<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 0-24954
U.S. FOODSERVICE
(Exact name of registrant as specified in its charter)
Delaware 52-1634568
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9755 Patuxent Woods Drive 21046
Columbia, Maryland (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 312-7100
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
-----
The number of shares of the registrant's common stock, par value $.01 per
share, outstanding at February 5, 1999 was 48,252,833 shares.
<PAGE>
U.S. FOODSERVICE
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 27, 1998 and December 26, 1998 3
Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss)
Three and Six months ended December 27, 1997
and December 26, 1998 4
Condensed Consolidated Statements of Cash Flows
Six months ended December 27, 1997
and December 26, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JUNE 27, DECEMBER 26,
1998* 1998
-------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 57,817 $ 64,486
Receivables, net 215,459 303,909
Residual interest on accounts
receivable sold 106,581 135,583
Inventories 349,583 377,125
Other current assets 28,548 32,853
Deferred income taxes 39,294 37,398
---------- ----------
Total current assets 797,282 951,354
Property and equipment, net 437,265 440,997
Goodwill and other noncurrent assets 583,244 628,840
---------- ----------
Total assets $1,817,791 $2,021,191
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 604 $ 683
Current obligations under capital leases 6,933 5,592
Accounts payable 381,151 363,253
Accrued expenses 120,778 104,125
---------- ----------
Total current liabilities 509,466 473,653
Noncurrent liabilities
Long-term debt 650,679 737,101
Obligations under capital leases 29,946 28,328
Deferred income taxes 6,064 6,015
Other noncurrent liabilities 36,916 101,992
---------- ----------
Total liabilities 1,233,071 1,347,089
---------- ----------
Commitments and contingent liabilities
Stockholders' equity 584,720 674,102
---------- ----------
Total liabilities and stockholders' equity $1,817,791 $2,021,191
========== ==========
</TABLE>
* Amounts were derived from the Company's audited consolidated balance sheet.
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- ---------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 27, DECEMBER 26,
1997 1998 1997 1998
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 1,373,258 $ 1,533,089 $ 2,712,086 $ 3,011,459
Cost of sales 1,116,761 1,251,007 2,199,343 2,459,400
----------- ----------- ----------- -----------
Gross profit 256,497 282,082 512,743 552,059
Operating expenses 232,322 226,686 449,166 447,694
Amortization of intangible assets 3,738 4,147 7,419 8,077
Restructuring costs 38,037 38,037
Asset impairment 32,135 32,135
----------- ----------- ----------- -----------
Income (loss) from operations (49,735) 51,249 (14,014) 96,288
Interest and other financing costs, net 20,319 16,476 39,246 32,672
Nonrecurring acquisition charges 17,822 17,822
----------- ----------- ----------- -----------
Income (loss) before income taxes
(benefit) and extraordinary charge (87,876) 34,733 (71,082) 63,616
Provision for income taxes (benefit) (17,254) 14,165 (10,251) 26,096
----------- ----------- ----------- -----------
Income (loss) before extraordinary charge (70,622) 20,608 (60,831) 37,520
Extraordinary charge, net of income
tax benefit 9,712 2,748 9,712 2,748
----------- ----------- ----------- -----------
Net income (loss) and comprehensive
income (loss) $ (80,334) $ 17,860 $ (70,543) $ 34,772
=========== =========== =========== ===========
Basic earnings (loss) per common share:
Before extraordinary charge $ (1.56) $ 0.43 $ (1.35) $ 0.80
Extraordinary charge (0.22) (0.06) (0.22) (0.06)
----------- ----------- ----------- -----------
Basic earnings (loss) per common share $ (1.78) $ 0.37 $ (1.57) $ 0.74
=========== =========== =========== ===========
Basic weighted average common
shares outstanding 45,072,000 47,536,000 44,811,000 47,039,000
Diluted earnings (loss) per common share:
Before extraordinary charge $ (1.56) $ 0.43 $ (1.35) $ 0.79
Extraordinary charge (0.22) (0.06) (0.22) (0.06)
----------- ----------- ----------- -----------
Diluted earnings (loss) per common share $ (1.78) $ 0.37 $ (1.57) $ 0.73
=========== =========== =========== ===========
Diluted weighted average common
shares outstanding 45,072,000 48,227,000 44,811,000 47,669,000
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
DECEMBER 27, DECEMBER 26,
1997 1998
-------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (70,543) $ 34,772
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 31,679 29,984
Write-off deferred financing costs 9,152 1,247
Asset impairment 32,135
Restructuring reserve 38,037
Other adjustments 3,594 (1,107)
Changes in working capital, net of effects
from acquisitions (84,355) (110,530)
-------------- ------------
Net cash used in operating activities (40,301) (45,634)
-------------- ------------
Cash flows from investing activities
Additions to property and equipment (60,060) (35,216)
Cost of businesses acquired, net of cash acquired (118) (8,438)
Proceeds from disposals of property 6,677 7,322
Proceeds from sale of manufacturing division assets 20,755
Other (535)
-------------- ------------
Net cash used in investing activities (53,501) (16,112)
-------------- ------------
Cash flows from financing activities
Increase under revolving credit line 153,300
Increase (decrease) in long-term debt, net 80,786 (93,515)
Principal payments under capital lease obligations (2,978) (3,116)
Proceeds from employee stock purchases 10,474 6,796
Treasury stock purchases (12,417)
Other 1,933 4,950
-------------- ------------
Net cash provided by financing activities 77,798 68,415
-------------- ------------
Net increase (decrease) in cash and cash equivalents (16,004) 6,669
Cash and cash equivalents:
Beginning of period 74,432 57,817
-------------- ------------
End of period $ 58,428 $ 64,486
============== ============
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of U.S. Foodservice and its
consolidated subsidiaries (the "Company") at December 26, 1998 and for the
three-month and six-month periods ended December 27, 1997 and December 26, 1998,
included herein are unaudited, but include all adjustments (consisting only of
normal recurring entries) which the Company's management believes to be
necessary for the fair presentation of the financial position, results of
operations and cash flows of the Company as of and for the periods presented.
Interim results are not necessarily indicative of results that may be expected
for the full year.
NOTE 2 -ACQUISITION OF RYKOFF-SEXTON, INC.
On December 23, 1997, Rykoff-Sexton, Inc. ("Rykoff-Sexton") was merged into a
wholly owned subsidiary of U.S. Foodservice (the "Acquisition"). The transaction
was accounted for under the pooling of interests method of accounting. In
connection with the Acquisition, the Company incurred restructuring costs, asset
impairment charges, non-recurring charges and certain other operating charges
resulting from the integration of the two businesses during the year ended June
27, 1998. These charges are further described as follows:
RESTRUCTURING COSTS - In connection with the Acquisition, the Company recorded a
$56.7 million restructuring charge during the year ended June 27, 1998. Of this
amount, the Company recognized $41.0 million in the quarter ended December 27,
1997 and the remainder in the quarter ended March 28, 1998. The restructuring
costs consisted primarily of $26.8 million for change in control payments to
former executives of Rykoff-Sexton, $12.2 million for severance and benefits,
$10.8 million for future lease commitments and $6.9 million for idle facility
and facility closure costs related to the Company's plan to consolidate and
realign certain operating units and consolidate various overhead functions.
During the six months ended December 26, 1998, the Company continued the
implementation of its restructuring plan initiated in December 1997. The plan
included the closure of 13 distribution centers in 11 states and consolidation
of the operations of these centers with facilities in the same geographic
region. As of December 26, 1998, consolidation of 11 of the distribution
centers was complete. The Company expects that consolidation of the remaining
two centers will be completed by the end of fiscal 1999.
During the six months ended December 26, 1998, the Company expended $2.1 million
of costs for severance and benefits, $0.7 million of lease commitment costs and
$0.9 million of idle facility and facility closure costs. At December 26, 1998,
$5.2 million of costs for severance and benefits, $9.7 million of lease
commitment costs and $4.3 million of idle facility and facility closure costs
have yet to be expended. Of these amounts, the Company expects to expend $8.4
million during the remainder of fiscal 1999 and $5.4 million in fiscal 2000.
The remaining charges of $5.4 million relate primarily to losses on lease
commitments, the last of which expires in fiscal 2008.
ASSET IMPAIRMENT- During the fiscal year ended June 27, 1998, the Company
recognized non-cash asset impairment charges of $35.5 million. Of this amount,
the Company recognized $32.1 million in the quarter ended December 27, 1997 and
the remainder in the quarter ended March 28, 1998. Of these asset impairment
charges, $7.6 million related to the write-down to net realizable value of
buildings and improvements of nine owned facilities being closed; $3.1 million
related to the write-down to net realizable value of buildings which were held
for sale at the date of the Acquisition; $12 million related to costs deferred
for a new management information system which is not being placed in service as
a result of the Acquisition; and $12.8 million related to other long-term
assets at facilities being closed.
The Company does not expect to incur any additional restructuring costs, asset
impairment charges or transaction costs related to the Acquisition. Any
additional operating costs related to the integration of the two businesses are
not expected to be material.
OTHER OPERATING CHARGES - During the fiscal quarter ended December 27, 1997, the
Company charged $6.1 million to cost of goods sold and $15.6 million to
operating expense for write-downs of inventory, receivables and other current
assets resulting from the operating unit consolidation and realignment during
fiscal 1998. The charges related principally to receivable write-offs resulting
from the rationalization of customer and vendor relationships and inventory
write-downs resulting from the reductions in the number of products distributed
by the combined company following the Acquisition, particularly at divisions
being closed and consolidated.
6
<PAGE>
NONRECURRING ACQUISITION CHARGES - During the fiscal quarter ended December 27,
1997, the Company recorded nonrecurring charges of approximately $17.8 million
for merger related costs and expenses (consisting primarily of legal and other
professional fees) required to complete the transaction.
NOTE 3 -PRIOR RESTRUCTURING COSTS
In connection with its acquisition of US Foodservice Inc. on May 17, 1996,
Rykoff-Sexton recorded a restructuring charge of $57.6 million ($35.7 million
after tax) in the transition period ended June 29, 1996. Approximately $10.7
million of the charge related to severance and termination benefit costs, $20.2
million related to lease related costs and $26.7 million related to other exit
costs, including the closure of duplicate facilities and other integration
activities. During the fiscal quarter ended December 27, 1997, the Company
charged $2.6 million against the restructuring liability and reversed $3.0
million of unutilized reserves against restructuring costs. The reversal
related to restructuring activities for which the actual costs were
overestimated or for which contemplated restructuring plans ultimately changed.
During the six months ended December 26, 1998, the Company expended $0.1 million
of costs for severance and benefits, $0.7 million for lease commitment costs and
$0.5 million for other exit costs. At December 26, 1998, $0.9 million of costs
for severance and benefits, $11.8 million of lease commitment costs and $2.5
million of other exit costs have yet to be expended. The Company expects these
expenditures to occur at the rate of approximately $2 million per year for
fiscal 1999 and the next three fiscal years and $1 million per year for the
following seven fiscal years.
NOTE 4 - EXTRAORDINARY CHARGES
During the fiscal quarter ended December 26, 1998, the Company recorded an
extraordinary charge of $2.7 million (net of a $1.8 million income tax benefit)
related to the redemption and retirement of $75.1 million 8 7/8% Senior
Subordinated Notes due 2003. The extraordinary charge consisted of a $3.3
million redemption premium paid to note holders and the write-off of $1.2
million of unamortized deferred financing costs.
On December 23, 1997, in connection with the consummation of the Acquisition,
the Company entered into a new bank credit facility which provided for a $550
million five-year revolving credit facility and a $200 million revolver/term
loan facility (collectively, the "New Credit Facility"). During the fiscal
quarter ended December 27, 1997, the Company applied the proceeds of the New
Credit Facility to refinance substantially all of its indebtedness in order to
lower significantly its overall borrowing costs. As a result of this
refinancing, the Company recorded an extraordinary charge of $9.7 million (net
of $6.3 million income tax benefit) related to the write-off of deferred
financing costs with respect to the extinguished debt and additional payments to
holders of the Company's senior notes due 2004 in accordance with the senior
note terms.
NOTE 5 - OUTSOURCING OF THE MANUFACTURING DIVISION
On August 28, 1998, the Company sold the inventory and fixed assets of its
manufacturing division to a third party. In connection with the sale, the
Company entered into a six-year supply agreement. Under the terms of the sale
and supply agreements, the Company received $85 million in cash and a $16
million subordinated note from the buyer bearing interest at 13% and payable in
August 2006. Interest on the note payable is payable in additional notes
through August 2005 and thereafter in cash. The assets transferred had a net
book value of approximately $20 million, including $10.8 million in inventories.
Costs to complete the transaction were approximately $3 million. Net gain on
the sale of assets and proceeds from entering into the supply agreement
aggregated approximately $78 million.
The supply agreement establishes minimum purchase obligations by the Company for
each of the next six years. First year minimum purchase obligations are based
on purchase levels prior to the sale, with the succeeding years' purchase
obligations increasing at a rate of 6% per year. Based on current product
prices, the supply agreement obligates the Company to purchase in excess of $750
million of products over the next six years. The Company may incur substantial
penalties if it does not purchase the minimum product quantities specified in
the agreement.
As a result of the Company's significant continuing involvement in the
manufacturing business, $62 million of the gain is being deferred and recognized
over the life of the supply agreement as goods are purchased from the
manufacturing business and sold to the Company's foodservice customers. The
balance of the gain, including interest attributable to the subordinated note
receivable, will not be recognized until such time as the buyer has sufficient
cash flows to demonstrate payment of the principal and interest.
NOTE 6 - ACQUISITIONS
7
<PAGE>
HAAR - Effective October 23, 1998, the Company completed the acquisition of J.H.
Haar & Sons, L.L. C. ("Haar"), a broadline foodservice distributor serving the
New York City metropolitan market. Annual sales for Haar for its fiscal year
ended September 30, 1998 totaled $57 million. Under the terms of the
acquisition agreement, the Company acquired all of the membership interests of
Haar in exchange for 550,543 shares of the Company's common stock. The
transaction was accounted for as a pooling of interests. Due to the fact that
total assets, net assets and the results of operations were not material to the
Company for any of the prior years, the transaction was recorded as of September
27, 1998.
WEBB - Effective November 16, 1998, the Company completed the acquisition of
Joseph Webb Foods, Inc (" Webb"), a broadline foodservice distributor serving
the San Diego and other Southern California markets. Under the terms of the
acquisition agreement, the Company acquired 100% of the stock of Webb for
896,057 shares of the Company's common stock and $8.0 million in cash, including
transaction costs. In addition, the agreement includes a provision for future
stock payments to the selling shareholders contingent upon achievement of future
sales performance targets. The transaction was accounted for as a purchase.
OTHER - During fiscal 1998, the Company acquired Outwest Meat Company
("Outwest"), Sorrento Food Service, Inc. ("Sorrento") and Westlund Provisions,
Inc. ("Westlunds").
The tables below set forth pro forma information for the three-month and six-
month periods ended December 27, 1997 and December 26, 1998 giving effect to the
acquisitions of Haar, Webb, Westlunds, Sorrento and Outwest as if such
acquisitions had been consummated as of June 28, 1997:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 27, December 26, December 27, December 26,
1997 1998 1997 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $1,457,757 $1,552,338 $2,929,085 $3,093,934
Income (loss) before
extraordinary charge $ (69,805) $ 20,541 $ (59,442) $ 36,157
Net income (loss) $ (79,517) $ 17,793 $ (67,154) $ 33,409
Income (loss) per common
share before
extraordinary charge
Basic $ (1.49) $ 0.43 $ (1.28) $ 0.77
Diluted $ (1.49) $ 0.43 $ (1.28) $ 0.76
Net income (loss) per
common share
Basic $ (1.70) $ 0.37 $ (1.48) $ 0.71
Diluted $ (1.70) $ 0.37 $ (1.48) $ 0.70
</TABLE>
NOTE 7 - RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
During the fiscal quarter ended September 26, 1998, the Company adopted
Statement of Financial Accounting Standard (SFAS) No. 130, Reporting
Comprehensive Income. Adoption had no impact on the Company's condensed
consolidated financial statements, as comprehensive income (loss) and net income
(loss) were the same.
NOTE 8 - CONTINGENCIES
From time to time, the Company is involved in litigation and proceedings arising
out of the ordinary course of business. There are no pending material legal
proceedings or environmental investigations to which the Company is a party or
to which the property of the Company is subject as of the date of this report.
NOTE 9 - EARNINGS PER SHARE
The following table reconciles the numerators and denominators of the Company's
basic and diluted earnings per share (EPS) computations for income before
extraordinary charge (in 000's):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 27, 1997 December 26, 1998
--------------------------------------- ---------------------------------------
Income (loss) Share Income (loss) Share
Numerator Denominator Per share Numerator Denominator Per share
------------ ----------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) before
extraordinary charge (70,622) 45,072 (1.56) 20,608 47,536 0.43
Effect of Dilutive Securities
Warrants -- -- -- 50
Common stock options -- -- -- 631
Other stock-based
compensation arrangements -- -- -- 10
Diluted EPS
Income (loss) before
extraordinary charge (70,622) 45,072 (1.56) 20,608 48,227 0.43
<CAPTION>
Six Months Ended Six Months Ended
December 27, 1997 December 26, 1998
--------------------------------------- ---------------------------------------
Income (loss) Share Income (loss) Share
Numerator Denominator Per share Numerator Denominator Per share
------------ ----------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) before
extraordinary charge (60,831) 44,811 (1.35) 37,520 47,039 0.80
Effect of Dilutive Securities
Warrants -- -- -- 65
Common stock options -- -- -- 575
Other stock-based
compensation arrangements -- -- -- 20
Diluted EPS
Income (loss) before
extraordinary charge (60,831) 44,811 (1.35) 37,520 47,699 0.79
</TABLE>
The effect of stock options outstanding during fiscal 1998 were not included in
the computation of diluted EPS because the effect would have been antidilutive.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements regarding the Company's expected financial position and
operating results, its business strategy, its financing plans, its ability to
realize anticipated cost savings and other benefits from acquisitions and its
ability to recover acquisition-related costs are forward-looking statements.
These statements are subject to risks and uncertainties that could cause the
Company's actual results to differ materially. Such risks and uncertainties
include the sensitivity of the Company's business to national and regional
economic conditions, the effects of inflation and deflation in food prices, the
highly competitive markets in which the Company operates and the Company's
ability to integrate acquired businesses. The Company's Annual Report on Form
10-K for the fiscal year ended June 27, 1998, filed with the Securities and
Exchange Commission on September 24, 1998, and amended on January 14, 1999,
discusses some of the important factors that could cause the Company's actual
results to differ materially from those in such forward-looking statements.
Overview
- --------
Effective December 23, 1997, Rykoff-Sexton was merged into a wholly owned
subsidiary of U.S. Foodservice (the "Acquisition"). The transaction was
accounted for under the pooling of interests method. Accordingly, the condensed
consolidated statements of operations and cash flows for the three-month and
six-month periods ended December 27, 1997 have been restated to include
consolidated information for Rykoff-Sexton.
