Designation of Senior Debt. The Loans are senior to the obligations
--------------------------
of Borrower under or in
112
<PAGE>
respect of the Subordinated Borrower Notes and constitute, and are entitled to
the benefits of, "Senior Indebtedness," as such term is defined in the
Subordinated Borrower Notes and instruments creating, evidencing or governing
the Subordinated Borrower Notes.
12.16 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
---------------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
113
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
AMERISOURCE CORPORATION,
a Delaware corporation
By ___________________________
Name _________________________
Title ________________________
LENDERS:
-------
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent, a Managing Agent and a Lender
By ___________________________
Charles D. Chiodo
Duly Authorized Signatory
Lending Office:
501 Merritt Seven, Third Floor
Norwalk, Connecticut 06851
Attention: Mr. Charles D. Chiodo
Facsimile No.: (203) 840-4560
BANKERS TRUST COMPANY, as a Managing Agent, an Issuing
Lender and a Lender
By ___________________________
Fritz Thomas
Vice President
Lending Office:
14 Wall Street, Third Floor
New York, New York 10005
Attention: Mr. Fritz Thomas
Facsimile No.: (212) 618-2640
BANKAMERICA BUSINESS CREDIT, INC., formerly known as
Security Pacific Business Credit Inc., as a Co-Agent
and a Lender
By ___________________________
George C. Markowsky
Vice President
Lending Office:
40 East 52nd Street, 2nd Floor
New York, New York 10022
Attention: Robert Beninati,
Account Administrator
<PAGE>
Telecopy No.: (212) 836-5172
HELLER FINANCIAL, INC., as a Co-Agent
and as a Lender
By ___________________________
Frank X. Cahill
Assistant Vice President
Lending Office:
101 Park Avenue, 12th Floor
New York, New York 10178
Attention: Angelina Mendoza
Telecopy No.: (312) 441-7341
BANK OF MONTREAL, as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
115 South LaSalle Street, 12W
Chicago, Illinois 60603
Attention: Irene M. Geller
Facsimile No.: (312) 750-4314
BANK OF NEW YORK COMMERCIAL CORPORATION,
as a Lender
By ___________________________
Anthony Viola
Vice President
Lending Office:
530 Fifth Avenue, 3rd Floor
New York, New York 10036
Attention: Doo Jack Louie,
Assistant Vice President
Telecopy No.: (212) 852-4517
<PAGE>
BOT FINANCIAL CORPORATION, as a Lender
By ___________________________
William R. York, Jr.
Vice President
Lending Office:
125 Summer Street, 4th Floor
Boston, Massachusetts 02110
Attention: Paul Anagnostos,
Operations Manager
Telecopy No.: (617) 345-5250
with a copy to:
3141 Fairview Park Drive, Suite 600
Falls Church, Virginia 22042
Attention: Kenneth A. Slavitt
Telecopy No.: (703) 204-0648
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
1211 Avenue of Americas, 22nd Floor
New York, New York 10036
Attention: Marvin Daniels,
Assistant Secretary
Joseph Primm,
Assistant Secretary
Telecopy No.: (212) 536-1329
CORESTATES BANK, N.A., as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19104
Attention: James D. Nelsen
Telecopy No.: (215) 973-7814
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By ___________________________
William C. Purinton
Vice President
Lending Office:
400 Perimeter Center Terrace, Suite 745
Atlanta, Georgia 30346
Attention: Pamela Petrick
Telecopy No.: (404) 393-4166
GIROCREDIT BANK AKTIENGESELLSCHAFT
DER SPARKASSEN, GRAND CAYMAN ISLAND
BRANCH, as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
65 East 55th Street, Park Avenue Tower
New York, New York 10021
Attention: Orlando Diaz
Facsimile No.: (212) 223-0283
HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC., as a
Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Maria C. Pacios
Facsimile No.: (708) 564-6238
<PAGE>
LASALLE BANK, as a Lender
By ___________________________
Christopher G. Clifford
First Vice President
Lending Office:
120 South LaSalle Street, Suite 509
Chicago, Illinois 60603
Attention: Lourdes Reyes
Telecopy No.: (312) 750-6450
MERIDIAN BANK, as a Lender
By ___________________________
Philip Newmuis, Jr.
Assistant Vice President
Lending Office:
One Liberty Place, Suite 3600
Philadelphia, Pennsylvania 19103
Attention: Marie Giannone
Telecopy No.: (215) 854-3774
NATIONSBANK OF GEORGIA, N.A.,
as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
600 Peachtree Street, 13th Floor
Atlanta, Georgia 30308
Attention: Betty Mills
Facsimile No.: (404) 607-6439
<PAGE>
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By ___________________________
Peter Skavla
Region Credit Manager
Lending Office:
500 Glen Pointe Centre West
Teaneck, New Jersey 07666-6802
Attention: Bob Nadler
Telecopy No.: (201) 836-4744
SHAWMUT BANK, N.A.,
as a Lender
By ___________________________
Name _________________________
Title ________________________
Lending Office:
One Federal Street, OF-3203
Boston, Massachusetts 02211
Attention: Salvatore Salzillo
Facsimile No.: (617) 292-4358
<PAGE>
Exhibit 4.11
================================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of December 13, 1994
between
AMERISOURCE CORPORATION,
as Seller
and
AMERISOURCE RECEIVABLES CORPORATION,
as Purchaser
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
<TABLE>
<C> <S> <C>
SECTION 1.1 Agreement to Purchase and Sell ........................ 1
SECTION 1.2 Timing of Purchases and Contributions ................. 2
SECTION 1.3 Consideration for Purchases ........................... 5
SECTION 1.4 No Recourse ........................................... 5
SECTION 1.5 No Assumption of Obligations Relating
to Receivables, Related Assets or Contracts ........... 5
SECTION 1.6 True Sales ............................................ 5
SECTION 1.7 Addition of Sellers ................................... 6
SECTION 1.8 Termination of Status as a Seller ..................... 6
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price ......................... 7
SECTION 2.2 Definitions and Calculations Related
to Purchase Price Percentage .......................... 8
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments ............................... 9
SECTION 3.2 The ARC Note .......................................... 11
SECTION 3.3 Application of Collections and Other Funds ............ 11
SECTION 3.4 Servicing of Receivables and Related Assets ........... 12
SECTION 3.5 Adjustments for Noncomplying Receivables,
Dilution and Cash Discounts ........................... 12
SECTION 3.6 Payments and Computations, Etc ........................ 12
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase .............. 13
SECTION 4.2 Certification as to Representations and Warranties .... 14
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 4.3 Effect of Payment of Purchase Price ................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Seller .......... 15
SECTION 5.2 Representations and Warranties of ARC ................. 20
ARTICLE VI
GENERAL COVENANTS OF THE SELLER
SECTION 6.1 Affirmative Covenants ................................. 21
SECTION 6.2 Reporting Requirements ................................ 24
SECTION 6.3 Negative Covenants .................................... 25
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS
SECTION 7.1 Rights of ARC ......................................... 28
SECTION 7.2 Responsibilities of the Seller ........................ 28
SECTION 7.3 Further Action Evidencing Purchases ................... 29
SECTION 7.4 Collection of Receivables; Rights
of ARC and Its Assignees .............................. 30
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Seller ............................. 31
SECTION 8.2 Automatic Termination ................................. 31
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Seller ............................. 32
</TABLE>
<PAGE>
ARTICLE X
MISCELLANEOUS
<TABLE>
<C> <S> <C>
SECTION 10.1 Amendments; Waivers, Etc ............................. 34
SECTION 10.2 Notices, Etc ......................................... 34
SECTION 10.3 Cumulative Remedies .................................. 35
SECTION 10.4 Binding Effect; Assignability;
Survival of Provisions ............................... 35
SECTION 10.5 Governing Law ........................................ 35
SECTION 10.6 Costs, Expenses and Taxes ............................ 35
SECTION 10.7 Submission to Jurisdiction ........................... 36
SECTION 10.8 Waiver of Jury Trial ................................. 36
SECTION 10.9 Integration .......................................... 37
SECTION 10.10 Counterparts ......................................... 37
SECTION 10.11 Acknowledgment and Consent ........................... 37
SECTION 10.12 No Partnership or Joint Venture ...................... 38
SECTION 10.13 No Proceedings ....................................... 38
SECTION 10.14 Severability of Provisions ........................... 38
SECTION 10.15 Recourse to ARC ...................................... 38
</TABLE>
EXHIBITS
EXHIBIT A Form of ARC Note
EXHIBIT B Form of AmeriSource Certificate
EXHIBIT C Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 1 Litigation and Other Proceedings
SCHEDULE 2 Offices of the Seller where Records are Maintained
SCHEDULE 3 Legal Names, Trade Names and Names Under Which the
Companies Do Business
SCHEDULE 4 Changes in Financial Condition
APPENDIX
APPENDIX A Definitions
<PAGE>
This RECEIVABLES PURCHASE AGREEMENT, dated as of December 13, 1994 (this
"Agreement"), is made between AMERISOURCE CORPORATION, a Delaware corporation
(the "Seller"), and AMERISOURCE RECEIVABLES CORPORATION, a Delaware corporation
("ARC"). Except as otherwise defined herein, capitalized terms have the
meanings that Appendix A assigns to them, and this Agreement shall be
----------
interpreted in accordance with the conventions set forth in Parts B, C and D of
------- - -
Appendix A.
- - - ----------
WHEREAS, pursuant to the Pooling Agreement, ARC intends to transfer its
interests in the Receivables sold pursuant hereto, together with Receivables
contributed to ARC by the Seller from time to time, to the Trust in order to,
among other things, finance its purchases hereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell . On the terms and subject to
-------------------------------
the conditions set forth in this Agreement (including the conditions to
purchases set forth in Article IV), the Seller agrees to sell, transfer, assign,
----------
set over and otherwise convey to ARC and ARC agrees to purchase from the Seller,
at the times set forth in Section 1.2, all of the Seller's right, title and
-----------
interest in, to and under:
(a) each Receivable of the Seller (other than Contributed
Receivables) and any Notes Receivable that existed and were owing to the
Seller as at the closing of the Seller's business on the Initial Cut-Off
Date,
(b) each Receivable created by the Seller (other than Contributed
Receivables) and any Notes Receivable that arise during the period from and
including the closing of the Seller's business on the Initial Cut-Off Date
to but excluding the Purchase Termination Date,
(c) all Related Security with respect to all Receivables (other than
Contributed Receivables) of the Seller,
(d) all proceeds of the foregoing, including all funds received by
any Person in payment of any amounts owed (including invoice prices,
finance charges, interest and all other charges, if any) in respect of any
Receivable described above (other than a Contributed Receivable) or Related
Security with respect to any such Receivable, or
<PAGE>
otherwise applied to repay or discharge any such Receivable (including
insurance payments that the Seller or the Servicer applies in the ordinary
course of its business to amounts owed in respect of any such Receivable
(it being understood that property insurance covering inventory is not so
applied and is not included in this grant) and net proceeds of any sale or
other disposition of repossessed goods that were the subject of any such
Receivable) or other collateral or property of any Obligor or any other
party directly or indirectly liable for payment of such Receivables (other
than Returned Goods), and
(e) all Records relating to any of the foregoing.
As used herein, (i) "Purchased Receivables" means the items listed above in
clauses (a) and (b), (ii) "Related Purchased Assets" means the items listed
- - - ----------- ---
above in clauses (c), (d) and (e), (iii) "Related Assets" means the Related
----------- --- ---
Purchased Assets and the Related Contributed Assets, (iv) "Purchased Assets"
means the Purchased Receivables and the Related Purchased Assets, and (v)
"Transferred Assets" means the Purchased Receivables, the Contributed
Receivables and the Related Assets.
SECTION 1.2 Timing of Purchases and Contributions .
--------------------------------------
(a) Closing Date Purchases. All of the Purchased Assets of the
----------------------
Seller that existed at the closing of the Seller's business on the Initial Cut-
Off Date will be sold or (in accordance with the Subscription Agreement)
contributed automatically to ARC on the Closing Date.
(b) Regular Purchases and Contributions. Except as otherwise provided in
-----------------------------------
Section 8.2, until the end of Phase I (or, if earlier, the Purchase Termination
- - - -----------
Date), each Receivable and the Related Assets with respect thereto shall be sold
by the Seller to ARC unless the Receivable and Related Assets with respect
thereto have been contributed by the Seller to ARC in accordance with the
Subscription Agreement. The time at which each such sale and contribution
becomes effective shall be determined in accordance with the remaining
provisions of this Section 1.2. During Phase II, until the Purchase Termination
-----------
Date and except as otherwise provided in Section 8.2, each Receivable shall be
-----------
deemed to have been sold by the Seller to ARC immediately (and without further
action by any Person) upon the opening of business on the Determination Date for
such Receivable, unless the Receivable and Related Assets have been contributed
to ARC in accordance with the Subscription Agreement at such time.
(c) Determination Date Calculations. No later than 11:00 a. m., New York
-------------------------------
City time, on each Determination Date during Phase I, the Servicer will
determine (which determination will be set forth in the Daily Report for such
Determination Date):
page 2
<PAGE>
(i) the aggregate Unpaid Balance of Receivables (the
"Available Receivables") originated on each Origination Date occurring
on or after the previous Business Day but prior to such Determination
Date,
(ii) the Minimum Return for the Available Receivables,
(iii) the amount of the Cash Transfer (if any) that would be
made on such day if the Available Receivables were sold by the Seller
to ARC, and transferred by ARC to the Trust, on such day,
(iv) the net increase (if any) that would be made in the ARC
Revolving Amount on such day if the Available Receivables were sold by
the Seller to ARC, and transferred by ARC to the Trust, on such day,
(v) the "Transfer Value" for the Available Receivables, which
shall be the sum of the amounts determined pursuant to clauses (iii)
-------------
and (iv) above, and
----
(vi) the excess (which may be a positive or negative number) of
the Transfer Value of the Available Receivables over the Minimum
Return for the Available Receivables; any such negative excess being
the "Shortfall" for such Determination Date.
(d) Sale Timing if No Shortfall Exists. If there is no Shortfall on such
----------------------------------
Determination Date (and no Look Back Period is then in effect), the Available
Receivables will be sold by the Seller to ARC on that day, effective as of the
time the Trustee initiates a wire transfer of that day's Cash Transfer to ARC;
provided, that on any such Determination Date for which there is no Cash
Transfer, such sale by the Seller shall be effective upon the Trustee's receipt
of the Daily Report for such day.
(e) Sale Timing if a Shortfall Exists. If a Shortfall shall exist
---------------------------------
on such Determination Date:
(i) the Servicer shall, no later than 11:00 a.m., New York time,
on the Determination Date, notify the Trustee and the Seller Agent by
telephone (to be promptly confirmed by telecopy),
(ii) the Seller shall deliver to the Seller Agent, no later
than 11:15 a.m., New York time, on the Determination Date, a
certificate in the form attached as Exhibit B (the "AmeriSource
Certificate") signed by a senior officer of AmeriSource identified
pursuant to the Original Seller Credit Agreement as being acceptable
to the Seller Agent for such purpose that (A) specifies whether an
Event of Default or an Unmatured Event of Default then exists (and, if
such an event exists, describing such event in detail), and (B) sets
forth the End-of-the-Day Seller Excess Borrowing Base
page 3
<PAGE>
for such day, as well as the calculation thereof. The AmeriSource
Certificate may provide that the End-of-the-Day Seller Excess
Borrowing Base has been calculated on the basis of the most recently
required Borrowing Base Certificate under the Original Seller Credit
Agreement, but in that event the AmeriSource Certificate shall also
include a representation and warranty by AmeriSource to Seller Agent
and each Seller Party that AmeriSource has no reason to believe that
the End-of-the-Day Seller Excess Borrowing Base set forth therein
would be any lower than $40,000,000 if calculated on the basis of a
new Borrowing Base Certificate delivered under the Original Seller
Credit Agreement as of the Determination Date.
(iii) a period (the "Look Back Period") will commence; it being
understood that the Look Back Period will end on the date the Trustee
receives or is deemed to receive a Stop Date Notice or a Confirmation
Notice, and
(iv) the Affected Receivables will not be sold by the Seller to
ARC, or transferred by ARC to the Trust, unless and until the Trustee
receives or is deemed to receive a Confirmation Notice.
(f) Deemed Confirmation Notice. If on the basis of the AmeriSource
--------------------------
Certificate the End-of-the-Day Seller Excess Borrowing Base equals or exceeds
$40,000,000, the Seller shall notify the Trustee and the Servicer as soon as
practical in writing. Such notice shall be deemed to constitute a Confirmation
Notice from the Seller Agent to the Trustee and the Servicer.
(g) Additional Look Back Period Calculations. On each Business Day
----------------------------------------
(other than the first Determination Date) falling in a Look Back Period, the
mechanics described in clauses 1.2(c) through 1.2(f) will be repeated, with the
-------------- ------
modifications that (i) all calculations (including calculations of the permitted
Cash Transfer, the Transfer Value, the Shortfall and the End-of-the-Day Excess
Borrowing Base) shall be made on a cumulative basis, as if all of the days in
the Look Back Period were a single day, (ii) references to "Available
Receivables" shall be deemed to be references to all Affected Receivables
arising during the Look Back Period, (iii) references to the Determination Date
will be deemed to be references to the day on which such mechanics are
performed, (iv) Segregated Cash shall be recomputed on the basis of such day's
Daily Reports, and (v) no additional Look Back Period will commence, and instead
the existing Look Back Period will continue. If, on any such day, there is no
Shortfall on such a cumulative basis or, on the basis of the AmeriSource
Certificate, the End-of-the-Day Seller Excess Borrowing Base equals or exceeds
$40,000,000, then the Seller shall notify the Trustee and the Servicer in
writing, and the Servicer shall cause Segregated Cash in an amount not less than
the amount assumed to be received by the Seller Agent for purposes of the
calculation of the End-of-the-Day Seller Excess Borrowing Base to be transferred
by the Trust to ARC on such day. Such notice from the Seller to the Trustee and
the Servicer shall be deemed to constitute a Confirmation Notice from the Seller
Agent to the Trustee and the Servicer.
page 4
<PAGE>
(h) Effect of Confirmation Notice. If the Trustee receives a
-----------------------------
Confirmation Notice by 2:00 p. m., New York City time, on any Business Day
(including the Determination Date) during the Look Back Period, the Affected
Receivables shall be sold by the Seller to ARC on such day. If the Trustee
receives a Confirmation Notice on a day which is not a Business Day, or after
2:00 P.M., New York City time, on a Business Day, the Affected Receivables shall
be sold by the Seller to ARC on the next Business Day. Any such sales shall be
effective as of the time the Trustee initiates a wire transfer of an amount
equal to the Segregated Cash (including that day's Cash Transfer) to ARC;
provided, that if the amount of such Segregated Cash is zero, such sale by the
Seller shall be effective upon the Trustee's receipt of the Confirmation Notice.
(i) Deemed Stop Date Notice. If the Seller Agent has not delivered
-----------------------
(or been deemed to deliver) either a Stop Date Notice or a Confirmation Notice
to the Trustee by 11:15 a.m., New York time, on the 5th Business Day after the
Determination Date in any Look Back Period, the Seller Agent shall be deemed to
have given a Stop Date Notice on such day.
(j) Trustee Reliance. The Trustee shall be entitled to rely
----------------
exclusively on the Servicer's determination of whether a Shortfall exists or the
conditions specified in Section 1.2(f) or 1.2(g) exist, and such determination
-------------- ------
shall be binding on all parties to the Transaction Documents.
SECTION 1.3 Consideration for Purchases . On the terms and subject to the
----------------------------
conditions set forth in this Agreement, ARC agrees to make Purchase Price
payments to the Seller in accordance with Article III.
-----------
SECTION 1.4 No Recourse . Except as specifically provided in this
------------
Agreement, the sale and purchase of Purchased Assets under this Agreement shall
be without recourse to the Seller; it being understood that the Seller shall be
liable to ARC for all representations, warranties, covenants and indemnities
made by the Seller pursuant to the terms of this Agreement, all of which
obligations are limited so as not to constitute recourse to the Seller for the
credit risk of the Obligors.
SECTION 1.5 No Assumption of Obligations Relating to Receivables, Related
-------------------------------------------------------------
Assets or Contracts . Neither ARC, the Servicer nor the Trustee shall have any
- - - -------------------
obligation or liability to any Obligor or other customer or client of the Seller
(including any obligation to perform any of the obligations of the Seller under
any Receivable, related Contracts or any other related purchase orders or other
agreements). No such obligation or liability is intended to be assumed by ARC,
the Servicer or the Trustee hereunder, and any assumption is expressly
disclaimed.
SECTION 1.6 True Sales . The Seller and ARC intend the transfers of
----------
Receivables hereunder to be true sales by the Seller to ARC that are absolute
and irrevocable and that provide ARC with the full benefits of ownership of the
Receivables, and neither the Seller
page 5
<PAGE>
nor ARC intends the transactions contemplated hereunder to be, or for any
purpose to be characterized as, loans from ARC to the Seller.
SECTION 1.7 Addition of Sellers . Any Subsidiary or Affiliate of the
--------------------
Seller may become a Seller hereunder and sell its accounts receivable and
property of the types that constitute Related Assets hereunder to ARC if the
Rating Agency Condition is satisfied with respect to such addition. The Seller
and its Subsidiary or Affiliate that is proposed to be added as a Seller shall
give to ARC and the Applicable Rating Agencies not less than 30 days' prior
written notice of the effective date of the addition of the Subsidiary or
Affiliate as a Seller. Once the notice has been given, any addition of a
Subsidiary or Affiliate of the Seller as a Seller pursuant to this section shall
become effective on the first Business Day following the expiration of the 30-
day period (or such later date as may be specified in the notice) on which (i)
the Rating Agency Condition has been satisfied, (ii) the Seller has given the
notice described in Section 3.05(e) of the Pooling Agreement to ARC, (iii) the
Servicer shall have delivered to the Trustee a supplement to the Settlement
Statement then in effect as described in Section 3.05(e) of the Pooling
Agreement and (iv) the Subsidiary or Affiliate and the parties hereto shall have
executed and delivered the agreements, instruments and other documents and the
amendments or other modifications to the Transaction Documents, in form and
substance reasonably satisfactory to ARC and the Trustee, that ARC or the
Trustee reasonably determines are necessary or appropriate to effect the
addition.
SECTION 1.8 Termination of Status as a Seller . (a) At any time when
----------------------------------
more than one Person is a Seller, a Seller may terminate its obligation to sell
its Receivables and Related Assets to ARC if:
(i) the Seller (a "Terminating Seller") shall have given ARC
not less than 30 days' prior written notice of its intention to terminate
the obligations, which notice shall be given by ARC to the Trustee and the
Applicable Rating Agencies,
(ii) an Authorized Officer of the Terminating Seller shall have
certified that the termination by the Terminating Seller of its status as a
Seller will not have a Material Adverse Effect, and
(iii) both immediately before and after giving effect to the
termination by the Terminating Seller, no Liquidation Event or Unmatured
Liquidation Event or Pay-Out Event shall have occurred and be continuing or
shall reasonably be expected to occur.
Any termination by a Seller shall become effective on the first Business
Day that follows the day on which the requirements of clauses (a)(i) through
--------------
(iii) shall have been satisfied (or such later date specified in the notice or
- - - -----
certificate referred to in the clauses). Any termination by a Seller shall
terminate its right and obligation to sell Receivables and Related Assets
hereunder to ARC and ARC's agreement, with respect to the Terminating Seller, to
purchase the Receivables and Related Assets; provided, however, that the
page 6
<PAGE>
termination shall not relieve the Terminating Seller of any of its other
Obligations, to the extent the Obligations relate to Receivables (and Related
Assets with respect thereto) originated by the Terminating Seller prior to the
effective date of the termination.
(b) A Seller's right and obligation to sell its Receivables and Related
Assets to ARC shall terminate immediately if the Seller ceases to be a
Subsidiary of the Seller; provided, however, that the termination shall not
relieve the Seller of any of its other Obligations, to the extent the
Obligations relate to Receivables (and Related Assets with respect thereto)
originated by the Seller prior to the effective date of the termination.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price. (a) On each Business Day
-----------------------------
(including the Closing Date), the Servicer shall deliver to ARC, the Trustee and
the Seller a Daily Report with respect to ARC's purchases of Receivables from
the Seller:
(i) that are to be made on the Closing Date (in the case of the Daily
Report to be delivered on the Closing Date) or
(ii) that were made on the immediately preceding Business Day (in the
case of each subsequent Daily Report).
(b) On each day when Receivables or Notes Receivable are purchased by ARC
from the Seller pursuant to Article I, the "Purchase Price" to be paid to the
---------
Seller on such day for the Purchased Receivables and Related Purchased Assets
that are to be sold by the Seller on such day shall be determined in accordance
with the following formula:
PP = AUB x PPP
where:
PP = the aggregate Purchase Price for the Purchased Receivables and
Related Purchased Assets to be purchased from the Seller on such
day
AUB the "Aggregate Unpaid Balance" of the Purchased Receivables that
are to be purchased from the Seller on such day. For purposes of
this calculation, "Aggregate Unpaid Balance" shall mean (i) for
purposes of calculating the Purchase Price to be paid to the
Seller on the Closing Date, the sum of the Unpaid Balance of each
Receivable generated by the Seller, as measured as at the closing
of the Seller's business on the
page 7
<PAGE>
Initial Cut-Off Date, and (ii) for purposes of calculating the
Purchase Price on each Business Day thereafter, the sum of the
Unpaid Balance of each Receivable to be purchased from the Seller
on such day, calculated at the time of the Receivable's sale to
ARC
PPP = the Purchase Price Percentage applicable to the Receivables to be
purchased from the Seller on such day, as determined pursuant to
Section 2.2.
-----------
SECTION 2.2 Definitions and Calculations Related to Purchase Price
------------------------------------------------------
Percentage .
-----------
(a) "Purchase Price Percentage" for the Receivables to be sold by the
Seller on any day shall mean the percentage determined in accordance with the
following formula:
PPP = 100% - (LD + PDRR + RGP)
where:
PPP = the Purchase Price Percentage in effect on such day for the
Seller,
LD = the Loss Discount (expressed as a percentage) in effect on such
day for the Seller, as determined pursuant to subsection (b)
--------------
below,
PDRR = the Purchase Discount Reserve Ratio (expressed as a percentage)
in effect on such day for the Seller, as determined on such day
pursuant to subsection (c) below, and
--------------
RGP = the Returned Goods Percentage.
The Purchase Price Percentage, the Loss Discount and the Purchase Discount
Reserve Ratio shall be recomputed by the Servicer on each Report Date, in each
case as of the then most recent Cut-Off Date, and shall become effective on the
next Settlement Date.
(b) "Loss Discount" in effect for any day for the Seller means a
percentage equal to the Loss to Liquidation Ratio (expressed as a percentage) as
in effect on such day (it being understood that the allocation of certain
miscellaneous items will be required to be estimated for this purpose).
(c) "Purchase Discount Reserve Ratio" for the Receivables to be sold by
the Seller on any day shall mean a percentage determined in accordance with the
following formula:
PDRR = (TD x DR) + PD
--
360
page 8
<PAGE>
where:
PDRR = the Purchase Discount Reserve Ratio in effect on such day for the
Seller,
TD = the Turnover Days for the Receivables originated by the Seller
during the immediately preceding Calculation Period,
DR = the Discount Rate (expressed as a percentage) in effect on such
day as determined pursuant to subsection (d) below, and
PD = a profit discount equal to 0.25%.
(d) "Discount Rate" for the Receivables to be sold by the Seller on any
day shall mean a fraction (expressed as a percentage) having (i) a numerator
equal to 12, multiplied by an amount equal to the accrued Carrying Costs for the
immediately preceding Calculation Period, and (ii) a denominator equal to the
aggregate Unpaid Balance of the Receivables as of the last day of the
immediately preceding Calculation Period.
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments. (a) On the Closing Date and on the
-----------------------
Business Day following each day on which any Receivables are purchased (or
deemed purchased) from the Seller by ARC pursuant to Article I, on the terms and
---------
subject to the conditions of this Agreement, ARC shall pay to the Seller the
Purchase Price for the Receivables and Related Assets purchased on such day by
ARC from the Seller by (i) making a cash payment (on the basis of the Purchase
Price owing to the Seller) to the Seller to the extent that ARC has cash
available to make the payment pursuant to Section 3.3 and (ii) if the Purchase
-----------
Price to be paid to the Seller for the Receivables and Related Assets exceeds
the amount of any cash payment on such day to the Seller pursuant to clause (i),
----------
by automatically increasing the principal amount outstanding under the ARC Note
by the amount of the excess. In addition, on any Business Day ARC may prepay
the Purchase Price to be paid to the Seller for Receivables and Related Assets
generated on a subsequent Business Day. For purposes of the remaining
provisions of this section, the Purchase Price otherwise payable on any day by
ARC to the Seller shall be deemed to be reduced by cumulative unused amount of
such prepayments.
(b) On each Business Day, the "Noncomplying Receivables and Dilution
Adjustment" shall be equal to the difference (whether the difference is positive
or negative) between (i) the sum of (A) the Seller Dilution Adjustment, if any,
for the immediately preceding
page 9
<PAGE>
Business Day, as shown in the Daily Report for such day, plus (B) the Seller
Noncomplying Receivables Adjustment, if any, for the immediately preceding
Business Day, as shown in the Daily Report for such day, in the case of each of
clauses (A) and (B), as the amounts are determined pursuant to Section 3.5,
- - - ----------- --- -----------
minus (ii) the amount of any payments (if any) that ARC shall have received on
the immediately preceding Business Day on account of a Seller Noncomplying
Receivable that has been the subject of an earlier Seller Noncomplying
Receivables Adjustment. If the Noncomplying Receivables and Dilution Adjustment
is positive on any day, ARC shall reduce the Purchase Price payable to the
Seller on such day by the absolute value of the Noncomplying Receivables and
Dilution Adjustment. If instead the Noncomplying Receivables and Dilution
Adjustment for the Seller is negative on any day, ARC shall increase the
Purchase Price payable to the Seller on suc h day by the absolute value of the
Noncomplying Receivables and Dilution Adjustment.
(c) If a positive Noncomplying Receivables and Dilution Adjustment for the
Seller on any day exceeds the Purchase Price payable by ARC to the Seller on
such day, or if such day falls on or after the Purchase Termination Date, then,
if the Seller continues to hold the ARC Note, the principal amount of that ARC
Note shall be reduced automatically by the amount of the excess.
(d) If, on any day prior to the Purchase Termination Date, the principal
amount of the ARC Note is zero, then the amount of the excess of a positive
Noncomplying Receivables and Dilution Adjustment for the Seller on such day over
the Purchase Price payable by ARC to the Seller on such day (the "Purchase Price
Credit") shall be credited against the Purchase Price payable by ARC to the
Seller for subsequent Purchases of Receivables and Related Assets by ARC. If
any Purchase Price Credit for the Seller has not been fully applied on or prior
to the tenth Business Day (or mutually agreed upon earlier day) after the
creation of the Purchase Price Credit, then, on the Business Day that follows
the end of the ten Business Day (or shorter) period, the Seller shall pay to ARC
in cash the remaining unapplied amount of the Purchase Price Credit.
(e) If, on any day on or after the Purchase Termination Date, the
principal amount of the ARC Note has been reduced to zero and there is a
positive Noncomplying Receivables and Dilution Adjustment for the Seller for
such day, then the Seller shall pay to ARC in cash the amount of the
Noncomplying Receivables and Dilution Adjustment on the next succeeding Business
Day.
(f) If, on any day on or after the Purchase Termination Date, there is a
negative Noncomplying Receivables and Dilution Adjustment for the Seller for
such day, then ARC shall pay to the Seller in cash the amount of the
Noncomplying Receivables and Dilution Adjustment no later than the Final
Maturity Date, and the amount, until paid, shall bear interest at the rate of
interest publicly announced from time to time by the Trustee as its reference
rate, which interest shall also be paid no later than the Final Maturity Date.
page 10
<PAGE>
SECTION 3.2 The ARC Note . (a) On the Closing Date, ARC will deliver to
-------------
the Seller a promissory note, substantially in the form of Exhibit A, payable
---------
to the order of the Seller (the promissory note, as the same may be amended,
supplemented, endorsed or otherwise modified from time to time, together with
any promissory note issued from time to time in substitution therefor or renewal
thereof in accordance with the Transaction Documents, being herein called the
"ARC Note"), that is subordinated to all Senior Interests now or hereafter
arising under or in connection with the Pooling Agreement. The ARC Note is
payable in full on the date that is twelve months after the date on which all
Investor Certificates and Purchased Interests have been repaid in full and the
Revolving Periods for all Investor Revolving Certificates and Purchased
Interests have terminated. The ARC Note bears interest at a rate per annum
equal to the rate publicly announced by the Trustee from time to time as its
"reference" rate, determined as of each Cut-Off Date. ARC may prepay all or
part of the outstanding balance of the ARC Note from time to time without any
premium or penalty, unless the prepayment would result in a default in ARC's
payment of any other amount required to be paid by it under any Transaction
Document; provided, however, that no Liquidation Event or Unmatured Liquidation
Event has occurred.
(b) The Seller (or its designee) shall hold the ARC Note for the
benefit of the Seller and shall make all appropriate recordkeeping entries with
respect to the ARC Note or otherwise to reflect the payments on and adjustments
of the ARC Note. The Servicer's books and records shall constitute rebuttable
presumptive evidence of the principal amount of and accrued interest on the ARC
Note at any time. The Seller hereby irrevocably authorizes the Servicer to mark
the ARC Note "CANCELLED" and return it to ARC upon the final payment thereof.
SECTION 3.3 Application of Collections and Other Funds. If, on any day,
------------------------------------------
ARC receives proceeds of transfers pursuant to the Pooling Agreement, ARC shall
apply the funds as follows:
(a) first, to pay its existing expenses and to set aside funds for the
payment of expenses that are then accrued (in each case to the extent such
expenses are permitted to exist under Section 7.02(m) of the Pooling
---------------
Agreement).
(b) second, to pay the Purchase Price pursuant to Section 3.1 for
-----------
Receivables and Related Assets purchased by ARC from the Seller on such day
(in the case of the Closing Date) or the next preceding Business Day, and
(c) third, in such order as ARC may elect, (A) to repay amounts owed
by ARC to the Seller under the ARC Note, provided, however, that no
Liquidation Event or Unmatured Liquidation Event has occurred,(B) to pay
amounts owed pursuant to Section 3.1(f), or (C) to declare and pay
--------------
dividends to the Seller to the extent permitted by law, so long as ARC
shall be in compliance with Section 7.02(o) of the Pooling Agreement after
giving effect to the dividends.
page 11
<PAGE>
SECTION 3.4 Servicing of Receivables and Related Assets . Consistent with
--------------------------------------------
ARC's ownership of the Receivables and the Related Assets, as between the
parties to this Agreement, ARC shall have the sole right to service, administer
and collect the Receivables, to assign the right and to delegate the right to
others. Without limiting the generality of Section 10.11, the Seller hereby
-------------
acknowledges and agrees that ARC shall assign to the Trustee for the benefit of
the Certificateholders the rights and interests granted by the Seller to ARC
hereunder and agrees to cooperate fully with the Servicer and the Trustee in the
exercise of the rights. As more fully described in Section 7.4(b) and in the
--------------
Pooling Agreement, the Trustee may exercise the rights in the place of ARC (as
assignee or otherwise) only after the designation of a Servicer other than the
Seller pursuant to Section 10.02 of the Pooling Agreement.
SECTION 3.5 Adjustments for Noncomplying Receivables, Dilution and Cash
-----------------------------------------------------------
Discounts . (a) If at any time any of ARC, the Servicer, the Trustee or the
- - - ----------
Seller shall determine that any Receivable identified by the Servicer as an
Eligible Receivable on the date of Purchase thereof by ARC or the contribution
thereof to ARC was in fact a Seller Noncomplying Receivable on such date, or
that any of the representations and warranties made by the Seller in Section
-------
5.1(k) with respect to the Receivable was not true on such date, the Seller
- - - ------
shall be deemed to have received on the date of such determination a Collection
of the Receivable in an amount equal to the Unpaid Balance of the Receivable
(the sum of all such amounts for the Seller on any day being called the "Seller
Noncomplying Receivables Adjustment" for the Seller for such day), and the
Seller shall pay the amount of the Seller Noncomplying Receivables Adjustment to
ARC in the manner provided for in Section 3.1.
-----------
(b) If on any day the aggregate Unpaid Balance of the Receivables sold or
contributed to ARC on or before such date by the Seller is reduced in any manner
described in the definition of "Dilution" or on account of any Cash Discounts
(the total of the reductions being called the "Seller Dilution Adjustment" for
the Seller for such day), then the Seller shall be deemed to have received on
such day a Collection of Receivables in the amount of the Seller Dilution
Adjustment and the Seller shall pay the amount to ARC in the manner provided in
Section 3.1.
- - - -----------
SECTION 3.6 Payments and Computations, Etc . (a) All amounts to be paid
-------------------------------
by the Seller to ARC hereunder shall be paid in accordance with the terms hereof
no later than 2:00 p. m., New York City time, on the day when due in Dollars in
immediately available funds to an account that ARC shall from time to time
specify in writing. Payments received by ARC after such time shall be deemed to
have been received on the next Business Day. In the event that any payment
becomes due on a day that is not a Business Day, then the payment shall be made
on the next Business Day. The Seller shall, to the extent permitted by law, pay
to ARC, on demand, interest on all amounts not paid when due hereunder at 2% per
annum above the interest rate on the ARC Note in effect on the date the payment
was due; provided, however, that the interest rate shall not at any time exceed
the maximum rate
page 12
<PAGE>
permitted by applicable law. All computations of interest payable hereunder
shall be made on the basis of a year of 360 days for the actual number of days
(including the first but excluding the last day) elapsed.
(b) All amounts to be paid by ARC to the Seller hereunder shall be paid no
later than 2:00 p. m., New York City time, on the day when due in Dollars in
immediately available funds to an account that the Seller shall from time to
time specify in writing. Payments received by the Seller after such time shall
be deemed to have been received on the next Business Day. In the event that any
payment becomes due on a day that is not a Business Day, then such payment shall
be made on the next Business Day.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial
----------------------------------------
purchase hereunder is subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and effectiveness of each other
Transaction Document (other than a condition precedent in any other Transaction
Document relating to the effectiveness of this Agreement) shall have been
fulfilled to the satisfaction of ARC, and (ii) ARC shall have received (or in
the case of subsection (g) below, shall have delivered) each of the following,
--------------
on or before the Closing Date, each (unless otherwise indicated) dated the date
hereof or the Closing Date and each in form and substance satisfactory to ARC:
(a) Seller Assignment Certificates. A Seller Assignment
------------------------------
Certificate in the form of Exhibit C from the Seller, duly completed,
---------
executed and delivered by the Seller,
(b) Resolutions. A copy of the resolutions of the Board of
-----------
Directors of the Seller approving this Agreement and the other Transaction
Documents to be delivered by it hereunder and the transactions contemplated
hereby and thereby and addressing such other matters as may be required by
ARC, certified by its Secretary or Assistant Secretary, each as of a recent
date acceptable to ARC,
(c) Good Standing Certificate of the Seller; Certificates as to
-----------------------------------------------------------
Foreign Qualification of the Seller. A good standing certificate for the
-----------------------------------
Seller, issued by the Secretary of State of the jurisdiction of its
incorporation and of each state in which the Seller transacts business, is
required to be in good standing and where the failure to be in good
standing could materially and adversely affect the condition (financial or
otherwise), properties, business or results of operations of the Seller,
each dated as of a recent date,
page 13
<PAGE>
(d) Incumbency Certificate. A certificate of the Secretary or
----------------------
Assistant Secretary of the Seller certifying, as of a recent date
reasonably acceptable to ARC, the names and true signatures of the officers
authorized on the Seller's behalf to sign the Transaction Documents to be
delivered by the Seller (on which certificate ARC, the Trustee and the
Servicer may conclusively rely until such time as ARC shall receive from
the Seller (with a copy to the Trustee and the Servicer), a revised
certificate meeting the requirements of this subsection),
(e) Other Transaction Documents. Original copies, executed by each
---------------------------
of the parties thereto in such reasonable number as shall be specified by
ARC, of each of the other Transaction Documents to be executed and
delivered in connection herewith,
(f) Opinions of Counsel. The opinion of Dechert Price & Rhoads,
-------------------
special counsel to the Seller, in form and substance satisfactory to ARC,
as to general corporate, Federal, Pennsylvania and New York tax and UCC
matters and true sale and non-consolidation,
(g) ARC Note. The ARC Note, executed by ARC, and
--------
(h) License Agreements. Duly executed and counterparts of (i) a
------------------
software license agreement between Seller and ARC, and (ii) an amendment to
any license agreement between Seller and any third party vendor adding ARC
as a licensee.
SECTION 4.2 Certification as to Representations and Warranties. The
--------------------------------------------------
Seller, by accepting the Purchase Price paid for each Purchase, shall be deemed
to have certified, with respect to the Receivables and Related Assets to be sold
by it on such day, that its representations and warranties contained in Article
-------
V (excluding, with respect to any day after the Closing Date, Section 5.1(i))
- - - - --------------
are true and correct on and as of such day, with the same effect as though made
on and as of such day.
SECTION 4.3 Effect of Payment of Purchase Price . Upon the payment of the
------------------------------------
Purchase Price (whether in cash or by an increase in the ARC Note pursuant to
Section 3.1) for any Purchase, title to the Receivables and the Related Assets
- - - -----------
included in the Purchase shall rest in ARC, whether or not the conditions
precedent to the Purchase were in fact satisfied; provided, however, that ARC
shall not be deemed to have waived any claim it may have under this Agreement
for the failure by the Seller in fact to satisfy any such condition precedent.
page 14
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Seller . In order to
---------------------------------------------
induce ARC to enter into this Agreement and to make purchases hereunder, the
Seller hereby makes the representations and warranties set forth in this section
at the times and to the extent set forth in Section 4.2.
-----------
(a) Organization and Good Standing. The Seller is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full power and authority to own
its properties and to conduct its business as the properties presently are
owned and the business presently is conducted. The Seller had at all
relevant times, and now has, all necessary power, authority, and legal
right to own and sell the Receivables and the Related Assets.
(b) Due Qualification. The Seller 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 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.
(c) Power and Authority; Due Authorization. The Seller has (i) all
--------------------------------------
necessary power and authority to (A) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (B) perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party, and (C) sell and assign the Receivables and the
Related Assets on the terms and subject to the conditions herein and
therein provided and (ii) duly authorized by all necessary action the sale
and assignment and the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions provided for in this Agreement and the
other Transaction Documents to which it is a party.
(d) Valid Sale; Binding Obligations. Each sale made by the Seller
-------------------------------
pursuant to this Agreement, and each contribution made to ARC pursuant to
the Subscription Agreement, shall constitute a valid sale (except in the
case of Contributed Receivables), transfer, and assignment of all of the
Seller's right, title and interest in, to and under the Receivables and the
Related Assets of the Seller to ARC that is perfected and of first priority
under the UCC and otherwise, enforceable against creditors of, and
purchasers from, the Seller and free and clear of any Adverse Claim (other
than any Permitted Adverse Claim or any Adverse Claim arising solely as a
page 15
<PAGE>
result of any action taken by ARC hereunder or by the Trustee under the
Pooling Agreement); and this Agreement constitutes, and each other
Transaction Document to which the Seller is a party when duly executed and
delivered will constitute, a legal, valid and binding obligation of the
Seller, enforceable against it in accordance with its terms, except as
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) 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 to be signed by the
Seller and the fulfillment of the terms hereof and thereof 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 the Seller 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 the Receivables or Related
Assets 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. Except as described in
--------------------------------
Schedule 1, (i) there is no action, suit, proceeding or investigation
----------
pending or, to the best knowledge of the Seller, 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 each
of clauses (i) and (ii), (A) asserts the invalidity of this Agreement or
----------- ----
any other Transaction Document, (B) seeks to prevent the sale of any
Receivables or Related Assets by the Seller to ARC, the issuance of the
applicable Seller Assignment Certificate 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 materially and
adversely affect the performance by the Seller 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 purchases
hereunder or the applicable Seller Assignment Certificate, in the case of
each of the foregoing Whether under the United States
page 16
<PAGE>
Federal income tax system or any state income tax system, or (E)
individually or in the aggregate for all such actions, suits, proceedings
and investigations would have a substantial likelihood of having a Material
Adverse Effect.
(g) Government Approvals. All authorizations, consents, orders and
--------------------
approvals of, or other action by, any Governmental Authority that are
required to be obtained by the Seller, and all notices to and filings
(except, in respect of enforceability against a Federal Obligor, any
filings under the Assignment of Claims Act and any consents required by
states with respect to any Receivables arising from State and Local
Obligors so long as such Receivables are not reported as Eligible
Receivables), with any Governmental Authority that are required to be made
by it, in the case of each of the foregoing in connection with the
conveyance of Receivables and Related Assets or the due execution, delivery
and performance by the Seller of this Agreement, the Seller's Seller
Assignment Certificate or any other Transaction Document 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, notice or filing, individually or in the aggregate for all
such failures, would not reasonably be expected to have a Material Adverse
Effect.
(h) 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.
(i) Financial Condition. The Seller hereby represents that its
-------------------
consolidated balance sheets as at September 30, 1993, and the related
statements of income and shareholders' equity of the Seller and its
Consolidated Subsidiaries for the fiscal year then ended certified by Ernst
& Young, copies of which have been furnished to ARC and the Trustee, fairly
present in all material respects the consolidated financial position and
business of the Seller and its Consolidated Subsidiaries as at such date
and the consolidated results of the operations of the Seller and its
Consolidated Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied throughout the periods reflected
therein, and, except as set forth in Schedule 4, since September 30, 1993
through the date hereof there has been no material adverse change in the
condition (financial or otherwise), business or operations of the Seller.
(j) Margin Regulations. No use of any funds obtained by the Seller
------------------
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.
page 17
<PAGE>
(k) Quality of Title.
----------------
(i) Immediately before each purchase to be made by ARC
hereunder and each contribution to be made under the Subscription Agreement
to ARC, each Receivable and Related Asset of the Seller that is then to be
transferred to ARC thereunder, and the related Contracts, shall be owned by
the Seller free and clear of any Adverse Claim (other than any Permitted
Adverse Claim or any Adverse Claim arising solely as the result of any
action taken by ARC hereunder or by the Trustee under the Pooling
Agreement); and the Seller shall have made all filings and shall have taken
all other action under applicable law in each relevant jurisdiction in
order to protect and perfect the ownership interest of ARC and its
successors in the Receivables and Related Assets against all creditors of,
and purchasers from, the Seller.
(ii) Whenever ARC makes a purchase hereunder or accepts a
contribution under the Subscription Agreement, it shall have acquired a
valid and perfected first priority ownership interest in each Transferred
Asset, free and clear of any Adverse Claim (other than any Permitted
Adverse Claim or any Adverse Claim arising solely as the result of any
action taken by ARC hereunder or by the Trustee under the Pooling
Agreement).
(iii) No effective financing statement or other instrument
similar in effect that covers all or part of any Receivable, any interest
therein or any Related Asset with respect thereto is on file in any
recording office except financing statements as to termination statements
or releases that are filed on the Closing Date or the day after the Closing
Date and (x) such as may be filed (A) in favor of the Seller in accordance
with the Contracts, (B) in favor of ARC pursuant to this Agreement or the
Subscription Agreement and (C) in favor of the Trustee, for the benefit of
the Certificateholders, in accordance with the Pooling Agreement and (y)
such as may have been identified to ARC prior to the Closing Date and
termination statements relating to which have been placed with LEXIS
Document Services for filing on the First Issuance Date or the first
Business Day thereafter. No effective financing statement or instrument
similar in effect relating to perfection that covers any inventory of the
Seller that might give rise to Receivables is on file in any recording
office except for (so long as the Intercreditor Agreement is in effect)
financing statements or instruments in favor of the Seller Agent.
(iv) No Purchase by ARC 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.
page 18
<PAGE>
(v) The Purchase by ARC constitutes a true and valid sale of
the Receivables and Related Assets under applicable state law and true and
valid assignments and transfers for consideration (and not merely a pledge
of the Receivables and Related Assets for security purposes), enforceable
against the creditors of the Seller, and no Receivables or Related Assets
transferred to ARC hereunder or under the Subscription Agreement shall
constitute property of the Seller.
(l) Eligible Receivables. (i) On the date of each purchase of
--------------------
Receivables hereunder,each such Receivable,unless otherwise identified to
ARC and the Trustee by the Servicer in the Daily Report for such date, is
an eligable Receivable,and (ii) on the date of each Daily Report or
Settlement statement that identifies a Receivable as an Eligible
Receivable, such Receivable is an Eligable Receivable
(m) Accuracy of Information. All written information furnished on
-----------------------
and after the Closing Date by the Seller or any other AmeriSource Person to
ARC, the Servicer or the Trustee pursuant to or in connection with any
Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts 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.
(n) Offices. The principal place of business and chief executive
-------
office of the Seller is located at the address set forth under the Seller's
signature hereto, and the offices where the Seller keeps all Records and
all Contracts, purchase orders and agreements related to the Receivables
and the Related Assets (and all original documents relating thereto) are
located at the addresses specified in Schedule 2 (or at such other
----------
locations, notified to the Servicerand the Trustee in accordance
with Section 6.1(f), in jurisdictions where all action required pursuant to
--------------
Section 7.3 has been taken and completed).
-----------
(o) Account Banks and Payment Instructions.The names and addresses of
--------------------------------------
all the banks, together with the account numbers of the accounts at the
banks, into which Collections are paid as of the Closing Date have been
accurately identified to ARC in a letter from the Seller to ARC dated the
Closing Date or have been specified in the notices as shall have been
delivered thereafter pursuant to Section 6.3(c). Each Account Bank has
executed and delivered an --------------
Account Agreement to ARC and the Trustee. Up to 5% of payments may, as a
convenience, be picked up by employees or agents of the Seller authorized
to accept payment for deliveries. Notwithstanding the foregoing, the Seller
has instructed all Obligors to submit all payments on the Receivables and
Related Assets directly to one of the Lockbox Accounts. Any
page 19
<PAGE>
payments not made directly to the Account Banks will be forwarded to the
Account Banks within two Business Days.
(p) Subscription Agreement. Each of the representations and
----------------------
warranties made by the Seller in the Subscription Agreement will be true
and correct as of the date or dates made.
(q) Compliance with Applicable Laws. The Seller 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.
(r) Legal Names. Except as set forth in Schedule 3, since October
----------- ----------
31, 1989 the Seller has not been known by any legal name other than its
corporate name as of the date hereof, except to the extent permitted
otherwise pursuant to Section 6.3(e), nor has the Seller been the subject
--------------
of any merger or other corporate reorganization since October 31, 1989 that
resulted in a change of name, identity or corporate structure. The Seller
uses no trade names other than its actual corporate name and the trade
names set forth in Schedule 3.
(s) Investment Company Act. The Seller 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.
(t) Taxes. The Seller 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 diligently
contested in good faith by appropriate proceedings, (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 Related Assets.
SECTION 5.2 Representations and Warranties of ARC . From the date hereof
--------------------------------------
until the Purchase Termination Date, ARC hereby represents and warrants that
(a)(i) this Agreement has been duly executed and delivered by ARC and (ii)
constitutes the legal, valid and binding obligation of ARC, enforceable against
it in accordance with its terms, except as 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, and (b) the execution, delivery and performance of this Agreement does
not violate any applicable law or any agreement to which ARC is a party or by
which its properties are bound.
page 20
<PAGE>
ARTICLE VI
GENERAL COVENANTS OF THE SELLER
SECTION 6.1 Affirmative Covenants . From the Closing Date until the first
----------------------
day following the Purchase Termination Date on which all Obligations of the
Seller shall have been finally and fully paid and performed and the Investor
Invested Amount shall have been reduced to zero, unless ARC shall otherwise give
its prior written consent, the Seller hereby agrees that it will perform the
covenants and agreements set forth in this section.
(a) Compliance with Laws, Etc. The Seller will comply in all
--------------------------
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Assets, the related Contracts of the Seller and any other
agreements related thereto), 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. The Seller will 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) Receivables Reviews. The Seller shall, during regular business
-------------------
hours upon not less than five Business Days' prior notice, permit ARC and
its agents or representatives, at the expense of the Seller, (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 the Seller
relating to the Receivables or Related Assets generated by the Seller, and
(ii) to visit the offices and properties of the Seller for the purpose of
examining the materials described in clause (i) above, and to discuss
----------
matters relating to any Receivables or any Related Assets of the Seller or
the Seller's performance hereunder with any of the Authorized Officers of
the Seller or, with the prior consent of an Authorized Officer of the
Seller, with employees of the Seller having knowledge of such matters (the
examinations set forth in the foregoing clauses (i) and (ii) being herein
----------- ----
called a "Seller Receivables Review"). ARC and its agents or
representatives shall be entitled to conduct Seller Receivables Reviews
whenever ARC, in its reasonable judgment, deems it appropriate; provided,
that prior to the occurrence and continuance of a Liquidation Event, ARC
(or its agent or representative) shall give the Seller at least five
Business Days' prior notice of any Seller Receivables Review, and ARC shall
have the right to request a Seller Receivables Review not more than twice
in any calendar year.
page 21
<PAGE>
(d) Keeping of Records and Books of Account. The Seller shall
---------------------------------------
maintain and implement administrative and operating procedures (including,
an ability to recreate records evidencing its Receivables and Related
Assets in the event of the destruction of the originals thereof), and shall
keep and maintain all documents, books, records and other information that,
in the reasonable determination of ARC and the Trustee, are necessary or
advisable in accordance with prudent industry practice and custom for
transactions of this type for the collection of all Receivables and the
Related Assets. Upon the reasonable request of ARC made at any time after
the occurrence and continuance of a Servicer Default, the Seller will
deliver copies of all books and records maintained pursuant to this
subsection to the Trustee. The Seller shall maintain at all times accurate
and complete books, records and accounts relating to the Receivables,
Related Assets and Contracts and all Collections thereon in which timely
entries shall be made. Such books and records shall be marked to indicate
the sales of all Receivables and Related Assets hereunder and shall include
(i) all payments received and all credits and extensions granted with
respect to the Receivables and (ii) the return, rejection, repossession, or
stoppage in transit of any merchandise, the sale of which has given rise to
a Receivable that has been purchased by ARC.
(e) Performance and Compliance with Receivables and Contracts. The
---------------------------------------------------------
Seller will, at its expense, timely and fully perform and comply with all
provisions, covenants and other promises required to be observed by it
under the Contracts of the Seller related to the Receivables and Related
Assets, the breach of which provisions, covenants or promises would have a
substantial likelihood of having a Material Adverse Effect.
(f) Location of Records and Offices. The Seller will keep its
-------------------------------
principal place of business and chief executive office, and the offices
where it keeps all Records related to the Receivables and the Related
Assets (and all original documents relating thereto), at the addresses
referred to in Schedule 2 or, upon not less than 30 days' prior written
----------
notice given by the Seller to ARC, the Trustee and the Applicable Rating
Agencies, at such other locations in jurisdictions where all action
required by Section 7.3 shall have been taken and completed.
-----------
(g) Credit and Collection Policies. The Seller will comply in all
------------------------------
material respects with its Credit and Collection Policy in regard to each
Receivable of the Seller and the Related Assets and the Contracts related
to each such Receivable, where the failure so to comply, individually or in
the aggregate for all such failures, would have a substantial likelihood of
having a Material Adverse Effect.
(h) Separate Corporate Existence of ARC. The Seller hereby
-----------------------------------
acknowledges that the Trustee, on behalf of the Trust, is entering into the
transactions contemplated by the Transaction Documents in reliance upon
ARC's identity as a legal entity
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<PAGE>
separate from the Seller and the other AmeriSource Persons. Therefore, from
and after the date hereof until the first day following the Purchase
Termination Date on which all Obligations of the Seller shall have been
fully paid and performed and the Investor Invested Amount shall have been
reduced to zero, the Seller will, and will cause each other AmeriSource
Person to, take all reasonable steps to continue their respective
identities as separate legal entities and to make it apparent to third
Persons that each is an entity with assets and liabilities distinct from
those of ARC and that ARC is not a division of the Servicer, the Seller or
any other Person.
(i) Payment Instructions to Obligors. The Seller will instruct all
--------------------------------
Obligors to submit all payments either (i) to one of the lockboxes
maintained at the Lockbox Banks for deposit in a Lockbox Account or to a
Concentration Account or (ii) directly to one of the Lockbox Accounts;
except to the extent otherwise permitted under Section 5.1(o).
--------------
(j) Segregation of Collections. The Seller shall use reasonable
--------------------------
efforts to minimize the deposit of any funds other than Collections into
any of the Lockbox Accounts and, to the extent that any such funds
nevertheless are deposited into any of the Lockbox Accounts, shall promptly
identify any such funds, or shall cause the funds to be so identified, to
ARC, the Servicer and the Trustee (following which notice, ARC shall cause
the Servicer to return all the funds to the Seller).
(k) Identification of Eligible Receivables. The Seller 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 to be sold on that date that are not Eligible Receivables, and
(ii) except as permitted in Section 3.05(c) of the Pooling Agreement,
notify ARC prior to the occurrence of a Purchase if a Receivable to be sold
hereunder will, to the Seller's knowledge, not be an Eligible Receivable as
of the date of Purchase.
(l) Accuracy of Information. All written information furnished on
-----------------------
and after the Closing Date by the Seller or any other AmeriSource Person to
ARC, the Servicer or the Trustee pursuant to or in connection with any
Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts 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.
(m) 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 could not
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<PAGE>
reasonably be expected to have an adverse effect, and pay or cause to be
paid all taxes shown to be due and payable on taxes or assessments, the
validity of which are being contested in good faith by appropriate
proceedings and with respect to which the Seller shall have set aside
adequate reserves on its books in accordance with GAAP and which
proceedings could not reasonably be expected to have a Material Adverse
Effect.
SECTION 6.2 Reporting Requirements . From the Closing Date until the
-----------------------
first day following the Purchase Termination Date on which all Obligations of
the Seller shall have been finally and fully paid and performed and the Investor
Invested Amount shall have been reduced to zero, the Seller agrees that it will,
unless ARC and the Trustee shall otherwise give prior written consent, and (with
respect to the notices described below in subsections (c) and (d)) unless the
--------------- ---
Rating Agency Condition has beensatisfied, furnish to ARC and the Trustee and,
in the case of the notices described below in subsections (c), (d) and (f), to
the Applicable Rating --------------- --- ---
Agencies:
(a) Quarterly Financial Statements. Within 50 days after the end of
------------------------------
each of the first three fiscal quarters of each fiscal year of the Seller,
copies of the unaudited consolidated balance sheets of the Seller and its
Consolidated Subsidiaries as at the end of the fiscal quarter and the
related unaudited statements of earnings and cash flows, in each case for
the fiscal quarter and for the period from the beginning of the fiscal year
through the end of such fiscal quarter, prepared in accordance with GAAP
consistently applied throughout the periods reflected therein and certified
(subject to year end adjustments and the omission of footnotes) by the
chief financial officer or chief accounting officer of the Seller,
(b) Annual Financial Statements. As soon as possible and in any
---------------------------
event within 120 days after the end of each fiscal year of the Seller, a
copy of the consolidated balance sheet of the Seller and its Consolidated
Subsidiaries as at the end of the fiscal year and the related statements of
earnings, stockholders' equity and cash flows of the Seller and its
Consolidated Subsidiaries for the fiscal year, setting forth in each case
in comparative form the corresponding figures for the preceding fiscal year
and prepared in accordance with GAAP consistently applied throughout the
periods reflected therein, certified, without Impermissible Qualification,
by Ernst & Young (or such other independent certified public accountants of
a nationally recognized standing in the United States of America as shall
be selected by the Seller),
(c) Liquidation Events. As soon as possible, and in any event
------------------
within five Business Days after an Authorized Officer of the Seller has
obtained knowledge of the occurrence of any Liquidation Event or any
Unmatured Liquidation Event, a written statement of an Authorized Officer
of the Seller describing the event and the action that the Seller proposes
to take with respect thereto, in each case in reasonable detail,
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<PAGE>
(d) Material Adverse Effect. As soon as possible and in any event
-----------------------
within five Business Days after an Authorized Officer of the Seller has
knowledge thereof, written notice that describes in reasonable detail any
event or occurrence that, individually or in the aggregate for all such
events or occurrences, has had, or that would have a substantial likelihood
of having, a Material Adverse Effect,
(e) Proceedings. As soon as possible and in any event within five
-----------
Business Days after an Authorized Officer of the Seller has knowledge
thereof, written notice of (i) any litigation, investigation or proceeding
of the type described in Section 5.1(f) not previously disclosed to ARC and
--------------
(ii) any judgment,settlement or other final disposition with respect to any
such previously disclosed litigation, investigation or proceeding, and
(f) Other. Promptly, from time to time, (i) such other information,
-----
documents, records or reports respecting the Receivables or the Related
Assets or (ii) such other publicly available information respecting the
condition or operations, financial or otherwise, of the Seller, in each
case as ARC may from time to time reasonably request in order to protect
the interests of ARC, the Trustee or the Certificateholders under or as
contemplated by this Agreement.
SECTION 6.3 Negative Covenants . From the Closing Date until the first
-------------------
day following the Purchase Termination Date on which all Obligations of the
Seller shall have been finally and fully paid and performed and the Investor
Invested Amount shall have been reduced to zero, unless ARC shall otherwise give
its prior written consent, the Seller hereby agrees that it will perform the
covenants and agreements set forth in this section.
(a) Sales, Liens, Etc. Except as otherwise provided herein or in the
------------------
Pooling Agreement, the Seller 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 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 Related Assets are sent or any interest therein, or (ii)
except with respect to the security interest in Purchase Price granted to
the Seller's senior lender, assign to any Person any right to receive
income from or in respect of any of the foregoing.
In the event that the Seller fails to keep any Transferred Assets free
and clear of any Adverse Claim (other than a Permitted Adverse Claim, any
Adverse Claims arising hereunder, and other Adverse Claims permitted by any
other Transaction Document), ARC may (without limiting its other rights
with respect to the Seller's breach of its obligations hereunder) make
reasonable expenditures necessary to release
page 25
<PAGE>
page 25
the Adverse Claim. ARC shall be entitled to indemnification for any such
expenditures pursuant to the indemnification provisions of Article IX.
----------
Alternatively, ARC may deduct such expenditures as an offset to the
Purchase Price owed to the Seller hereunder.
The Seller will not pledge or grant any security interest in its
inventory, the ARC Note or the capital stock of ARC unless prior to any
pledge or grant the Seller, ARC, the Trustee and the person for whose
benefits the pledge or grant is being made have entered into an
Intercreditor Agreement.
(b) Extension or Amendment of Receivables; Change in Credit and
-----------------------------------------------------------
Collection Policy or Contracts. The Seller will not, (i) without the
------------------------------
prior written consent of ARC and the Trustee, which consent will not be
unreasonably withheld, extend, amend or otherwise modify the terms of any
Receivable or Contract in a manner that would have a Material Adverse
Effect on the Investor Certificateholders or the Purchasers or (ii) 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, ARC and each
Purchaser Agent and the Rating Agency Condition is satisfied with respect
thereto, (y) with respect to collection procedures, the change is made with
prior written notice to the Trustee, ARC and each Purchaser Agent and no
Material Adverse Effect on any Series or Purchased Interest would result
and (z) with respect to accounting policies relating to Receivables that
have become Charged-Off Receivables, the change is made in accordance with
GAAP.
(c) Change in Payment Instructions to Obligors. The Seller will
------------------------------------------
not (i) add or terminate any bank as an Account Bank from those listed in
the letter referred to in Section 5.1(o) unless, prior to any such addition
--------------
or termination,
ARC, the Trustee and the Applicable Rating Agencies shall have received not
less than five Business Days' prior written notice of the addition or
termination and, not less than five Business Days prior to the effective
date of any such proposed addition or termination, ARC and the 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 ARC and the
Trustee, or (ii) make any change in its instructions to Obligors, given in
accordance with Section 5.1(o), regarding payments to be made to the Seller
--------------
or payments to be made to any Account Bank, 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.
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<PAGE>
(d) Mergers, Acquisitions, Sales, etc. Except for (i) mergers or
----------------------------------
consolidations in which the Seller is the surviving Person, (ii) mergers or
consolidations of a Subsidiary of the Seller into the Seller or (iii)
mergers or consolidations in which the surviving Person expressly assumes
the performance of this Agreement and the Rating Agency Condition shall
have been satisfied with respect to the consolidation or merger, the Seller
will not be a constituent corporation to any merger or consolidation. The
Seller will give the Applicable Rating Agencies and the Trustee notice of
any such permitted merger or consolidation promptly following completion
thereof. The Seller will not, directly or indirectly, 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 Assets, in each case other than
pursuant to this Agreement, the Subscription Agreement or the Inventory
Credit Agreement.
(e) Change in Name. The Seller will not (i) change its corporate
--------------
name or (ii) change the name under or by which it does business in any
manner that would or may make any financing statement filed by the Seller
in accordance herewith seriously misleading within the meaning of Section9-
402(7) of an applicable enactment of the UCC, in each case unless the
Seller shall have given ARC, the Servicer, the Trustee and the Applicable
Rating Agencies 30 days' prior written notice thereof and unless, prior to
any change in name, the Seller shall have taken and completed all action
required by Section 7.3.
-----------
(f) Certificate of Incorporation. The Seller will not cause ARC to
----------------------------
amend Article 3,6,7,8 or 9 of its Certificate of Incorporation without the
Trustee's prior written consent, which consent will not be unreasonably
withheld or delayed.
(g) Amendments to Transaction Documents. The Seller will not amend
-----------------------------------
or otherwise modify or supplement any Transaction Document to which it is a
party unless (i) ARC shall have given its prior written consent to each
amendment, modification or supplement, which consent shall not be
unreasonably withheld or delayed, and (ii) the Rating Agency Condition
shall have been satisfied.
(h) Accounting for Purchases. The Seller shall prepare its financial
------------------------
statements in accordance with GAAP. The Seller shall not prepare any
financial statements that account for the transactions contemplated in this
Agreement in any manner other than as a sale of the Purchased Assets by the
Seller to ARC, 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 Purchased Assets by the
Seller to ARC.
page 27
<PAGE>
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS
SECTION 7.1 Rights of ARC. (a) Subject to Section 7.4(b), the Seller
------------- --------------
hereby authorizes ARC, the Servicer and/or their respective designees to take
any and all steps in the Seller's name and on behalf of the Seller that ARC, the
Servicer and/or their respective designees determine are reasonably necessary or
appropriate to collect all amounts due under any and all Transferred Assets,
including endorsing the name of the Seller on checks and other instruments
representing Collections and enforcing the Seller's rights under such
Transferred Assets.
(b) Except as set forth in Section 3.5 with respect to Seller Noncomplying
-----------
Receivables, ARC shall have no obligation to account for, to replace, to
substitute or to return any Purchased Asset to the Seller. ARC shall have no
obligation to account for, or to return Collections, or any interest or other
finance charge collected pursuant thereto, to the Seller, irrespective of
whether such Collections and charges are in excess of the Purchase Price for the
Purchased Assets.
(c) ARC shall have the unrestricted right to further assign, transfer,
deliver, hypothecate, subdivide or otherwise deal with the Transferred Assets,
and all of ARC's right, title and interest in, to and under this Agreement and
the Subscription Agreement, on whatever terms ARC shall determine, pursuant to
the Pooling Agreement or otherwise.
(d) ARC shall have the sole right to retain any gains or profits created
by buying, selling or holding the Transferred Assets and shall have the sole
risk of and responsibility for losses or damages created by such buying, selling
or holding.
SECTION 7.2 Responsibilities of the Seller . Anything herein to the
-------------------------------
contrary notwithstanding:
(a) The Seller agrees to deliver directly to the Servicer (for ARC's
account), within three Business Days after receipt thereof, any Collections
that it receives, in the form so received, and agrees that all such
Collections shall be deemed to be received in trust for ARC and shall be
maintained and segregated separate and apart from all other funds and
moneys of the Seller until delivery of such Collections to the Servicer.
(b) The Seller shall perform all of its obligations hereunder and
under the Contracts related to the Receivables and Related Assets to the
same extent as if the Receivables had not been sold hereunder, and the
exercise by ARC or its designee or assignee of ARC's rights hereunder or in
connection herewith shall not relieve the
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<PAGE>
Seller from any of its obligations under the Contracts or Related Assets
related to the Receivables.
(c) The Seller hereby grants to ARC an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the
name of the Seller all steps necessary or advisable to endorse, negotiate
or otherwise realize on any writing or other right of any kind held or
transmitted by the Seller or transmitted or received by ARC (whether or not
from the Seller) in connection with any Transferred Asset.
(d) To the extent that the Seller does not own the computer software
that the Seller uses to account for Receivables, the Seller shall use
reasonable efforts to provide ARC and the Trustee with such licenses,
sublicenses and/or assignments of contracts as ARC or the Trustee shall
require with regard to all services and computer hardware or software used
by the Seller that relate to the servicing of the Transferred Assets.
SECTION 7.3 Further Action Evidencing Purchases . The Seller agrees that
-----------------------------------
from time to time, at its expense, it will promptly, upon reasonable request,
execute and deliver all further instruments and documents, and take all further
action, in order to perfect, protect or more fully evidence the purchase by ARC
or contribution to ARC of the Receivables and the Related Assets under this
Agreement or the Subscription Agreement (as applicable), or to enable ARC to
exercise or enforce any of its rights under any Transaction Document. The
Seller further agrees that from time to time, at its expense, it will promptly,
upon request, take all action that ARC, the Servicer or the Trustee may
reasonably request in order to perfect, protect or more fully evidence the
purchase or contribution of the Receivables and the Related Assets or to enable
ARC or the Trustee (as the assignee of ARC) to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of ARC, the Seller will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as ARC or the Trustee may reasonably determine to be necessary or
appropriate, and
(b) mark the master data processing records evidencing the
Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO
AMERISOURCE RECEIVABLES CORPORATION PURSUANT TO A
RECEIVABLES PURCHASE AGREEMENT, DATED AS OF DECEMBER 13,
1994, BETWEEN AMERISOURCE CORPORATION, AS SELLER, AND
AMERISOURCE RECEIVABLES CORPORATION, AS PURCHASER; AND
SUCH
page 29
<PAGE>
RECEIVABLES HAVE BEEN TRANSFERRED TO THE AMERISOURCE
RECEIVABLES MASTER TRUST PURSUANT TO A POOLING AND
SERVICING AGREEMENT, DATED AS OF DECEMBER 13, 1994, AMONG
AMERISOURCE RECEIVABLES CORPORATION, AS TRANSFEROR,
AMERISOURCE CORPORATION, AS THE INITIAL SERVICER, AND
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE."
The Seller hereby authorizes ARC or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Receivables and Related Assets of the
Seller, in each case whether now existing or hereafter generated by the Seller.
Except for material performance obligations of the Seller to any Obligor
hereunder or under any of the Contracts, if (i) the Seller fails to perform any
of its agreements or obligations under this Agreement and does not remedy the
failure within the applicable cure period, if any, and (ii) ARC in good faith
reasonably believes that the performance of such agreements and obligations is
necessary or appropriate to protect its interests under this Agreement, then ARC
or its designee may (but shall not be required to) perform, or cause performance
of, such agreement or obligation and the reasonable expenses of ARC or its
designee or assignee incurred in connection with such performance shall be
payable by the Seller as provided in Section 9.1.
-----------
SECTION 7.4 Collection of Receivables; Rights of ARC and Its Assignees .
----------------------------------------------------------
(a) The Seller hereby transfers to the Trustee (as transferee of ARC's interest
in the Transferred Assets) the ownership of, and the exclusive dominion and
control over, each of the Bank Accounts and all related lockboxes owned by the
Seller, and the Seller hereby agrees to take any further action that ARC or the
Trustee may reasonably request in order to effect or complete the transfer. The
Seller further agrees to use reasonable efforts to prevent funds other than
proceeds of the Transferred Assets from being deposited in any Bank Account.
(b) ARC may, at any time after a Liquidation Event or Servicer
Default, direct the Obligors of Receivables, or any of them, to pay all amounts
payable under any Transferred Asset directly to the Trustee or its designees.
Furthermore, the Seller shall, at the request of ARC and at the Seller's
expense, promptly give notice of the Trust's interest in the Receivables of the
Obligor and the Related Assets to each such Obligor and direct that payments be
made directly to the Trustee or its designee, which notice shall be acceptable
in form and substance to ARC. In addition, the Seller hereby authorizes ARC to
take any and all steps in the Seller's name and on its behalf that are necessary
or desirable, in the reasonable determination of ARC, to collect all amounts due
under any and all Transferred Assets, including endorsing the Seller's name on
checks and other instruments representing Collections and enforcing the
Transferred Assets and the Contracts related to the Receivables. The Trustee may
exercise any of the foregoing rights in the place of ARC (as
page 30
<PAGE>
assignee or otherwise) at any time following the designation of a Servicer
other than the Seller pursuant to Section 10.02 of the Pooling Agreement.
(c) At any time when (i) a Liquidation Event shall have occurred and
remain continuing or (ii) a Servicer other than the Seller has been designated
pursuant to Section 10.02 of the Pooling Agreement, the Seller shall, at ARC's
request, assemble all of the Records that evidence the Receivables and Related
Assets originated by the Seller and the Contracts related to the Receivables, or
that are otherwise necessary or desirable to collect the Receivables or Related
Assets, and make the same available to ARC or the Trustee at a place selected by
the Trustee or its designee.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Seller. Prior to the Liquidation
-------------------------
Commencement Date, the Seller may terminate its agreement to sell Receivables
hereunder to ARC by giving ARC and the Trustee not less than five Business Days'
prior written notice of its election not to continue to sell Receivables to ARC.
The Trustee shall notify the Certificateholders of all Series within five
Business Days of receiving any notice. Upon receipt of a termination notice
from the Seller, ARC shall notify the holders of each Series of Fixed Principal
Certificates that it is electing to cause that Series to be prepaid in full and
shall cause each Series of Investor Revolving Certificates and Purchased
Interests to be repaid as early as is practicable. The sale of Receivables
under this Agreement will not cease until all prepayments and repayments have
been completed.
SECTION 8.2 Automatic Termination. The agreement of the Seller to sell
---------------------
Receivables hereunder, and the agreement of ARC to purchase Receivables from the
Seller hereunder, shall terminate automatically upon the Liquidation
Commencement Date (including without limitation a Liquidation Commencement Date
resulting from the Trustee's receipt of a Stop Date Notice); provided, however,
that if, at any time prior to the Liquidation Commencement Date, an Event of
Bankruptcy occurs as a result of a bankruptcy proceeding being filed against the
Seller, then on and after the date on which such bankruptcy proceeding is filed
until the dismissal of the proceeding ARC shall not purchase Receivables and
Related Purchased Assets from the Seller.
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<PAGE>
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Seller. Without limiting any other rights
-------------------------
that any RPA Indemnified Party (as defined below) may have hereunder or under
applicable law, the Seller agrees to indemnify ARC, each of its successors,
permitted transferees and assigns, and all officers, directors, shareholders,
controlling Persons, employees and agents of any of the foregoing (each of the
foregoing Persons being individually called a "RPA Indemnified Party"),
forthwith on demand, from and against any and all damages, losses, claims
(whether on account of settlements or otherwise), judgments, liabilities and
related reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) awarded against or incurred by any of them arising out of or as a
result of any of the following (all of the foregoing being collectively called
"RPA Indemnified Losses"):
(a) any representation or warranty made in writing by the Seller (or
any of its Authorized Officers) under any of the Transaction Documents, any
Settlement Statement, any Daily Report or any other information or report
delivered by the Seller or the Servicer with respect to the Seller or the
Receivables or Related Assets originated by the Seller, that contained any
untrue statement of a material fact or omitted to state material facts
necessary to make the statements not misleading when made,
(b) the failure by the Seller to comply with any applicable law, rule
or regulation with respect to any Receivable or any Related Asset or to
comply with any Contract related thereto, or the nonconformity of any
Receivable, the related Contract or any Related Assets with any such
applicable law, rule or regulation ,
(c) the failure to vest and maintain vested in ARC a first priority
perfected ownership interest in the Receivables, the Related Assets, the
related Collections and the proceeds of each of the foregoing, free and
clear of any Adverse Claim (other than an Adverse Claim created in favor of
ARC pursuant to this Agreement or in favor of the Trustee pursuant to the
Pooling Agreement), whether existing at the time of the sale of such
Receivable or at any time thereafter and without regard to whether such
Adverse Claim was a Permitted Adverse Claim,
(d) any failure of the Seller to perform its duties or obligations in
accordance with the provisions of the Transaction Documents,
(e) any products liability claim, personal injury or property damage
suit, environmental liability claim or any other claim or action by a party
other than ARC of whatever sort, whether sounding in tort, contract or any
other legal theory, arising
page 32
<PAGE>
out of or in connection with the goods or services that are the subject of
any Transferred Assets with respect thereto or Collections thereof,
(f) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Transferred
Assets or Collections, whether at the time of any sale or at any subsequent
time,
(g) any dispute, claim, offset or defense (other than the discharge
in bankruptcy) of an Obligor to the payment of any Receivable or Related
Asset, or purported Receivable or Related Asset, including a defense based
on the Receivable's or the related Contract's not being a legal, valid and
binding obligation of the Obligor enforceable against it in accordance with
its terms, and
(h) any tax or governmental fee or charge (other than franchise taxes
and taxes on or measured by the net income of ARC or any of its assignees),
all interest and penalties thereon or with respect thereto, and all
reasonable out-of-pocket costs and expenses, including the reasonable fees
and expenses of counsel in defending against the same, that may arise by
reason of the purchase or ownership of the Receivables or any Related Asset
connected with any such Receivable s.
Notwithstanding the foregoing (and with respect to clause (ii) below, without
-----------
prejudice to the rights that ARC may have pursuant to the other provisions of
this Agreement or the provisions of any of the other Transaction Documents), in
no event shall any RPA Indemnified Party be indemnified for any RPA Indemnified
Losses (i) resulting from gross negligence or willful misconduct on the part of
the RPA Indemnified Party, (ii) to the extent the same includes losses in
respect of Receivables and reimbursement therefor that would constitute credit
recourse to the Seller for the amount of any Receivable or Related Asset not
paid by the related Obligor, (iii) resulting from the action or omission of the
Servicer (unless the Servicer is an AmeriSource Person), (iv) to the extent the
same are or result from lost profits, (v) to the extent the same are or result
from taxes on or measured by the net income of the RPA Indemnified Party and
(vi) to the extent the same constitute consequential, special or punitive
damages.
If for any reason the indemnification provided above in this section is
unavailable to a RPA Indemnified Party or is insufficient to hold a RPA
Indemnified Party harmless, then the Seller shall contribute to the maximum
amount payable or paid to the RPA Indemnified Party as a result of the loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the RPA Indemnified Party on the one hand
and the Seller on the other hand, but also the relative fault of the RPA
Indemnified Party (if any) and the Seller and any other relevant equitable
considerations.
page 33
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc. (a) The provisions of this
------------------------
Agreement may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and signed by ARC and the Seller
(with respect to an amendment) or by ARC (with respect to a waiver or consent by
it) and, in the case of any amendment, modification or waiver, to the extent
provided in Section 7.02(k) of the Pooling Agreement, by the Trustee, and then
the waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. This Agreement shall not be amended unless
(i) ARC shall have delivered the proposed amendment to the Applicable 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
Rating Agency Condition has been satisfied with respect to such amendment, and
(ii) if the terms of the Intercreditor Agreement prohibit such amendment,
modification or waiver without the written consent of the Seller Agent, ARC and
the Trustee shall have received copies of such consent.
(b) No failure or delay on the part of ARC, any RPA Indemnified
Party, or the Trustee or any other third party beneficiary referred to in
Section 10.11(a) in exercising any power or right hereunder shall operate as a
- - - ----------------
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Seller in any case shall
entitle it to any notice or demand in similar or other circumstances. No waiver
or approval by ARC or the Trustee under this Agreement shall, except as may
otherwise be stated in the waiver or approval, be applicable to subsequent
transactions. No waiver or approval under this Agreement shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2 Notices, Etc. 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
party at the address or facsimile number of such party set forth under its name
on the signature pages hereof or at such other address or facsimile number as
shall be designated by the party in a written notice to the other parties hereto
given in accordance with this section. Copies of all notices and other
communications provided for hereunder shall be delivered to the Trustee and the
Applicable Rating Agencies at their respective addresses for notices set forth
in the Pooling Agreement. All notices and 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
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<PAGE>
Business Days after having been given to the courier unless sooner received
by the addressee.
SECTION 10.3 Cumulative Remedies. The remedies herein provided are
-------------------
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, the Seller hereby authorizes ARC, at any time and from time to
time, to the fullest extent permitted by law, to set-off, against any
Obligations of the Seller to ARC that are then due and payable or that are not
then due and payable from the Seller to ARC but have then accrued, any and all
indebtedness or other obligations at any time owing to the Seller by ARC to or
for the credit or the account of the Seller or that are not then due and payable
from ARC to the Seller but have then accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions. This
-----------------------------------------------------
Agreement shall be binding upon and inure to the benefit of ARC and the Seller
and their respective successors and permitted assigns. The Seller may not
assign any of its rights hereunder or any interest herein without the prior
written consent of ARC, the Trustee and the Applicable Rating Agencies. 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 first date following the Purchase Termination Date, but not later than
the date on which the Trust is terminated pursuant to Section 12.01 of the
Pooling Agreement, on which all Obligations of the Seller shall have been
finally and fully paid and performed or such other time as the parties hereto
shall agree and as to which the Trustee (at the direction of the Majority
Investors) shall have given its prior written consent, which consent shall not
be unreasonably withheld or delayed. The rights and remedies with respect to
any breach of any representation and warranty made by the Seller pursuant to
Article V and the indemnification and payment provisions of Article IX and
- - - --------- ----------
Section 10.6 shall be continuing and shall survive any termination of this
- - - ------------
Agreement.
SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
ARC IN THE RECEIVABLES AND THE RELATED ASSETS ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of
-------------------------
the Seller under Article IX, the Seller agrees to pay on demand:
----------
(a) all reasonable out-of-pocket and other costs and expenses in
connection with the enforcement of this Agreement, the applicable Seller
Assignment Certificate or the other Transaction Documents by ARC or any
successor in interest to ARC, and
page 35
<PAGE>
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery, and the filing and
recording, of this Agreement or the other Transaction Documents, and agrees
to indemnify each RPA Indemnified Party against any liabilities with
respect to or resulting from any delay in paying or omission to pay the
taxes and fees.
SECTION 10.7 Submission to Jurisdiction. EACH PARTY HERETO HEREBY
--------------------------
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, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT,
(B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR PROCEEDING,
AND (C) IN THE CASE OF ARC, IRREVOCABLY APPOINTS PRENTICE-HALL CORPORATION
SYSTEM, INC. (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 15
COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, UNITED STATES OF AMERICA, 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 ANY ACTION OR
PROCEEDING. THE SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF THE
PROCESS TO ARC IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE
ADDRESS, AND ARC HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT THE SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF
ARC AND THE SELLER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO
ARC OR THE SELLER (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 THE OTHER PARTY OR ANY OF ITS PROPERTIES
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 10.8 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
page36
<PAGE>
CONNECTION THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER 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 10.9 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 between the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION 10.10 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by 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 agreement.
SECTION 10.11 Acknowledgment and Consent. (a) The Seller acknowledges
--------------------------
that, contemporaneously herewith, ARC is selling, transferring, assigning,
setting over and otherwise conveying to the Trust all of ARC's right, title and
interest in, to and under the Transferred Assets, this Agreement and all of the
other Transaction Documents pursuant to Sections 2.01 and 2.04 of the Pooling
Agreement. The Seller hereby consents to the sale, transfer, assignment, set
over and conveyance to the Trust by ARC of all right, title and interest of ARC
in, to and under the Transferred Assets, this Agreement and the other
Transaction Documents, and all of ARC's rights, remedies, powers and privileges,
and all claims of ARC against the Seller, under or with respect to this
Agreement and the other Transaction Documents (whether arising pursuant to the
terms of this Agreement or otherwise available at law or in equity), including
(i) the right of ARC, at any time, to enforce this Agreement against the Seller
and the obligations of the Seller hereunder, (ii) the right to appoint a
successor to the Servicer at the times and upon the conditions set forth in the
Pooling Agreement, and (iii) the right, at any time, to give or withhold any and
all consents, requests, notices, directions, approvals, demands, extensions or
waivers under or with respect to this Agreement, any other Transaction Document
or the obligations in respect of the Seller thereunder to the same extent as ARC
may do. Each of the parties hereto acknowledges and agrees that the Trustee and
the Trust are third party beneficiaries of the rights of ARC arising hereunder
and under the other Transaction Documents to which the Seller is a party. The
Seller hereby acknowledges and agrees that it has no claim to or interest in any
of the Bank Accounts or the Trust Accounts.
(b) The Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that ARC or the Trustee reasonably
determines is necessary or appropriate to evidence its consent described in
subsection (a) above. To the extent that
- - - --------------
page 37
<PAGE>
ARC, individually or through the Servicer, has granted or grants powers of
attorney to the Trustee under the Pooling Agreement, the Seller hereby grants a
corresponding power of attorney on the same terms to ARC. The Seller hereby
acknowledges and agrees that ARC, in all of its capacities, shall assign to the
Trustee for the benefit of the Certificateholders the powers of attorney and
other rights and interests granted by the Seller to ARC hereunder and agrees to
cooperate fully with the Trustee in the exercise of the rights.
SECTION 10.12 No Partnership or Joint Venture. Nothing contained in this
-------------------------------
Agreement shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent or of partnership or of
joint venture.
SECTION 10.13 No Proceedings. The Seller hereby agrees that it will not
--------------
institute against ARC or the Trust, or join any other Person in instituting
against ARC or the Trust, any insolvency proceeding (namely, any proceeding of
the type referred to in the definition of Event of Bankruptcy) so long as any
Investor Certificates 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
Investor Certificates shall have been outstanding. The foregoing shall not
limit the right of the Seller to file any claim in or otherwise take any action
with respect to any insolvency proceeding that was instituted against ARC or the
Trust by any Person other than a Seller, the Seller or any other AmeriSource
Person.
SECTION 10.14 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
affect the validity or enforceability of the other provisions of this Agreement
or any of the other Transaction Documents.
SECTION 10.15 Recourse to ARC. Except to the extent expressly provided
---------------
otherwise in the Transaction Documents, the obligations of ARC under the
Transaction Documents to which it is a party are solely the obligations of ARC,
and no recourse shall be had for payment of any fee payable by or other
obligation of or claim against ARC that arises out of any Transaction Document
to which ARC is a party against any director, officer or employee of ARC. The
provisions of this section shall survive the termination of this Agreement.
[Remainder of page intentionally left blank.]
page 38
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
AMERISOURCE CORPORATION,
as the Seller
By:______________________________
Title:__________________________
Address: 300 Chester Field Parkway
Malvern, Pennsylvania 19355
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
AMERISOURCE RECEIVABLES CORPORATION,
as the purchaser
By:_______________________________
Title:___________________________
Address: P.O. Box 1735
Southeastern,
Pennsylvania 19399-1735
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the __th day of December, 1994 before me personally came
____________________ to me known, who, being by me duly sworn, did depose and
say that he resides at ___________________; that he is a _____________________
of AmeriSource Corporation, a Delaware corporation, the corporation described in
and that executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of the corporation.
Given under my hand and notarial seal, this __th day of December, 1994.
________________________________
Notary Public
Type or
Print Name:_____________________
My commission expires:
- - - --------------------------
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the __th day of December, 1994 before me personally came ______________
to me known, who, being by me duly sworn, did depose and say that he resides at
_________________________; that he is the ______________ of AmeriSource
Receivables Corporation, a __________ corporation, the corporation described in
and that executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of the corporation.
Given under my hand and notarial seal, this __th day of December, 1994.
________________________________
Notary Public
Type or
Print Name:_____________________
My commission expires:
- - - -------------------------
<PAGE>
EXHIBIT A
FORM OF ARC NOTE
----------------
New York, New York
December 13, 1994
FOR VALUE RECEIVED, the undersigned, AMERISOURCE RECEIVABLES CORPORATION, a
Delaware corporation ("ARC"), promises to pay to AMERISOURCE CORPORATION, a
Delaware corporation (the "Seller" and together with its successors and assigns,
the "Holder"), on the terms and subject to the conditions set forth in this
promissory note (this "Note") and in the Receivables Purchase Agreement of even
date herewith (the "Agreement") between ARC and the Seller, an amount equal to
the aggregate unpaid principal amount of all borrowings deemed to be made by ARC
from the Seller pursuant to Article III of the Agreement. Such amount, as shown
in the records of the Servicer, will be rebuttable presumptive evidence of the
principal amount and interest owing under this Note.
1. Purchase Agreement. This Note is the ARC Note described in, and is
------------------
subject to the terms and conditions set forth in, the Agreement. Reference is
hereby made to the Agreement for a statement of certain other rights and
obligations of ARC and the Seller.
2. Rules of Construction; Definitions. Certain rules of construction
----------------------------------
governing the interpretation of this Note are set forth in Appendix A to the
Agreement and, except as otherwise specifically provided herein, capitalized
terms used but not defined herein have the meanings ascribed to them in Appendix
A to the Agreement. In addition, as used herein, the following terms have the
following meanings:
"Bankruptcy Proceedings" means any dissolution, winding up,
liquidation, readjustment, reorganization or other similar event relating
to ARC, whether voluntary or involuntary, partial or complete, and whether
in bankruptcy, insolvency, receivership or other similar proceedings, or
upon an assignment for the benefit of creditors, or any other marshalling
of the assets and liabilities of ARC or any sale of all or substantially
all of the assets of ARC; provided, however, that none of the commencement
of the Liquidation Period, the allocation and distribution of Collections
and other amounts during the Liquidation Period in accordance with the
terms of the Pooling Agreement and the liquidation, dissolution and winding
up of ARC during the Liquidation Period in accordance with the Pooling
Agreement after the termination of the Pooling Agreement in accordance with
Section 12.01 thereof shall constitute a "Bankruptcy Proceeding," so long
as no bankruptcy, insolvency, receivership or other similar proceedings
shall have been commenced by or against ARC and be continuing.
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<PAGE>
"Final Maturity Date" means the date occurring one year and one
day after the Final Scheduled Payment Date of the latest maturing Series or
Purchased Interest from time to time outstanding.
"Highest Lawful Rate" has the meaning set forth in paragraph 9.
-----------
"Junior Liabilities" means all obligations of ARC to the Holder
under this Note.
"Reference Rate" means, with respect to any day occurring in a
Calculation Period, the rate of interest publicly announced from time to
time by Bankers Trust Company as its "prime rate" and in effect on the
first day of such Calculation Period, as determined by the Servicer.
"Senior Interests" means all obligations of ARC to the
Certificateholders under or in connection with the Transaction Documents,
whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, including without limitation interest or
other amounts due or to become due after an Event of Bankruptcy.
"Subordination Provisions" means, collectively, the provisions
of paragraph 7.
-----------
3. Interest. Subject to the Subordination Provisions, ARC promises to pay
--------
interest on the aggregate unpaid principal amount of this Note outstanding on
each day at an adjustable rate per annum equal to the Reference Rate in effect
on such day.
4. Interest Payment Dates. (a) Subject to the Subordination Provisions,
----------------------
ARC shall pay accrued interest on this Note on each Settlement Date and on the
Final Maturity Date. ARC also shall pay accrued interest on the principal amount
of each prepayment hereof on the last day of each calendar month.
(b) Notwithstanding the provisions of paragraph 4(a), in the event that on
--------------
the date an interest payment is due hereunder the amount of funds available
therefor pursuant to clause Eighth of Section 4.03(g) of the Pooling Agreement
is insufficient to pay any amount due pursuant to paragraph 4(a), then interest
--------------
shall be payable only to the extent that funds are available therefor in
accordance with Section 4.03(g) of the Pooling Agreement. All interest on this
Note that is not paid when due pursuant to this paragraph shall be payable on
the next date on which an interest payment on this Note is due and on which
funds are available therefor pursuant to clause Eighth of Section 4.03(g) of the
Pooling Agreement, and all such unpaid interest shall accrue interest at the
Reference Rate until paid in full.
5. Basis of Computation. Interest accrued hereunder shall be computed for
--------------------
the actual number of days elapsed on the basis of a 360-day year.
page 2
<PAGE>
6. Principal Payment Dates. Subject to the Subordination Provisions, any
-----------------------
unpaid principal of this Note shall only become due and payable on the Final
Maturity Date. Subject to the Subordination Provisions, the principal amount of
and accrued interest on this Note may be prepaid on any Business Day without
premium or penalty; provided, that no prepayment shall be made by ARC to the
extent that such prepayment would result in a default in the payment of any
other amount required to be paid by ARC under any Transaction Document.
7. Subordination Provisions. ARC covenants and agrees, and the Holder, by
------------------------
its acceptance of this Note, likewise covenants and agrees, that the payment of
all Junior Liabilities is hereby expressly subordinated in right of payment to
the payment and performance of the Senior Interests to the extent and in the
manner set forth in this paragraph:
(a) In the event of any Bankruptcy Proceeding, the Senior Interests
shall first be paid and performed in full and in cash before the Holder
shall be entitled to receive and to retain any payment or distribution in
respect of the Junior Liabilities. In order to implement the foregoing: (i)
all payments and distributions of any kind or character in respect of the
Junior Liabilities to which the Holder would be entitled except for this
clause (a) shall be made directly to the Certificateholders, and (ii)
----------
if a Bankruptcy Proceeding has been commenced, the Holder shall promptly
file a claim or claims, in the form required in any Bankruptcy Proceedings,
for the full outstanding amount the Junior Liabilities, and shall use
commercially reasonable efforts to cause said claim or claims to be
approved and all payments and other distributions in respect thereof to be
made directly to the Certificateholders until the Senior Interests shall
have been paid and performed in full and in cash.
(b) In the event that the Holder receives any payment or other
distribution of any kind or character from ARC or from any other source
whatsoever, in payment of the Junior Liabilities, after the commencement of
any Bankruptcy Proceeding, such payment or other distribution shall be
received in trust for the Certificateholders and shall be turned over by
the Holder to the Certificateholders forthwith.
(c) Upon the final indefeasible payment in full and in cash of all
Senior Interests, the Holder shall be subrogated to the rights of the
Certificateholders to receive payments or distributions from ARC that are
applicable to the Senior Interests until the Junior Liabilities are paid in
ull.
(d) These Subordination Provisions are intended solely for the purpose
of defining the relative rights of the Holder, on the one hand, and the
Certificateholders on the other hand. Nothing contained in these
Subordination Provisions or elsewhere in this Note is intended to or shall
impair, as between ARC, its creditors (other than the Certificateholders)
and the Holder, ARC's obligation, which is unconditional and
page 3
<PAGE>
absolute, to pay the Junior Liabilities as and when the same shall become
due and payable in accordance with the terms hereof and of the Agreement or
to affect the relative rights of the Holder and creditors of ARC (other
than the Certificateholders).
(e) The Holder shall not, until the Senior Interests have been
finally paid and performed in full and in cash, (i) cancel, waive, forgive,
transfer or assign, or commence legal proceedings to enforce or collect, or
subordinate to any obligation of ARC (other than to the Senior Interests),
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to become
due, the Junior Liabilities or any rights in respect hereof or (ii) convert
the Junior Liabilities into an equity interest in ARC, unless, in the case
of each of clauses (i) and (ii), the Holdershall have received the prior
----------- ----
written consent of the Certificateholders in each case.
(f) The Holder shall not, without the advance written consent of the
Certificateholders, commence, or join with any other Person in commencing,
any Bankruptcy Proceedings with respect to ARC until at least one year and
one day shall have passed after the Senior Interests shall have been
finally paid and performed in full and in cash; provided, however, that the
Holder shall at all times have the right to file any claim in or otherwise
take any action with respect to any insolvency proceeding instituted
against ARC by any Person other than the Holder, ARC or any other
AmeriSource Person (provided that no such action may be taken by the Holder
until such proceeding has continued undismissed, unstayed and in effect for
a period of 10 days).
(g) If, at any time, any payment (in whole or in part) made with
respect to any Senior Interest is rescinded or must be restored or returned
by a Certificateholder (whether in connection with any Bankruptcy
Proceedings or otherwise), these Subordination Provisions shall continue to
be effective or shall be reinstated, as the case may be, as though such
payment had not been made.
(h) Each of the Certificateholders may, from time to time, in its
sole discretion, without notice to the Holder, and without waiving any of
its rights under these Subordination Provisions, take any or all of the
following actions: (i) retain or obtain an interest in any property to
secure any of the Interests, (ii) retain or obtain the primary or secondary
obligations of any other obligor or obligors with respect to any of the
Senior Interests, (iii) extend or renew for one or more periods (whether or
not longer than the original period), alter, increase or exchange any of
the Senior Interests, or release or compromise any obligation of any nature
with respect to any of the Senior Interests, (iv) amend, supplement, amend
and restate, or otherwise modify any Transaction Document to which it is a
party, and (v) release its security interest in, or surrender, release or
permit any substitution or exchange for all or any part of any rights or
property securing any of the Senior Interests, or
page 4
<PAGE>
extend or renew for one or more periods (whether or not longer than the
original period), or release, compromise, alter or exchange any obligations
of any nature of any obligor with respect to any such rights or property.
(i) The Holder hereby waives: (i) notice of acceptance of these
Subordination Provisions by any of the Certificateholders, (ii) notice of
the existence, creation, non-payment or non-performance of all or any of
the Senior Interests, and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Interests, or any thereof,
or any security therefor.
(j) These Subordination Provisions constitute a continuing offer from
ARC to all Persons who become the holders of, or who continue to hold,
Senior Interests, and these Subordination Provisions are made for the
benefit of the Certificateholders, and the Trustee may proceed to enforce
such provisions on behalf of each of such Persons.
8. General. No failure or delay on the part of the Holder in
-------
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Note shall in any event be effective unless (a) the same shall
be in writing and signed and delivered by ARC and the Seller, and (b) all
consents required for such actions under the Transaction Documents shall have
been received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note to the
----------------------
contrary, ARC shall never be required to pay unearned interest on any amount
outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder, at a rate in excess of the maximum
nonusurious interest rate that may be contracted for, charged or received under
applicable federal or state law (such maximum rate being herein called the
"Highest Lawful Rate"). If the effective rate of interest that would otherwise
be payable under this Note would exceed the Highest Lawful Rate, or the Holder
shall receive any unearned interest or shall receive monies that are deemed to
constitute interest that would increase the effective rate of interest payable
by ARC under this Note to a rate in excess of the Highest Lawful Rate, then (a)
the amount of interest that would otherwise be payable by ARC under this Note
shall be reduced to the amount allowed by applicable law, and (b) any unearned
interest paid by ARC or any interest paid by ARC in excess of the Highest Lawful
Rate shall be refunded to ARC. Without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or
page 5
<PAGE>
received by the Holder under this Note that are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate shall be made, to
the extent permitted by applicable usury laws (now or hereafter enacted), by
amortizing, prorating and spreading in equal parts during the actual period
during which any amount has been outstanding hereunder all interest at any time
contracted for, charged or received by the Seller in connection herewith. If at
any time and from time to time (i) the amount of interest payable to the Holder
on any date shall be computed at the Highest Lawful Rate pursuant to the
provisions of the foregoing sentence, and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to the
Holder would be less than the amount of interest payable to the Holder computed
at the Highest Lawful Rate, then the amount of interest payable to the Holder in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate until the total amount of interest payable
to the Holder shall equal the total amount of interest that would have been
payable to the Holder if the total amount of interest had been computed without
giving effect to the provisions of the foregoing sentence.
10 No Negotiation. This Note is not negotiable.
--------------
11 Governing Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
-------------
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
12 Security Interest. The Seller may grant a security interest in or
-----------------
otherwise pledge this Note as security, and any Person to whom such security
interest is granted or to whom this Note is pledged shall be bound by, and for
all purposes takes this Note subject to, the restrictions and other provisions
(including the Subordination Provisions) set forth herein.
13 Captions. Paragraph captions used in this Note are provided solely for
--------
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Note.
AMERISOURCE RECEIVABLES CORPORATION
By:_________________________________
Title:____________________________
page 6
<PAGE>
EXHIBIT B
FORM OF
AMERISOURCE CERTIFICATE
-----------------------
page 7
<PAGE>
EXHIBIT C
FORM OF
SELLER ASSIGNMENT CERTIFICATE
-----------------------------
Reference is made to the Receivables Purchase Agreement of even date
herewith (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Agreement") between AMERISOURCE
CORPORATION (the "Seller") and AMERISOURCE RECEIVABLES CORPORATION ("ARC").
Unless otherwise defined herein, capitalized terms used herein have the meanings
provided in Appendix A to the Agreement.
The Seller hereby sells, transfers, assigns, sets over and conveys unto ARC
and its successors and assigns all right, title and interest of the Seller in,
to and under:
(a) each Receivable of the Seller (other than Contributed
Receivables) that existed and was owing to the Seller as at the closing of
the Seller's business on the Initial Cut-Off Date,
(b) each Receivable created by the Seller (other than Contributed
Receivables) that arises during the period from and including the closing
of the Seller's business on the Initial Cut-Off Date to but excluding the
Purchase Termination Date,
(c) all Related Security with respect to all Receivables (other than
Contributed Receivables) of the Seller,
(d) all proceeds of the foregoing, including all funds received by
any Person in payment of any amounts owed (including invoice prices,
finance charges, interest and all other charges, if any) in respect of any
Receivable described above (other than a Contributed Receivable) or Related
Security with respect to any such Receivable, or otherwise applied to repay
or discharge any such Receivable (including insurance payments that the
Seller or the Servicer applies in the ordinary course of its business to
amounts owed in respect of any such Receivable (it being understood that
property insurance covering inventory is not so applied and is not included
in this grant) and net proceeds of any sale or other disposition of
repossessed goods that were the subject of any such Receivable) or other
collateral or property of any Obligor or any other party directly or
indirectly liable for payment of such Receivables), and
(e) all Records relating to any of the foregoing.
This Seller Assignment Certificate is made without recourse but on the
terms and subject to the conditions set forth in the Transaction Documents
to which the Seller is a
page 1
<PAGE>
party. The Seller acknowledges and agrees that ARC is accepting this Seller
Assignment Certificate in reliance on the representations, warranties and
covenants of the Seller contained in the Transaction Documents to which the
Seller is a party.
THIS SELLER ASSIGNMENT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE AGREEMENT AND THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Seller Assignment
Certificate to be duly executed and delivered by its duly Authorized Officer
this 13th day of December, 1994.
AMERISOURCE CORPORATION
By:_________________________________
Title:____________________________
page 2
<PAGE>
SCHEDULE 1
to Purchase Agreement
LITIGATION AND OTHER PROCEEDINGS
--------------------------------
A. Seller is named as a defendant in the following L-Tryptophan lawsuit.
Seller believes it is entitled to full indemnification by its suppliers and
the manufacturer of L-Tryptophan with respect to this lawsuit:
1. Margaret M. O'Neill, et al. v. Showa Denko, K.K., et al., Court of
-------------------------------------------------------
Common Pleas, Cuyahoga County, Ohio, No. 91-218888-CV.
B. Seller is named as a defendant, along with six other wholesale distributors
and twenty-four pharmaceutical manufacturers, in 14 civil actions filed in
the United States District Court for the Southern District of New York. For
pretrial matters, these cases, along with thirty-four others (to which the
Company is not a party) have been transferred to the United States District
Court for the Northern District of Illinois. In general, these lawsuits all
claim that the manufacturer and wholesaler defendants have combined,
contracted and conspired to fix the prices charged to plaintiffs and class
members for prescription brand name pharmaceuticals. Specifically,
plaintiffs claim that m the defendants use "chargeback agreements" to give
some institutional pharmacies discounts that are not made available to
retail drug stores. Seller believes it has meritorious defenses to the
claims asserted in these lawsuits.
C. In connection with its examination of the consolidated Federal income tax
returns of Seller and its subsidiaries for the taxable years ended
September 30, 1987 through December 29, 1988 and of AmeriSource
Distribution Corporation and its subsidiaries (including Seller) for the
taxable years ended September 30, 1989 through September 30, 1991, the
Internal Revenue Service (the "IRS") has delivered to Seller certain
Notices of Proposed Adjustment reflecting proposed increases to the taxable
income of the consolidated groups for those periods.
The IRS has not yet delivered a Revenue Agent's Report and accompanying"30-
day letter" upon the conclusion of the examination pursuant to which the
taxpayers are permitted to file an administrative protest of any proposed
adjustments with the IRS Appeals Office. Seller expects to contest
substantially all of the proposed adjustments.
D. Seller has removed two underground storage tanks (the "USTs") at its
Charleston, South Carolina facility and is awaiting finalization by the
South Carolina Department of Health and Environmental Control on its
closure report. The USTs in South
<PAGE>
Carolina are registered under the state's SUPERB program.
Seller retained General Engineering Laboratories ("GEL") to study its
Charleston, South Carolina property and to determine the extent of the
environmental problem existing at that site.
GEL completed its Subsurface Soil Investigation and issued a report dated
October 22, 1993, which identified elevated concentrations of lead in the
soil at the Charleston, South Carolina facility. Seller then retained RMT,
Inc. ("RMT") to perform a groundwater investigation at the facility. RMT
completed its Groundwater Investigation and issued a report dated July
1994, which found lead in unfiltered groundwater samples taken at the
facility. Seller submitted RMT's report to the South Carolina Department of
Health and Environmental Control ("SC DHEC").
As described in Seller's Form 10-Q for the Fiscal Quarter Ended June 30,
1994, Seller reserved $4.1 million during the third quarter of fiscal 1994
to cover future consulting, legal and remediation and ongoing monitoring
costs for the Charleston, South Carolina facility.
In September 1994, SC DHEC directed Seller to conduct additional
groundwater and soil investigations at the facility. In October 1994, RMT
submitted a proposed workplan to SC DHEC describing the additional
investigation activities that will be undertaken at the facility.
<PAGE>
SCHEDULE 2
to Purchase Agreement
OFFICES OF THE SELLER WHERE
RECORDS ARE MAINTAINED
-------------------------------
AmeriSource Corporation AmeriSource-Louisville
300 Chester Field Parkway 244 E. Woodlawn
Malvern, PA 19355 Louisville, ky 40214
AmeriSource-Chattanooga AmeriSource-Lynchburg
300 Tallan Building 9221 Timberlake Road
Two Union Square Lynchburg, VA 24502
Chattanooga, TN 37402
AmeriSource-Paducah
322 North 3rd Street
Paducah, KY 42001
AmeriSource-Minneapolis
6810 Shady Oak Road
Eden Prairie, MN 55344
AmeriSource-Thorofare
400 Grove Road
Thorofare, NJ 08086
Rita-Ann Distributors
901 Curtain Avenue
Baltimore, MD 21218
AmeriSource-Columbus
1200 E. 5th Avenue
Columbus, OH 43219
AmeriSource- Toledo
3145 Nebraska
Toledo, OH 43607
<PAGE>
SCHEDULE 3
to Purchase Agreement
LEGAL NAMES
-----------
AmeriSource Corporation
Alco Health Services Corporation
TRADE NAMES
-----------
1. AmeriSource Corporation
Malvern, PA
2. The Drug House
Harrisburg, PA
3. The Drug House
Thorofare, NJ
4. Family Independent Pharmacy
Columbus, OH
5. Family Pharmacy
Columbus, OH
6. The Kauffman-Lattimer Company
Louisville, KY
7. The Kauffman-Lattimer Company
Columbus, OH
8. Home Health Care
Sioux Falls, SD
9. Meyers & Company
Tiffin, OH
10. R A Distributors
Baltimore, MD
11. Rita-Ann Distributors
Baltimore, MD
12. Strother Drug Company
Lynchburg, VA
13. Alco Health Services Northeast
Thorofare, NJ
Harrisburg, PA
<PAGE>
14. Alco Health Services Southeast
Chattanooga, TN
Johnson City, TN
Valdosta, GA
15. Alco Health Services West Central
Sioux Falls, SD
Council Bluffs, IA
Joplin, MO
Minneapolis, MN
16. Alco Health Services Mid Central
Columbus, OH
Louisville, KY
17. Alco Health Services North Central
Mishawaka, IN
Toledo, OH
Tiffin, OH
18. Alco Health Services South Central
Paducah, KY
19. Alco Health Services Atlantic Coast
Lynchburg, VA
20. Duff Brothers
Chattanooga, TN
21. Smith-Higgins Company
Johnson City, TN
22. Brown Drug Company
Sioux City, SD
Council Bluffs, IA
23. AmeriSource (Minnesota) Corporation
24. AmeriSource (New York)
25. AmeriSource (Indiana) Corporation
26. AmeriSource (Iowa) Corporation
27. AmeriSource (Services) Corporation
<PAGE>
SCHEDULE 4
to Purchase Agreement
CHANGES IN FINANCIAL CONDITION
------------------------------
A. Write-off of Seller's remaining balance of goodwill of $179.8 million in
the third quarter of fiscal 1994, as described in Seller's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1994.
B. Redemption of Existing Subordinated Notes, as described in Seller's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994.
C. Exchange of $40,329,000 principal amount of New Subordinated Notes and
$101,000 cash for $40,329,000 principal amount of Existing Subordinated
Notes, as described in Seller's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994. In addition, Seller paid certain
holders of Existing Subordinated Notes cash consideration of $520,000 in
exchange for such holders' agreement not to tender any of the Existing
Subordinated Notes or to exercise any other rights they might have with
respect to a consolidated net worth provision in the indenture for the
Existing Subordinated Notes, as described in Seller's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1994.
D. See Schedule 1 - Litigation and Other Proceedings.
----------
E. Effective October 1, 1993, Seller adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions" (Statement 106) and Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (Statement 109). See
Seller's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1994 for a discussion.
F. As of the date hereof, Seller has commenced the redemption of all
outstanding Subordinated Notes which will be redeemed at the applicable
premium set forth in the Subordinated Notes.
G. Commencement of the transaction contemplated by the Original Seller Credit
Agreements.
<PAGE>
APPENDIX A
[Same as Appendix A to Pooling Agreement]
<PAGE>
APPENDIX A
DEFINITIONS
This is Appendix A to (a) the Purchase Agreement (as hereinafter defined)
----------
and (b) the Pooling Agreement (as hereinafter defined).
A. Defined Terms. As used in the Purchase Agreement, the Pooling
-------------
Agreement or any Supplement, as the case may be (unless the context requires a
different meaning), the following terms have the following meanings (such
meanings to be equally applicable to the singular and plural forms thereof):
"Acceptable Guarantee Instrument" means (a) an irrevocable letter of credit
issued by a commercial bank having a short-term debt or certificate of deposit
rating of at least "A-1+" from S&P, which letter of credit shall be a "direct
pay" letter of credit, reasonably satisfactory in form and substance to the
Trustee, or (b) a surety bond issued by an insurance company having a claims
paying ability rating of at least "A-1+" from S&P; provided, that no letter of
credit or surety bond shall constitute an Acceptable Guarantee Instrument until
the Rating Agency Condition has been met with respect to the terms and
conditions of the letter of credit or surety bond, as the case may be.
"Account Agreements" means the Concentration Account Agreements and the
Lockbox Agreements, as they may be amended, supplemented, amended and restated
or otherwise modified from time to time in accordance with the Pooling
Agreement.
"Account Banks" means the Concentration Account Banks and the Lockbox
Banks.
"Accrual Reserve" means, on any day, the product of (a) the aggregate
amount of the accounting reserves or "contra" entries established by the Sellers
on their books and records as of such day in respect of the Sellers' expected
liability for Cash Discounts and (b) a factor which shall equal (i) prior to the
date referred to in the following sentence, 1.75 and (ii) on and after that
date, 0. The date for the change in the factor described in clause (b) above
----------
will be the date, falling not later than 60 days after the Closing Date, upon
which AmeriSource has (x) recalculated its Dilution statistics for each of the
twelve most recent Calculation Periods ending prior to such date to give effect
to the actual Cash Discounts taken during each such Calculation Period, (y)
recalculated the Dilution Ratios for each such Calculation Period accordingly
and (z) recalculated the then-current Dilution Reserve Ratio accordingly (and
given effect to such recalculation in a Daily Report).
"Accrued Carrying Costs" is defined in Section 4.03(a) of the Pooling
Agreement.
"Accumulation Account" is defined in Section 4.02(g) of the Pooling
Agreement.
<PAGE>
"Accumulation Account Termination Date" is defined in Section 4.02(g) of
the Pooling Agreement.
"Accumulation Period" means, with respect to a Series of Investor
Certificates or Purchased Interests, the period commencing on the Scheduled
Accumulation Commencement Date that applies to that Series of Investor
Certificates and ending on the earlier of (a) the Liquidation Commencement Date,
(b) the Pay-Out Period Commencement Date and (c) the Expected Final Payment Date
for that Series.
"Accumulation Period Commencement Date" means, with respect to a Series of
Investor Certificates, the Scheduled Accumulation Commencement Date for the
Series of Investor Certificates.
"Adjusted Eligible Receivables" means, at any time, the excess of (a) the
then aggregate Unpaid Balance of all Eligible Receivables in the Trust over (b)
the Unapplied Cash held by the Trust.
"Advances" has the meaning assigned to that term in the Original Seller
Credit Agreement.
"Adverse Claim" means any claim of ownership interest or any mortgage, deed
of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other) or other security agreement of any kind or nature
whatsoever, including any conditional sale or other title retention agreement
and any financing lease having substantially the same economic effect as any of
the foregoing.
"Affected Receivables" means, with respect to a Look Back Period, Available
Receivables for each day during such Look Back Period.
"Affiliate" when used with respect to a Person means any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. As used in this definition, the term "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of a Person, whether through the ownership of such Person's voting
securities, by contract or otherwise, and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the term "control."
"Aged Receivables Ratio" means, as calculated in each Settlement Statement
as of the Cut-Off Date for the related Calculation Period, a fraction (expressed
as a percentage) having (a) a numerator that is the sum of (i) the aggregate
Unpaid Balance of Receivables that were past due 121 to 150 days, as determined
as of the Cut-Off Date for the most recently ended Calculation Period, plus (ii)
the aggregate Unpaid Balance of Receivables that were written off as
uncollectible during the most recently ended Calculation Period and that were
not more than 150 days past due as of that Cut-Off Date and (b) a denominator
that is the aggregate
page A-2
<PAGE>
amount payable pursuant to invoices giving rise to Receivables that were
generated by the Seller during the Calculation Period that occurred five
Calculation Periods prior to the most recently ended Calculation Period, as
determined as of the Cut-Off Date for such prior Calculation Period.
"Agent" means, with respect to a Series of Revolving Certificates, the bank
or similar Person designated as the agent for the Revolving Purchasers in the
Series' Revolving Certificate Purchase Agreement.
"Aggregate Unpaid Balance" is defined in Section 2.1(b) of the Purchase
Agreement.
"Allocable Charged-Off Amount" is defined in Section 4.03(e) of the Pooling
Agreement.
"Allocable Daily Collections" means, with respect to any Series or
Purchased Interest on any day, an amount equal to the product of:
(a) a fraction, (i) the numerator of which is the Ratable Principal
Amount of the Series or Purchased Interest and (ii) the denominator of
which is the sum of the Ratable Principal Amounts of all then-outstanding
Investor Certificates, all then outstanding Purchased Interests and the ARC
Revolving Certificate, multiplied by
(b) the amount of collected funds on deposit in the Master Collection
Account on that day.
"Alternate Base Rate" shall be as stated in the Supplement pursuant to
which a Series of Certificates is offered.
"AmeriSource" means AmeriSource Corporation, a Delaware corporation, or its
successor in interest.
"AmeriSource Certificate" is defined in Section 1.2(e) of the Purchase
--------------
Agreement.
"AmeriSource Person" means AmeriSource and each of its Subsidiaries and
Affiliates other than ARC.
"Applicable Rating Agencies" means each of the nationally recognized
statistical rating agencies that, at the request of the Seller or ARC, has rated
any then-issued and outstanding Series or Class of Investor Certificates.
"Applicable Reserve Ratio" means, at any time, the greater of (a) the
Minimum Required Reserve Ratio and (b) the sum of the Required Reserve Ratios
then in effect.
page A-3
<PAGE>
"Applicant" is defined in Section 6.07 of the Pooling Agreement.
"ARC" means AmeriSource Receivables Corporation, a Delaware corporation, or
its successor in interest.
"ARC Allocation Percentage" means, on any Settlement Date after the
Liquidation Commencement Date, a fraction with (a) a numerator that equals the
ARC Revolving Amount (after giving effect to any adjustments pursuant to the
Pooling Agreement on the Settlement Date), and (b) a denominator that equals the
Invested Amount, in each case calculated as of the Settlement Date.
"ARC Note" means the note defined in Section 3.2 of the Purchase Agreement,
substantially in the form of Exhibit A to the Purchase Agreement.
"ARC Revolving Amount" means, at any time, (a)(i) the ARC Revolving Initial
Amount, plus (ii) all additions made to the ARC Revolving Amount pursuant to
Section 4.03 of the Pooling Agreement, minus (iii) all reductions in the ARC
Revolving Amount made pursuant to Section 4.03 of the Pooling Agreement, minus
(b) the amount of all other principal payments made to ARC prior to such time in
respect of the ARC Revolving Certificate and any Allocable Charged-Off Amounts
(net of Net Recoveries) allocated to the ARC Revolving Certificate.
"ARC Revolving Certificate" means the Revolving Certificate, substantially
in the form of Exhibit G to the Pooling Agreement, that represents a right to
receive a variable principal amount, was issued to ARC on the First Issuance
Date (and any Revolving Certificate issued to ARC in replacement thereof or in
exchange or substitution therefor), does not bear interest and was executed by
ARC and authenticated by or on behalf of the Trustee.
"ARC Revolving Initial Amount" means $ , being the initial
------------
principal amount of the ARC Revolving Certificate on the Closing Date.
"Assignment of Claims Act" is defined in Section 2.03(E)(iii) of the
Pooling Agreement.
"Authorized Newspaper" means 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.
"Authorized Officer" means, (a) with respect to ARC: Kurt J. Hilzinger,
Vice President, John A. Kurcik, Vice President, Teresa Ciccotelli, Secretary, R.
David Yost, Treasurer, Julie Frantz, Assistant Treasurer, (b) with respect to
the Seller: Kurt J. Hilzinger, Vice President Finance and Treasurer, John A.
Kurcik, Vice President, Controller
page A-4
<PAGE>
and Assistant Treasurer, Teresa Ciccotelli, Vice President and Secretary, M.
Curtis Young, Corporate Asset Manager, Julie Frantz, Treasury Operations Manager
and (c) with respect to the Servicer: Kurt J. Hilzinger, Vice President Finance
and Treasurer, John A. Kurcik, Vice President, Controller and Assistant
Treasurer, Teresa Ciccotelli, Vice President and Secretary, M. Curtis Young,
Corporate Asset Manager, Julie Frantz, Treasury Operations Manager.
"Available Final Distribution Amount" means, with respect to any Series,
the amount that would be available in the Master Collection Account on the
Series Sale Date for the Series for distribution to the Certificateholders of
such Series.
"Available Receivables" has the meaning assigned to such term in Section
1.2(c) of the Purchase Agreement.
"Available Subordinated Amount" is defined in Section 4.03(e) of the
Pooling Agreement.
"Bank Accounts" means the Lockbox Accounts and the Concentration Accounts.
"Base Amount" is defined in Section 4.03(b) of the Pooling Agreement.
"Benchmark Percentage" shall be as stated in the definition of "Excess
Concentration Balances".
"Book-Entry Certificates" means certificates evidencing a beneficial
interest in the Investor Certificates, ownership and transfers of which shall be
made through book entries by a Clearing Agency as described in Section 6.12 of
the Pooling Agreement; provided, however, that after the occurrence of a
condition whereupon book-entry registration and transfer are no longer permitted
and Definitive Certificates are to be issued to the Certificate Owners, such
certificates shall no longer be "Book-Entry Certificates".
"Borrowing Base" has the meaning assigned to such term in the Original
Seller Credit Agreement.
"Bridge Facility" means the transactions contemplated by the Supplement for
the Series 1994-1 Certificates, as in effect on the Closing Date.
"Business Day" means a day (other than a Saturday or Sunday) on which
commercial banks in New York, New York are not authorized or required to be
closed for business.
"Calculation Period" means each period commencing on the first day of a
Fiscal Month and ending on the last day of such Fiscal Month.
page A-5
<PAGE>
"Carrying Cost Account" is defined in Section 4.02(b) of the Pooling
Agreement.
"Carrying Cost Reserve" is defined in Section 4.03(a) of the Pooling
Agreement.
"Carrying Costs" means, for any period, (a) Fixed Principal Yield, Investor
Revolving Yield and PI Yield for the period, (b) interest payable by ARC on the
ARC Note for the period (provided that this interest shall be included as
"Carrying Costs" only for purposes of determining the Purchase Price Percentage
pursuant to Section 2.2 of the Purchase Agreement), (c) the Servicing Fee for
the period in the applicable amount provided for in Section 3.04 of the Pooling
Agreement, (d) the operating expenses described in Section 7.02(m) of the
Pooling Agreement for the period, and (e) other fees, costs and expenses
incurred by ARC for the period and paid to third Persons who are not either
AmeriSource or any of its Affiliates and by the Trustee for the period in
connection with its duties under the Transaction Documents (in the case of the
Trustee, to the extent not included in the Servicing Fee).
"Cash Discounts" means the discount provided to certain of Seller's
customers for payment within the terms of the invoice expressed as a percentage
of the gross amount of the invoice.
"Cash Transfer" means, with respect to any day, the aggregate amount of
cash transferred by ARC to the Seller or its designee, whether in the form of
Purchase Price payments or prepayments, payments on the ARC Note, payments of
Servicing Fees, dividends, loans or otherwise.
"Certificate" means any one of the Fixed Principal Certificates, the
Revolving Certificates or the Residual Certificate.
"Certificate Calculation Amount" means the result of (a) the Fixed
Principal Calculation Amount plus (b) the Revolving Certificate Calculation
Amount minus (c) the amount of funds on deposit in the Set-Aside Account.
"Certificateholder" means the Person in whose name a Certificate is
registered in the Certificate Register.
"Certificate Invested Amount" means the sum of the Fixed Principal Invested
Amount, plus the Investor Revolving Invested Amount.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
page A-6
<PAGE>
"Certificate Rate" means, with respect to any Certificate at any time, the
fixed or variable rate of interest per annum applicable to the Series of which
that Certificate is a part at such time, as the interest rate is calculated in
accordance with the Supplement pursuant to which the Series is issued.
"Certificate Register" means the register maintained pursuant to Section
6.03(a) of the Pooling Agreement, providing for the registration of the
Certificates and transfers and exchanges thereof.
"Charged-Off Amount" means, with respect to any Calculation Period, an
amount equal to (a) the amount of Receivables that became Charged-Off
Receivables during such Calculation Period, minus (b) the amount of Recoveries
received by the Servicer during such Calculation Period.
"Charged-Off Receivable" means any Receivable that, consistent with the
Credit and Collection Policy, has been or should have been charged-off as
uncollectible.
"Class" means, with respect to any Series, any class of Investor
Certificates of that Series.
"Class Allocation Percentage" means, with respect to any Class or Purchased
Interest on any Settlement Date after the Liquidation Commencement Date, a
fraction with (a) a numerator that equals the Class Invested Amount of that
Class or PI Invested Amount of that Purchased Interest, and (b) a denominator
that equals the sum of the Class Invested Amount or PI Invested Amount of each
Subordinated Class and Subordinated Purchased Interest (if the Class Allocation
Percentage is being calculated for a Subordinated Class or a Subordinated
Purchased Interest) or of each Senior Class and Senior Purchased Interest (if
the Class Allocation Percentage is being calculated for a Senior Class or a
Senior Purchased Interest).
"Class Invested Amount" means, with respect to any Class, the amount
calculated as the invested amount of that Class pursuant to the applicable
Supplement.
"Clearing Agency" means, with respect to any Book-Entry Certificate, any
Person designated as such by ARC, which person must be registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" is defined in Section 6.12(d) of the Pooling
Agreement.
"Closing Date" means December 13, 1994.
page A-7
<PAGE>
"Collections" means all funds that are received by the Seller, ARC, the
Servicer or the Trustee from or on behalf of any Obligor in payment of any
amounts owed (including invoice prices, finance charges, interest and all other
charges, if any) in respect of any Receivable or Related Asset, or otherwise
applied to repay or discharge any Receivable (including insurance payments that
the Seller, ARC or the Servicer applies in the ordinary course of its business
to amounts owed in respect of such Receivable and net proceeds of sale or other
disposition of repossessed goods that were the subject of such Receivable).
"Concentration Account" means any bank account that is created in
accordance with, and to perform the functions contemplated for Concentration
Accounts in, Section 3.03 of the Pooling Agreement.
"Concentration Account Agreement" means a letter agreement, substantially
in the form of Exhibit B to the Pooling Agreement (or such other form as is
reasonably acceptable to the Trustee), among ARC, the Seller, a Concentration
Account Bank and the Trustee that relates to one or more Concentration Accounts,
as it may be amended, supplemented, amended and restated or otherwise modified
from time to time.
"Concentration Account Banks" means any of the banks at which one or more
Concentration Accounts are maintained from time to time.
"Concentration Factor" means, as of any Cut-Off Date, the greatest of (a)
the "Benchmark Percentage" then in effect for purposes of clause (c) of the
----------
definition of Excess Concentration Balances, (b) two multiplied by the
"Benchmark Percentage" then in effect for purposes of clause (d) of that
----------
definition, and (c) four multiplied by the "Benchmark Percentage" then in effect
for purposes of clause (e) of that definition.
----------
"Confidential Information" is defined in Section 13.21 of the Pooling
Agreement.
"Confirmation Notice" means a written notice given by the Seller Agent to
the Trustee and the Servicer on a Business Day to the effect that the Seller
Parties waive any rights to Affected Receivables arising during the then current
Look Back Period, the receipt of which notice shall terminate such Look Back
Period; provided, that if the Trustee shall receive such notice on any day other
than a Business Day or later than 2:00 p. m., New York City time, on any
Business Day, such notice will be deemed to have been received on the next
Business Day.
"Consolidated Subsidiary" means any Subsidiary or any other Person, some or
all of the stock of which, or other equity interests in which, is owned
(directly or indirectly) by AmeriSource and the accounts of which would be
consolidated with those of AmeriSource in its consolidated financial statements
as of such time in accordance with GAAP. For the purposes of this definition,
the term "Consolidated Subsidiary" shall include ARC, unless otherwise specified
in a Transaction Document.
page A-8
<PAGE>
"Contract" means a contract or other written agreement between the Seller
and any Person pursuant to or under which such Person shall be obligated to make
payments in respect of any Receivable or Related Asset to the Seller from time
to time.
"Contributed Receivables" means all right, title and interest of
AmeriSource in the Receivables (and Related Security in connection therewith)
contributed by AmeriSource to ARC.
"Controlled Accumulation Amount" means, with respect to a Series to which
it applies, for any Settlement Date during an Accumulation Period with respect
to such Series, the amount specified as the Controlled Accumulation Amount in
the related Supplement.
"Controlled Deposit Amount" means, with respect to any Series, for any
Settlement Date during an Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Settlement Date and the Deficit
Controlled Accumulation Amount, if any, for the immediately preceding Settlement
Date.
"Corporate Trust Office" means the principal office of the Trustee in
Buffalo, New York, at which at any particular time its corporate trust business
shall be principally administered.
"Credit and Collection Policy" means, with respect to the Seller, its
credit and collection policies and practices relating to the Contracts and
Receivables of the Seller that the Seller has provided to ARC and the Trustee
prior to the Closing Date, as such credit and collection policies may be
modified without violating Section 6.3(b) of the Purchase Agreement or Section
7.02(g) of the Pooling Agreement. Notwithstanding the foregoing, as applied to
any Successor Servicer, "Credit and Collection Policy" means the collection
policies and practices of the Successor Servicer with respect to receivables
like the Receivables.
"Credit Exposure", with respect to any Series of Investor Revolving
Certificates, is defined in the applicable Revolving Certificate Purchase
Agreement.
"Cut-Off Date" means the last day of any Calculation Period.
"Daily Report" is defined in Section 3.05(c) of the Pooling Agreement.
"Defeasance Account" is defined in Section 4.02(e) of the Pooling
Agreement.
"Defeasance Allocation Percentage" means, on any Business Day with respect
to any Series of Investor Certificates or Purchased Interest that is in an
Accumulation Period, a Pay-Out Period or a Prepayment Accumulation Period:
page A-9
<PAGE>
(a) if no other Series of Investor Certificates or Purchased Interest
is in an Accumulation Period, a Pay-Out Period or a Prepayment Accumulation
Period on that Business Day, the Investor Allocation Percentage on that
Business Day, and
(b) if at least one other Series of Investor Certificates or
Purchased Interest is in an Accumulation Period, a Pay-Out Period or a
Prepayment Accumulation Period on that Business Day, the product of (i) the
Investor Allocation Percentage on that Business Day multiplied by (ii) a
fraction (A) the numerator of which is the Ratable Principal Amount of the
Series or Purchased Interest for which the Defeasance Allocation Percentage
is being calculated as of the Accumulation Period Commencement Date, Pay-
Out Period Commencement Date or Prepayment Accumulation Commencement Date
for that Series or Purchased Interest and (B) the denominator of which is
the sum of the Ratable Principal Amounts of each Series and each Purchased
Interest that is in an Accumulation Period, a Pay-Out Period or Prepayment
Accumulation Period, as of the Accumulation Period Commencement Date, Pay-
Out Period Commencement Date or Prepayment Accumulation Commencement Date
for each.