In connection with the Acquisition, management of the combined companies
developed a restructuring plan that included the consolidation of duplicate
distribution centers and the centralization of certain general and
administrative functions. The Company planned to close 13 distributions centers
located in California, Florida, Iowa, Maryland, Massachusetts, Minnesota,
Missouri, Nevada, Ohio, Pennsylvania and Virginia. The Company incurred
restructuring costs, asset impairment charges, transaction costs and certain
other operating charges resulting from the integration of the two businesses
(the "Acquisition Related Costs") which significantly affected the Company's
results for fiscal 1998. For the six months ended December 27, 1997, the Company
recognized Acquisition Related Costs totaling $112.6 million. During the fiscal
quarter ended March 28, 1998, the Company recognized an additional $25.4 million
of Acquisition Related Costs. Of the total Acquisition Related Costs recognized
during fiscal 1998, $76.6 million consisted of non-cash charges. Of the cash
charges, $38.5 million was expended in fiscal 1998 and $ 3.7 million in the six
months ended December 26, 1998. As of December 26, 1998, consolidation of 11 of
the distribution centers was complete. The Company expects that consolidation
of the remaining two centers will be completed by the end of the fiscal year.
Virtually all the corporate overhead functions have been consolidated as of
December 26, 1998. As of this date, the following costs have yet to be
expended: $5.2 million of costs for severance and benefits, of which $2.0
million relates to deferred change in control payments; $9.7 million of lease
commitment costs; and $4.3 million of idle facility and facility closure costs.
Management anticipates that $8.4 million will be expended in the balance of
fiscal 1999 and $5.4 million in fiscal 2000. The remaining cash outlays of $5.4
million relate primarily to losses on lease commitments, the last of which
expires in fiscal 2008.
The Company is funding these expenditures through, among other things,
realization of cost savings resulting from the integration of the two
businesses, proceeds from the disposition of closed facilities and income tax
benefits. To date, the Company has experienced no significant changes in the
restructuring plan. The Company does not expect to incur any additional
restructuring costs, asset impairment charges or transaction charges with
respect to the Acquisition. Any additional operating costs related to the
integration of the two businesses are not expected to be material.
In connection with the integration plan for the combination of the two
businesses, the Company expected to realize operating costs and interest savings
of $19 million in fiscal 1998, $30 million in fiscal 1999 and $40 million in
fiscal 2000 and thereafter. The Company believes operating costs and interest
savings exceeded $20 million in fiscal 1998 and $17 million in the first two
quarters of fiscal 1999. The Company achieved operating cost savings through
the consolidation and re-negotiation of purchasing programs, consolidation and
realignment of distribution facilities and consolidation of the general and
administrative functions. Interest savings were realized through the
refinancing of the Company's senior debt. Based on the results for fiscal 1998
and the first two quarters of fiscal 1999 and the status of the integration
plan, the Company believes it can achieve the costs savings estimated for fiscal
1999 and subsequent periods.
9
<PAGE>
Net Sales
- ---------
The Company's net sales of $1.53 billion for the three months ended December 26,
1998 (the "1999 fiscal quarter") represented a 11.7% increase from the $1.37
billion net sales level achieved for the three months ended December 27, 1997
(the "1998 fiscal quarter"). For the six months ended December 26, 1998 (the
"1999 fiscal six-month period"), net sales increased 11.1% to $3.01 billion from
$2.71 billion for the six months ended December 27, 1997 (the "1998 fiscal six-
month period"). The acquisitions of Outwest Meat Company ("Outwest") in the
second quarter of fiscal 1998, Sorrento Food Service, Inc. ("Sorrento") and
Westlund Provisions, Inc. ("Westlund") in the third quarter of fiscal 1998, and
J.H. Haar & Sons, L.L.C. ("Haar") and Joseph Webb Foods, Inc. ("Webb") in the
1999 fiscal quarter accounted for approximately 55% of the sales growth for the
1999 fiscal quarter and approximately 48% of the sales growth for the 1999
fiscal six-month period.
Growth in both multi-unit "chain" account sales and independent "street" sales
contributed to the remaining increase in sales. Chain account sales increased
16.6% for the 1999 fiscal quarter and 15.9% for the 1999 fiscal six-month
period. A significant portion of this increase was attributable to the expansion
of sales to existing chain customers resulting from the national distribution
capability created through the Acquisition. Street sales increased 8.5% for the
1999 fiscal quarter and 7.9% for the 1999 fiscal six-month period principally as
a result of the growth of the street sales force and improved sales force
productivity. Because chain sales grew at a faster rate than street sales, the
street sales mix, or street sales as a percentage of total net sales, decreased
to 59.6% in the 1999 fiscal quarter from 61.3% in the 1998 fiscal quarter.
Gross Profit
- ------------
The Company's gross profit margin decreased to 18.4% in the 1999 fiscal quarter
and to 18.3% in the 1999 fiscal six-month period from a gross profit margin,
prior to Acquisition Related Costs, of 19.1% in both the 1998 fiscal quarter and
1998 fiscal six-month period. The decrease was primarily attributable to a
continuing shift in product mix from certain high-margin items to higher-
turnover, lower-margin items, primarily "center-of-the-plate" entree products in
the former Rykoff-Sexton operations, and to an increase in chain sales as a
percentage of net sales in the 1999 fiscal quarter and 1999 fiscal six-month
period.
Operating Expenses
- ------------------
Operating expenses decreased by 2.4% ($5.6 million) in the 1999 fiscal quarter
and by 0.3% ($1.5 million) in the 1999 fiscal six-month period over the
corresponding periods in fiscal 1998. These decreases were principally
attributable to $15.6 million of non-cash charges recorded in the 1998 fiscal
quarter, which primarily consisted of write-downs of receivables and other
assets at operating units undergoing consolidation or realignment as part of the
Acquisition.
Excluding the effects of these Acquisition Related Costs, operating expenses
increased by 4.6% ($9.9 million) in the 1999 fiscal quarter and by 3.2% ($14.1
million) in the 1999 fiscal six-month period over the corresponding periods in
1998 and, as a percentage of net sales, decreased to 14.8% in the 1999 fiscal
quarter from 15.8% in the 1998 fiscal quarter and to 14.9% in the 1999 fiscal
six-month period from 16.0% in the 1998 fiscal six-month period. These decreases
were primarily attributable to operating efficiencies resulting from the
Acquisition restructuring plan, cost reductions achieved through the
consolidation of the Company's general and administrative functions, and an
increase in the average size of customer deliveries resulting from the shift in
sales mix to increased chain account sales and in product mix towards "center of
the plate" items.
Amortization of Goodwill and Other Intangible Assets
- ----------------------------------------------------
Amortization of goodwill and other intangible assets was $4.1 million in the
1999 fiscal quarter compared to $3.7 million in the 1998 fiscal quarter.
Amortization of goodwill and other intangible assets was $8.1 million in the
1999 fiscal six-month period compared to $7.4 million in the 1998 fiscal six-
month period. These increases were attributable to the goodwill arising from
the Sorrento, Westlunds and Webb acquisitions.
Restructuring Costs and Asset Impairment
- ----------------------------------------
The Acquisition Related Costs in the 1998 fiscal quarter included a net
restructuring charge of $41.0 million, of which $16 million constituted non-cash
charges. These costs consisted primarily of change in control payments made to
former executives of Rykoff-Sexton and severance, idle facility and facility
closure costs related to the Company's plan to consolidate and realign certain
operating units and consolidate various overhead functions. Such costs were
offset in part by a reversal of $3.0 million of unutilized reserves from a prior
restructuring. The reversal related to activities for which the actual costs
were overestimated or for which the contemplated restructuring plans were
ultimately changed.
The Acquisition Related Costs in the fiscal 1998 quarter also included non-cash
asset impairment charges of $32.1 million. These charges were related to write-
downs to net realizable value of assets and facilities at operating units that
are being consolidated or realigned and assets related to management information
systems which are being replaced and not currently utilized.
10
<PAGE>
Income (loss) from Operations
- -----------------------------
Income from operations was $51.2 million in the 1999 fiscal quarter compared to
a loss from operations of $49.7 million in the 1998 fiscal quarter. Income from
operations was $96.3 million in the 1999 fiscal six-month period compared to a
loss of $14.0 million in the 1998 fiscal six-month period. Excluding the
Acquisition Related Costs, income from operations increased 21.9% ($9.2 million)
in the 1999 fiscal quarter from the 1998 fiscal quarter and 23.8% ($18.5
million) in the 1999 fiscal six-month period from the 1998 fiscal six-month
period. The increases in both periods were attributable to the increase in net
sales and the reduction of operating expenses as a percentage of net sales.
Interest Expense and Other Financing Costs, Net
- -----------------------------------------------
Interest expense and other financing costs decreased $3.8 million or 18.9% for
the 1999 fiscal quarter and $6.6 million or 16.8% for the 1999 fiscal six-month
period from the corresponding periods in fiscal 1998. The reduced interest
expense was attributable to lower overall interest rates under the credit
facility established in connection with the Acquisition.
Non-Recurring Charges
- ---------------------
The Company incurred non-recurring charges of $17.8 million in the 1998 fiscal
quarter. These charges principally related to fees for financial advisory,
legal and accounting and other professional services incurred by both companies
to consummate the Acquisition.
Provision for Income Taxes (Benefit)
- ------------------------------------
During the three-month and six-month periods ended December 26, 1998, the
Company recognized income tax expense at effective rates of 40.8% and 41.0%,
respectively, as compared to (19.6)% and (14.4)%, respectively, for the
corresponding periods of the prior year. The prior year rates reflect the
effect on the income tax provision of the tax deductibility of certain of the
Acquisition Related Costs and the amortization of goodwill. The Company's
effective tax rate before the effect of the Acquisition Related Costs was 44.8%
for the 1998 fiscal quarter and 45.3% for the 1998 fiscal six month period.
Liquidity and Capital Resources
- -------------------------------
As of December 26, 1998, the Company's total long-term indebtedness, including
current portion, was $771.7 million, with an overall weighted average interest
rate of 6.3% (excluding deferred financing costs). Long-term borrowing
increased by $56.7 million during the 1999 fiscal six-month period primarily
as a result of net cash used in operating activities of $45.6 million, capital
expenditures of $35.2 million, and net cash of $8.4 million used in
acquisitions. These uses of cash were offset in part by the receipt of $37.1
million of net cash proceeds from the sale of assets and employee stock
purchases.
The Company's working capital balance (excluding current portion of long-term
debt) of $484 million at December 26, 1998 increased by $188.6 million from the
balance at June 27, 1998. The higher working capital balances were primarily
attributable to increased net sales and seasonal increases in inventory and
receivables.
The Company made $35.2 million of capital expenditures in the 1999 fiscal six-
month period, primarily for facility expansion projects and the upgrading of
management information systems. During the 1999 fiscal six-month period, the
Company realized $7.3 million from the sale of redundant facilities. The Company
estimates that assets held for sale at December 26, 1998 will generate proceeds
of $15 million.
From time to time, the Company acquires other foodservice businesses. Any such
business may be acquired for cash, common stock of the Company, or a combination
of cash and common stock.
As of December 26, 1998, $645.5 million of borrowings and $37.5 million of
letters of credit were outstanding under the Company's credit facility and an
additional $67 million remained available to finance the Company's working
capital needs and to meet the Company's other liquidity requirements. At
December 31, 1998, the Company increased the capacity of its existing $250
million revolving securitization arrangements for accounts receivable to $353
million, thereby increasing its borrowing capacity by an additional $103
million. The Company believes that the combination of the cash flow generated
from operations, additional leasing activity, sales of duplicate assets and
borrowings under the credit facility will be sufficient to enable it to finance
its growth and meet its currently projected capital expenditures and other
liquidity requirements for at least the next 12 months.
Information Systems and the Impact of the Year 2000
- ---------------------------------------------------
The Year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year.
Software and hardware may recognize a date using ''00'' as the year 1900, rather
than the year 2000. Such an inability of computer programs to recognize a year
that begins with "20" could result in system failures, miscalculations or errors
11
<PAGE>
causing disruptions of operations or other business problems, including, among
others, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
The Company's Program. The Company has undertaken a program to address the Year
2000 issue with respect to the following: (i) the Company's information
technology and operating systems, including its billing, accounting and
financial reporting systems; (ii) the Company's non-information technology
systems, such as buildings, equipment, telephone systems and other
infrastructure systems that may contain embedded microcontroller technology;
(iii) certain systems of the Company's major vendors and material service
providers insofar as such systems relate to the Company's business activities
with such parties; and (iv) the Company's material customers insofar as the
Year 2000 issue relates to the Company's ability to provide services to such
customers. As described below, the Company's Year 2000 program involves (i) an
assessment of the Year 2000 problems that may affect the Company, (ii) the
development of remedies to address the problems discovered in the assessment
phase, (iii) the testing of such remedies and (iv) the preparation of
contingency plans to deal with worst case scenarios.
Assessment Phase. In order to determine the extent to which its internal
systems are vulnerable to the Year 2000 issue, the Company is currently
evaluating the systems that are date sensitive. The Company's 39 distribution
centers and its corporate headquarters currently use various information systems
to process transactions and meet financial reporting needs. Most of these
systems are not fully Year 2000 compliant. As of December 27, 1998, information
systems used by 11 of the distribution centers are Year 2000 compliant The
Company's data processing systems represent its most significant challenge with
respect to Year 2000 compliance. The Company has completed its evaluation of
its internal systems. In addition, in the third quarter of fiscal 1999, the
Company will complete the process of sending letters to certain of its
significant hardware, software and other equipment vendors and other material
service providers, as well as to its significant customers, requesting them to
provide the Company with detailed, written information concerning existing or
anticipated Year 2000 compliance by their systems insofar as the systems relate
to such parties' business activities with the Company. The Company is currently
evaluating responses on Year 2000 compliance from the third parties who have
responded to the Company's inquiries. The Company expects that it will complete
its assessment of all third-party issues by April 30, 1999.
Remediation and Testing Phase. The activities conducted during the remediation
and testing phase are intended to address potential Year 2000 problems in
Company-developed computer software and in its other information technology and
non-information technology systems in an attempt to demonstrate that this
software will be made substantially Year 2000 compliant on a timely basis. In
this phase, the Company has evaluated the program applications and identified
the Year 2000 problems and is in the process of taking steps to attempt to
remediate such problems and individually test the applications to confirm that
the remediating changes are effective and have not adversely affected the
functionality of the applications. The Company is undertaking similar
remediation and testing with respect to the hardware and other equipment that
runs or is run by the software. After the individual applications and system
components have undergone remediation and testing phases, the Company will
conduct integrated testing for the purpose of demonstrating functional
integrated systems operation. Following completion of its internal, integrated
systems testing, the Company intends to conduct laboratory-simulated integrated
systems testing in an attempt to demonstrate substantial Year 2000 compliance of
the Company's systems as they interface with external systems and equipment of
major vendors, other material service providers and material customers.
During fiscal 1998, among other activities, the Company replaced information
processing systems (consisting of hardware and software) at five distribution
centers, initiated software remediation efforts at 15 distribution centers, and
installed new payroll and human resources information systems at 14 distribution
centers and its corporate headquarters. As of the date of this report, the
Company has initiated software and hardware remediation efforts at the remaining
distribution centers and its corporate headquarters. The Company currently
seeks to have most of its software remediated by March 1999 and to have all of
its information systems at its distribution centers and its corporate
headquarters Year 2000 compliant by July 1999.
Contingency Plans. The Company is developing contingency plans to handle its
most reasonably likely worst case Year 2000 scenarios, which it has not yet
identified fully. The Company intends to complete its determination of worst
case scenarios after it has received and analyzed responses to substantially all
of the inquiries it has made of third parties. The Company intends to complete
its contingency plans by June 30, 1999.
Costs Related to the Year 2000 Issue. To date, the Company has incurred
approximately $1.5 million in costs for its Year 2000 program. Such costs do
not include internal staff costs, consisting principally of payroll costs,
incurred on Year 2000 matters, because the Company does not separately track
such costs. It has also expended approximately $12.0 million of capital
expenditures on new information processing systems that are already Year 2000
compliant. The Company currently estimates that it will incur additional costs,
which are not expected to exceed approximately $5.0 million (excluding internal
staff costs), to complete its Year
12
<PAGE>
2000 compliance work with respect to the Company's major information systems. Of
such additional costs, approximately $3.0 million of costs are expected to be
incurred during fiscal 1999 and approximately $2.0 million of costs are expected
to be incurred during fiscal 2000. These costs will be expensed as incurred.
Actual costs may vary from the foregoing estimates based on the Company's
evaluation of responses to its third-party inquiries and on the results of its
remediation and testing activities. The Company expects to fund its Year 2000
remediation costs out of the cash flows generated by its operations. The Company
has not deferred any of its information technology projects to date as a result
of the Year 2000 issue. The Company currently believes that the costs to resolve
compliance issues with respect to other information systems and its non-
information technology systems will not be material.
Risks Related to the Year 2000 Issue. Although the Company's Year 2000 efforts
are intended to minimize the adverse effects of the Year 2000 issue on the
Company's business and operations, the actual effects of the issue and the
success or failure of the Company's efforts described above cannot be known
until the year 2000. Failure by the Company and its major vendors, other
material service providers and material customers to address adequately their
respective Year 2000 issues in a timely manner, insofar as such issues relate to
the Company's business, could have a material adverse effect on the Company's
business, results of operations and financial condition.
Changes in Accounting Standards
- -------------------------------
During 1997 and 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 130, Reporting Comprehensive Income,
SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, and SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activity. SFAS No. 130 and 131 generally require additional financial statement
disclosure. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities and requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The Company adopted SFAS No. 130
during the first quarter of fiscal 1999 and will adopt SFAS No. 131 during
fiscal 1999 and SFAS No. 133 during fiscal 2000, in accordance with the
pronouncements. The Company is currently evaluating the impact, if any, that
SFAS No.133 will have on its consolidated financial statements.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's major market risk exposure is to changing interest rates. The
Company's policy is to manage interest rates through the use of a combination of
fixed and floating rate debt. The Company uses interest rate swap, cap and
collar contracts to manage its exposure to fluctuations in interest rates on
floating long-term debt. Certain management monitoring processes are designed
to minimize the impact of sudden and sustained changes in interest rates. As of
December 26, 1998, the Company's long-term indebtedness consists of fixed rate
and variable rate debt of $56.4 million and $681.4 million, respectively.
Substantially all of the Company's floating rate debt is based on LIBOR. The
Company has effectively capped its interest rate exposure at 7.85% on
approximately $400.0 million of its floating rate debt through June 30, 1999.
In addition, the Company sells $250.0 million of accounts receivable on a
revolving basis under accounts receivable securitization arrangements. The
proceeds received from sales of receivables under these arrangements, which are
accounted for under SFAS No. 125, are based to a large extent on LIBOR. The
Company also uses fixed-rate capital leases to finance certain of its trucks and
trailers.
Currently, the Company does not use foreign currency forward contracts or
commodity contracts and does not have any material foreign currency exposure.
13
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Effective October 23, 1998, the Company issued 550,543 shares of its common
stock valued at approximately $23.8 million to Geoffrey Haar. Mr. Haar was the
sole member of J.H. Haar and Sons, L.L.C., a company U.S. Foodservice acquired
in consideration of its issuance of shares of common stock. See Note 6 to the
financial statements appearing elsewhere in this report.
Effective November 16, 1998, U.S. Foodservice issued, in the aggregate, 896,057
shares of its common stock valued at approximately $42.3 million to three
stockholders of Joseph Webb Foods, Inc., a company U.S. Foodservice acquired in
consideration of its issuance of shares of common stock. See Note 6 to the
financial statements appearing elsewhere in this report.
In connection with such issuances, the Company relied on the exemption from
registration under the Securities Act of 1933 provided in Section 4(2) of such
Act. U.S. Foodservice did not engage in any advertising or general solicitation
in connection with the offer and sale of the securities. In addition, the
Company provided or made available information concerning the Company and the
common stock, obtained investment representations from the selling stockholders
and placed restrictive legends on the certificates evidencing such securities.