"Deficit Controlled Accumulation Amount" means, with respect to any Series,
(a) on the first Settlement Date with respect to an Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Settlement Date
over the amount distributed from the Defeasance Account as the Principal
Distribution Amount for such Settlement Date and (b) on each subsequent
Settlement Date with respect to an Accumulation Period, the excess, if any, of
the Controlled Deposit Amount for such subsequent Settlement Date over the
amount distributed from the Defeasance Account as the Principal Distribution
Amount for such subsequent Settlement Date.
"Definitive Certificates" means any Certificate other than a Book-Entry
Certificate.
"Depositary Regulation S Certification" is defined in Section 6.03(i) of
the Pooling Agreement.
"Determination Date" means, with respect to any Receivable, the Business
Day following its Origination Date.
"Dilution" means, with respect to any Receivable, the aggregate reduction
in the paid balance or Unpaid Balance of the Receivable on account of discounts,
incorrect billings, credits, rebates, allowances, chargebacks, returned or
repossessed goods, allowances for early payments and any other such reductions
granted in the ordinary course of business that are unrelated to the inability
of the Obligor to pay such Receivables, but excluding (prior to the date
referred to in the final sentence of the definition of "Accrual Reserve") any
amount representing Cash Discounts; provided, that for purposes of calculating
the Dilution Ratio for any Calculation Period, the aggregate amount of checks
written by the Seller to any Obligor
page A-10
<PAGE>
on account of rebates during such Calculation Period shall also be included as
"Dilution"; provided, further that until the Report Date related to the December
1994 Cut-off Date, the aggregate amount of Dilution of the type referred to in
the preceding proviso with respect to each relevant Cut-off Date shall be deemed
to be $370,000.
"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
generated by the Seller during the one Calculation Period ending on the most
recent Cut-Off Date (as calculated on that Cut-Off Date) and (b) a denominator
equal to the aggregate Unpaid Balance of all Eligible Receivables, as calculated
on the most recent Cut-Off Date.
"Dilution Ratio" means, as calculated in each Settlement Statement 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 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 that were generated by the Seller during the preceding
Calculation Period (so that, for example, if the Calculation Period specified in
clause (a) corresponded to the March Fiscal Month, the Calculation Period in
- - - ----------
this clause (b) would be the one corresponding to the February Fiscal Month).
----------
"Dilution Reserve Ratio" means, as calculated in each Settlement Statement,
the result (expressed as a percentage), calculated as of the most recent Cut-Off
Date, equal to:
(a)(i) 1.75 multiplied by (ii) the average of the Dilution Ratios
during the period of 12 consecutive Calculation Periods ending on the most
recent Cut-Off Date, plus
(b)(i) the highest Dilution Ratio during the period of 12 consecutive
Calculation Periods ending on the most recent Cut-Off Date minus (ii) the
amount described in clause (a)(ii), multiplied by (iii) a fraction having a
--------------
numerator equal to the amount described in clause (b)(i) and a denominator
-------------
equal to the amount described in clause (a)(ii),
--------------
multiplied by:
(c) the Dilution Horizon Variable;
provided that the Dilution Reserve Ratio shall be recalculated on the 60th day
following the Closing Date (or earlier if the necessary recalculations are
completed prior to that date) to reflect the recalculations referred to in the
final sentence of the definition of "Accrual Reserve."
"Discount Rate" is defined in Section 2.2(d) of the Purchase Agreement.
page A-11
<PAGE>
"Discount Rate Reserve" means, at any time, the positive excess (if any)
of:
(a) the accrued and unpaid Carrying Costs for the current Calculation
Period plus any additional Carrying Costs expected to accrue through the
end of the current Calculation Period, plus estimated Carrying Costs for
the longer of (i) the immediately following Calculation Period or (ii) a
period equal to 1.75 times the number of Turnover Days), over
(b) the balance in the Carrying Cost Account as of such time.
"Disposition" is defined in Section 9.03(a)(i) of the Pooling Agreement.
"Dollars" means dollars in lawful money of the United States of America.
"Eligible Institution" means, with respect to any Series, the Eligible
Institution specified in the related Supplement.
"Eligible Inventory" has the meaning assigned to that term in the Original
Seller Credit Agreement.
"Eligible Investments" means any of the following:
(a) deposit accounts that are established and maintained at a
financial institution, the short-term debt securities or certificates of
deposit of which have at the time of investment the highest short-term debt
or certificate of deposit rating (as the case may be) available from the
Applicable Rating Agencies, and that are held in the name of the Trustee in
trust for the benefit of the Certificateholders, subject to the exclusive
custody and control of the Trustee and for which the Trustee has sole
signature authority; provided, however, that this clause shall not apply to
the Lockbox Accounts or to the Trust Accounts,
(b) marketable obligations of the United States of America, the full
and timely payment of principal and interest on which is backed by the full
faith and credit of the United States of America, that have a maturity date
not later than the next succeeding Settlement Date,
(c) marketable obligations directly and fully guaranteed by the
United States of America, the full and timely payment of principal and
interest on which is backed by the full faith and credit of the United
States of America, that have a maturity date not later than the next
succeeding Settlement Date,
page A-12
<PAGE>
(d) banker's acceptances, certificates of deposit and other interest-
bearing obligations denominated in Dollars (subject to the proviso at the
end of this definition),
(e) repurchase agreements (i) that are entered into with any
financial institution having the ratings referred to in clause (a) and (ii)
----------
that are secured by a perfected first priority security interest in an
obligation of the type described in clause (b) or (c); provided, however,
---------- ---
that such obligation may mature later than the next succeeding Settlement
Date if such bank is required to repurchase such obligation not later than
the next succeeding Settlement Date; and provided further, that (i) the
market value of the obligation with respect to which such bank has a
repurchase obligation, determined as of the date on which such obligation
is originally purchased, shall equal or exceed 102% of the repurchase price
to be paid by such bank and (ii) the Trustee or a custodian acting on its
behalf shall have possession of the instruments or documents evidencing
such obligations,
(f) guaranteed investment contracts entered into with any financial
institution, the short-term debt securities of which have the highest
short-term debt rating available from the Applicable Rating Agencies that,
in each case, have a maturity date not later than the next succeeding
Settlement Date,
(g) commercial paper (except for commercial paper issued by the
Seller or any Affiliate of the Seller) rated at the time of investment not
less than "A-1+" or the equivalent thereof by the Applicable Rating
Agencies and having a maturity date not later than the next succeeding
Settlement Date, and
(h) freely redeemable shares in open-end money market mutual funds
(including such mutual funds that are offered by the Person who is acting
as the Trustee or by any agent of such Person) that (i) maintain a constant
net-asset value and (ii) at the time of such investment have been rated not
less than "AAA\\m\\" or the equivalent thereof by S&P,
provided, however, that (A) the Trustee shall only acquire banker's acceptances
and certificates of deposit of, and enter into repurchase agreements with,
institutions whose short-term obligations have been rated not less than "A-1+"
or the equivalent thereof by the Applicable Rating Agencies and whose long-term
obligations have been rated not less than "AA-" by S&P and (B) the securities,
banker's acceptances, certificates of deposit, other obligations and repurchase
agreements described above shall only constitute "Eligible Investments" if and
to the extent that the Servicer is satisfied that the Trustee will have a
perfected security interest therein for the benefit of the Certificateholders.
"Eligible Obligor" means, at any time, an Obligor that satisfies the
following criteria:
page A-13
<PAGE>
(a) it has a place of business located in the United States of
America or Puerto Rico or is otherwise subject to the jurisdiction of one
or more courts in the United States of America or Puerto Rico,
(b) it is not a direct or indirect Subsidiary of AmeriSource or any
other entity with respect to which AmeriSource or any of its Subsidiaries
owns, directly or indirectly, more than 50% of the entity's equity
interests,
(c) with respect to which no Event of Bankruptcy had occurred and was
continuing as of the end of the most recent Calculation Period and is
continuing; provided, however, that this clause shall not apply if a
bankruptcy court has approved the Obligor's payment of its obligations on
the Receivables,
(d) as of the end of the most recent Calculation Period, no more than
50% of all Receivables of the Obligor were (for reasons other than
disputes) aged more than 90 days past their respective due dates,
(e) as of the end of the most recent Calculation Period, none of the
past due Receivables of the Obligor included in the Receivables Pool were
evidenced by promissory notes,
(f) it is not an Obligor with whom the Seller has a "cash in advance"
or "cash on account" arrangement, it being understood that a "same-day
payment" arrangement will not constitute a "cash in advance" or "cash on
account" arrangement,
(g) if it is a State Obligor in the state of North Carolina, Arizona,
Connecticut, Georgia, Idaho, Nebraska or Virginia, then it shall only be an
Eligible Obligor to the extent that its consent to the assignment of the
accounts receivable that it then or thereafter owes to the Seller shall
have been received with respect to the transfers contemplated by the
Transaction Documents or, at the election of ARC, a favorable opinion of
counsel in that state to the effect that no consent is required shall have
been provided to the Trustee, and for which the Rating Agency Condition has
been satisfied, and
(h) if it is a State Obligor in the state of Maryland, Montana or
Utah, then it shall only be an Eligible Obligor to the extent that (i) the
Rating Agency Condition has been satisfied and (ii) the notice shall have
been given to the State Obligor with respect to the transfers contemplated
by the Transaction Documents.
"Eligible Receivable" means, at any time, a Receivable:
page A-14
<PAGE>
(a) that arises from the sale of merchandise or services by the
Seller in the ordinary course of (i) AmeriSource or (ii) any additional
Seller that becomes a party to the Purchase Agreement pursuant to Section
1.7 thereof,
(b) that represents a bona fide obligation resulting from a sale of
goods that have been shipped or services that have been performed and is
due and payable not more than 120 days after the date on which the invoice
for services or merchandise, the sale of which gave rise to such
Receivable, is provided or delivered,
(c) that, as of the end of the previous Calculation Period, was not
aged more than 60 days past its original due date,
(d) that (i) if the perfection of ARC's and the Trust's interests
therein is governed by the laws of a jurisdiction where the UCC is in
force, constitutes an account or a general intangible for the payment of
money and not an instrument or chattel paper, as such terms are defined in
the UCC and (ii) if the perfection of ARC's and the Trust's interests
therein is governed by the law of any jurisdiction where the UCC is not in
force, the Seller of the Receivable has furnished to the Trustee an Opinion
of Counsel to the effect that the ownership interest of the Trust in the
Trust Assets and other rights with respect thereto are not significantly
less protected and favorable than such rights would be if secured by a
perfected security interest under the UCC,
(e) the Obligor of which is an Eligible Obligor,
(f) with regard to which both the representation and warranty of ARC
in Section 2.03(a)(ii) of the Pooling Agreement and the representation and
warranty of the relevant Seller in Section 5.1(k) of the Purchase Agreement
are true and correct,
(g) the transfer of which (including the sale of which by the
applicable Seller to ARC and the transfer of which by ARC to the Trust)
does not contravene or conflict with any law, rule or regulation or any
contractual or other restriction, limitation or encumbrance that applies to
the Seller, ARC or the Trust, and the sale, assignment or transfer of
which, and the granting of a security interest in which, does not require
the consent of the Obligor thereof or any other Person, other than any such
consent that has been obtained previously,
(h) that is denominated and payable only in Dollars in the United
States of America and is non-interest bearing; provided, however, that a
Receivable shall not be deemed to be interest-bearing solely as a result of
the Seller's imposition of an interest or other charge on any such
Receivable that remains unpaid after its scheduled due date; and provided
further, that, except for certain amounts included on
page A-15
<PAGE>
the Closing Date, such interest charge or other charge shall not be
included in the Unpaid Balance of a Receivable for purposes of calculating
the Base Amount,
(i) that arises under a Contract that has been duly authorized and
that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its 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,
(j) that is not subject to any asserted reduction (including any
reduction on account of any offsetting account payable of ARC or the Seller
to an Obligor or funds of an Obligor held by ARC or the Seller),
cancellation, or refund or any dispute, offset, counterclaim, lien or
defense whatsoever (except, with respect to State Obligors, Local Obligors
or Federal Obligors, to the extent of the applicable Individual Group
Reserve or Federal Set Off Reserve); provided, however, that a Receivable
that is subject only in part to any of the foregoing shall be an Eligible
Receivable to the extent not subject to reduction, cancellation, refund,
dispute, offset, counterclaim, lien or other defense,
(k) that, together with the Contract related thereto, was created in
accordance with, and conforms in all material respects with, all applicable
laws, rules, regulations, orders, judgments, decrees and determinations of
all courts and other governmental authorities (whether Federal, state,
local or foreign and including usury laws),
(l) that satisfies all applicable requirements of the Credit and
Collection Policy of the Seller,
(m) that has not been compromised, adjusted, satisfied, subordinated,
rescinded or modified (including by extension of time or payment or the
granting of any discounts, allowances or credits), except as permitted by
Section 7.02(g) of the Pooling Agreement,
(n) if owed by a Restricted Federal Obligor or a State Obligor, for
which ARC shall have made the certification required by Section 3.06 of the
Pooling Agreement with respect to such Restricted Federal Obligor or State
Obligor as of the end of the most recent fiscal quarter of AmeriSource, and
page A-16
<PAGE>
(o) if owed by a State Obligor or a Local Obligor in a Set Off Group,
the Rating Agency Condition shall have been satisfied with respect to the
State/Local Tax Period and Individual Group Reserves for such Set Off
Group.
"Eligible Servicer" means (a) AmeriSource, (b) the Trustee or (c) an entity
that, at the time of its appointment as Servicer, (i) is servicing a portfolio
of trade receivables, (ii) is legally qualified and has the capacity to service
the Receivables, (iii) has demonstrated the ability to service professionally
and competently a portfolio of trade receivables similar to the Receivables in
accordance with high standards of skill and care, (iv) is qualified to use the
software that is then being used to service the Receivables or obtains the right
to use or has its own software that is adequate to perform its duties under the
Pooling Agreement, and (v) is acceptable to the Applicable Rating Agencies as
evidenced by satisfaction of the Rating Agency Condition.
"End-of-the Day Seller Excess Borrowing Base" means, as of any day, the
amount (which may be a positive or negative number) by which:
(a) the Borrowing Base as set forth in the borrowing base certificate
then most recently required to be delivered to the Seller Agent pursuant to
the Original Seller Credit Agreement, exceeds
(b) the pro forma Seller Outstandings at the end of such day,
assuming that (i) the Seller Agent receives on such day any Segregated Cash
that would, if the Look Back Period ended on such day, be payable by the
Trust to ARC (and in turn by ARC to AmeriSource) and (ii) any Advance or
Letter of Credit requested by AmeriSource on such day has been funded or
issued (respectively),
provided, however, that if an Event of Default or Unmatured Event of Default
exists, the End-of-the-Day Seller Excess Borrowing Base shall be deemed to be
zero.
"Enhancement" means, with respect to any Series or Purchased Interest, any
surety bond, letter of credit, guaranteed rate agreement, maturity guaranty
facility, cash collateral account or guaranty, tax protection agreement,
interest rate swap or other contract or agreement for the benefit of
Certificateholders of the Series or Purchaser of the Purchased Interest. The
drawing on or payment of any Enhancement for the benefit of a Series or Class of
Investor Certificates shall not be available to the Investor Certificateholders
of any other Series or Class.
"Enhancement Provider" shall mean the Person providing any Enhancement,
other than any Certificateholders (including any Holder of the Residual
Certificate) the Certificates of which are subordinated to any Series or Class.
"Equalization Account" is defined in Section 4.02(c) of the Pooling
Agreement.
page A-17
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and any successor statute of similar
import, together with any regulations thereunder, in each case as in effect from
time to time. References to sections of ERISA also refer to any successor
sections.
"Estimated Base Amount" is defined in Section 3.05(c) of the Pooling
Agreement.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law (foreign or domestic)
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of (i) in the
case of any Person other than ARC, 60 days, and (ii) in the case of ARC,
ten days; or an order for relief in respect of such Person shall be entered
in an involuntary case under the federal bankruptcy laws or other similar
laws (foreign or domestic) now or hereafter in effect, or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or the like, for
such Person or any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail to, or admit
in writing its inability to, pay its debts generally as they become due.
"Event of Default" (a) when used in connection with the Original Seller
Credit Agreement, has the meaning assigned to that term in the Original Seller
Credit Agreement, and (b) otherwise, has the meaning assigned to that term in
the Replacement Credit Agreement.
"Excess Concentration Balances" means for any Obligor, the aggregate
outstanding balances of Eligible Receivables it owes that, expressed as a
percentage of the Adjusted Eligible Receivables, exceeds the following
percentages for the following Obligors:
(a) 100% for any Tier-1 Obligor,
page A-18
<PAGE>
(b) 100% for (i) any Tier-2 Obligor or (ii) all Receivables owing
from any foreign Obligor, payment of which is fully supported by a direct
pay letter of credit that is (A) issued by a domestic banking institution
rated at least "A" by the Applicable Rating Agencies and (B) assigned to
the Trustee,
(c) 10% for any Tier-3 Obligor,
(d) 5% for any Tier-4 Obligor, and
(e) 2% for any Tier-5 Obligor; provided, however, with respect to the
two Obligors (other than State Obligors and Local Obligors) that represent
the two highest percentages of Adjusted Eligible Receivables in this
category, the percentage will be 3%,
(each of the percentages above being herein called a "Benchmark Percentage");
provided, that ARC may, by notice in any Settlement Statement (and after
satisfying the Rating Agency Condition) increase or decrease the Benchmark
Percentage. Any change to a Benchmark Percentage shall result in a
corresponding change to the Concentration Factor and hence in the Minimum
Required Reserve Ratio, as set forth in the definitions thereof.
"Excess Specified Obligor Balance" means, on any day, (a) the aggregate
amount of otherwise Eligible Receivables due from Specified Obligors minus (b)
3% of the Adjusted Eligible Receivables.
"Exchange Date" is defined in Section 6.12(c) of the Pooling Agreement.
"Expected Final Payment Date" means, with respect to any Series, the date
specified as the Expected Final Payment Date in the related Supplement.
"Federal Funds Rate" shall be as stated in the Supplement pursuant to which
a Series of Certificates is issued.
"Federal Obligor" means the United States of America or any department,
agency or instrumentality thereof; provided, that any such department, agency or
instrumentality may be recharacterized as other than a Federal Obligor if
AmeriSource shall have presented the Applicable Rating Agencies with evidence
that such Person is not entitled to set off for obligations owed to other
Federal Obligors and the Rating Agency Condition shall have been satisfied with
respect to such recharacterization.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System, or any successor thereto or to the functions thereof.
"Federal Set Off Reserve" means:
page A-19
<PAGE>
(a) on any day prior to the Settlement Date relating to the April,
1995 Cut-Off Date, it shall be $5,868,679; provided that if the Seller
shall not have made the Federal income tax payment owed by it on January
15, 1995 or March 15, 1995, the aggregate amount of the Seller's tax
liability accrued prior to that date will be added to the Federal Set Off
Reserve for purposes of this clause (a), and
----------
(b) on any day occurring thereafter, (i) the aggregate amount of
Federal income taxes and withholding taxes accrued by the Seller during the
calendar quarter ending prior to the most recent Settlement Date (the
"Benchmark Quarter's Federal Taxes") plus (ii) one-ninetieth of the
Benchmark Quarter's Federal Taxes for each day that has elapsed since the
last payment of Federal income taxes by the Seller plus (iii) the aggregate
amount of any Federal income taxes and withholding taxes accrued by the
Seller prior to the current calendar quarter that have not been paid;
provided, however, that in no event shall the Federal Set Off Reserve exceed the
aggregate Unpaid Balance of Eligible Receivables owed by Restricted Federal
Obligors.
"Final Maturity Date" is defined in the ARC Note.
"Final Scheduled Payment Date" is defined in Section 12.01(a) of the
Pooling Agreement.
"Financial Advisors" means the financial advisors denominated as such in a
Revolving Certificate Purchase Agreement.
"First Issuance Date" means the Closing Date.
"Fiscal Month" means a fiscal month of AmeriSource.
"Fixed Principal Calculation Amount" means, as of the opening of business
on any day, the Fixed Principal Invested Amount for all outstanding Series of
Fixed Principal Certificates.
"Fixed Principal Certificate" means any Certificate of any Series that is
not a Revolving Certificate or the Residual Certificate.
"Fixed Principal Initial Invested Amount" means (a) with respect to any
Series of Fixed Principal Certificates, its aggregate principal amount on the
Closing Date or the Subsequent Issuance Date (as applicable) for the Series, as
is stated in the Supplement pursuant to which it is issued and (b) with respect
to all Fixed Principal Certificates, the aggregate initial principal amount of
all then-issued and outstanding Fixed Principal Certificates.
page A-20
<PAGE>
"Fixed Principal Interest" is defined in Section 4.01 of the Pooling
Agreement.
"Fixed Principal Invested Amount" means, at any time, (a) with respect to
any Series of Fixed Principal Certificates, an amount equal to (i) the Fixed
Principal Initial Invested Amount with respect to such Series minus (ii) the
aggregate amount of (x) principal payments made to the Holders of such Series of
Fixed Principal Certificates prior to such time in respect of such Series of
Fixed Principal Certificates, (y) all funds on deposit in the Principal Funding
Account and the Defeasance Account with respect thereto, and (z) any Investor
Allocable Charged-Off Amount (net of Investor Net Recoveries) with respect
thereto, and (b) with respect to all Series of Fixed Principal Certificates, the
sum of the amounts calculated pursuant to clause (a) with respect to each such
----------
Series.
"Fixed Principal Yield" means the scheduled interest payable in respect of
Fixed Principal Certificates as computed by reference to the applicable
Certificate Rate(s).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, as in effect from time to time.
"Governmental Authority" means the United States of America, any state or
other political subdivision thereof and any entity in the United States of
America or any applicable foreign jurisdiction that exercises executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty" means any agreement, undertaking or arrangement by which any
Person guarantees, endorses, agrees to purchase or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
"Highest Bid" means the highest cash purchase offer for a Series received
by the Servicer pursuant to Section 12.01 of the Pooling Agreement.
"Holder" means the Person in whose name a Certificate is registered in the
Certificate Register or a Person who holds a Purchased Interest.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of AmeriSource, any qualification or exception to such opinion or certification
that is of a "going concern" or similar nature.
page A-21
<PAGE>
"Indebtedness" of any Person means, without duplication:
(a) all of its obligations for borrowed money and all of such
Person's obligations evidenced by bonds, debentures, notes or other similar
instruments,
(b) all of its obligations as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capitalized leases, and
(c) whether or not so included as liabilities in accordance with
GAAP, all of its obligations to pay the deferred purchase price of property
or services, and indebtedness (excluding prepaid interest thereon) secured
by an Adverse Claim on property owned or being purchased by it (including
indebtedness arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed by it
or is limited in recourse.
For purposes of the Transaction Documents, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which it is a
general partner or a joint venturer.
"Indemnified Losses" is defined in Section 7.03(a) of the Pooling
Agreement.
"Indemnified Party" is defined in Section 7.03(a) of the Pooling Agreement.
"Independent Director" is defined in Section 7.02(n) of the Pooling
Agreement.
"Individual Group Reserve" means with respect to any Set Off Group on any
day, (a) 90 multiplied by the State/Local Tax Per Diem plus (b) an amount equal
to the State/Local Tax Per Diem for each day that has elapsed since the end of
the most recent State/Local Tax Period plus (iii) the aggregate amount of any
state/local income tax obligations accrued prior to the current State/Local Tax
Period that have not been paid; provided that if Servicer shall have elected to
exclude Receivables owed by all Obligors in a Set Off Group from the Eligible
Receivables on any day, the Individual Group Reserve for that Set Off Group on
such day shall be zero; and provided further, that the Individual Group Reserve
for any Set Off Group shall not exceed the aggregate Unpaid Balance of Eligible
Receivables owed by Obligors in such Set Off Group.
"Initial Cut-Off Date" means the Business Day immediately preceding the
Closing Date.
"Initial Invested Amount" means (a) with respect to any Fixed Principal
Certificate, the related Fixed Principal Initial Invested Amount, (b) with
respect to any Investor Revolving Principal Certificate, the related Investor
Revolving Initial Invested Amount and (c) with respect to any Purchased
Interest, the related PI Initial Invested Amount.
page A-22
<PAGE>
"Intercreditor Agreement" means (a) during Phase I, an intercreditor
agreement substantially in the form of Exhibit O-1 to the Pooling Agreement
between the Seller Agent and the Trustee, and (b) during Phase II, an
intercreditor agreement substantially in the form of Exhibit O-2 of the Pooling
Agreement between the Seller Agent and the Trustee.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Inventory Advance Rate" means at any time the advance rate percentage then
applied to Eligible Inventory for purposes of calculating the Borrowing Base.
"Inventory Credit Agreement" means the Amended and Restated Credit
Agreement, and all exhibits thereto, dated as of December 13, 1994, among
AmeriSource, General Electric Capital Corporation, as Agent and Managing Agent,
Bankers Trust Company, as Issuing Lender and Managing Agent, certain Co-Agents
and certain Lenders, as it may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with its terms.
"Invested Amount" means, at any time, (a) the Fixed Principal Invested
Amount at such time plus (b) the Revolving Certificate Invested Amount at such
time plus (c) the PI Invested Amount at such time.
"Investor Allocable Charged-Off Amount" is defined in Section 4.03(e) of
the Pooling Agreement.
"Investor Allocation Percentage" means, on any Business Day, a fraction
(expressed as a percentage) (a) the numerator of which is the sum of the Ratable
Principal Amounts of all outstanding Series of Investor Certificates and
Purchased Interests as of (i) in the case of a Series of Investor Certificates
or Purchased Interests that is in an Accumulation Period, Pay-Out Period or
Prepayment Accumulation Period, the applicable Accumulation Period Commencement
Date, Pay-Out Period Commencement Date or Prepayment Accumulation Commencement
Date and (ii) in the case of a Series of Investor Certificates or Purchased
Interest that is in a Revolving Period and is not in a Prepayment Accumulation
Period, that Business Day and (b) the denominator of which is the sum of the
numerator plus the Ratable Principal Amount of the ARC Revolving Certificate as
of that day.
"Investor Certificateholder" means the Person in whose name an Investor
Certificate is registered in the Certificate Register.
"Investor Certificates" means the Fixed Principal Certificates and the
Investor Revolving Certificates.
"Investor Exchange" is defined in Section 6.10(a) of the Pooling Agreement.
page A-23
<PAGE>
"Investor Initial Invested Amount" means the sum of the Fixed Principal
Initial Invested Amount, the Investor Revolving Initial Invested Amount and the
PI Initial Invested Amount.
"Investor Invested Amount" means (a) the Fixed Principal Invested Amount
plus (b) the Investor Revolving Invested Amount plus (c) the PI Invested Amount.
"Investor Net Recoveries" is defined in Section 4.03(e) of the Pooling
Agreement.
"Investor Repayment Amount" means, at any time, the sum of (i) the
Certificate Calculation Amount, (ii) the PI Calculation Amount, plus (iii) the
aggregate amount of all other Obligations.
"Investor Revolving Certificate" means any Certificate of any Series that
is designated as a Series of Investor Revolving Certificates in the Supplement
pursuant to which the Series is issued.
"Investor Revolving Certificateholder" means the Person in whose name an
Investor Revolving Certificate is registered in the Certificate Register.
"Investor Revolving Certificate Rate" means, with respect to any Investor
Revolving Certificate, the rate of interest per annum applicable to the Investor
Revolving Certificate at such time, as the interest rate is calculated in
accordance with the Supplement pursuant to which the Series is issued.
"Investor Revolving Initial Invested Amount" means (a) with respect to any
Series of Investor Revolving Certificates, its aggregate principal amount on the
Closing Date or any Subsequent Issuance Date (as applicable) for such Series, as
is stated in the Supplement pursuant to which it is issued and (b) with respect
to all then-issued and outstanding Investor Revolving Certificates, the
aggregate initial principal amount of all Investor Revolving Certificates.
"Investor Revolving Invested Amount" means, at any time:
(a) with respect to any Series of Investor Revolving Certificates,
(i)(A) the Investor Revolving Initial Invested Amount with respect to such
Series plus (B) all additions made to the Investor Revolving Invested
Amount with respect to such Series pursuant to Section 4.03 of the Pooling
Agreement plus (C) all additions to the principal amount of Investor
Revolving Certificates of such Series made pursuant to Section 6.11 of the
Pooling Agreement, minus (ii)(A) all reductions in the Investor Revolving
Invested Amount with respect to Investor Revolving Certificates of such
Series made pursuant to Section 4.03 of the Pooling Agreement plus (B) the
aggregate amount of all other principal payments made to the Holders of
such Series prior to
page A-24
<PAGE>
such time in respect of such Series plus (C) the aggregate amount of all
funds on deposit in the Principal Funding Account and the Defeasance
Account with respect thereto plus (D) any Investor Allocable Charged-Off
Amounts (net of Investor Net Recoveries) allocated to such Series, and
(b) with respect to all Series of Investor Revolving Certificates,
the sum of the amounts calculated pursuant to clause (a) with respect to
----------
each such Series.
"Investor Revolving Yield" means scheduled interest payable in respect of
the Investor Revolving Certificates at the applicable Investor Revolving
Certificate Rate(s).
"Involuntary Adverse Claim" means a lien in favor of the Internal Revenue
Service or the PBGC on any Trust Assets.
"Lead Placement Agent" means the Person designated as such by ARC in
connection with the issuance of any Certificates.
"Letter of Credit" has the meaning assigned to that term in the Original
Seller Credit Agreement.
"Letter of Credit Obligations" has the meaning assigned to that term in the
Original Seller Credit Agreement.
"Letter of Representations" means the agreement among ARC, the Trustee and
the applicable Clearing Agency, with respect to any Book-Entry Certificates, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.
"Liquidation Commencement Date" means the earlier to occur of (a) the
Scheduled Liquidation Commencement Date and (b) the date on or following a
Liquidation Event that is the Liquidation Commencement Date by operation of
Section 9.01 of the Pooling Agreement.
"Liquidation Event" is defined in Section 9.01 of the Pooling Agreement.
"Liquidation Period" means the period commencing on the Liquidation
Commencement Date.
"Local Obligor" means any county, municipal or other local government or
any department, agency or instrumentality thereof.
"Lockbox Accounts" means the bank accounts, maintained at those certain
locations described in Schedule 2 to the Pooling Agreement, into which
Collections from Receivables are deposited, and any bank account that is
hereafter created in accordance with, and to
page A-25
<PAGE>
perform the functions contemplated for "Lockbox Accounts" in, Section 3.03 of
the Pooling Agreement.
"Lockbox Agreement" means any of the letter agreements delivered in
connection with the Pooling Agreement and any other letter agreement,
substantially in the form of Exhibit A to the Pooling Agreement (or such other
form as is reasonably acceptable to the Trustee), among a Lockbox Bank, the
Seller, the Servicer and the Trustee that relates to one or more Lockbox
Accounts, as they may be amended, supplemented, amended and restated or
otherwise modified from time to time.
"Lockbox Bank" means any of the banks at which one or more Lockbox Accounts
are maintained from time to time.
"Look Back Period" has the meaning assigned to such term in Section 1.2(e)
of the Purchase Agreement.
"Loss Discount" is defined in Section 2.2(b) of the Purchase Agreement.
"Loss Reserve Ratio" means, as calculated in each Settlement Statement, the
result (expressed as a percentage) equal to (a) two 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 generated by the Seller
during the three Calculation Periods preceding or ending on the most recent Cut-
Off Date, and (ii) a denominator equal to the Adjusted Eligible Receivables, as
determined on the most recent Cut-Off Date, multiplied by (d) the Payment Term
Variable as of the most recent Cut-Off Date.
"Loss to Liquidation Ratio" means, as calculated in each Settlement
Statement, a fraction (a) the numerator of which is the aggregate Unpaid Balance
of Receivables (net of recoveries) that were written off as uncollectible or
(without duplication) converted into promissory notes during the three preceding
Calculation Periods in accordance with the Credit and Collection Policy of the
Seller, and (b) the denominator of which is the aggregate amount of Collections
on the Receivables received during the three Calculation Periods.
"Majority Investors" means Holders of Investor Certificates and Purchasers
holding Purchased Interests that collectively evidence more than 50% of the
Investor Invested Amount.
"Mark-Up Percentage" means 2.5%.
page A-26
<PAGE>
"Master Collection Account" is defined in the Section 4.02(b) of the
Pooling Agreement.
"Material Adverse Effect" means, with respect to any AmeriSource Person and
to any event or circumstance and at any time, a material adverse effect on (a)
the ability of that Person to perform its obligations under any Transaction
Document or (b) the validity, enforceability or collectibility of any
Receivables, Related Assets or Contracts that, individually or in the aggregate,
represent or evidence a right to payment in excess of 5% of the aggregate Unpaid
Balance of the Receivables at such time.
"Maximum Bridge Funding" means the aggregate Stated Amounts of Investor
Revolving Certificates issued pursuant to the Bridge Facility.
"Maximum Take Out Funding" means (a) the aggregate principal amounts of
Fixed Principal Certificates issued pursuant to the Take Out Facility plus (b)
the aggregate Stated Amounts of Investor Revolving Certificates or Purchased
Interests issued pursuant to the Take Out Facility.
"Member Organization" is defined in Section 6.12(c) of the Pooling
Agreement.
"Minimum Required Reserve Ratio" means the sum, as of any Cut-Off Date, of:
(a) the Concentration Factor for the Cut-Off Date, plus
(b) the average of the Dilution Ratios for the twelve preceding
Collection Periods ending on the Cut-Off Date, multiplied by the Dilution
Horizon Variable for the Cut-Off Date,
provided, that in no event shall the Minimum Required Reserve Ratio be less than
14%.
"Minimum Return" means, with respect to the Receivables sold or contributed
on any day by the Seller to ARC, (a) the Inventory Advance Rate multiplied by
(b) one minus the sum of the Mark-Up Percentage and the Returned Goods
Percentage multiplied by (c) the aggregate Unpaid Balance of such Receivables;
provided, that the Minimum Return shall in no event exceed 70% of the aggregate
Unpaid Balance of such Receivables.
"Net Eligible Receivables" means, at any time, (a) the Adjusted Eligible
Receivables minus (b) the then aggregate amount of all Excess Concentration
Balances with respect to all Obligors minus (c) the then Accrual Reserve, minus
(d) the Federal Set Off Reserve, minus (e) the State/Local Set Off Reserve,
minus (f) the Excess Specified Obligor Balance.
page A-27
<PAGE>
"Net Recoveries" means, with respect to any Calculation Period, an amount
equal to (a) the amount of Recoveries received in such Calculation Period minus
(b) the amount of Receivables that became Charged-Off Receivables in such
Calculation Period.
"New Issuance" is defined in Section 6.10(a) of the Pooling Agreement.
"Noncomplying Receivables and Dilution Adjustment" is defined in Section
3.1(b) of the Purchase Agreement.
"Notes Receivable" means any right to payment of Seller recorded by it in
its books and records as a receivable that is not a Receivable.
"Obligations" means (a) all obligations of ARC, the Seller and a Servicer
to the Trustee, the Trust, any other Indemnified Party, the Investor
Certificateholders and their respective successors, permitted transferees and
assigns, arising under or in connection with the Transaction Documents, and (b)
all obligations of a Seller to ARC, any other RPA Indemnified Party and their
respective successors, transferees and assigns, arising under or in connection
with the Transaction Documents, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.
"Obligor" means a Person obligated to make payments on a Receivable.
"Officer's Certificate" means, unless otherwise specified in the Pooling
Agreement or in any Supplement, a certificate signed by an Authorized Officer of
ARC or the initial Servicer, as the case may be, or, in the case of a Successor
Servicer, a certificate signed by the President, any Vice President or the
financial controller (or an officer holding an office with equivalent or more
senior responsibilities) of such Successor Servicer, that, in the case of any of
the foregoing, is delivered to the Trustee.
"144A Book-Entry Certificate" is defined in Section 6.12(b) of the Pooling
Agreement.
"Opinion of Counsel" means a written opinion of counsel, who shall be
reasonably acceptable to the Trustee.
"Original Intercreditor Mechanics" shall mean Sections 1.2 and 8.2 of the
Purchase Agreement and Exhibits O-I and O-II to the Pooling Agreement.
------------ ----
"Original Obligations" means all obligations of the Seller under the
Original Seller Credit Agreement, other than contingent obligations which have
not been identified in a notice to the Seller on the date on which all
commitments of the Seller Parties thereunder have terminated and all Advances
and Letter of Credit Obligations have been paid.
page A-28
<PAGE>
"Original Seller Credit Agreement" means:
(a) the Inventory Credit Agreement, or
(b) any agreement entered into by AmeriSource to refinance any other
Original Seller Credit Agreement; provided, that (i) parties to such
agreement shall have executed and delivered to the Trustee, for the benefit
of the Trustee, the Investor Certificateholders and the Purchasers, an
intercreditor agreement substantially in the form of Exhibit O-1 of the
Pooling Agreement and such other consents, releases and other documents as
the parties to the Original Seller Credit Agreement shall have executed for
the benefit of the Trustee, and (ii) the Seller shall have elected, by
written notice to the Trustee, to classify such agreement as the Original
Seller Credit Agreement, as the same may be amended, modified or restated
from time to time.
"Original Stop Date Conditions" shall exist when (a) there is a Shortfall
and the End-of-the-Day Excess Borrowing Base does not equal or exceed zero, or
(b) any other Event of Default shall have occurred and be continuing.
"Origination Date" means, with respect to a Receivable, the date on which
such Receivable is originated.
"Owner Regulation S Certification" is defined in Section 6.03(i) of the
Pooling Agreement.
"Paired Series" means, collectively, each Series that has been paired with
a prefunded Series and such prefunded Series.
"Paying Agent" means any paying agent appointed pursuant to Section 6.06 of
the Pooling Agreement and shall initially be the Trustee.
"Payment Term Variable" means, as calculated in each Settlement Statement
as of the most recently ended Cut-Off Date, (a) 1.0, if the weighted average of
the number of days after the original invoice date on which Receivables will
become due and payable (the "Payment Days") is not more than 39 days, (b) 1.167,
if the weighted average of the Payment Days is 40 to 49 days, (c) 1.333, if the
weighted average of the Payment Days is 50 to 59 days or (d) 1.500 if the
weighted average of the Payment Days is 60 to 69 days; provided, however, that,
if the weighted average of the Payment Days exceeds 69 days, the Payment Term
Variable shall be determined by calculating the sum of (x) 1.500, and (y) 0.125
for each ten-day increment by which the weighted average Payment Days exceeds 69
days, it being understood that the same number shall apply for all weighted
average Payment Days that fall within a ten-day range. For purposes of the
foregoing, the weighted average of the Payment Days, if not a whole number, will
be rounded to the nearest whole number (with 0.5 being rounded up).
page A-29
<PAGE>
"Pay-Out Event" means, with respect to any Series of Investor Certificates,
any event defined as such in the Supplement pursuant to which the Series was
issued.
"Pay-Out Period" means, with respect to any Series of Investor
Certificates, the period commencing on the Pay-Out Period Commencement Date that
applies to the Series of Investor Certificates and ending on the date on which
all such Series of Investor Certificates shall have been paid in full.
"Pay-Out Period Commencement Date" means, with respect to any Series of
Investor Certificates, the date on which a Pay-Out Event for the Series occurs.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Adverse Claims" means, at any time, one or more involuntary
Adverse Claims; provided, that (a) the aggregate amount secured by all such
Adverse Claims does not exceed $2,000,000, (b) AmeriSource, the Sellers and/or
ARC (as applicable) shall be maintaining reserves against such amount in
accordance with GAAP, and (c) AmeriSource, the Sellers and/or ARC (as
applicable) shall be contesting such Adverse Claims in good faith and by
appropriate proceedings.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government or any agency or political subdivision thereof or any other
entity.
"Phase I" means the period from the Closing Date until all Original
Obligations have been paid in full and all commitments of the Seller Parties to
lend or issue letters of credit thereunder have been terminated.
"Phase II" means the period following the end of Phase I.
"PI Agreement" means, with respect to any Purchased Interest, an agreement
or agreements executed and delivered in connection with the sale of the
Purchased Interest, all amendments thereof and supplements thereto, and the
Parallel Purchase Commitment (as defined in the PI Agreement), if any, entered
into in connection therewith.
"PI Calculation Amount" means, as of the opening of business on any day,
the PI Invested Amount in the aggregate for all Purchased Interests as of the
opening of business on such day.
"PI Initial Invested Amount" means (a) with respect to any Purchased
Interest, its aggregate principal amount on the date of the first purchase made
pursuant to the related PI Agreement and (b) with respect to all
then-outstanding Purchased Interests, the sum of the amounts calculated pursuant
to clause (a) with respect to each.
- - - ----------
page A-30
<PAGE>
"PI Invested Amount" means, at any time:
(a) with respect to any Purchased Interest, an amount equal to the
difference between (i) the sum of (A) the PI Initial Invested Amount with
respect to such Purchased Interest plus (B) all additions made to the PI
Invested Amount with respect to such Purchased Interest pursuant to Section
4.03 of the Pooling Agreement minus (ii) the sum of (A) all reductions in
the PI Invested Amount with respect to such Purchased Interest made
pursuant to Section 4.03 of the Pooling Agreement, (B) the aggregate amount
of all other principal payments made to the Purchaser of such Purchased
Interest prior to such time in respect of such Purchased Interest, (C) the
aggregate amount of all funds on deposit in the Principal Funding Account,
the Defeasance Account and the Purchaser Account with respect thereto, and
(D) the amount of any Investor Allocable Charged-Off Amounts (net of
Investor Net Recoveries) allocated to such Purchased Interest, and
(b) with respect to all Purchased Interests, an amount equal to the
sum of the amounts calculated pursuant to clause (a) with respect to each
----------
Purchased Interest.
"PI Rate" means, with respect to any Purchased Interest at any time, the
fixed or variable rate of interest per annum applicable to that Purchased
Interest at such time, as such interest rate is calculated in accordance with
the applicable PI Agreement.
"PI Yield" means scheduled yield payable in respect of the Purchased
Interests at the applicable PI Rates.
"Pooling Agreement" means the Pooling and Servicing Agreement, dated as of
December 13, 1994, among ARC, as transferor, AmeriSource, as initial Servicer,
and the Trustee, as it may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with its terms.
"Prepayment Accumulation Commencement Date" means, with respect to any
Series, the date specified in any notice of optional prepayment given by ARC to
the Trustee pursuant to the Supplement relating to the Series.
"Prepayment Accumulation Period" means the period commencing on the
Prepayment Accumulation Commencement Date and ending on the earlier to occur of
(a) the Liquidation Commencement Date, (b) the Pay-Out Period Commencement Date,
and (c) the date on which the full amount to be prepaid, plus the applicable
Prepayment Premium, shall have been accumulated in the Defeasance Account.
"Prepayment Premium" means, with respect to each Series, the amount
specified in its Supplement.
page A-31
<PAGE>
"Principal Accumulation Amount" means, with respect to any Series or
Purchased Interest, for any Settlement Date occurring during the Accumulation
Period, the sum of the amounts set aside in the Defeasance Account with respect
to that Series or Purchased Interest during the preceding Calculation Period,
and the amount so set aside on each Business Day during the Accumulation Period
(until the portion of the Invested Amount allocable to such Series or Purchased
Interest has been provided for in full) will equal the product of (a) the
Defeasance Allocation Percentage for that Series or Purchased Interest and (b)
the balance of Collections available in the Master Collection Account, after
making any required transfers to the Carrying Cost Account.
"Principal Distribution Amount" means (a) for any Settlement Date occurring
after the Calculation Period in which the Liquidation Period commences, with
respect to any Class of Investor Certificates or Purchased Interest, the product
of (i) the balance of Collections in the Master Collection Account that were
deposited therein prior to the end of the preceding Calculation Period remaining
after application thereof as provided in clause First of Section 4.03(h) of the
Pooling Agreement (and, in the case of any Subordinated Class or Subordinated
Purchased Interest, after application thereof to the repayment in full of all
Senior Classes and Senior Purchased Interests) and (ii) the Class Allocation
Percentage of such Class or Purchased Interest, and (b) for any Settlement Date
occurring after the Calculation Period in which a Pay-Out Period commences, with
respect to any Series of Investor Certificates or Purchased Interest, an amount
equal to the amount calculated in the same manner as the Principal Accumulation
Amount with respect to a Settlement Date in the Accumulation Period.
"Principal Funding Account" is defined in Section 4.02(e) of the Pooling
Agreement.
"Process Agent" is defined in Section 10.7 of the Purchase Agreement.
"Program" means the transactions contemplated in the Transaction Documents.
"Publication Date" is defined in Section 9.03(a) of the Pooling Agreement.
"Purchase" means each purchase of Receivables and Related Assets by ARC
from the Seller under the Purchase Agreement.
"Purchase Agreement" means the Receivables Purchase Agreement, dated as of
December 13, 1994, between the Seller and ARC, as it may be amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with its terms and with the Pooling Agreement.
"Purchased Assets" is defined in Section 1.1 of the Purchase Agreement.
page A-32
<PAGE>
"Purchased Interest" means a fluctuating undivided ownership interest in
the Trust Assets, purchased pursuant to the PI Agreement related thereto, that
shall include the right to receive, to the extent necessary to make required
payments to Purchasers at the time and in the amounts specified in the related
PI Agreement, the portion of Collections allocable to such Purchased Interest
pursuant to the Pooling Agreement and the PI Agreement, funds on deposit in the
Master Collection Account allocable to the Purchased Interest pursuant to the
Pooling Agreement and the PI Agreement, funds on deposit in any related
Purchaser Account and funds available pursuant to any related Enhancement.
"Purchase Discount Reserve Ratio" is defined in Section 2.2(c) of the
Purchase Agreement.
"Purchased Receivables" is defined in Section 1.1 of the Purchase
Agreement.
"Purchase Price" is defined in Section 2.1(b) of the Purchase Agreement.
"Purchase Price Credit" is defined in Section 3.1(d) of the Purchase
Agreement.
"Purchase Price Percentage" is defined in Section 2.2(a) of the Purchase
Agreement.
"Purchase Termination Date" means the earlier to occur of (a) the date
specified by the Seller pursuant to Section 8.1 of the Purchase Agreement and
(b) any event referred to in Section 8.2 of the Purchase Agreement.
"Purchaser" means a purchaser, or any owner by permitted assignment, of a
Purchased Interest.
"Purchaser Account" means any deposit, trust, escrow or similar account
maintained exclusively for the benefit of any Purchaser and not for the benefit
of ARC or any Investor Certificateholder, as specified in any PI Agreement,
which account shall not be a Trust Asset.
"Purchaser Agent" means, with respect to each Purchased Interest, the agent
who shall act on behalf of all the related Purchasers and who shall be specified
as such in the related PI Agreement.
"Ratable Principal Amount" means, as to any Series or Class of Investor
Certificates, any Purchased Interest or the ARC Revolving Certificate, the
outstanding principal amount thereof, except that:
(a) if so provided in the Supplement pursuant to which a Series or
Class of Investor Certificates is issued, the Ratable Principal Amount of
that Series or Class may be greater or less than its outstanding principal
amount,
page A-33
<PAGE>
(b) if so provided in the PI Agreement relating to a Purchased
Interest, the Ratable Principal Amount of that Purchased Interest may be
greater or lesser than its outstanding principal amount, and
(c) if so provided in any Supplement or PI Agreement, the Ratable
Principal Amount of the ARC Revolving Certificate may be greater or less
than its outstanding principal amount.
"Rating Agency Condition" means, with respect to any action, that the
Applicable Rating Agency has notified the Servicer and the Trustee in writing
that such action will not result in a reduction or withdrawal of the rating of
any outstanding Series or Class with respect to which it is an Applicable Rating
Agency.
"Receivable" means any right of the Seller to payment from or on behalf of
an Obligor (other than any of the Seller's Subsidiaries or Affiliates)
satisfying the requirement set out in clause (a) of the definition of "Eligible
----------
Obligor," whether constituting an account,
chattel paper, instrument, general intangible or otherwise, arising from the
sale of goods or services by the Seller and includes the right to payment of any
interest or finance charges and other obligations of the Obligor with respect
thereto; provided, however, that until such time (and only until such time) as
the Seller notifies ARC of the discontinuation of sales of Receivables described
in Section 1.8 of the Purchase Agreement, receivables of the Seller shall,
whether or not described above, be "Receivables" (but not "Eligible
Receivables").
"Receivables Pool" means at any time all then outstanding Receivables.
"Records" means all Contracts, purchase orders, invoices and other
agreements, documents, books, records and other media for the storage of
information (including tapes, disks, punch cards, computer programs and
databases and related property) maintained by ARC, the Seller or the Servicer
with respect to the Purchased Assets, the Trust Assets and/or the related
Obligors.
"Recoveries" means all Collections received by the Trust in respect of any
Charged-Off Receivable held by the Trust.
"Regulation S Book-Entry Certificate" is defined in Section 6.12(c) of the
Pooling Agreement.
"Regulation S Temporary Book-Entry Certificate" is defined in Section
6.12(c) of the Pooling Agreement.
"Related Assets" is defined in Section 1.1 of the Purchase Agreement.
page A-34
<PAGE>
"Related Contributed Assets" is defined in Section 2(c) of the Subscription
Agreement.
"Related Purchased Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Related Security" means, with respect to any Receivable, (a) all of the
Seller's right, title and interest in and to the goods, if any, relating to the
sale that gave rise to the Receivable, excluding any Returned Goods, (b) all
other security interests or liens and property subject thereto from time to time
purporting to secure payment of the Receivable, whether pursuant to the Contract
related to the Receivable or otherwise, and (c) all letters of credit,
guarantees and other agreements or arrangements of whatever character from time
to time supporting or securing payment of the Receivable whether pursuant to the
Contract related to the Receivable or otherwise.
"Related Transferred Assets" is defined in Section 2.01(a) of the Pooling
Agreement.
"Replacement Seller Credit Agreement" means any agreement (other than an
agreement referred to in clause (b) of the definition of Original Seller Credit
----------
Agreement) entered into by AmeriSource to refinance the Original Seller Credit
Agreement; provided, that (i) the parties to such agreement shall have executed
and delivered to the Trustee, for the benefit of the Trustee, the Investor
Certificateholders and the Purchasers, an intercreditor agreement substantially
in the form of Exhibit O-2 to the Pooling Agreement and such other consents,
releases and other documents as the parties to the Original Seller Credit
Agreement shall have executed for the benefit of the Trustee, and (ii) the
Seller shall have elected, by written notice to the Trustee, to classify such
Agreement as the Replacement Seller Credit Agreement, as the same may be
amended, modified or restated from time to time.
"Replacement Stop Date Conditions" shall exist when (a) any Event of
Default shall have occurred and be continuing, and (b) any Unmatured Event of
Default shall have occurred and be continuing; provided, that such Unmatured
Event of Default relates to (i) failure of the Seller to make a payment of
principal or interest when due, or (ii) the value or enforceability of the
collateral for the Replacement Seller Credit Agreement.
"Report Date" means the Business Day that is three Business Days prior to a
Settlement Date.
"Required Investors" means Holders of Investor Certificates that evidence
at least 66-2/3% of the Investor Invested Amount.
"Required Reserve Ratios" means, as calculated in each Settlement
Statement, (a) the Loss Reserve Ratio and (b) the Dilution Reserve Ratio.
page A-35
<PAGE>
"Required Reserves" means, at any time, (a) the Net Eligible Receivables
multiplied by (b) the Applicable Reserve Ratio.
"Required Series Holders" means, at any time, (a) with respect to any
action to be taken by Holders of any Series of Fixed Principal Certificates,
Holders of the Series of Fixed Principal Certificates that evidence at least 66-
2/3% of the Fixed Principal Invested Amount with respect to such Series of Fixed
Principal Certificates, and (b) with respect to any action to be taken by
Holders of any Series of Investor Revolving Certificates, Holders of the Series
of Investor Revolving Certificates that evidence at least 66-2/3% of the
aggregate Stated Amount of the Series of Investor Revolving Certificates.
"Requisite Lenders" has the meaning assigned to that term in the Original
Seller Credit Agreement.
"Residual Certificate" means the Certificate, executed by ARC and
authenticated by or on behalf of the Trustee, that is substantially in the form
of Exhibit H to the Pooling Agreement.
"Residual Interest" is defined in Section 4.01 of the Pooling Agreement.
"Responsible Officer" means, when used with respect to the Trustee, (a) any
officer within the Corporate Trust Office (or any successor group of the
Trustee), including any vice president, assistant vice president or any officer
or assistant trust officer of the Trustee customarily performing functions
similar to those performed by the persons who hold the office of vice president,
assistant vice president, or assistant secretary and (b) any other officer
within the Corporate Trust Office with direct responsibility for the
administration of the Pooling Agreement or to whom any corporate trust matter is
referred at the Trustee's Corporate Trust Office because of his knowledge of and
familiarity with the particular subject.
"Restricted Federal Obligor" means any Federal Obligor other than an
Unrestricted Federal Obligor.
"Returned Goods" means all right, title and interest of the Seller or its
assigns in and to goods and/or merchandise, the sale of which gave rise to
Receivables that have been returned to, repossessed by or foreclosed on by
AmeriSource (as Seller or Servicer).
"Returned Goods Percentage" means 1%.
"Revolving Certificate Calculation Amount" means, as of the opening of
business on any day, the Revolving Certificate Invested Amount.
"Revolving Certificate Interest" is defined in Section 4.01 of the Pooling
Agreement.
page A-36
<PAGE>
"Revolving Certificate Invested Amount" means, at any time, an amount equal
to the sum of (a) the ARC Revolving Amount at such time, plus (b) the Investor
Revolving Invested Amount at such time.
"Revolving Certificate Purchase Agreement" means, for a Series of Investor
Revolving Certificates, the agreement in which, with the Series' Supplement, the
terms and provisions applicable to the Series are set out.
"Revolving Certificates" means the Investor Revolving Certificates and the
ARC Revolving Certificate.
"Revolving Period" means, with respect to each Series, the period before
the commencement of the earliest of the Liquidation Period or any applicable
Accumulation Period, Pay-Out Period or Prepayment Accumulation Period.
"RPA Indemnified Losses" is defined in Section 9.1 of the Purchase
Agreement.
"RPA Indemnified Party" is defined in Section 9.1 of the Purchase
Agreement.
"Sale Date" means, with respect to any Series and unless otherwise
specified in the applicable Supplement, the first anniversary of the day on
which the Revolving Period for the Series ends.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Scheduled Accumulation Commencement Date" means, with respect to a Series
to which it applies, the date specified as such in the Supplement pursuant to
which the Series is issued.
"Scheduled Liquidation Commencement Date" means the date that is 18 months
after the Pay-Out Period Commencement Date for the latest maturing Series of
Investor Certificates.
"Scheduled Pay-Out Commencement Date" means, with respect to any Series of
Revolving Certificates, the date specified as such in the Supplement pursuant to
which the Series of Revolving Certificates is issued.
"Securities Act" means the Securities Act of 1933, as it may be amended
from time to time.
"Segregated Cash" means, as of any day in a Look Back Period, the excess
(if any) of (a) the aggregate amount of funds then on deposit in the
Equalization Account, over (b) the aggregate amount of funds that would be
required to be on deposit in the Equalization
page A-37
<PAGE>
Account on such day to cause the sum of (i) the Certificate Calculation Amount
plus (ii) the PI Calculation Amount minus (iii) funds then on deposit in the
Equalization Account to equal the Base Amount.
"Seller" means AmeriSource; provided, however, that such term also shall
include any Subsidiary of AmeriSource that becomes a party to the Purchase
Agreement pursuant to Section 1.7 thereof and shall exclude any Person that is
terminated as a Seller pursuant to Section 1.8 thereof.
"Seller Adjustment" is defined in Section 4.03(d) of the Pooling Agreement.
"Seller Agent" means (a) General Electric Capital Corporation, as
Administrative Agent and Managing Agent under the Original Seller Credit
Agreement, and any successor thereto in such capacity, and (b) any agent under a
Replacement Seller Credit Agreement.
"Seller Assignment Certificate" means an assignment by the Seller,
substantially in the form of Exhibit B to the Purchase Agreement, evidencing
ARC's ownership of the Receivables (excluding the Contributed Receivables) and
Related Assets generated by the Seller, as it may be amended, supplemented,
amended and restated or otherwise modified from time to time in accordance with
the Purchase Agreement.
"Seller Change Event" is defined in Section 3.05(e) of the Pooling
Agreement.
"Seller Credit Agreement" shall mean the Original Seller Credit Agreement
or the Replacement Seller Credit Agreement, whichever is in effect.
"Seller Dilution Adjustment" is defined in Section 3.5(b) of the Purchase
Agreement.
"Seller Noncomplying Receivable" means a Receivable that does not meet the
criteria set forth in the definition of Eligible Receivables (after excluding
(a) the criteria contained in clause (c) of such definition and (b) the criteria
----------
contained in clause (d) or (e) of the definition of Eligible Obligor).
---------- ---
"Seller Noncomplying Receivables Adjustment" is defined in Section 3.5(a)
of the Purchase Agreement.
"Seller Outstandings" means the sum of the outstanding principal amount of
the Advances plus the outstanding face amount of the Letter of Credit
Obligations.
"Seller Parties" shall mean the parties to the Seller Credit Agreement
(other than AmeriSource).
"Seller Receivables Review" is defined in Section 6.1(c) of the Purchase
Agreement.
page A-38
<PAGE>
"Seller Transaction Documents" means the Purchase Agreement, the Seller
Assignment Certificates, the Subscription Agreement and the Account Agreements.
"Senior Class" means any Class of Investor Certificates that is identified
as a "Senior Class" in the applicable Supplement.
"Senior Interest" is defined in the ARC Note.
"Senior Purchased Interest" means any Purchased Interest that is identified
as a "Senior Purchased Interest" in the applicable PI Agreement.
"Series" means any Series of Investor Certificates issued pursuant to
Section 6.10 of the Pooling Agreement.
"Series Sale Date" means, with respect to any Series, the date specified as
the Sale Date for the Series in the related Supplement.
"Servicer" means at any time the Person then authorized pursuant to Article
III of the Pooling Agreement to service, administer and collect Receivables and
Related Transferred Assets.
"Servicer Default" is defined in Section 10.01 of the Pooling Agreement.
"Service Transfer" is defined in Section 10.02(b) of the Pooling Agreement.
"Servicing Fee" is defined in Section 3.04 of the Pooling Agreement.
"Set-Aside Account" is defined in Section 4.02(f) of the Pooling Agreement.
"Set Off Group" means, initially, with respect to each state, all State and
Local Obligors arising for such state; provided, however, that, with respect to
any state, if the Rating Agency Condition has been satisfied after AmeriSource
shall have provided the Applicable Rating Agencies with information to the
effect that: (a) the State Obligors in that state could not set off taxes owed
by AmeriSource to such State Obligors against Receivables owed by Local Obligors
in that state to AmeriSource, and (b) the Local Obligors in that state could not
set off taxes owed by AmeriSource to such Local Obligors against Receivables
owed by State Obligors in that state to AmeriSource, then AmeriSource could
elect to create several separate Set Off Groups for that state, one of which
would contain all of such State Obligors and each other of which would contain a
Local Obligor; and, provided further, that an Unrestricted State/Local Obligor
need not be included in any Set Off Group.
"Settlement Date" means, with respect to any Calculation Period, the 24th
Business Day following the Cut-Off Date for such Calculation Period.
page A-39
<PAGE>
"Settlement Statement" is defined in Section 3.05(d) of the Pooling
Agreement.
"Specified Obligor" means State Obligors in Kentucky, Louisiana, Nevada and
Vermont, and State and Local Obligors in Alabama.
"Shortfall" is defined in Section 1.2(c) of the Purchase Agreement.
"State/Local Set Off Reserve means, on any day, the aggregate amount of the
Individual Group Reserves for all Set Off Groups.
"State/Local Tax Per Diem" means, for any Set Off Group, (a) the amount of
state and local tax obligations of the Seller to Obligors in such Set Off Group
accrued during the calendar quarter ending prior to the most recent Settlement
Date, whether remitted to the applicable State and Local Obligor quarterly,
monthly or otherwise, divided by (b) 90.
"State/Local Tax Period" means, for any Set Off Group, the period selected
by AmeriSource, subject to satisfaction of the Rating Agency Condition.
"State Obligor" means any state or any department, agency or
instrumentality thereof.
"Stated Amount" means, as to any Investor Revolving Certificate or
Purchased Interest, the maximum principal amount that may be required to be
funded by the Holder of such Investor Revolving Certificate or Purchaser, as
applicable, as determined pursuant to the applicable Supplement or PI Agreement.
"Stop Date Conditions" mean (a) during the term of the Original Seller
Credit Agreement (and until all Original Obligations are paid in full), the
Original Stop Date Conditions, and (b) thereafter, the Replacement Stop Date
Conditions.
"Stop Date Notice" means a written notice given by the Seller Agent to the
Trustee and the Servicer on a Business Day, to the effect that (a) the Stop Date
Conditions have occurred and are continuing, and (b) under the Seller Credit
Agreement, the Seller Agent has instructed the Seller to stop selling
Receivables to ARC under the Purchase Agreement; provided, that if the Trustee
shall receive such notice later than 11:15 a. m., New York City time, on any
day, such notice shall be deemed to have been received on the next Business Day.
"Subordinated Class" means any Class of Investor Certificates that is
identified as a "Subordinated Class" in the applicable Supplement.
"Subordinated Purchased Interest" means any Purchased Interest that is
identified as a "Subordinated Purchased Interest" in the applicable PI
Agreement.
page A-40
<PAGE>
"Subscription Agreement" means the Subscription and Stockholder Agreement,
dated as of December 13, 1994, between the Seller and ARC, as it may be amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with the Purchase Agreement and the Pooling Agreement.
"Subsequent Issuance" is defined in Section 6.10(a) of the Pooling
Agreement.
"Subsequent Issuance Date" is defined in Section 6.10(b) of the Pooling
Agreement.
"Subsequent Issuance Investor Certificates" is defined in Section 6.02(b)
of the Pooling Agreement.
"Subsequent Issuance Notice" is defined in Section 6.10(b) of the Pooling
Agreement.
"Sub-Servicer" is defined in Section 3.01(b) of the Pooling Agreement.
"Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person.
"Successor Servicer" is defined in Section 10.02(a) of the Pooling
Agreement.
"Supplement" means each Supplement (including any related documents, such
as a Revolving Certificate Purchase Agreement) executed by ARC, the Servicer and
the Trustee on each Subsequent Issuance Date, into each of which agreements the
terms and provisions of the Pooling Agreement shall be incorporated by reference
and in each of which the terms and provisions applicable to the Series of
Certificates to be issued thereby shall be set out, as it may be amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with its terms and with the Pooling Agreement.
"Syndication Documents" means the documents prepared in connection with the
syndication of the Bridge Facility, as identified in one or more letter
agreements between ARC and the initial purchaser of Investor Certificates issued
under the Bridge Facility.
"Take Out Facility" means the transactions contemplated by the Program
Documents, as amended, modified or supplemented (including any amendments,
modifications or supplements implemented by means of Supplements and PI
Agreements) in order to refinance or (as contemplated by Section 10.12 of the
Revolving Certificate Purchase Agreement included in the Bridge Facility)
restructure the Bridge Facility.
page A-41
<PAGE>
"Tax Opinion" means, with respect to any action, an Opinion of Counsel to
the effect that, for Federal and Pennsylvania and New York state income and
franchise tax purposes, (a) such action will not adversely affect the
characterization of the Investor Certificates of any outstanding Series or Class
as debt, (b) following such action the Trust will not be treated as an
association (or publicly traded partnership) taxable as a corporation and (c) in
the case of the original issuance of any Series or Class of Investor
Certificates, the Investor Certificates of the new Series will properly be
characterized as debt or partnership interests.
"Terminating Seller" is defined in Section 1.8(a) of the Purchase
Agreement.
"Termination Notice" is defined in Section 10.01 of the Pooling Agreement.
"Tier-1 Obligor" means any Obligor that has (a) a commercial paper rating
from the Applicable Rating Agencies of at least "A-1+" (or its equivalent) or
(b) a senior actual or implied debt rating from the Applicable Rating Agencies
of at least "AAA" (or its equivalent).
"Tier-2 Obligor" means any Obligor (other than a Tier-1 Obligor) that has
(a) a commercial paper rating from the Applicable Rating Agencies of at least
"A-1" (or its equivalent) or (b) a senior actual or implied debt rating from the
Applicable Rating Agencies of at least "A+" (or its equivalent).
"Tier-3 Obligor" means any Obligor (other than a Tier-1 Obligor or a Tier-2
Obligor) that has (a) a commercial paper rating from the Applicable Rating
Agencies of at least "A-2" (or its equivalent) or (b) a senior actual or implied
debt rating from the Applicable Rating Agencies of at least "BBB+" (or its
equivalent).