Item 4. Submission of Matters to a Vote of Security Holders
(a) U.S. Foodservice held its 1998 annual meeting of stockholders
(the "1998 annual meeting") on November 20, 1998.
(b) The following sets forth information regarding each matter voted upon at the
1998 annual meeting. There were 46,698,839 shares of common stock outstanding as
of the record date for, and entitled to vote at, the 1998 annual meeting.
Proposal No. 1. The stockholders approved election of each of the nominees to
the Board of Directors. The tabulation of votes on this proposal is as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Michael J. Drabb 41,131,850 72,194
Eric E. Glass 41,134,041 70,003
Lewis Hay, III 41,136,262 67,782
Paul I. Latta, Jr. 41,132,628 71,416
</TABLE>
Proposal No. 2. The stockholders approved a proposal to adopt the U.S.
Foodservice 1998 Stock Option and Incentive Plan. The tabulation of votes on
this proposal is as follows:
<TABLE>
<CAPTION>
<S> <C>
For 24,780,580
Withheld/Against 13,551,040
Exception/Abstain 45,030
----------
Total Shares Voted 38,376,650
Broker Non-Votes 8,322,189
</TABLE>
Proposal No. 3. The stockholders approved a proposal to approve the material
terms for payment of annual executive incentive compensation. The tabulation of
votes on this proposal is as follows:
<TABLE>
<CAPTION>
<S> <C>
For 40,750,924
Withheld/Against 396,377
Exception/Abstain 56,741
----------
Total Shares Voted 41,204,042
Broker Non-Votes 5,494,797
</TABLE>
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The Company files herewith the following exhibits:
10.1 Non-Employee Director Voluntary Deferred Compensation Plan.
10.2 Series 1998-1 Supplement, dated as of December 31, 1998, to
Pooling Agreement, dated as of November 15, 1996, among RS
Funding Inc., U.S. Foodservice, Inc. and The Chase Manhattan
Bank, as Trustee.
10.3 SPC Receivables Sale Agreement, dated as of December 31,
1998, among JPFD Funding Company and RS Funding Inc.
10.4 Additional Seller/Servicer Supplement, dated December 31,
1998, to (i) Receivables Sale Agreement, dated as of
November 15, 1996 (as amended, supplemented or otherwise
modified from time to time), among the Sellers from time to
time party thereto, U.S. Foodservice, Inc. and RS Funding
Inc. and (ii) Servicing Agreement, dated as of November 15,
1996 (as amended, supplemented or otherwise modified from
time to time), among U.S. Foodservice, Inc., RS Funding
Inc., the SubServicers from time to time party thereto and
The Chase Manhattan Bank, as Trustee.
27.1 Financial Data Schedule.
(b) The following Current Report on Form 8-K was filed by U.S.
Foodservice during the period covered by this report.
Date of Report Item Reported
----------------------- ----------------------------------
December 18, 1998 Item 5 (Operating Results with
Combined Acquired Company)
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
U.S. FOODSERVICE
(Registrant)
DATE: February 9, 1999 /s/ Lewis Hay, III
----------------------------------------
Lewis Hay, III, Executive Vice President
and Chief Financial Officer
(Duly Authorized and Principal
Financial Officer)
16
<PAGE>
Exhibit 10.1
U.S. FOODSERVICE
NON-EMPLOYEE DIRECTOR VOLUNTARY DEFERRED COMPENSATION PLAN
EFFECTIVE: JANUARY 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS........................................... 1
2. PURPOSE............................................... 2
3. SHARES SUBJECT TO THE PLAN............................ 2
4. PARTICIPATION IN THE PLAN............................. 2
4.1. Participation; Election Form.................... 2
4.2. Time for Filing Election Form................... 3
4.3. Modification of the Election Form............... 3
5. PARTICIPANT ACCOUNTS AND CONTRIBUTIONS................ 3
5.1. Accounts........................................ 3
5.2. Participant Contribution........................ 3
5.3. Company Contribution............................ 3
6. CHANGE OF CONTROL..................................... 4
7. INVESTMENT EXPERIENCE................................. 5
7.1. Company and Participant Contributions........... 5
7.2. Taxes; Statements............................... 5
8. DISTRIBUTIONS......................................... 6
8.1. Timing and Method of Payment.................... 6
8.2. Hardship........................................ 6
8.3. Form of Payment................................. 7
9. ADMINISTRATION........................................ 7
9.1. Committee....................................... 7
9.2. Rules for Administration........................ 7
9.3. Committee Action................................ 8
9.4. Delegation...................................... 8
9.5. Services........................................ 8
9.6. Indemnification................................. 8
10. AMENDMENT AND TERMINATION............................ 8
11. GENERAL PROVISIONS................................... 9
11.1. Limitation of Rights........................... 9
11.2. No Rights as Stockholders...................... 9
11.3. Rights as a Non-Employee Director.............. 9
11.4. Assignment, Pledge or Encumbrance.............. 9
11.5. Minor or Incompetent........................... 9
11.6. Beneficiary.................................... 9
11.7. Binding Provisions............................. 10
11.8. Notices........................................ 10
11.9. Governing Law.................................. 10
11.10. Pronouns...................................... 10
11.11. Withholding................................... 10
11.12. Effective Dates............................... 11
</TABLE>
-i-
<PAGE>
1. DEFINITIONS
1.1 "Beneficiary" means any person(s) or legal entity(ies) designated by the
-----------
Participant or otherwise determined in accordance with SECTION 11.6.
1.2 "Board of Directors" or "Board" means the Board of Directors of the
------------------ -----
Company.
1.3 "Change of Control" shall have the meaning set forth in SECTION 6.
-----------------
1.4 "Committee" means the Administrative Committee which administers the Plan
---------
in accordance with SECTION 9.1.
1.5 "Common Stock" means the common stock, par value $0.01 per share, of the
------------
Company.
1.6 "Company" means U.S. Foodservice, a Delaware corporation, or any successor
-------
thereto.
1.7 "Company Contribution" means a contribution by the Company to a Participant
--------------------
Account in accordance with SECTION 5.3.
1.8 "Director Retainer" means an annual fee retainer earned by an Eligible
-----------------
Director for service on the Board of Directors.
1.9 "Election Form" means the form used by an Eligible Director to elect to
-------------
defer his Meeting Fees and all or a portion of his Director Retainer for a
Plan Year.
1.10 "Eligible Director" for each Plan Year means a member of the Board of
-----------------
Directors of the Company who is not an employee of the Company or any
Subsidiary.
1.11 "Fair Market Value" means the opening price of a share of Common Stock
-----------------
reported on the New York Stock Exchange (the "NYSE") on the date Fair
Market Value is being determined, provided that if there is no opening
price reported on such date, the Fair Market Value of a share of Common
Stock on such date shall be deemed equal to the closing price as reported
by the NYSE for the last preceding date on which sales of shares of Common
Stock were reported. Notwithstanding the foregoing, in the event that the
shares of Common Stock are listed upon more than one established stock
exchange, "Fair Market Value" means the opening price of the shares of
Common Stock reported on the exchange that trades the largest volume of
shares of Common Stock on the date Fair Market Value is being determined.
1.12 "Meeting Fees" means fees earned by an Eligible Director for service on the
------------
Board of Directors and includes fees for attending, either in person or by
-1-
<PAGE>
telephone, meetings of the Board of Directors and any duly authorized
committee thereof.
1.13 "Participant" for any Plan Year means an Eligible Director who participates
-----------
in the Plan for that Plan Year in accordance with SECTION 4.1.
1.14 "Participant Account" means an account maintained for a Participant
-------------------
pursuant to SECTION 5.1.
1.15 "Participant Contribution" means the portion of Meeting Fees and Director
------------------------
Retainer a Participant elects to contribute to his Participant Account in
accordance with SECTION 4.1.
1.16 "Plan" means the U.S. Foodservice Non-Employee Director Voluntary Deferred
----
Compensation Plan as set forth herein and as amended from time to time.
1.17 "Plan Year" means each fiscal year of the Company.
---------
1.18 "Separation from Service" means that the Participant ceases to provide
-----------------------
services to the Company in any capacity.
1.19 "Subsidiary" means any "subsidiary corporation" of the Company within the
----------
meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended.
2. PURPOSE
The purpose of the Plan is to provide an incentive for Eligible Directors
to increase their equity holdings in the Company so that the financial interests
of the Eligible Directors shall be more closely aligned with the financial
interests of the Company's stockholders.
3. SHARES SUBJECT TO THE PLAN
The shares of Common Stock issuable under the Plan shall be issued pursuant to
the U.S. Foodservice 1998 Stock Option and Incentive Plan, and may be authorized
but unissued shares, treasury shares or issued and outstanding shares that are
purchased in the open market.
4. PARTICIPATION IN THE PLAN
4.1. PARTICIPATION; ELECTION FORM
An Eligible Director may elect to participate in the Plan by filing an
Election Form, in the form and manner prescribed by the Board. Filing of a
completed Election Form will authorize the Company to retain a percentage
of, or a
2
<PAGE>
specific dollar amount out of, the Participant's Director Retainer as
indicated on the Election Form, and if the Participant so elects, all of
the Participant's Meeting Fees for the Plan Year.
4.2. TIME FOR FILING ELECTION FORM
An Election Form shall be completed and filed by each newly elected
Eligible Director within 30 days after his election to the Board, and
elections under the Plan made by newly elected Eligible Directors shall
apply to the Participant's Meeting Fees and Director Retainer for the
remainder of the Plan Year. Continuing Directors shall complete an
Election Form prior to December 31 for Meeting Fees and Director Retainers
earned in the remainder of the Plan Year. Continuing Directors shall
complete an Election Form prior to the last day of the Company's fiscal
year for Meeting Fees and Director Retainers earned in the next succeeding
Plan Year.
4.3. MODIFICATION OF THE ELECTION FORM
An election made by an Eligible Director pursuant to SECTION 4.1 shall be
irrevocable for the Plan Year for which such election is made.
5. PARTICIPANT ACCOUNTS AND CONTRIBUTIONS
5.1. ACCOUNTS
The Company shall create and maintain a separate Participant Account for
each Eligible Director for all periods during which such Participant
participates in the Plan. The Accounts shall be memorandum bookkeeping
accounts only.
5.2. PARTICIPANT CONTRIBUTION
In accordance with the Participant's Election Form, each Participant
Account shall be credited with the Participant Contribution elected by the
Participant in accordance with SECTION 4.1 at the time the Meeting Fees or
Director Retainer would otherwise be payable.
5.3. COMPANY CONTRIBUTION
The Company shall credit each Participant Account an amount equal to 25% of
the Eligible Director's Participant Contribution for the Plan Year.
Company Contributions shall be credited to each Participant Account at such
3
<PAGE>
times as may be determined by the Committee, but not less frequently than
every three months.
6. CHANGE OF CONTROL
"Change of Control" shall mean the happening of any of the following
events:
(a) individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board of Directors; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person (as defined in Paragraph (b) below) other than the Board of
Directors;
(b) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person"), is or becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the Company's stock generally
entitled to vote for the election of directors ("Voting Stock") or the
consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company or other transaction (a "Business Transaction"), in each case,
unless, following such Business Transaction, (i) no Person (excluding
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Transaction) beneficially
owns, directly or indirectly, 50% or more of, respectively, the then
outstanding shares of Voting Stock of the Company or the corporation
resulting from such Business Transaction and (ii) at least a majority
of the members of the board of directors of the corporation resulting
from such Business Transaction were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business Transaction; or
(c) consummation of a complete liquidation or dissolution of the Company.
4
<PAGE>
7. INVESTMENT EXPERIENCE
7.1. COMPANY AND PARTICIPANT CONTRIBUTIONS
The Company and the Participant Contributions to each Participant Account
shall be deemed to be invested in the number of full or fractional shares
of Common Stock determined by dividing the amount of the sum of the Company
Contribution and the Participant Contribution by the Fair Market Value of
the Common Stock on the date the Participant Account is credited with such
Contribution. Each Participant Account shall receive credits based on cash
dividends distributed on the Common Stock as if the shares in which the
accounts are deemed invested had been issued to and held in the accounts.
Such cash dividend equivalents shall be deemed to be reinvested in
additional Common Stock, which may thereafter accrue additional dividend
equivalents. Any such reinvestment shall be at Fair Market Value on the
date of reinvestment. The deemed investment is to be used only for the
purpose of valuing the Participant Account. The Company and the Committee
are under no obligation to acquire or provide any Common Stock, and any
investments actually made by the Committee shall be made solely in the name
of the Company and shall remain the property of the Company. If the number
of outstanding shares of Common Stock is increased or decreased or the
shares of Common Stock are changed into or exchanged for a different number
or kind of shares or other securities of the Company, in each case on
account of any recapitalization, reclassification, stock split, reverse
split, combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Company, the
number and kinds of shares in which the Participant Account is deemed
invested shall be adjusted proportionately and accordingly by the Company.
7.2. TAXES; STATEMENTS
All taxes required to be paid in connection with the deemed investment
experience of the Participant Accounts, but not in connection with the
distributions to Participants, shall be paid by the Company. At least as
often as 30 days after the last business day of each calendar quarter, the
Committee shall provide the Participant with a statement of the
Participant's Account, in such reasonable detail as the Committee shall
deem appropriate.
5
<PAGE>
8. DISTRIBUTIONS
8.1. TIMING AND METHOD OF PAYMENT.
At the time an Eligible Director commences participation in the Plan, such
Eligible Director shall also elect in such manner as approved by the
Committee one of the following times for distributions from the Participant
Account to commence: (i) following the Participant's Separation from
Service at a stated age, (ii) following the Participant's ceasing to be an
Eligible Director for any reason, or (iii) following the occurrence of a
Change of Control. At the same time, such Eligible Director shall also
elect in such manner as approved by the Committee one of the following
methods for the payment of the Participant's Account:
(a) a lump sum payment; or
(b) pro-rata annual installment payments for a period not to exceed five
years after the distributions are scheduled to commence in accordance
with this SECTION 8.1, with each installment equal to the unpaid
balance of the Participant's Account divided by the number of
remaining payments; and, if the Participant dies before all payments
are made, the remaining payments shall be made to the Participant's
Beneficiary.
A Participant may elect one method of payment to such Participant and a
different method of payment to the Participant's Beneficiary.
A Participant may request a change of the Participant's election as to the
timing or method of payment, by written notice to the Committee, subject to
approval by the Committee in its sole discretion, at any time in a tax year
prior to the tax year of the commencement of distributions in accordance
with SECTION 8.1; provided, however, that if distributions are scheduled to
commence for any reason other than death less than 90 days following any
election or request for a change in election of a method of payment to the
Participant, such election may be disregarded by the Committee.
8.2. HARDSHIP
(a) Upon application by a Participant and approval thereof by the
Committee, the Participant may withdraw, upon a showing of hardship,
part or all of the amount in the Participant's Account.
(b) For purposes of SECTION 8.2(A), "hardship" shall mean severe financial
hardship to a Participant resulting from a sudden and unexpected
illness or accident of or involving the Participant or of or involving
a
6
<PAGE>
dependent (as defined in Section 152(a) of the Internal Revenue Code
of 1986, as amended) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant, which hardship may not be relieved through
reimbursement or compensation by insurance or otherwise or by
liquidation of the Participant's assets (to the extent such
liquidation would not itself cause severe financial hardship).
8.3. FORM OF PAYMENT
The value of the Participant Account shall be distributed to the
Participant in shares of Common Stock, except that cash shall be
distributed in lieu of fractional shares. The Company shall use its best
efforts to maintain the effectiveness of a registration statement on Form
S-8 (or any successor form) or another appropriate form with respect to
shares of Common Stock distributable pursuant to the Plan.
9. ADMINISTRATION
9.1. COMMITTEE
The general administration of the Plan and the responsibility for carrying
out its provisions shall be placed in an Administrative Committee. The
Committee shall consist of at least two members appointed from time to time
by the Board of Directors to serve at the pleasure thereof. The initial
Administrative Committee shall consist of the Chief Financial Officer and
the General Counsel of the Company. Any member of the Committee may resign
by delivering the Participant's written resignation to the Company, and may
be removed at any time by action of the Board of Directors.
9.2. RULES FOR ADMINISTRATION
Subject to the limitations of the Plan, the Committee may from time to time
establish such rules and procedures for the administration and
interpretation of the Plan and the transaction of its business as the
Committee may deem necessary or appropriate. The determination of the
Committee as to any disputed question relating to the administration and
interpretation of the Plan shall be conclusive.
7
<PAGE>
9.3. COMMITTEE ACTION
Any act which the Plan authorizes or requires the Committee to do may be
done by a majority of its members. The action of such majority, expressed
from time to time by a vote at a meeting (a) in person, (b) by telephone or
other means by which all members can hear one another or (c) in writing
without a meeting, shall constitute the action of the Committee and shall
have the same effect for all purposes as if assented to by all members of
the Committee at the time in office.
9.4. DELEGATION
The members of the Committee may authorize one or more of their number to
execute or deliver any instrument, make any payment or perform any other
act which the Plan authorizes or requires the Committee to do.
9.5. SERVICES
The Committee may employ or retain agents to perform such clerical,
accounting and other services as they may require in carrying out the
provisions of the Plan.
9.6. INDEMNIFICATION
The Company shall indemnify and save harmless each member of the Committee
against all expenses and liabilities arising out of membership on the
Committee, other than expenses and liabilities arising from the such
member's own gross negligence or willful misconduct, as determined by the
Board of Directors.
10. AMENDMENT AND TERMINATION
The Company, by action of the Board of Directors or the Compensation Committee
thereof, may at any time or from time to time modify or amend any or all of the
provisions of the Plan, or may at any time terminate the Plan. No such action
shall adversely affect the accrued rights of any Participant hereunder without
the Participant's consent thereto.
8
<PAGE>
11. GENERAL PROVISIONS
11.1. LIMITATION OF RIGHTS
No Participant shall have any right to any payment or benefit hereunder
except to the extent provided in the Plan.
11.2. NO RIGHTS AS STOCKHOLDERS
Nothing contained in this Plan shall be construed as giving any Participant
rights as a stockholder of the Company.
11.3. RIGHTS AS A NON-EMPLOYEE DIRECTOR
Nothing contained in this Plan shall be construed as giving any Participant
a right to be retained as a non-employee Director of the Company.
11.4. ASSIGNMENT, PLEDGE OR ENCUMBRANCE
No assignment, pledge or other encumbrance of any payments or benefits
under the Plan shall be permitted or recognized and, to the extent
permitted by law, no such payments or benefits shall be subject to legal
process or attachment for the payment of any claim of any person entitled
to receive the same, except to the extent such assignment, pledge or other
encumbrance is in favor of the Company to secure a loan or other extension
of credit from the Company to the Participant.
11.5. MINOR OR INCOMPETENT
If the Committee determines that any person to whom a payment is due
hereunder is a minor or is incompetent by reason of physical or mental
disability, the Committee shall have the power to cause the payments
becoming due to such person to be made to another person for the benefit of
such minor or incompetent, without responsibility of the Company or the
Committee to see to the application of such payment, unless prior to such
payment a claim to such payment is made by a duly appointed legal
representative. Payments made pursuant to such power shall operate as a
complete discharge of the Company and the Committee.