"Tier-4 Obligor" means any Obligor (other than a Tier-1 Obligor, a Tier-2
Obligor or a Tier-3 Obligor) that has (a) a commercial paper rating from the
Applicable Rating Agencies of at least "A-3" (or its equivalent) or (b) a senior
actual or implied debt rating from the Applicable Rating Agencies of at least
"BBB-" (or its equivalent).
"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.
"Transaction Documents" means the Purchase Agreement, the Pooling
Agreement, each Supplement and each PI Agreement.
"Transfer Agent and Registrar" means any transfer agent and registrar
appointed pursuant to Section 6.03(a) of the Pooling Agreement and shall
initially be the Trustee.
"Transfer Value" is defined in Section 1.2(c) of the Purchase Agreement.
page A-42
<PAGE>
"Transferee Regulation S Certification" is defined in Section 6.03(i) of
the Pooling Agreement.
"Transferred Assets" is defined in Section 1.1 of the Purchase Agreement.
"Trust" means the AmeriSource Receivables Master Trust created by the
Pooling Agreement.
"Trust Accounts" means the accounts described in Sections 4.02(b), (c),
(e), (f) and (g) of the Pooling Agreement and any accounts required to be
established pursuant to any Supplement that are designated as Trust Accounts in
that Supplement.
"Trust Assets" is defined in Section 2.01(a) of the Pooling Agreement.
"Trustee" means Manufacturers and Traders Trust Company, in its capacity as
trustee on behalf of the Trust, or its successor-in-interest, or any successor
trustee appointed as provided in the Pooling Agreement.
"Turnover Days" means, at any time, the product of (a) the sum of the
beginning and ending Unpaid Balances of Receivables during the immediately
preceding Calculation Period divided by two, multiplied by (b) 30, divided by
the aggregate amount payable pursuant to invoices giving rise to Receivables
that were generated during the Calculation Period.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.
"Unapplied Cash" means, at any time, cash received by the Trustee but not
then identified by the Servicer as Collections on a particular Receivable.
"Unfunded Certificate" is defined in Section 6.10(a) of the Pooling
Agreement.
"Unmatured Event of Default" means an event or condition that, with the
giving of notice or lapse of time or both, would constitute an Event of Default.
"Unmatured Liquidation Event" means any event that, with the giving of
notice or lapse of time, or both, would become a Liquidation Event.
"Unpaid Balance" of any Receivable means at any time the unpaid amount
thereof as shown in the books of the Servicer at such time.
"Unrestricted Book-Entry Certificate" is defined in Section 6.12(c) of the
Pooling Agreement.
page A-43
<PAGE>
"Unrestricted Federal Obligor" means a Federal Obligor that has waived in
writing its right to set off (a) amounts owed by the Seller to it against (b)
Receivables owed by it to the Seller; provided, however, that if such waiver
shall only apply to certain Receivables, such Federal Obligor shall be an
Unrestricted Federal Obligor only to the extent of such Receivables.
"Unrestricted State/Local Obligor" means a State Obligor or Local Obligor
that has waived, or is otherwise not entitled to exercise, any right to withhold
payments on Receivables owed by it on account of setoff; provided that evidence
of such waiver or lack of entitlement shall have been presented to the
Applicable Rating Agencies and the Rating Agency Condition shall have been
satisfied with respect to classification of such Obligor as an Unrestricted
State/Local Obligor.
"Variable Amount" is defined in Section 4.03(c) of the Pooling Agreement.
B. Other Terms. All accounting terms not specifically defined herein
-----------
shall be construed in accordance with United States generally accepted
accounting principles. To the extent that the definitions of accounting terms
in any Transaction Document are inconsistent with the meanings of such terms
under generally accepted accounting principles or regulatory accounting
principles, the definitions contained in such Transaction Document shall
control. All terms used in Article 9 of the UCC in the State of New York, and
not specifically defined herein, are used herein as defined in such Article 9.
As used in the Transaction Documents, the term "including" means "including
without limitation," and other forms of the verb "to include" have correlative
meanings. All references to any Person shall include such Person's permitted
successors.
C. Computation of Time Periods. Unless otherwise stated in the Purchase
---------------------------
Agreement or the Pooling Agreement, as the case may be, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding".
D. Reference; Captions. The words "hereof", "herein" and "hereunder" and
-------------------
words of similar import when used in any Transaction Document shall refer to
such Transaction Document as a whole and not to any particular provision of such
Transaction Document; and references to "Section", "subsection", "Schedule" and
"Exhibit" in any Transaction Document are references to Sections, subsections,
Schedules and Exhibits in or to such Transaction Document unless otherwise
specified in such Transaction Document. The various captions (including the
tables of contents) in each Transaction Document are provided solely for
convenience of reference and shall not affect the meaning or interpretation of
any Transaction Document.
page A-44
<PAGE>
Exhibit 4.12
================================================================================
AMERISOURCE RECEIVABLES MASTER TRUST
POOLING AND SERVICING AGREEMENT
dated as of December 13, 1994
among
AMERISOURCE RECEIVABLES CORPORATION,
as transferor,
AMERISOURCE CORPORATION,
as the initial Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01 Definitions.................................................. 1
<CAPTION>
ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF CERTIFICATES
<S> <C> <C>
SECTION 2.01 Creation of the Trust; Conveyance of Certain Assets.......... 1
SECTION 2.02 Acceptance by Trustee........................................ 3
SECTION 2.03 Representations and Warranties of ARC Relating to the Trust
Assets....................................................... 3
SECTION 2.04 No Assumption of Obligations Relating to Receivables, Related
Transferred Assets or Contracts.............................. 5
SECTION 2.05 Conveyance of Receivables by the Trust....................... 5
<CAPTION>
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
<S> <C> <C>
SECTION 3.01 Acceptance of Appointment and Other Matters Relating to the
Servicer..................................................... 6
SECTION 3.02 Duties of the Servicer and ARC............................... 7
SECTION 3.03 Lockbox Accounts; Concentration Accounts..................... 10
SECTION 3.04 Servicing Compensation....................................... 12
SECTION 3.05 Records of the Servicer and Reports to be Prepared by the
Servicer..................................................... 13
SECTION 3.06 Monthly Servicer's Certificate............................... 15
SECTION 3.07 Annual Servicing Report of Independent Public Accountants;
Forms 10-Q and 10-K.......................................... 15
SECTION 3.08 Rights of the Trustee........................................ 16
SECTION 3.09 Ongoing Responsibilities of AmeriSource...................... 18
SECTION 3.10 Further Action Evidencing Transfers.......................... 19
<CAPTION>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
<S> <C> <C>
SECTION 4.01 Rights of Certificateholders................................. 20
SECTION 4.02 Establishment of Trust Accounts.............................. 20
SECTION 4.03 Daily Calculations and Funds Allocations..................... 23
SECTION 4.04 Investment of Funds in Trust Accounts........................ 34
SECTION 4.05 Attachment of Trust Accounts................................. 35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
<S> <C> <C>
SECTION 5.01 Distributions to Holders of Investor Certificates and
Purchasers................................................... 35
SECTION 5.02 Distributions on the ARC Revolving Certificate and the
Residual Certificate......................................... 39
SECTION 5.03 Information to Certificateholders............................ 39
SECTION 5.04 Notice of Early Liquidation at Seller Election............... 40
<CAPTION>
ARTICLE VI
THE CERTIFICATES
<S> <C> <C>
SECTION 6.01 The Certificates............................................. 40
SECTION 6.02 Authentication of Certificates............................... 41
SECTION 6.03 Registration of Transfer and Exchange of Certificates........ 42
SECTION 6.04 Mutilated, Destroyed, Lost or Stolen Certificates............ 47
SECTION 6.05 Persons Deemed Owners........................................ 47
SECTION 6.06 Appointment of Paying Agent.................................. 47
SECTION 6.07 Access to List of Certificateholders' Names and Addresses.... 48
SECTION 6.08 Authenticating Agent......................................... 49
SECTION 6.09 Tax Treatment................................................ 50
SECTION 6.10 Issuance of Additional Series of Certificates and Sales
of Purchased Interests....................................... 50
SECTION 6.11 Changes in Amount of Investor Revolving Certificates......... 55
SECTION 6.12 Book-Entry Certificates...................................... 56
SECTION 6.13 Notices to Clearing Agency................................... 58
SECTION 6.14 Definitive Certificates...................................... 58
SECTION 6.15 Letter of Representations.................................... 58
<CAPTION>
ARTICLE VII
ARC
<S> <C> <C>
SECTION 7.01 Representations and Warranties of ARC Relating to ARC and
the Transaction Documents.................................... 59
SECTION 7.02 Covenants of ARC............................................. 62
SECTION 7.03 Indemnification by ARC....................................... 69
<CAPTION>
ARTICLE VIII
THE SERVICER
<S> <C> <C>
SECTION 8.01 Representations and Warranties of the Servicer............... 71
SECTION 8.02 Covenants of the Servicer.................................... 73
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
SECTION 8.03 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer................................. 74
SECTION 8.04 Indemnification by the Servicer.............................. 74
SECTION 8.05 Servicer Liability........................................... 75
SECTION 8.06 Limitation on Liability of the Servicer and Others........... 75
<CAPTION>
ARTICLE IX
LIQUIDATION EVENTS
<S> <C> <C>
SECTION 9.01 Liquidation Events........................................... 76
SECTION 9.02 Remedies..................................................... 79
SECTION 9.03 Additional Rights Upon the Occurrence of Certain Events...... 79
<CAPTION>
ARTICLE X
SERVICER DEFAULTS
<S> <C> <C>
SECTION 10.01 Servicer Defaults........................................... 80
SECTION 10.02 Trustee to Act; Appointment of Successor.................... 82
SECTION 10.03 Notification of Servicer Default; Notification
of Appointment of Successor Servicer........................ 84
<CAPTION>
ARTICLE XI
THE TRUSTEE
<S> <C> <C>
SECTION 11.01 Duties of Trustee........................................... 84
SECTION 11.02 Certain Matters Affecting the Trustee....................... 87
SECTION 11.03 Limitation on Liability of Trustee.......................... 89
SECTION 11.04 Trustee May Deal with Other Parties......................... 90
SECTION 11.05 Servicer To Pay Trustee's Fees and Expenses................. 90
SECTION 11.06 Eligibility Requirements for Trustee........................ 91
SECTION 11.07 Resignation or Removal of Trustee........................... 91
SECTION 11.08 Successor Trustee........................................... 92
SECTION 11.09 Merger or Consolidation of Trustee.......................... 92
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee............... 93
SECTION 11.11 Tax Returns................................................. 94
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates................................................ 94
SECTION 11.13 Suits for Enforcement....................................... 94
SECTION 11.14 Rights of Investor Certificateholders To Direct Trustee..... 95
SECTION 11.15 Representations and Warranties of Trustee................... 95
SECTION 11.16 Maintenance of Office or Agency............................. 96
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ARTICLE XII
TERMINATION
<S> <C> <C>
SECTION 12.01 Termination of Trust........................................ 96
SECTION 12.02 Final Distribution.......................................... 97
SECTION 12.03 Rights Upon Termination of the Trust........................ 98
<CAPTION>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 13.01 Amendment, Waiver, Etc...................................... 99
SECTION 13.02 Actions by Certificateholders.............................. 101
SECTION 13.03 Limitation on Rights of Certificateholders................. 102
SECTION 13.04 Limitation on Rights of Purchasers......................... 103
SECTION 13.05 Governing Law.............................................. 103
SECTION 13.06 Notices.................................................... 104
SECTION 13.07 Severability of Provisions................................. 104
SECTION 13.08 Certificates Nonassessable and Fully Paid.................. 104
SECTION 13.09 Further Assurances......................................... 105
SECTION 13.10 Nonpetition Covenant....................................... 105
SECTION 13.11 No Waiver; Cumulative Remedies............................. 105
SECTION 13.12 Counterparts............................................... 105
SECTION 13.13 Third-Party Beneficiaries.................................. 105
SECTION 13.14 Integration................................................ 106
SECTION 13.15 Binding Effect; Assignability; Survival of Provisions...... 106
SECTION 13.16 Recourse to ARC............................................ 106
SECTION 13.17 Recourse to Trust Assets................................... 106
SECTION 13.18 Submission to Jurisdiction................................. 106
SECTION 13.19 Waiver of Jury Trial....................................... 107
SECTION 13.20 Certain Partial Releases................................... 107
SECTION 13.21 Confidentiality............................................ 108
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Form of Lockbox Account Letter Agreement
EXHIBIT B Form of Concentration Account Letter Agreement
EXHIBIT C-1 Form of Daily Report (Pre-Liquidation
EXHIBIT C-2 Form of Daily Report (Liquidation)
EXHIBIT D-1 Form of Settlement Statement (Pre-Liquidation)
EXHIBIT D-2 Form of Settlement Statement (Liquidation)
EXHIBIT E Form of Monthly Servicer's Certificate
EXHIBIT F Form of Monthly Report to Certificateholders
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
EXHIBIT G Form of ARC Revolving Certificate
EXHIBIT H Form of Residual Certificate
EXHIBIT I Form of Owner Regulation S Certification
EXHIBIT J Form of Transferee Regulation S Certification
EXHIBIT K Form of Depositary Regulation S Certification
EXHIBIT L Form of Transfer to Regulation S Certification
EXHIBIT M Form of Placement Agent Exchange Instructions
EXHIBIT N Form of Restrictive Legends
EXHIBIT O-1 Form of Phase I Intercreditor Agreement
EXHIBIT O-2 Form of Phase II Intercreditor Agreement
<CAPTION>
SCHEDULES
<S> <C>
SCHEDULE 1 Offices of the Transferor, the Servicer and the Seller Where
Records are Maintained
SCHEDULE 2 Account Banks
<CAPTION>
APPENDIX
<S> <C>
APPENDIX A Definitions
</TABLE>
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<PAGE>
This POOLING AND SERVICING AGREEMENT, dated as of December 13, 1994 (this
"Agreement"), is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware
corporation ("ARC"), as transferor, AMERISOURCE CORPORATION, a Delaware
corporation ("AmeriSource"), as initial Servicer, and Manufacturers and Traders
Trust Company, a New York banking corporation, as Trustee.
In consideration of the mutual agreements herein, each party agrees as
follows for the benefit of the other parties and the Certificateholders to the
extent provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Whenever used in this Agreement, capitalized
-----------
terms, unless otherwise defined herein, have the meanings that Appendix A
----------
assigns to them, and this Agreement shall be interpreted in accordance with the
conventions set forth in Parts B, C and D of Appendix A.
------- - - ----------
ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF CERTIFICATES
SECTION 2.01 Creation of the Trust; Conveyance of Certain Assets. (a) By
---------------------------------------------------
execution and delivery of this Agreement, ARC does hereby transfer, assign, set
over and otherwise convey to the Trust, for the benefit of the
Certificateholders, all its right, title and interest in, to and under, without
recourse except as expressly provided otherwise herein, (i) each Receivable and
any Notes Receivable that is or have been transferred by the Seller to ARC,
pursuant to the Purchase Agreement or the Subscription Agreement, from and
including the date on which the first Purchases occur under the Purchase
Agreement to but excluding the Purchase Termination Date, (ii) all Related
Assets, (iii) the Seller Transaction Documents (excluding the Subscription
Agreement) (all of ARC's right, title and interest in, to and under such Seller
Transaction Documents and the Related Assets being called the "Related
Transferred Assets"), (iv) all funds from time to time on deposit in each of the
Trust Accounts and all funds from time to time on deposit in each of the Bank
Accounts representing Collections on, or other proceeds of, the foregoing and,
in each case, 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) funds in an amount, if positive, equal to, as of the First
Issuance Date, (A) the
<PAGE>
Investor Initial Invested Amount minus (B) the Base Amount (which funds the
Trustee is directed to deposit into the Equalization Account on the date
hereof), 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 shall constitute the assets of the Trust (collectively,
the "Trust Assets"). The foregoing transfer, assignment, setover and conveyance
to the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, setover and conveyance
shall be construed accordingly.
(b) In connection with the transfer described in subsection (a), ARC and
--------------
the Servicer have recorded and filed or caused to be recorded and filed, in
connection with the First Issuance Date, as an expense of the Servicer paid out
of the Servicing Fee, financing statements (and continuation statements with
respect to such financing statements when applicable) with respect to the Trust
Assets (whether now existing or hereafter created) meeting the requirements of
applicable state law in such manner and in such jurisdictions as the Servicer
reasonably determined were necessary or desirable to perfect, and maintain
perfection of, the transfer and assignment of the Trust Assets to the Trust. The
Trustee shall be under no obligation whatsoever to file such financing
statements, or continuation statements to such financing statements, or to make
any other filing under the UCC in connection with such transfer. In connection
with the transfer described in subsection (a), ARC and the Servicer further
--------------
agree to deliver to the Trustee each Trust Asset (including any original
documents or instruments included in the Trust Assets as are necessary to effect
such transfer) in which the transfer of an interest is perfected under the UCC
or otherwise by possession. ARC or the Servicer shall deliver each such Trust
Asset to the Trustee, as an expense of the Servicer paid out of the Servicing
Fee, immediately upon the transfer of any such Trust Asset to the Trustee
pursuant to subsection (a).
--------------
(c) In connection with the transfer described above in subsection (a), the
--------------
Servicer shall, on behalf of ARC, as an expense of the Servicer paid out of the
Servicing Fee, on or prior to the Closing Date, mark the master data processing
records evidencing the Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO AMERISOURCE
RECEIVABLES CORPORATION PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT,
DATED AS OF DECEMBER 13, 1994, AMONG AMERISOURCE CORPORATION, AS
SELLER, AND AMERISOURCE RECEIVABLES CORPORATION, AS PURCHASER; AND
SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE AMERISOURCE RECEIVABLES
MASTER TRUST PURSUANT TO A POOLING AND SERVICING AGREEMENT, DATED AS
OF DECEMBER 13, 1994, AMONG AMERISOURCE RECEIVABLES CORPORATION, AS
TRANSFEROR, AMERISOURCE CORPORATION, AS THE
Page 2
<PAGE>
INITIAL SERVICER, AND MANUFACTURERS AND TRADERS TRUST COMPANY, AS
TRUSTEE."
(d) Upon the request of ARC, the 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 ARC pursuant to Section
-------
6.02.
- - - ----
SECTION 2.02 Acceptance by Trustee. The Trustee hereby acknowledges its
---------------------
acceptance on behalf of the Trust of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Trust pursuant to
Section 2.01(a) and declares that it shall maintain such right, title and
- - - ---------------
interest, upon the trust herein set forth, for the benefit of all
Certificateholders, on the terms and subject to the conditions hereinafter set
forth.
SECTION 2.03 Representations and Warranties of ARC Relating to the Trust
-----------------------------------------------------------
Assets.
- - - ------
(a) Representations and Warranties. At the time that any Receivable or
------------------------------
Related Asset is sold or transferred by ARC to the Trust, ARC hereby represents
and warrants that:
(i) Valid Transfer. Each transfer made by ARC pursuant to this
--------------
Agreement constitutes a valid transfer and assignment of all of its right,
title and interest in, to and under the Receivables and the Related
Transferred Assets to the Trust that is perfected and of first priority
under the UCC and otherwise, enforceable against creditors of, and
purchasers from, ARC and the Seller and free and clear of any Adverse Claim
(other than any Permitted Adverse Claim and any Adverse Claim arising
solely as a result of any action taken by the Trustee under this
Agreement).
(ii) Quality of Title. (A) Immediately before each transfer to be
----------------
made by ARC hereunder, each Receivable and Related Transferred Asset that
was then to be transferred to the Trust hereunder was owned by ARC free and
clear of any Adverse Claim (other than any Permitted Adverse Claim and any
Adverse Claim arising solely as a result of any action taken by the Trustee
under this Agreement); and, in connection with the First Issuance Date, ARC
and the 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 Trust's interest in such Receivables, such Related
Transferred Assets and the funds in the Trust Accounts against all
creditors of, and purchasers from, ARC and the Seller.
(B) Each transfer of Receivables and Related Transferred Assets by ARC
to the Trust pursuant to this Agreement constitutes a valid transfer and
assignment to the Trust of all right, title and interest of ARC in the
Receivables and the Related Transferred Assets, free and clear of any
Adverse Claim (other than any Permitted Adverse Claim and any Adverse Claim
arising solely as the result of any action taken by the Trustee under this
Agreement), and constitutes either an absolute transfer of
Page 3
<PAGE>
such property to the Trust or a grant of a first priority perfected
security interest in such property to the Trust. Whenever the Trust accepts
a transfer of a Receivable or a Related Transferred Asset hereunder, it
shall have acquired a valid and perfected first priority interest in such
Receivable or Related Transferred Asset free and clear of any Adverse Claim
(other than any Permitted Adverse Claim and any Adverse Claim arising
solely as a result of any action taken by the Trustee under this
Agreement).
(C) No effective financing statement or other instrument similar in
effect that covers all or part of any Receivable, any Related Transferred
Asset, any other Trust Asset or any interest in any thereof is on file in
any recording office except financing statements as to which termination
statements or releases are filed on the Closing Date or the day after the
Closing Date and except such as may be filed (1) in favor of the Seller in
accordance with the Contracts, (2) in favor of ARC pursuant to the Purchase
Agreement or the Subscription Agreement, and (3) in favor of the Trustee,
for the benefit of the Certificateholders, in accordance with this
Agreement or otherwise filed by or at the direction of the Trustee. No
effective financing statement or instrument similar in effect relating to
perfection that covers any inventory of the Seller that might give rise to
Receivables is on file in any recording office except for (so long as the
Intercreditor Agreement is in effect) financing statements or instruments
in favor of the Seller Agent.
(D) No acquisition of any Receivable or Related Transferred Asset by
ARC or the Trust 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.
(E) The transfer of the Receivables and Related Transferred Assets by
the Seller to ARC constitutes a true and valid assignment and transfer for
consideration of such Receivables and Related Transferred Assets under
applicable state law (and not merely a pledge of such Receivables and
Related Transferred Assets for security purposes), enforceable against the
creditors of the Seller, and any Receivables and Related Transferred Assets
so transferred do not constitute property of the Seller.
(iii) 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 Seller, the Servicer or ARC in connection with the conveyance of the
Receivable and Related Transferred Asset by the Seller to ARC, or by ARC to
the Trust, have been duly obtained, effected or given and are in full force
and effect, except, in respect of enforceability against a Federal Obligor,
for any consents or filings referred to in 31 U.S.C. (S)(S) 3727(b) and (c)
(the "Assignment of Claims Act") and any consents required by states with
respect to any
Page 4
<PAGE>
Receivables arising from State and Local Obligors so long as such
Receivables are not reported as Eligible Receivables.
(iv) Eligible Receivables. (A) On the date on which the Seller
--------------------
transfers a Receivable to ARC, and ARC transfers such Receivable to the
Trust, unless otherwise identified by the Servicer in the Daily Report for
such date, such Receivable is an Eligible Receivable, and (B) on the date
of each Daily Report or Settlement Statement that identifies a Receivable
as an Eligible Receivable, such Receivable is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set forth in
----------------
subsection (a) shall survive the transfer and assignment of the Receivables and
---
the Related Transferred Assets to the Trust. Upon discovery by ARC, the Servicer
or the Trustee of a breach of any of the representations and warranties set
forth in this subsection (a), the party discovering the breach shall give
--------------
written notice to the other parties to this Agreement within four Business Days
following the discovery. The Trustee's obligations in respect of discovering any
breach are limited as provided in Section 11.02(g).
----------------
SECTION 2.04 No Assumption of Obligations Relating to Receivables, Related
-------------------------------------------------------------
Transferred Assets or Contracts. The transfer, assignment, setover and
- - - -------------------------------
conveyance described in Section 2.01 does not constitute and is not intended to
------------
result in a creation or an assumption by the Trust, the Trustee or any Investor
Certificateholder of any obligation of the Servicer, ARC, the 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, including any obligation to any Obligors. None of the Trustee,
the Trust or any Investor Certificateholder shall have any obligation or
liability to any Obligor or other customer or client of the Seller (including
any obligation to perform any of the obligations of the Seller to any Obligor
under any such Receivables, related Contracts or any other related purchase
orders or other agreements or otherwise). No such obligation or liability is
intended to be assumed by the Trustee, the Trust or any Investor
Certificateholder hereunder, and any such assumption is hereby expressly
disclaimed.
SECTION 2.05 Conveyance of Receivables by the Trust. Pursuant to the
--------------------------------------
terms of a PI Agreement, the 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 the Purchaser Agent for the account of a Purchaser; and the
Trustee, on behalf of the Trust, is authorized and directed (subject to the
applicable terms of Section 6.10), upon the written request of the Seller, 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. Each Purchased Interest shall be equally
and ratably entitled as provided herein to the benefits of this Agreement
without preference, priority or distinction, all in
Page 5
<PAGE>
accordance with the terms and provisions of this Agreement except as otherwise
expressly provided herein.
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
SECTION 3.01 Acceptance of Appointment and Other Matters Relating to the
-----------------------------------------------------------
Servicer.
- - - --------
(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. Until the Trustee gives a Termination Notice to AmeriSource
pursuant to Section 10.01, AmeriSource is hereby designated as, and AmeriSource
-------------
hereby agrees to act as, the Servicer under this Agreement and the other
Transaction Documents with respect to the Receivables and the Related
Transferred Assets, and the Certificateholders and the Purchasers by their
acceptance of the Certificates and Purchased Interests consent to AmeriSource
acting as the Servicer.
(b) Delegation of Certain Servicing Activities. In the ordinary course of
------------------------------------------
business, the 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
subsection is herein called a "Sub-Servicer". Notwithstanding any such
delegation by the Servicer (including any such delegation by the Servicer to a
Seller), the Servicer shall remain liable for the performance of all duties and
obligations of the Servicer pursuant to the terms of this Agreement and the
other Transaction Documents and such delegation shall not relieve the Servicer
of its liability and responsibility with respect to its duties. The fees and
expenses of any Sub-Servicers shall be as agreed between the Servicer and the
Sub-Servicers from time to time and none of the Trust, the Trustee or the
Certificateholders shall have any responsibility therefor. Upon any termination
of a Servicer pursuant to Section 10.01, all Sub-Servicers designated pursuant
-------------
to this subsection by such Servicer shall automatically also be terminated.
(c) Termination. The designation of the Servicer (and each Sub-Servicer)
-----------
under this Agreement (and, in the case of any Sub-Servicer, under the agreement
or other document in which the Servicer makes a delegation of servicing duties
to the Sub-Servicer) shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.01.
-------------
(d) Resignation of the Servicer. The Servicer shall not resign from the
---------------------------
obligations and duties hereby imposed on it except upon its determination that
(i) the performance of its duties is no longer permissible under applicable law
and (ii) there is no reasonable action that
Page 6
<PAGE>
it could take to make the performance of its duties permissible under applicable
law. If the Servicer makes a determination that it must resign for the reasons
stated above, it shall, prior to the tendering of its resignation, deliver to
the Trustee an Opinion of Counsel for the Servicer, in form and substance
reasonably satisfactory to the Trustee, confirming the satisfaction of the
conditions set forth in clause (i) of the preceding sentence. No resignation by
----------
the Servicer shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.02. If the Servicer has tendered its resignation and
-------------
no Successor Servicer has been appointed, the Trustee may appoint, or may
petition a court of competent jurisdiction to appoint, a Successor Servicer
hereunder. The Trustee shall give prompt notice to the Applicable Rating
Agencies of the appointment of any Successor Servicer.
SECTION 3.02 Duties of the Servicer and ARC.
------------------------------
(a) Duties of the Servicer in General. The Servicer shall service and
---------------------------------
administer 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 of its Sub-Servicers, to do any and all things in
connection with such servicing and administration that it may deem necessary or
appropriate. The Trustee shall execute and deliver to the Servicer any powers of
attorney or other instruments or documents that are prepared by the Servicer and
stated in an Officer's Certificate to be, and shall furnish the Servicer with
any documents in its possession, necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties. The Servicer shall
exercise the same care and apply the same policies with respect to the
collection, administration 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.
The Servicer shall take or cause to be taken all such actions as it deems
necessary or appropriate to collect each Receivable and Related Transferred
Asset (and shall cause each of its Sub-Servicers (if any) to take or cause to be
taken all such actions as the Servicer deems necessary or appropriate to collect
each Receivable and Related Transferred Asset for which a Sub-Servicer is
responsible in its capacity as Sub-Servicer) from time to time, all in
accordance with applicable law and the Credit and Collection Policy.
Without limiting the generality of the foregoing and subject to the next
preceding paragraph and Section 10.01, the Servicer or its designee is hereby
-------------
authorized and empowered, unless such power and authority is revoked by the
Trustee on account of the occurrence of a Servicer Default, (i) to instruct the
Trustee to make withdrawals and payments from the Trust Accounts as set forth in
this Agreement, (ii) to execute and deliver, on behalf of the Trust for the
benefit of the Certificateholders, 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,
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<PAGE>
(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) after the
delinquency of any Receivable or any default in connection with a Related
Transferred Asset and 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 such Receivable and otherwise
to enforce the rights and interests of the Trust and the Certificateholders in,
to and under such Receivable or Related Transferred Asset (as applicable). The
Trustee shall promptly comply with the instructions of the Servicer to withdraw
funds and make payments from the Trust Accounts pursuant to the terms of this
Agreement.
(b) Identification and Transfer of Collections. The Servicer shall cause
------------------------------------------
Collections and all other Trust Assets that consist of cash or cash equivalents
to be deposited into the Bank Accounts and the Trust Accounts pursuant to the
terms and provisions of Section 3.03 and Article IV. Following notification
------------ ----------
from the Seller to the Servicer or discovery by the Servicer that collections of
any receivable or other asset that is not a Collection of a Receivable or a
Related Transferred Asset have been deposited into a Bank Account or the Master
Collection Account, the Servicer shall cause all such collections to be
segregated, apart and in different accounts, from the Bank Accounts and the
Trust Accounts. The Servicer and, to the extent applicable, the Trustee shall
hold all such funds in trust, separate and apart from such Person's other funds.
On each Business Day, after such misapplied collections have been reasonably
identified by the Servicer to the Trustee, the Servicer shall instruct the
Trustee to, and the Trustee shall, turn over to the appropriate Lockbox Bank,
Seller or other applicable AmeriSource Person (or their designees) all such
misapplied collections less all reasonable and appropriate out-of-pocket costs
and expenses, if any, incurred by the Servicer in collecting such receivables.
All payments made by an Obligor that is obligated to make payments with
respect to both Transferred Receivables and other Receivables shall be applied
against the specified Receivables, if any, that are designated by such Obligor
by reference to the applicable invoice as the Receivables with respect to which
such payments should be applied. In the absence of such designation, such
payments shall be applied against the oldest outstanding Receivables owed by
such Obligor.
Following notification from a Lockbox Bank that any item has been returned
or is uncollected and that such Lockbox Bank has not been otherwise reimbursed
pursuant to the terms of the applicable Lockbox Agreement for any amounts it
credited to the relevant Lockbox Account (and then transferred to the Master
Collection Account), the Servicer shall
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<PAGE>
instruct the Trustee to, and the Trustee shall, turn over to such Lockbox 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, the Servicer may adjust, and may permit
each Sub-Servicer appointed by it to adjust, in accordance with Section 3.02(a)
---------------
and the Credit and Collection Policy, the outstanding unpaid balance of any
Receivable, or otherwise modify the terms of any Receivable or amend, modify or
waive any term or condition of any Contract related thereto, all as it may
determine to be appropriate to maximize collection thereof. The Servicer shall,
or shall cause the applicable Sub-Servicer to, write off Receivables from time
to time in accordance with the terms of this Agreement (including Section
-------
7.02(g)) and the Credit and Collection Policy.
- - - -------
(d) Documents and Records. At any time when AmeriSource shall not be the
---------------------
Servicer, ARC, 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 Seller
to deliver to the Servicer, and the Servicer shall hold in trust for ARC and the
Trustee in accordance with their respective interests, all Records that evidence
or relate to the Receivables and Related Transferred Assets of the Seller.
(e) Certain Duties to the Seller. The Servicer, if other than
----------------------------
AmeriSource, shall, as soon as practicable after a demand by the Seller, deliver
to the Seller all documents, instruments and records in its possession that
evidence or relate to accounts receivable of the Seller or other AmeriSource
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 ARC's Agent. Without limiting the generality
-----------------------------------
of subsection (a), ARC hereby appoints the Servicer as its agent for the
--------------
following purposes: (i) specifying accounts to which payments are to be made to
ARC, (ii) making transfers among, and deposits to and withdrawals from, all
deposit accounts of ARC for the purposes described in the Transaction Documents,
and (iii) arranging payment by ARC of all fees, expenses and other amounts
payable by ARC pursuant to the Transaction Documents. ARC irrevocably agrees
that (A) it shall be bound by all actions taken by the Servicer pursuant to the
preceding sentence, and (B) the Trustee and the banks holding all deposit
accounts of
Page 9
<PAGE>
ARC are entitled to accept submissions, determinations, selections,
specifications, transfers, deposits and withdrawal requests, and payments from
the Servicer on behalf of ARC.
(h) Grant of Power of Attorney. ARC and the Trustee hereby each grant to
--------------------------
the Servicer a power of attorney, with full power of substitution, to take in
the name of ARC and the 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 ARC or transmitted or received by the Trustee (whether or not
from ARC) in connection with any Receivable or Related Transferred Asset. The
power of attorney that ARC and the Trustee have granted to the Servicer may be
revoked by the Trustee, and shall be revoked by ARC, on the date on which the
Trustee shall be entitled to exercise the powers granted to the Trustee pursuant
to Section 3.08(b). In exercising its power granted hereby, the Servicer shall
---------------
take directions from the Trustee, if any, arising out of the exercise of the
rights granted under Section 11.14.
-------------
(i) Turnover of Collections. If the Servicer, ARC or any of their
-----------------------
respective agents or representatives shall at any time receive any cash, checks
or other instruments constituting Collections (including any payments received
by ARC on account of any Seller Noncomplying Receivables Adjustment or Seller
Dilution Adjustment), such recipient shall segregate such payments and hold such
payments in trust for, and in a manner acceptable to, the Trustee and shall,
promptly upon receipt (and in any event within two Business Days 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; provided, however, that post-dated checks received by the
Servicer in the ordinary course of business and not aggregating at any one time
in the possession of the Servicer more than $50,000 may be held by the Servicer
for deposit on the date appearing on each such check. In the event that the
aggregate principal amount of post-dated checks held by the Servicer in this
manner at any one time exceeds $50,000, the Servicer shall promptly make
arrangements for such checks to be transferred to and held by the Trustee or a
co-trustee or separate trustee appointed pursuant to Section 11.10.
-------------
SECTION 3.03 Lockbox Accounts; Concentration Accounts. (a) Each Lockbox
----------------------------------------
Account shall be subject to a Lockbox Agreement substantially in the form of
Exhibit A. Unless instructed otherwise by the Servicer (or, after the
- - - ---------
occurrence and continuance of a Liquidation Event, the Trustee), each Lockbox
Bank shall be instructed by the Servicer 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 a Concentration Account
or the Master Collection Account. Any Concentration Account shall be maintained
in the name of the Trustee on behalf of the Trust pursuant to a Concentration
Account Agreement substantially in the form of Exhibit B. Except as expressly
---------
provided in this Agreement and the applicable Account Agreements, none of the
Seller, ARC, the Servicer, or any Person claiming by, through or under the
Seller, ARC or the Servicer shall have any control over the use of, or any right
to withdraw any item or amount from, any
Page 10
<PAGE>
Lockbox Account or Concentration Account. The Servicer and the Trustee are each
hereby irrevocably authorized and empowered, as ARC's attorney-in-fact, to
endorse any item deposited in a lockbox or presented for deposit in any Lockbox
Account or Concentration Account requiring the endorsement of ARC, which
authorization is coupled with an interest and is irrevocable. Each Lockbox
Account shall be maintained with a Lockbox Bank that has a short-term debt
rating of at least A-1 or its equivalent by the Applicable Rating Agency or
shall be a segregated trust account at a national bank with a long-term debt
rating of at least BBB by S&P or otherwise approved by the Applicable Rating
Agency.
(b) The Servicer shall instruct (or shall cause the Seller to instruct) all
Obligors to make all payments due to ARC or the Seller relating to or
constituting Collections (or any proceeds thereof) (i) to lockboxes maintained
at the Lockbox Banks for deposit in a Lockbox Account or a Concentration Account
or (ii) directly to a Lockbox Account. If ARC or the Seller receives any
Collections or any other payment of proceeds of any other Related Transferred
Asset, the Servicer shall cause such recipient to (x) segregate such payment and
hold it in trust for the benefit of the Trustee and the Certificateholders, and
(y) as soon as practicable, but no later than the second Business Day following
receipt of such item by such Person, deposit such payment in a Bank Account or
the Master Collection Account. The Servicer shall, and shall cause ARC and the
Seller to, use reasonable efforts to prevent the deposit of any amounts other
than Collections in any Lockbox Account or Concentration Account. In the event
that the Servicer is notified by the Seller that any amount other than
Collections has been deposited in any Lockbox Account or Concentration Account,
the Servicer shall promptly instruct the appropriate Account Bank and the
Trustee to segregate such amount, and shall direct such Account Bank or the
Trustee (as appropriate) to turn over such amounts to the Seller or other
AmeriSource Person (or their designees) to whom such amounts are owed.
(c)(i) The Servicer may, from time to time after the Closing Date,
designate a new account as a Lockbox Account or a Concentration Account, and
such account shall become a Lockbox Account or Concentration Account (and the
bank at which such account is maintained shall become a Lockbox Bank or a
Concentration Account Bank for purposes of this Agreement); provided, however,
that the Trustee shall have received not less than 15 Business Days' prior
written notice of the account and/or the bank that are proposed to be added as a
Bank Account or an Account Bank (as applicable) and, not less than ten Business
Days prior to the effective date of any such proposed addition, the Trustee
shall have received (x) counterparts of a Lockbox Agreement or a Concentration
Account Agreement, as applicable, with each new Account Bank, duly executed by
such new Account Bank and all other parties thereto and (y) copies of all other
agreements and documents signed by the new Account Bank or such other parties
with respect to any new Lockbox Account or Concentration Account, as applicable.
(ii) The Servicer may, from time to time after the Closing Date, terminate
an account as a Lockbox Account or a Concentration Account or a bank as an
Account Bank; provided,
Page 11
<PAGE>
however, that (x) no such termination shall occur unless the Trustee shall have
received not less than ten Business Days' 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 prior to the
effective date of any such proposed termination, the Trustee shall have received
counterparts of an agreement, duly executed by the applicable Account Bank and
reasonably satisfactory in form and substance to the 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 another
lockbox or transferred to another Lockbox Account, Concentration Account or the
Master Collection Account promptly after such Account Bank or former Account
Bank (as applicable) discovers that it has received any such funds or items, and
(y) notwithstanding clause (x), ARC and the Servicer may at any time establish
----------
alternative collection procedures that do not require the use of Lockbox
Accounts with the consent of each Purchaser Agent and any Enhancement Provider
and upon satisfaction of the Rating Agency Condition.
(d) The Servicer shall instruct each Concentration Account Bank (if any),
to transfer on a daily basis in same day funds to the Master Collection Account
all collected funds on deposit in the Concentration Account maintained with such
Concentration Account Bank. All such transfers shall be made in accordance with
the relevant Concentration Account Agreement.
SECTION 3.04 Servicing Compensation. ARC hereby agrees to pay to the
----------------------
Servicer, as full compensation for servicing activities performed under the
Transaction Documents, a servicing fee (the "Servicing Fee") in respect of each
Calculation Period (or portion thereof) prior to the termination of the Trust
pursuant to Section 12.01, payable in arrears on each Settlement Date. The
-------------
Servicing Fee shall be paid out of funds in the Master Collection Account as
more fully described in Article IV, and shall be payable to the Servicer solely
----------
to the extent amounts are available for payment pursuant to Article IV. In no
----------
event shall the Trust, the Trustee or the Certificateholders be liable for
payment of the Servicing Fee.
At any time when AmeriSource or any of its Affiliates is the Servicer, the
Servicing Fee for any Calculation 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 the most recently ended
Calculation Period. If AmeriSource ceases to be the Servicer, the Servicing Fee
for a Successor Servicer that is not an Affiliate of AmeriSource 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 Calculation Period in connection with the
performance of its obligations under this Agreement and the other Transaction
Documents, and (y) the other
Page 12
<PAGE>
costs and expenses that are to be paid out of the Servicing Fee, as described in
the next sentence; provided, however, that the amount provided for in clause (x)
----------
shall not exceed one-twelfth of 2.5% of the aggregate Unpaid Balance of the
Receivables as measured on the last Business Day of the most recently ended
Calculation Period. The fees, costs and expenses of the Trustee, the Paying
Agent, any authenticating agent, the Lockbox Banks, the Concentration 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 Series Supplement or any PI Agreement to be payable by the Trust or ARC,
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 the Servicer from the funds
that constitute the Servicing Fee. The Servicing Fee shall be paid to the
Servicer solely to the extent that funds are available to make such payment
pursuant to Sections 4.03(g) or (h) (as the case may be), and there shall be no
---------------- ---
recourse to ARC for all or any part of the Servicing Fee that is payable from
time to time if such funds are at any time insufficient to pay the Servicing
Fee.
SECTION 3.05 Records of the Servicer and Reports to be Prepared by the
---------------------------------------------------------
Servicer.
- - - --------
(a) Keeping of Records and Books of Account. The Servicer shall maintain
---------------------------------------
at all times accurate and complete books, records and accounts relating to the
Receivables, Related Transferred Assets and Contracts of each Seller and all
Collections thereon in which timely entries shall be made.
The 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 the Servicer deems reasonably necessary,
consistent with Section 3.02(a), for the collection of all Receivables and
---------------
Related Transferred Assets. Without limiting the generality of the foregoing,
the Servicer shall back up the receivables data every night and store the back-
up off site. The Servicer shall further (i) implement a "hot site" disaster
recovery program with a third party vendor for all of its processing locations
within 150 days of the Closing Date, and (ii) maintain all such "hot site"
disaster programs at all times thereafter.
(b) Receivables Reviews. The Servicer shall provide the Trustee access to
-------------------
the documentation regarding the Receivables when the 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 the
Servicer's normal security and confidentiality procedures, (iv) at reasonably
accessible offices in the continental United States of America designated by the
Servicer and (v) upon five Business Days' prior notice; provided, however, that
no notice shall be required if a
Page 13
<PAGE>
Liquidation Event shall have occurred and be continuing. The Servicer, the
Seller and the Trustee shall provide each Purchaser Agent with such information,
access, audit and inspection rights as shall be specified in each Receivables
Purchase Agreement.
(c) Daily Reports. Prior to 11:00 a. m., New York City time, on each
-------------
Business Day, the Servicer shall prepare and deliver to the Trustee and any
Agent a report substantially in the form of Exhibit C (as the same may be
---------
supplemented in accordance with any Supplement or PI Agreement) or in such other
form as is reasonably acceptable to the Trustee and the Servicer (each such
report being a "Daily Report"); provided, that if, on any Business Day, the
Servicer is unable to prepare and deliver a Daily Report to the 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 the Servicer's ability to monitor the origination
and/or preparation of Receivables, then the Base Amount used in preparation of
the Daily Report shall be the lowest Base Amount shown in the Daily Reports
delivered during the immediately preceding month (such amount, an "Estimated
Base Amount"). The Servicer may use an Estimated Base Amount to prepare the
Daily Report until the earlier to occur of (i) the disruption no longer prevents
the Servicer from preparing the Daily Report using the actual data required by
the Daily Report and delivering it to the Trustee, and (ii) the sixth Business
Day following the commencement of such disruption.
No later than 11:15 a. m. on the 2nd Business Day of the Look Back Period,
the Servicer shall deliver to the Trustee a modified Daily Report for the
Determination Date, reflecting the exclusion of the Affected Receivables from
the Base Amount. With respect to each other Business Day falling in the Look
Back Period (including such 2nd Business Day), two Daily Reports shall be
prepared and delivered to the Trustee pursuant to Section 3.05(c) (and clearly
---------------
marked to distinguish between them); (1) one reflecting exclusion of Affected
Receivables in the Base Amount; and (2) another including the Affected
Receivables in the Base Amount (to the extent permitted by other terms of the
Transaction Documents).
(d) Settlement Statement. On each Report Date, the Servicer shall prepare
--------------------
and deliver to the Trustee and the Applicable Rating Agencies a report
substantially in the form of Exhibit D (as the same may be supplemented in
---------
accordance with any Supplement or PI Agreement) or in such other form as is
reasonably acceptable to the Trustee and the Servicer (each such report being a
"Settlement Statement").
(e) Notice of Seller Change Events; Supplements to Settlement Statements.
--------------------------------------------------------------------
Sections 1.7 and 1.8 of the Purchase Agreement describe circumstances under
which (i) Subsidiaries of AmeriSource may be added to the Program as a Seller
and (ii) the Seller may terminate its status as Seller under the Program (each
event being herein called a "Seller Change Event"). Those Sections of the
Purchase Agreement require AmeriSource to give written notice to ARC of the
occurrence of a Seller Change Event not less than 30 days prior to the
occurrence thereof, and ARC hereby agrees to give prompt written notice of its
receipt
Page 14
<PAGE>
of any such notice to the Trustee and the Applicable Rating Agencies. If the
notice is given to the Trustee, within five Business Days after the receipt of
the notice by the Trustee (or such later date, as specified in the notice, on
which the applicable Seller Change Event shall become effective), the Servicer
shall deliver to the Trustee and the Applicable Rating Agencies a supplement to
the Settlement Statement then in effect, which supplement shall show (A) the
calculation or recalculation of the Required Reserves and the Discount Rate
Reserve (if necessary) to reflect the addition of accounts receivable originated
by any such Subsidiary that is being added to the Program as a Seller, and the
exclusion of any Receivables originated by any such Subsidiary that is
terminating its status as a Seller (as applicable), and (B) the Loss Discount
and the Purchase Discount Reserve Ratio for any such Subsidiary that is being
added to the Program as a Seller. For purposes of all calculations hereunder and
under the Purchase Agreement, the Required Reserves and (if applicable) the Loss
Discount and the Purchase Discount Reserve Ratio for the relevant Subsidiary of
AmeriSource shown in such supplement shall supersede and/or supplement the
calculation of such items in the then outstanding Settlement Statement,
effective as of the fifth Business Day following the 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 3.06 Monthly Servicer's Certificate. On each Report Date, the
------------------------------
Servicer shall deliver to the Trustee, the Paying Agent, ARC and the Applicable
Rating Agencies a certificate of an Authorized Officer of the Servicer
substantially in the form of Exhibit E, with such additions as may be required
---------
by any Supplement. ARC will join in each certificate delivered with respect to a
Cut-Off Date that is the end of a calendar quarter for purposes of confirming
that ARC, AmeriSource and the Seller shall not have any obligations to any
Restricted Federal Obligor or State Obligor that (a) are due and payable, (b)
could be set off against the Unpaid Balance of the Receivable owed by such
Obligor, except for obligations that are being contested in good faith and by
appropriate proceedings and against which ARC, AmeriSource and/or the Seller (as
applicable) maintain reserves in accordance with GAAP and (c) the method for
calculating tax reserves reflected in the books and records of AmeriSource and
ARC complies with GAAP and fairly presents estimated tax liabilities to the best
of AmeriSource's and ARC's knowledge.
SECTION 3.07 Annual 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 ARC, beginning with the fiscal year ending September 30, 1994, the
Servicer shall, as an expense of the Servicer paid out of the Servicing Fee,
cause Ernst & Young or another firm of nationally recognized independent public
accountants (which may also render other services to the Servicer, the Seller or
ARC) to furnish a report to the Trustee, the Servicer, the Applicable Rating
Agencies and ARC (which report shall be addressed to the Trustee and shall
relate to ARC's most recently ended fiscal year). The accountants' report shall
set forth the results of their performance of certain procedures that will have
been agreed upon prior to the First Issuance Date by the Servicer and ARC with
respect to the Settlement
Page 15
<PAGE>
Statements and Daily Reports delivered to the Trustee pursuant to Section 3.05
------------
during the prior fiscal year.
(ii) Each accountants' report shall state that the accountants have
compared the amounts contained in the Settlement Statements and a sample
randomly selected from all Daily Reports delivered to the Trustee during the
period covered by the report with the 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, a copy
of the report may be obtained by any Investor Certificateholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.
(b) Promptly after the filing of such reports with the Securities and
Exchange Commission, the Servicer shall provide each of the Applicable Rating
Agencies with copies of each Quarterly Report on Form 10-Q and each Annual
Report on Form 10-K of the Servicer.
SECTION 3.08 Rights of the Trustee.
---------------------
(a) The Trustee has (for the benefit of the Certificateholders) the
exclusive dominion and control over the Bank Accounts, and ARC shall take any
action that the Trustee may reasonably request to effect or evidence such
dominion and control. At any time following the occurrence of a Servicer
Default, the Trustee is hereby authorized to give notice to the Account Banks,
as provided in the Account Agreements, of the revocation of the Servicer's
authority to give instructions or take any other actions with respect to the
Bank Accounts that the Servicer would otherwise be authorized to give or to take
pursuant to Sections 3.02 and 3.03.
------------- ----
(b) At any time following the designation of a Servicer other than
AmeriSource until a Successor Servicer (if other than the Trustee) has been
appointed:
(i) The Trustee may direct any Obligors of Receivables to pay all
amounts payable under any Receivable or any Related Transferred Assets
directly to the Trustee or its designee; provided, however, that the
Trustee shall provide the 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 Seller as to the text of the notice.
(ii) The Trustee may direct the Seller to make payment of all amounts
payable to ARC under any Transaction Document to which the Seller is a
party directly to the Trustee or its designee.
Page 16
<PAGE>
(iii) ARC and the Servicer shall, at the Trustee's request and as an
expense of the Servicer paid out of the Servicing Fee, give notice of the
Trust's ownership of the Receivables and the Related Transferred Assets to
each Obligor and direct that payments be made directly to the Trustee or
its designee.
(iv) ARC shall, and shall cause the Seller to, at the Trustee's
request, (A) assemble all of the Records that are necessary or appropriate
to collect the Receivables and Related Transferred Assets, and shall make
the same available to the Trustee at one or more places selected by the
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 the Trustee and shall, promptly upon receipt (and,
subject to Section 3.02(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 the Trustee or
its designee 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.
(c) Each of ARC and the Servicer hereby authorizes the Trustee, from time
to time after the designation of a Servicer other than AmeriSource, to take any
and all steps in ARC's name and on behalf of ARC and the Servicer that are
necessary or appropriate, in the reasonable determination of the Trustee, to
collect all amounts due under any and all Receivables or Related Transferred
Assets, including endorsing the name of ARC or the Seller on checks and other
instruments representing Collections and enforcing such Receivables and the
Related Transferred Assets.
(d) ARC hereby irrevocably appoints the Trustee to act as ARC's attorney-
in-fact, with full authority in the place and stead of ARC and in the name of
ARC or otherwise, from time to time after the designation of a Servicer other
than AmeriSource, to take (subject to Section 11.14 hereof) any action and to
-------------
execute any instrument or document that the 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 the 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
Page 17
<PAGE>
enforce the rights of the Trustee and the Certificateholders with respect
to any of the Receivables or any Related Transferred Asset, and
(iv) to perform the affirmative obligations of ARC under any
Transaction Document.
ARC hereby acknowledges, consents and agrees that the power of attorney granted
pursuant to this subsection is irrevocable and coupled with an interest.
SECTION 3.09 Ongoing Responsibilities of AmeriSource. Anything herein to
---------------------------------------
the contrary notwithstanding:
(a) If at any time AmeriSource shall not be the Servicer, it shall
deliver all Collections received or deemed received by it or its
Subsidiaries to the Trustee no later than two Business Days after receipt
or deemed receipt thereof and the 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 AmeriSource or any
of its Subsidiaries shall hold any Collections or deemed Collections
required to be paid to the 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. AmeriSource hereby grants to the 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 AmeriSource all steps necessary or appropriate to endorse,
negotiate or otherwise realize on any writing or other right of any kind
held or transmitted by AmeriSource or transmitted and received by the
Trustee (whether or not from AmeriSource) in connection with any Receivable
or Related Transferred Asset.
(b) AmeriSource hereby irrevocably agrees that, if at any time it
shall cease to be the Servicer, it shall act (if the then current Servicer
so requests) as the data processing agent of the Servicer and, in such
capacity, AmeriSource 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 AmeriSource (or its Sub-Servicers)
conducted such data processing functions while AmeriSource acted as the
Servicer. AmeriSource 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 AmeriSource as Servicer
hereunder, AmeriSource shall continue to indemnify the Trustee on the terms
set out in Section 11.05 with respect to circumstances existing, or actions
-------------
taken or omitted, prior to such termination.
Page 18
<PAGE>
SECTION 3.10 Further Action Evidencing Transfers. (a) Each of ARC and
-----------------------------------
the Servicer agrees that from time to time, as an expense of the Servicer paid
out of the Servicing Fee, it will promptly execute and deliver (or cause the
relevant Sub-Servicer to execute and deliver) all further instruments and
documents, and will promptly take all further action (or cause the relevant Sub-
Servicer to take all further action) that the Trustee may reasonably request, in
order to perfect, protect or more fully evidence the conveyances hereunder, or
to enable the Investor Certificateholders or the Trustee to exercise or enforce
any of their respective rights under any Transaction Documents. Without limiting
the generality of the foregoing, upon the Trustee's request, ARC (or, in the
case of clause (ii) below, the Servicer) will, or will cause the Servicer to:
-----------
(i) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be required from time to time pursuant to Section 7.02(c)
---------------
or as the Trustee reasonably determines necessary or desirable, and
(ii) mark its master data processing records that evidence or list
Receivables or Related Transferred Assets as described in Section 2.01(d).
---------------
The Servicer shall cause all financing statements and continuation statements
and any other necessary documents relating to the right, title and interest of
the Trustee (for the benefit of the Certificateholders) in and to the Trust
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 the Trustee hereunder (for the benefit of the
Certificateholders) in and to all property comprising the Trust Assets. The
Servicer shall deliver to the 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. ARC shall cooperate
fully with the 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.
(b) If (i) ARC or the 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, and (ii) the Trustee in good faith
reasonably believes that the performance of such agreements and obligations is
necessary or appropriate to protect the interests of the Certificateholders
under this Agreement, then the 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 the Trustee or its designee incurred
in connection therewith shall be payable by the Servicer as provided in Section
-------
11.05 and (if applicable) by ARC as provided in Section 7.03. If, at any time,
- - - ----- ------------
ARC or the Servicer fails to file any financing statement or continuation
statement, or amendment thereto or assignment thereof, that is required to be
filed pursuant to this Agreement or any of the other Transaction Documents, the
Trustee may (but shall not be required to), and ARC and the Servicer hereby
authorize
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<PAGE>
the Trustee to, file such financing or continuation statements, and amendments
thereto and assignments thereof, relative to all or any of the Receivables or
the Related Transferred Assets now existing or hereafter arising in the name of
ARC or the Servicer as an expense of the Servicer paid out of the Servicing Fee.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01 Rights of Certificateholders. Each Fixed Principal
----------------------------
Certificate shall represent a fractional undivided interest in the Trust,
consisting of the right to receive Collections, funds on deposit in the Trust
Accounts and other Trust Assets, to the extent and at the times provided herein
and in the relevant Supplement, in payment of the principal amount of such Fixed
Principal Certificate, interest accrued on such principal amount from time to
time at the applicable Certificate Rate, and other Obligations owed to the
Holder of such Fixed Principal Certificate (all such undivided interests being
collectively called the "Fixed Principal Interest").
Each Revolving Certificate shall represent a fractional undivided interest
in the Trust, consisting of a right to receive Collections, funds on deposit in
the Trust Accounts and other Trust Assets, to the extent and at the times
provided herein, in payment of the principal amount of such Revolving
Certificate (which principal amount shall vary from time to time in accordance
with the terms of this Agreement) and interest accrued on the principal amount
of any Investor Revolving Certificate from time to time at the applicable
Certificate Rate, and other Obligations owed to the Holder of an Investor
Revolving Certificate (all such undivided interests being collectively called
the "Revolving Certificate Interest").
The Residual Certificate shall represent the ownership interest in the
remainder of the Trust Assets not allocated pursuant to this Agreement to the
Fixed Principal Interest or the Revolving Certificate Interest, including the
right to receive payments at the times and in the amounts specified in this
Article IV to be paid to ARC in respect of the Residual Certificate (the
- - - ----------
"Residual Interest"). The Residual Certificate will not bear interest.
SECTION 4.02 Establishment of Trust Accounts. (a) The Trustee shall
-------------------------------
establish and maintain in the name of the Trustee, on behalf of the Trust and
for the benefit of the Certificateholders, the segregated trust accounts
referred to in subsections (b) through (g) below (and such additional accounts
--------------- ---
as may be required by any Supplement). Each of the Trust Accounts shall be
established and maintained in the corporate trust department of the Trustee and
shall bear a designation clearly indicating that funds deposited therein are
held for the benefit of the Certificateholders and the Purchasers.
Page 20
<PAGE>
(b) All Collections and all other Trust Assets consisting of cash or cash
equivalents shall be transferred from the Bank Accounts and deposited in a
segregated trust account maintained with the Trustee (the "Master Collection
Account"). In addition, on the first day of the Liquidation Period, any funds in
the Equalization Account will be transferred to the Master Collection Account.
Funds on deposit in the Master Collection Account will be allocated as provided
in Section 4.03. As described in Section 4.03(g), certain funds in the Master
------------ ---------------
Collection Account shall be allocated from time to time prior to commencement of
the Liquidation Period to an administrative sub-account of the Master Collection
Account or to a separate trust account created by the Trustee at the direction
of ARC (such sub-account or separate account being referred to herein as the
"Carrying Cost Account"). Funds shall be withdrawn from the Carrying Cost
Account to pay interest on the Fixed Principal Certificates and the Revolving
Certificates, yield on Purchased Interests and other Carrying Costs when due. If
on any day funds allocated to the Carrying Cost Account are not sufficient to
pay all amounts of such Carrying Costs then due, then in the event that there
are any funds on deposit in the Equalization Account or the Defeasance Account,
such funds shall be withdrawn (in an amount equal to the lesser of the amount of
the deficiency and the amount of such funds) and transferred to the Carrying
Cost Account. On the first day of the Liquidation Period, the Carrying Cost
Account shall be closed and thereafter funds that had been allocated thereto
shall be distributed in the same manner as other funds in the Master Collection
Account, as provided in Section 4.03(h).
---------------
(c) From time to time prior to the commencement of the Liquidation Period,
funds will be deposited into a segregated trust account maintained by the
Trustee (the "Equalization Account") from the Master Collection Account, and
withdrawn from the Equalization Account for deposit into the Master Collection
Account, to compensate for fluctuations in the Base Amount or to segregate funds
that would otherwise be remitted by the Trustee to ARC during a Look Back
Period, as provided in Sections 4.03(c), (f) and (g). On the first day of the
---------------- --- ---
Liquidation Period, all funds in the Equalization Account shall be transferred
to the Master Collection Account for disposition in the same manner as other
funds in the Master Collection Account, as provided in Section 4.03(h).
---------------
(d) Any Trust Accounts established pursuant to any Supplement shall be held
by the Trustee for the benefit of only such Series of Certificates as are
indicated in that Supplement. The Master Collection Account, Carrying Cost
Account and Equalization Account shall be held by the Trustee for the benefit of
all Certificateholders and Purchasers, except to the extent indicated in any
Supplement with respect to the Series issued pursuant to that Supplement. Each
Trust Account shall be a segregated account maintained in the corporate trust
department of the Trustee, the corporate trust department of a bank that has a
long-term debt rating of at least "BBB" by S&P or with an Eligible Institution.
(e) At the times specified in Section 4.03(g), the Servicer shall allocate
---------------
funds pursuant to clauses Second, Fifth and Sixth of Section 4.03(g) to an
-------------- ----- ----- ---------------
administrative sub-account of the Master Collection Account or to a separate
trust account created by the
Page 21
<PAGE>
Trustee at the direction of ARC (such sub-account or separate account being the
"Defeasance Account"). If the Defeasance Account is a separate trust account, it
shall be established and maintained in the name of the Trustee in the corporate
trust department of the Trustee and shall bear a designation clearly indicating
that funds deposited therein are held for the benefit of the Investor
Certificateholders and the Purchasers. Funds shall be withdrawn from the
Defeasance Account to make the payments described in Section 4.03(g) to Holders
---------------
of the relevant Series of Investor Certificates or Purchased Interests. If the
Liquidation Commencement Date occurs, at any time when funds are being allocated
to the Defeasance Account, the Servicer shall in the Daily Report reallocate all
funds that are on deposit or would otherwise be allocated to the Defeasance
Account to the Master Collection Account, within one Business Day after the
occurrence of the Liquidation Commencement Date, for allocation pursuant to
Section 4.03(h). Notwithstanding anything to the contrary provided herein, ARC
- - - ---------------
may in no event deposit its own funds into the Defeasance Account. On each
Settlement Date after the commencement of the Accumulation Period for a
particular Series, the Trustee shall withdraw from the Defeasance Account and
deposit into a segregated trust account maintained by the Trustee (the
"Principal Funding Account") an amount equal to the lesser of (i) the applicable
Principal Accumulation Amount for such Settlement Date and (ii) the applicable
Controlled Deposit Amount for such Settlement Date to be applied to the
repayment of the Invested Amount of such Series on the Expected Final Payment
Date for such Series as provided in Section 4.03(g). The Principal Funding
---------------
Account shall be established and maintained in the name of the Trustee in the
corporate trust department of the Trustee and shall bear a designation clearly
indicating that funds deposited therein are held for the benefit of the Investor
Certificateholders and the Purchasers. Upon the occurrence and continuance of an
Unmatured Liquidation Event, no further payments shall be made from the
Principal Funding Account. If the Liquidation Commencement Date occurs at any
time when funds are being allocated to the Principal Funding Account, the
Servicer shall in the Daily Report reallocate all funds that are on deposit or
would otherwise be allocated to the Principal Funding Account to the Master
Collection Account, within one Business Day after the occurrence of the
Liquidation Commencement Date, for allocation pursuant to Section 4.03(h).
---------------
(f) From time to time prior to the commencement of the Liquidation Period,
funds will be allocated to an administrative sub-account of the Master
Collection Account or to a separate trust account created by the Trustee at the
direction of ARC (such sub-account or separate account being the "Set-Aside
Account") for the purposes described in Section 4.03(c)(iii). If the Set-Aside
--------------------
Account is a separate trust account, it shall be established and maintained in
the name of the Trustee in the corporate trust department of the Trustee and
shall bear a designation clearly indicating that funds deposited therein are
held for the benefit of the Investor Certificateholders and the Purchasers.
(g) From time to time after the commencement of the Liquidation Period,
funds that would otherwise be remitted by the Trustee to ARC in respect of the
ARC Revolving Amount will be deposited to a segregated trust account maintained
by the Trustee (the
Page 22
<PAGE>
"Accumulation Account"). Until the earlier to occur of (i) the date that falls
twelve months after the Liquidation Commencement Date, (ii) the day on which
Investor Certificates, Purchased Interests and other Obligations shall have been
paid in full and (iii) the first Business Day on or after the Liquidation
Commencement Date on which (A) the amount of funds then held in the Trust
Accounts that are allocated to pay the Investor Repayment Amount equals or
exceeds (B) the Investor Repayment Amount (the earliest of such dates being the
"Accumulation Account Termination Date"), all amounts payable to ARC in respect
of the ARC Revolving Amount pursuant to clause Second of Section 4.03(h) shall
------ ------ ---------------
be deposited in the Accumulation Account instead of being paid to ARC. If at any
time prior to the Accumulation Account Termination Date, the amount of funds in
the Accumulations Account exceeds the difference of (1) the Investor Repayment
Amount minus (2) the amount of funds then held in the Trust Accounts that are
-----
allocated to pay the Investor Repayment Amount, then the amount of such excess
funds shall be released from the Accumulation Account and shall be paid to ARC.
No funds shall be allocated to the Accumulation Account from and after the
Accumulation Account Termination Date. On such date, the Servicer (or, after the
occurrence and during the continuance of a Servicer Default, the Trustee) shall
calculate, or shall cause to be calculated, an amount equal to (x) the aggregate
amount of funds held in the Accumulation Account in respect of the ARC Revolving
Amount, minus (y) the Seller Adjustments accrued during the Liquidation Period
-----
which have not yet been paid. The amount of such difference, if positive, will
be paid to ARC. The funds remaining in the Accumulation Account after the
payment of such amount to ARC shall be transferred to the Master Collection
Account and applied to the items listed in Section 4.03(h), in the order of
---------------
priority specified therein.
(h) The Trustee shall possess (for its benefit and for the benefit of the
Certificateholders) all right, title and interest in and to all funds on deposit
from time to time in each of the Trust Accounts and in all proceeds thereof. The
Trust Accounts shall be under the sole dominion and control of the Trustee for
the benefit of the applicable Certificateholders. The Servicer agrees that it
shall have no right of setoff against, and no right otherwise to deduct from,
any funds held in any of the Trust Accounts or the Bank Accounts for any amount
owed to it by the Trustee, the Trust or any Certificateholder. Pursuant to the
authority granted to the Servicer in Section 3.02, the Servicer shall have the
------------
power, revocable after the occurrence and during the continuance of a Servicer
Default by the Trustee or by the Trustee at the direction of the Majority
Investors, to make withdrawals and payments from the Bank Accounts and to
instruct the Trustee to make withdrawals and payments from the Trust Accounts
for the purposes of carrying out the Servicer's or the Trustee's duties
hereunder.
SECTION 4.03 Daily Calculations and Funds Allocations.
----------------------------------------
(a) Calculation of Carrying Cost Reserve. On each Business Day prior to
------------------------------------
the Liquidation Commencement Date, the Servicer will calculate an amount equal
to the Carrying Cost Reserve for such Business Day. "Carrying Cost Reserve"
means an amount
Page 23
<PAGE>
equal to (i) the Accrued Carrying Costs (as defined below), plus (ii) an amount
equal to (A) the aggregate outstanding principal amount of all Investor
Certificates and Purchased Interests multiplied by (B) the weighted average of
the interest rates per annum on the then-issued Series of Investor Certificates
and Purchased Interests as of the most recent Cut-Off Date; provided, however,
that if any Investor Certificate or Purchased Interest bears interest at a
variable rate calculated by reference to an interest index rate (such as LIBO or
prime), and ARC may elect to change the index from time to time, then the index
resulting in the highest interest rate payable on such Investor Certificates or
Purchased Interest shall be deemed to have applied on the Cut-Off Date and such
highest interest rate shall be multiplied by 1.52, multiplied by (C) the greater
of (i) 1/4 and (ii) a fraction the numerator of which is the product of 1.75 and
the number of Turnover Days and the denominator of which is 360. "Accrued
Carrying Costs" means, at any time, the sum of the then accrued and unpaid
Carrying Costs, plus the amount of Carrying Costs that will, or are estimated
to, have accrued by the next Settlement Date.
(b) Calculation of the Base Amount. On each Business Day prior to the
------------------------------
Liquidation Commencement Date, the Servicer will calculate the Base Amount for
such day. On any Business Day, the "Base Amount" will equal the result of (i)
the Net Eligible Receivables as reported in the Daily Report for that Business
Day, minus (ii) the Required Reserves for that Business Day, minus (iii) the
Discount Rate Reserve as of the opening of business on that Business Day, minus
(iv) any other amount required to be subtracted by any Supplement or PI
Agreement on that Business Day.
(c) Variable Amount.
---------------
(i) Calculation of Variable Amount. On each Business Day prior to
------------------------------
the Liquidation Commencement Date, the Servicer shall calculate an amount
(whether positive or negative, the "Variable Amount") equal to (A) the Base
Amount at the opening of business on such day, minus (B) the Certificate
Calculation Amount, minus (C) the PI Calculation Amount, plus (D) the
balance on deposit in the Equalization Account; provided, that for purposes
of this calculation (but without double counting), the Certificate
Calculation Amount shall be reduced by the aggregate amount of reductions
to the ARC Revolving Certificate made pursuant to subsection (d), and such
--------------
reductions shall be given effect for purposes of all calculations required
by this subsection or by subsection (f). The Variable Amount will be
--------------
allocated in the manner described hereinafter and will be reported by the
Servicer in the Daily Report for such day.
(ii) Allocation of Positive Variable Amount. On any Business Day
--------------------------------------
when the Variable Amount is zero or a positive number, the Servicer shall,
if so directed by ARC, take one or more of the following actions:
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<PAGE>
(A) If there are funds on deposit in the Set-Aside Account, then
the Servicer shall, before taking any of the other actions referred to
below, transfer all such funds to the Master Collection Account for
application along with other funds on deposit in the Master Collection
Account on that day in such manner that there would not be a negative
Variable Amount after giving effect to such transfer and such
application(s).
(B) If the positive Variable Amount exceeds the amount on deposit
in the Set-Aside Account (or there are no funds on deposit in the Set-
Aside Account), ARC may direct the Servicer to (1) transfer funds (if
any) on deposit in the Equalization Account into the Master Collection
Account for application along with other funds on deposit in the
Master Collection Account on that day and/or (2) increase the
principal amount of one or more Revolving Certificates or Purchased
Interests specified by ARC such that the sum of the amount of any such
transfer and the amount(s) of any such increase(s) equals not more
than the remaining (or total) positive Variable Amount; provided,
however, that (x) any such allocation to any Investor Revolving
Certificate shall be subject to Section 6.11(b), and any such
---------------
allocation to any Purchased Interest shall be subject to the
applicable PI Agreement, (y) no such allocation to any Investor
Revolving Certificate or Purchased Interest shall be made during a
Look Back Period, and (z) no funds shall be released from the
Equalization Account during a Look Back Period.
(iii) Allocation of Negative Variable Amount. On any Business Day
--------------------------------------
when the Variable Amount is a negative number, the Servicer, at the
direction of ARC, shall take one or more of the following actions with
Collections available in the Master Collection Account for applications on
such day:
(A) allocate the Collections to one or more Revolving
Certificates or Purchased Interests in reduction of the principal
amounts of the Revolving Certificates or Purchased Interests or to the
Defeasance Account in accordance with clause Second of subsection (g),
------------- --------------
and/or
(B) transfer a portion of the Collections to the Equalization
Account, pursuant to clause Fourth of subsection (g),
------------- --------------
such that the aggregate amount of the transfer, the reduction(s) and the
allocations to the Defeasance Account equals the absolute value of the
Variable Amount; provided, that if the amount of Collections available for
such purposes on such day, after any required deposits to the Carrying Cost
Account, is less than the absolute value of the Variable Amount, then (x)
any such allocation to any Revolving Certificate or Purchased Interest or
to the Defeasance Account shall not exceed an amount equal to the
applicable Revolving Certificateholder's, Purchaser's or Series' Allocable
Daily
Page 25
<PAGE>
Collections on such day (less any amount of such Allocable Daily
Collections transferred to the Carrying Cost Account in accordance with
subsection (g)) and (y) if any allocation is made to any Revolving
--------------
Certificate or Purchased Interest, or to the Defeasance Account, then the
remainder of such available Collections shall be transferred to the Set-
Aside Account for the benefit of any holder who may be entitled to receive
such Collections pursuant to Section 5.01(i).
---------------
In addition, on any Business Day when the Variable Amount is a
negative number and the amount of Collections available for application on
such day (after making deposits to the Carrying Cost Account) equals or
exceeds the absolute value of such negative number, ARC may direct the
Servicer to remove all or part of the funds then on deposit in the Set-
Aside Account and allocate the funds to one or more Revolving Certificates
or Purchased Interests in reduction of the outstanding principal amount of
such Revolving Certificates or Purchased Interests or to allocate the funds
to the Equalization Account.
If, at any time when funds are being allocated to or are on deposit in
the Set-Aside Account, the Liquidation Commencement Date occurs, all funds
then allocated to or on deposit in the Set-Aside Account shall be paid to
the holders of the then-issued and outstanding Certificates and Purchased
Interests on the next Settlement Date in the manner described in Section
-------
5.01(i).
-------
(iv) Reallocation of ARC Revolving Amount. On any Business Day prior
------------------------------------
to the Liquidation Commencement Date, ARC may direct the Servicer to
reallocate all or a portion of the principal amount of the ARC Revolving
Certificate to an Investor Revolving Certificate (subject to the
requirements of Section 6.11(b)) or a Purchased Interest (subject to the
----------------
requirements of the related PI Agreement).
In addition, ARC may (subject to the terms of any Supplement or PI
Agreement) direct the Servicer to direct the Trustee, pursuant to clause
------
Eighth in subsection (g), to pay to a holder of an Investor Revolving
------ --------------
Certificate or a Purchaser, in reduction of the principal amount of such
Investor Revolving Certificate or the applicable Purchased Interest,
Collections that would otherwise be payable to ARC.
(d) Calculation of Seller Adjustments; Related Adjustments to ARC
-------------------------------------------------------------
Revolving Amount. On each Business Day, the Servicer shall calculate and report
- - - ----------------
the aggregate amount of Noncomplying Receivables and Dilution Adjustments for
the day and shall report the aggregate amount of payments actually made by the
Seller to ARC on the day in respect of Noncomplying Receivables and Dilution
Adjustments. The ARC Revolving Amount shall be reduced by an amount equal to the
lesser of (x) the Noncomplying Receivables and Dilution Adjustments for such
Business Day, less the aggregate amount of cash payments in respect of
Noncomplying Receivables and Dilution Adjustments made by the Seller to ARC and
by ARC to the Trustee on such day (such difference being a "Seller Adjustment"),
(y) the
Page 26
<PAGE>
ARC Revolving Amount, and (z) on any Business Day prior to the Liquidation
Commencement Date, the amount by which (1) the sum of the Base Amount plus the
balance on deposit in the Equalization Account is less than (2) the sum of the
Certificate Calculation Amount plus the PI Calculation Amount. The foregoing
reduction in the ARC Revolving Amount shall occur without any payment in respect
thereof being made to ARC, and shall be made (on each Business Day prior to the
Liquidation Commencement Date) before giving effect to the adjustments to the
ARC Revolving Amount made pursuant to subsection (c).
--------------
(e) Certain Calculations in the Liquidation Period.
----------------------------------------------
(i) On the Liquidation Commencement Date and on each Settlement Date
thereafter, the Servicer shall calculate an amount (the "Available
Subordinated Amount"), which shall equal:
(A) on the Liquidation Commencement Date, the result of (w) the
Unpaid Balance of Receivables held by the Trust at the opening of
Business on the next preceding Business Day, minus (x) the sum of the
Certificate Calculation Amount and the PI Calculation Amount, as of
the next preceding Business Day (but after giving effect to all
allocations and other adjustments made pursuant to this section on
such next preceding Business Day), plus (y) the balance on deposit in
the Equalization Account at the end of the next preceding Business
Day, minus (z) the Discount Rate Reserve as of the next preceding
Business Day, and
(B) on each Settlement Date thereafter, the result (but not less
than zero nor greater than the initial Available Subordinated Amount)
of (x) the Available Subordinated Amount as calculated on the next
preceding Settlement Date (or on the Liquidation Commencement Date, in
the case of the first Settlement Date falling after the Liquidation
Commencement Date) minus (y) the Charged-Off Amount (if positive) with
respect to the most recently ended Calculation Period plus (z) (so
long as the Available Subordinated Amount has not been reduced to
zero) the amount of the Net Recoveries (if positive) with respect to
the most recently ended Calculation Period.
(ii) On each Settlement Date after the Liquidation Commencement Date,
the Servicer shall calculate an amount (the "Allocable Charged-Off
Amount"), which shall equal:
(A) zero, so long as the Available Subordinated Amount is greater
than zero,
(B) on the first Settlement Date on which the Available
Subordinated Amount is reduced to zero, the excess (if any) of (x) the
Charged-Off Amount
Page 27
<PAGE>
for the most recently ended Calculation Period, over (y) the Available
Subordinated Amount as of the next preceding Settlement Date (or as of
the Liquidation Commencement Date, if this occurs on the first
Settlement Date falling after the Liquidation Commencement Date), and
(C) on each subsequent Settlement Date, the Charged-Off Amount
(if positive) for the most recently ended Calculation Period.
(iii) If the Allocable Charged-Off Amount calculated on any Settlement
Date is greater than zero, the Allocable Charged-Off Amount shall be
allocated on the Settlement Date among the various outstanding Classes of
Investor Certificates, outstanding Purchased Interests and the ARC
Revolving Certificate as follows:
(A) a portion of the Allocable Charged-Off Amount equal to the
product of the Allocable Charged-Off Amount multiplied by the ARC
Allocation Percentage shall be allocated to the ARC Revolving
Certificate,
(B) the remainder of the Allocable Charged-Off Amount shall be
allocated to the various outstanding Classes of Investor Certificates
and Purchased Interests in the following priority:
First, to the various Subordinated Classes and Subordinated
Purchased Interests, in accordance with their respective Class
Allocation Percentages, until their respective Class Invested
Amounts and PI Invested Amounts have been reduced to zero, and
Second, any remaining Allocable Charged-Off Amount to the
Senior Classes and Senior Purchased Interests, in accordance with
their respective Class Allocation Percentages, until their
respective Class Invested Amounts and PI Invested Amounts have
been reduced to zero.
(iv) Any Net Recoveries (if positive) with respect to any Calculation
Period ending after the Available Subordinated Amount has been reduced to
zero shall be allocated among the various outstanding Classes of Investor
Certificates, outstanding Purchased Interests and the ARC Revolving
Certificate as follows:
(A) a portion of such Net Recoveries equal to the product of such
Net Recoveries multiplied by the ARC Allocation Percentage shall be
allocated to the ARC Revolving Certificate,
(B) the remainder of such Net Recoveries shall be allocated to
the various outstanding Classes of Investor Certificates and Purchased
Interests in the following priority:
Page 28
<PAGE>
First, to the various Senior Classes and Senior Purchased
Interests, in accordance with their respective Class Allocation
Percentages, until all previous reductions to their respective
Class Invested Amounts and PI Invested Amounts on account of
Allocable Charged-Off Amounts have been reinstated, and
Second, any remaining Net Recoveries to the Subordinated
Classes and Subordinated Purchased Interests, in accordance with
their respective Class Allocation Percentages, until all previous
reductions to their respective Class Invested Amounts and PI
Invested Amounts on account of Allocable Charged-Off Amounts have
been reinstated.
(v) No Class or Purchased Interest will be deemed to be "outstanding"
for purposes of clause (iii) or (iv) after its Class Invested Amount or PI
------------ ----
Invested Amount has been reduced to zero. The portion of the Allocable
Charged-Off Amount allocated to any Class or Purchased Interest (as to such
Class or Purchased Interest, its "Investor Allocable Charged-Off Amount")
or to the ARC Revolving Certificate will reduce the invested amount and the
outstanding principal amount of such Class or Purchased Interest or the ARC
Revolving Amount for all purposes. The portion of the Net Recoveries
allocated to any Class or Purchased Interest (as to such Class or Purchased
Interest, its "Investor Net Recoveries") or to the ARC Revolving
Certificate will increase the invested amount and the outstanding principal
amount of such Class or Purchased Interest or the ARC Revolving Amount for
all purposes.
(f) Withdrawals from Equalization Account and Set-Aside Account. Subject
-----------------------------------------------------------
to the last paragraph of this Section 4.03(f), on any Business Day prior to the
---------------
Liquidation Commencement Date, the Servicer may instruct the Trustee in writing
to withdraw funds from the Set-Aside Account and/or the Equalization Account and
allocate such funds to (i) the reduction of the principal amount of the ARC
Revolving Certificate and/or one or more Investor Revolving Certificates
(subject to the requirements of Section 6.11(b)) or Purchased Interests (subject
---------------
to the requirements of the related PI Agreement), and/or (ii) the Defeasance
Account, so long as (x) there would not be a negative Variable Amount after
giving effect to such transfer and such application(s) and (y) in the case of
any such withdrawal from the Equalization Account, no funds are on deposit in
the Set-Aside Account (including as a result of transfers made on that day).
In addition, on any Business Day when there is a negative Variable Amount
and funds are on deposit in the Equalization Account, subject to the last
paragraph of this Section 4.03(f), the Servicer may instruct the Trustee in
---------------
writing to withdraw funds from the Equalization Account and apply them as
described in clause (i) above; provided, that (x) any such allocation to any
----------
Revolving Certificate or Purchased Interest shall not exceed an amount equal to
the applicable Revolving Certificateholder's or Purchaser's pro rata share of
--- ----
such funds (prorating on the basis of such Revolving Certificateholder's or
Purchaser's Ratable
Page 29
<PAGE>
Principal Amount as a percentage of the sum of the Ratable Principal Amounts of
the ARC Revolving Certificate and of all then-outstanding Investor Certificates
and Purchased Interests) and (y) if any such allocation is made to any Revolving
Certificate or Purchased Interest, then the remainder of such funds in the
Equalization Account shall be transferred to the Set-Aside Account.
No funds shall under any circumstances be withdrawn from the Equalization
Account during a Look Back Period. If on any Business Day the Trustee has
received (or is deemed to have received) a Confirmation Notice, the Servicer may
instruct the Trustee in writing to withdraw the Segregated Cash (calculated
prior to giving effect to the purchase of Receivables at the end of the related
Look Back Period) from the Equalization Account and remit such funds to ARC on
such Business Day.
(g) Daily Allocation of Funds in the Master Collection Account Prior to
-------------------------------------------------------------------
the Liquidation Commencement Date. On each Business Day prior to the
- - - ---------------------------------
Liquidation Commencement Date, the Servicer shall allocate all collected funds
(including Collections attributable to all Receivables, whether or not such
Receivables are Eligible Receivables or constitute Excess Concentration
Balances) then on deposit in the Master Collection Account (other than funds
that are required to be returned to AmeriSource Persons (or their designees)
pursuant to Section 3.02(b)) to the following items, in the following order of
---------------
priority, each of which (except as expressly provided otherwise below) shall be
paid on the next Settlement Date:
First, to the Carrying Cost Account until the amount allocated to the
Carrying Cost Account equals the Carrying Cost Reserve calculated pursuant
to subsection (a); provided, that the amount allocated pursuant to this
--------------
clause First to ordinary course expenses as described in Section 7.02(m)
------------ ---------------
shall not exceed $50,000 in any Calculation Period,
Second, to the Defeasance Account in respect of any Series of Investor
Certificates or Purchased Interest as to which an Accumulation Period, Pay-
Out Period or Prepayment Accumulation Period has commenced until the amount
on deposit therein in respect of such Series or Purchased Interest equals:
(x) in the case of a Series or Purchased Interest in an
Accumulation Period, the Controlled Deposit Amount for such Series or
Purchased Interest,
(y) in the case of a Series or Purchased Interest in a Pay-Out
Period, the outstanding principal amount of such Series or Purchased
Interest, and
(z) in the case of a Series in a Prepayment Accumulation Period,
the amount of principal to be prepaid with respect to such Series or
Purchased Interest,
Page 30
<PAGE>
in an amount on each Business Day equal to the product of (i) the balance
of collected funds on deposit in the Master Collection Account after
allocation to clause First above and (ii) the applicable Defeasance
------------
Allocation Percentage,
Third, to make payments on such Business Day (i) to the Revolving
Certificateholders or Purchasers in respect of one or more of the Revolving
Certificates or Purchased Interests to reduce the outstanding principal
amount of such Revolving Certificates or Purchased Interests, to the extent
such reduction is required or permitted by subsection (c) or (f) and (ii)
-------------- ---
under the circumstances described in subsections (c) and (f), to the Set-
--------------- ---
Aside Account; provided that if a Look Back Period exists, funds that would
otherwise be remitted to ARC pursuant to this clause shall be deposited to
the Equalization Account,
Fourth, to fund the Equalization Account, to the extent such funding
is required or permitted by subsection (c),
--------------
Fifth, to the Defeasance Account in respect of any repayment or
prepayment of any Series of Investor Certificates that is to occur during
an Accumulation Period, a Pay-Out Period or a Prepayment Accumulation
Period in an amount equal to any amounts (other than in respect of Carrying
Costs and principal and amounts assigned to the following clause Sixth by
------------
the related Supplements) owed to the Holders of Investor Certificates of
such Series in connection with the Program,
Sixth, to the Defeasance Account in respect of any other amounts that
are required to be paid as a result of repayments or prepayments of any
Series of Investor Certificates or Purchased Interests during an
Accumulation Period, a Pay-Out Period or a Prepayment Accumulation Period
in accordance with the related Supplements,
Seventh, to pay on the next Settlement Date (i) other accrued and
unpaid expenses of the Program (including indemnification payments to be
made pursuant to Section 7.03 and ordinary course expenses not covered by
------------
clause First above but excluding, during a Look Back Period, amounts owed
------------
to the Seller or AmeriSource, as Servicer), and (ii) all other amounts
payable to Investor Certificateholders or Holders of a Purchased Interest
pursuant to the related Supplements, and
Eighth, to make payments to ARC on such Business Day in respect of the
Residual Certificate; provided, however, that ARC may, from time to time,
direct the Trustee to set aside all or any part of the funds to be paid
pursuant to this clause Eighth in order to (i) pay all or part of the funds
-------------
to the Holders of one or more Investor Revolving Certificates or Purchasers
in order to effect the allocations described in subsection (c), or (ii)
--------------
hold the funds in the Master Collection Account until the Trustee receives
instructions from ARC concerning the application of the funds; and
provided, further, that if a Look Back Period exists, funds that would
Page 31
<PAGE>
otherwise would be remitted to ARC pursuant to this clause shall be
deposited in the Equalization Account.
If, on any day, the amount of Collections that is then allocated to the Carrying
Cost Account exceeds the amount of Collections that are then required to be
allocated to the Carrying Cost Account, the Servicer shall reallocate such
Collections on such day to one or more of the obligations described above in
clauses Second through Eighth in that order of priority.
- - - -------------- ------
Collections in the Master Collection Account that are allocated to the
priority described in clause Seventh shall be paid on the next Settlement Date;
--------------
provided, however, that, if the Collections available on such Settlement Date to
pay the amount required to be paid pursuant to clause Seventh are insufficient
--------------
to pay the full amount thereof, the portion of such amount that is not paid on
such Settlement Date shall be paid on each Business Day following such
Settlement Date on which Collections are available to pay such remaining amount
until it is paid in full.
Payments to be made during a Pay-Out Period will commence on the Settlement
Date that occurs in the month following the month in which the first day of the
Pay-Out Period occurs, and will be made on each Settlement Date that occurs
thereafter until the Investor Certificates that are being paid during such Pay-
Out Period have been paid in full. During a Pay-Out Period, the Holders of the
Series of Investor Certificates that are being paid out during such Pay-Out
Period shall receive the amounts allocated to the Defeasance Account pursuant to
clause Second in payment of the outstanding principal amount of such Series,
- - - -------------
pursuant to clause Fifth in payment of certain other amounts that are payable
------------
with respect to such Series, and pursuant to clause Sixth in payment of any
------------
other amounts that are payable with respect to such Series.
On the Expected Final Payment Date with respect to any Series, all funds
that have been deposited in the Principal Funding Account pursuant to Section
-------
4.02(e) with respect to such Series prior to the end of the most recently ended
- - - -------
Calculation Period shall be applied to the repayment of the principal amount of
the Certificates of such Series.
If, on any day prior to the Liquidation Commencement Date, funds on deposit
in the Master Collection Account and available for allocation under any of
clauses First through Seventh above are less than the amount of the obligations
- - - ------------- -------
described in such clause, then the available Collections shall be allocated by
the Servicer to the holders of such obligations pro rata according to the
--- ----
respective amounts of such obligations held by them (in the case of Investor
Certificate holders and Purchasers, as weighted in accordance with any
adjustment factors used in determining their respective Ratable Principal
Amounts). All other obligations in lower priority categories shall remain
unsatisfied until the obligations in the preceding category have been satisfied.
Page 32
<PAGE>
(h) Allocation of Funds in the Master Collection Account During
-----------------------------------------------------------
Liquidation. On the Liquidation Commencement Date, the outstanding principal
- - - -----------
amount of each of the then-issued and outstanding Revolving Certificates shall
cease to fluctuate, and the outstanding principal amount of each Revolving
Certificate and Purchased Interest shall be fixed as of such day (except as
reduced by the application of Collections hereunder).
On each Business Day on and after the Liquidation Commencement Date, the
Servicer shall allocate all collected funds (including Collections attributable
to all Receivables whether or not such Receivables are Eligible Receivables or
constitute Excess Concentration Balances) then on deposit in the Master
Collection Account (other than funds that are required to be returned to
AmeriSource Persons (or their designees) or Lockbox Banks pursuant to Section
-------
3.02(b)) as follows; provided, however, that funds so allocated shall be held in
- - - -------
trust by the Trustee and, based upon and in accordance with the related
Settlement Statement, paid to the relevant Certificateholders or other specified
payees on the next Settlement Date (commencing with the first Settlement Date
falling after the Calculation Period during which the Liquidation Period
commences, except that distributions will be made pursuant to clause First below
------------
on each Settlement Date in the Liquidation Period):
First, to pay accrued Carrying Costs; provided, however, that if
AmeriSource is the Servicer, then the allocation to be made pursuant to
this clause First to pay the Servicing Fee shall equal only the portion of
------------
the Servicing Fee that is to be paid to Persons other than an AmeriSource
Person,
Second, to make payments of the Principal Distribution Amounts with
respect to (x) each outstanding Senior Class and Senior Purchased Interest
(ratably in accordance with their respective Class Allocation Percentages)
until (and only until) the outstanding principal amounts thereof have been
repaid in full, (y) to each outstanding Subordinated Class and Subordinated
Purchased Interest (ratably in accordance with their respective Class
Allocation Percentages) until the outstanding principal amounts thereof
have been repaid in full, and (z) the ARC Revolving Certificate until the
outstanding principal amount thereof has been paid in full; provided that
prior to the Accumulation Account Termination Date, amounts payable to ARC
pursuant to this clause Second shall be deposited in the Accumulation
-------------
Account,
Third, to pay other Obligations owed to the Investor
Certificateholders (as set forth in the related Supplement) or Purchasers
(as set forth in the related PI Agreement),
Fourth, to pay the accrued and unpaid Servicing Fee that has not been
paid pursuant to clause First, and
------------
Page 33
<PAGE>
Fifth, to pay (x) other accrued and unpaid expenses of the Program
(including indemnification payments to be made pursuant to Section 7.03,
------------
but excluding any such expenses that have been paid pursuant to clause
------
Third) and (y) all other amounts payable to the Investor Certificateholders
-----
pursuant to the related Supplements (including, without limitation, any
non-usage fees).
If, on any day during the Liquidation Period, funds on deposit in the
Master Collection Account and available for allocation under any of clauses
-------
First through Fifth above are less than the amount of the obligations described
- - - ----- -----
in such clause, then the available Collections shall be allocated by the
Servicer to the holders of such obligations pro rata according to the respective
--- ----
amounts of such obligations held by them (in the case of Investor
Certificateholders and Purchasers, as weighted in accordance with any adjustment
factors used in determining their respective Ratable Principal Amounts and
subject to the following paragraph of this Section). All other obligations in
lower priority categories shall remain unsatisfied until the obligations in the
preceding category have been satisfied.
If, on any day during the Liquidation Period, the amount of funds on
deposit in the Master Collection Account and available for allocation to
Investor Certificateholders and Purchasers under any of clauses First through
-------------
Third is less than the amount of the obligations to such Persons described in
- - - -----
such clause, then the available Collections shall be allocated by the Servicer
(1) to the Holders of such obligations relating to any Senior Class or Senior
Purchased Interest until the same have been paid in full and (2) thereafter to
the holders of such obligations relating to any Subordinated Class or
Subordinated Purchased Interest. The allocation among holders within each of
clauses (1) and (2) shall be made pro rata according to the respective amounts
- - - ----------- ---
of such obligations held by them (as weighted in accordance with any adjustment
factors used in determining their respective Ratable Principal Amounts).
After the payment in full of all amounts described in priority clauses
-------
First through Fifth, ARC shall surrender the Residual Certificate to the Trustee
- - - ----- -----
for cancellation and the Trustee shall make the payments and other transfers
required by Section 12.03 to ARC in respect of the ARC Revolving Certificate and
-------------
the Residual Certificate. The Trust shall terminate pursuant to Section 12.01
-------------
after such payments and other transfers have been made to ARC in respect of the
Residual Certificate.
SECTION 4.04 Investment of Funds in Trust Accounts. On any day when funds
-------------------------------------
on deposit in any Trust Account shall exceed $10,000 (after giving effect to the
allocations of such funds required by this Article IV), and at such other times
----------
as investment is practicable, the Trustee, at the direction of the Servicer,
shall invest and reinvest monies on deposit in such Trust Account (in the name
of the Trustee) in such Eligible Investments as are specified in a notice from
the Servicer, subject to the restrictions set forth hereinafter. The Trustee
shall, at the direction of the Servicer, invest the funds in the Equalization
Account, the Carrying Cost Account and all other Trust Accounts in Eligible
Investments. All Eligible Investments made from funds in any Trust Account, and
the interest, dividends and income
Page 34
<PAGE>
received thereon and therefrom and the net proceeds realized on the sale
thereof, shall be deposited in such Trust Account. The 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 negligence of the Trustee or willful misconduct by
the Trustee, the 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 Trust Accounts shall
be treated as income of ARC.
SECTION 4.05 Attachment of Trust Accounts. If the Trustee receives
----------------------------
written notice that any account designated as a Trust Account has or will become
subject to any writ, judgment, warrant of attachment, execution or similar
process, the Trustee shall (notwithstanding any other provision of the
Transaction Documents) promptly notify ARC, the Servicer and the
Certificateholders thereof, and shall not deposit or transfer funds into such
Trust Account but shall cause funds otherwise required to be deposited into such
Trust 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 TO
CERTIFICATEHOLDERS
Payments on the Certificates and Purchased Interests shall be made as
provided in Sections 5.01 and 5.02, except as otherwise provided in the
------------- ----
applicable Supplement or PI Agreement. All payments made by the Trustee or the
Paying Agent pursuant to Sections 5.01 and 5.02 shall be made based upon the
------------- ----
information set forth in and pursuant to the applicable Daily Report or
Settlement Statement delivered to the Trustee.
SECTION 5.01 Distributions to Holders of Investor Certificates and
-----------------------------------------------------
Purchasers. (a) On each Settlement Date, the Paying Agent shall distribute, in
- - - ----------
respect of the period from the preceding Settlement Date to (but excluding) the
then-current Settlement Date, to each Fixed Principal Certificateholder of
record on the Report Date immediately prior to the then-current Settlement Date
(other than as provided in Section 12.02 respecting a final distribution) its
-------------
pro rata share (based on the aggregate amount of accrued and unpaid interest on
- - - --- ----
the Fixed Principal Certificates held by such Certificateholder) of the amounts
that (i) prior to the Liquidation Commencement Date, are allocated to the
Carrying Cost Account with respect to Fixed Principal Yield pursuant to clause
------
First of Section 4.03(g), and (ii) on and after the Liquidation Commencement
- - - ----- ---------------
Date, are on deposit in the Master Collection Account and allocated to Fixed
Principal Yield pursuant to clause First of Section 4.03(h).
------------ ---------------
Page 35
<PAGE>
(b)(i) On each Settlement Date that occurs during a Pay-Out Period in which
one or more Series of Fixed Principal Certificates is/are being repaid or during
the Liquidation Period (commencing with the first Settlement Date falling after
the Calculation Period during which the Pay-Out Period or Liquidation Period
commences), the Paying Agent shall distribute to each Holder of record of Fixed
Principal Certificates of such Series as of the Report Date immediately prior to
the then-current Settlement Date (other than as provided in Section 12.02
-------------
respecting a final distribution) its pro rata share (based on the aggregate
--- ----
outstanding principal amount of Fixed Principal Certificates held by such
Certificateholder) of (A) in the case of Settlement Dates that occur during a
Pay-Out Period, the amounts on deposit in the Defeasance Account that are
allocated to the Principal Distribution Amount of the related Series pursuant to
clause Second of Section 4.03(g) during the most recently ended Calculation
- - - ------------- ---------------
Period, (B) in the case of Settlement Dates that occur during the Liquidation
Period, the amounts on deposit in the Master Collection Account that are
allocated to the Principal Distribution Amount of the related Series pursuant to
clause Second of Section 4.03(h), and (C) in the case of the first Settlement
- - - ------------- ---------------
Date on which such distributions are made in any Pay-Out Period, and provided
that no Liquidation Event or Unmatured Liquidation Event has occurred and is
continuing, in addition to the amount described in clause (A) or (B) above, as
---------- ---
applicable, the amounts on deposit in the Principal Funding Account that are
allocated to the Fixed Principal Invested Amount of the related Series.
(ii) On the Expected Final Payment Date with respect to any Series of
Fixed Principal Certificates, unless the Liquidation Period shall have
commenced the Paying Agent shall distribute, to each Holder of record of
Fixed Principal Certificates of such Series as of the Report Date
immediately prior to the then-current Settlement Date such Fixed Principal
Certificateholder's pro rata share (based on the aggregate outstanding
--- ----
principal amount of Fixed Principal Certificates held by such
Certificateholder) of the amounts on deposit in the Principal Funding
Account that are allocated to the Fixed Principal Invested Amount of the
related Series.
(iii) On each Settlement Date during the Revolving Period for any
Series of Fixed Principal Certificates on which any full or partial
prepayment of the principal amount of the Investor Certificates of that
Series is to be made in accordance with the related Supplement, the Paying
Agent shall distribute, to each Holder of record of Fixed Principal
Certificates of such Series as of the Report Date immediately prior to the
then-current Settlement Date such Fixed Principal Certificateholder's pro
---
rata share (based on the aggregate outstanding principal amount of Fixed
----
Principal Certificates held by such Certificateholder) of the amounts on
deposit in the Defeasance Account that are allocated to the Fixed Principal
Invested amount of, and any other amounts (including any Prepayment
Premium) payable to, the related Series.
Page 36
<PAGE>
(c) On each Settlement Date, the Paying Agent shall distribute to each
Investor Revolving Certificateholder of record on the Report Date immediately
prior to the then-current Settlement Date (other than as provided in Section
-------
12.02 respecting a final distribution) its pro rata share of the sum of the
- - - ----- --- ----
amounts, if any, that (i) prior to the Liquidation Commencement Date, are
allocated to the Carrying Cost Account with respect to Investor Revolving Yield
payable on such Settlement Date, pursuant to clause First of Section 4.03(g),
------------ ---------------
and (ii) on and after the Liquidation Commencement Date, are on deposit in the
Master Collection Account and are allocated to Investor Revolving Yield payable
on such Settlement Date pursuant to clause First of Section 4.03(h). Also, on
------------ ---------------
each Business Day prior to the Liquidation Commencement Date, the Paying Agent
shall distribute to each such Investor Revolving Certificateholder the amounts,
if any, that are allocated to reduce the portion of the Investor Revolving
Invested Amount represented by the related Investor Revolving Certificate
pursuant to Section 4.03(c) or (f) and clause Third of Section 4.03(g) or are
--------------- --- ------------ ---------------
due as interest on the Investor Revolving Certificate in accordance with the
applicable Supplement.
(d) On each Settlement Date that occurs during a Pay-Out Period in which
one or more Series of Investor Revolving Certificates is/are being repaid or
during the Liquidation Period (commencing with the first Settlement Date falling
after the Calculation Period during which the Pay-Out Period or Liquidation
Period commences), the Paying Agent shall distribute to each Holder of record of
Investor Revolving Certificates of such Series as of the Report Date immediately
prior to the then-current Settlement Date (other than as provided in Section
-------
12.02 respecting a final distribution) its pro rata share (based on the
- - - ----- --- ----
aggregate outstanding principal amount of Investor Revolving Certificates held
by the Certificateholder) of (i) in the case of Settlement Dates that occur
during a Pay-Out Period, the amounts on deposit in the Defeasance Account that
are allocated to the Investor Revolving Invested Amount of the related Series
pursuant to clause Second or Third of Section 4.03(g) during the most recently
------------- ----- ---------------
ended Calculation Period and (ii) in the case of Settlement Dates that occur
during the Liquidation Period, the amounts on deposit in the Master Collection
Account that are allocated to the Investor Revolving Invested Amount of the
related Series pursuant to clause Second of Section 4.03(h). In addition, on
------------- ---------------
each Business Day during such a Pay-Out Period, the Paying Agent shall
distribute to each such Holder of Investor Revolving Certificates such amounts
as shall be directed by the Servicer in the applicable Daily Report from amounts
allocated to such Series as described in the preceding sentence. On each
Business Day during such a Pay-Out Period or during the Liquidation Period, the
Paying Agent shall distribute to each such holder such amounts as shall be
directed by the Servicer in the Daily Report as being due on an Investor
Revolving Certificate as interest pursuant to the related Supplement.
(e) On each Settlement Date that occurs during a Pay-Out Period with
respect to one or more Series of Investor Certificates, the Paying Agent shall
distribute, in respect of the period from the preceding Settlement Date to (but
excluding) the then-current Settlement Date, to each Holder of record of
Investor Certificates of such Series as of the Report Date
Page 37
<PAGE>
immediately prior to the then-current Settlement Date (other than as provided in
Section 12.02 respecting a final distribution) its pro rata share (based on the
- - - ------------- --- ----
aggregate outstanding amount of Obligations owed to the Investor
Certificateholder, other than Obligations constituting the outstanding principal
amount of or interest on the Investor Certificates, but giving effect to the
priorities set forth in clauses Fifth and Sixth of Section 4.03(g)) of the
------------- ----- ---------------
amounts on deposit in the Defeasance Account allocable to the Obligations owed
to such Investor Certificateholders (other than obligations in respect of
principal of or interest on the Investor Certificates) pursuant to clauses Fifth
-------------
and Sixth of Section 4.03(g).
----- ---------------
(f) On each Settlement Date that occurs during the Liquidation Period, the
Paying Agent shall distribute, in respect of the period from the preceding
Settlement Date to (but excluding) the then-current Settlement Date, to each
Investor Certificateholder of record on the Report Date immediately prior to the
then-current Settlement Date (other than as provided in Section 12.02 respecting
-------------
a final distribution) its pro rata share (based on the aggregate outstanding
--- ----
amount of Obligations owed to such Investor Certificateholder pursuant to
clauses Third and Fifth of Section 4.03(h)) of the amounts on deposit in the
- - - ------------- ----- ---------------
Master Collection Account allocable to the Obligations owed to Investor
Certificateholders pursuant to clauses Third and Fifth of Section 4.03(h).
------------- ----- ---------------
(g) On each Settlement Date, the Paying Agent shall distribute to each
Purchaser the amounts required pursuant to the applicable PI Agreement.
(h) Each distribution to Investor Certificateholders shall be made by the
Paying Agent (i) by wire transfer of immediately available funds on the date on
which such distribution is required to be made, to an account at a bank or other
entity having appropriate facilities therefor that the Person entitled thereto
specifies in a written notice given to the Trustee on or prior to the Report
Date immediately preceding the Settlement Date on which such payment is to be
made, if such Person is the Holder of Investor Certificates in an aggregate
Stated Amount or principal amount equal to or in excess of $1,000,000, and (ii)
in all other cases, by check mailed to each such other Certificateholder at its
address appearing in the Certificate Register, in either case without
presentation or surrender of any Investor Certificate held by the
Certificateholder or the making of any notation thereon; provided, however,
that, except as expressly provided otherwise in Section 6.04, the final
------------
principal payment to be made on any Certificate in connection with the
retirement of a Series of Certificates will be made to each Holder of a
Certificate of such Series only upon presentation and surrender by such Holder
of each of its Certificates of such Series at the office or offices specified in
a notice of such final principal payment that the Trustee delivers or causes to
be delivered to each Holder not less than 15 Business Days prior to such final
principal payment date.
(i) On the first Settlement Date that occurs after the Calculation Period
during which the Liquidation Commencement Date occurs, the Paying Agent shall
distribute to each Certificateholder and Purchaser of record on the Record Date
immediately prior to such
Page 38
<PAGE>
Settlement Date, its pro rata share (based on the Ratable Principal Amount of
--- ----
such Certificateholder or Purchaser) of amounts on deposit in the Set-Aside
Account as of the Liquidation Commencement Date in repayment of the principal
amount owed to such Certificateholder; provided, however, that (i) such pro rata
--- ----
shares shall be calculated by including in the aggregate amount to be
distributed amounts that were distributed to any Holder of an Investor Revolving
Certificate or Purchaser in connection with the deposit of such amounts into the
Set-Aside Account and (ii) the amounts previously so distributed to such Holders
or Purchasers shall be deducted from the amounts distributable to them pursuant
to this paragraph (i).
-------------
SECTION 5.02 Distributions on the ARC Revolving Certificate and the
------------------------------------------------------
Residual Certificate. (a) On each Business Day prior to the Liquidation
- - - --------------------
Commencement Date, the Paying Agent shall distribute to ARC in respect of the
ARC Revolving Certificate the amount to be paid, if any, to reduce the ARC
Revolving Amount pursuant to clause Third of Section 4.03(g); provided, that if
------------ ---------------
a Look Back Period exists, amounts otherwise payable to ARC pursuant to this
Section shall be deposited in the Equalization Account.
(b) On each Business Day prior to the Liquidation Commencement Date, the
Paying Agent shall distribute to ARC in respect of the Residual Certificate the
amount payable to ARC in respect of the Residual Certificate pursuant to clause
------
Eighth of Section 4.03(g) to the extent that funds are available to make such
- - - ------ ---------------
payments; provided, that if a Look Back Period exists, amounts otherwise payable
to ARC pursuant to this Section shall be deposited in the Equalization Account.
(c) Distributions to ARC in respect of the ARC Revolving Certificate and
the Residual Certificate hereunder shall be made by the Paying Agent on the date
on which the distribution is required to be made by wire transfer of immediately
available funds, no later than 2:00 p. m., New York City time (or later, to the
extent delayed by any circumstance outside of the Paying Agent's reasonable
control), on the date on which the distribution is required to be made, to an
account at a bank or other entity having appropriate facilities therefor that
ARC specifies in a written notice given to the Trustee on or prior to the Report
Date immediately preceding the Settlement Date on which the payment is to be
made.
SECTION 5.03 Information to Certificateholders.
---------------------------------
(a) Monthly Report. Within seven days after each Settlement Date, the
--------------
Paying Agent, on behalf of the Trustee, shall send to each Investor
Certificateholder a copy of a monthly report prepared by the Servicer in the
form of Exhibit F, and shall send to the Applicable Rating Agencies without any
---------
request therefor by any of them, each Settlement Statement by first-class mail,
postage prepaid, to the address of such Investor Certificateholder that is
indicated in the Certificate Register.
Page 39
<PAGE>
(b) Annual Tax Information. On or before February 15, of each calendar
----------------------
year, beginning with calendar year 1995, the Servicer, on behalf of the Trustee,
shall furnish or cause to be furnished to each Person who at any time during the
preceding calendar year was an Investor Certificateholder the information for
the preceding calendar year, or the applicable portion thereof during which the
Person was a Holder of record of an Investor Certificate, 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 the Investor Certificateholders to prepare their federal
income tax returns. Such obligation of the Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent to the Investor Certificateholder pursuant to this
Agreement or any requirements of the Internal Revenue Code as from time to time
in effect. Notwithstanding anything to the contrary contained in this Agreement,
the Trustee shall, to the extent required by applicable law, from time to time
furnish to the appropriate Persons a Form 1099-INT within the period required by
applicable law.
SECTION 5.04 Notice of Early Liquidation at Seller Election. If ARC shall
----------------------------------------------
receive a notice from a Seller, pursuant to Section 8.1 of the Purchase
Agreement, to the effect that the Seller desires to terminate its agreement to
sell Receivables to ARC, ARC shall deliver a copy of the notice to the Trustee,
and the Trustee shall deliver a copy to each Investor Certificateholder and to
the Applicable Rating Agencies, as soon as practicable, which notice shall
become effective at the time, and subject to the conditions, specified in the
notice and in Section 8.1 of the Purchase Agreement.
ARTICLE VI
THE CERTIFICATES
SECTION 6.01 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 ARC Revolving Certificate
and the Residual Certificate shall be substantially in the forms of Exhibit G
---------
and Exhibit H, respectively. Upon issuance, all Certificates shall be executed
---------
and delivered by ARC to the Trustee for authentication and redelivery as
provided in Section 6.02. 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 $1,000,000. Each Series
of Fixed Principal Certificates initially shall be issued as one or more Series
of Fixed Principal Certificates in an aggregate original principal amount equal
to the Fixed Principal Initial Invested Amount for the Series. Each Series of
Investor Revolving Certificates initially shall be issued as one or more Series
of Investor Revolving Certificates in an aggregate original principal amount
equal to the Investor Revolving Initial Invested Amount for the Series and with
an initial aggregate Stated Amount in the amount set out in the related
Supplement. The ARC
Page 40
<PAGE>
Revolving Certificate and the Residual Certificate each shall be a single
certificate. The Investor Revolving Certificates and the ARC Revolving
Certificate together shall represent the Revolving Certificate Interest. The
Residual Certificate shall represent the Residual Interest.
Each Certificate issued as a Definitive Certificate shall be executed by
manual or facsimile signature on behalf of ARC 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 Trust by manual signature of a duly authorized
signatory of the 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 ARC or the Trust (as applicable)
shall be valid and binding obligations of the Trust, 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 substantially in the form provided for herein
executed by or on behalf of the 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 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
issued and sold pursuant to an exemption from the Securities Act. Any Series
sold pursuant to Rule 144A, Regulation S or another exemption under the
Securities Act, including Rule 144 (as enacted under the Securities Act), may be
delivered in book-entry form as provided in Sections 6.12 and 6.13.
------------- ----
SECTION 6.02 Authentication of Certificates. (a) Contemporaneously with
------------------------------
the assignment and transfer of the Receivables and the other Trust Assets to the
Trust, the Trustee shall authenticate and deliver the ARC Revolving Certificate
and the Residual Certificate to ARC.
(b) On each Subsequent Issuance Date, upon the order of ARC, the Trustee
shall authenticate and deliver to ARC the Series of Certificates that are to be
issued originally on such Subsequent Issuance Date (the "Subsequent Issuance
Investor Certificates") pursuant to the applicable Supplement. Upon the issuance
of the Subsequent Issuance Investor Certificates on each Subsequent Issuance
Date, the ARC Revolving Amount automatically shall be reduced by an amount equal
to the portion of the ARC Revolving Amount allocated to the new Series pursuant
to the related Supplement. The Subsequent Issuance Investor Certificates shall
be duly authenticated by or on behalf of the Trustee, in authorized
Page 41
<PAGE>
denominations equal, in the aggregate, to (i) the portion of the Fixed Principal
Invested Amount that is attributable to the Series, in the case of a Series of
Fixed Principal Certificates or (ii) the aggregate Stated Amounts of the
Certificates, in the case of a Series of Investor Revolving Certificates.
SECTION 6.03 Registration of Transfer and Exchange of Certificates. (a)
-----------------------------------------------------
The Trustee, as agent for ARC, 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 the 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. ARC hereby appoints the Trustee as the initial
Transfer Agent and Registrar.
ARC, or the Trustee as agent for ARC, may revoke the appointment as
Transfer Agent and Registrar and remove the then-acting Transfer Agent and
Registrar if the Trustee or ARC (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 the Trustee, ARC and
the Servicer; provided, however, 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 the Trustee has appointed a
successor Transfer Agent and Registrar reasonably acceptable to ARC and the
Person so appointed has given the Trustee written notice that it accepts the
appointment. The provisions of Sections 11.01 through 11.05 shall apply to the
-------------- -----
Transfer Agent and Registrar as if all references to "the Trustee" in the
applicable provisions of Sections 11.01 through 11.05 were references to the
-------------- -----
Transfer Agent and Registrar.
It is intended that the registration of Certificates that is described in
this subsection comply with the registration requirements contained in Section
163 of the Internal Revenue Code.
(b) In connection with each issuance of a Series of Certificates, ARC will
determine whether such Certificates may be purchased by employee benefit plans
(as defined in ERISA) and shall cause the Certificates evidencing the Series to
bear a legend describing any restrictions on the purchases.
(c) No transfer of all or any part of the ARC Revolving Certificate shall
be made unless (i) ARC shall have given the Applicable Rating Agencies and the
Trustee prior written notice of the proposed transfer, (ii) the Rating Agency
Condition shall have been satisfied in connection with the proposed transfer and
(iii) ARC shall have delivered to the Trustee a Tax Opinion with respect to such
transfer.
Page 42
<PAGE>
(d) ARC shall not transfer, assign, exchange or otherwise convey or pledge,
hypothecate or otherwise grant a security interest in the Residual Certificate
or any interest represented thereby, and any attempt to transfer, assign,
exchange, convey, pledge, hypothecate or grant a security interest in the
Residual Certificate or any interest represented thereby shall be void and of no
effect.
(e) Subject to the requirements of subsection (b) and, if applicable,
--------------
subsection (c) 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, ARC shall execute, and the 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 (i) in the case of the
Fixed Principal Certificates, are in authorized denominations of like aggregate
fractional interest in the Fixed Principal Interest and (ii) in the case of the
Investor Revolving Certificates, are in authorized denominations of like
aggregate fractional interest in the Revolving Certificate Interest, and, in the
case of each Investor Certificate, 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 Fixed Principal Interest or the Revolving
Certificate Interest (as applicable) 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, ARC shall execute, and the 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 the 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 or any co-
transfer agent and co-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 the Trustee.
(f) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in Section
-------
13.06.
- - - -----
Page 43
<PAGE>
(g) Transfers of Book-Entry Certificates, in whole or in part, issued in
accordance with Section 6.12 and the Series Supplements shall be made in
------------
accordance with this subsection. Subject to clauses (i) through (iv) below,
----------- ----
transfers of a Book-Entry Certificate shall be limited to transfers of the Book-
Entry Certificate in whole, but not in part, to nominees of the Clearing Agency
or to a successor of the Clearing Agency or such successor's nominee.
(i) For transfers within a Regulation S Temporary Book-Entry
Certificate, if the Certificateholder of a Regulation S Temporary Book-
Entry Certificate wishes at any time to transfer their interest to a Person
who wishes to take delivery thereof in the form of a beneficial interest in
the Regulation S Temporary Book-Entry Certificate, the transfer may be
effected in accordance with this clause. Upon delivery (A) by a
Certificateholder of an interest in a Regulation S Temporary Book-Entry
Certificate to Euroclear or Cedel, as the case may be, of a certification
in the form set forth in Exhibit I (the "Owner Regulation S
---------
Certification"), (B) by the transferee of the beneficial interest in the
Regulation S Temporary Book-Entry Certificate to Euroclear or Cedel, as the
case may be, of a written certification in the form set forth in Exhibit J
---------
(the "Transferee Regulation S Certification"), and (C) by Euroclear or
Cedel, as the case may be, to the Transfer Agent and Registrar of a
certification in the form set forth in Exhibit K (the "Depositary
---------
Regulation S Certification"), the Transfer Agent and Registrar may direct
either Euroclear or Cedel, as the case may be, to reflect on its records
the transfer of a beneficial interest in the Regulation S Temporary Book-
Entry Certificate from the Certificateholder providing the Owner Regulation
S Certification to the Person providing the Transferee Regulation S
Certification.
(ii) 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 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
Page 44
<PAGE>
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.
(iii) For transfers of an interest in the 144A Book-Entry Certificate
for an interest in the Regulation S Book-Entry Certificate, if the
Certificateholder of 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 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) a certificate in the form of Exhibit L attached
---------
hereto given by the Certificateholder of the beneficial 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
Page 45
<PAGE>
in the Regulation S Book-Entry Certificate equal to the reduction in the
principal amount of the 144A Book-Entry Certificate.
(iv) 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
-------
M. 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.
(v) In the event that a 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 the Trustee.
(h) Certificateholders holding Definitive Certificates shall not sell,
transfer or otherwise dispose of the Certificates unless the sale is to a
transferee to whom the sale, transfer or disposition is being made pursuant to
an applicable exemption from the registration requirements of the Securities Act
and applicable state securities laws and, prior to the proposed sale, transfer
or disposition, the Certificateholder and the proposed transferee each provide
the Trustee and ARC with representations and, if requested by the Trustee or
ARC, an opinion of counsel (which may be in-house counsel), in each case
satisfactory in form and substance to the Trustee, concerning the proposed sale,
transfer or disposition and the availability of the exemption.
(i) Certificateholders shall not use any means of general solicitation or
distribution in connection with the marketing, sale, transfer or other
disposition of any Certificates. None of the Certificates may be issued, sold,
transferred or otherwise disposed of in a transaction registered under the
Securities Act. The Certificates shall bear restrictive legends substantially as
set forth in Exhibit N.
---------
Page 46
<PAGE>
SECTION 6.04 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 and the Trustee such security or indemnity as may
be required by them and ARC to hold each of them, the Trust and ARC harmless,
then, in the absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, ARC shall execute and, upon the request of
---- ----
ARC, the 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, the 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 the 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 6.05 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, ARC, the 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 as the owner of such
Certificate for the purpose of receiving distributions pursuant to Sections 5.01
-------------
and 5.02 and for all other purposes whatsoever, and none of ARC, the 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, however, that, in
determining whether the Holders of the requisite principal amount or Stated
Amount (as applicable) of Certificates or Purchased Interests have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Certificates and Purchased Interests owned by ARC, the Servicer or any Affiliate
thereof shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates and Purchased Interests that the 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 the Trustee the
pledgee's right so to act with respect to such Certificates or Purchased
Interests and that the pledgee is not ARC, the Servicer or an Affiliate thereof.
SECTION 6.06 Appointment of Paying Agent. The Paying Agent initially
---------------------------
shall be the Trustee. ARC hereby appoints the Paying Agent as its agent to make
distributions to Certificateholders and Purchasers from the Master Collection
Account pursuant to Sections
--------
Page 47
<PAGE>
5.01 and 5.02 and to report the amounts of the distributions to the Trustee.
- - - ---- ----
Any Paying Agent shall have the revocable power to withdraw funds from the
Master Collection Account for the purpose of making the distributions. The
Trustee or, at any time when the Trustee is also the Paying Agent, ARC may
revoke such power of the Paying Agent and remove the Paying Agent if the Trustee
or ARC (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 the Trustee, ARC, the Servicer and the
Applicable 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 the Trustee shall no longer be the
Paying Agent, the Trustee shall appoint a successor Paying Agent (which shall be
a bank or trust company) reasonably acceptable to ARC, which appointment shall
be effective on the date on which the Person so appointed gives the Trustee
written notice that it accepts the appointment. The Trustee shall cause the
successor Paying Agent or any additional Paying Agent appointed by the Trustee
to execute and deliver to the Trustee an instrument in which it shall agree with
the 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 the Trustee, and upon removal of a Paying Agent such Paying
Agent shall also return all funds in its possession to the Trustee. The
provisions of Sections 11.01 through 11.05 shall apply to the Paying Agent as if
-------------- -----
all references in the applicable provisions thereof to "the Trustee" were
references to the Paying Agent.
SECTION 6.07 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
The Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to ARC, the Servicer, the Seller or the Paying Agent, within two
Business Days after receipt by the Trustee of a written request therefor from
the Servicer or the Paying Agent, a list in the form the Servicer or the Paying
Agent may reasonably require of the names and addresses of the
Certificateholders as of the most recent Settlement Date. If 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 (the "Applicant") applies
in writing to the Trustee, and the application states that the Applicant desires
to communicate with other Certificateholders with respect to their rights under
this Agreement, any Supplement or the Certificates and is accompanied by a copy
of the communication that the Applicant proposes to transmit, then the 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 held by the Trustee, within five Business Days after the
receipt of the application and indemnification.
Page 48
<PAGE>
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 the Trustee that neither the Trustee, the Transfer Agent and Registrar,
ARC, the Servicer, the 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 6.08 Authenticating Agent. (a) The Trustee may appoint one or
--------------------
more authenticating agents with respect to the Certificates that shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Either the Trustee or the authenticating agent,
if any, then appointed and acting on behalf of the Trustee shall authenticate
the Certificates. Whenever reference is made in this Agreement to the
authentication of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be acceptable to ARC.
(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 the
Trustee, the authenticating agent or any other Person.
(c) An authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and ARC. The Trustee may at any time terminate the
agency of an authenticating agent by giving notice of termination to the
authenticating agent and ARC. 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 the Trustee or ARC, the 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 the
Trustee and ARC.
(d) The Servicer agrees to pay to each authenticating agent (if any), as an
expense of the Servicer paid out of the Servicing Fee, reasonable compensation
from time to time for services performed under this section.
(e) The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable
-------------- ----- -----
to any authenticating agent as if the references in the applicable provisions
thereof to "the Trustee" were references to the authenticating agent.
Page 49
<PAGE>
(f) Pursuant to an appointment made under this section, the Certificates
may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in the Supplement dated as
of __________ ___, 199_.
Manufacturers and Traders Trust Company, as Trustee
By:___________________________
as Authenticating Agent
for the Trustee,
By:___________________________
Authorized Officer."
SECTION 6.09 Tax Treatment. It is the intent of ARC and the Investor
-------------
Certificateholders that, for purposes of Federal, state and local income and
franchise taxes and for other taxes measured by or imposed on income, the
Investor Certificates will be treated as evidence of indebtedness secured by the
Trust Assets and the Trust will not be characterized as an association taxable
as a corporation. ARC, by entering into this Agreement, and each Investor
Certificateholder, by its acceptance of its Investor Certificate, agree to treat
the Investor Certificates for purposes of Federal, state and local income and
franchise taxes and for any other taxes measured by or imposed on income as
indebtedness. 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, ARC agrees that it will report its income for
purposes of Federal, state and local income or franchise taxes, or for purposes
of 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, or to the extent the Trustee is otherwise
advised by counsel, the 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) ARC may from time to time direct the Trustee to issue
- - - -------------------
to it one or more Classes of any newly issued Series of Investor Certificates
and either (i) allocate to the Series a portion of the ARC Revolving Amount or
(ii) deposit an amount of funds equal to the initial Invested Amount of the
Certificates to the Defeasance Account (an "Unfunded Certificate") or (iii) take
a combination of the actions specified in clauses (i) and (ii); provided, that
----------- ----
the sum of the portion of the ARC Revolving Amount that is transferred under
clause (i) and the amount to be paid to the Defeasance Account under clause (ii)
- - - ---------- -----------
equals the
Page 50
<PAGE>
Initial Invested Amount of the Investor Certificates delivered to ARC (any such
event under clauses (i), (ii) or (iii), 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 the Trustee, and ARC may allocate a portion of
the ARC Revolving Amount pursuant to the 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 "Subsequent Issuances".
(b) ARC may direct the Trustee to effect a Subsequent Issuance by notifying
the Trustee, in writing, at least five Business Days (or such shorter period as
shall be acceptable to the Trustee) in advance (a "Subsequent Issuance Notice")
of the date upon which the Subsequent Issuance is to occur (a "Subsequent
Issuance Date"). Any Subsequent Issuance Notice shall state the designation of
any Series to be issued on the Subsequent 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 Certificate 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 Subsequent Issuance Date, ARC shall deliver to the Trustee for
authentication under Section 6.02, and the Trustee shall authenticate and
------------
deliver any such Class or Classes of Series of Investor Certificates only upon
delivery to it of the following:
(i) a Supplement satisfying the criteria set forth in subsection (d)
--------------
and in form reasonably satisfactory to the Trustee executed by ARC and the
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 with respect to such Subsequent Issuance,
(v) evidence that the Rating Agency Condition has been satisfied with
respect to such Subsequent Issuance,
(vi) an Officer's Certificate of ARC that on the Subsequent Issuance
Date, after giving effect to the Subsequent Issuance (and the repayment, on
the date of the Subsequent Issuance Date, of any existing Investor
Certificates with funds (including proceeds of sale of the new Series) on
deposit in the Defeasance Account), any requirements set out in the
Supplement with respect to any then-outstanding Series
Page 51
<PAGE>
with respect to the amount of Certificates that may not, by their terms, be
transferred has been satisfied,
(vii) an Officer's Certificate of the Servicer stating that no
Liquidation Event, Unmatured Liquidation Event or Pay-Out Event has
occurred and is continuing and that the Subsequent Issuance is not
reasonably expected to result in a Liquidation Event or Pay-Out 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 the Servicer to the effect that all
conditions specified in clauses (i) through (ix) have been satisfied.
----------- ----
Upon satisfaction of the conditions, the Trustee shall cancel any applicable
Investor Certificates and issue, as provided above, the new Series of Investor
Certificates dated the Subsequent 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 ARC. There is no limit to the number of
Subsequent Issuances that may be performed under this Agreement.
(d) In conjunction with a Subsequent 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 Certificate Rate (or formula for the
determination thereof), (iv) the Subsequent Issuance Date, (v) the rating agency
or agencies rating the Series, (vi) the name of the Clearing Agency, if any,
(vii) the portion of the ARC Revolving Amount that has been transferred to the
Holders of the Series pursuant to the Subsequent Issuance, (viii) the interest
payment date or dates and the date or dates from which interest shall accrue,
(ix) 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 and the method for allocating charge-offs, (x) the names of any
accounts to be used by the Series and the terms governing the operation of any
such account, (xi) the Ratable Principal Amount of the Series and related terms,
(xii) the Expected Final Payment Date, (xiii) the terms of any Enhancement with
respect to the Series, (xiv) the Enhancement Provider, if applicable, (xv) the
base rate applicable to the Series, (xvi) the terms on which the Certificates of
the Series may be repurchased or remarketed to other investors, (xvii) any
deposit into any account provided for the Series, (xviii) the number of Classes
of the Series, and if more than one Class, the rights and priorities of each
Class, (xix) whether any fees,
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breakage payments or early termination payments will be included in the funds
available to be paid for the Series, (xx) the subordination of the Series to any
other Series, (xxi) whether the Series will be a part of a group or subject to
being paired with any other Series, (xxii) whether the Series will be prefunded
and (xxiii) any other relevant terms of the Series (including whether or not the
Series will be pledged as collateral for an issuance of any other securities,
including commercial paper). The terms of the Supplement may modify or amend the
terms of this Agreement solely as applied to the new Series.
(e) Except as specified in any Supplement for a 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) ARC may from time to time direct the Trustee, on behalf of the Trust,
to sell one or more Purchased Interests pursuant to a PI Agreement. 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
Trust Account established pursuant to any Supplement or any Purchaser Account
established in respect of 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 terms of the PI Agreement may modify or amend the
terms of this Agreement solely as applied to the Purchased Interest. The
obligation of the 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 parties) immediately preceding the related closing
date, ARC shall have given the Trustee, the Servicer, each Applicable
Rating Agency (if any rated Investor Certificates are outstanding), each
Purchaser and each Enhancement Provider (if any) written notice of the sale
of the Purchased Interest and the closing date,
(ii) ARC shall have delivered to the Trustee the related PI Agreement,
in form satisfactory to the Trustee, each executed by each party thereto
other than the Trustee,
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(iii) the Rating Agency Condition shall have been satisfied with
respect to the sale (if any rated Investor Certificates are outstanding),
(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 reasonably be expected to result, at any time in the
future, in) the occurrence of, a Liquidation Event, an Unmatured
Liquidation Event or a Pay-Out Event,
(v) ARC shall have delivered to the Trustee, each Applicable Rating
Agency (if any rated Investor Certificates are outstanding), each Purchaser
and any Enhancement Provider, a Tax Opinion, dated the closing date, with
respect to the sale, and
(vi) ARC shall have delivered to the Trustee an Officer's Certificate,
dated the Closing Date for such Purchased Interest, to the effect that each
of the conditions set forth in this subsection 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, the Trustee shall execute and, at the
written direction of ARC, deliver the related PI Agreement and any related
documents that ARC shall reasonably request.
(h) ARC may from time to time direct the Trustee, on behalf of the Trust,
to extend any PI Agreement. The obligation of the Trustee to execute and deliver
all agreements, certificates, documents and filings required in connection
therewith, 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 parties) immediately preceding the date of the
extension, ARC shall have given the Trustee, the Servicer, the Rating
Agency (if any rated Investor Certificates are outstanding) and any
Enhancement Provider written notice of the extension and the date on which
the extension shall occur,
(ii) ARC shall have delivered to the Trustee the required agreements,
certificates, documents and filings, in form satisfactory to the Trustee,
executed by each party thereto other than the 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, a Liquidation Event, an
Unmatured Liquidation Event or a Pay-Out Event,
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<PAGE>
(iv) ARC shall have delivered to the Trust, the Rating Agency (if any
rated Investor Certificates are outstanding) and any Enhancement Provider a
Tax Opinion, dated the date of the extension, with respect to the
extension,
(v) ARC shall have delivered to the Trustee an Officer's Certificate,
dated the date of the extension, to the effect that each of the conditions
set forth in this subsection for the extension of such PI Agreement and the
execution and delivery of the related documents has been satisfied, and
(vi) the Rating Agency Condition shall have been satisfied.
(i) Prior to the execution by the Trustee of any Supplement or PI Agreement
that allocates to any Certificate or Purchased Interest a Ratable Principal
Amount in excess of its outstanding principal amount, the Trustee shall receive
from the Servicer an Officer's Certificate to the effect that the allocation
will not dilute the benefit of the required dilution and loss reserves to which
any pre-existing Series or Purchased Interest is entitled prior to the
effectiveness of the Supplement or PI Agreement.