11.6. BENEFICIARY
Each Participant may designate, by written notice to the Committee, any
person or persons or legal entity or legal entities, including such
Participant's estate, as such Participant's Beneficiary under the Plan. By
written notice to
9
<PAGE>
the Committee, a Participant may revoke the Participant's designation of a
Beneficiary or change such Participant's Beneficiary at any time prior to
such Participant's death. If no person or legal entity shall be designated
by a Participant as such Participant's Beneficiary or if no designated
Beneficiary survives such Participant, such Participant's Beneficiary shall
be such Participant's estate.
11.7. BINDING PROVISIONS
The provisions of this Plan shall be binding upon each Participant as a
consequence of the Participant's election to participate in the Plan, upon
the Company, upon the Participant's heirs, executors and administrators and
upon the successors and assigns of the Participant and the Company.
11.8. NOTICES
Any election made or notice given by a Participant pursuant to the Plan
shall be in writing to the Committee or to such representative thereof as
may be designated by the Committee for such purpose and shall be deemed to
have been made or given on the date received by the Committee or its
representative.
11.9. GOVERNING LAW
The validity and interpretation of the Plan and of any of its provisions
shall be construed under the laws of the State of Maryland without giving
effect to the choice of law provisions thereof.
11.10. PRONOUNS
The masculine pronoun shall be deemed to include the feminine wherever it
appears in the Plan unless a different meaning is required by the context.
11.11. WITHHOLDING
Upon the request of the Participant, the Company shall withhold from the
shares of Common Stock distributable to such Participant such number of
shares of Common Stock as shall be sufficient to satisfy all or a portion
of any federal, state and local tax requirements applicable to the
designated distribution. If federal, state or local tax withholding
requirements become applicable to the designated distribution and the
Participant has not requested to have sufficient shares withheld to satisfy
all such withholding requirements, the Company shall have the right to
deduct from the Common Stock distributable hereunder any federal, state or
local taxes required by
10
<PAGE>
law to be withheld with respect to such distributions, and such additional
amounts of withholding as are reasonably requested by the Participant.
11.12. EFFECTIVE DATES
This Plan shall be effective as of January 1, 1999.
* * * * *
11
<PAGE>
EXHIBIT 10.2
[Final Version]
---------------
______________________________________________________________________________
RS FUNDING INC.,
as Company,
U.S. FOODSERVICE, INC.
(as successor to U.S.F. Distributors, Inc.
which was formerly known as US Foodservice Inc.),
as the Servicer,
and
THE CHASE MANHATTAN BANK,
as Trustee
_____________________
SERIES 1998-1 SUPPLEMENT
Dated as of December 31, 1998
to
POOLING AGREEMENT
Dated as of November 15, 1996
_____________________
RYKOFF-SEXTON RECEIVABLES MASTER TRUST
______________________________________________________________________________
<PAGE>
1
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................. 1
SECTION 1.1. Definitions...................................................... 1
ARTICLE II DESIGNATION OF CERTIFICATES; PURCHASE AND SALE OF THE VFC CERTIFICATES... 18
SECTION 2.1. Designation...................................................... 18
SECTION 2.2. The Series 1998-1 Certificates................................... 18
SECTION 2.3. Delivery......................................................... 18
SECTION 2.4. Procedure for Increasing the Series 1998-1 Invested Amount....... 18
SECTION 2.5. Procedure for Decreasing the Series 1998-1 Invested Amount;
Optional Termination............................................ 20
SECTION 2.6. Funding Certification............................................ 22
SECTION 2.7. Interest; Fees................................................... 23
SECTION 2.8. Indemnification by the Company and the Servicer.................. 24
ARTICLE III OF THE AGREEMENT........................................................ 26
SECTION 3C.2. Establishment of Trust Accounts................................. 26
SECTION 3C.3. Daily Allocations............................................... 27
SECTION 3C.4. Selection of Funding Periods; Determination of Interest Rates.. 29
SECTION 3C.5. Determination of Series 1998-1 Amortization Principal Payment... 30
SECTION 3C.6. Applications..................................................... 31
ARTICLE IV.......................................................................... 34
DISTRIBUTIONS AND REPORTS...................................................... 34
SECTION 4C.1. Distributions................................................... 34
SECTION 4C.2. Daily Reports................................................... 34
SECTION 4C.3. Statements and Notices.......................................... 34
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS..................................... 36
SECTION 5.1. Additional Early Amortization Events............................. 36
ARTICLE VI SERVICING FEE........................................................... 39
SECTION 6.1. Servicing Compensation........................................... 39
ARTICLE VII REPRESENTATIONS AND WARRANTIES, COVENANTS.............................. 40
SECTION 7.1. Representations and Warranties of the Company and the Servicer... 40
SECTION 7.2. Covenants of the Company and the Servicer........................ 40
SECTION 7.3. Covenants of the Servicer........................................ 41
SECTION 7.4. Covenant of the Trustee.......................................... 42
SECTION 7.5. Obligations Unaffected........................................... 42
ARTICLE VIII CONDITIONS PRECEDENT.................................................. 42
SECTION 8.1. Conditions Precedent to Effectiveness of the Supplement.......... 42
ARTICLE IX MISCELLANEOUS........................................................... 45
SECTION 9.1. Ratification of Agreement........................................ 45
SECTION 9.2. Governing Law.................................................... 45
SECTION 9.3. Further Assurances............................................... 46
SECTION 9.4. No Waiver; Cumulative Remedies................................... 46
SECTION 9.5. Amendments....................................................... 46
SECTION 9.6. Severability..................................................... 46
SECTION 9.7. Notices.......................................................... 46
SECTION 9.8. Counterparts..................................................... 47
SECTION 9.9. Limitation on Addition and Termination of Sellers................ 47
ARTICLE X FINAL DISTRIBUTIONS...................................................... 49
SECTION 10.1. Certain Distributions........................................... 49
ARTICLE XI MISCELLANEOUS........................................................... 50
SECTION 11.2. Lockbox Concentration Accounts.................................. 50
SECTION 11.3. Effectiveness................................................... 51
</TABLE>
<PAGE>
iii
EXHIBITS
Exhibit A Form of VFC Certificate
Exhibit B Form of Series 1998-1 Subordinated Certificate
Exhibit C Form of Daily Report
Exhibit D-1 Form of Monthly Settlement Statement
Exhibit D-2 Form of Funding Period Settlement Statement
Exhibit E Form of Funding Certification
Exhibit F Form of UCC Certificate
Exhibit G Form of Increase Request
SCHEDULES
Schedule 1 Trust Accounts
Schedule 2 Additional Sellers
ANNEXES
Annex I Financial Covenant Definitions
<PAGE>
SERIES 1998-1 SUPPLEMENT, dated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, this "Supplement"), among
----------
RS Funding Inc., a Nevada corporation (the "Company"), U.S. Foodservice, Inc.
-------
(as successor to U.S.F. Distributors, Inc., which was formerly known as US
Foodservice Inc.), a Delaware corporation ("U.S. Foodservice"), as servicer
(except where otherwise noted) (in such capacity, the "Servicer"), and The Chase
--------
Manhattan Bank, a New York banking corporation, in its capacity as Trustee (the
"Trustee") under the Agreement (as defined below).
-------
W I T N E S S E T H :
-------------------
WHEREAS, the Company, the Servicer and the Trustee have entered into a
Pooling Agreement, dated as of November 15, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Agreement");
---------
WHEREAS, the Agreement provides, among other things, that the Company,
the Servicer and the Trustee may at any time and from time to time enter into
supplements to the Agreement for the purpose of authorizing the issuance on
behalf of the Trust by the Company for execution, and redelivery to the Trustee
for authentication, of one or more Series of Investor Certificates; and
WHEREAS, the Company, the Servicer and the Trustee wish to supplement
the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. Definitions. (a) The following words and phrases shall
-----------
have the following meanings with respect to Series 1998-1 and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accrual Period" shall mean the period from and including a
--------------
Distribution Date, or, in the case of the initial Accrual Period, the
Issuance Date, to but excluding the immediately succeeding Distribution
Date.
"Accrued Expense Amount" shall mean, for each Business Day during an
----------------------
Accrual Period, the sum of (i) the Daily Interest Deposit for such Business
Day, (ii) (A) if such Business Day is prior to the 20th day of such Accrual
Period, 1/10 of each of the Series 1998-1 Monthly Servicing Fee and the
portion of each of the Program Fee, the Administrative Fee and the Facility
Fee to be paid on the next succeeding Distribution Date (up to but not
exceeding, in each case, the full amount thereof), or (B) if such Business
Day is on or after the 20th day of such Accrual Period and if the Agent
notifies the Servicer and the Trustee on such Business Day that Aggregate
Daily Collections previously transferred to the Series 1998-1 Non-Principal
Collection Sub-subaccount are insufficient to pay the Series 1998-1 Monthly
Servicing Fee and the portion of each of the Program Fee, the
Administrative Fee and the Facility Fee to be paid on the next succeeding
Distribution Date, an amount reasonably expected by the Agent to be equal
to such insufficiency, which amount shall be specified in such notice to
the Servicer and the Trustee, (iii) if such Business Day is during the
period from the date on which notice
<PAGE>
2
of a request for the issuance of Commercial Paper is given through the date
of the issuance of such Commercial Paper, the amount of the Dealer Fee,
notified by the Agent to the Trustee, expected to be incurred in connection
with the issuance of such Commercial Paper (the "Dealer Fee Notification
Amount"), and (iv) all Program Costs which have accrued since the preceding
Business Day.
"Additional Interest" shall mean with respect to any outstanding Past
-------------------
Due Interest, interest thereon, until paid in full, at a per annum rate
equal to the sum of (i) Base Rate as in effect from day to day and actual
days elapsed and (ii) 2.00%.
"Adjusted Eurodollar Rate" for any Eurodollar Tranche for any
------------------------
Eurodollar Period shall mean an interest rate per annum equal to (A) LIBOR
for such Eurodollar Period, divided by (B) (1) one minus (2) the Eurodollar
------- -- -----
Reserve Requirements (expressed as a decimal) applicable during that
Eurodollar Period.
"Administrative Fees" shall have the meaning specified in subsection
-------------------
2.7(c).
"Administrative Fee Rate" means the per annum rate described as the
-----------------------
"Administrative Fee Rate", as set forth in the Fee Letter.
"Aged Receivables Ratio" shall mean, as of the last day of each
----------------------
Settlement Period, the percentage equivalent of a fraction, (i) the
numerator of which shall be the sum of (A) the aggregate unpaid balance of
Receivables that were 91-120 days past their respective original invoice
dates as of such last day and (B) the aggregate amount of Receivables of
the Sellers which were charged off as uncollectible prior to the day which
is 91 days after their respective original invoice dates during such
Settlement Period, and (ii) the denominator of which shall be the aggregate
Principal Amount of Receivables originated by the Sellers during the third
prior Settlement Period (including the Settlement Period ended on such
day).
"Agent" shall mean at any time, the financial institution then serving
-----
as the "Agent" under and as defined in the Certificate Purchase Agreement.
"Alternate Purchaser" shall have the meaning specified in the
-------------------
Certificate Purchase Agreement.
"Applicable Margin" shall mean, for purposes of calculating the
-----------------
Eurodollar Rate for any Eurodollar Tranche, the applicable margin
corresponding to the "Total Debt Ratio" (as such term is defined in Annex I
hereto) set forth below in effect as of the most recent Determination Date:
Total Debt Ratio Applicable Margin
---------------- -----------------
less than or equal to 2.5 to 1.0 100.0 basis points
greater than 2.5 to 1.0
but less than or equal to 4.0 to 1.0 112.5 basis points
greater than 4.0 to 1.0 125.0 basis points
<PAGE>
3
"Available Funds" shall have the meaning specified in subsection
---------------
2.7(g).
"Base Rate" or "BR" means, a rate per annum equal to the greater of
--------- --
(i) the prime rate of interest announced by NationsBank from time to time,
changing when and as said prime rate changes (such rate not necessarily
being the lowest or best rate charged by NationsBank), and (ii) the sum of
(a) 1.50% and (b) the rate equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if
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
for such transactions received by NationsBank from three Federal funds
brokers of recognized standing selected by it.
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement Report
---------------------------
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to the product of (A) the
greatest of (1) 2.00 times Days Sales Outstanding as of such day, (2) 60
-----
and (3) the weighted average length of all then outstanding Funding Periods
and (B) the greater of (1) the Discount Rate or (2) the Base Rate as of
such day plus 2.0%, as either (1) or (2) of clause (B) shall be divided by
---- ------- --
360.
"Certificate Purchase Agreement" shall mean the Certificate Purchase
------------------------------
Agreement, dated as of December 31, 1998, among each of the Company, U.S.
Foodservice, the "Conduit Purchasers" parties thereto from time to time,
the "Alternate Purchasers" parties thereto from time to time, and
NationsBank, as "Agent" for the "Conduit Purchasers" and "Alternate
Purchasers" thereunder, as the same may be amended, restated, supplemented
or otherwise modified from time to time.
"Change in Control" shall mean the occurrence of any event the result
-----------------
of which causes the Company not to be a direct or indirect, wholly-owned
Subsidiary of U.S. Foodservice.
"Clean-Up Call Amount" shall mean the Clean-Up Call Percentage of the
--------------------
highest Series 1998-1 Invested Amount at any time during the Series 1998-1
Revolving Period.
"Clean-Up Call Percentage" shall mean 10%.
------------------------
<PAGE>
4
"Commercial Paper" shall mean, with respect to a Conduit Purchaser,
----------------
commercial paper notes issued by such Conduit Purchaser in order to fund
the purchase or maintenance by such Conduit Purchaser of an interest in the
VFC Certificates under the Certificate Purchase Agreement.
"Conduit Purchaser" shall have the meaning assigned to such term in
-----------------
the Certificate Purchase Agreement.
"Daily Interest Deposit" shall mean, for any Business Day, an amount
----------------------
equal to the sum of (i) the aggregate accrued but unpaid Funding Period
Interest on the VFC Certificates for all outstanding Funding Periods to the
extent not previously deposited to the Series 1998-1 Non-Principal
Collection Sub-subaccount; provided, however, that if such Business Day is
-------- -------
the first, second or third Business Day preceding the Funding Period
Settlement Date for any Funding Period, the accrued Funding Period Interest
for such Funding Period shall be deemed to be the full amount of Funding
Period Interest scheduled (or in the case of the Unallocated Balance,
expected in good faith by the Servicer) to be due and payable on such
Funding Period Settlement Date up to the full amount thereof, plus (ii) the
----
aggregate amount of all previously accrued and unpaid Daily Interest
Deposits, plus (iii) the aggregate amount of all accrued and unpaid
----
Additional Interest accrued since the previous Business Day.
"Daily Report" shall mean a report prepared by the Servicer on each
------------
Business Day for the period specified therein, in substantially the form of
Exhibit C.
"Days Sales Outstanding" shall mean, as of any Settlement Report Date
----------------------
and continuing until (but not including) the next Settlement Report Date,
the number of days equal to the product of (a) 91 and (b) the amount
obtained by dividing (i) the aggregate Principal Amount of Eligible
Receivables as of the last day of the immediately preceding Settlement
Period by (ii) the aggregate Principal Amount of Receivables generated by
the Sellers for the three Settlement Periods immediately preceding such
earlier Settlement Report Date.
"Dealer Fee" shall have the meaning assigned to such term in the Fee
----------
Letter.
"Decrease" shall have the meaning specified in subsection 2.5(a).
--------
"Delinquency Ratio" shall mean, for any Settlement Period, the ratio
-----------------
(expressed as a percentage) computed as of the last day of such Settlement
<PAGE>
5
Period by dividing (i) the aggregate outstanding Principal Amount of all
Delinquent Receivables as of such date by (ii) the aggregate outstanding
Principal Amount of all Receivables (other than Defaulted Receivables) as
of such date.
"Delinquent Receivable" shall mean, as of any date of determination,
---------------------
any Receivable (i) which is unpaid in whole or in part for more than 60
days after its original invoice date and (ii) which is not a Defaulted
Receivable.
"Dilution Horizon" shall mean, (i) for the period from the Issuance
----------------
Date until May 17, 1999, 8.432 days, and (ii) for each six-month period
(beginning and ending on a Settlement Report Date) to occur after such
initial period, as determined by the Servicer by selecting a random sample
of approximately 1,000 Dilution Adjustment memos created during such
period, the number of days (expressed as a dollar weighted average based
upon the Dilution Adjustments for such period) from the occurrence of any
event which gives rise to a Dilution Adjustment until a Dilution Adjustment
memo is issued by the Servicer in accordance with the Policies; provided
--------
that in no event shall the Dilution Horizon be less than 3.5 days.
"Dilution Horizon Factor" shall mean (a) for the period from the
-----------------------
Issuance Date until May 17, 1999, 0.281, and (b) for each six-month period
(beginning and ending on a Settlement Report Date) to occur after such
initial period, a fraction, (i) the numerator of which is the Dilution
Horizon for such period and (ii) the denominator of which is 30; provided,
--------
however, that if the Dilution Horizon Factor for any period would be less
-------
than the Dilution Horizon Factor for the immediately preceding period, then
the actual Dilution Horizon Factor for such current period shall be
recalculated to equal a fraction, the numerator of which is equal to the
average of the numerators used to calculate the Dilution Horizon Factor for
such immediately preceding period and such current period and the
denominator of which is 30.
"Dilution Period" shall mean, as of any Settlement Report Date and
---------------
continuing until (but not including) the next Settlement Report Date, the
quotient of (i) the product of (A) the aggregate Principal Amount of
Receivables which were originated by the Sellers during the Settlement
Period immediately preceding such earlier Settlement Report Date and (B)
the Dilution Horizon Factor then in effect and (ii) the Aggregate
Receivables Amount as of the last day of the Settlement Period immediately
preceding such earlier Settlement Report Date.
<PAGE>
6
"Dilution Ratio" shall mean, for each Settlement Period, an amount
--------------
(expressed as a percentage) equal to the aggregate amount of Dilution
Adjustments made during such Settlement Period divided by the aggregate
------- --
Principal Amount of Receivables which were originated by the Sellers during
such Settlement Period.
"Dilution Reserve Ratio" shall mean, as of any Settlement Report Date
----------------------
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) which is calculated for the VFC
Certificates, as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.00;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the highest Dilution Ratio for any Settlement Period during
the period of twelve consecutive Settlement Periods ending
prior to such earlier Settlement Report Date; and
f = the Dilution Period.
"Discount Rate" shall mean, as of any date of determination,
-------------
(x) the sum of (i) the product of (A) the aggregate amount of interest
accrued with respect to the VFC Certificates during the Settlement Period
immediately preceding the most recent Settlement Report Date, and (B) 1.50,
and (ii) an amount equal to (A) the sum of the aggregate amount of fees
(other than the Servicing Fee and Program Costs) accrued with respect to
the VFC Certificates during the Settlement Period immediately preceding the
most recent Settlement Report Date; divided by
------- --
(y) the average daily Series 1998-1 Invested Amount during such
Settlement Period.
"Early Amortization Event" shall have the meanings assigned in Section
------------------------
5.1 of this Supplement and Section 7.1 of the Agreement.
<PAGE>
7
"Early Amortization Period" shall have the meaning assigned in Section
-------------------------
5.1 of this Supplement and Section 7.1 of the Agreement.
"Effective Date" shall have the meaning assigned in Section 8.1 of
--------------
this Supplement.
"Eurodollar Period" shall mean with respect to any Eurodollar Tranche,
-----------------
the Period of 30 days or more to which any portion of the Unallocated
Balance is allocated pursuant to subsection 3C.4 in a manner giving rise to
a Eurodollar Tranche.
"Eurodollar Reserve Requirements" shall mean for any Eurodollar
-------------------------------
Period, the daily average (rounded upward, if necessary, to the nearest
whole multiple of 1/16 of 1% per annum) of the aggregate (without
duplication) of the maximum rates (expressed as a decimal fraction) of
reserve requirements in effect on each day during such Eurodollar Period
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other Governmental Authority having jurisdiction with
respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency liabilities"
in Regulation D of such Board) maintained by a member bank of the Federal
Reserve System.
"Eurodollar Tranche" shall mean a portion of the Series 1998-1
------------------
Invested Amount allocable to interests in VFC Certificates for which
Funding Period Interest is calculated by reference to an Adjusted
Eurodollar Rate for a particular Eurodollar Period pursuant to subsection
3C.4.
"Facility Fee Rate" means the per annum rate described as the
-----------------
"Facility Fee Rate", as set forth in the Fee Letter.
"Facility Fees" shall have the meaning specified in subsection 2.7(d).
-------------
"Fee Letter" means the letter agreement dated as of December 31, 1998
----------
among the Company, the Agent, and a certain Conduit Purchaser, with respect
to certain fees to be paid by the Company hereunder, as amended, restated,
supplemented or otherwise modified from time to time.
"Funding Certification" shall have the meaning specified in subsection
---------------------
2.6.
<PAGE>
8
"Funding Period" shall mean (i) with reference to any portion of the
--------------
Series 1998-1 Invested Amount allocable to interests in the VFC
Certificates funded by the issuance of Commercial Paper, (1) initially, a
period of 1 to 120 days, and otherwise determined in accordance with the
requirements of subsection 3C.4(b), commencing on the Issuance Date, and
(2) thereafter, a period of 1 to 120 days, determined in accordance with
the requirements of subsection 3C.4(b), commencing on the last day of the
immediately preceding Funding Period for such portion of the Series 1998-1
Invested Amount; provided, however, that the Funding Period applicable to
-------- -------
the amount of any Increase allocated to the Purchaser subsequent to the
Issuance Date shall be a period of 1 to 120 days, determined in accordance
with the requirements of subsection 3C.4(b), commencing on the applicable
Increase Date and (ii) with reference to any portion of the Series 1998-1
Invested Amount not allocable to interests in the VFC Certificates funded
by the issuance of Commercial Paper, a period of 30 days or more.
"Funding Period Determination Date" shall mean with respect to any
---------------------------------
Funding Period Settlement Date, the Business Day immediately preceding such
Funding Period Settlement Date.
"Funding Period Interest" shall mean (i) with respect to that portion
-----------------------
of the Series 1998-1 Invested Amount allocated to a Funding Period as
provided in Section 3C.4, the aggregate interest accrued at the Funding
Period Rate for such Funding Period on such allocated portion of the Series
1998-1 Invested Amount, calculated on the basis specified in subsection
2.7(e) and (ii) as of any Distribution Date with respect to the Unallocated
Balance outstanding from time to time, the aggregate interest accrued
thereon at the Base Rate in effect from time to time from and including the
preceding Distribution Date with respect to the Unallocated Balance to but
excluding the current Distribution Date with respect to the Unallocated
Balance, calculated on the basis specified in subsection 2.7(e).
"Funding Period Rate" shall mean, for any Funding Period and that
-------------------
portion of the Series 1998-1 Invested Amount allocated to that Funding
Period:
(i) (A) to the extent of the interest in the VFC Certificates
evidencing the Series 1998-1 Invested Amount funded by any Conduit
Purchaser through the issuance of Commercial Paper, the rate
equivalent to the rate (or if more than one rate, the weighted average
of the rates), at which Commercial Paper of such Conduit Purchaser
having a term equal to such Funding Period were sold by any placement
agent or commercial paper dealer selected by such
<PAGE>
9
Conduit Purchaser, as agreed between each such agent or dealer and
such Conduit Purchaser and notified by such Conduit Purchaser to the
Servicer within 2 Business Days of such agreement; provided, however,
-------- -------
if the rate (or rates) as agreed between any such agent or dealer and
a Conduit Purchaser with regard to any Funding Period is a discount
rate (or rates), the "Funding Period Rate" for such Funding Period
-------------------
shall be the rate (or if more than one rate, the weighted average of
the rates) resulting from converting such discount rate (or rates) to
an interest-bearing equivalent rate (or rates) per annum; and (B) to
the extent of any interest in the VFC Certificates evidencing the
Series 1998-1 Invested Amount funded by any Conduit Purchaser other
than through issuing Commercial Paper, a rate equal to (1) to the
extent that such portion of its investment in such VFC Certificates is
funded by draws on liquidity or credit enhancement facilities
available to such Conduit Purchaser, the rate (or if more than one
rate, the weighted average of the rates) charged to such Conduit
Purchaser by the relevant liquidity providers or credit enhancers then
providing such funding and notified by such Conduit Purchaser to the
Servicer, and (2) in all other cases, (x) the Base Rate, or (y) such
other rate as such Conduit Purchaser and the Company shall agree to in
writing; and
(ii) to the extent of the interests held by each Alternate
Purchaser in the VFC Certificates evidencing the Series 1998-1
Invested Amount, either (A) (1) the Base Rate in effect from time to
time during such Funding Period or (2) in respect of any portion of
the Series 1998-1 Invested Amount then allocated to a Eurodollar
Tranche, the sum of (x) the Adjusted Eurodollar Rate for such Funding
Period and (y) the Applicable Margin, as the Company shall select in
accordance with the provisions of subsection 3C.4(a), or, if the Agent
so declares in accordance with subsection 3C.4(b) after the occurrence
and during the continuance of an Early Amortization Event, the Base
Rate in effect during such Funding Period plus 2.0% or (B) such other
rate as such Alternate Purchaser and the Company shall agree to in
writing.
"Funding Period Settlement Date" shall mean (i) with respect to any
------------------------------
Funding Period, the last day of such Funding Period and (ii) with respect
to the Unallocated Balance outstanding from time to time during any Accrual
Period, the Distribution Date immediately following the end of such Accrual
Period.
<PAGE>
10
"Funding Period Settlement Statement" shall have the meaning specified
-----------------------------------
in Section 4C.3.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time.
"Increase" shall have the meaning specified in subsection 2.4(a).
--------
"Increase Amount" shall have the meaning specified in subsection
---------------
2.4(a).
"Increase Date" shall have the meaning specified in subsection 2.4(a).
-------------
"Initial Subordinated Certificate Amount" shall mean the Series 1998-1
---------------------------------------
Subordinated Certificate Amount on the Issuance Date.
"Invested Percentage" shall mean, with respect to any Business Day (i)
-------------------
during the Series 1998-1 Revolving Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1998-1 Allocated Receivables
Amount as of the end of the immediately preceding Business Day and the
denominator of which is the Aggregate Receivables Amount as of the end of
the immediately preceding Business Day and (ii) during the Series 1998-1
Amortization Period, the percentage equivalent of a fraction, the numerator
of which is the Series 1998-1 Allocated Receivables Amount as of the end of
the last Business Day of the Series 1998-1 Revolving Period (provided that
-------- ----
if during the Series 1998-1 Amortization Period, the amortization periods
of all other Outstanding Series which were outstanding prior to the
commencement of the Series 1998-1 Amortization Period commence, then, from
and after the date the last of such Series commences its Amortization
Period, the numerator shall be the Series 1998-1 Allocated Receivables
Amount as of the end of the Business Day preceding such date) and the
denominator of which is the greater of (A) the Aggregate Receivables Amount
as of the end of the immediately preceding Business Day and (B) the sum of
the numerators used to calculate the Invested Percentage for all
Outstanding Series on the Business Day for which such percentage is
determined.
"Issuance Date" shall mean ________ __, 1999.
-------------
"LIBOR" shall mean, for any Eurodollar Period, the rate per annum, as
-----
recorded by the Trustee, which is the arithmetic mean (rounded to the
nearest 1/100th of 1%) of the offered rates for Dollar deposits having a
maturity of 30 days or more commencing on the first day of such
<PAGE>
11
Eurodollar Period that appears on the Telerate British Bankers Assoc.
Interest Settlement Rates Page (as defined below) at approximately 11:00
a.m., London time, on the second full Business Day prior to such date;
provided, however, that if there shall at any time no longer exist a
-------- -------
Telerate British Bankers Assoc. Interest Settlement Rates Page, "LIBOR"
shall mean with respect to each day during each Eurodollar Period, the rate
per annum equal to the rate at which The Chase Manhattan Bank is offered
Dollar deposits at or about 10:00 a.m., New York City time, two Business
Days prior to the beginning of such Eurodollar Period in the London
interbank eurodollar market for delivery on the first day of such
Eurodollar Period for 30 days or more and in a principal amount equal to an
amount of not less than $1,000,000. "Telerate British Bankers Assoc.
-------------------------------
Interest Settlement Rates Page" shall mean the display designated as Page
------------------------------
3750 on the Telerate System Incorporated Service (or such other page as may
replace such page on such service for the purpose of displaying the rates
at which Dollar deposits are offered by leading banks in the London
interbank deposit market).
"Loss Reserve Ratio" shall mean, as of any Settlement Report Date and
------------------
continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) which is calculated as follows:
LRR = [(a * b)/c] * d
Where:
LRR = Loss Reserve Ratio;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately
preceding such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods preceding such earlier Settlement Report
Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period preceding such earlier Settlement Report Date;
and
d = 2.0
<PAGE>
12
"Loss-to-Liquidation Ratio" means, for any Settlement Period, the
-------------------------
ratio (expressed as a percentage) computed as of the last day of such
Settlement Period by dividing (i) the sum of (a) the aggregate outstanding
Principal Amount of all Receivables as to which any payment, or part
thereof, remains unpaid for 91 - 120 days after the original invoice date
of such Receivable and (b) the greater of (1) the aggregate outstanding
Principal Amount of all Receivables which have been charged off during such
Settlement Period as uncollectible prior to the day which is 91 days after
the original invoice date of such Receivable and (2) 0, by (ii) the
aggregate amount of Aggregate Daily Collections received during such
Settlement Period.
"Majority Purchasers" shall have the meaning assigned to such term in
-------------------
the Certificate Purchase Agreement.
"Maximum Invested Amount" shall mean , as of any date of
-----------------------
determination, an amount equal to $153,000,000; provided, however, that at
-------- -------
all times on and after the first day of the Series 1998-1 Amortization
Period, the "Maximum Invested Amount" shall be equal to the Series 1998-1
-----------------------
Invested Amount in effect at such time.
"Minimum Ratio" shall mean, as of any Settlement Report Date and
-------------
continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) which is calculated as follows:
MR = (a * b) + c
Where:
MR = Minimum Ratio;
a = the average of the Dilution Ratios during the period of the
twelve consecutive Settlement Periods ending prior to such
earlier Settlement Report Date;
b = the Dilution Period; and
c = a percentage equal to the sum of
(x) 1.75%, and
(y) the greater of (1) the product of 1 and the percentage
set forth opposite the entry "A-2 or BBB+" under the
heading "S&P" in the definition
<PAGE>
13
of the term "Overconcentration Amount" set forth in
Section 1.1 of the Agreement from time to time, (2) the
product of 2 and the percentage set forth opposite the
entry "A3 or BBB-" under the heading "S&P" in the
definition of the term "Overconcentration Amount" set
forth in Section 1.1 of the Agreement from time to time,
and (3) the product of 4 and the percentage set forth
opposite the entry "Not rated/other" under the heading
"S&P" in the definition of the term "Overconcentration
Amount" set forth in Section 1.1 of the Agreement from
time to time.
"Monthly Settlement Statement" shall have the meaning specified in
----------------------------
Section 4C.3.
"NationsBank" means NationsBank, N.A., and any successor thereto.
-----------
"Optional Termination Date" shall have the meaning assigned in
-------------------------
subsection 2.5(e).
"Optional Termination Notice" shall have the meaning assigned in
---------------------------
subsection 2.5(e).
"Past Due Interest" shall mean with reference to any Funding Period
-----------------
Settlement Date, any portion of the Funding Period Interest originally due
on a previous Funding Period Settlement Date that remains outstanding on
the current Funding Period Settlement Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA.
"Program Costs" shall mean, for any Business Day, the product of (i)
-------------
all unpaid fees and expenses due and payable to counsel to, and independent
auditors of, the Company (other than fees and expenses payable on or in
connection with the closing of the issuance of the VFC Certificates) on
such Business Day and (ii) a fraction, the numerator of which is the Series
1998-1 Invested Amount on such Business Day and the denominator of which is
the Aggregate Invested Amount on such Business Day; provided, however, that
-------- -------
Program Costs shall not exceed $50,000 in the aggregate in any fiscal year
of the Company.
"Program Fee" shall have the meaning specified in subsection 2.7(b).
-----------
<PAGE>
14
"Program Fee Rate" means the per annum rate described as the "Program
----------------
Fee Rate", as set forth in the Fee Letter.
"Purchaser" shall mean either of a Conduit Purchaser or an Alternate
---------
Purchaser.
"Rating Agency" shall mean the Agent. Notwithstanding anything to the
-------------
contrary contained in the Agreement, with respect to any references to the
"Rating Agency Condition" contained in this Supplement, the Agreement or
-----------------------
any other Transaction Document, the "Rating Agency Condition" may be
satisfied solely by way of compliance with subsection 7.2(e) hereof.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
last Business Day of the immediately preceding Settlement Period.
"Scheduled Revolving Termination Date" shall mean April 30, 1999, as
------------------------------------
such date may be extended from time to time pursuant to Section 2.05 of the
Certificate Purchase Agreement.
"Series 1998-1" shall mean Series 1998-1, the Principal Terms of which
-------------
are set forth in this Supplement.
"Series 1998-1 Accrued Interest Sub-subaccount" shall have the meaning
---------------------------------------------
assigned in subsection 3C.2(a).
"Series 1998-1 Adjusted Invested Amount" shall mean, as of any date of
--------------------------------------
determination, the greater of (i) (A) the Series 1998-1 Invested Amount on
such date, minus (B) the amount on deposit in the Series 1998-1 Principal
-----
Collection Sub-subaccount on such date and (ii) an amount equal, during the
Series 1998-1 Revolving Period, to $500,000 and, thereafter, to $0.
"Series 1998-1 Allocable Charged-Off Amount" shall mean, with respect
------------------------------------------
to any Special Allocation Settlement Report Date, the "Allocable Charged-
Off Amount", if any, which has been allocated to Series 1998-1.
"Series 1998-1 Allocable Recoveries Amount" shall mean, with respect
-----------------------------------------
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, which has been allocated to Series 1998-1.
"Series 1998-1 Allocated Receivables Amount" shall mean, on any date
------------------------------------------
of determination, the lower of (i) the Series 1998-1 Target Receivables
<PAGE>
15
Amount on such day and (ii) the product of (x) the Aggregate Receivables
Amount on such day and (y) the percentage equivalent of a fraction the
numerator of which is the Series 1998-1 Target Receivables Amount on such
day and the denominator of which is the Aggregate Target Receivables Amount
on such day.
"Series 1998-1 Amortization Period" shall mean the period commencing
---------------------------------
on the Business Day following the termination of the Series 1998-1
Revolving Period and ending on the earlier of (x) the date when the Series
1998-1 Invested Amount (calculated without regard to clauses (iv) and (v)
of the definition of Series 1998-1 Invested Amount) shall have been reduced
to zero and all accrued interest on and fees payable (A) in respect of the
VFC Certificates and (B) to the Agent and the Purchasers hereunder and
under the Certificate Purchase Agreement, shall have been paid in full and
(y) the Series 1998-1 Termination Date.
"Series 1998-1 Amortization Principal Payment" shall have the meaning
--------------------------------------------
assigned in subsection 3C.5(a).
"Series 1998-1 Collection Subaccount" shall have the meaning assigned
-----------------------------------
in subsection 3C.2(a).
"Series 1998-1 Initial Invested Amount" shall mean $51,000,000.
-------------------------------------
"Series 1998-1 Interests" shall mean, collectively, the Series 1998-1
-----------------------
Certificateholders' Interest and the Series 1998-1 Subordinated Interest.
"Series 1998-1 Invested Amount" shall mean, with respect to any date
-----------------------------
of determination, (i) an amount equal to the Series 1998-1 Initial Invested
Amount, plus (ii) the amount of all Increases effected pursuant to Section
----
2.4 made on or prior to such day, minus (iii) the amount of all
-----
distributions to the Purchasers in reduction of the Series 1998-1 Invested
Amount pursuant to Section 2.5 or Section 3C.6 on or prior to such day,
minus (iv) the aggregate Series 1998-1 Allocable Charged-Off Amount applied
-----
to the Purchasers on or prior to such date pursuant to subsection
3C.5(b)(ii), plus (v) the aggregate Series 1998-1 Allocable Recoveries
----
Amount applied to the Purchasers on or prior to such date (but only to the
extent of any unreimbursed reductions made pursuant to clause (iv) above)
pursuant to subsection 3C.5(c)(i).
"Series 1998-1 Monthly Servicing Fee" shall have the meaning assigned
-----------------------------------
in Section 6.1.
"Series 1998-1 Non-Principal Collection Sub-subaccount" shall have the
-----------------------------------------------------
meaning assigned in subsection 3C.2(a).
<PAGE>
16
"Series 1998-1 Non-Subordinated Percentage" shall mean a percentage
-----------------------------------------
equal to (a) 100 percent, minus (b) the Series 1998-1 Subordinated
-----
Percentage.
"Series 1998-1 Principal Collection Sub-subaccount" shall have the
-------------------------------------------------
meaning assigned in subsection 3C.2(a).
"Series 1998-1 Ratio" shall mean, as of any Settlement Report Date and
-------------------
continuing until (but not including) the next Settlement Report Date, the
greater of (i) the sum of the Loss Reserve Ratio and the Dilution Reserve
Ratio and (ii) the Minimum Ratio, in each case, then in effect.
"Series 1998-1 Required Reserves" shall mean, subject to Section 9.9,
-------------------------------
(x) on any date of determination during the Series 1998-1 Revolving Period,
an amount equal to the sum of:
(a) an amount equal to the product of (A) the Series 1998-1
Adjusted Invested Amount on such day (after giving effect to any
increase or decrease thereof on such day) and (B) the percentage
equivalent of (1) a fraction, the numerator of which is one and the
denominator of which is one minus the Series 1998-1 Ratio, minus (2)
----- -----
one; and
(b) the product of (i) the Series 1998-1 Invested Amount on such
day and (ii) a fraction, the numerator of which is the Carrying Cost
Reserve Ratio, and the denominator of which is one minus the Series
-----
1998-1 Ratio; and
(c) the product of (i) the aggregate Principal Amount of
Receivables in the Trust on such day, (ii) a fraction, the numerator
of which is the Series 1998-1 Invested Amount on such day, and the
denominator of which is the Aggregate Invested Amount on such day, and
(iii) a fraction, the numerator of which is the Servicing Reserve
Ratio, and the denominator of which is one minus the Series 1998-1
-----
Ratio; and
(d) the amount of any Accrued Expense Amount in respect of which
sufficient Aggregate Daily Collections have not been transferred to
the Series 1998-1 Non-Principal Collection Sub-subaccount; and
(e) the product of (i) $50,000 and (ii) the percentage
equivalent of a fraction, the numerator of which is one and the
denominator of which is one minus the Series 1998-1 Ratio;
-----
<PAGE>
17
and (y) on any date of determination during the Series 1998-1 Amortization
Period, an amount equal to the Series 1998-1 Required Reserves on the last
Business Day of the Series 1998-1 Revolving Period; provided, in the case
--------
of this clause (y), that such amount shall be adjusted on each Special
Allocation Settlement Report Date, if any, to the extent required as set
forth in Section 3C.5(b)(i) and Section 3C.5(c)(ii).