SECTION 6.11 Changes in Amount of Investor Revolving Certificates. (a)
----------------------------------------------------
The outstanding principal amount of an Investor Revolving Certificate shall at
no time exceed the Stated Amount then applicable to such Investor Revolving
Certificate. The Stated Amount of an Investor Revolving Certificate may be
increased or decreased from time to time by ARC, with the prior written consent
of the Holder of the Investor Revolving Certificate, if the following conditions
each shall have been satisfied on or prior to the effective date of the proposed
increase or decrease (as the case may be):
(i) ARC shall have delivered to the Trustee a Tax Opinion with respect
to the proposed increase, and
(ii) the Rating Agency Condition shall have been satisfied with
respect to the increase.
(b) ARC may, pursuant to the Supplement that applies to a particular
Investor Revolving Certificate, request the Holder of the Investor Revolving
Certificate to provide funds to the Trustee in respect of the Holder's Investor
Revolving Certificate in order to increase the then-outstanding principal amount
of the Investor Revolving Certificate, which requested increase shall be subject
to the further provisions of this subsection and to the provisions of the
Supplement. Except as otherwise provided in the related Supplement, all the
increases to be made on any day shall be in an aggregate amount not to exceed
the sum, if positive, of (i) the Variable Amount on the day on which the
increase takes effect and (ii) the ARC Revolving Amount as of the opening of
business on the day (after giving effect to any reduction in the amount of the
ARC Revolving Certificate as a result of any Seller Adjustments on the day). No
such increase may be requested or (even if previously
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<PAGE>
requested) implemented during a Look Back Period, the Liquidation Period or the
Pay-Out Period for the Investor Revolving Certificate. ARC may make such a
request at any time prior to the earlier of (x) the Liquidation Commencement
Date and (y) the Pay-Out Period Commencement Date for the Investor Revolving
Certificate, and shall make any such request in a writing that is substantially
in the form required by the applicable Supplement, appropriately completed, and
that is delivered to the Holder of the Investor Revolving Certificate at the
time required by the applicable Supplement. The outstanding principal amount of
the Holder's Investor Revolving Certificate shall be increased on the Business
Day on which the Holder provides to ARC immediately available funds in the
amount of the requested increase by an amount equal to the amount of the funds.
SECTION 6.12 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, ARC. 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 6.14. Unless and
------------
until Definitive Certificates have been issued to Certificate Owners pursuant to
Section 6.14:
- - - ------------
(i) the provisions of this section shall be in full force and effect,
(ii) ARC, the Servicer, the Paying Agent, the Transfer Agent and
Registrar and the 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
-------
6.14, 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 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
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<PAGE>
the order of ARC on the Closing Date with the Trustee as custodian for and
registered in the name of Cede & Co., as nominee of the Clearing Agency.
(c) Certificates sold in offshore transactions in reliance on Regulation S
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 Closing Date and (B) the completion of the distribution of the
Certificates, as certified by the Lead Placement Agent and (ii) the date on
which the requisite certifications are due to and provided to the 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 ARC with the Trustee as custodian for and registered 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 Certificateholder of the 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 of the Owner Regulation S Certification, 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 of the Depositary
Regulation S Certification. The delivery by the Certificateholder of the
Regulation S Temporary Book-Entry Certificate of the certification shall
constitute irrevocable instructions by the Certificateholder to Euroclear or
Cedel, as the case may be, to arrange for the exchange of the
Certificateholder'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 equal to 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 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
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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 the Trustee in exchange for beneficial interests in
the Unrestricted Book-Entry Certificate, the Trustee shall cancel the Regulation
S Temporary Book-Entry Certificate by perforation and shall forthwith destroy
it.
SECTION 6.13 Notices to Clearing Agency. Whenever notice or other
--------------------------
communication to the Investor Certificateholders of any Series represented by
Global Certificates is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.14, the Trustee, the 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 6.14 Definitive Certificates. If (a)(i) ARC advises the 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) ARC
is unable to locate a qualified successor, (b) ARC, at its option, advises the
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 the
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, the
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 the Trustee of the
Investor Certificates of the Series by the Clearing Agency accompanied by
registration instructions from the Clearing Agency for registration, the Trustee
shall authenticate and deliver Definitive Certificates of the Series. Neither
ARC, the Transfer Agent and Registrar nor the 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 the Trustee, to the extent applicable
with respect to the Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
SECTION 6.15 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.
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ARTICLE VII
ARC
SECTION 7.01 Representations and Warranties of ARC Relating to ARC and the
-------------------------------------------------------------
Transaction Documents. On the date hereof and on each Subsequent Issuance Date,
- - - ---------------------
ARC hereby represents and warrants that:
(a) Organization and Good Standing. ARC is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full power and authority to own its
properties and to conduct its business as the properties presently are
owned and the business presently is conducted. ARC had at all relevant
times, and now has, all necessary power, authority and legal right to
acquire, own and transfer the Receivables and the Related Transferred
Assets.
(b) Due Qualification. ARC 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 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.
(c) Power and Authority; Due Authorization. ARC has (i) all
--------------------------------------
necessary power and authority to (A) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (B) perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party, and (C) transfer, assign, set-over and convey its
right, title and interest in, to and under the Receivables, the Related
Transferred Assets and the funds in the Trust Accounts on the terms and
subject to the conditions herein and therein provided and (ii) duly
authorized by all necessary action the transfer, assignment, set-over and
conveyance and the execution, delivery and performance of this Agreement
and the other Transaction Documents to which it is a party and the
consummation of the transactions provided for in 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 ARC is a party when executed and delivered
will constitute, a legal, valid and binding obligation of ARC, enforceable
against it in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of
Page 59
<PAGE>
creditors' rights generally and by general principles of equity, regardless
of whether enforceability is considered in a proceeding in equity or at
law.
(e) 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 to be signed by ARC and
the fulfillment of the terms hereof and thereof 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 ARC 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 pursuant to the terms of any such contract,
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument, other than 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,
Page 60
<PAGE>
Exhibit 4.13
================================================================================
REVOLVING CERTIFICATE PURCHASE AGREEMENT
(SERIES 1994-1)
dated as of December 13, 1994
among
AMERISOURCE RECEIVABLES CORPORATION,
AMERISOURCE CORPORATION,
THE REVOLVING PURCHASERS DESCRIBED HEREIN,
and
BANKERS TRUST COMPANY,
as Agent and Revolving Purchaser
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
SECTION 1.01 Definitions.................................................... 2
ARTICLE II
PURCHASE AND SALE OF THE CERTIFICATES
SECTION 2.01 The Commitments................................................ 2
SECTION 2.02 Purchase Mechanics............................................. 3
SECTION 2.03 Reduction of Stated Amounts.................................... 4
SECTION 2.04 Certificates................................................... 4
ARTICLE III
REDUCTIONS IN INVESTOR REVOLVING INVESTED AMOUNT
SECTION 3.01 Negative Variable Amounts...................................... 5
SECTION 3.02 Other Reductions............................................... 5
SECTION 3.03 Notice to Revolving Purchasers................................. 6
ARTICLE IV
INVESTOR REVOLVING YIELD AND FEES
SECTION 4.01 Investor Revolving Yield....................................... 6
SECTION 4.02 Non-Usage Fees................................................. 7
SECTION 4.03 Yield Protection............................................... 7
SECTION 4.04 Illegality; Unavailability..................................... 10
SECTION 4.05 Indemnity...................................................... 10
SECTION 4.06 Taxes.......................................................... 11
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.01 Time and Method of Payment..................................... 12
SECTION 5.02 Pro Rata Treatment............................................. 13
</TABLE>
i
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
SECTION 6.01 ARC........................................................... 13
SECTION 6.02 AmeriSource................................................... 14
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Initial Purchase................................ 15
SECTION 7.02 Conditions to Each Purchase................................... 18
ARTICLE VIII
AFFIRMATIVE COVENANTS
SECTION 8.01 Affirmative Covenants......................................... 18
ARTICLE IX
THE AGENT
SECTION 9.01 Appointment................................................... 20
SECTION 9.02 Nature of Duties.............................................. 20
SECTION 9.03 Lack of Reliance on the Agent and BT Securities Corporation... 21
SECTION 9.04 Certain Rights of the Agent................................... 21
SECTION 9.05 Reliance...................................................... 21
SECTION 9.06 Indemnification............................................... 22
SECTION 9.07 The Agent in Its Individual Capacity.......................... 22
SECTION 9.08 Resignation by the Agent...................................... 22
SECTION 9.09 Reference Bank................................................ 23
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 Amendments................................................... 23
SECTION 10.02 No Waiver; Remedies.......................................... 24
SECTION 10.03 Successors and Assigns; Assignments.......................... 24
SECTION 10.04 Survival of Agreement........................................ 26
SECTION 10.05 Expenses; Indemnification.................................... 27
SECTION 10.06 Characterization as Transaction Document..................... 28
SECTION 10.07 Notices...................................................... 28
SECTION 10.08 Binding on Successors and Assigns............................ 28
SECTION 10.09 Severability of Provisions................................... 28
SECTION 10.10 Counterparts................................................. 28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 10.11 Governing Law................................................ 29
SECTION 10.12 Failure to Refinance......................................... 29
SECTION 10.13 Tax Characterization......................................... 30
SECTION 10.14 No Proceedings............................................... 30
SECTION 10.15 Confidentiality.............................................. 30
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
OF POOLING AGREEMENT
SECTION 1.01 Definitions................................................... 1
SECTION 1.02 Incorporation of Terms and Provisions of the Pooling
Agreement................................................... 5
ARTICLE II
DESIGNATION
SECTION 2.01 Designation................................................... 5
ARTICLE III
PAYMENTS
SECTION 3.01 Payments...................................................... 5
SECTION 3.02 Interest...................................................... 5
SECTION 3.03 Principal Payments............................................ 6
SECTION 3.04 Commitment Fees; Additional Amounts; Breakage Payments........ 7
ARTICLE IV
PAY-OUT EVENTS
SECTION 4.01 Pay-Out Events................................................ 7
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Governing Law................................................. 8
SECTION 5.02 Counterparts.................................................. 8
SECTION 5.03 Severability of Provisions.................................... 8
SECTION 5.04 Amendment, Waiver, Etc........................................ 8
SECTION 5.05 The Trustee................................................... 8
SECTION 5.06 Instructions in Writing....................................... 8
</TABLE>
iii
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Receivables Purchase Agreement
EXHIBIT C Form of Series 1994-1 Supplement
EXHIBIT D Form of Assignment Agreement
</TABLE>
APPENDIX
APPENDIX X Index of Additional Defined Terms
iv
<PAGE>
This REVOLVING CERTIFICATE PURCHASE AGREEMENT, dated as of December 13,
1994 (this "Agreement"), is made among AMERISOURCE RECEIVABLES CORPORATION, a
Delaware corporation ("ARC"), AMERISOURCE CORPORATION, a Delaware corporation
(the "Servicer" or "AmeriSource"), the revolving purchasers (together with their
respective permitted assigns, the "Revolving Purchasers"), and BANKERS TRUST
COMPANY, as agent for the Revolving Purchasers (in that capacity, together with
any successors in that capacity, the "Agent").
BACKGROUND
1. ARC will enter into (a) a Pooling Agreement substantially in the form of
Exhibit A (the "Pooling Agreement") with AmeriSource, as initial Servicer,
- - - ---------
and Manufacturers and Traders Trust Company, a New York banking corporation, as
trustee (in that capacity, together with any successors in that capacity, the
"Trustee"), (b) a Receivables Purchase Agreement substantially in the form of
Exhibit B, (c) a Series 1994-1 Supplement to the Pooling Agreement substantially
- - - ---------
in the form of Exhibit C (the "Supplement"), and (d) certain related documents
---------
referred to in the forms of those documents. Pursuant to the Pooling Agreement,
ARC will obtain the Series 1994-1 Investor Revolving Certificates (the
"Certificates"), which will represent fractional undivided beneficial interests
in the assets of the AmeriSource Receivables Master Trust (the "Trust"), a trust
to be organized pursuant to the Pooling Agreement. This Agreement is a Revolving
Certificate Purchase Agreement as such is defined in the Pooling Agreement.
2. ARC wishes to sell the Certificates to the Revolving Purchasers and
obtain their commitment to purchase fractional undivided beneficial interests in
the assets of the Trust (each a "Trust Interest") that will be evidenced by the
Certificates. Subject to the terms and conditions of this Agreement, each
Revolving Purchaser is willing (a) to purchase a Certificate with an initial
Stated Amount in the amount set forth below its name on the signature pages to
this Agreement and (b) to agree to make purchases of Trust Interests.
AmeriSource has joined in this Agreement to confirm certain representations,
warranties and covenants for the benefit of the Revolving Purchasers and the
Agent.
3. The Certificates and the Trust Interests represented thereby will serve
as a bridge financing, and it is intended that they will be repaid in full and
cancelled as soon as practicable from the proceeds of a refinancing, as more
fully described herein.
page 1
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Except for terms otherwise defined herein
-----------
(including without limitation the term "Certificate"), capitalized terms have
the meanings assigned to them in the Supplement or in Appendix A to the Pooling
Agreement, and this Agreement shall be interpreted in accordance with the
conventions set forth in Parts B, C and D of Appendix A to the Pooling
Agreement. An index of terms defined directly in this Agreement is attached as
Appendix X.
- - - ----------
ARTICLE II
PURCHASE AND SALE OF THE CERTIFICATES
SECTION 2.01 The Commitments. Subject to the terms and conditions of this
---------------
Agreement, each Revolving Purchaser agrees, severally and for itself alone, upon
ARC's request, to make purchases (each, a "Purchase") of Trust Interests from
time to time during the period from (and including) the date hereof to (but
excluding) the earlier to occur of the Pay-Out Period Commencement Date for the
Certificates and the Liquidation Commencement Date; provided, that no Revolving
Purchaser will be required or permitted to make a Purchase on any date if the
funded principal amount of its Certificate, after giving effect to the Purchase,
would exceed the lesser of (a) the Stated Amount of its Certificate and (b) its
Percentage multiplied by the Investor Revolving Invested Amount. In addition, no
Revolving Purchaser will be required or permitted to make a Purchase if, after
giving effect thereto (and any corresponding reduction to the ARC Revolving
Amount pursuant to Section 4.03(c) of the Pooling Agreement), the (x) Investor
Revolving Invested Amount would exceed (y) the excess, on that date, of the Base
Amount over the ARC Revolving Amount. The Purchases by the Revolving Purchasers
shall be made ratably in accordance with their respective Percentages; provided,
that the failure of any Revolving Purchaser to make any Purchase shall not
relieve any other Revolving Purchaser of its obligation to make Purchases
hereunder. No Revolving Purchaser shall, however, be responsible for the failure
of any other Revolving Purchaser to make any Purchase. Subject to the terms of
this Agreement, the aggregate principal amount of a Revolving Purchaser's
investment represented by its Certificate may be increased or decreased from
time to time.
For purposes of this Agreement, "Percentage" means, with respect to each
Revolving Purchaser, the percentage equivalent (carried out to twelve decimal
places) of a fraction the numerator of which is the Stated Amount of the
Revolving Purchaser's Certificate and the denominator of which is the sum of the
Stated Amounts of all of the Revolving Purchasers' Certificates. The initial
Percentages of the initial Revolving Purchasers, and the Stated Amounts of their
Certificates, are set out below their names on the signature pages to this
Agreement.
page 2
<PAGE>
SECTION 2.02 Purchase Mechanics. (a) Whenever ARC wishes the Revolving
------------------
Purchasers to make Purchases, it shall cause the Servicer to notify the Agent if
the Trust Interests to be purchased initially will form a part of (i) the ABR
Tranche, not later than noon, New York City time, one Business Day prior to the
date of the proposed Purchase and (ii) a Eurodollar Tranche, not later than 2:00
p. m., New York City time, three Business Days prior to the date of the proposed
Purchase. Each notice shall be irrevocable and shall in each case refer to this
Agreement and specify (x) the aggregate purchase price for the requested
Purchases (which shall be in a minimum amount of $1,000,000 or a greater
integral multiple of $500,000 (or in the total unutilized amount of the various
Revolving Purchasers' Stated Amounts)), (y) whether the Trust Interests to be
purchased will form a part of the ABR Tranche or a Eurodollar Tranche and (z)
the date of the Purchase (which shall be a Business Day) and the amount thereof.
If no election required by clause (y) is made in any notice, then the Trust
----------
Interests obtained in the Purchase shall form a part of the ABR Tranche. The
Agent shall promptly advise the Revolving Purchasers of any notice given
pursuant to this section and of the amount of each Revolving Purchaser's
Purchase.
(b) After receiving notice from the Agent of any notice given pursuant to
subsection (a), each Revolving Purchaser shall make a Purchase in the amount of
- - - --------------
its pro rata portion of aggregate Purchases requested to be made, ratably
according to its Percentage, on the proposed date thereof by wire transfer in
Dollars of immediately available funds to the Agent at the office designated
from time to time by the Agent, not later than 11:00 a. m., New York City time,
and the Agent shall (unless notified in writing that any condition precedent has
not been satisfied), by 2:00 p. m., New York City time, on the same day, make
available to ARC by wire transfer of Dollars in immediately available funds the
aggregate amount of the funds received. Unless the Agent shall have received
written notice from a Revolving Purchaser prior to the date of any Purchase that
the Revolving Purchaser will not make available to the Agent its purchase price,
the Agent may (but shall not be required to) assume that the Revolving Purchaser
has made that portion available to the Agent on the date of the Purchase in
accordance with this subsection, and the Agent may, in reliance upon that
assumption, make available to ARC on that date a corresponding amount.
(c) If and to the extent that any Revolving Purchaser shall not have made
its purchase price available to the Agent and the Agent has made available a
corresponding amount to ARC, the Revolving Purchaser agrees to repay to the
Agent forthwith on demand a corresponding amount, together with interest
thereon, for each day from the date the amount is made available to ARC until
the date the amount is repaid to the Agent (i) for the first three days
following the date the amount is made available, at a rate per annum equal to
the Federal Funds Rate and (ii) thereafter, at a rate per annum equal to the
Federal Funds Rate plus 1%. If the Revolving Purchaser shall repay to the Agent
a corresponding amount, the amount shall constitute its Purchase for purposes of
this Agreement, and if ARC shall have already made the repayment (as provided
below), the Revolving Purchaser shall make a corresponding amount immediately
available to ARC. At any time after the Agent learns that a Revolving Purchaser
has failed to make the purchase price for a Purchase available as described
above, the Agent may give notice to ARC and the Servicer of that failure, and
page 3
<PAGE>
upon notice ARC will be required to refund to the Agent an amount equal to that
purchase price, together with interest on the amount at the rate applicable to
the Purchase of which the defaulting Revolving Purchaser's Purchase was to form
a part. In the event that ARC fails to make the payment, the amount of the
purchase price shall, if elected by the Agent, be allocated to the outstanding
principal investment under the Certificate held by the Agent (in its capacity as
a Revolving Purchaser), and any funds subsequently transferred to the Agent
pursuant to Section 3.01 or 3.02 shall be applied first to reduce the
------------ ----
outstanding principal investment under its Certificate until the Agent has been
repaid an aggregate amount equal to the amount of the increase referred to above
before being applied for any other purpose. Nothing contained in this subsection
shall, or shall be construed to, relieve any Revolving Purchaser from its
obligations hereunder to make available to the Agent its purchase price for each
Purchase.
SECTION 2.03 Reduction of Stated Amounts. Upon at least three Business
---------------------------
Days' prior irrevocable notice to the Revolving Purchasers in writing, ARC may
reduce the Stated Amounts of the Certificates; provided, that (a) each partial
reduction of the Stated Amounts shall be, in the aggregate for all Certificates,
in an integral multiple of $1,000,000 and in a minimum principal amount of
$5,000,000 and (b) no partial reduction shall be made that would reduce the
aggregate Stated Amounts to an amount less than the Investor Revolving Invested
Amount at the time of the reduction. Each reduction in the Stated Amounts shall
be made ratably among the Revolving Purchasers in accordance with their
respective Stated Amounts. The Agent shall promptly advise the Revolving
Purchasers of any notice given pursuant to this section. Each reference in this
Agreement to the "Stated Amount" of a Certificate means the Stated Amount of the
Certificate after giving effect to any reductions made pursuant to this section.
Promptly after the Stated Amount of any Revolving Purchaser's Certificate has
been reduced to zero (and all Obligations owed to the Revolving Purchaser have
been repaid in full), the Revolving Purchaser will mark its Certificate
"CANCELED" and return it to ARC.
SECTION 2.04 Certificates. The outstanding amounts of the Purchases made
------------
by each Revolving Purchaser shall be evidenced by its Certificate, to be issued
on the Closing Date substantially in the form of Exhibit A to the Supplement.
Each Revolving Purchaser shall and is hereby authorized to record on the grid
attached to its Certificate (or at its option, in its internal books and
records) the date and amount of each Purchase made by it, the amount of each
repayment of the principal amount represented by its Certificate, the portions
of its Purchases that are from time to time allocated to the ABR Tranche and any
Eurodollar Tranche, and any reductions to the Stated Amount of its Certificate
made pursuant to Section 2.03; provided, that failure to make any recordation on
------------
the grid or records or any error in the grid or records shall not adversely
affect the Revolving Purchaser's rights with respect to its interest in the
assets of the Trust and its right to receive Investor Revolving Yield in respect
of the outstanding principal amount of all Purchases made by the Revolving
Purchaser.
page 4
<PAGE>
ARTICLE III
REDUCTIONS IN INVESTOR REVOLVING INVESTED AMOUNT
SECTION 3.01 Negative Variable Amounts. On any Business Day prior to the
-------------------------
Liquidation Commencement Date on which the Variable Amount, as determined
pursuant to Section 4.03(c) of the Pooling Agreement, is a negative number, ARC
shall allocate, in accordance with that section, that negative amount (less any
amounts deposited into the Equalization Account on that day in respect of that
negative amount) to reduce the outstanding principal amount evidenced by (x) the
ARC Revolving Certificate, (y) the Investor Certificates or (z) both the ARC
Revolving Certificate and the Investor Certificates; provided, that:
(a) if any reduction is made to the outstanding principal amount
represented by the Investor Certificates (and thus to the Investor
Revolving Invested Amount), the Servicer shall notify the Agent of the
reduction not less than one Business Day prior to the date of the reduction
(which shall be a Business Day) and direct the Trustee to transfer funds
from the Master Collection Account to the Agent, for the account of the
Revolving Purchasers, in an amount equal to the reduction for application
to the reduction of the principal investment (and the reduction in the
outstanding principal amount represented by the Certificates shall not
exceed the amount of funds so transferred to the Agent),
(b) any reduction to the aggregate outstanding principal amount
represented by the Investor Certificates must be in a minimum amount of
$1,000,000 (or the entire outstanding principal amount, if less) or a
greater integral multiple of $500,000, and
(c) any amounts transferred to the Agent pursuant to clause (a) shall
----------
be applied first, to any then outstanding ABR Tranche or to Eurodollar
Tranches with Yield Periods ending on the date of the transfer (as selected
by ARC and notified to the Agent in the notice of reduction delivered
pursuant to clause (a)) and second, only after the ABR Tranche and all such
----------
Eurodollar Tranches have been reduced to zero, to other outstanding
Eurodollar Tranches.
SECTION 3.02 Other Reductions. In addition to the foregoing, ARC may, on
----------------
at least two Business Days' prior notice by ARC or the Servicer to the Agent,
reduce the Investor Revolving Invested Amount by causing an amount of funds
equal to the desired amount of the reduction that are available for this purpose
in accordance with the terms of the Pooling Agreement to be transferred to the
Agent, for the account of the Revolving Purchasers (and application to the
reduction of the outstanding principal balance of the Certificates). Any
reduction shall be subject to the requirements specified in clauses (b) and (c)
----------- ---
of Section 3.01.
------------
page 5
<PAGE>
SECTION 3.03 Notice to Revolving Purchasers. The Agent shall promptly
------------------------------
advise the Revolving Purchasers of any notice given pursuant to Section 3.01 or
------------
3.02.
- - - ----
ARTICLE IV
INVESTOR REVOLVING YIELD AND FEES
SECTION 4.01 Investor Revolving Yield. (a) Each time ARC requests the
------------------------
Revolving Purchasers to make Purchases hereunder, ARC will notify the Agent in
writing as to whether the Trust Interests included in the Purchase shall, in
whole or in part, be deemed part of the ABR Tranche or (subject to subsections
-----------
(b)(iii) and (b)(iv) below) a Eurodollar Tranche.
- - - -------- -------
(b) Subject to the terms and conditions set forth in this section and
Section 4.04, ARC shall have the option: (x) on any Business Day, to convert all
- - - ------------
or part of the ABR Tranche to a Eurodollar Tranche and (y) on the last day of
any Yield Period of a Eurodollar Tranche, to convert all or any part of that
Eurodollar Tranche to form a part of the ABR Tranche and/or to continue all or
any part of that Eurodollar Tranche as a new Eurodollar Tranche the Yield Period
for which shall commence on the last day of the prior Yield Period; provided,
that:
(i) each conversion or continuation shall be made ratably among the
Revolving Purchasers in accordance with their respective amounts of the
Purchases comprising the converted or continued Tranche,
(ii) if less than all of the outstanding amount of any Tranche shall
be converted or continued, the aggregate amount of the Tranche converted or
continued shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $2,000,000,
(iii) no outstanding Eurodollar Tranche may be continued as a
Eurodollar Tranche, and no portion of the ABR Tranche may be converted into
a Eurodollar Tranche, at any time that a Liquidation Event or an Unmatured
Liquidation Event has occurred and is continuing; and any Yield Period for
a Eurodollar Tranche that commences after the Liquidation Commencement Date
must begin on a Settlement Date and end on the next Settlement Date, and
(iv) there shall not be more than four separate Eurodollar Tranches
outstanding at any one time.
(c) If ARC wishes to convert and/or continue a Tranche under this section,
ARC shall notify the Agent in writing (i) in the case of a conversion to or
continuation of a Eurodollar Tranche, not later than 11:00 a. m., New York City
time, three Business Days
page 6
<PAGE>
prior to the date of the proposed conversion or continuation date and (ii)
otherwise, not later than 11:00 a. m., New York City time, one Business Day
prior to the date of the proposed conversion or continuation. Each notice shall
be irrevocable and shall refer to this Agreement and specify (x) the identity
and amount of the Tranche that ARC wishes to convert or continue, (y) whether
all or part of the Tranche is to be converted into or continued as a Eurodollar
Tranche and (z) the date of the proposed conversion or continuation (which shall
be a Business Day). If ARC shall not have delivered a timely notice in
accordance with this section with respect to any Tranche, the Tranche shall, at
the end of the Yield Period applicable to it (unless repaid pursuant to the
terms hereof), automatically be converted into or continued as the ABR Tranche.
The Agent shall promptly advise the Revolving Purchasers of any notice given
pursuant to this section and of each Revolving Purchaser's portion of any
converted or continued Tranche.
(d) In accordance with Section 3.02(d) of the Supplement, each Revolving
Purchaser and the Agent will be entitled to receive additional interest (at the
rate specified therein) on amounts that are not paid when due under this
Agreement or under its Certificate.
SECTION 4.02 Non-Usage Fees. As the holder of its Certificate, each
--------------
Revolving Purchaser shall be entitled to receive from Collections a fee (a "Non-
Usage Fee") for the period from and including the date hereof, until the earlier
to occur of the Liquidation Commencement Date and the Pay-Out Commencement Date
for the Certificates, equal to the Specified Basis Points accrued on the daily
average of (a) the Stated Amount of its Certificate minus (b) the amount
represented by the Revolving Purchaser's Percentage of the Investor Revolving
Invested Amount. The Non-Usage Fee shall be payable in arrears on each
Settlement Date for the period ending on the preceding Report Date.
"Specified Basis Points" means, with respect to any period set forth below,
the number of basis points set forth opposite the period, accrued at a rate per
annum:
<TABLE>
<CAPTION>
Period Basis Points
------ ------------
<S> <C>
Closing to the date six months after the Closing Date 25
then to the date nine months after the Closing Date 31.25
then to the date one year after the Closing Date 37.5
thereafter 75
</TABLE>
provided, however, that the Non-Usage Fee shall be calculated on the basis of
actual days over a year of 365 or 366 days, as applicable.
SECTION 4.03 Yield Protection. (a) Notwithstanding any other provision
----------------
herein, if, after the date hereof, either:
(i) the adoption of any law, rule or regulation (including any
imposition or increase of reserve requirements) or any change after the
date hereof in the
page 7
<PAGE>
interpretation or administration of any law, rule or regulation by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or
(ii) the compliance by a Revolving Purchaser with any guideline or
request from any central bank or other Governmental Authority or quasi-
governmental authority exercising control over banks or financial
institutions generally (whether or not having the force of law),
shall subject a Revolving Purchaser to the imposition or modification of any
reserve (including any imposed by the Federal Reserve Board), special deposit or
similar requirement (including a reserve, special deposit or similar requirement
that takes the form of a tax) against assets of, deposits with or for the
account of, or credit extended by, the Revolving Purchaser or the office from
time to time that it designates to the Agent as the office through which it
makes and maintains Purchases comprising part of a Eurodollar Tranche (as to
each Revolving Purchaser, its "LIBOR Office") or impose any other condition on a
Revolving Purchaser affecting its Eurodollar Tranches or its obligations
hereunder, and as a result of either of the foregoing there shall be any
increase in the cost to the Revolving Purchaser of agreeing to make or making,
funding or maintaining Purchases as Eurodollar Tranches (except to the extent
already included in the determination of LIBOR), or there shall be a reduction
in the amount received or receivable by the Revolving Purchaser or its LIBOR
Office, then, upon written notice from the Revolving Purchaser to ARC and the
Servicer (with a copy to the Agent), signed by an officer of the Revolving
Purchaser with knowledge of and responsibility for such matters, and setting
forth in reasonable detail the calculation used to arrive at the amounts,
additional amounts sufficient to indemnify that Revolving Purchaser against the
increased cost or reduction in amounts received or receivable shall constitute
"Obligations" for purposes of the Pooling Agreement, and the Revolving Purchaser
shall be entitled to receive these additional amounts, solely from amounts
allocated thereto and paid pursuant to the Pooling Agreement.
(b) If a Revolving Purchaser shall reasonably determine that the adoption
after the date hereof of any law, rule or regulation regarding capital adequacy
or capital maintenance, or any change after the date hereof in any of the
foregoing or in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Revolving Purchaser, any of its
lending offices or its holding company with any request or directive regarding
capital adequacy or capital maintenance (whether or not having the force of law)
or any such Governmental Authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the Revolving
Purchaser's capital or the capital of its holding company as a consequence of
this Agreement, the commitment of the Revolving Purchaser to make Purchases or
the Purchases made by the Revolving Purchaser pursuant hereto to a level below
that the Revolving Purchaser or its holding company could have achieved but for
the adoption, change or compliance (taking into consideration the Revolving
Purchaser's policies, and the policies of its holding company, with respect to
capital
page 8
<PAGE>
adequacy), then, upon written notice from the Revolving Purchaser to ARC and the
Servicer (with a copy to the Agent), signed by an officer of the Revolving
Purchaser with knowledge of and responsibility for such matters, and setting
forth in reasonable detail the calculation used to arrive at the amounts, any
additional amounts as will compensate the Revolving Purchaser or its holding
company for the reduction shall constitute "Obligations" for purposes of the
Pooling Agreement, and the Revolving Purchaser shall be entitled to receive
these additional amounts, solely from amounts allocated thereto and paid
pursuant to the Pooling Agreement.
(c) A Revolving Purchaser shall promptly notify ARC, the Servicer and the
Agent in writing of any event of which it has knowledge occurring after the date
hereof that will entitle it to compensation pursuant to this section. A
certificate of the Revolving Purchaser, signed by an officer of the Revolving
Purchaser with knowledge of and responsibility for such matters, and setting
forth in reasonable detail the calculation used to arrive at the amounts
necessary to compensate the Revolving Purchaser or its holding company as
specified in subsection (a) or (b), as the case may be shall be delivered to ARC
-------------- ---
and the Servicer and shall be conclusive absent demonstrable error. After
receiving a notice from any Revolving Purchaser pursuant to subsection (a), ARC
--------------
may convert that Revolving Purchaser's interests in each Eurodollar Tranche into
a portion of the ABR Tranche; provided, that if more than one Revolving
Purchaser is so affected at any time, then all affected Revolving Purchasers
must be treated in the same manner pursuant to this sentence.
(d) Failure on the part of a Revolving Purchaser to demand compensation for
any amounts as specified in subsection (a) or (b) with respect to any period
-------------- ---
shall not constitute a waiver of its right to demand compensation with respect
to that period or any other period. The protection of this section shall be
available to the Revolving Purchasers regardless of any possible contention of
the invalidity or inapplicability of the law, rule, regulation, guideline or
other change or condition that shall have occurred or been imposed.
(e) Promptly after giving any notice to ARC pursuant to this section, a
Revolving Purchaser will use its best efforts to designate one of its offices
located at an address other than that previously designated pursuant to this
Agreement as the office from which its Purchases will be made after the
designation if it will avoid the need for, or materially reduce the amount of,
any payment to which the Revolving Purchaser would otherwise be entitled
pursuant to this section and will not, in the sole discretion of the Revolving
Purchaser, be otherwise disadvantageous to the Revolving Purchaser.
(f) If circumstances subsequently change so that any affected Revolving
Purchaser shall determine that it is no longer affected by any of the items
described in this section or in Section 4.04, the Revolving Purchaser shall
------------
promptly notify ARC and the Agent, and upon receipt of the notice, the
obligations of the Revolving Purchaser to make or continue Purchases as parts of
Eurodollar Tranches, and to permit Purchases comprising part of the ABR Tranche
to be converted into a part of a Eurodollar Tranche, shall be reinstated.
page 9
<PAGE>
SECTION 4.04 Illegality; Unavailability. (a) In the event that on any
--------------------------
date any Revolving Purchaser shall have determined (which determination shall be
final and conclusive and binding upon all parties) that the making or
continuation of its Purchases as Eurodollar Tranches has become unlawful by
compliance by the Revolving Purchaser in good faith with any law, governmental
rule, regulation or order or has become impossible as a result of a contingency
occurring after the date hereof that materially and adversely affects its
interbank eurodollar market, then, and in any such event, that Revolving
Purchaser shall promptly give notice (by telephone confirmed in writing) to ARC,
the Servicer and the Agent (which notice the Agent shall promptly transmit to
each Revolving Purchaser) of that determination. The obligation of the affected
Revolving Purchaser to make or maintain its Purchases as Eurodollar Tranches
during any such period shall be terminated at the earlier of the termination of
the Yield Period then in effect for each Eurodollar Tranche or when required by
law, and ARC shall, no later than the time specified for the termination,
convert any Purchases of the affected Revolving Purchaser that constitute part
of any Eurodollar Tranche into a part of the ABR Tranche.
(b) If, prior to the beginning of any Yield Period, the Agent shall have
determined (which determination shall be final and conclusive and binding upon
all parties) that: (i) Dollar deposits in the relevant amount and for the Yield
Period are not available in the relevant interbank eurodollar market or (ii) by
reason of circumstances affecting the interbank eurodollar market, that adequate
and fair means do not exist for ascertaining the LIBOR applicable to a
Eurodollar Tranche, then the Agent shall promptly give notice of this
determination to ARC and to each Revolving Purchaser. Thereafter, and continuing
until the Agent shall notify ARC that the circumstances giving rise to this
determination no longer exist, (x) each Eurodollar Tranche will, on the last day
of the applicable Yield Period, convert into a part of the ABR Tranche, (y) the
right of ARC to request Eurodollar Tranches shall be suspended and (z) any
Purchases requested to be made as Eurodollar Tranches prior to such time but not
yet made shall be made as ABR Tranches.
SECTION 4.05 Indemnity. If a Revolving Purchaser shall incur any losses,
---------
expenses or liabilities (including any interest paid to lenders of funds
borrowed by it to fund any Purchase as a Eurodollar Tranche and any loss
sustained in connection with the re-deployment of such funds) as a result of (a)
the failure of a Purchase to be made on a date specified therefor in a notice
delivered pursuant to Section 2.02 (other than any such failure resulting from
------------
the Revolving Purchaser's default in the performance of its obligations
hereunder) or (b) any payment, including under Section 3.01, of the Revolving
------------
Purchaser's Purchases on a date that is not the last day of the Yield Period
applicable to the Purchase or on any date specified in a notice of payment given
by the Servicer, then, upon written notice (which notice shall be signed by an
officer of the Revolving Purchaser with knowledge of and responsibility for such
matters and shall set forth in reasonable detail the basis for requesting the
amounts) from the Revolving Purchaser to ARC and the Servicer, additional
amounts sufficient to indemnify the Revolving Purchaser against the losses,
expenses and liabilities, but not for any lost profits associated therewith,
shall constitute "Obligations" for purposes of the Pooling Agreement, and the
Revolving Purchaser shall be entitled to receive
page 10
<PAGE>
these additional amounts, solely from amounts allocated thereto and paid
pursuant to the Pooling Agreement.
SECTION 4.06 Taxes. (a) Any and all payments made to each Revolving
-----
Purchaser under this Agreement and its Certificate shall be made free and clear
of and without deduction for any and all current or future taxes, stamp or other
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding taxes imposed on, or measured by reference to,
the net income of, franchise taxes imposed on, and taxes (other than withholding
taxes) imposed on the gross receipts or gross income of, the Revolving
Purchasers by the United States of America or by any jurisdiction under whose
laws the Revolving Purchasers are organized or any political subdivision of any
such jurisdiction (all the nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Trustee shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Certificate to the Revolving
Purchasers, then the sum payable shall be increased by the amount necessary to
yield to each Revolving Purchaser (after payment of all Taxes) an amount equal
to the sum it would have received had no deductions been made, and the
additional amount shall constitute "Obligations" for purposes of the Pooling
Agreement.
(b) Whenever any Taxes are paid by the Trustee pursuant to subsection (a),
--------------
as promptly as possible thereafter the Servicer shall send to the relevant
Revolving Purchaser the original or a certified copy of an original official
receipt showing payment thereof (if any) or any other evidence of the payment as
may be available to the Servicer through the exercise of its reasonable efforts.
If the Trustee fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Revolving Purchaser the required receipts or
other required documentary evidence, the Revolving Purchaser shall be entitled
to receive, solely from amounts allocated with respect thereto and paid pursuant
to the Pooling Agreement, additional amounts necessary to indemnify it for any
incremental taxes, interest or penalties that may become payable by the
Revolving Purchaser as a result of any such failure, and the amounts shall
constitute "Obligations" for purposes of the Pooling Agreement.
(c) On or before the date it becomes a party to this Agreement (and, so
long as it may properly do so, periodically thereafter, as requested by the
Servicer, to keep forms up to date), each Revolving Purchaser that is organized
under the laws of a jurisdiction outside the United States of America shall
deliver to the Trustee any certificates, documents or other evidence that shall
be required by the Internal Revenue Code or Treasury Regulations issued pursuant
thereto to establish its exemption from existing United States Federal
withholding requirements, including (i) two original copies of Internal Revenue
Service Form 1001 or Form 4224 or successor applicable form, properly completed
and duly executed by the Revolving Purchaser certifying that it is entitled to
receive payments under this Agreement without deduction or withholding of any
United States Federal income taxes, and (ii) an original copy of Internal
Revenue Service Form W-8 or W-9 or applicable successor form, properly completed
and duly executed; provided, that if any Revolving Purchaser does not
page 11
<PAGE>
comply with this Section 4.06(c), amounts payable to such Revolving Purchaser
---------------
under this Section 4.06 shall be limited to amounts that would have been payable
------------
under this section if such Revolving Purchaser had so complied.
(d) No Revolving Purchaser shall be entitled to receive any additional
amounts under this section in respect of United States Federal withholding tax
to the extent that the obligation to pay additional amounts would not have
arisen but for its failure to comply with the provisions of subsection (c).
--------------
(e) The Revolving Purchasers shall be entitled to receive amounts described
in this section solely from amounts allocated to the payment thereof pursuant to
the Pooling Agreement.
(f) Notwithstanding anything to the contrary in this section, if the
Internal Revenue Service determines that a Revolving Purchaser is a conduit
entity participating in a conduit financing arrangement within the meaning of
Section 7701(l) of the Code and Proposed Regulations (S)1.881-3 (or successor
provisions thereto) then (i) any additional Taxes that the Trustee or ARC is
required to withhold from payments to the Revolving Purchaser by virtue of the
conduit financing arrangement shall be excluded from the definition of Covered
Taxes and (ii) the Revolving Purchaser shall indemnify the Trustee and ARC in
full for any and all additional Taxes for which the Trustee or ARC is held
directly liable under Section 1461 of the Code by virtue of the conduit
financing arrangement. In addition to other rights and remedies that the Trustee
or ARC may have, the Trustee may, to the fullest extent permitted by law, set
off and apply any and all amounts that a Revolving Purchaser is required to
indemnify the Trustee or ARC hereunder against amounts otherwise payable to the
Revolving Purchaser under the Certificates.
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.01 Time and Method of Payment. (a) All amounts payable to any
--------------------------
Revolving Purchaser hereunder or with respect to its Certificate shall be made
to the Agent for the account of the Revolving Purchaser 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 will be deemed to have
been received on the next Business Day. The Agent shall distribute all payments
to the Revolving Purchasers, in accordance with their respective interests,
prior to the close of business on the Business Day on which any payment is
deemed received.
(b) On any date on which a payment to one or more Revolving Purchasers
hereunder or under the Certificates is due and payable, the Agent may (but in no
event shall be required to) assume that the payment has been made available to
the Agent on the date of the
page 12
<PAGE>
payment in accordance with this section, and the Agent may (but in no event
shall be required to), in reliance upon this assumption, make payment of a
corresponding amount to the Revolving Purchasers. If and to the extent any
amounts shall not have so been made available to the Agent, each Revolving
Purchaser irrevocably and unconditionally agrees to repay to the Agent forthwith
on demand the amount of payment it received together with interest thereon, for
each day from the date payment is made by the Agent until the date the amount is
repaid to the Agent, (i) for the first three days following the date the payment
is made, at a rate per annum equal to the Federal Funds Rate (determined as
provided in the definition of Alternate Base Rate) and (ii) thereafter, at a
rate per annum equal to the Federal Funds Rate plus 1%.
SECTION 5.02 Pro Rata Treatment. Each repayment of Purchases (except as
------------------
otherwise required by Section 2.02(c)), each payment of Investor Revolving
---------------
Yield, each payment of the Non-Usage Fee, each reduction of the Stated Amounts
and each conversion or continuation of any Tranche (except as otherwise required
by Sections 4.03(c) and 4.04(b) with respect to conversions) shall be allocated
---------------- -------
pro rata among the Revolving Purchasers on the date of payment or reduction, in
accordance with their respective Percentages (or, if different, in the case of
Investor Revolving Yield, on the basis of their respective shares in the
Tranches on which the Investor Revolving Yield is paid). Each Revolving
Purchaser agrees that in computing its portion of any Purchases to be made
hereunder, the Agent may, in its discretion, round each Revolving Purchaser's
pro rata share of the Purchases to the next higher or lower whole dollar amount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01 ARC. As of the First Issuance Date, ARC represents and
---
warrants to the Revolving Purchasers that each of its representations and
warranties in the Pooling Agreement and Purchase Agreement is true and correct,
as if made on the First Issuance Date with the same effect as though made on
that date (unless specifically stated to relate to an earlier date), and further
represents and warrants that:
(a) no Liquidation Event or Unmatured Liquidation Event has occurred
and is continuing,
(b) assuming the Revolving Purchasers are not purchasing with a view
toward further distribution and there has been no general solicitation or
general advertising within the meaning of the Securities Act, the offer and
sale of the Certificates in the manner contemplated by this Agreement is a
transaction exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Pooling Agreement is
not required to be qualified under the Trust Indenture Act of 1939, as
amended,
page 13
<PAGE>
(c) except for BT Securities Corporation, in its capacity as
structuring agent for the Purchase, Bankers Trust International PLC and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Financial
Advisors"), ARC has not dealt with any financial advisor, or other Person
who may be entitled to any commission or compensation in connection with
the sale of the Certificates, and the fees of the Financial Advisors shall
be an obligation of AmeriSource, and
(d) no information supplied by or on behalf of ARC or AmeriSource to
the Agent or the Revolving Purchasers in connection with the Transaction
Documents (including without limitation the information contained in the
Syndication Documents) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which
they were made.
SECTION 6.02 AmeriSource. As of the First Issuance Date, AmeriSource
-----------
represents and warrants to the Revolving Purchasers that:
(a) each of its representations and warranties in the Pooling
Agreement (in its capacity as Servicer) and the Purchase Agreement (in its
capacity as a Seller) is true and correct, as if made on the First Issuance
Date with the same effect as if made on that date (unless specifically
stated to related to an earlier date),
(b) the audited financial statements and schedules of AmeriSource and
its Subsidiaries for the period ended September 30, 1993, as prepared by
Ernst & Young and filed with the Securities Exchange Commission on Form 10-
K (the "Financial Statements"), present fairly in all material respects the
financial position, results of operations and cash flows of AmeriSource at
the dates and for the periods to which they relate and have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis, except as otherwise stated therein,
(c) except as disclosed in the financial statements and schedules of
AmeriSource and its Subsidiaries filed with the Securities and Exchange
Commission on Form 10-Q, since the date of the Financial Statements (i)
there has been no material adverse change in the condition, financial or
otherwise, or the earnings, business affairs or business prospects of ARC
or AmeriSource, whether or not arising in the ordinary course of business,
and (ii) there have been no transactions entered into by ARC or AmeriSource
that are material with respect to the condition, financial or otherwise, or
the earnings, business affairs or business prospects of ARC or AmeriSource,
(d) when filed with the Securities and Exchange Commission on Form 10-
K, the audited financial statements and schedules of AmeriSource and its
Subsidiaries for
page 14
<PAGE>
the period ended September 30, 1994, as prepared by Ernst & Young, will
fairly present in all material respect the financial position, results of
operations and cash flows of AmeriSource as the dates and for the periods
to which they relate and will have been prepared in accordance with general
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein, and
(e) no information supplied by or on behalf of ARC or AmeriSource to
the Agent or the Revolving Purchasers in connection with the Transaction
Documents (including without limitation the information contained in the
Syndication Documents) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which
they were made.
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Initial Purchase. The obligation of each
------------------------------
Revolving Purchaser to make its initial Purchase shall be subject to the
satisfaction of the conditions precedent that it shall have received (x) a duly
executed and authenticated Certificate registered in its name and in a Stated
Amount equal to the amount set out opposite its name on the signature page of
this Agreement, (y) reimbursement of any expenses referred to in Section 10.05
-------------
for which invoices have been presented and (z) an original (except as indicated
below) counterpart of the following (each of which, if not in a form attached to
this Agreement, shall be in form and substance satisfactory to the Revolving
Purchaser):
(a) each of the Pooling Agreement, the Purchase Agreement and the
Subscription Agreement (each of which shall have been finalized in a manner
satisfactory to the Agent and ARC), which shall be in full force and
effect, and all actions required to be taken under those documents in
connection with the issuance of the Certificates shall have been taken,
(b) photocopies of each Account Agreement, of each closing document
delivered pursuant to the Purchase Agreement and of a demand subscription
agreement dated not later than the First Issuance Date between ARC and
AmeriSource,
(c) a certificate of the Secretary of AmeriSource to the effect that
the conditions precedent to the effectiveness of the Inventory Credit
Agreement and any necessary amendments to other debt documents shall have
been satisfied or waived; and the Intercreditor Agreement shall have been
executed by all parties thereto and delivered to the Trustee,
page 15
<PAGE>
(d) a certificate of the Secretary, or an Assistant Secretary, of each
of ARC and the Servicer with respect to:
(i) attached copies of resolutions of its Board of Directors then
in full force and effect authorizing the execution, delivery and
performance of the Transaction Documents,
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to the Transaction Documents, and
(iii) attached copies of its certificate of incorporation and by-
laws,
(e) a certificate of an Authorized Officer of each of ARC and the
Servicer as to the satisfaction of the conditions precedent set forth in
Section 7.02,
------------
(f) a certificate of an appropriate officer of the Trustee stating
that the Pooling Agreement has been duly authorized, executed and delivered
by the Trustee and the Certificates have been duly authenticated by the
Trustee in accordance with the Pooling Agreement and an opinion of counsel
to the Trustee as to related matters,
(g) confirmation satisfactory to the Agent that the following have
been placed with Lexis Document Services or another filing service selected
by the Agent for filing, the filing to occur on the First Issuance Date or
the first Business Day thereafter:
(i) UCC financing statements naming the Seller, as seller/debtor,
ARC, as secured party/purchaser, and the Trustee, as assignee of the
secured party, in each office where the filing is necessary for the
perfection of the sales of Receivables and Transferred Assets by each
Seller to ARC, and
(ii) UCC financing statements naming ARC, as seller/debtor, and
the Trustee, as secured party, in each office where the filing is
necessary for the perfection of the transfers of Receivables and Trust
Assets by ARC to the Trust,
(h) results of recent searches of the UCC filing records in each
office in which a filing referred to in subsection (g) has been made for
--------------
filings against the Seller (including any predecessors in interest to
Seller going back five years) and ARC, showing no filings of record that
cover any of the Receivables or the Transferred Assets other than (i) the
financing statements referred to in subsection (g) (if shown in the
--------------
searches) and (ii) any other filings as to which the Agent has received
signed UCC-3 termination statements or pay-off letters in form and
substance satisfactory to it,
page 16
<PAGE>
(i) opinions addressed to the Agent and the Revolving Purchasers of
Dechert Price & Rhoads, special counsel to ARC and the Servicer, as to the
matters, and in such form and substance, as shall be satisfactory to the
Agent,
(j) evidence, reasonably satisfactory to the Agent and the Revolving
Purchasers, of the payment of all taxes, fees and other governmental
charges, if any, incidental to the issuance of the Certificates and to the
consummation of the transactions contemplated hereunder and under the
Pooling Agreement,
(k) solvency certificates, in form and substance satisfactory to the
Agent, with respect to each of ARC and AmeriSource, signed by their chief
financial officers,
(l) a rating letter of S&P pursuant to which it shall have rated the
Certificates "A" or better,
(m) a signed fee letter between AmeriSource and the Agent and payment
of the upfront fees referred to in that letter and all other reasonable
fees and expenses of the Agent (including the reasonable fees and expenses
of counsel) in connection with the preparation, negotiation and execution
of this Agreement, the Supplement and the other Transaction Documents,
(n) an agreed-upon procedures letter, in form and substance
satisfactory to the Agent, from Ernst & Young, with respect to certain
historical information provided by AmeriSource with respect to the
Receivables and included in the Syndication Documents,
(o) a signed letter from AmeriSource and ARC, in form and substance
satisfactory to the Agent, identifying and approving the Syndication
Documents, and
(p) any other information, certificates, opinions and documents as the
Agent may have reasonably requested.
In addition, the initial Purchase hereunder shall be subject to the
conditions precedent that (x) ARC and AmeriSource shall have disclosed to the
Agent and the initial Revolving Purchasers their plans for the refinancing of
the Certificates, including reasonable detail as to the timing of the
refinancing and any potential restrictions thereon or impediments thereto, and
(y) the Agent and the initial Revolving Purchasers shall be satisfied with the
form and substance of the plans.
If, (x) the conditions specified above have not been fulfilled on or prior
to December 16, 1994 or (y) on the First Issuance Date, any condition specified
in this Agreement shall not have been fulfilled when and as required in this
Agreement or waived by the Revolving Purchasers, in each case a Revolving
Purchaser's obligations to purchase the Certificates pursuant to this Agreement
may be terminated by notice to ARC. In addition, if, under the
page 17
<PAGE>
circumstances, it shall not be feasible for the Revolving Purchasers to invest
on the date the funds that are held available by the Revolving Purchasers for
the Purchase, ARC shall pay the Revolving Purchasers interest on the funds at
the Alternate Base Rate from the date of the notice until the next succeeding
Business Day on which it is feasible for the Revolving Purchasers to invest the
funds. Nothing in this paragraph shall operate to relieve ARC from any of its
obligations hereunder or otherwise waive any of the Revolving Purchasers' rights
against ARC.
SECTION 7.02 Conditions to Each Purchase. The obligation of each
---------------------------
Revolving Purchaser to make any Purchase on any day (including those comprising
the initial Purchase) shall be subject to the Agent's receipt of the Daily
Report for that day and to the conditions precedent that on the date of the
Purchase, before and after giving effect thereto and to the application of any
proceeds therefrom, the following statements shall be true:
(a) the representations and warranties of ARC and AmeriSource set out
in this Agreement, with the exception of Sections 6.02(b) and 6.02(c)
---------------- -------
(which shall have been true and accurate on the date hereof), are true and
accurate as of that date with the same effect as though made on that date
(unless specifically stated to relate to an earlier date), and
(b) neither the Liquidation Commencement Date nor the Pay-Out
Commencement Date has occurred, and no Liquidation Event or Unmatured
Liquidation Event has occurred and is continuing.
The giving of any notice pursuant to Section 2.02 shall constitute a
------------
representation and warranty by ARC and AmeriSource that the foregoing statements
(limited, in the case of subsection (a) to the representations and warranties of
--------------
the Person deemed to make the representation and warranty referred to in this
sentence) are true.
ARTICLE VIII
AFFIRMATIVE COVENANTS
SECTION 8.01 Affirmative Covenants. ARC and AmeriSource each severally
---------------------
covenants and agrees that, until the Certificates have been paid in full and the
obligations of the Revolving Purchasers to make Purchases have terminated, it
will:
(a) duly and timely perform all of its covenants and obligations under
each Transaction Document to which it is a party,
(b) not, except as contemplated by Section 13.01 of the Pooling
Agreement, amend or otherwise modify any Transaction Document to which it
is a party or grant
page 18
<PAGE>
any waiver or consent thereunder, without the prior written consent of
Revolving Purchasers having percentages that aggregate at least 66 2/3%
(the "Required Revolving Purchasers"); provided, however, that no amendment
shall (i) reduce in any manner the amount of, or delay the timing of,
allocations, payments or distributions in respect of any Certificate
without the consent of the related Revolving Purchaser, (ii) amend, modify
or waive any provision of this Agreement that requires the approval or
consent of a specified percentage of Revolving Purchasers without the
consent of that percentage of Revolving Purchasers and (iii) amend, modify
or waive the provisions of this section with respect to the rights of any
Revolving Purchaser without the consent of that Revolving Purchaser,
(c) promptly deliver to each Revolving Purchaser (in addition to the
materials required to be delivered pursuant to the Pooling Agreement) the
information, documents, records or reports respecting the Trust or the
condition or operations, financial or otherwise, of ARC, AmeriSource and
the Seller as the Revolving Purchaser may from time to time reasonably
request,
(d) at the same time any report (including any Daily Report,
Settlement Statement or annual auditors' report), notice or other document
is provided to the Trustee, or caused to be provided, by ARC or the
Servicer under the Pooling Agreement, provide the Agent with a copy of the
report, and
(e)(i) use reasonable efforts to cause the Trustee to issue one or
more additional Series or Purchased Interests in order to repay in full the
Investor Revolving Amount and all other Obligations owed in respect of the
Certificates as soon as practicable, and (ii) not cause the Trustee to
issue any other Series or Purchased Interest except for the purposes
described in clause (i); provided, that any such issuance must yield
----------
sufficient proceeds to repay in full the Investor Revolving Amount and all
other Obligations owed in respect of the Certificates.
In addition, it is understood and agreed that so long as the Certificates
remain outstanding, the Servicer and ARC shall, subject to the proviso to the
next sentence, during regular business hours upon not less than five Business
Days' prior notice, permit the Trustee or the Agent (or such other Person as the
Trustee or the Agent may designate from time to time), or their respective
agents or representatives (including certified public accountants or other
auditors), as an expense of the Servicer paid out of the Servicing Fee, (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 the Servicer or ARC,
including the related Contracts and purchase orders, invoices and other
agreements related thereto, and (ii) to visit the offices and properties of the
Servicer and ARC for the purpose of examining such materials described in clause
------
(i), and to discuss matters relating to the Receivables or the Related
- - - ---
Transferred Assets or the performance by the Servicer or ARC of their respective
obligations under any Transaction Document with any officer, employee or
representative of
page 19
<PAGE>
the Servicer or ARC. The Trustee or the Agent may (but shall not be obligated
to) conduct, or cause its agents or representatives to conduct, reviews of the
types described in this paragraph (each such review, a "Receivables Review")
whenever the Trustee or the Agent, in its reasonable judgment, deems any such
review appropriate, and the Trustee or the Agent shall conduct, or cause its
agents or representatives to conduct, such a review if requested by either the
Agent or the Majority Investors; provided, that, prior to February 28, 1995 or
the occurrence and continuance of a Liquidation Event or an Unmatured
Liquidation Event, the Trustee or the Agent shall have the right to request a
Receivables Review not more than twice in any calendar year; and provided
further, that, after February 28, 1995 or after the occurrence and during the
continuance of a Liquidation Event or an Unmatured Liquidation Event, there
shall be no limitation on the number of Receivables Reviews that are conducted
by or on behalf of the Trustee or the Agent. Notwithstanding the five-day notice
provision above, no such notice shall be required if a Liquidation Event shall
have occurred and be continuing.
In connection with clause (e) above, ARC and AmeriSource will assist the
----------
Financial Advisors in the marketing of any additional Series and Purchase
Interests to be issued and (promptly upon request) provide all the information
necessary to any Financial Advisor to market such facilities; provided, however,
that any information distributed in connection with such marketing shall be
subject to the confidentiality standards set forth in the agreements among the
Financial Advisors and AmeriSource. In addition, ARC and AmeriSource will use
their reasonable best efforts to make appropriate officers and representatives
of AmeriSource and ARC available to participate in the information meetings for
potential investors at such times and places as may reasonably be requested.
ARTICLE IX
THE AGENT
SECTION 9.01 Appointment. The Revolving Purchasers hereby designate
-----------
Bankers Trust Company as Agent. Each Revolving Purchaser hereby irrevocably
authorizes the Agent to take action on its behalf under the provisions of the
Transaction Documents and any other instruments and agreements referred to
therein and to exercise the powers and perform the duties hereunder and
thereunder that are specifically delegated to or required of the Agent by the
terms hereof and thereof, and any other powers as are reasonably incidental
thereto. The Agent may perform any of its duties by or through its respective
officers, directors, agents or employees.
SECTION 9.02 Nature of Duties. The Agent shall not have any duties or
----------------
responsibilities except those expressly set forth in this Agreement. Neither the
Agent nor any of its officers, directors, agents or employees shall be liable
for any action taken or omitted by it or them under any Transaction Document or
in connection herewith or
page 20
<PAGE>
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Agent shall be mechanical and administrative in nature, the
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Revolving Purchaser, and nothing in any Transaction Document,
expressed or implied, is intended to or shall be construed as to impose upon the
Agent any obligations in respect of any Transaction Document except as expressly
set forth herein.
SECTION 9.03 Lack of Reliance on the Agent and BT Securities Corporation.
-----------------------------------------------------------
Independently and without reliance upon the Agent or BT Securities Corporation,
each Revolving Purchaser, to the extent it deems appropriate, has made and shall
continue to make (a) its own independent investigation of the financial
condition and affairs of ARC, the Seller, the Servicer and the Trust in
connection with the making and the continuation of each Purchase and the taking
or not taking of any action in connection herewith and (b) its own appraisal of
the creditworthiness of ARC, the Seller and the Servicer and the merits and
risks of an investment in the Certificates, and, except as expressly provided in
this Agreement, the Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Revolving Purchaser with any
credit or other information with respect thereto, whether coming into its
possession before the making of a Purchase or at any time or times thereafter.
The Agent shall not be responsible to any Revolving Purchaser for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Transaction Documents or the
financial condition of ARC, the Seller, the Servicer or the Trust or be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of any Transaction Document, or the
financial condition of ARC, the Seller, the Servicer or the Trust or the
existence or possible existence of any Liquidation Event or Unmatured
Liquidation Event.
SECTION 9.04 Certain Rights of the Agent. If the Agent shall request
---------------------------
instructions from the Required Revolving Purchasers with respect to any act or
action (including failure to act) in connection with any Transaction Document,
the Agent shall be entitled to refrain from acting or taking the action unless
and until the Agent shall have received instructions from the Required Revolving
Purchasers, and the Agent shall not incur liability to any person by reason of
so refraining. Without limiting the foregoing, no Revolving Purchaser shall have
any right of action whatsoever against the Agent as a result of the Agent acting
or refraining from acting under any Transaction Document in accordance with the
instructions of the Required Revolving Purchasers as for refraining to act in
the absence of instruction.
SECTION 9.05 Reliance. The Agent shall be entitled to rely, and shall be
--------
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any person that the Agent believed to be the proper person. The Agent may
consult with legal counsel (including counsel for any AmeriSource Person),
page 21
<PAGE>
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in accordance with the advice
of such counsel, accountants or experts.
SECTION 9.06 Indemnification. To the extent the Agent is not reimbursed
---------------
and indemnified by ARC or the Servicer, the Revolving Purchasers will reimburse
and indemnify the Agent ratably in accordance with their respective Percentages
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses or disbursements
of whatsoever kind or nature that may be imposed on, asserted against or
incurred or suffered by the Agent (including fees and expenses of legal counsel,
accountants and experts) in performing its duties or as a result of any action
taken or omitted to be taken by the Agent under any Transaction Document or in
any way relating to or arising out of any Transaction Document; provided, that
no Revolving Purchaser shall be liable for any portion of these liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable order).
SECTION 9.07 The Agent in Its Individual Capacity. With respect to its
------------------------------------
obligation to purchase Trust Interests under this Agreement, the Agent shall
have the rights and powers specified herein for a Revolving Purchaser and may
exercise the same rights and powers as though it were not performing the duties
of the "Agent" specified herein, and the term "Revolving Purchasers," "Required
Revolving Purchasers" and "Holders" or "payees" of any Certificates or any
similar terms shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity. The Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with ARC or the Servicer or any AmeriSource Person as if the
Agent were not performing the duties specified herein, and may accept fees and
other consideration from ARC or the Servicer for services in connection with
this Agreement and otherwise without having to account for the same to the
Revolving Purchasers. Each of the parties hereto acknowledges that the Agent
will be acting both as a lender under the Inventory Credit Agreement and as a
Revolving Purchaser and the Agent under this Agreement.
SECTION 9.08 Resignation by the Agent. (a) The Agent may resign at any
------------------------
time by giving notice to ARC and the Revolving Purchasers. The resignation shall
take effect upon the appointment of a successor Agent pursuant to subsections
-----------
(b) and (c) below or as otherwise provided below.
- - - --- ---
(b) Upon any notice of resignation, the Required Revolving Purchasers shall
appoint a successor Agent hereunder who shall be a commercial bank or trust
company reasonably acceptable to ARC (it being understood and agreed that any
Revolving Purchaser is deemed to be acceptable to ARC).
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<PAGE>
(c) If a successor Agent is not appointed within 30 days after the delivery
of the notice referred to in subsection (a), the Agent, with the consent of
--------------
ARC, shall then appoint a successor Agent who shall serve as Agent hereunder
until the time, if any, that the Required Revolving Purchasers appoint a
successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to subsection (b) or
--------------
(c) above by the 60th day after the date notice of resignation was given by the
- - - ---
Agent, the Agent's resignation shall become effective and the Revolving
Purchasers shall thereafter perform all the duties of the Agent under the
Transaction Documents until the time, if any, that the Revolving Purchasers
appoint a successor Agent as provided above.
SECTION 9.09 Reference Bank. By its execution of this Agreement, the
--------------
Agent agrees to act as the Reference Bank for purposes of calculations relating
to the Certificates, including as contemplated by the definition of "Alternate
Base Rate."
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 Amendments. No amendment to or waiver of any provision of
----------
any Transaction Document, nor consent to any departure by ARC therefrom, shall
in any event be effective unless the same shall be in writing and signed by ARC,
the Agent and the Required Revolving Purchasers; provided, however, that no
amendment shall (a) decrease the outstanding amount of, or extend the repayment
of or any scheduled payment date for the payment of, any Investor Revolving
Yield in respect of the Certificate or any fees owed to a Revolving Purchaser
without its prior written consent, (b) forgive or waive or otherwise excuse any
repayment of the Investor Revolving Invested Amount without the prior written
consent of each Revolving Purchaser affected thereby, (c) increase the Stated
Amount of any Revolving Purchaser without its prior written consent, (d) waive
any Liquidation Event arising from an Event of Bankruptcy with respect to ARC or
the Seller without the consent of each Revolving Purchaser and prior notice to
the Applicable Rating Agencies, (e) amend or modify the Percentage of any
Revolving Purchaser without its prior written consent, (f) waive any of the
requirements hereunder that the interests of the Trustee in the Receivables and
the other Trust Assets be perfected by appropriate UCC filings without the prior
written consent of each Revolving Purchaser or (g) amend, modify or otherwise
affect the rights or duties of the Agent hereunder without the prior written
consent of the Agent; provided, however, that this Agreement may not be amended
unless ARC shall have delivered the proposed amendment to the Applicable Rating
Agency at least ten Business Days (or a shorter period that shall be acceptable
to it) prior to the execution and delivery thereof and the Rating Agency
Condition has been satisfied with respect to the amendment. Each Revolving
Purchaser shall be bound by any modification, waiver or consent authorized by
page 23
<PAGE>
this section, whether or not its Certificate shall have been marked to indicate
the modification, waiver or consent.