"Series 1998-1 Required Reserves Ratio" shall mean, as of any date of
-------------------------------------
determination, the quotient of (i) the Series 1998-1 Required Reserves on
such day and (ii) the Series 1998-1 Adjusted Invested Amount on such day.
"Series 1998-1 Required Subordinated Amount" shall mean, (x) on any
------------------------------------------
date of determination during the Series 1998-1 Revolving Period, the
product of (i) the Series 1998-1 Adjusted Invested Amount and (ii) the
Series 1998-1 Required Reserves Ratio and (y) on any date of determination
during the Series 1998-1 Amortization Period, an amount equal to the amount
calculated pursuant to clause (x) above as of the last Business Day of the
Series 1998-1 Revolving Period; provided, in each case, that such amount
--------
shall be adjusted on each Special Allocation Settlement Report Date, if
any, to the extent required as set forth in Section 3C.5(b)(i) and Section
3C.5(c)(ii).
"Series 1998-1 Revolving Period" shall mean the period commencing on
------------------------------
the Issuance Date and terminating on the close of business on the earliest
to occur of: (i) the date on which an Early Amortization Period is declared
to commence or automatically commences, (ii) the Optional Termination Date
and (iii) the Scheduled Revolving Termination Date.
"Series 1998-1 Subordinated Certificate Amount" shall mean, for any
---------------------------------------------
date of determination, an amount equal to (i) the Series 1998-1 Allocated
Receivables Amount minus (ii) the Series 1998-1 Adjusted Invested Amount.
-----
"Series 1998-1 Subordinated Certificate Increase Amount" shall have
------------------------------------------------------
the meaning assigned in subsection 2.4(a).
"Series 1998-1 Subordinated Certificate Reduction Amount" shall have
-------------------------------------------------------
the meaning assigned in subsection 2.5(c).
"Series 1998-1 Subordinated Interest" shall have the meaning assigned
-----------------------------------
in subsection 2.2(b).
<PAGE>
18
"Series 1998-1 Subordinated Percentage" shall mean the percentage
-------------------------------------
equivalent of a fraction, the numerator of which is the Series 1998-1
Required Reserves on the last Business Day of the Series 1998-1 Revolving
Period, and the denominator of which is the sum of the Series 1998-1
Adjusted Invested Amount and the Series
1998-1 Required Reserves, in each case on the last Business Day of the
Series 1998-1 Revolving Period.
"Series 1998-1 Target Receivables Amount" shall mean, on any date of
---------------------------------------
determination, the sum of (i) the Series 1998-1 Adjusted Invested Amount on
such day and (ii) the Series 1998-1 Required Reserves for such day.
"Series 1998-1 Termination Date" shall mean the Distribution Date that
------------------------------
occurs in February of 2000, or as otherwise extended.
"Servicer" shall have the meaning specified in the preamble hereto.
--------
"Servicing Reserve Ratio" shall mean, as of any Settlement Report Date
-----------------------
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) equal to (i) the product of (A) the
Servicing Fee Percentage and (B) 2.0 times Days Sales Outstanding as of
-----
such earlier Settlement Report Date, divided by (ii) 360.
------- --
"Structuring Agent" means NationsBanc Montgomery Securities LLC.
-----------------
"Structuring Fee" shall have the meaning specified in subsection
---------------
2.7(f).
"Trust Accounts" shall have the meaning specified in subsection
--------------
3C.2(a).
"UCC Certificate" shall mean a certificate substantially in the form
---------------
of Exhibit F to this Supplement
"Unallocated Balance" shall have the meaning specified in subsection
-------------------
3C.4(c).
"U.S. Foodservice" shall have the meaning specified in the preamble
----------------
hereto.
"VFC Certificate" shall mean a Floating Rate Variable Funding Trade
---------------
Receivables Participation Certificate, Series 1998-1, executed by the
<PAGE>
19
Company and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A.
"VFC Certificateholder" shall mean the Agent, for the benefit of the
---------------------
Purchasers.
"VFC Certificateholders* Interest" shall have the meaning assigned in
--------------------------------
Section 2.2(a).
(b) If any term or provision contained herein conflicts with or is
inconsistent with any term, definition or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article, Section
or subsection references herein shall mean Article, Section or subsections of
this Supplement, except as otherwise provided herein. Unless otherwise stated
herein, the context otherwise requires or such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1998-1 Certificates and no other Series of Investor Certificates issued
by the Trust.
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
SECTION II.1. Designation. The Certificates and interests created
-----------
and authorized pursuant to the Agreement and this Supplement shall consist of
(i) a class of Certificates, designated as the "Floating Rate Variable Funding
Trade Receivables Participation Certificates, Series 1998-1" and (ii) an
interest designated as the "Series 1998-1 Subordinated Interest".
SECTION II.2. The Series 1998-1 Certificates. (a) The VFC
------------------------------
Certificates shall represent fractional undivided interests in the Trust,
consisting of the right to receive (i) the Invested Percentage (expressed as a
decimal) of Collections received with respect to the Receivables and all other
funds on deposit in the Collection Account and (ii) all other funds on deposit
in the Series Collection Subaccounts and any subaccounts thereof (collectively,
the "VFC Certificateholders' Interest").
--------------------------------
(b) The Series 1998-1 Subordinated Certificate shall represent a
fractional undivided interest in the Trust, consisting of the right to receive
Collections with respect to the Receivables allocated to the VFC
Certificateholders' Interest and not required to be distributed to or for the
<PAGE>
20
benefit of the Holders of the VFC Certificates (the "Series 1998-1 Subordinated
--------------------------
Interest").
- --------
(c) The VFC Certificates and the Series 1998-1 Subordinated
Certificate shall be issued in registered form substantially in the forms of
Exhibits A and B, respectively, and shall, upon issue, be executed and delivered
by the Company to the Trustee for authentication and redelivery as provided in
Section 2.3 hereof and Section 5.2 of the Agreement.
SECTION II.3. Delivery. (a) On the Issuance Date, the Company shall
--------
sign, on behalf of the Trust, and shall direct the Trustee in writing pursuant
to Section 5.2 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate (i) the VFC Certificates in such
names and such denominations and deliver such VFC Certificates to the VFC
Certificateholder in accordance with such written directions and (ii) the Series
1998-1 Subordinated Certificate and deliver such Series 1998-1 Subordinated
Certificate to the Company as holder thereof in accordance with such written
directions. The VFC Certificates shall be issued in minimum denominations of
$5,000,000 and in integral multiples of $1,000,000 in excess thereof. The
Trustee shall mark on its books the actual Series 1998-1 Invested Amount and
Series 1998-1 Subordinated Certificate Amount outstanding on any date of
determination, which, absent manifest error, shall constitute prima facie
----- -----
evidence of the outstanding Series 1998-1 Invested Amount and Series 1998-1
Subordinated Certificate Amount from time to time.
SECTION II.4. Procedure for Increasing the Series 1998-1 Invested
---------------------------------------------------
Amount.
- ------
(a) Subject to subsection 2.4(b), on any Business Day during the
Series 1998-1 Revolving Period, each Purchaser agrees that the Series 1998-1
Invested Amount may be increased (an "Increase"), upon the request of the
--------
Servicer or the Company on behalf of the Trust (each date on which an increase
in the Series 1998-1 Invested Amount occurs hereunder being herein referred to
as the "Increase Date" applicable to such Increase) up to an amount not
-------------
exceeding the Maximum Invested Amount on such day; provided that the Servicer or
--------
the Company, as the case may be, shall have given the Agent (with a copy to the
Trustee) irrevocable written notice (effective upon receipt), substantially in
the form of Exhibit G hereto, of such request no later than (i) other than in
the case of clause (ii) described below, on or prior to 11:00 a.m., New York
City time, on the second Business Day next preceding the Issuance Date or such
Increase Date, as the case may be, or (ii) if all or a portion of the Initial
Series 1998-1 Invested Amount or Increase Amount is to be allocated to a
Eurodollar Tranche, 1:00 p.m., New York City time, two Business Days prior to
the Issuance Date or such Increase Date, as the case may be; provided, further,
-------- -------
that the provisions of this subsection shall not restrict the allocations of
Collections pursuant to Article III. Such notice shall state (w) the Issuance
<PAGE>
21
Date or the Increase Date, as the case may be; (x) the Initial Series 1998-1
Invested Amount or the proposed amount of such Increase (the "Increase Amount"),
---------------
as the case may be; (y) what portions thereof, if any, will be allocated to a
Eurodollar Tranche; and (z) what portions thereof will be allocated to each of
the Purchasers pursuant to the Certificate Purchase Agreement. Upon satisfaction
of the conditions precedent set forth in subsection 2.4(b) of this Supplement,
together with, in the case of any of the Purchasers participating in such
initial purchase or Increase, any applicable additional conditions specified in
the Certificate Purchase Agreement, each of the Purchasers participating in such
initial purchase or Increase shall remit its share of the initial Purchase or
applicable Increase to the Trustee for deposit in the Series 1998-1 Collection
Subaccount in immediately available funds by no later than 2:00 p.m., New York
City time, on the applicable Increase Date, for remittance to the Company in
accordance with the written payment instructions of the Company; it being
-- -----
understood, however, that the failure to satisfy any condition precedent
- ---------- -------
applicable with respect to one of the particular Purchasers under the applicable
Certificate Purchase Agreement will not relieve any of the other Alternate
Purchasers from its respective obligation to fund its share of any initial
purchase or Increase on the applicable Increase Date. None of the Purchasers
shall be obligated to fund any Increase unless (x) such Purchaser is an
Alternate Purchaser, and (y) concurrently with any such Increase in the Series
1998-1 Invested Amount, the Series 1998-1 Subordinated Certificate Amount shall
be increased by an amount (the "Series 1998-1 Subordinated Certificate Increase
-----------------------------------------------
Amount") such that after giving effect to such increase, the Series 1998-1
- ------
Adjusted Invested Amount plus the Series 1998-1 Subordinated Certificate Amount
----
equals the Series 1998-1 Target Receivables Amount.
(b) None of the Purchasers shall be required to fund its portion of the
initial purchase of VFC Certificates on the Issuance Date or of any increase the
respective Series 1998-1 Invested Amounts on any Increase Date hereunder unless
such Purchaser is an Alternate Purchaser and:
(i) the related aggregate initial purchase amount or Increase
Amount is equal to $1,000,000 or an integral multiple of $500,000 in excess
thereof;
(ii) after giving effect to the initial purchase amount or
Increase Amount, (A) the Series 1998-1 Invested Amount (calculated without
regard to clauses (iv) and (v) of the definition of Series 1998-1 Invested
Amount) plus the aggregate commercial paper discount on outstanding related
----
Commercial Paper would not exceed the Maximum Invested Amount on the
Issuance Date or such Increase Date, as the case may be, and (B) the Series
1998-1 Allocated Receivables Amount would not be less than the Series 1998-
1 Target Receivables Amount on the Issuance Date or such Increase Date, as
the case may be;
(iii) no Early Amortization Event or Potential Early
Amortization Event shall have occurred and be continuing or shall result
from such Increase;
<PAGE>
22
(iv) all of the representations and warranties made by each of
the Company, the Servicer, each Sub-Servicer and each Seller in each
Transaction Document to which it is a party are true and correct in all
material respects on and as of the Issuance Date or such Increase Date, as
the case may be, as if made on and as of such date; and
(v) no event shall have occurred since September 26, 1998 with
respect to U.S. Foodservice and its Subsidiaries, which would result in a
Material Adverse Effect with respect to U.S. Foodservice and its
Subsidiaries taken as a whole.
The Company's acceptance of funds in connection with (x) the initial purchase of
VFC Certificates on the Issuance Date and (y) each Increase occurring on any
Increase Date, shall constitute a representation and warranty by the Company to
the Agent and the Purchasers as of the Issuance Date or such Increase Date, as
the case may be, that all of the conditions contained in this subsection 2.4(b)
and all of the applicable conditions contained in the Certificate Purchase
Agreement with respect to each such Purchaser have been satisfied.
SECTION II.5. Procedure for Decreasing the Series 1998-1 Invested Amount;
-----------------------------------------------------------
Optional Termination. (a) On any Business Day during the Series 1998-1
- --------------------
Revolving Period or the Series 1998-1 Amortization Period (except for Funding
Period Settlement Dates during the Series 1998-1 Amortization Period (which
shall be governed by subsection 3C.6(d)), upon the written request of the
Servicer or the Company on behalf of the Trust, the portion of the Series 1998-1
Invested Amount identified in such request by the Servicer or the Company (as
the case may be) to one or more Funding Periods on such day may be reduced (a
"Decrease") by the distribution by the Trustee to the Agent, for the pro rata
-------- --- ----
benefit of the Purchasers in accordance with their respective portions of the
Series 1998-1 Invested Amount allocated to such Funding Periods, of funds on
deposit in the Series 1998-1 Principal Collection Sub-subaccount on such day in
an amount not to exceed the amount of such funds on deposit on such day;
provided that the Servicer shall have given the Agent (with a copy to the
- --------
Trustee) irrevocable written notice (effective upon receipt), prior to 11:00
a.m., New York City time, on the Business Day immediately preceding the date of
such Decrease (unless any such Funding Period is a Eurodollar Period, in which
case such notice must be received prior to 11:00 a.m., New York City time, on
the third Business Day preceding the date of such Decrease) and which notice
shall state the amount of such Decrease and set forth the pro rata distribution
--- ----
of such amount to be allocated among the Purchasers holding a portion of the
Series 1998-1 Invested Amount originally allocated to such Funding Period(s)
and; provided, further, that (i) such Decrease shall be in an amount equal to
-------- -------
$1,000,000 and integral multiples of $500,000 in excess thereof, (ii) the amount
of such Decrease shall
<PAGE>
23
not exceed either the aggregate Series 1998-1 Invested Amount allocated to such
Funding Period(s) or, with respect to any of the Purchasers, the aggregate
portion of the Series 1998-1 Invested Amount allocated to such Funding Period(s)
then held by such Purchaser, and (iii) no payment in reduction of the Series
1998-1 Invested Amount shall be made in connection with any Decrease unless,
concurrently with such payment, the Servicer or the Company shall have paid to
the relevant Purchasers all amounts due and payable pursuant to Section 2.8, if
any.
(b) If on any Business Day, the right or commitment (as the case may
be) of any of the Purchasers to fund its pro rata portion of the Series 1998-1
--- ----
Invested Amount is reduced or terminated (other than in connection with the
termination of the Series 1998-1 Revolving Period) and after giving effect to
such reduction or termination, the aggregate portion of the Series 1998-1
Invested Amount then held by such Purchaser exceeds the pro rata portion of the
--- ----
Series 1998-1 Invested Amount to which such Purchaser is entitled or obligated
(as the case may be) to fund under the terms of the Certificate Purchase
Agreement, then the Company shall, on the next Funding Period Settlement Date
relating to any Funding Period with respect to which a portion of the Series
1998-1 Invested Amount allocated thereto is then held by such Purchaser, and on
each such Funding Period Settlement Date thereafter, until the aggregate portion
of the Series 1998-1 Invested Amount held by such Purchaser is equal to or less
than the amount of such Purchaser's pro rata share of the Series 1998-1 Invested
--- ----
Amount after giving effect to such reduction or termination, effect a mandatory
Decrease of the Series 1998-1 Invested Amount by distribution to such Purchaser
of an amount equal to the least of (i) the portion of the Series 1998-1 Invested
Amount allocated to the Funding Period ending on such Business Day and then held
by such Purchaser, (ii) the excess of the aggregate portion of the Series 1998-1
Invested Amount then held by such Purchaser over the portion of the Series 1998-
1 Invested Amount corresponding to the right or commitment (as the case may be)
of such Purchaser to fund its pro rata portion of the Series 1998-1 Invested
--- ----
Amount after giving effect to such reduction or termination (other than in
connection with the termination of the Series 1998-1 Revolving Period), and
(iii) the aggregate amount of the funds on deposit in the Series 1998-1
Principal Collection Sub-subaccount on such day. The Company or the Servicer
shall give the Trustee and the Agent irrevocable written notice of such Decrease
(effective upon receipt), prior to 11:00 a.m., New York City time, on the
Business Day immediately preceding the date of such Decrease (unless any
relevant Funding Period is a Eurodollar Period, in which case such notice must
be received prior to 11:00 a.m., New York City time, on the third Business Day
preceding the date of such Decrease) and which notice shall state the amount of
such Decrease.
<PAGE>
24
(c) Simultaneously with any Decrease during the Series 1998-1
Revolving Period, the Series 1998-1 Subordinated Certificate Amount shall be
reduced by an amount (the "Series 1998-1 Subordinated Certificate Reduction
------------------------------------------------
Amount") such that the Series 1998-1 Subordinated Certificate Amount shall equal
- ------
the Series 1998-1 Required Subordinated Amount after giving effect to such
Decrease. During the Series 1998-1 Revolving Period, after the distribution
described in subsection (a) or (b) above has been made, and the Series 1998-1
Subordinated Certificate Amount shall have been reduced by the Series 1998-1
Subordinated Certificate Reduction Amount, a distribution shall be made to the
holder of the Series 1998-1 Subordinated Certificate out of remaining funds on
deposit in the Series 1998-1 Principal Collection Sub-subaccount in an amount
equal to the lesser of (x) the Series 1998-1 Subordinated Certificate Reduction
Amount and (y) the amount of such remaining funds on deposit in the Series 1998-
1 Principal Collection Sub-subaccount.
(d) Any reduction in the Series 1998-1 Invested Amount on any
Business Day shall be allocated first to reduce the Unallocated Balance.
(e) (i) On any Business Day unless the Scheduled Revolving
Termination Date, an Early Amortization Event or a Potential Early Amortization
Event shall have occurred and be continuing, the Company shall have the right to
deliver an irrevocable written notice (an "Optional Termination Notice") to the
---------------------------
Trustee and the Servicer in which the Company declares that the Series 1998-1
Revolving Period shall terminate on the date (the "Optional Termination Date")
-------------------------
set forth in such notice (which date, in any event, shall not be less than 30
days from the date on which such notice is delivered).
(ii) From and after the Optional Termination Date, the Series
1998-1 Amortization Period shall commence for all purposes under this Agreement
and the other Transaction Documents. Upon receipt of an Optional Termination
Notice, the Trustee shall promptly forward a copy thereof to the Purchasers and
the Agent.
SECTION II.6. Funding Certification. At such time as any Purchaser shall
---------------------
extend, increase, terminate or reduce the amount of its right or commitment, as
the case may be, to fund a portion of the Series 1998-1 Invested Amount, whether
pursuant to the Certificate Purchase Agreement or any assignment thereunder,
such Purchaser and the Company shall certify to the Trustee the resulting amount
of such Purchaser's right or commitment, as the case may be by delivery to the
Trustee of a certificate in substantially the form of Exhibit E hereto (a
"Funding Certification"); provided, however, that in the case of any voluntary
--------------------- -------- -------
reduction or termination by the Company of any such right or commitment of a
Purchaser consistent with the terms of the Certificate
<PAGE>
25
Purchase Agreement, such Funding Certification need only be signed by the
Company. The Trustee shall be entitled to rely on such Funding Certification for
all purposes hereunder until such time as it shall have received from the
Company and the applicable Purchaser a revised Funding Certification. The
Trustee shall maintain at its address referred to in Section 9.7 a copy of each
Funding Certification delivered to it.