SECTION 10.02 No Waiver; Remedies. Any waiver, consent or approval given
-------------------
by any party hereto shall be effective only in the specific instance and for the
specific purpose for which given, and no waiver by a party of any breach or
default under this Agreement shall be deemed a waiver of any other breach or
default. No failure on the part of any party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder, or any abandonment or
discontinuation of steps to enforce the right, power or privilege, preclude any
other or further exercise thereof or the exercise of any other right. No notice
to or demand on any party hereto in any case shall entitle such party to any
other or further notice or demand in the same, similar or other circumstances.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 10.03 Successors and Assigns; Assignments. (a) This Agreement
-----------------------------------
shall be binding upon, and inure to the benefit of, ARC, the Servicer, the
Agent, the Revolving Purchasers and their respective successors and assigns;
provided, however, that neither ARC nor the Servicer may assign its rights or
obligations hereunder or in connection herewith or any interest herein
(voluntarily, by operation of law or otherwise) without the prior written
consent of all the Revolving Purchasers; and provided further, that no Revolving
Purchaser may transfer, pledge, assign, sell participations in or otherwise
encumber its rights or obligations hereunder or in connection herewith or any
interest herein except as permitted under this section.
(b) Each Revolving Purchaser may at any time sell to one or more banks or
other entities ("Participants") participating interests in all or any portion of
its Certificate and its obligations hereunder (its "Credit Exposure"). In the
event of any sale by a Revolving Purchaser of participating interests to a
Participant, the Revolving Purchaser shall notify ARC of the identity of the
Participant upon a request by ARC, the Revolving Purchaser's obligations under
this Agreement shall remain unchanged, the Revolving Purchaser shall remain
solely responsible for the performance thereof, and the Revolving Purchaser
shall remain the holder of its rights under its Certificate and this Agreement
for all purposes under this Agreement, and the other parties to the Transaction
Documents shall continue to deal solely and directly with the Revolving
Purchaser in connection with such rights and obligations under this Agreement.
ARC agrees that each Participant shall be entitled to the benefits of Sections
--------
4.03, 4.04, 4.05 and 4.06 with respect to its participation in the Certificate.
- - - ---- ---- ---- ----
The Revolving Purchasers agree that any agreement between them and any
Participant in respect of a participating interest shall not restrict the
Revolving Purchasers' right to agree to any amendment, supplement or
modification of the Transaction Documents except to (i) extend the final
maturity of any Obligation, (ii) reduce the rate or extend the time of payment
of interest thereon or any fees owed to the Revolving Purchasers under the
Transaction Documents, (iii) reduce the principal amount of any Obligation, (iv)
release or
page 24
<PAGE>
direct the release of all or substantially all of the Trust Assets or the
Trustee's claim to the Trust Assets, (v) reduce substantially the amount of any
reserve included in the calculation of the Base Amount, (vi) increase the amount
of the participation from the amount thereof then in effect (it being understood
that any waiver of any Liquidation Event or Unmatured Liquidation event will not
constitute a change in the terms of such participation, and that any increase in
a commitment or Stated Amount of a Certificate shall be permitted without the
consent of the Participant if the Participant's participation is not increased
as a result thereof), or (vii) permit assignment or transfer by ARC or
AmeriSource of its rights or obligations under the Transaction Documents.
(c) Subject to Article VI of the Pooling Agreement and the next sentence
hereof, any Revolving Purchaser may at any time assign to one or more banks or
other financial institutions ("Assignees") all or any part of its Credit
Exposure; provided, that (i) unless assigned to an Affiliate of the Revolving
Purchaser, it assigns all of its Credit Exposure or a portion of its Credit
Exposure in an amount not less than $5,000,000, (ii) after the assignment, the
Revolving Purchaser and its Affiliates continue to hold at least $5,000,000 of
Credit Exposure or have reduced their Credit Exposure to $0, (iii) any Assignee,
other than an Affiliate of the Revolving Purchaser, must be reasonably
acceptable to the Agent, which acceptance shall not be delayed or withheld
unreasonably, (iv) if such Assignee is organized under the laws of a
jurisdiction outside the United States of America, such Assignee shall satisfy
the requirements of Section 4.06(c), or amounts payable to it under Section 4.06
--------------- ------------
shall be limited to amounts that would be payable if such Assignee had complied
with Section 4.06(c), and (v) unless the Assignee is a bank with paid-in capital
---------------
and surplus of at least $100,000,000 or a financial institution that is a party
to the Seller Credit Agreement, any such assignment shall be subject to the
prior written consent of ARC, which consent shall not be unreasonably delayed or
withheld. The requirements of clauses (i), (ii), (iii) and (v) of the preceding
----------- ---- ----- ---
sentence and the requirement that an Assignee be a bank or other financial
institution shall not apply to any Assignee of a fixed principal certificate
issued in connection with the restructuring of the Program as contemplated by
Section 10.12, so long as such Assignee is a qualified institutional buyer
- - - -------------
(within the meaning of Rule 144A under the Securities Act). In the event of any
assignment, the Revolving Purchaser shall comply with Article VI of the Pooling
Agreement and also shall give notice to ARC and the Agent and shall deliver to
the Agent, for acceptance and recording in its records, an assignment agreement
substantially in the form of Exhibit C together with a processing and
---------
recordation fee of $3,000. Within five Business Days of receipt thereof, the
Agent shall, if the assignment agreement has been fully executed by the
Assignee, the assignor Revolving Purchaser and ARC, is completed and is in
substantially the form of Exhibit C, execute the assignment agreement and record
---------
the information contained therein in its records. Upon the earlier of the
expiration of the five Business Day period or the date of the recording, the
assignment will become effective. ARC, the Agent and the Revolving Purchasers
agree to extend the rights and benefits with respect to ARC under this Agreement
to the Assignee to the extent the Assignee would have had if it were a Revolving
Purchaser that was an original signatory to this Agreement; provided, that ARC
shall be entitled to continue to deal solely
page 25
<PAGE>
and directly with the assignor Revolving Purchaser in connection with the
interests so assigned to the Assignee until the assignment agreement and any
required fee, as described above, shall have been delivered to ARC and the Agent
by the Revolving Purchaser and the Assignee and the assignment shall have become
effective. Upon the effective assignment of its Credit Exposure, the Revolving
Purchaser shall be relieved of its obligations hereunder to the extent of the
assignment.
(d) The sale or assignment of any Credit Exposure to any Assignee or
Participant (each, a "Transferee") shall not be effective until it has agreed to
be bound by the provisions of Sections 10.14 and 10.15. ARC and AmeriSource
-------------- -----
each authorize the Revolving Purchasers to disclose to any Transferee and any
prospective Transferee any and all information in their possession concerning
ARC and AmeriSource that has been delivered to them by ARC, AmeriSource or the
Trustee in connection with their credit evaluation of the Trust prior to
entering into this Agreement. Further, each of ARC and AmeriSource agrees, upon
the request of a Revolving Purchaser, to cause Ernst & Young to deliver to any
potential Transferee a reliance letter (for the benefit of such potential
Transferee) with respect to the agreed upon procedures letter described in
Section 7.01(n).
- - - ---------------
(e) Notwithstanding any other provisions set forth in this Agreement, the
Revolving Purchasers may at any time create a security interest in all or any
portion of their rights under this Agreement and the Certificates in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
(f) ARC and AmeriSource agree to assist the Agent in any marketing of the
Certificates or of any Investor Certificates or Purchased Interests issued or
sold in a restructuring of the Program (as contemplated by the final paragraph
of Section 10.12) and (promptly upon request) to provide all information deemed
-------------
necessary by the Agent in such marketing; provided, however, that any
information distributed in connection with such marketing shall be subject to
the confidentiality standards set forth in Section 10.15. In addition, ARC and
-------------
AmeriSource will use their reasonable best efforts to make appropriate officers
and representatives of AmeriSource and ARC available to participate in the
information meetings for potential investors at such times and places as the
Agent may reasonably request.
SECTION 10.04 Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made herein and in the Certificates delivered
pursuant hereto shall survive the making and the repayment of the Purchases and
the execution and delivery of this Agreement and the Certificates and shall
continue in full force and effect until all Obligations have been paid in full
and all commitments of the Revolving Purchasers hereunder have been terminated.
In addition, the obligations of ARC under Sections 4.03, 4.04, 4.06 and 10.05
------------- ---- ---- -----
and the obligations of the Revolving Purchasers under Section 9.06 shall survive
------------
the termination of this Agreement.
page 26
<PAGE>
SECTION 10.05 Expenses; Indemnification. ARC and AmeriSource jointly and
-------------------------
severally shall pay on demand (a) all reasonable out-of-pocket fees and expenses
(including reasonable attorneys fees and expenses) of the Agent incurred in
connection with the preparation, execution, delivery, administration, amendment,
modification and waiver of the Transaction Documents and the making and
repayment of the Purchases, including any Servicer or collection agent fees paid
to any third party for services rendered to the Revolving Purchasers and the
Agent in collecting the Receivables and (b) all reasonable out-of-pocket fees
and expenses of the Revolving Purchasers and the Agent (including reasonable
attorneys fees and expenses of their counsel) incurred in connection with the
enforcement of the Transaction Documents against ARC, the Servicer and the
Seller and in connection with any workout or restructuring of the Transaction
Documents. In addition, ARC will pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing, recording or enforcement of this Agreement or any payment made under the
Transaction Documents, and hereby indemnifies and saves the Agent and the
Revolving Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay the taxes
and fees. ARC and AmeriSource jointly and severally agree to reimburse and
indemnify the Agent and each Revolving Purchaser and their respective officers,
directors, shareholders, controlling Persons, employees and agents
(collectively, the "Indemnitees") from and against any and all actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature that
may be imposed on, asserted against or incurred or suffered by the Agent or the
Revolving Purchasers (including fees and expenses of legal counsel, accountants
and experts) in any way relating to or arising out of any Transaction Document.
Notwithstanding the foregoing (and with respect to clause (w) below,
----------
without prejudice to the rights that an Indemnitee may have pursuant to the
other provisions of the Transaction Documents), in no event shall any Indemnitee
be indemnified against any amounts (v) resulting from gross negligence or
willful misconduct on the part of any of its officers, directors, employees or
agents, (w) to the extent they include amounts in respect of Receivables and
reimbursement therefore that would constitute credit recourse to the Servicer
for the amount of any Receivable or Related Transferred Asset not paid by the
related Obligor, (x) to the extent they are or result from lost profits, (y) to
the extent they are or result from taxes (including interest and penalties
thereon) asserted with respect to (1) distributions on the Certificates, (2)
franchise or withholding taxes imposed on any Indemnitee other than the Trust or
the Trustee in its capacity as Trustee or (3) Federal or other income taxes on
or measured by the net income of the Indemnitee and costs and expenses in
defending against the same, or (z) 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 Indemnitee or is insufficient to hold it harmless, then ARC
and AmeriSource jointly and severally shall contribute to the amount paid by the
Indemnitee as a result of any loss, claim, damage or liability in a proportion
that is appropriate to reflect not only the relative benefits
page 27
<PAGE>
received by the Indemnitee on the one hand and ARC and AmeriSource on the other
hand, but also the relative fault of the Indemnitee (if any), ARC and
AmeriSource and any other relevant equitable considerations; provided, however,
that ARC's obligations under this section shall be paid by ARC only to the
extent that funds are available to make the payments after all amounts to be
paid to Investor Certificateholders and Holders of Purchased Interests pursuant
to Section 4.03(f) or 4.03(a) (as applicable) shall have been paid, and there
--------------- -------
shall be no recourse to ARC for all or any part of any amounts payable pursuant
to this section if the funds are at any time insufficient to make all or part of
any such payments.
SECTION 10.06 Characterization as Transaction Document; Entire Agreement.
----------------------------------------------------------
This Agreement shall be deemed to be a Transaction Document for all purposes of
the Pooling Agreement and the other Transaction Documents. This Agreement,
together with the documents delivered pursuant to Section 7.01 and the other
------------
Transaction Documents, including the exhibits and schedules thereto, contains a
final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof,
superseding all previous oral statements and other writings with respect
thereto.
SECTION 10.07 Notices. All communications hereunder shall be in writing
-------
(except that notices pursuant to Sections 3.01 and 3.03 may be given by
------------- ----
telephone promptly confirmed in writing or by facsimile transmission) and shall
be deemed to have been duly given if personally delivered, sent by overnight
courier or mailed by registered mail, postage prepaid and return receipt
requested, or transmitted by telex or facsimile transmission and confirmed by a
similar mailed writing to any party at the address for that party set forth (a)
on the signature page to this Agreement or (b) to another address as that party
may designate in writing to the Agent and ARC.
SECTION 10.08 Binding on Successors and Assigns. This Agreement shall
---------------------------------
inure to the benefit of and be binding upon ARC, the Revolving Purchasers and
their respective permitted successors and assigns. Nothing expressed herein is
intended or shall be construed to give any Person other than the Persons
referred to in the preceding sentence any legal or equitable right, remedy or
claim under or in respect of this Agreement.
SECTION 10.09 Severability of Provisions. Any covenant, provision,
--------------------------
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability without invalidating the
remaining provisions of this Agreement.
SECTION 10.10 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.
page 28
<PAGE>
SECTION 10.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 10.12 Failure to Refinance. If the Revolving Purchasers shall not
--------------------
have been repaid in full and their Stated Amount reduced to zero on or prior to
the 180th day falling after the date of the initial Purchase, then:
(a) ARC and AmeriSource will cooperate in good faith with the Agent to
restructure the Program and to design securities to be issued by the Trust
in order to facilitate the refinancing in full of the Certificates and/or
the complete assignment by the initial Revolving Purchasers of their Credit
Exposure, which restructuring and design may include, but not be limited
to, (i) the creation of senior and subordinated classes of securities, (ii)
the creation of fixed principal and variable principal securities with
varying maturities and interest rates, it being understood that no
specified proportion of securities with fixed versus variable principal or
fixed versus variable interest rates need be maintained, and that the
proportion with respect with either type of principal may be 0% (provided,
that the aggregate principal amount of fixed principal certificates shall
not, without ARC's and AmeriSource's consent, exceed the greater of (x)
$175,000,000 and (y) the average, for the preceding six Calculation Periods
(or, if less, the number of complete Calculation Periods elapsed since the
date of this Agreement), of the lowest Base Amount properly reported in any
Daily Report during each such Calculation Period), (iii) changes to the
number and type of investors required to take (or omit to take a particular
action (such as a waiver, amendment or instruction to the Trustee)), (iv)
the imposition of make-whole payments or other prepayment premiums if the
securities are repaid prior to their scheduled maturity voluntarily, as the
result of the Trustee's receipt of a Stop Date Notice or for any other
reason agreed to by AmeriSource, (v) any changes or modification necessary
to enable an investor to qualify for the portfolio interest exemption, thus
permitting the securities to be marketed to investors who do not have a
place of business in the United States, and (vi) any changes or
modifications necessary to satisfy then current requirements of S&P (or any
other Applicable Rating Agency) for trade receivables securitizations rated
"AAA" (in the case of senior securities) or "A" (in the case of subordinate
securities), and
(b) if requested to do so by any Revolving Purchaser, the Trustee or
the Agent shall exercise its rights under the final paragraph of Section
-------
8.01 to conduct a Receivables Review.
----
ARC and AmeriSource shall enter into the amendments to the Transaction
Documents as may be requested by the Agent as necessary or desirable to
restructure the Program and design securities as contemplated in subsection (a);
--------------
provided, that, notwithstanding the foregoing, neither ARC nor AmeriSource shall
be required to consent to any amendment to
page 29
<PAGE>
any Transaction Document that it determines in its sole and reasonable
discretion to be materially adverse to its own interests.
SECTION 10.13 Tax Characterization. Each party to this Agreement (a)
--------------------
acknowledges that it is the intent of the parties to this Agreement that, for
Federal, state and local income and franchise tax purposes only, the
Certificates will be treated as evidence of indebtedness secured by the Trust
Assets and the Trust not be characterized as an association taxable as a
corporation, (b) agrees to treat the Certificates for Federal, state and local
income and franchise tax purposes as indebtedness and (c) agrees that the
provisions of the Transaction Documents shall be construed to further these
intentions.
SECTION 10.14 No Proceedings. Each of AmeriSource, the Agent (solely in
--------------
its capacity as such) and each of the Revolving Purchasers (solely in its
capacity as such) hereby agrees that it will not institute against ARC or the
Trust, or join any other Person in instituting against ARC or the Trust, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of "Event of Bankruptcy") so long as any Investor Certificates 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 Investor Certificates shall have been
outstanding. The foregoing shall not limit the right of AmeriSource or any
Revolving Purchaser to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted against ARC or the
Trust by any other Person. In addition, each of the foregoing parties agree that
all amounts owed to them by the Trust or ARC shall be payable solely from
amounts that become available for payment pursuant to the Pooling Agreement and
the Supplement, and no amounts shall constitute a claim against the Trust or ARC
to the extent that they are in excess of the amounts available for their
payment.
SECTION 10.15 Confidentiality. The Agent and each Revolving Purchaser
---------------
acknowledge that all information concerning the Seller, ARC, any AmeriSource
Person, the Receivables and the Related Transferred Assets (collectively the
"Confidential Information") that has been, is being and will be delivered or
made available by the Seller and ARC to the Agent and the Revolving Purchasers
is highly confidential; provided, that the term "Confidential Information" shall
not include (x) any of the foregoing information that is or becomes generally
available to the public or is or becomes available to the Agent or a Revolving
Purchaser (as applicable) on a nonconfidential basis or was or becomes known to
the Agent or a Revolving Purchaser (as applicable) on a nonconfidential basis
without violation of this section, (y) the Transaction Documents or any Daily
Report or Settlement Statement delivered thereunder or (z) the information
included in the Syndication Documents.
Each of the Trustee and the Revolving Purchasers hereby agrees to use its
best efforts to hold in confidence all Confidential Information; provided, that
nothing herein shall prevent the Trustee or any Revolving Purchaser from
delivering Confidential Information to:
page 30
<PAGE>
(a) the respective affiliates, directors, officers, employees, agents
and professional consultants (each of which being a "Representative") of
the Agent or a Revolving Purchaser who, in the case of each Representative,
shall be subject to confidentiality arrangements at least substantially
comparable hereto,
(b) any Federal or state regulatory authority having jurisdiction over
the Agent or the Revolving Purchasers,
(c) any Transferee or potential Transferee, who shall be subject to a
written confidentiality agreement at least substantially comparable hereto,
(d) any Person engaged by AmeriSource or ARC to assist in structuring,
marketing or otherwise facilitating arrangements necessary to refinance the
Certificates (including, without limitation, the Financial Advisors),
(e) any Person pursuant to subpoena or other court process or
otherwise in connection with applicable litigation, or
(f) any Person to the extent required by applicable law.
The Agent and each Revolving Purchaser recognize the competitive value and
confidential nature of the Confidential Information and the irreparable damage
that could result to the Seller, ARC or the other AmeriSource Persons if it is
disclosed to any third party in violation of the requirements of this section.
The Agent and each Revolving Purchaser recognize that money damages would not be
a sufficient remedy for any breach of the requirements of this section, and each
of the foregoing severally agrees that the Seller, ARC and any other AmeriSource
Person shall be entitled to equitable relief, including injunctive relief and
specific performance, in the event of any breach or potential breach of the
requirements of this section, in addition to all other remedies available to the
Seller, ARC and the other AmeriSource Persons at law or in equity. None of the
requirements of this section may be waived or amended except by prior written
consent of the Seller, ARC or the other AmeriSource Person, as applicable, who
provided the information to the Person who wishes to disclose it, which written
consent shall expressly refer to the requirements of this section.
page 31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
AMERISOURCE RECEIVABLES CORPORATION
By: ____________________________________
Title: ________________________________
Address: P.O. Box 1735
Southeastern, Pennsylvania 19399-1735
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
AMERISOURCE CORPORATION
By: ____________________________________
Title: ________________________________
Address: 300 Chester Field Parkway
Malvern, Pennsylvania 19355
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
<PAGE>
BANKERS TRUST COMPANY,
as Agent and, individually,
as a Revolving Purchaser
By: _____________________________________
Title: _________________________________
Address: ________________________________
________________________________
Attention: ______________________________
Telephone: ______________________________
Facsimile: ______________________________
STATED AMOUNT: __________________
PERCENTAGE: 100%
<PAGE>
EXHIBIT A
to Revolving Certificate Purchase
Agreement Series 1994-1
FORM OF POOLING AND SERVICING AGREEMENT
---------------------------------------
<PAGE>
EXHIBIT B
to Revolving Certificate Purchase
Agreement Series 1994-1
FORM OF RECEIVABLES PURCHASE AGREEMENT
--------------------------------------
<PAGE>
EXHIBIT C
to Revolving Certificate Purchase
Agreement Series 1994-1
FORM OF SERIES 1994-1 SUPPLEMENT
--------------------------------
================================================================================
SERIES 1994-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
dated as of December 13, 1994
among
AMERISOURCE RECEIVABLES CORPORATION,
as transferor,
AMERISOURCE CORPORATION,
as initial Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
............................................................................. 2
SECTION 1.01 Definitions.................................................... 2
-----------
ARTICLE II
PURCHASE AND SALE OF THE CERTIFICATES
<S> <C> <C>
............................................................................. 2
SECTION 2.01 The Commitments........................................... 2
---------------
SECTION 2.02 Purchase Mechanics........................................ 3
------------------
SECTION 2.03 Reduction of Stated Amounts............................... 4
---------------------------
SECTION 2.04 Certificates.............................................. 4
------------
ARTICLE III
REDUCTIONS IN INVESTOR REVOLVING INVESTED AMOUNT
............................................................................. 5
SECTION 3.01 Negative Variable Amounts................................. 5
-------------------------
SECTION 3.02 Other Reductions.......................................... 5
----------------
SECTION 3.03 Notice to Revolving Purchasers............................ 6
------------------------------
ARTICLE IV
INVESTOR REVOLVING YIELD AND FEES
............................................................................. 6
SECTION 4.01 Investor Revolving Yield.................................. 6
------------------------
SECTION 4.02 Non-Usage Fees............................................ 7
--------------
SECTION 4.03 Yield Protection.......................................... 7
----------------
SECTION 4.04 Illegality; Unavailability................................ 10
--------------------------
SECTION 4.05 Indemnity................................................. 10
---------
SECTION 4.06 Taxes..................................................... 11
-----
ARTICLE V
OTHER PAYMENT TERMS
............................................................................. 12
SECTION 5.01 Time and Method of Payment................................ 12
--------------------------
SECTION 5.02 Pro Rata Treatment........................................ 13
------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
............................................................................. 13
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.01 ARC....................................................... 13
---
SECTION 6.02 AmeriSource............................................... 14
-----------
ARTICLE VII
CONDITIONS
............................................................................. 15
SECTION 7.01 Conditions to Initial Purchase............................ 15
------------------------------
SECTION 7.02 Conditions to Each Purchase............................... 18
---------------------------
ARTICLE VIII
AFFIRMATIVE COVENANTS
............................................................................. 18
SECTION 8.01 Affirmative Covenants..................................... 18
---------------------
ARTICLE IX
THE AGENT
............................................................................. 20
SECTION 9.01 Appointment............................................... 20
-----------
SECTION 9.02 Nature of Duties.......................................... 20
----------------
SECTION 9.03 Lack of Reliance on the Agent and BT Securities
-----------------------------------------------
Corporation............................................. 21
-----------
SECTION 9.04 Certain Rights of the Agent............................... 21
---------------------------
SECTION 9.05 Reliance.................................................. 21
--------
SECTION 9.06 Indemnification........................................... 22
---------------
SECTION 9.07 The Agent in Its Individual Capacity...................... 22
------------------------------------
SECTION 9.08 Resignation by the Agent.................................. 22
------------------------
SECTION 9.09 Reference Bank............................................ 23
--------------
ARTICLE X
MISCELLANEOUS PROVISIONS
............................................................................. 23
SECTION 10.01 Amendments............................................... 23
----------
SECTION 10.02 No Waiver; Remedies...................................... 24
-------------------
SECTION 10.03 Successors and Assigns; Assignments...................... 24
-----------------------------------
SECTION 10.04 Survival of Agreement.................................... 26
---------------------
SECTION 10.05 Expenses; Indemnification................................ 27
-------------------------
SECTION 10.06 Characterization as Transaction Document................. 28
----------------------------------------
SECTION 10.07 Notices.................................................. 28
-------
SECTION 10.08 Binding on Successors and Assigns........................ 28
---------------------------------
SECTION 10.09 Severability of Provisions............................... 28
--------------------------
SECTION 10.10 Counterparts............................................. 28
------------
SECTION 10.11 Governing Law............................................ 29
-------------
SECTION 10.12 Failure to Refinance..................................... 29
--------------------
SECTION 10.13 Tax Characterization..................................... 30
--------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 10.14 No Proceedings................................................ 30
--------------
SECTION 10.15 Confidentiality............................................... 30
---------------
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
OF POOLING AGREEMENT
<S> <C> <C>
............................................................................. 1
SECTION 1.01 Definitions............................................... 1
-----------
SECTION 1.02 Incorporation of Terms and Provisions of the Pooling
----------------------------------------------------
Agreement................................................. 5
---------
ARTICLE II
DESIGNATION
............................................................................. 5
SECTION 2.01 Designation............................................... 5
-----------
ARTICLE III
PAYMENTS
............................................................................. 5
SECTION 3.01 Payments.................................................. 5
--------
SECTION 3.02 Interest.................................................. 5
--------
SECTION 3.03 Principal Payments........................................ 6
------------------
SECTION 3.04 Commitment Fees; Additional Amounts; Breakage Payments.... 7
------------------------------------------------------
ARTICLE IV
PAY-OUT EVENTS
............................................................................. 7
SECTION 4.01 Pay-Out Events............................................ 7
--------------
ARTICLE V
MISCELLANEOUS
............................................................................. 8
SECTION 5.01 Governing Law............................................. 8
-------------
SECTION 5.02 Counterparts.............................................. 8
------------
SECTION 5.03 Severability of Provisions................................ 8
--------------------------
SECTION 5.04 Amendment, Waiver, Etc.................................... 8
----------------------
SECTION 5.05 The Trustee............................................... 8
-----------
SECTION 5.06 Instructions in Writing................................... 8
-----------------------
</TABLE>
<PAGE>
EXHIBIT
EXHIBIT A Form of Series 1994-1 Investor Revolving Certificate
<PAGE>
This Series 1994-1 SUPPLEMENT, dated as of December 13, 1994 (this
"Supplement"), is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware
corporation, as transferor ("ARC"), AMERISOURCE CORPORATION, a Delaware
corporation ("AmeriSource"), as the initial Servicer (in that capacity, together
with any successor in that capacity, the "Servicer"), and MANUFACTURERS AND
TRADERS TRUST COMPANY, a New York banking corporation, as Trustee (in that
capacity, together with any successor in that capacity, the "Trustee").
Pursuant to the Pooling and Servicing Agreement, dated as of December 13,
1994, (as it may be amended, supplemented or otherwise modified from time to
time, and as supplemented hereby, the "Pooling Agreement"), among ARC, the
Servicer and the Trustee, ARC may from time to time direct the Trustee to issue,
on behalf of the Trust, one or more Series of Investor Revolving Certificates
representing undivided interests in the Trust. Certain terms applicable to a
Series are to be set forth in a Supplement. This Supplement is a Supplement as
such is defined in the Pooling Agreement.
Pursuant to this Supplement, ARC and the Trustee shall create a Series of
Investor Revolving Certificates and specify certain terms thereof.
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
OF POOLING AGREEMENT
SECTION 1.01 Definitions. (a) Except as otherwise defined herein,
-----------
capitalized terms have the meanings that Appendix A to the Pooling Agreement
assigns to them, and this Supplement shall be interpreted in accordance with the
conventions set forth in Parts B, C and D of that Appendix A.
(b) Each capitalized term defined herein relates only to the Series 1994-1
Certificates and to no other Series of Certificates issued by the Trust.
Whenever used in this Supplement, the following words and phrases shall have the
following meanings:
"ABR Tranche" means, at any time, the portion of the Series 1994-1 Invested
Amount that is designated by ARC in accordance with the Revolving Certificate
Purchase Agreement to accrue interest based on the Alternate Base Rate.
"Alternate Base Rate" means, on any day, a fluctuating rate of interest per
annum equal to the higher of:
(a) the rate of interest most recently announced by the Reference
Bank at its principal office as its prime lending rate, and
page 1
<PAGE>
(b) the Federal Funds Rate plus 50 basis points.
Any change in the interest rate resulting from a change in the prime lending
rate announced by the Reference Bank shall become effective without prior notice
to ARC or the Servicer as of 12:01 a. m., New York City time, on the Business
Day on which each change in the prime lending rate is announced by the Reference
Bank. The prime lending rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged by the Reference Bank to any
customer. The Reference Bank may make commercial loans or other loans at rates
of interest at, above or below the prime lending rate.
"Applicable Margin" means:
(a) with respect to any Eurodollar Tranche and any period set forth
below, the number of basis points set forth opposite the period:
<TABLE>
<CAPTION>
Period Basis Points
------ ------------
<S> <C>
Closing to the date six months after the Closing Date 50
then to the date nine months after the Closing Date 62.5
then to the date one year after the Closing Date 75
thereafter 150
</TABLE>
(b) with respect to any ABR Tranche and any period set forth below,
the number of basis points set forth opposite the period:
<TABLE>
<CAPTION>
Period Basis Points
------ ------------
<S> <C>
Closing to the date one year after the Closing Date 0
thereafter 50
</TABLE>
"Applicable Ratings Agencies" means each of the nationally recognized
statistical rating agencies that, at the request of ARC, at that time maintains
a credit rating of the Series 1994-1 Certificates.
"Base Amount" means the Base Amount as calculated pursuant to Section
4.03(b) of the Pooling Agreement; provided, however, that upon ARC's giving of
notice to the Revolving Purchasers, pursuant to Section 2.03 of the Revolving
Certificate Purchase Agreement for this Series, that each of their Stated
Amounts is to be reduced to zero due to the issuance of another Series of
Certificates (the "Take-out Certificates"), the Base Amount shall equal the
lower of (a) the Base Amount as calculated for purposes of the Series 1994-1
Certificates and (b) the Base Amount as calculated for purposes of the Take-out
Certificates that are to be issued.
page 2
<PAGE>
"Eligible Institution" means a bank that has a long-term debt rating of at
least "A" by S&P or is otherwise approved by the Applicable Rating Agencies.
"Eurodollar Tranche" means, during any Yield Period, any portion of the
Series 1994-1 Invested Amount that has been designated by ARC in accordance with
the Revolving Certificate Purchase Agreement to accrue interest based on LIBOR.
Pursuant to the Revolving Certificate Purchase Agreement, there may be up to
four Eurodollar Tranches outstanding at any time.
"Expected Final Payment Date" means, with respect to the Series 1994-1
Certificates, the Settlement Date that is 60 months after the Closing Date.
"Federal Funds Rate" means 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 the day (or, if the day is not a
Business Day, the immediately preceding Business Day) by the Federal Reserve
Bank of New York; provided, that, if the rate is not so published for any
Business Day, the rate for purposes of this clause will be the average of the
quotations for the day on such transactions received by the Reference Bank from
three Federal funds brokers of recognized standing selected by it.
"LIBOR" means, with respect to any Yield Period, the rate per annum equal
to (a) the rate at which deposits in Dollars are offered by the Reference Bank
to first-class banks in the London interbank market at approximately 11:00 a.
m., London time, two Business Days prior to the first day of the relevant Yield
Period, such deposits being in the approximate amount of and having a Yield
Period equivalent to the Eurodollar Tranche to be funded or maintained, divided
by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to
the Yield Period. LIBOR shall be rounded, if necessary, to the next higher of
1/16 of 1%.
"Pay-Out Event" is defined in Section 4.01 of this Supplement.
------------
"Reference Bank" means the Agent under the Revolving
Certificate Purchase Agreement.
"Reserve Requirement" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) that is imposed
against the Reference Bank in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Revolving Certificate Purchase Agreement" means the Revolving Certificate
Purchase Agreement dated as of the date hereof among ARC, AmeriSource, the
Revolving Purchasers named therein and Bankers Trust Company, as Agent and
Revolving Purchaser, as it may be amended, supplemented or otherwise modified
from time to time.
page 3
<PAGE>
"Sale Date" means, with respect to the Series 1994-1 Certificates, the
Settlement Date that is 70 months after the Closing Date.
"Scheduled Final Payment Date" means the Sale Date.
"Scheduled Pay-Out Commencement Date" means the first day of the October,
1999 Calculation Period.
"Series 1994-1 Certificate" means any Certificate issued pursuant to this
Supplement and the Revolving Certificate Purchase Agreement, substantially in
the form of Exhibit A to this Supplement.
---------
"Series 1994-1 Initial Invested Amount" means $0.
"Series 1994-1 Invested Amount" means, at any time, an amount equal to (a)
the sum of (i) the Series 1994-1 Initial Invested Amount, plus (ii) all
additions made to the Series 1994-1 Invested Amount pursuant to Section 4.03 of
the Pooling Agreement plus (iii) all additions to the principal amount of Series
1994-1 Certificates made pursuant to Section 6.11 of the Pooling Agreement,
minus (b) the sum of (i) all reductions in the Series 1994-1 Invested Amount
made pursuant to Section 4.03 of the Pooling Agreement, (ii) the aggregate
amount of all other principal payments made to the Holders of the Series prior
to that time in respect of the Series, (iii) the aggregate amount of all funds
on deposit in the Principal Funding Account and the Defeasance Account with
respect to the Series and (iv) any Investor Allocable Charged-Off Amounts (net
of Investor Net Recoveries) allocated to the Series.
"Series 1994-1 Investor Revolving Certificate Rate" means, at any time, the
weighted average of the interest rates on all outstanding Tranches.
"Tranche" means each of the ABR Tranche and each Eurodollar Tranche.
"Yield Period" means, with respect to the Series 1994-1 Certificates:
(a) as to the ABR Tranche (if any) from time to time, each period
from one Settlement Date to the next Settlement Date (except that the
initial Yield Period shall commence on the Closing Date), and
(b) as to each Eurodollar Tranche (if any) from time to time, each
period from the date upon which it was first designated as such pursuant to
the Revolving Certificate Purchase Agreement (or the end of the next
preceding Yield Period for such Eurodollar Tranche, if there has been one)
to the corresponding date in the next calendar month; provided, that (i) if
there is no corresponding date, the Yield Period will end on the last day
of the next calendar month and (ii) if any Yield Period for a Eurodollar
Tranche would otherwise end on a day that is not a Business Day, such
page 4
<PAGE>
Eurodollar Tranche shall instead end on the next Business Day (or, if the
next Business Day falls in the next calendar month, then the Yield Period
shall end on the next preceding Business Day).
SECTION 1.02 Incorporation of Terms and Provisions of the Pooling
----------------------------------------------------
Agreement. This Supplement hereby incorporates by reference the terms and
- - - ---------
provisions of the Pooling Agreement as if they were set forth in full herein.
As supplemented by this Supplement, the Pooling Agreement is hereby in all
respects ratified and confirmed and both together shall be read, taken and
construed as one and the same agreement. In the event of any conflict or
inconsistency between the terms of this Supplement and the terms of the Pooling
Agreement as the terms apply to any of the Series 1994-1 Certificates, the terms
of this Supplement shall control.
ARTICLE II
DESIGNATION
SECTION 2.01 Designation. There is hereby created a Series of Investor
-----------
Revolving Certificates to be issued pursuant to the Pooling Agreement and this
Supplement to be known as "Series 1994-1 Certificates." Subject to the
conditions set forth in the Revolving Certificate Purchase Agreement, the
Trustee shall authenticate and deliver the Series 1994-1 Certificates, to or
upon the order of ARC, in an aggregate stated amount equal to $230,000,000. The
Series 1994-1 Certificates shall be authenticated and delivered in the manner
and at the times for authentication and delivery of Investor Revolving
Certificates that are specified in Article VI of the Pooling Agreement. The
Series 1994-1 Certificates are a Senior Class.
ARTICLE III
PAYMENTS
SECTION 3.01 Payments. Except as expressly provided otherwise in this
--------
Supplement, interest and principal shall be distributed in respect of the Series
1994-1 Certificates at the times described in, and in the amounts calculated
pursuant to, Articles IV and V of the Pooling Agreement for payments that are to
be made with respect to Investor Revolving Certificates.
SECTION 3.02 Interest. (a) ARC shall have the right from time to time to
--------
allocate the outstanding principal amount under the 1994-1 Certificates to
multiple Tranches: up to four Eurodollar Tranches and an ABR Tranche. Interest
on the ABR Tranche shall be payable on each Settlement Date, and interest on a
Eurodollar Tranche shall be payable at the
page 5
<PAGE>
end of the applicable Yield Period, except that interest on the amount of any
principal repaid on any other date shall be payable on the date of the
repayment.
(b) Interest on a Eurodollar Tranche shall accrue during any Yield Period
at a rate per annum equal to the Applicable Margin plus the applicable LIBOR and
shall be calculated on the basis of actual days over a year of 360 days.
(c) Interest on the ABR Tranche shall accrue (i) during the period from
the Closing Date to (and including) the 75th day following the Closing Date, at
125 basis points over the Federal Funds Rate in effect from time to time, and
(ii) thereafter at the Applicable Margin plus the Alternate Base Rate in effect
from time to time. The interest 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 1994-1 Certificates due but not
paid on any Settlement Date or the last day of a Yield Period, as the case may
be, will be due on the next Settlement Date or last day of the next Yield Period
with additional interest on the amount at 2% above the applicable Certificate
Rate to the extent permitted by law.
SECTION 3.03 Principal Payments. (a) Prior to the earlier of the
------------------
Liquidation Commencement Date and the Pay-Out Period Commencement Date, the
outstanding principal amount of the 1994-1 Certificates shall vary from time to
time as positive Variable Amounts and other amounts are allocated (in whole or
in part) to increase the Series 1994-1 Invested Amount and as Collections are
allocated to repay (in whole or in part) the Series 1994-1 Invested Amount. In
any event, the principal amount of any Series 1994-1 Certificate outstanding at
any time shall not exceed its Stated Amount.
(b) After the commencement of the Liquidation Period or the Pay-Out Period
with respect to Series 1994-1 Certificates, no further increases in the Investor
Revolving Invested Amount of the Series 1994-1 Certificates shall be made. On
each Business Day during the Pay-Out Period for Series 1994-1 Certificates
(until the Series 1994-1 Invested Amount has been provided for in full), the
Servicer shall allocate a portion of the Collections available in the Master
Collection Account, after making any required transfers to the Carrying Cost
Account, to the Series 1994-1 Invested Amount and transfer the portion to the
Defeasance Account. The portion of Collections so allocated and transferred
shall equal (i) the Defeasance Allocation Percentage for the Series 1994-1
Certificates multiplied by (ii) the amount of the available Collections. The
amounts so allocated to the Defeasance Account during each Calculation Period
shall be paid to the Holders of the Series 1994-1 Certificates in reduction of
the Series 1994-1 Invested Amount on the next Settlement Date or on an earlier
date that ARC may elect; provided, however, that if the Liquidation Period
commences at a time when any such amounts are being held in the Defeasance
Account, the amounts being so held shall be reallocated to the Master Collection
Account for application along with the other amounts held therein.
page 6
<PAGE>
(c) If the Liquidation Period commences at any time when the Series 1994-1
Invested Amount is greater than zero, the Series 1994-1 Certificates shall
thereafter be entitled to receive, on each Settlement Date occurring after the
Calculation Period in which the Liquidation Period commences (and until the
principal outstanding under the 1994-1 Certificates has been paid in full) funds
in an amount equal to the Principal Distribution Amount with respect to the
Series 1994-1 Certificates.
SECTION 3.04 Commitment Fees; Additional Amounts; Breakage Payments. (a)
------------------------------------------------------
Non-Usage Fees and other fees payable by ARC to the Revolving Purchasers and the
Agent under the Revolving Certificate Purchase Agreement and one or more fee
letters executed by ARC shall be payable from funds available for allocation
under clause Seventh of Section 4.03(g) of the Pooling Agreement or clause Third
of Section 4.03(h) of the Pooling Agreement, as applicable.
(b) Additional amounts and breakage payments on account of increased costs
relating to eurodollar funding, capital costs, breakage of a Eurodollar Tranche,
changes in tax laws and certain indemnity obligations payable under the
Revolving Certificate Purchase Agreement shall be payable from funds available
for allocation under clause Seventh of Section 4.03(g) or clause Third of
Section 4.03(h) of the Pooling Agreement, as applicable.
(c) The rating of the Series 1994-1 Certificates will not address the
likelihood of payment of any such fees, additional amounts or breakage payments.
ARTICLE IV
PAY-OUT EVENTS
SECTION 4.01 Pay-Out Events. Any of the following shall be a "Pay-Out
--------------
Event" with respect to the Series 1994-1 Certificates:
(a) The Majority Investors do not declare a Liquidation Commencement
Date with respect to a Liquidation Event described in clause (a), (b) or
(f) of Section 9.01 of the Pooling Agreement, and Holders of Investor
Certificates representing more than 50% of the Series 1994-1 Invested
Amount declare that a Pay-Out Event has occurred.
(b) The Series 1994-1 Certificates shall cease to be rated "A" or
better by S&P and such condition shall continue for a period of 90 days;
provided, that during such period ARC, AmeriSource and the Holders of the
Certificates shall cooperate in good faith to make such changes to the
Program and the Certificates that may be required to restore the rating;
and provided further that no such party shall be required to consent to any
amendment to a
page 7
<PAGE>
Transaction Document that it determines in its sole and reasonable
discretion to be materially adverse to its own interests.
(c) The Scheduled Pay-Out Commencement Date shall occur.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 5.02 Counterparts. This Supplement may be executed in any number
------------
of counterparts 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 5.03 Severability of Provisions. If any one or more of the
--------------------------
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall in
no way affect the validity or enforceability of the other provisions or terms of
this Supplement.
SECTION 5.04 Amendment, Waiver, Etc. The provisions of this Supplement
-----------------------
may be amended, modified or waived from time to time by the Servicer, ARC and
the Trustee with the consent of the Required Series Holders of the Series 1994-1
Certificates to the extent permitted by Section 13.01 of the Pooling Agreement,
and the terms of that section shall apply to any such amendment, modification or
waiver.
SECTION 5.05 The Trustee. The 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 ARC and the Servicer.
SECTION 5.06 Instructions in Writing. All instructions given by the
-----------------------
Servicer to the Trustee pursuant to this Supplement shall be in writing, and may
be included in a Daily Report or Settlement Statement.
page 8
<PAGE>
IN WITNESS WHEREOF, ARC, the Servicer and the 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.
AMERISOURCE RECEIVABLES CORPORATION,
as transferor
By: ______________________________________
Title: __________________________________
Address: P.O. Box 1735
Southeastern, Pennsylvania 19399-1735
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
AMERISOURCE CORPORATION,
as initial Servicer
By: _____________________________________
Title: _________________________________
Address: 300 Chester Field Parkway
Malvern, Pennsylvania 19355
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By:______________________________________
Title: Assistant Vice President
Address: One M&T Plaza - 7th Floor
Buffalo, New York 14203
Attention: Russell Whitley
Telephone: (716) 842-5602
Facsimile: (716) 842-4474
page 9
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came ____________,
who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of AmeriSource Receivables
Corporation, a Delaware corporation, the corporation described in and that
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
______________________________
Notary Public
Type or
Print Name:___________________
My commission expires:
__________________
page 10
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came ____________,
who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of AmeriSource Corporation, a
Delaware corporation, the corporation described in and that executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
_______________________________
Notary Public
Type or
Print Name:____________________
My commission expires:
_________________
page 11
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came ____________,
who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of Manufacturers and Traders
Trust Company, a New York banking corporation, the corporation described in and
that executed the foregoing instrument; and that he signed his name thereto by
order of the board of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
_______________________________
Notary Public
Type or
Print Name:____________________
My commission expires:
_________________
page 12
<PAGE>
EXHIBIT A
to the Series 1994-1 Supplement
FORM OF SERIES 1994-1 INVESTOR REVOLVING CERTIFICATE
----------------------------------------------------
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THE CERTIFICATEHOLDER
HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE CERTIFICATEHOLDER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A (A "QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, AND WHOM THE
CERTIFICATEHOLDER HAS INFORMED, IN EACH CASE, THAT THE OFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN A TRANSACTION
COMPLYING WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT OR (3)
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND THE
TRUSTEE AND ARC RECEIVES WRITTEN REPRESENTATIONS OF THE TRANSFEROR AND
TRANSFEREE SATISFACTORY TO THE TRUSTEE AND ARC REGARDING THE DISPOSITIONS, AND,
IF THE TRUSTEE OR ARC SO REQUIRES, AN OPINION OF COUNSEL OF THE TRANSFEROR
SATISFACTORY TO THE TRUSTEE AND ARC WITH RESPECT TO THE AVAILABILITY OF SUCH
EXEMPTION PRIOR TO THE RESALE OR TRANSFER. WITH RESPECT TO CLAUSES (1), (2) AND
----------- ---
(3), SUBJECT TO THE RECEIPT BY THE TRUSTEE OF OTHER EVIDENCE ACCEPTABLE TO THE
- - - ---
TRUSTEE THAT THE OFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES OF AMERICA OR OTHER APPLICABLE
JURISDICTION AND SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE UNITED STATES
OF AMERICA. THE CERTIFICATEHOLDER OF THIS CERTIFICATE AGREES THAT IT WILL, AND
EACH SUBSEQUENT CERTIFICATEHOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
page 1
<PAGE>
AMERISOURCE RECEIVABLES MASTER TRUST
SERIES 1994-1 INVESTOR REVOLVING CERTIFICATE
Initial Stated Amount: $230,000,000
Percentage Interest evidenced
by this Certificate: 100%
Initial Cut-Off Date: December 12, 1994
First Distribution Date: Settlement Date relating to November 1994 Cut-Off Date
THIS CERTIFIES THAT Bankers Trust Company is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the AmeriSource
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of December 13, 1994 (as the same may
be amended, supplemented, amended and restated or otherwise modified from time
to time, the "Pooling Agreement"), among AmeriSource Receivables Corporation, a
Delaware corporation, as transferor ("ARC"), AmeriSource Corporation, a Delaware
corporation, as initial Servicer (in such capacity, the "Servicer"), and
Manufacturers and Traders Trust Company, a New York banking corporation, as
trustee (together with its successors and assigns in such capacity, the
"Trustee") and (b) the Supplement dated as of December 13 relating to the Series
1994-1 Investor Revolving Certificates (the "Supplement"). This Certificate is
one of the duly authorized Series 1994-1 Investor Revolving Certificates
designated and issued under the Pooling Agreement and the Supplement. Except as
otherwise defined herein, capitalized terms have the meanings that the
Supplement or Appendix A to the Pooling Agreement 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, 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 Series 1994-1
Investor Revolving Certificates are a Senior Class.
This Certificate evidences the amount of Purchases (as defined in the
Revolving Certificate Purchase Agreement) made by the Holder hereof that are
from time to time outstanding. The Holder hereof shall and is hereby authorized
to record on the grid attached to this Certificate (or at such Holder's option,
in its internal books and records) the date and amount of each Purchase made by
it, the portion of its outstanding Purchases that are from time to time
allocated to the ABR Tranche and any Eurodollar Tranche, the amount of each
repayment of the principal amount represented by this Certificate and any
reductions to the Stated Amount of this Certificate made pursuant to Section
2.03 of the Revolving Certificate Purchase Agreement; provided, however, that
failure to make any such recordation on the grid or records or any error in the
grid or records shall not adversely affect the Holder's rights with respect to
its interest in the assets of the Trust and its right to receive Investor
page 2
<PAGE>
Revolving Yield in respect of the outstanding principal amount of all Purchases
made by the Revolving Purchasers.
Investor Revolving Yield shall accrue on this Certificate as set forth in
the Pooling Agreement, the Revolving Certificate Purchase Agreement and the
Supplement. This Certificate is subject to prepayment prior to the maturity
hereof to the extent set forth in the Pooling Agreement and the Supplement.
The Pooling Agreement, the Revolving Certificate Purchase Agreement and the
Supplement 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, the Revolving Certificate Purchase Agreement and the Supplement.
Unless the certificate of authentication hereon shall have been executed by
or on behalf of the 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, ARC, any Seller, the Servicer, the Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Trust Assets.
As provided in the Pooling Agreement, and subject to the restrictions on
sale, transfer and disposition set forth in the Transaction Documents, upon
surrender for registration of transfer of this Certificate at any office or
agency of the Transfer Agent and Registrar maintained for that purpose, ARC
shall execute and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and Series that is/are in authorized denominations of like aggregate
fractional interests in the assets of the Trust of the Series 1994-1 Investor
Revolving Certificates, and that bear(s) a number that is not contemporaneously
outstanding.
As provided in the Pooling Agreement, and subject to the restrictions on
exchange set forth in the Transaction Documents, at the option of the Holder,
this Certificate may be exchanged for other Certificates of the same Class and
Series of authorized denominations of like aggregate fractional interests in the
Revolving Certificate Interest of the Series 1994-1 Investor Revolving
Certificates and bearing numbers that are not contemporaneously outstanding,
upon surrender of this Certificate to be exchanged at any such office or agency.
If this Certificate is so surrendered for exchange, ARC shall execute, and the
Trustee shall authenticate and deliver, the appropriate number of Certificates
of the same Class and Series.
If this Certificate is presented or surrendered for registration of
transfer or exchange, it shall be accompanied by a written instrument of
transfer in a form satisfactory to the
page 3
<PAGE>
Trustee and the Transfer Agent and Registrar duly executed by the Holder hereof
or his attorney-in-fact duly authorized in a writing delivered to the Transfer
Agent and Registrar.
By its acceptance of this Certificate, each Holder hereof (a) acknowledges
that it is the intent of ARC, and agrees that it is the intent of the Holder
that, for Federal, state and local income and franchise tax purposes only, the
Investor Certificates (including this Certificate) will be treated as evidence
of indebtedness secured by the Trust 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 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 New York, 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 New
York.
IN WITNESS WHEREOF, ARC has caused this Certificate to be executed by its
officer thereunto duly authorized.
AMERISOURCE RECEIVABLES CORPORATION
By: _______________________________
Title: ___________________________
page 4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1994-1 Investor Revolving Certificates referred
to in the Pooling Agreement.
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By: ___________________________________
Title: _______________________________
Dated: ______________, ____
page 5
<PAGE>
PURCHASES AND REPAYMENTS
<TABLE>
<CAPTION>
Principal
Amount of Outstanding
Purchase Principal
Amount Purchased Repaid Balance Stated Amount
- - - ------------------ ----------------- ------------------ --------------------
Yield
Base Eurodollar Period (if Base Eurodollar Base Eurodollar
Rate Rate applicable) Rate Rate Rate Rate Reduction Net
- - - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
</TABLE>
page 6
<PAGE>
EXHIBIT D
to Revolving Certificate Purchase
Agreement Series 1994-1
FORM OF ASSIGNMENT AGREEMENT
----------------------------
This ASSIGNMENT AGREEMENT, dated as of ____________ (this "Agreement"), is
made between ____________________ (the "Assignor"), and _____________________
(the "Assignee"). Except as otherwise defined herein, capitalized terms have
the meanings assigned to them in the Revolving Certificate Purchase Agreement
(as defined below).
BACKGROUND
1. The Assignor is a party to the Revolving Certificate Purchase
Agreement, dated as of December 13, 1994 (as amended, supplemented or otherwise
modified from time time, the "Revolving Certificate Purchase Agreement"), among
AmeriSource Receivables Corporation, a Delaware corporation ("ARC"), AmeriSource
Corporation, a Delaware corporation, the Revolving Purchasers party thereto
(including the Assignor), and Bankers Trust Company, as the Agent and Revolving
Purchaser.
2. The Assignor wishes to assign, and the Assignee wishes to be so
assigned, the Assignor's rights and obligations arising on and after the
Effective Date (as defined below) under the Revolving Certificate Purchase
Agreement and its Certificate, including (a) its obligations to make Purchases
(its "Credit Exposure") and (b) its outstanding Purchases (the "Purchases").
3. The Assignor and the Assignee also wish (a) the Assignee to assume the
obligations of the Assignor under the Revolving Certificate Purchase Agreement
with respect to the Assignee's Share (as defined below) to the extent of the
rights assigned and (b) the Assignor to be released from the obligations assumed
by Assignee.
4. ARC, by its execution hereof, is providing its written consent to the
assignment accomplished by this Agreement.
SECTION 1. Assignment. Effective on the Effective Date (as defined below)
----------
and upon payment of the amount specified in Section 3(a), the Assignor hereby
------------
assigns and transfers to the Assignee, without recourse, representation or
warranty of any kind, express or implied (except as provided in Sections 6(a)
-------------
and (b)), and subject to Section 4(b), the Assignee's Share (as specified in
--- ------------
Annex I hereto) (the "Assignee's Share") of all of the
- - - -------
page 1
<PAGE>
Assignor's rights, title and interest arising under (a) the Revolving
Certificate Purchase Agreement relating to the Assignor's Credit Exposure
including all rights and obligations with respect to the Purchases attributable
to the Assignee's Share and (b) the Assignor's Certificate with respect to the
Assignee's Share as will result in the Assignee having from and after the
Effective Date the Percentage ("Assignee's Percentage") specified in Annex I.
-------
The Stated Amount associated with Assignee's Share is also specified in Annex I.
-------
SECTION 2. Assumption. Effective on the Effective Date, the Assignee
----------
hereby irrevocably purchases, assumes and takes from the Assignor, and the
Assignor is hereby expressly and absolutely released from, all of the Assignor's
obligations arising under the Revolving Certificate Purchase Agreement relating
to the Assignee's Share and of any outstanding Purchases attributable to the
Assignee's Share.
SECTION 3. Payment. In consideration of the assignment by the Assignor to
-------
the Assignee as set forth above, the Assignee agrees to pay to the Assignor, in
Dollars and in immediately available funds, (a) on or prior to the Effective
Date, an amount specified by the Assignor in writing on or prior to the
Effective Date that represents the Assignee's Share attributable to the
principal amount of the Purchases made pursuant to the Revolving Certificate
Purchase Agreement and outstanding on the Effective Date, and (b) from time to
time thereafter, other amounts (if any) that the Assignee has agreed in writing
to pay to the Assignor after the Effective Date. In consideration of the
assumption by the Assignee, the Assignor agrees to pay to the Assignee within
two Business Days of the Effective Date, an assignment fee (if any) that
previously has been agreed to in writing by both parties.
Notwithstanding anything to the contrary in this Agreement, if and when the
Assignee receives or collects (x) any payment of principal or Investor Revolving
Yield relating to any Purchases or (y) any payment of fees that are required to
be paid to the Assignor pursuant to this Agreement, then the Assignee shall
forward the payment to the Assignor.
To the extent payment of funds to the Assignee or the Assignor are not made
within two Business Days, each, as the case may be, shall be entitled to recover
the due amount, together with interest thereon at the Federal Funds Rate per
annum accruing from the date of payment or the date of receipt of the funds by
the other party.
SECTION 4. Effectiveness. (a)(i) This Agreement shall become effective
-------------
on the date (the "Effective Date") on which it shall have been duly executed by
all parties and the Agent shall have recorded the information contained herein
in its records (or automatically if not so recorded within five Business Days
from the Agent's receipt of this Agreement signed by the Assignor, the Assignee
and ARC). The Assignor hereby notifies the Agent of the assignment, effective
as of the Effective Date, of the Assignee's Share and any Purchases attributable
to the Assignee's Share, and directs the Agent to pay the Assignee (A) any
payment of principal of, or Investor Revolving Yield on, any Purchase
attributable to the Assignee's Share of any Purchases and (B) any Non-Usage Fees
attributable to the
page 2
<PAGE>
Assignee's Share of the Credit Exposure. No (x) failure of either the Assignee
or the Assignor to settle any amount owed to the other (except with respect to
the payment of the processing and recordation fee to the Agent and the payment
due under Section 3(a)), (y) dispute respecting any other settlement, including
------------
in respect of ARC, or (z) bankruptcy, insolvency or other condition whatsoever
respecting any Person, shall in any way impair, reduce or otherwise affect the
effectiveness of this Agreement.
(ii) The Assignor, the Assignee and the Agent each acknowledges and
agrees that from and after the Effective Date, the Agent shall make all
payments under the Revolving Certificate Purchase Agreement in respect of
the Assignee's Share (including all payments of principal, Investor
Revolving Yield and Non-Usage Fees with respect thereto, whether or not the
payments shall have accrued prior to or after the Effective Date) to the
Assignee only. The Assignor and the Assignee hereby agree further to make
all appropriate adjustments in payments to either of them under the
Revolving Certificate Purchase Agreement for periods prior to the Effective
Date directly between themselves.
(b) With respect to any Purchase attributable to the Assignee's Share, if
and when the Assignor receives or collects any payment of principal, Investor
Revolving Yield, Non-Usage Fees or other fees with respect to the Assignee's
Share for any period commencing on or after the Effective Date, the Assignor
shall distribute to the Assignee the portion attributable to the Assignee's
Share, but only to the extent it accrued on or after the Effective Date and was
not theretofore paid to the Assignee by ARC or otherwise. Any principal,
Investor Revolving Yield and Non-Usage Fees paid prior to the Effective Date
shall be retained by the Assignor. Any principal, Investor Revolving Yield or
Non-Usage Fees received by the Assignee that accrued prior to the Effective Date
shall be forwarded promptly, in the form received, to the Assignor. The
Assignee recognizes and agrees that (i) it shall receive no payment on account
of any Agent's fees or other amounts or expenses (including counsel fees)
payable to the Agent (in such capacities and for its own account), (ii) this
Agreement shall not operate to assign any rights or delegate any obligations of
the Agent (in such capacities), and (iii) notwithstanding anything to the
contrary in this Agreement, the Assignor shall retain all of its rights to
indemnification under the Revolving Certificate Purchase Agreement for any
events, acts or omissions occurring prior to the Effective Date.
(c) The Agent, by its execution hereof, acknowledges the assignment and
agrees to make payments in respect of Investor Revolving Yield, reimbursements
and fees as described in clause (a).
----------
SECTION 5. Rights as Revolving Purchaser under Revolving Certificate
---------------------------------------------------------
Purchase Agreement. In accordance with Section 10.03 of the Revolving
- - - ------------------
Certificate Purchase Agreement, (a) as of the Effective Date, the Assignee will
be a Revolving Purchaser under, and party to, the Revolving Certificate Purchase
Agreement and shall have (i) all of the rights and obligations of a Revolving
Purchaser (to the extent of the assignment and
page 3
<PAGE>
assumption of the Assignee's Share effected by this Agreement) and (ii) the
addresses for (A) notice purposes and (B) LIBOR Office as set forth in items 2
and 3, respectively, of Annex I hereto and (b) promptly on or after the
-------
Effective Date, ARC will execute and deliver any documents and instruments that
the Assignor or the Assignee reasonably may require.
SECTION 6. Representations and Warranties. (a) Each of the Assignor and
------------------------------
the Assignee represents and warrants to the other as follows:
(i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement, to fulfill the
obligations hereunder and to consummate the transactions contemplated
hereby,
(ii) the making and performance of this Agreement and all documents
required to be executed and delivered hereunder do not and will not violate
any law or regulation of the jurisdiction of its incorporation or any other
applicable law or regulation,
(iii) this Agreement has been duly executed and delivered and
constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms, and
(iv) all approvals, authorizations or other actions by, or filing
with, any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained.
(b) The Assignor represents and warrants to the Assignee that the
Assignee's Share and the Purchases attributable to the Assignee's Share are not
subject to any liens or security interests created by the Assignor.
(c) Except as set forth in subsections (a) and (b), the Assignor makes no
--------------- ---
representations or warranties, express or implied, to the Assignee and shall not
be responsible to the Assignee for (i) the execution, effectiveness,
genuineness, legality, validity, enforceability, collectibility, regulatory
status or sufficiency of the Revolving Certificate Purchase Agreement or any of
the other Transaction Documents, (ii) the perfection, priority, value or
adequacy of any collateral security or guaranty, (iii) the taking of any action,
or the failure to take any action, with respect to any of the Transaction
Documents, (iv) any representations, warranties, recitals or statements made in
any of the Transaction Documents or in any written or oral financial or other
statements, instruments, reports, certificates or documents made or furnished by
the Assignor to the Assignee or by or on behalf of ARC or any of its Affiliates
to the Assignor or the Assignee in connection with the Transaction Documents and
the transactions contemplated thereby, (v) the financial or other condition of
ARC or any other Person or (vi) any other matter having any relation to any of
the foregoing. The Assignor shall not be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or
page 4
<PAGE>
agreements contained in any of the Transaction Documents or the existence or
possible existence of any Unmatured Liquidation Event, Liquidation Event or
Servicer Default. Additionally, the Assignor shall not have any duty or
responsibility either initially or on a continuing basis to make any
investigation or any appraisal on the Assignee's behalf or to provide the
Assignee with any credit or other information with respect thereto, whether
coming into the Assignor's possession before the execution of the Revolving
Certificate Purchase Agreement or at any time thereafter. The Assignor shall
have no responsibility with respect to the accuracy of, or the completeness of,
any information provided to the Assignee, whether by the Assignor or by or on
behalf of ARC or any other Person obligated under the Revolving Certificate
Purchase Agreement or any related instrument or document.
(d) The Assignee represents and warrants that it has made its own
independent investigation of each of the foregoing matters, including the
financial condition and affairs of ARC and its Affiliates, in connection with
the making of the Purchases and the execution of this Agreement (including the
solvency of ARC and its Affiliates, their ability to pay their respective debts
as they mature and the capital of ARC and its Affiliates remaining after the
closing under the Transaction Documents and the consummation of the transactions
contemplated thereby) and has made and shall continue to make its own appraisal
of the creditworthiness of ARC and its Affiliates. The Assignee (i) confirms
that it has received copies of the Transaction Documents together with copies of
certain other closing documents delivered in connection with the Revolving
Certificate Purchase Agreement, financial statements and any other documents and
information that it has requested or deemed appropriate to make its own credit
analysis and decision to enter into this Agreement and (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Revolving Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Transaction Documents.
SECTION 7. No Proceedings and Confidentiality. The Assignee hereby agrees
----------------------------------
to be bound by the provisions of Sections 10.14 and 10.15 of the Revolving
Certificate Purchase Agreement.
SECTION 8. [Withholding Taxes. In accordance with Section 4.06 of the
-----------------
Revolving Certificate Purchase Agreement, the Assignee agrees to execute and
deliver to the Agent, for delivery to ARC, on or before the Effective Date, and
thereafter before January 15th of each year, (a) an Internal Revenue Service
Form 1001 or 4224 or successor applicable form, properly completed and duly
executed by the Revolving Purchaser certifying that it is entitled to receive
payments under the Revolving Certificate Purchase Agreement without deduction or
withholding of any United States Federal income taxes, and (b) an original copy
of Internal Revenue Service Form W-8 or W-9 or applicable successor form,
properly completed and duly executed. The Assignee represents and warrants to
ARC and the Assignor that, as of the Effective Date, it shall be entitled to
receive payments of principal and Investor Revolving Yield hereunder without
deduction for or on account of any taxes
page 5
<PAGE>
imposed by the United States of America or any political subdivision thereof.
In the event that, after delivering the applicable form, the Assignee shall
cease to be exempt from withholding and/or deduction of taxes, then the Agent
may withhold and/or deduct the applicable amount from any payments of principal,
Investor Revolving Yield and any fees to which the Assignee otherwise would be
entitled, and the Agent shall have no liability whatsoever to the Assignee for
any such withholding or deduction. The Assignee shall indemnify ARC and the
Agent from and against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs or expenses that result from the Assignee's
breach of such representation and warranty./*/
SECTION 9. ]Miscellaneous. (a) Each of the parties hereto agrees to take
-------------
any action and execute and deliver any documents that any party hereto
reasonably may request from time to time in order to implement more fully the
purposes of this Agreement. Without limiting the generality of the foregoing,
the Assignor and the Assignee will cooperate in obtaining for the Assignee a
Certificate (as well as a replacement Certificate for the Assignor representing
any retained interest of the Assignor).
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
(c) Except as otherwise set forth herein, this Agreement sets forth the
entire agreement between the parties relating to the subject matter hereof, and
no term or provision of this Agreement may be amended, changed, waived,
discharged or terminated orally or otherwise, except in a writing signed by the
Assignor and the Assignee.
(d) This Agreement may be executed in any number of counterparts 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.