SECTION II.7. Interest; Fees. (a) Interest shall be payable on the
--------------
VFC Certificates on each Funding Period Settlement Date pursuant to subsection
3C.6(a).
(b) The Trustee (acting at the written direction of the Servicer upon
which the Trustee may conclusively rely) shall pay to the Agent, on each
Distribution Date to occur during the period commencing on the Issuance Date and
ending on and including the first Distribution Date to occur after the
termination of the Series 1998-1 Amortization Period, a program fee with respect
to each Accrual Period or portion thereof ending on each such Distribution Date
(the "Program Fee") in an amount equal to the product of the Program Fee Rate
-----------
and the average daily Series 1998-1 Invested Amount (calculated without regard
to clauses (iv) and (v) of the definition thereof) during such Accrual Period.
The Program Fee shall be payable monthly in arrears on each Distribution Date.
To the extent that funds on deposit in the Series 1998-1 Accrued Interest Sub-
subaccount and the Series 1998-1 Non-Principal Collection Sub-subaccount at any
such date are insufficient to pay the Program Fee due on such date, the Servicer
shall so notify the Company and the Company shall immediately pay the Agent the
amount of any such deficiency. Notwithstanding the foregoing, the Program Fee
shall be applicable only in the event that the Purchaser is the Conduit
Purchaser.
(c) The Trustee (acting at the written direction of the Servicer upon
which the Trustee may conclusively rely) shall pay to the Agent, on each
Distribution Date to occur during the period commencing on the Issuance Date and
ending on and including the first Distribution Date to occur after the
termination of the Series 1998-1 Amortization Period, an administrative fee with
respect to each Accrual Period or portion thereof ending on each such
Distribution Date (the "Administrative Fee") in an amount equal to the product
------------------
of the Administrative Fee Rate and the average daily Maximum Invested Amount
during such Accrual Period. The Administrative Fee shall be payable monthly in
arrears on each Distribution Date. To the extent that funds on deposit in the
Series 1998-1 Accrued Interest Sub-subaccount and the Series 1998-1 Non-
Principal Collection Sub-subaccount at any such date are insufficient to pay the
Administrative Fee due on such date, the Servicer shall so notify the Company
and the Company shall immediately pay the Agent the amount of any such
deficiency.
<PAGE>
26
(d) The Trustee (acting at the written direction of the Servicer upon
which the Trustee may conclusively rely) shall pay to the Agent, on each
Distribution Date to occur during the period commencing on the Issuance Date and
ending on and including the first Distribution Date to occur after the date of
termination of the commitments of all of the Alternate Purchasers to advance
funds to either of the Company or one or more Conduit Purchasers under the terms
of the Certificate Purchase Agreement (as such termination date may be extended
from time to time), for the pro rata benefit of the Alternate Purchasers, a
--- ----
facility fee with respect to each Accrual Period or portion thereof ending on
each such Distribution Date (the "Facility Fee") in an amount equal to the
------------
product of the Facility Fee Rate and the aggregate average daily amount which
the Alternate Purchasers are required to advance under the terms of the
Certificate Purchase Agreement during the period of their respective commitments
thereunder (calculated without regard to whether or not the amounts of such
commitments have been so advanced) during such Accrual Period. The Facility Fee
shall be payable monthly in arrears on each Distribution Date. To the extent
that funds on deposit in the Series 1998-1 Accrued Interest Sub-subaccount and
the Series 1998-1 Non-Principal Collection Sub-subaccount at any such date are
insufficient to pay the Facility Fee due on such date, the Servicer shall so
notify the Company and the Company shall immediately pay the Agent the amount of
any such deficiency.
(e) Unless otherwise specified, rates and fees under this Supplement,
including those set forth in the Fee Letter, shall be calculated on a per annum
basis. Calculations of per annum rates and fees under this Supplement shall be
made on the basis of a 360-day year with respect to Program Fees, Administrative
Fees, Facility Fees, other fees, and, except with respect to calculations of
interest at the Base Rate, interest rates. Calculations of per annum rates
under this Supplement with respect to interest rates calculated at the Base Rate
shall be made on the basis of a year of 365 or 366 days (as the case may be).
Each determination of the Adjusted Eurodollar Rate, Funding Period Rate, Program
Fee, Administrative Fee, and Facility Fee by the Agent shall be conclusive and
binding upon each of the parties hereto in the absence of manifest error.
(f) The Company shall pay or cause to be paid to the Structuring
Agent, on or prior to the Issuance Date, a structuring fee (the "Structuring
-----------
Fee") in connection with Series 1998-1, in the amount set forth therefor in the
- ---
Fee Letter.
(g) In the case of any payments required to be made by the Company
pursuant to subsections 2.7(b), (c) or (d) above, such payments shall be made
solely from funds available to the Company ("Available Funds") which
---------------
<PAGE>
27
are not otherwise needed to be applied to the payment of any amounts pursuant to
any Pooling and Servicing Agreements (other than any such amounts (i) payable to
the Company, or (ii) which are limited in recourse to the Company to a similar
extent as the payment obligations described in this sentence, howsoever such
limitation may be described in any such Pooling and Servicing Agreement), shall
be non-recourse other than with respect to Available Funds, and shall not
constitute a claim against the Company to the extent that insufficient Available
Funds exist to make such payments.
SECTION II.8. Indemnification by the Company and the Servicer. (a)
-----------------------------------------------
The Company agrees to indemnify and hold harmless each of the Agent, each
Purchaser and each of their respective officers, directors, agents and employees
(each, a "Company indemnified person") from and against any loss, liability,
--------------------------
expense, damage or injury suffered or sustained by such Company indemnified
person (a "Claim") by reason of (i) any acts, omissions or alleged acts or
-----
omissions arising out of, or relating to, activities of the Company pursuant to
any Pooling and Servicing Agreement or the other Transaction Documents to which
it is a party, (ii) a breach of any representation or warranty made or deemed
made by the Company (or any of its officers) in any Pooling and Servicing
Agreement or other Transaction Document or (iii) a failure by the Company to
comply with any applicable law or regulation or to perform its covenants,
agreements, duties or obligations required to be performed or observed by it in
accordance with the provisions of any Pooling and Servicing Agreement or the
other Transaction Documents, including, but not limited to, any judgment, award,
settlement, reasonable attorneys* fees and other reasonable costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim, except to the extent such loss, liability, expense, damage
or injury resulted from the gross negligence, bad faith or wilful misconduct of
such Company indemnified person or its officers, directors, agents, principals,
employees or employers.
(b) Without in any way limiting the obligations of the Company set
forth in Section 2.8(a) above, the Company agrees to indemnify each Purchaser
and to hold each Purchaser harmless from any loss or expense which the Purchaser
may sustain or incur as a consequence of (a) default by the Company in making an
Increase after the Company has given irrevocable notice requesting the same in
accordance with the provisions of this Supplement, (b) default by the Company in
making any prepayment in connection with a Decrease after the Company has given
irrevocable notice thereof in accordance with the provisions of this Supplement
or (c) the making of a prepayment, whether in connection with a Decrease or
otherwise, in an amount in excess of the portion of the Series 1998-1 Invested
Amount allocated to a Funding Period (other than a Funding Period to which the
Base Rate is the applicable interest rate) ending on the date of such
prepayment. Such
<PAGE>
28
indemnification shall include, without limitation, any loss (including those of
anticipated profits, net of anticipated profits in respect of the reemployment
of such funds in the manner determined by such Purchaser), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Purchaser to fund or maintain the applicable portion of the
Series 1998-1 Invested Amount or such requested Increase
(c) The Servicer agrees to indemnify and hold harmless each of the
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "Servicer indemnified person") from and against any Claim
---------------------------
by reason of (i) any acts, omissions or alleged acts or omissions arising out
of, or relating to, activities of the Servicer pursuant to any Pooling and
Servicing Agreement or the other Transaction Documents to which it is a party,
(ii) a breach of any representation or warranty made or deemed made by the
Servicer (or any of its officers) in any Pooling and Servicing Agreement or
other Transaction Document or (c) a failure by the Servicer to comply with any
applicable law or regulation or to perform its covenants, agreements, duties or
obligations required to be performed or observed by it in accordance with the
provisions of any Pooling and Servicing Agreement or the other Transaction
Documents, including, but not limited to, any judgment, award, settlement,
reasonable attorneys* fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, except to the extent such loss, liability, expense, damage or injury
resulted from the gross negligence, bad faith or wilful misconduct of such
Servicer indemnified person or its officers, directors, agents, principals,
employees or employers.
(d) The covenants set forth in this Section 2.8 shall survive the
termination of this Supplement and the Certificate Purchase Agreement and the
payment of all amounts payable hereunder and thereunder. A certificate as to
any additional amounts payable pursuant to the foregoing provisions of this
Section 2.8 submitted by any of the Agent or any Purchaser to the Company and/or
the Servicer shall be conclusive absent manifest error. In the case of any
payments required to be made by the Company pursuant to subsections 2.8(a) or
(b) above, such payments shall be made solely from Available Funds which are not
otherwise needed to be applied to the payment of any amounts pursuant to any
Pooling and Servicing Agreements (other than any such amounts (i) payable to the
Company, or (ii) which are limited in recourse to the Company to a similar
extent as the payment obligations described in this sentence, howsoever such
limitation may be described in any such Pooling and Servicing Agreement), shall
be non-recourse other than with respect to Available Funds, and shall not
constitute a claim against the Company to the extent that insufficient Available
Funds exist to make such payments.
<PAGE>
29
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement and each other section of Article III of
the Agreement relating to another Series shall read in their entirety as
provided in the Agreement. Article III of the Agreement (except for Section 3.1
thereof and any portion thereof relating to another Series) shall read in its
entirety as follows and shall be exclusively applicable to the Series 1998-1
Certificates:
SECTION 3C.2. Establishment of Trust Accounts. (a) The Trustee
-------------------------------
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Agent and the Purchasers and
(ii) in the case of clauses (A) and (B) below, for the benefit, subject to the
prior and senior interest of the Agent and the Purchasers, of the holder of the
Series 1998-1 Subordinated Certificate, (A) a subaccount of the Collection
Account (the "Series 1998-1 Collection Subaccount"), which subaccount is the
-----------------------------------
Series Collection Subaccount with respect to Series 1998-1; (B) two subaccounts
of the Series 1998-1 Collection Subaccount: (1) the Series 1998-1 Principal
Collection Sub-subaccount and (2) the Series 1998-1 Non-Principal Collection
Sub-subaccount (respectively, the "Series 1998-1 Principal Collection Sub-
---------------------------------------
subaccount" and the "Series 1998-1 Non-Principal Collection Sub-subaccount"),
- ---------- -----------------------------------------------------
and (C) a subaccount of the Series 1998-1 Non-Principal Collection Sub-
subaccount (the "Series 1998-1 Accrued Interest Sub-subaccount"; all accounts
---------------------------------------------
established pursuant to this subsection 3C.2(a) and listed on Schedule 1,
collectively, the "Trust Accounts"), each Trust Account to bear a designation
--------------
indicating that the funds deposited therein are held for the benefit of the
Persons (and, for each such Person, to the extent) set forth in clauses (i) and
(ii) above. The Trustee, on behalf of the Holders, shall possess all right,
title and interest in, to and under all funds from time to time on deposit in,
and all Eligible Investments credited to, the Trust Accounts, and in all
proceeds thereof. The Trust Accounts shall be under the sole dominion and
control of the Trustee for the exclusive benefit of the Persons (and, for each
such Person, to the extent) set forth in clauses (i) and (ii) above.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Holders, for the exclusive benefit of the Agent
and the Purchasers, and, subject to the prior interest of the Agent and the
Purchasers, the holder of the Series 1998-1 Subordinated Certificate; provided,
--------
however, that funds on deposit in a Trust Account which is a sub-subaccount of a
- -------
Collection Account may, at the direction of the Company, be invested together
with funds held in other sub-subaccounts of the Collection Account. After
giving effect to any distribution to the Company pursuant to subsection 3C.3(b),
amounts on deposit and available for investment in the Series 1998-1 Principal
Collection Sub-subaccount shall be invested by the Trustee at the written
direction of the Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, (i) in the case of any
such investment made during the Series 1998-1 Revolving Period, on or prior to
the
<PAGE>
30
next Business Day and (ii) in the case of any such investment made during the
Series 1998-1 Amortization Period, on or prior to the Business Day immediately
preceding the next subsequent Funding Period Settlement Date. Amounts on deposit
and available for investment in the Series 1998-1 Non-Principal Collection Sub-
subaccount and the Series 1998-1 Accrued Interest Sub-subaccount shall be
invested by the Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable upon demand of the
holder thereof, on or prior to the Business Day immediately preceding the next
subsequent Distribution Date or Funding Period Settlement Date, whichever is
earliest. As of each Business Day immediately preceding a Distribution Date or
Funding Period Settlement Date, all interest and other investment earnings (net
of losses and investment expenses) on funds deposited in the Series 1998-1
Accrued Interest Sub-subaccount shall be deposited in the Series 1998-1 Non-
Principal Collection Sub-subaccount. All interest and investment earnings (net
of losses and investment expenses) on funds deposited in the Series 1998-1
Principal Collection Sub-subaccount shall be deposited in the Series 1998-1 Non-
Principal Collection Sub-subaccount.
SECTION 3C.3. Daily Allocations. In accordance with the written
-----------------
direction of the Servicer, upon which the Trustee may conclusively rely:
(a) The portion of the Aggregate Daily Collections allocated to the
Series 1998-1 Certificates pursuant to Article III of the Agreement shall be
allocated and distributed as set forth in this Article III by the Trustee as
follows:
(i) on each Business Day, an amount equal to the Accrued
Expense Amount for such day (or, during the Series 1998-1 Revolving Period,
such greater amount as the Company may request in writing) shall be
transferred from the Series 1998-1 Collection Subaccount to the Series
1998-1 Non-Principal Collection Sub-subaccount;
(ii) following the transfer pursuant to clause (i) above, any
remaining funds on deposit in the Series 1998-1 Collection Subaccount shall
be transferred by the Trustee to the Series 1998-1 Principal Collection
Sub-subaccount.
(b) (i) On each Business Day during the Series 1998-1 Revolving
Period (including Distribution Dates), after giving effect to (x) all
allocations of Aggregate Daily Collections on such Business Day and (y) any
deposit resulting from an Increase, if any, pursuant to subsection 2.4(a) on
such Business Day, amounts on deposit in the Series 1998-1 Principal Collection
Sub-subaccount shall be distributed by the Trustee to the Company (but only to
the extent that
<PAGE>
31
the Trustee has received a Daily Report which reflects the receipt of the
Collections on deposit therein) in accordance with directions contained in the
Daily Report; provided that such distribution shall be made only if no Early
--------
Amortization Event or Potential Early Amortization Event, in each case pursuant
to Section 7.1 of the Agreement or subsections (a), (d) (but only with respect
to a Servicer Default set forth in subsection 6.1(e) of the Servicing
Agreement), (g), (i) or (j) of Section 5.1 of this Supplement has occurred and
is continuing and only to the extent that, if after giving effect to such
distribution, the Series 1998-1 Target Receivables Amount would not exceed the
Series 1998-1 Allocated Receivables Amount; provided further that if the Company
-------- -------
or the Servicer, on behalf of the Company, shall have given the Agent
irrevocable written notice (effective upon receipt) at least one Business Day
prior to such day (or, in the case of any portion of the Series 1998-1 Invested
Amount then accruing interest at the Base Rate, notice may be given on such
day), the Company or the Servicer may instruct the Trustee in writing
(specifying the related amount) to withdraw all or a portion of such amounts on
deposit in the Series 1998-1 Principal Collection Sub-subaccount and apply such
withdrawn amounts toward the reduction of the Series 1998-1 Invested Amount and
the Series 1998-1 Subordinated Certificate Amount in accordance with Section 2.5
of this Supplement. Amounts distributed to the Company hereunder shall be deemed
to be paid first from Collections received directly by the Servicer and second
from Collections received in the Lockboxes.
(ii) On each Business Day during the Series 1998-1 Amortization Period
(including Distribution Dates), funds deposited in the Series 1998-1 Principal
Collection Sub-subaccount shall be invested in Eligible Investments that mature
on or prior to the Business Day immediately preceding the next Funding Period
Settlement Date and shall be distributed on such Funding Period Settlement Date
in accordance with subsection 3C.6(d). No amounts on deposit in the Series 1998-
1 Principal Collection Sub-subaccount shall be distributed by the Trustee to the
Company or the Holder of the Series 1998-1 Subordinated Certificate during the
Series 1998-1 Amortization Period.
(c) On each Business Day, an amount equal to the Daily Interest Deposit
for such day shall be transferred by the Trustee from the Series 1998-1 Non-
Principal Collection Sub-subaccount to the Series 1998-1 Accrued Interest Sub-
subaccount.
(d) In addition to the foregoing, on the Distribution Date during the
Series 1998-1 Amortization Period following the Settlement Report Date on which
(i) the Series 1998-1 Invested Amount has been reduced to an amount which is
equal to or less than the Clean-Up Call Amount, (ii) the amount on deposit in
the Series 1998-1 Principal Collection Sub-subaccount equals or exceeds the
Clean-Up Call Repurchase Price, and (iii) the Company has
<PAGE>
32
exercised its clean-up option pursuant to Section 9.2 of the Pooling Agreement
to repurchase the Series 1998-1 Certificates, the Trustee may use the amount on
deposit in the Series 1998-1 Principal Collection Sub-subaccount up to the
amount of the Clean-Up Call Repurchase Price to pay the Clean-Up Call Repurchase
Price in full; provided, however, that no such use may be made of the amount on
-------- -------
deposit in the Series 1998-1 Principal Collection Sub-subaccount unless
simultaneously with such use of funds, each Purchaser receives all payments (if
any) to which it is entitled under Section 2.8(b) arising out of such payment of
the Clean-Up Call Repurchase Price. The provisions of this paragraph (d) shall
in no event be construed to affect any other financial obligations of any
Seller, any Servicing Party or the Company under any of the Transaction
Documents.
(e) The allocations to be made pursuant to this Section 3C.3 are subject
to the provisions of Sections 2.5, 2.6, 7.2 and 9.1 of the Agreement.
SECTION 3C.4. Selection of Funding Periods; Determination of Interest
-------------------------------------------------------
Rates. (a) At all times hereafter, all of the aggregate outstanding Series 1998-
- -----
1 Invested Amount shall be allocated to one or more Funding Periods. The
Servicer, subject to the limitations described below, shall select Funding
Periods and the applicable Funding Period Rates for such Funding Periods, for
all of the Series 1998-1 Invested Amount, except that the Unallocated Balance,
if any, outstanding from time to time, shall at all times be allocated to a
Funding Period coinciding with the Accrual Period then in effect.