(e) Each of the parties hereto agrees that each party shall bear its own
expenses in connection with the preparation and execution of this Agreement and
the consummation of the Assignment described herein. The Assignee further
agrees that it shall send a check in the amount of $3,000 to the Agent on or
prior to the Effective Date, as payment of the processing and recordation fee
described in Section 10.3(c) of the Revolving Certificate Purchase Agreement.
(f) All representations and warranties made, and indemnities provided for,
herein shall survive the consummation of the transactions contemplated hereby.
____________________________
/*/ If the Assignee is a foreign entity.
page 6
<PAGE>
(g) The Assignor may at any time or from time to time grant assignments
and participations in its rights and obligations under the Revolving Certificate
Purchase Agreement and its Certificate to other Persons, but not in the portions
thereof assigned to the Assignee.
(h) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Neither the
Assignor nor the Assignee may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
party. The preceding sentence shall not limit the right of the Assignee to
assign all or part of the Assignee's Share in the manner contemplated by the
Revolving Certificate Purchase Agreement.
(i) The Assignee acknowledges that all obligations of the Agent are
subject to Article IX of the Revolving Certificate Purchase Agreement.
page 7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
_____________________________,
as Assignor
By: _________________________
Title: _____________________
_____________________________,
as Assignee
By: _________________________
Title: _____________________
The undersigned hereby acknowledges the terms and provisions of this
Agreement, and agrees to make payments in respect of principal, Investor
Revolving Yield and fees as described in Section 4(a).
------------
BANKERS TRUST COMPANY,
as the Agent
By: _______________________
Title: ___________________
page 8
<PAGE>
ANNEX I
to the Assignment Agreement
ITEM 1. ASSIGNEE'S SHARE:
(a) Assignee's Stated Amount $______________
(b) Assignee's Percentage ______________%
ITEM 2. ADDRESS OF ASSIGNEE FOR NOTICE PURPOSES:
__________________________________
__________________________________
__________________________________
Attention: _______________________
Telephone: _______________________
Facsimile: _______________________
ITEM 3. LIBOR OFFICE OF ASSIGNEE:
__________________________________
__________________________________
__________________________________
page 9
<PAGE>
|| APPENDIX X
to Revolving Certificate Purchase
Agreement Series 1994-1
INDEX OF ADDITIONAL DEFINED TERMS
---------------------------------
<TABLE>
<S> <C>
Agent..........................................................................1
Agreement......................................................................1
AmeriSource....................................................................1
ARC............................................................................1
Assignees.....................................................................25
Certificates...................................................................1
Confidential Information......................................................30
Credit Exposure...............................................................24
Financial Advisors............................................................14
Indemnitees...................................................................27
LIBOR Office...................................................................8
Non-Usage Fee..................................................................7
Participants..................................................................24
Percentage.....................................................................2
Pooling Agreement..............................................................1
Purchase.......................................................................2
Receivables Review............................................................20
Representative................................................................31
Required Revolving Purchasers.................................................19
Revolving Purchasers...........................................................1
Securities Act................................................................13
Servicer.......................................................................1
Specified Basis Points.........................................................7
Stated Amount..................................................................4
Supplement.....................................................................1
Taxes.........................................................................11
Transferee....................................................................26
Trust..........................................................................1
Trust Interest.................................................................1
Trustee........................................................................1
page 10
</TABLE>
||
<PAGE>
Exhibit 4.14
================================================================================
SERIES 1994-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
dated as of December 13, 1994
among
AMERISOURCE RECEIVABLES CORPORATION,
as transferor,
AMERISOURCE CORPORATION,
as initial Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
OF POOLING AGREEMENT
<S> <C> <C>
SECTION 1.01 Definitions .................................................. 1
SECTION 1.02 Incorporation of Terms andProvisions of the Pooling
Agreement................................................... 5
<CAPTION>
ARTICLE II
DESIGNATION
<S> <C> <C>
SECTION 2.01 Designation .................................................. 5
<CAPTION>
ARTICLE III
PAYMENTS
<S> <C> <C>
SECTION 3.01 Payments ..................................................... 5
SECTION 3.02 Interest ..................................................... 5
SECTION 3.03 Principal Payments ........................................... 6
SECTION 3.04 Commitment Fees; Additional Amounts; Breakage Payment ........ 7
<CAPTION>
ARTICLE IV
PAY-OUT EVENTS
<S> <C> <C>
SECTION 4.01 Pay-Out Events ............................................... 7
<CAPTION>
ARTICLE V
MISCELLANEOUS
<S> <C> <C>
SECTION 5.01 Governing Law ................................................ 8
SECTION 5.02 Counterparts ................................................. 8
SECTION 5.03 Severability of Provisions ................................... 8
SECTION 5.04 Amendment, Waiver, Etc ....................................... 8
SECTION 5.05 The Trustee .................................................. 8
SECTION 5.06 Instructions in Writing ...................................... 8
</TABLE>
EXHIBIT
EXHIBIT A Form of Series 1994-1 Investor Revolving Certificate
<PAGE>
This Series 1994-1 SUPPLEMENT, dated as of December 13, 1994 (this
"Supplement"), is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware
corporation, as transferor ("ARC"), AMERISOURCE CORPORATION, a Delaware
corporation ("AmeriSource"), as the initial Servicer (in that capacity, together
with any successor in that capacity, the "Servicer"), and MANUFACTURERS AND
TRADERS TRUST COMPANY, a New York banking corporation, as Trustee (in that
capacity, together with any successor in that capacity, the "Trustee").
Pursuant to the Pooling and Servicing Agreement, dated as of December 13,
1994, (as it may be amended, supplemented or otherwise modified from time to
time, and as supplemented hereby, the "Pooling Agreement"), among ARC, the
Servicer and the Trustee, ARC may from time to time direct the Trustee to issue,
on behalf of the Trust, one or more Series of Investor Revolving Certificates
representing undivided interests in the Trust. Certain terms applicable to a
Series are to be set forth in a Supplement. This Supplement is a Supplement as
such is defined in the Pooling Agreement.
Pursuant to this Supplement, ARC and the Trustee shall create a Series of
Investor Revolving Certificates and specify certain terms thereof.
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
OF POOLING AGREEMENT
SECTION 1.01 Definitions. (a) Except as otherwise defined herein,
-----------
capitalized terms have the meanings that Appendix A to the Pooling Agreement
assigns to them, and this Supplement shall be interpreted in accordance with the
conventions set forth in Parts B, C and D of that Appendix A.
(b) Each capitalized term defined herein relates only to the Series
1994-1 Certificates and to no other Series of Certificates issued by the Trust.
Whenever used in this Supplement, the following words and phrases shall have the
following meanings:
"ABR Tranche" means, at any time, the portion of the Series 1994-1
Invested Amount that is designated by ARC in accordance with the Revolving
Certificate Purchase Agreement to accrue interest based on the Alternate Base
Rate.
"Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest most recently announced by the Reference
Bank at its principal office as its prime lending rate, and
Page 1
<PAGE>
(b) the Federal Funds Rate plus 50 basis points.
Any change in the interest rate resulting from a change in the prime
lending rate announced by the Reference Bank shall become effective without
prior notice to ARC or the Servicer as of 12:01 a. m., New York City time, on
the Business Day on which each change in the prime lending rate is announced by
the Reference Bank. The prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged by the Reference
Bank to any customer. The Reference Bank may make commercial loans or other
loans at rates of interest at, above or below the prime lending rate.
"Applicable Margin" means:
(a) with respect to any Eurodollar Tranche and any period set
forth below, the number of basis points set forth opposite the period:
<TABLE>
<CAPTION>
Period Basis Points
------ ------------
<S> <C>
Closing to the date six months after the Closing Date 50
then to the date nine months after the Closing Date 62.5
then to the date one year after the Closing Date 75
thereafter 150
</TABLE>
(b) with respect to any ABR Tranche and any period set forth below,
the number of basis points set forth opposite the period:
<TABLE>
<CAPTION>
Period Basis Points
------ ------------
<S> <C>
Closing to the date one year after the Closing Date 0
thereafter 50
</TABLE>
"Applicable Ratings Agencies" means each of the nationally recognized
statistical rating agencies that, at the request of ARC, at that time maintains
a credit rating of the Series 1994-1 Certificates.
"Base Amount" means the Base Amount as calculated pursuant to Section
4.03(b) of the Pooling Agreement; provided, however, that upon ARC's giving of
notice to the Revolving Purchasers, pursuant to Section 2.03 of the Revolving
Certificate Purchase Agreement for this Series, that each of their Stated
Amounts is to be reduced to zero due to the issuance of another Series of
Certificates (the "Take-out Certificates"), the Base Amount shall equal the
lower of (a) the Base Amount as calculated for purposes of the Series 1994-1
Certificates and (b) the Base Amount as calculated for purposes of the Take-out
Certificates that are to be issued.
Page 2
<PAGE>
"Eligible Institution" means a bank that has a long-term debt rating of
at least "A" by S&P or is otherwise approved by the Applicable Rating Agencies.
"Eurodollar Tranche" means, during any Yield Period, any portion of the
Series 1994-1 Invested Amount that has been designated by ARC in accordance with
the Revolving Certificate Purchase Agreement to accrue interest based on LIBOR.
Pursuant to the Revolving Certificate Purchase Agreement, there may be up to
four Eurodollar Tranches outstanding at any time.
"Expected Final Payment Date" means, with respect to the Series 1994-1
Certificates, the Settlement Date that is 60 months after the Closing Date.
"Federal Funds Rate" means 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 the day (or, if the day is not a
Business Day, the immediately preceding Business Day) by the Federal Reserve
Bank of New York; provided, that, if the rate is not so published for any
Business Day, the rate for purposes of this clause will be the average of the
quotations for the day on such transactions received by the Reference Bank from
three Federal funds brokers of recognized standing selected by it.
"LIBOR" means, with respect to any Yield Period, the rate per annum equal
to (a) the rate at which deposits in Dollars are offered by the Reference Bank
to first-class banks in the London interbank market at approximately 11:00 a.
m., London time, two Business Days prior to the first day of the relevant Yield
Period, such deposits being in the approximate amount of and having a Yield
Period equivalent to the Eurodollar Tranche to be funded or maintained, divided
by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to
the Yield Period. LIBOR shall be rounded, if necessary, to the next higher of
1/16 of 1%.
"Pay-Out Event" is defined in Section 4.01 of this Supplement.
------------
"Reference Bank" means the Agent under the Revolving
Certificate Purchase Agreement.
"Reserve Requirement" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) that is imposed
against the Reference Bank in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Revolving Certificate Purchase Agreement" means the Revolving
Certificate Purchase Agreement dated as of the date hereof among ARC,
AmeriSource, the Revolving Purchasers named therein and Bankers Trust Company,
as Agent and Revolving Purchaser, as it may be amended, supplemented or
otherwise modified from time to time.
Page 3
<PAGE>
"Sale Date" means, with respect to the Series 1994-1 Certificates, the
Settlement Date that is 70 months after the Closing Date.
"Scheduled Final Payment Date" means the Sale Date.
"Scheduled Pay-Out Commencement Date" means the first day of the October,
1999 Calculation Period.
"Series 1994-1 Certificate" means any Certificate issued pursuant to this
Supplement and the Revolving Certificate Purchase Agreement, substantially in
the form of Exhibit A to this Supplement.
---------
"Series 1994-1 Initial Invested Amount" means $0.
"Series 1994-1 Invested Amount" means, at any time, an amount equal to
(a) the sum of (i) the Series 1994-1 Initial Invested Amount, plus (ii) all
additions made to the Series 1994-1 Invested Amount pursuant to Section 4.03 of
the Pooling Agreement plus (iii) all additions to the principal amount of Series
1994-1 Certificates made pursuant to Section 6.11 of the Pooling Agreement,
minus (b) the sum of (i) all reductions in the Series 1994-1 Invested Amount
made pursuant to Section 4.03 of the Pooling Agreement, (ii) the aggregate
amount of all other principal payments made to the Holders of the Series prior
to that time in respect of the Series, (iii) the aggregate amount of all funds
on deposit in the Principal Funding Account and the Defeasance Account with
respect to the Series and (iv) any Investor Allocable Charged-Off Amounts (net
of Investor Net Recoveries) allocated to the Series.
"Series 1994-1 Investor Revolving Certificate Rate" means, at any time,
the weighted average of the interest rates on all outstanding Tranches.
"Tranche" means each of the ABR Tranche and each Eurodollar Tranche.
"Yield Period" means, with respect to the Series 1994-1 Certificates:
(a) as to the ABR Tranche (if any) from time to time, each period
from one Settlement Date to the next Settlement Date (except that the
initial Yield Period shall commence on the Closing Date), and
(b) as to each Eurodollar Tranche (if any) from time to time, each
period from the date upon which it was first designated as such pursuant
to the Revolving Certificate Purchase Agreement (or the end of the next
preceding Yield Period for such Eurodollar Tranche, if there has been
one) to the corresponding date in the next calendar month; provided, that
(i) if there is no corresponding date, the Yield Period will end on the
last day of the next calendar month and (ii) if any Yield Period for a
Eurodollar Tranche would otherwise end on a day that is not a Business
Day, such
Page 4
<PAGE>
Eurodollar Tranche shall instead end on the next Business Day (or, if the
next Business Day falls in the next calendar month, then the Yield Period
shall end on the next preceding Business Day).
SECTION 1.02 Incorporation of Terms and Provisions of the Pooling
----------------------------------------------------
Agreement.
---------
This Supplement hereby incorporates by reference the terms and provisions of the
Pooling Agreement as if they were set forth in full herein. As supplemented by
this Supplement, the Pooling Agreement is hereby in all respects ratified and
confirmed and both together shall be read, taken and construed as one and the
same agreement. In the event of any conflict or inconsistency between the terms
of this Supplement and the terms of the Pooling Agreement as the terms apply to
any of the Series 1994-1 Certificates, the terms of this Supplement shall
control.
ARTICLE II
DESIGNATION
SECTION 2.01 Designation. There is hereby created a Series of
-----------
Investor Revolving Certificates to be issued pursuant to the Pooling Agreement
and this Supplement to be known as "Series 1994-1 Certificates." Subject to the
conditions set forth in the Revolving Certificate Purchase Agreement, the
Trustee shall authenticate and deliver the Series 1994-1 Certificates, to or
upon the order of ARC, in an aggregate stated amount equal to $230,000,000. The
Series 1994-1 Certificates shall be authenticated and delivered in the manner
and at the times for authentication and delivery of Investor Revolving
Certificates that are specified in Article VI of the Pooling Agreement. The
Series 1994-1 Certificates are a Senior Class.
ARTICLE III
PAYMENTS
SECTION 3.01 Payments. Except as expressly provided otherwise in
--------
this Supplement, interest and principal shall be distributed in respect of the
Series 1994-1 Certificates at the times described in, and in the amounts
calculated pursuant to, Articles IV and V of the Pooling Agreement for payments
that are to be made with respect to Investor Revolving Certificates.
SECTION 3.02 Interest. (a) ARC shall have the right from time to
--------
time to allocate the outstanding principal amount under the 1994-1 Certificates
to multiple Tranches: up to four Eurodollar Tranches and an ABR Tranche.
Interest on the ABR Tranche shall be payable on each Settlement Date, and
interest on a Eurodollar Tranche shall be payable at the
Page 5
<PAGE>
end of the applicable Yield Period, except that interest on the amount of any
principal repaid on any other date shall be payable on the date of the
repayment.
(b) Interest on a Eurodollar Tranche shall accrue during any Yield Period
at a rate per annum equal to the Applicable Margin plus the applicable LIBOR and
shall be calculated on the basis of actual days over a year of 360 days.
(c) Interest on the ABR Tranche shall accrue (i) during the period from
the Closing Date to (and including) the 75th day following the Closing Date, at
125 basis points over the Federal Funds Rate in effect from time to time, and
(ii) thereafter at the Applicable Margin plus the Alternate Base Rate in effect
from time to time. The interest 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 1994-1 Certificates due but not
paid on any Settlement Date or the last day of a Yield Period, as the case may
be, will be due on the next Settlement Date or last day of the next Yield Period
with additional interest on the amount at 2% above the applicable Certificate
Rate to the extent permitted by law.
SECTION 3.03 Principal Payments. (a) Prior to the earlier of the
------------------
Liquidation Commencement Date and the Pay-Out Period Commencement Date, the
outstanding principal amount of the 1994-1 Certificates shall vary from time to
time as positive Variable Amounts and other amounts are allocated (in whole or
in part) to increase the Series 1994-1 Invested Amount and as Collections are
allocated to repay (in whole or in part) the Series 1994-1 Invested Amount. In
any event, the principal amount of any Series 1994-1 Certificate outstanding at
any time shall not exceed its Stated Amount.
(b) After the commencement of the Liquidation Period or the Pay-Out
Period with respect to Series 1994-1 Certificates, no further increases in the
Investor Revolving Invested Amount of the Series 1994-1 Certificates shall be
made. On each Business Day during the Pay-Out Period for Series 1994-1
Certificates (until the Series 1994-1 Invested Amount has been provided for in
full), the Servicer shall allocate a portion of the Collections available in the
Master Collection Account, after making any required transfers to the Carrying
Cost Account, to the Series 1994-1 Invested Amount and transfer the portion to
the Defeasance Account. The portion of Collections so allocated and transferred
shall equal (i) the Defeasance Allocation Percentage for the Series 1994-1
Certificates multiplied by (ii) the amount of the available Collections. The
amounts so allocated to the Defeasance Account during each Calculation Period
shall be paid to the Holders of the Series 1994-1 Certificates in reduction of
the Series 1994-1 Invested Amount on the next Settlement Date or on an earlier
date that ARC may elect; provided, however, that if the Liquidation Period
commences at a time when any such amounts are being held in the Defeasance
Account, the amounts being so held shall be reallocated to the Master Collection
Account for application along with the other amounts held therein.
Page 6
<PAGE>
(c) If the Liquidation Period commences at any time when the Series
1994-1 Invested Amount is greater than zero, the Series 1994-1 Certificates
shall thereafter be entitled to receive, on each Settlement Date occurring after
the Calculation Period in which the Liquidation Period commences (and until the
principal outstanding under the 1994-1 Certificates has been paid in full) funds
in an amount equal to the Principal Distribution Amount with respect to the
Series 1994-1 Certificates.
SECTION 3.04 Commitment Fees; Additional Amounts; Breakage Payments. (a)
------------------------------------------------------
Non-Usage Fees and other fees payable by ARC to the Revolving Purchasers and the
Agent under the Revolving Certificate Purchase Agreement and one or more fee
letters executed by ARC shall be payable from funds available for allocation
under clause Seventh of Section 4.03(g) of the Pooling Agreement or clause Third
of Section 4.03(h) of the Pooling Agreement, as applicable.
(b) Additional amounts and breakage payments on account of increased
costs relating to eurodollar funding, capital costs, breakage of a Eurodollar
Tranche, changes in tax laws and certain indemnity obligations payable under the
Revolving Certificate Purchase Agreement shall be payable from funds available
for allocation under clause Seventh of Section 4.03(g) or clause Third of
Section 4.03(h) of the Pooling Agreement, as applicable.
(c) The rating of the Series 1994-1 Certificates will not address the
likelihood of payment of any such fees, additional amounts or breakage payments.
ARTICLE IV
PAY-OUT EVENTS
SECTION 4.01 Pay-Out Events. Any of the following shall be a "Pay-Out
--------------
Event" with respect to the Series 1994-1 Certificates:
(a) The Majority Investors do not declare a Liquidation Commencement
Date with respect to a Liquidation Event described in clause (a), (b) or
(f) of Section 9.01 of the Pooling Agreement, and Holders of Investor
Certificates representing more than 50% of the Series 1994-1 Invested
Amount declare that a Pay-Out Event has occurred.
(b) The Series 1994-1 Certificates shall cease to be rated "A" or
better by S&P and such condition shall continue for a period of 90 days;
provided, that during such period ARC, AmeriSource and the Holders of the
Certificates shall cooperate in good faith to make such changes to the
Program and the Certificates that may be required to restore the rating;
and provided further that no such party shall be required to consent to
any amendment to a
Page 7
<PAGE>
Transaction Document that it determines in its sole and reasonable
discretion to be materially adverse to its own interests.
(c) The Scheduled Pay-Out Commencement Date shall occur.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 5.02 Counterparts. This Supplement may be executed in any number
------------
of counterparts 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 5.03 Severability of Provisions. If any one or more of the
--------------------------
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall in
no way affect the validity or enforceability of the other provisions or terms of
this Supplement.
SECTION 5.04 Amendment, Waiver, Etc. The provisions of this Supplement
-----------------------
may be amended, modified or waived from time to time by the Servicer, ARC and
the Trustee with the consent of the Required Series Holders of the Series 1994-1
Certificates to the extent permitted by Section 13.01 of the Pooling Agreement,
and the terms of that section shall apply to any such amendment, modification or
waiver.
SECTION 5.05 The Trustee. The 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 ARC and the Servicer.
SECTION 5.06 Instructions in Writing. All instructions given by the
-----------------------
Servicer to the Trustee pursuant to this Supplement shall be in writing, and may
be included in a Daily Report or Settlement Statement.
Page 8
<PAGE>
IN WITNESS WHEREOF, ARC, the Servicer and the 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.
AMERISOURCE RECEIVABLES CORPORATION,
as transferor
By: _________________________________________
Title: _____________________________________
Address: P.O. Box 1735
Southeastern, Pennsylvania 19399-1735
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
AMERISOURCE CORPORATION,
as initial Servicer
By: _________________________________________
Title: _____________________________________
Address: 300 Chester Field Parkway
Malvern, Pennsylvania 19355
Attention: Kurt Hilzinger
Telephone: (610) 296-4480
Facsimile: (610) 993-9085
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By: _________________________________________
Title: Trust Officer
Address: One M&T Plaza - 7th Floor
Buffalo, New York 14203
Attention: Russell Whitley
Telephone: (716) 842-5602
Facsimile: (716) 842-4474
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came
____________, who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of AmeriSource Receivables
Corporation, a Delaware corporation, the corporation described in and that
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
_________________________________
Notary Public
Type or
Print Name: _____________________
My commission expires:
___________________
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came
____________, who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of AmeriSource Corporation, a
Delaware corporation, the corporation described in and that executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
_________________________________
Notary Public
Type or
Print Name: _____________________
My commission expires:
___________________
<PAGE>
STATE OF ___________ )
)
COUNTY OF __________ )
On the _____ day of December, 1994 before me personally came
____________, who being by me duly sworn, did depose and say that he resides at
__________________, that he is the ______________ of Manufacturers and Traders
Trust Company, a New York banking corporation, the corporation described in and
that executed the foregoing instrument; and that he signed his name thereto by
order of the board of directors of the corporation.
Given under my hand and notarial seal, this _____ day of December, 1994.
_________________________________
Notary Public
Type or
Print Name: _____________________
My commission expires:
___________________
<PAGE>
EXHIBIT A
to the Series 1994-1 Supplement
FORM OF SERIES 1994-1 INVESTOR REVOLVING CERTIFICATE
----------------------------------------------------
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THE CERTIFICATEHOLDER
HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE CERTIFICATEHOLDER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A (A "QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, AND WHOM THE
CERTIFICATEHOLDER HAS INFORMED, IN EACH CASE, THAT THE OFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN A TRANSACTION
COMPLYING WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT OR (3)
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND THE
TRUSTEE AND ARC RECEIVES WRITTEN REPRESENTATIONS OF THE TRANSFEROR AND
TRANSFEREE SATISFACTORY TO THE TRUSTEE AND ARC REGARDING THE DISPOSITIONS, AND,
IF THE TRUSTEE OR ARC SO REQUIRES, AN OPINION OF COUNSEL OF THE TRANSFEROR
SATISFACTORY TO THE TRUSTEE AND ARC WITH RESPECT TO THE AVAILABILITY OF SUCH
EXEMPTION PRIOR TO THE RESALE OR TRANSFER. WITH RESPECT TO CLAUSES (1), (2) AND
----------- ---
(3), SUBJECT TO THE RECEIPT BY THE TRUSTEE OF OTHER EVIDENCE ACCEPTABLE TO THE
- - - ---
TRUSTEE THAT THE OFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES OF AMERICA OR OTHER APPLICABLE
JURISDICTION AND SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE UNITED STATES
OF AMERICA. THE CERTIFICATEHOLDER OF THIS CERTIFICATE AGREES THAT IT WILL, AND
EACH SUBSEQUENT CERTIFICATEHOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
Page 1
<PAGE>
AMERISOURCE RECEIVABLES MASTER TRUST
SERIES 1994-1 INVESTOR REVOLVING CERTIFICATE
Initial Stated Amount: $230,000,000
Percentage Interest evidenced
by this Certificate: 100%
Initial Cut-Off Date: December 12, 1994
First Distribution Date: Settlement Date relating to November 1994 Cut-Off Date
THIS CERTIFIES THAT Bankers Trust Company is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the AmeriSource
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of December 13, 1994 (as the same may
be amended, supplemented, amended and restated or otherwise modified from time
to time, the "Pooling Agreement"), among AmeriSource Receivables Corporation, a
Delaware corporation, as transferor ("ARC"), AmeriSource Corporation, a Delaware
corporation, as initial Servicer (in such capacity, the "Servicer"), and
Manufacturers and Traders Trust Company, a New York banking corporation, as
trustee (together with its successors and assigns in such capacity, the
"Trustee") and (b) the Supplement dated as of December 13 relating to the Series
1994-1 Investor Revolving Certificates (the "Supplement"). This Certificate is
one of the duly authorized Series 1994-1 Investor Revolving Certificates
designated and issued under the Pooling Agreement and the Supplement. Except as
otherwise defined herein, capitalized terms have the meanings that the
Supplement or Appendix A to the Pooling Agreement 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, 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 Series 1994-1
Investor Revolving Certificates are a Senior Class.
This Certificate evidences the amount of Purchases (as defined in the
Revolving Certificate Purchase Agreement) made by the Holder hereof that are
from time to time outstanding. The Holder hereof shall and is hereby authorized
to record on the grid attached to this Certificate (or at such Holder's option,
in its internal books and records) the date and amount of each Purchase made by
it, the portion of its outstanding Purchases that are from time to time
allocated to the ABR Tranche and any Eurodollar Tranche, the amount of each
repayment of the principal amount represented by this Certificate and any
reductions to the Stated Amount of this Certificate made pursuant to Section
2.03 of the Revolving Certificate Purchase Agreement; provided, however, that
failure to make any such recordation on the grid or records or any error in the
grid or records shall not adversely affect the Holder's rights with respect to
its interest in the assets of the Trust and its right to receive Investor
Page 2
<PAGE>
Revolving Yield in respect of the outstanding principal amount of all Purchases
made by the Revolving Purchasers.
Investor Revolving Yield shall accrue on this Certificate as set forth in
the Pooling Agreement, the Revolving Certificate Purchase Agreement and the
Supplement. This Certificate is subject to prepayment prior to the maturity
hereof to the extent set forth in the Pooling Agreement and the Supplement.
The Pooling Agreement, the Revolving Certificate Purchase Agreement and
the Supplement 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, the Revolving Certificate Purchase Agreement and the
Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of the 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, ARC, any Seller, the Servicer, the Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Trust Assets.
As provided in the Pooling Agreement, and subject to the restrictions
on sale, transfer and disposition set forth in the Transaction Documents, upon
surrender for registration of transfer of this Certificate at any office or
agency of the Transfer Agent and Registrar maintained for that purpose, ARC
shall execute and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and Series that is/are in authorized denominations of like aggregate
fractional interests in the assets of the Trust of the Series 1994-1 Investor
Revolving Certificates, and that bear(s) a number that is not contemporaneously
outstanding.
As provided in the Pooling Agreement, and subject to the restrictions
on exchange set forth in the Transaction Documents, at the option of the Holder,
this Certificate may be exchanged for other Certificates of the same Class and
Series of authorized denominations of like aggregate fractional interests in the
Revolving Certificate Interest of the Series 1994-1 Investor Revolving
Certificates and bearing numbers that are not contemporaneously outstanding,
upon surrender of this Certificate to be exchanged at any such office or agency.
If this Certificate is so surrendered for exchange, ARC shall execute, and the
Trustee shall authenticate and deliver, the appropriate number of Certificates
of the same Class and Series.
If this Certificate is presented or surrendered for registration of
transfer or exchange, it shall be accompanied by a written instrument of
transfer in a form satisfactory to the
Page 3
<PAGE>
Trustee and the Transfer Agent and Registrar duly executed by the Holder hereof
or his attorney-in-fact duly authorized in a writing delivered to the Transfer
Agent and Registrar.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of ARC, and agrees that it is the intent of
the Holder that, for Federal, state and local income and franchise tax purposes
only, the Investor Certificates (including this Certificate) will be treated as
evidence of indebtedness secured by the Trust 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
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 New York, 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 New
York.
IN WITNESS WHEREOF, ARC has caused this Certificate to be executed by its
officer thereunto duly authorized.
AMERISOURCE RECEIVABLES CORPORATION
By: __________________________________
Title: ______________________________
Page 4
<PAGE>
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1994-1 Investor Revolving Certificates referred
to in the Pooling Agreement.
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By: _____________________________________
Title: _________________________________
Dated: December 13, 1994
Page 5
<PAGE>
PURCHASES AND REPAYMENTS
<TABLE>
<CAPTION>
Principal
Amount of Outstanding
Purchase Principal
Amount Purchased Repaid Balance Stated Amount
- - - ------------------ ---------------- ---------------------- ----------------
Yield
Base Eurodollar Period (if Base Eurodollar Base Eurodollar
Rate Rate applicable) Rate Rate Rate Rate Reduction Net
- - - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
EXHIBIT 10.13
JOINT DEFENSE MATERIAL
PRIVILEGED AND CONFIDENTIAL
AGREEMENT
---------
THIS AGREEMENT is made as of October 14, 1994, among the undersigned
corporations ("Party" and "Parties"), each of which is a defendant in at least
one proceeding consolidated or coordinated for pre-trial purposes before the
Hon. Charles P. Kocoras, in the United States District Court for the Northern
District of Illinois under Prescription Drug Master File No. 94 C 897 (the
"MDL Action"), or in related cases filed in state courts in Alabama, California
and Wisconsin alleging that the Parties charged collusively inflated and/or
discriminatory prices for prescription pharmaceutical products. Such cases
already filed, along with any others that may be filed in the future based on
allegations of similar conduct commencing before the effective date of this
Agreement, are collectively referred to herein as the "Prescription Drug Cases."
Some of these Prescription Drug Cases have been brought as purported class
actions. The Parties include manufacturers of prescription pharmaceutical
products ("Manufacturer Defendants") and wholesalers of prescription
pharmaceutical products ("Wholesaler Defendants").
WHEREAS plaintiffs in some of the Prescription Drug Cases have brought
claims against the Manufacturer Defendants under, among other statutes,
Section 1 of the Sherman Act that the Manufacturer Defendants and Wholesaler
Defendants believe to be without basis in fact;
<PAGE>
- 2 -
WHEREAS such claims, in addition to being without basis in fact, have been
brought by retail pharmacies which, in the great majority of instances, do not
purchase prescription pharmaceutical products directly from the Manufacturer
Defendants;
WHEREAS such claims are generally barred by the decision in Illinois Brick
--------------
Co. v. Illinois, 431 U.S. 720 (1977) ("Illinois Brick"), wherein the Supreme
- - - --------------- --------------
Court of the United States ruled that those who do not purchase products
directly from a manufacturer cannot assert antitrust damage claims under Section
1 of the Sherman Act against the manufacturer;
WHEREAS some of those plaintiffs, in order to avoid the impact of the
holding in Illinois Brick, have alleged that the Wholesaler Defendants from
--------------
which they purchase prescription pharmaceutical products directly also violated
Section 1 of the Sherman Act;
WHEREAS those plaintiffs have no basis for suing the Wholesaler Defendants
but, by filing suit, will require such defendants collectively to spend
substantial sums in attorneys' fees and defense costs;
WHEREAS the Wholesaler Defendants have filed, in the MDL Action, a motion
to have the case against them dismissed, as it should be;
WHEREAS the Manufacturer Defendants have been advised that the plaintiffs
had offered to drop their claims against the
<PAGE>
- 3 -
Wholesaler Defendants, if the Wholesaler Defendants would transfer to the
plaintiffs any claims the Wholesaler Defendants may have against the
Manufacturer Defendants as direct purchasers from them, and that the plaintiffs
renewed that offer when the Wholesaler Defendants filed their motion to have the
case against them dismissed;
WHEREAS the Wholesaler Defendants do not wish to transfer to the plaintiffs
any claims the Wholesaler Defendants may have against the Manufacturer
Defendants, which claims the Wholesaler Defendants believe are completely
without merit, but neither do they wish to spend substantial sums in defending
themselves in the Prescription Drug Cases;
WHEREAS the Wholesaler Defendants have asked the Manufacturer Defendants to
reimburse them for certain defense costs in accordance with Part I below, and to
permit them to join the judgment sharing arrangement set forth in Part II below,
in return for which the Wholesaler Defendants will defend themselves on the
merits in the Prescription Drug Cases (or settle on some other basis) rather
than assigning to the plaintiffs claims that the Wholesaler Defendants do not
believe are valid; and
WHEREAS the Wholesaler Defendants will accept the consideration received by
them pursuant to this Agreement in complete settlement of any claims they have
or might have against any of the Manufacturer Defendants for any acts which are
the subject of the Prescription Drug Cases, and will expressly release the
Manufacturer Defendants for any liability thereon;
<PAGE>
- 4 -
NOW THEREFORE
PART I
------
1. The undersigned Manufacturer Defendants shall reimburse the Wholesaler
Defendants, which are parties to this Agreement, for the first $9 million in
attorneys' fees and disbursements that such Wholesaler Defendants collectively
have been or will be required to pay and/or incur to litigate Prescription Drug
Cases brought against one or more Manufacturer Defendant. The amounts payable
to individual Wholesaler Defendants from said $9 million shall be determined by
agreement among the wholesaler Defendants in a manner designed by them equitably
to share the burdens imposed on the Wholesaler Defendants by the Prescription
Drug Cases.
2. The undersigned Manufacturer Defendants shall allocate any
reimbursement payments made or to be made to the Wholesaler Defendants among
Manufacturer Defendants according to the percentages set forth in Exhibit A
annexed hereto and made a part hereof. Exhibit A is based on purchases in
dollars of each Manufacturer Defendant's prescription pharmaceutical products by
retail drug outlets in the United States made either from the manufacturers
directly or through wholesalers.
3. Within thirty days after the effective date of this Agreement, and on a
monthly basis thereafter, the Wholesaler Defendants, acting through Weil Gotshal
& Manges or another entity designated by the wholesaler Defendants (the
"Wholesaler
<PAGE>
- 5 -
Defendants' Agent"), shall furnish to Simpson Thacher and Bartlett or another
entity designated by the Manufacturer Defendants (the "Manufacturer Defendants'
Agent") statements setting forth the amount of attorneys fees and disbursements
for which each Wholesaler Defendant seeks reimbursement pursuant to this
Agreement. The furnishing of such statements shall constitute (i) a
representation by the respective Wholesaler Defendant's attorneys that the
attorneys fees and disbursements set forth therein have been incurred in
connection with one or more of the Prescription Drug Cases brought against one
or more of the Manufacturer Defendants, are reasonable, comport with the
Wholesaler Defendant's guidelines, if any, respecting the handling of litigation
matters, and have been reviewed and approved by their Wholesaler Defendant
client, and (ii) a representation by the Wholesaler Defendants' Agent that such
defendants have agreed among themselves, pursuant to Section 1, above, that
the statements should be reimbursed by the Manufacturer Defendants pursuant to
this Agreement. The statements shall be paid by the Manufacturer Defendants
within thirty days of receipt by the Manufacturer Defendants' Agent unless
Manufacturer Defendants' Agent has a good faith objection thereto.
4. The Wholesaler Defendants hereby assign to the undersigned
Manufacturer Defendants the rights, if any, of Wholesaler Defendants to recover
from the plaintiffs, under Rule 11, Fed. R. Civ. P., 28 U.S.C. (S) 1927 or any
other applicable provision or principle of state or federal law2, any and all
costs
<PAGE>
- 6 -
and/or attorneys fees incurred by them in defending against baseless charges in
the Prescription Drug Cases to the extent that such attorneys fees and/or costs
have been reimbursed by the Manufacturer Defendants under Section 1, above; and
5. The undersigned Wholesaler Defendants shall not assign to the
plaintiffs or to any other person or entity the claims or causes of action, if
any, that such Wholesaler Defendants have or may have against one or more of the
Manufacturer Defendants for the acts that are the subject of the Prescription
Drug Cases; and each of the undersigned Wholesaler Defendants shall execute a
release in favor of each of the undersigned Manufacturer Defendants in the form
attached as Exhibit B.
<PAGE>
- 7 -
PART II
-------
Section 1: Preamble
--------
The Parties believe that they have no liability to the plaintiffs
(including, without limitation, any and all purported classes or groups of
plaintiffs) in the Prescription Drug Cases, and have expressly denied any and
all such alleged liability. The Parties recognize, however, that, in the
unlikely event that an adverse judgment is rendered against two or more of them,
jointly and severally, in any Prescription Drug Case, the plaintiffs may attempt
to satisfy, collect or enforce the entire amount of the judgment from or against
any one of the Parties alone. The Parties further recognize that any judgment
would be trebled and attorneys fees added because of the law applicable in
antitrust cases. Accordingly, the Parties wish to provide for an equitable
apportionment among themselves respecting the payment of any such judgment, and
to avoid controversy, dispute or litigation among themselves with respect
thereto.
Section 2: Definitions
-----------
The following terms shall be defined, solely for purposes of Part II of
this Agreement, as follows:
2.1 "Party" or "Parties" shall mean a signatory to this Agreement, its
subsidiaries and controlled affiliates and their successors and assigns. In the
event that a successor to a Party ("Party A") is itself a Party ("Party B"), the
obligations
<PAGE>
- 8 -
of the successor entity under this Agreement shall be the sum of the
obligations of Party A and Party B.
2.2 "Non-party Judgment Debtor" shall mean any person or entity other
than a Party who is found jointly and severally liable in a Final Judgment
together with a Party or Parties in any Prescription Drug Case. In the event
that a Party becomes the successor to a Non-party Judgment Debtor, the
succcessor Party shall be deemed to be a Non-party Judgment Debtor with respect
to all obligations of the Non-party Judgment Debtor to which it succeeded.
2.3 "Claim" shall mean any demand in any Prescription Drug Case for
damages, or for a refund or adjustment of prior charges, against more than one
Party, based on conduct commencing before the date of this Agreement and
extending up to the time of trial of such Prescription Drug Case, allegedly
charging or agreeing to charge inflated or discriminatory prices for
prescription pharmaceutical products in violation of the Sherman Act or any
other statute or rule of law, state or federal, prohibiting such conduct.
2.4 "Claimant" shall mean any person (including, without limitation,
any natural person and any legal entity of any type whatsoever) who asserts a
Claim or on whose behalf a Claim is asserted.
2.5 "Final Judgment" shall mean any judgment or part thereof for
money damages, entered jointly and severally, on any
<PAGE>
- 9 -
Claim against two or more Parties in any Prescription Drug Case by the trial
court under Fed. R. Civ. P. 58 or any analogous rule in state or federal court
upon which execution may be had against one or more such Parties. A Final
Judgment means not only damages awarded by the jury, but the tripling of such
damages as required by law, together with any statutory penalties, punitive
damages, and any sum awarded as attorneys' fees (for trial and, if applicable,
for appellate review), taxable costs (for trial and, if applicable, for
appellate review), and interest, less any payment or offset for prior
settlements, or other deductions as required by law.
2.6 "Shared Judgment" shall mean any Final Judgment less amounts paid on
such Final Judgment by Non-party Judgment Debtors or other payments reducing the
amount of the Final Judgment which may legally be collected from the Parties.
2.7 "Manufacturer Shared Judgment" shall mean any Shared Judgment less
amounts due on such Shared Judgment from Wholesaler Defendants under Section 3.2
of this Agreement.
2.8 "Settlement" shall mean any disposition of a Claim, in whole or in
part, by agreement between a Party and a Claimant, at any time, irrespective of
whether such disposition results in entry of judgment in favor of such Claimant.
2.9 "Amount Paid in Settlement" shall mean all consideration having a
monetary value, including monetary consideration and goods and services,
provided by a Party to a
<PAGE>
- 10 -
Claimant pursuant to a Settlement with such Claimant, including, without
limitation, any amounts paid for or attributed to costs of litigation or
attorneys' fees. Injunctive relief agreed to in any Settlement with a Claimant
shall, for the purpose of this provision, have no monetary value.
2.10 "Settling Party" means any Party to this Agreement who enters into a
Settlement of any Claim in any Prescription Drug Case in whole or in part at any
time.
2.11 "Payment" shall mean any amounts paid by any Party to this Agreement
in satisfaction of all or any part of a Final Judgment entered against it, or
deemed to have been entered against it as provided in Section 4.2 or Section 6
of this Agreement.
2.12 "Determination" shall mean (i) a ruling of the Court or, absent that,
(ii) an answer to a special jury interrogatory or a special verdict or, absent
either of the foregoing, (iii) a general verdict based on a Claimant's final
theory of damages presented at trial in one or more of the Prescription Drug
Cases.
2.13 "Sharing Parties" or "Sharing Party" shall mean those Parties against
which a Final Judgment is entered, or deemed to have been entered under Section
4.2(a) or Section 6 of this Agreement.
<PAGE>
- 11 -
Section 3: Allocation of Payments and Satisfaction of Judgment
---------------------------------------------------
3.1 If a Final Judgment is entered in any Prescription Drug Case,
the amount of the Shared Judgment shall be computed and Payment in satisfaction
thereof shall be allocated among the Sharing Parties in accordance with the
following provisions of this Agreement.
3.2 Each Sharing Party which is a Wholesaler Defendant ("Wholesaler
Sharing Party") shall pay, with respect to all of the Prescription Drug Cases,
the lesser amount of either (i) 1% of each Shared Judgment or (ii) an aggregate
amount of one million dollars ($1 million) on all Shared Judgments in all
Prescription Drug Cases. For purposes of this section, each Wholesaler Sharing
Party shall include any wholly owned subsidiaries, controlled affiliate and
successors and assigns, regardless of whether or not they are named as separate
defendants in any of the Prescription Drug Cases; and that Wholesaler Sharing
Party, including its subsidiaries, controlled affiliates and successors and
assigns shall pay only once the 1% or $1 million.
3.3 In the case of a Sharing Party which is a Manufacturer Defendant
("Manufacturer Sharing Party"), the first one half of any Manufacturer Shared
Judgment shall be allocated among the Manufacturer Sharing Parties as provided
in Section 3.4, below; and the second one-half of the Manufacturer Shared
<PAGE>
- 12 -
Judgment shall be allocated among the Manufacturer Sharing Parties in accordance
with 3.5 below.
3.4 The first one-half of any Manufacturer Shared Judgment shall be
allocated among the Manufacturer Sharing Parties in proportion to the
percentages set forth in Exhibit A.
Thus if a Final Judgment is entered against all Manufacturer Defendants
which are Parties, each such Manufacturer Defendant will be a Manufacturer
Sharing Party and will pay - as to the first one-half of the Manufacturer Shared
Judgment - the percentage thereof set forth opposite its name on Exhibit A.
If a Final Judgment is entered against less than all of the Manufacturer
Defendants which are Parties, then those Manufacturer Defendants against which
the Final Judgment is entered will be Manufacturer Sharing Parties and will pay
all of the first one-half of the Manufacturer Shared Judgment in proportion, pro
---
rata, to their percentages as set forth opposite their respective names in
- - - ----
Exhibit A.
3.5 Each Manufacturer Sharing Party shall pay a portion of the second
one-half of the Manufacturer Shared Judgment which is equal to the ratio of a)
the dollar sales of prescription pharmaceutical products sold by that
Manufacturer Sharing Party as to which damages were awarded in the Final
Judgment to b) the dollar sales of prescription pharmaceutical products sold by
all Manufacturer Sharing Parties as to which damages were awarded in the Final
Judgment.
<PAGE>
- 13 -
3.6 For the purposes of the application of Section 3.5, supra, it shall be
presumed that payment of the second one-half of said Manufacturer Shared
Judgment shall be allocated between or among the Manufacturer Sharing Parties in
accordance with the percentages set forth in Exhibit A, unless a) the award and
calculation of damages was made with reference to dollar sales of prescription
pharmaceutical products by the Manufacturer Sharing Parties, so that it is
feasible to apply the ratio set forth in Section 3.5, supra, and b) it
---
affirmatively appears from a Determination either that some or all of a
Manufacturer Sharing Party's sales of prescription pharmaceutical products made
to a Claimant through a non-Claimant wholesaler were not included in the award
and calculation of damages, or that one or more of the brand name prescription
pharmaceutical products sold by a Manufacturer Sharing Party was not included in
the award and calculation of damages. If both a) and b) above are true, the
second one half of the Manufacturer Shared Judgment shall not be allocated in
accordance with Exhibit A, but in accordance with the ratio set forth in
Section 3.5.
3.7 Except as expressly provided in Sections 4.2 and 6 of this Agreement,
no Party shall be under any obligation to make any Payment in full or partial
satisfaction of a Final Judgment unless such Final Judgment is entered against
such Party.
3.8 If a judgment is entered against any particular Party and that
judgment shows, in whole or in part, that any particular Party's liability is
not joint and several with any
<PAGE>
- 14 -
other Party's, then the Party whose liability is separate shall not be obligated
or benefitted under this Agreement with respect to that judgment or part
thereof.
The intent of this Section 3.8 is that, if any Final Judgment (which is
defined herein to include a part of a judgment) is subject to joint and several
liability, then the Parties intend that the payment of such Final Judgment shall
be allocated, pursuant to this Agreement, among those Parties which are jointly
and severally liable for that Final Judgment. If, however, there is no joint and
several liability as to any judgment or any part thereof in a Prescription Drug
Case or as to any one or more Parties, then the Parties intend that there would
be no sharing or allocation of liability under this Agreement as to the payment
of that judgment or part thereof or as to any Party not found to be jointly and
severally liable.
3.9 If a Final Judgment is entered in any Prescription Drug Case, the
Sharing Parties shall consult with each other with a view toward arranging the
satisfaction of such Final Judgment. If any Party is required by a Claimant to
make a Payment in excess of the amount allocable to it pursuant to this
Agreement, then within thirty (30) days after written demand by such Party upon
all other Sharing Parties, the other Sharing Parties shall pay to the Party
demanding payment the amount or amounts required to allocate the payment of the
Final Judgment in accordance with Section 3.2 through 3.8, inclusive, of this
Agreement. Any Sharing Party that fails to make its portion of such payment to
<PAGE>
- 15 -
the Party demanding payment within thirty (30) days of such demand shall remain
bound by the terms and conditions of this Agreement and, in addition, shall not,
during such time as it shall remain in default on its obligations under this
Section 3.9 be entitled to receive from any of the other Sharing Parties
reimbursement for any Payment made by it.
Section 4: Settlement
----------
4.1 Any Party may settle any Prescription Drug Case, in whole or in part,
whether for monetary or non-monetary consideration or injunctive relief, or any
combination thereof, at any time. A Settling Party shall provide the other
Parties with prompt written notice of (i) any such Settlement, (ii) the identity
of each Claimant that is a party to the Settlement and (iii) those terms of the
Settlement the presence or absence of which are pertinent to Section 4.2 of this
Agreement.
4.2 The conditions set forth in Sections 4.2 and 4.3 shall govern in the
event of a Settlement of any Prescription Drug Case by any Manufacturer
Defendant ("Manufacturer Settling Party"):
4.2(a) Any Manufacturer Settling Party that does not include a provision
in an agreement of Settlement of a Prescription Drug Case with the
characteristics set forth in Subsection 4.2(b) of this Agreement or, to the
extent applicable, in Section 4.3 of this Agreement shall, for the purpose of
this Agreement, be deemed liable with regard to any Final Judgment on a Claim
susceptible to joint and several liability as to which it
<PAGE>
- 16 -
was a named defendant, and shall remain liable under this Agreement for the
difference between the Amount Paid in Settlement and the amount it would
otherwise have paid in accordance with Sections 3.2 through 3.9, inclusive, of
this Agreement for its proportionate share of any Final Judgment.
4.2(b) To avoid the liability described in Subsection 4.2(a) of this
Agreement, a Manufacturer Settling Party's agreement of Settlement of any
Prescription Drug Case must expressly provide that the Claimant or Claimants
with whom it has settled any Claim or Claims shall exclude from the dollar
amount collectable from non-Settling Parties on any Final Judgment entered on
the Claim or Claims an amount calculated as follows:
i) determine the percentages (of each half of the Manufacturer
-----------
Shared Judgment) for which the Manufacturer Settling Party would have been
responsible under Sections 3.4 and 3.5 had it remained a Sharing Party with
respect to the Final Judgment, and
ii) apply those percentages to each half of the Shared Judgment.
4.2(c) Any manufacturer Settling Party's agreement of Settlement entered in
accordance with Section 4.2 and its subsections shall provide that each of the
other Parties shall be third party beneficiaries of the undertaking set forth
therein so as to reduce the Final Judgment in accordance with subsection
4.2(b).
4.2(d) Thus, in the event of a Settlement by all Manufacturer Defendants
in any Prescription Drug Case in
<PAGE>
- 17 -
accordance with Section 4.2 and its subsections, the Claimants in that case will
have agreed to reduce 100% (i.e., to zero) the dollar amount of any Final
Judgment collectable by the Claimants from any non-Settling Wholesaler
Defendants that might be jointly and severally liable on such Final Judgment.
4.3 If a Manufacturer Settling Party agrees to a Settlement of a judgment
following trial, and before any judgment for money damages entered jointly and
severally on any Claim in any Prescription Drug Case becomes a Final Judgment,
it shall, as a condition to avoid the liability described in Subsection 4.2(a)
of this Agreement, obtain from plaintiffs a written agreement, enforceable by
any other Party, that provides in addition to the provisions specified in
Sub-sections 4.2(b) and 4.2(c) that the amount of any supersedeas bond required
on appeal with respect to such judgment shall be reduced by the amounts (or by
any multiple of such amount if the supersedeas bond required is in excess of the
amount of such judgment) that the Manufacturer Settling Party would have been
required to pay pursuant to Sections 3.2 through 3.9, inclusive, if the judgment
was a Final Judgment and the Manufacturer Settling Party was a Manufacturer
Sharing Party with respect thereto.
4.4 Notwithstanding anything contained in this Section 4, if any Party
obtains a good faith litigated decision from a District Court or other trial
court, or from a jury, that the Party is not liable to plaintiffs in the
Prescription Drug Cases for any damages whatsoever, and the said non-liable
Party
<PAGE>
- 18 -
thereafter settles with plaintiffs before entry of an order by the appellate
court to which an appeal is taken, Section 4.1-4.3 shall not be applicable to
that non-liable Party.
Section 5: Conclusive Effect of Judgment in Principal Suit
-----------------------------------------------
In any arbitration or litigation between Parties concerning claims,
disputes or other questions arising out of, or relating to, this Agreement,
including, without limitation, any breach thereof, a Final Judgment in the
Prescription Drug Cases (i) shall be conclusive with respect to all issues
necessarily decided therein and (ii) may not be collaterally attacked by any
Party in any such arbitration or litigation.
Section 6: Default Judgment and Confession of Judgment
-------------------------------------------
Any Party against which a default judgment has been entered in the
Prescription Drug Cases and which is not thereafter satisfied, or which has
confessed judgment in the Prescription Drug Cases, shall be deemed, for
purposes of this Agreement to be subject to any Final Judgment entered in the
Prescription Drug Cases in which such default or confessed judgment is entered,
and said Party shall be obligated to pay its proportionate share of such Final
Judgment as provided for in Sections 3.2 through 3.6 and Section 3.9, hereof but
shall not be entitled to receive from any other Party hereto any reimbursement
whatsoever for Payment made be said Party.
<PAGE>
- 19 -
Section 7: Default by Party in Payment
---------------------------
If, because of bankruptcy or for any other reason, any Sharing Party fails
or refuses to pay its share of (i) a Final Judgment or (ii) the amounts due
under Part I, paragraph 1 hereof or any portion thereof (a "Defaulting Party")
the unpaid balance of such share shall be borne by the other Manufacturer
Parties, in the same proportion as such other Manufacturer Parties would have
been obligated to pay such Final Judgment (as provided for in Sections 3.2
through 3.6) or such amounts (as provided in Part I, paragraph 1 hereof), as if
the Defaulting party had not been a signatory to this Agreement, without in any
way waiving any rights the Parties have against the Defaulting Party or its
successors or assigns.
Section 8: Interest and Attorney's Fees
----------------------------
If any Party defaults in its obligation to reimburse to any other Party in
accordance with the terms of this Agreement, the amount due as said
reimbursement shall bear interest at the prime interest rate charged by the
Continental Illinois National Bank & Trust Co. at Chicago, Illinois, or any
successor in interest thereto from time to time prevailing, computed from the
date that the other Party serves written notice of demand for reimbursement
upon the Party in default.
In addition, if litigation or any other judicial or quasi-judicial
proceeding is brought by one or more Parties against one or more Parties to
enforce or collect any monetary
<PAGE>
- 20 -
obligation under this Agreement, the prevailing Party or Parties will be
entitled to recover in full the reasonable attorneys' fees, expenses and costs
incurred in pursuing or defending that litigation, or other judicial or
quasi-judicial proceeding.
Section 9: Contribution
------------
Except as provided in this Agreement, each Party waives and agrees not to
assert against any other Party, any claim of any kind, whether now existing or
hereafter created, for contribution, indemnity or sharing, arising from the
Prescription Drug Cases, including, without limitation, any such claim arising
from any judgment for contribution, indemnity or sharing arising from the
Prescription Drug Cases entered in favor of a non-Party defendant against any
Party. Any such judgment shall be paid by the Parties named in such judgment in
accordance with the allocation provisions set forth in Sections 3.2 through 3.6
and Section 3.9 of this Agreement. Nothing herein shall be deemed to be a
recognition that there exist any rights of contribution, or indemnity or sharing
other than as provided in this Agreement.
Section 10: Exclusive Remedy
----------------
10.1 Each Party agrees and covenants that it shall bring no action,
arbitration or proceeding against any other Party for indemnification,
contribution or sharing with respect to the Prescription Drug Cases except an
action to enforce or for breach of this Agreement.
<PAGE>
- 21 -
10.2 Each Party covenants not to sue any other Party on any claim for
indemnification, contribution or sharing arising from the Prescription Drug
Cases, except that this covenant shall not extend or be applicable to any
violation of the terms of this Agreement.
10.3 This Agreement and the covenants herein contained are made solely
for the benefit of the respective Parties, and no other person or entity shall
be entitled to enforce this Agreement or to any rights hereunder.
10.4 The Parties recognize that, in the event of a breach of this
Agreement by another Party or Parties, an award of monetary damages may not
adequately compensate the Parties injured by such a breach. Accordingly, each
Party hereby agrees that any breach of this Agreement may cause irreparable
injury and that the injured Party or Parties may sue for and have equitable
relief, including, without limitation, specific enforcement and/or injunctive
relief, to prevent any such actual or threatened breach.
Section 11: Assignment, Successors and Assigns
----------------------------------
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Parties; provided, however, that the obligations
of one or more Parties pursuant to this Agreement may not be assigned to any
person or entity without the prior written consent of each of the other Parties
hereto, which consent may not be unreasonably withheld. A merger
<PAGE>
- 22 -
or consolidation involving one or more of the Parties hereto whereby said
reimbursement obligation is assigned by operation of law, or the transfer of all
or substantially all of its wholesaling or manufacturing assets and liabilities
to another shall not require such prior written consent. A Party who assigns or
otherwise transfers its rights under this Agreement shall, notwithstanding such
assignment, be entitled to exercise such rights to the extent necessary to
recover the portion of any Payment it is required to make that is in excess of
the amount allocable to it pursuant to this Agreement.
Section 12: Costs Not Included in Agreement
-------------------------------
This Agreement does not provide for reimbursement of, and does not obligate
any Party hereto to reimburse, the attorneys' fees, costs or other expenses paid
or incurred by any of the Manufacturer Defendants in defense of the Prescription
Drug Cases.
Section 13: Counterclaims
-------------
Nothing contained in the Agreement is intended to be, or shall be deemed to
be, a waiver of any defense or counterclaim in any Prescription Drug Case, nor
shall any amount recovered by any Party pursuant to any counterclaim against a
Claimant be subject to, or affected by, this Agreement.
<PAGE>
- 23 -
Section 14: Notices
-------
All notices under this Agreement shall be in writing and shall be sent by
registered or certified mail, first-class postage prepaid, or by fax to the
respective Parties hereto at their addresses or such other addresses as the
Parties from time to time may designate in writing.
Section 15: Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with the
internal law of the State of Delaware, without regard to its choice of law or
conflict of laws principles.
Section 16: Counterparts
------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, provided that
the Agreement shall not become binding on any Party unless it has been executed
by all Parties whose names are typed at the end of this Agreement. Any defendant
in the Prescription Drug Cases may execute and become a Party to this Agreement
by signing any such counterpart and delivering the same to Howrey & Simon, 1299
Pennsylvania Avenue, N.W., Washington, D.C. 20004, provided that the Agreement
shall not become binding on any Party unless and until it has been executed by
all Parties whose names are typed at the end of this Agreement. Howrey & Simon
shall retain all executed counterparts
<PAGE>
- 24 -
of this Agreement and shall circulate to the Parties a conformed copy of this
Agreement indicating all signatures thereto.
Section 17: Miscellaneous
-------------
17.1 Each Party, with the assistance of its respective counsel, has read
this Agreement together with Exhibit A hereto, and the attached form of Release
which is Exhibit B hereto and has had an opportunity fully to negotiate the
terms of said Agreement and Release. Accordingly, any rule of construction
seeking to resolve any ambiguities against the drafting party shall not be
applied in the interpretation of this Agreement.
17.2(a) The Agreement contains the entire agreement and understanding
among the Parties as to the subject matter of the Agreement, and merges and
supersedes all prior agreements, commitments, representations, writings and
discussions among them. None of the Parties will be bound by any prior
obligations, conditions, or representations with respect to the subject matter
of the Agreement, unless expressly incorporated into the Agreement.
17.2(b) Nothing in this Agreement, including, without limitation, the
waivers and agreements not to sue or claim against set forth in Sections 9 and
10, and the provisions of Section 11 and 17.2(a), shall be deemed to supersede,
preclude or otherwise affect any prior or future agreements that are made
between any of the Parties or their affiliated entities in connection with the
acquisition of one Party or any of its
<PAGE>
- 25 -
affiliated entities by another Party or its affiliated entities and that
allocate, as between the parties to those agreement, their rights and
obligations in respect of the Prescription Drug Cases.
17.3 Each of the Parties to this Agreement hereby affirms and
acknowledges: (a) that a representative of the Party with the authority to bind
the Party with respect to the matters set forth herein has read and understood
the Agreement; (b) that the terms of this Agreement and the effects thereof
have been fully explained to that representative by its counsel; (c) that the
representative fully understands each term of the Agreement and its effect; and
(d) that no Party has relied upon any statement, representation or inducement
(whether material, false, negligently made or otherwise) of any other Party with
respect to said Party's decision to execute this Agreement.
<PAGE>
- 26 -
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties
have caused this Agreement to be executed by their officers hereunto duly
authorized, effective as of the date first above mentioned. In so doing, the
Parties expressly agree to and intend to be legally bound by both Part I and
Part II of this Agreement.
By: _____________________
Dated: __________________
For Abbott Laboratories
By: _____________________
Dated: __________________
For American Cyanamid
By: _____________________
Dated: __________________
For American Home Products
Corporation
By: _____________________
Dated: __________________
For AmeriSource Corporation
By: _____________________
Dated: __________________
For Bergen Brunswig Drug Co.
By: _____________________
Dated: __________________
For Boehringer Ingelheim Corp.
<PAGE>
- 27 -
By:_________________________
Dated:______________________
For Bindley Western Industries,
Inc.
By:_________________________
Dated:______________________
For Bristol-Meyers Squibb Co.
By:_________________________
Dated:______________________
For Burroughs Wellcome Co.
By:_________________________
Dated:______________________
For Cardinal Health, Inc.
By:_________________________
Dated:______________________
For Ciba-Geigy Corporation
By:_________________________
Dated:______________________
For Eli Lilly and Company
By:_________________________
Dated:______________________
For DuPont-Merck
Pharmaceuticals Co.
<PAGE>
- 28 -
By: _______________________
Dated:_____________________
For Forest Laboratories, Inc.
By: _______________________
Dated:_____________________
For FoxMeyer Drug Company
By: _______________________
Dated:_____________________
For Glaxo, Inc.
By: _______________________
Dated:_____________________
For Hoffmann-La Roche Inc.
By: _______________________
Dated:_____________________
For Johnson & Johnson
By: _______________________
Dated:_____________________
For Knoll Pharmaceutical Company
By: _______________________
Dated:_____________________
For Marion Merrell Dow, Inc.
By: _______________________
Dated:_____________________
For McKesson Corporation
<PAGE>
- 29 -
By: _______________________
Dated:_____________________
For Merck & Co., Inc.
By: _______________________
Dated:_____________________
For Pfizer, Inc.
By: _______________________
Dated:_____________________
For The Purdue Frederick
Company
By: _______________________
Dated:_____________________
For Rhone-Poulenc Rorer, Inc.
By: _______________________
Dated:_____________________
For Sandoz Corporation
By: _______________________
Dated:_____________________
For Schering-Plough Corporation
By: _______________________
Dated:_____________________
For G.D. Searle & Co.
<PAGE>
- 30 -
By: _______________________
Dated:_____________________
For SmithKline Beecham
Pharmaceuticals Co.
By: _______________________
Dated:_____________________
For The Upjohn Company
By: _______________________
Dated:_____________________
For Whitmire Distribution
Corporation
By: _______________________
Dated:_____________________
For Warner-Lambert Company
By: _______________________
Dated:_____________________
For Zeneca Inc.
<PAGE>
EXHIBIT 21
Subsidiaries of AmeriSource Distribution Corporation
As of December 1, 1994, the subsidiaries of AmeriSource Distribution
Corporation, together with their respective jurisdictions of incorporation, were
as follows:
Subsidiary Jurisdictions of Incorporation
---------- ------------------------------
AmeriSource Corporation Delaware
Subsidiaries of AmeriSource Corporation
As of December 1, 1994, the subsidiaries of AmeriSource Corporation,
together with their respective jurisdictions of incorporation, were as follows:
Subsidiary Jurisdictions of Incorporation
---------- ------------------------------
AmeriSource Receivables Corporation Delaware
Health Services Capital Corporation Delaware
Health Services Plus, Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000731269
<NAME> AMERISOURCE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<CASH> 25,273
<SECURITIES> 0
<RECEIVABLES> 272,281
<ALLOWANCES> 9,370
<INVENTORY> 351,676
<CURRENT-ASSETS> 651,672
<PP&E> 67,598
<DEPRECIATION> 26,416
<TOTAL-ASSETS> 705,955
<CURRENT-LIABILITIES> 524,079
<BONDS> 343,562
<COMMON> 1
0
0
<OTHER-SE> (171,473)
<TOTAL-LIABILITY-AND-EQUITY> 705,955
<SALES> 4,301,832
<TOTAL-REVENUES> 4,301,832
<CGS> 4,066,641
<TOTAL-COSTS> 4,066,641
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,612
<INTEREST-EXPENSE> 47,273
<INCOME-PRETAX> (149,161)
<INCOME-TAX> 23,080
<INCOME-CONTINUING> (172,241)
<DISCONTINUED> 0
<EXTRAORDINARY> (442)
<CHANGES> (35,045)
<NET-INCOME> (207,728)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000855042
<NAME> AMERISOURCE DISTRIBUTION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<CASH> 25,311
<SECURITIES> 0
<RECEIVABLES> 272,281
<ALLOWANCES> 9,370
<INVENTORY> 351,676
<CURRENT-ASSETS> 651,710
<PP&E> 67,598
<DEPRECIATION> 26,416
<TOTAL-ASSETS> 711,644
<CURRENT-LIABILITIES> 518,355
<BONDS> 487,575
<COMMON> 51
0
0
<OTHER-SE> (300,777)
<TOTAL-LIABILITY-AND-EQUITY> 711,644
<SALES> 4,301,832
<TOTAL-REVENUES> 4,301,832
<CGS> 4,066,641
<TOTAL-COSTS> 4,066,641
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,612
<INTEREST-EXPENSE> 62,611
<INCOME-PRETAX> (164,603)
<INCOME-TAX> 7,814
<INCOME-CONTINUING> (172,417)
<DISCONTINUED> 0
<EXTRAORDINARY> (656)
<CHANGES> (34,598)
<NET-INCOME> (207,671)
<EPS-PRIMARY> (41.53)
<EPS-DILUTED> (41.53)
</TABLE>