(b) Notwithstanding anything herein to the contrary, the selection by the
Servicer of Funding Periods and Funding Period Rates shall be subject to the
Agent's prior approval (which approval shall not be unreasonably withheld). The
Servicer shall specify its preferences with respect to such Funding Periods and
Funding Period Rates by notice to the Agent (which may be telephonic notice
confirmed promptly in writing), specifying the Business Day on which the
applicable Funding Period or Periods are requested to commence, the requested
duration of the applicable Funding Period or Periods, the requested Funding
Period Rate or Rates and the portions of the Series 1998-1 Invested Amount
requested to be allocated to each such requested Funding Period. Any such notice
must be received by the Agent no later than 11:00 a.m. New York City time on the
second Business Day immediately preceding the commencement of the applicable
Funding Period (or no later than 11:00 a.m. New York City time on the Business
Day on which the applicable Funding Period commences if interest is to accrue
for such Funding Period at the Base Rate); provided, however, that (x) if the
-------- -------
Agent shall not have received notice from the Servicer or shall not have
approved the Servicer's selection before the applicable time specified in this
subsection 3C.4(b) with respect to any Funding Period, such Funding Period and
the applicable
<PAGE>
33
Funding Period Rate shall be selected by the Agent and (y) if interest on the
portion of the Series 1998-1 Invested Amount allocated to such Funding Period is
requested to accrue at an interest rate determined in whole or in part by
reference to the Adjusted Eurodollar Rate, the Agent must receive notice from
the Servicer with regard thereto by 11:00 a.m., New York City time on the third
Business Day preceding the first day of such Funding Period. In addition,
Funding Periods and Funding Period Rates shall be subject to the following
additional restrictions: (i) no more than five Funding Periods shall be
outstanding at any time, (ii) any Funding Period that commences before the
commencement of the Series 1998-1 Amortization Period and would otherwise end on
a date occurring after the commencement of the Series 1998-1 Amortization Period
shall, if the Agent so selects by notice to the Company, end on the date of the
commencement of the Series 1998-1 Amortization Period, (iii) from and after the
commencement of the Series 1998-1 Amortization Period (x) if the Funding Period
Rate with respect to such Funding Period is the Adjusted Eurodollar Rate, the
Funding Period shall be an Accrual Period and (y) all such Funding Periods and
Funding Period Rates shall be selected by the Agent (and the Agent shall provide
notice to the Servicer of such selections), (iv) if it shall be unlawful or
impractical for any Alternate Purchaser or its applicable lending office to
maintain outstanding any existing portion of the Series 1998-1 Invested Amount
to which the Adjusted Eurodollar Rate is applicable, the Agent may, upon notice
to the Servicer, terminate any such Funding Period then in effect, (v) any such
Funding Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day, (vi) if the Funding
Period Rate with respect to such Funding Period is the Adjusted Eurodollar Rate,
the Funding Period shall commence on, and include, a Funding Period Settlement
Date (or, in the case of the initial Accrual Period, the Issuance Date), and end
on a Distribution Date and (vii) after the occurrence and during the continuance
of any Early Amortization Event, the Agent may declare the Funding Period Rate
equal to the Base Rate in effect from time to time during such Funding Period
plus 2.0%. On or before the first day of each Funding Period, the Servicer shall
- ----
notify the Trustee of the duration of such Funding Period and the applicable
Funding Period Rate.
(c) Any portion of the Series 1998-1 Invested Amount on any day that (x)
has not been funded by a Conduit Purchaser through the issuance of Commercial
Paper or a liquidity or credit enhancement facility available to such Conduit
Purchaser, (y) has not been allocated to a Eurodollar Tranche or (z) as to which
another rate has not been agreed among the Servicer, the Company and such
Person, shall accrue interest for such day at the Base Rate (the aggregate
amount of such unallocated portions of the Series 1998-1 Invested Amount being
referred to herein as the "Unallocated Balance"). Any reduction in the Series
-------------------
1998-1 Invested Amount shall be allocated
<PAGE>
34
first, to reduce the portion thereof constituting Unallocated Balance
-----
to zero, and
second, to reduce the portion thereof allocated to Funding Periods in
------
such order as the Company may select in order to minimize costs payable
pursuant to subsection 2.8(b).
(d) The amount of interest distributable with respect to the VFC
Certificates on any Funding Period Settlement Date shall be an amount equal to
the sum of (i) the aggregate Funding Period Interest for such Funding Period
Settlement Date, plus (ii) all outstanding Past Due Interest, plus (iii) the
---- ----
amount of any accrued but unpaid Additional Interest.
(e) Notwithstanding anything to the contrary contained in this subsection
3C.4, (i) the portion of the Series 1998-1 Invested Amount allocable to each
Eurodollar Tranche must be in an amount equal to $1,000,000 or an integral
multiple of $500,000 in excess thereof; and (ii) after the occurrence and during
the continuance of any Early Amortization Event or Potential Early Amortization
Event, in each case pursuant to Section 7.1 of the Agreement or subsections (a),
(d) (but only with respect to a Servicer Default set forth in subsection 6.1(e)
of the Servicing Agreement), (e), (g), (i) or (j) of Section 5.1 of this
Supplement, the Company may not elect to allocate any portion of the Series
1998-1 Invested Amount to a Eurodollar Tranche.
SECTION 3C.5. Determination of Series 1998-1 Amortization Principal
-----------------------------------------------------
Payment. (a) Payments of Series 1998-1 Principal. The amount (the "Series 1998-
- ------- ----------------------------------- -----------
1 Amortization Principal Payment") distributable from the Series 1998-1
- --------------------------------
Principal Collection Sub-subaccount on each Funding Period Settlement Date
during the Series 1998-1 Amortization Period shall be equal to the amount on
deposit in such account on the immediately preceding Funding Period
Determination Date; provided, however, that the Series 1998-1 Amortization
-------- -------
Principal Payment on any Funding Period Settlement Date shall not exceed the
Series 1998-1 Invested Amount on such Funding Period Settlement Date after
giving effect to the reductions and increases pursuant to paragraphs (b) and (c)
below. Further, on any other Business Day during the Series 1998-1 Amortization
Period, funds may be distributed from the Series 1998-1 Principal Collection
Sub-subaccount to the Purchasers in accordance with Section 2.5 of this
Supplement.
(b) Reductions to Series 1998-1 Principal. If, on any Special Allocation
-------------------------------------
Settlement Report Date, the Series 1998-1 Allocable Charged-Off Amount is
greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Servicer, upon which the
<PAGE>
35
Trustee may conclusively rely) make the following applications of such amounts
in the following order of priority:
(i) the Series 1998-1 Required Subordinated Amount shall be reduced
(but not below zero) by an amount equal to the Series 1998-1 Allocable
Charged-Off Amount (which shall be reduced by the amount so applied);
(ii) then, to the extent that the Series 1998-1 Allocable Charged-Off
Amount is greater than zero following the application in clause (i) above,
the Series 1998-1 Invested Amount shall be reduced (but not below zero) by
such remaining Series 1998-1 Allocable Charged-Off Amount (which shall be
reduced by the amount so applied).
(c) Increases to Series 1998-1 Principal. If, on any Special
------------------------------------
Allocation Settlement Report Date, the Series 1998-1 Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Servicer upon which the Trustee may
conclusively rely) make the following applications (after giving effect to the
applications in paragraph (b) of such amount in the following order of
priority):
(i) the Series 1998-1 Invested Amount shall be increased (but only
to the extent of any previous reductions of the Series 1998-1 Invested
Amount pursuant to subsection 3C.5(b)(ii)) by the amount of the Series
1998-1 Allocable Recoveries Amount (which shall be reduced by the amount so
applied);
(ii) then, to the extent that the Series 1998-1 Allocable Recoveries
Amount is greater than zero following the applications in clause (i) above,
the Series 1998-1 Required Subordinated Amount shall be increased (but only
to the extent of any previous reductions of the Series 1998-1 Required
Subordinated Amount pursuant to subsection 3C.5(b)(i)) by such remaining
Series 1998-1 Allocable Recoveries Amount (which shall be reduced by the
amount so applied).
SECTION 3C.6. Applications. (a) The Trustee shall, on each Funding
------------
Period Settlement Date, distribute to the Agent for the ratable benefit of the
applicable Purchasers from amounts on deposit in the Series 1998-1 Accrued
Interest Sub-subaccount, an amount equal to the sum of (i) Funding Period
Interest on the VFC Certificates for such Funding Period, (ii) all outstanding
Past Due Interest and (iii) all accrued but unpaid Additional Interest.
<PAGE>
36
(b) On each Distribution Date, the Trustee shall apply funds on
deposit in the Series 1998-1 Non-Principal Collection Sub-subaccount in the
following order of priority to the extent funds are available:
(i) an amount equal to the Program Fee for the Accrual Period
ending on such Distribution Date shall be withdrawn from the Series 1998-1
Non-Principal Collection Sub-subaccount by the Trustee and paid to the
Agent;
(ii) an amount equal to the Administrative Fee for the Accrual
Period ending on such Distribution Date shall be withdrawn from the Series
1998-1 Non-Principal Collection Sub-subaccount by the Trustee and paid to
the Agent;
(iii) an amount equal to the Facility Fee for the Accrual Period
ending on such Distribution Date shall be withdrawn from the Series 1998-1
Non-Principal Collection Sub-subaccount by the Trustee and paid to the
Agent;
(iv) an amount equal to the Series 1998-1 Monthly Servicing Fee
for the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1998-1 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Servicer (less any amounts payable to the Trustee
pursuant to Section 8.5 of the Agreement, which shall be paid to the
Trustee) or, if U.S. Foodservice or any Affiliate thereof is not the
Servicer, the Series 1998-1 Monthly Servicing Fee shall be paid to the
Person acting as Successor Servicer; and
(v) an amount equal to any unpaid Program Costs due and
payable shall be withdrawn from the Series 1998-1 Non-Principal Collection
Sub-subaccount by the Trustee and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1998-1 Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) through (v) above shall be paid to the holder
of the Series 1998-1 Subordinated Certificate; provided, however, that during
-------- -------
the Series 1998-1 Amortization Period, such remaining amounts shall be deposited
in the Series 1998-1 Principal Collection Sub-subaccount for distribution in
accordance with subsection 3C.6(d).
(c) During the Series 1998-1 Revolving Period (and during the Series
1998-1 Amortization Period, on any Business Day other than a Funding Period
Settlement Date), to the extent that the Company has elected or is
<PAGE>
37
required to effect a Decrease as described in Section 2.5, the Servicer shall
cause the Trustee to pay to the Agent for the benefit of the Purchasers in
reduction of the Invested Amount on each applicable Decrease date, amounts on
deposit in the Series 1998-1 Principal Collection Sub-subaccount, up to the
amount of the applicable Decrease.
(d) During the Series 1998-1 Amortization Period, the Trustee shall
apply, on each Funding Period Settlement Date, amounts on deposit in the Series
1998-1 Principal Collection Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 1998-1 Amortization
Principal Payment for such Funding Period Settlement Date shall be
distributed from the Series 1998-1 Principal Collection Sub-subaccount to
the Agent for the ratable benefit of the Purchasers; and
(ii) if, following the repayment in full of the Series 1998-1
Invested Amount, any amounts are owed to the Trustee or any other Person,
on account of its expenses, advances and disbursements incurred in respect
of the performance of its responsibilities hereunder or as Successor
Servicer, such amounts shall be transferred from the Series 1998-1
Principal Collection Sub-subaccount and paid to the Trustee or such other
Person; and
(iii) following the repayment in full of the Series 1998-1
Invested Amount and of all of the amounts set forth in clause (ii), the
remaining amount on deposit in the Series 1998-1 Principal Collection Sub-
subaccount on such Funding Period Settlement Date, if any, shall be treated
as follows:
(x) upon delivery by the Servicer to the Trustee of an
Officer's Certificate certifying that as of such date, no Seller has
any obligations outstanding to any Person that may be entitled to make
a claim for payment thereof pursuant to PACA, such amount on deposit
shall be distributed to the owner of the Series 1998-1 Subordinated
Interest, or
(y) if any such obligations remain outstanding on such
date, the Servicer shall deliver to the Trustee an Officer's
Certificate setting forth the amount thereof (the "Outstanding PACA
----------------
Amount"), and upon receipt thereof the Trustee (A) shall distribute
------
any funds on deposit in the Series 1998-1 Principal Collection Sub-
subaccount in excess of the Outstanding PACA Amount to the owner of
the Series 1998-1 Subordinated Interest
<PAGE>
38
and (B) shall maintain on deposit in the Series 1998-1 Principal
Collection Sub-subaccount funds in an aggregate amount equal to the
Outstanding PACA Amount until the Servicer has delivered an Officer's
Certificate certifying that such Outstanding PACA Amount has been paid
in full, in which case the Trustee shall distribute any remaining
amount of such funds pursuant to clause (x) above. In addition, the
Trust shall not be terminated pursuant to subsection 9.1(a)(ii) of the
Agreement except upon receipt by the Trustee of an Officer's
Certificate delivered by the Servicer certifying that as of the
proposed Trust Termination Date, no Seller has any obligations
outstanding to any Person that may be entitled to make a claim for
payment thereof pursuant to PACA.
(e) On each date on which Commercial Paper is issued, the Trustee
shall remit to the Agent from funds on deposit in the Series 1998-1 Non-
Principal Collection Sub-subaccount an amount equal to the Dealer Fee
Notification Amount.
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the VFC Certificates:
SECTION 4C.1. Distributions. (a) On each Distribution Date and on each
-------------
Funding Period Settlement Date, the Trustee shall distribute to the Agent, for
the benefit of each of the Purchasers in accordance with their respective
interests under the Certificate Purchase Agreement, the aggregate amount then
payable to the Agent and/or the Purchasers pursuant to the terms of Article III
hereunder, as determined by the Servicer and reported to the Trustee on the
preceding Settlement Report Date or Funding Period Determination Date, as
applicable.
(b) All allocations and distributions hereunder shall be in accordance
with the Daily Report, the Monthly Settlement Statement and the Funding Period
Settlement Statement, and shall be made in accordance with the provisions of
subsection 2.7(e) hereof and subject to subsection 3.1(h) of the Agreement.
SECTION 4C.2. Daily Reports. The Servicer shall provide the Agent and
-------------
the Trustee with a Daily Report in accordance with subsection 4.2(a)
<PAGE>
39
of the Servicing Agreement. The Agent shall make copies of the Daily Report
available to the Purchasers at their reasonable request at the Agent's office in
Charlotte, North Carolina.
SECTION 4C.3. Statements and Notices. (a) Monthly Settlement
---------------------- ------------------
Statements; Pooling and Servicing Agreement Reports; Funding Period Settlement
- ------------------------------------------------------------------------------
Statements. (i) On each Settlement Report Date, the Servicer shall deliver to
- ----------
the Trustee and the Agent (commencing with the Settlement Report Date occurring
on February 15, 1999) a completed Monthly Settlement Statement in the Form of
Exhibit D-1 (the "Monthly Settlement Statement") setting forth, among other
- ----------- ----------------------------
things, the Loss Reserve Ratio, the Dilution Reserve Ratio, the Minimum Ratio,
the Carrying Cost Reserve Ratio and the Servicing Reserve Ratio and the
components of the calculation thereof, each as recalculated for the period until
the next succeeding Settlement Report Date.
(ii) On each Funding Period Determination Date, the Servicer shall
deliver to the Trustee and the Agent a completed Funding Period Settlement
Statement in the Form of Exhibit D-2 (the "Funding Period Settlement
----------- -------------------------
Statement").
- ---------
(iii) The Agent shall forward a copy of each Monthly Settlement
Statement and/or Funding Period Settlement Statement to any Purchaser upon
request by such Purchaser. Each of the Company and the Servicer will deliver
copies of all notices, reports, statements and other documents delivered by it
pursuant to the Pooling and Servicing Agreements to the Rating Agency. A copy of
any such items may be obtained by any Certificateholder upon a written request
delivered to the Trustee at the Corporate Trust Office.
(b) Annual Certificateholders[_] Tax Statement. On or before April
------------------------------------------
1 of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1999, the Company 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 a Purchaser, a statement prepared by the Company
containing the aggregate amount distributed to such Person for such calendar
year or the applicable portion thereof during which such Person was a Purchaser,
together with such other information as is required to be provided by an issuer
of indebtedness under the Internal Revenue Code and such other customary
information as the Company deems necessary or desirable to enable the Purchaser
to prepare their tax returns. Such obligation of the Company shall be deemed to
have been satisfied to the extent that substantially comparable information
shall have been prepared by the Servicer and provided to the Trustee or the
Agent and to the Purchasers, in each case pursuant to any requirements of the
Internal Revenue Code as from time to time in effect.
<PAGE>
40
(c) Early Amortization Event/Distribution of Principal Notices. Upon
----------------------------------------------------------
the occurrence of an Early Amortization Event with respect to Series 1998-1, the
Company or the Servicer, as the case may be, shall give prompt written notice
thereof to the Trustee and the Agent. As promptly as reasonably practicable
after its receipt of notice of the occurrence of an Early Amortization Event
with respect to Series 1998-1, the Agent shall give notice thereof to each
Purchaser.
(d) Principal Payment Notices. During the Amortization Period, on
-------------------------
each date which is three Business Days prior to a Funding Period Settlement
Date, the Trustee shall deliver to the Agent a notice by fax, followed by a hard
copy delivered by overnight carrier, setting forth the amount on deposit and
available for distribution in the Series 1998-1 Principal Collection Sub-
subaccount as of the opening of business on such date. In addition, on the
Business Day preceding each day on which a distribution of principal is to be
made during the Series 1998-1 Amortization Period, the Servicer shall notify the
Agent, and direct the Agent to send notice to each Purchaser, which notice shall
set forth the amount of principal to be distributed on the related date to the
Purchasers with respect to the outstanding Series 1998-1 Invested Amount.
(e) Forwarding of Other Notices and Documents. The Trustee shall
-----------------------------------------
promptly (but in any event within two Business Days following receipt thereof)
forward to the Agent (and upon the request of any Purchaser, the Agent shall
forward a copy of the same to such Purchaser) copies of the following documents
and/or notices upon receipt thereof by a Responsible Officer of the Trustee:
(i) Financial Statements of Company. All financial statements
-------------------------------
delivered by the Company pursuant to subsection 2.7(a) of the Agreement or
by the Servicer pursuant to subsection 4.12 of the Servicing Agreement.
(ii) Early Amortization, Insolvency and Lien Notices. Any
-----------------------------------------------
notice delivered by the Company pursuant to subsection 2.7(h) or 7.2(a) of
the Agreement or any notice delivered by the Servicer pursuant to Section
7.1 of the Agreement.
(iii) Certificates. All certificates delivered by the Servicer
------------
pursuant to Sections 4.3 and 4.4 of the Servicing Agreement.
(iv) Accountants' Letters. All certificates or letters (as the
--------------------
case may be) delivered by the Servicer or the Servicer's independent public
<PAGE>
41
accountants (as the case may be ) pursuant to Section 4.3 or 4.4 of the
Servicing Agreement.
(f) Termination of Sellers; Securities Filings. The Servicer shall
------------------------------------------
promptly (i) notify the Agent of the addition or termination of any Seller under
the Receivables Sale Agreement, and deliver to the Agent copies of any filings
made by U.S. Foodservice with the Securities and Exchange Commission from time
to time.
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION V.1. Additional Early Amortization Events. If any one of the
------------------------------------
events specified in Section 7.1 of the Agreement (after any grace periods or
consents applicable thereto) or any one of the following events (each, an "Early
-----
Amortization Event") shall occur during the Series 1998-1 Revolving Period with
- ------------------
respect to the Series 1998-1 Certificates:
(a) (i) failure on the part of the Servicer to direct any payment or
deposit to be made or failure of any payment or deposit to be made in
respect of interest owing on any VFC Certificates on the date such interest
is due or (ii) failure on the part of the Servicer to direct any payment or
deposit to be made or of the Company to make any payment or deposit in
respect of any other amounts owing by the Company under any Pooling and
Servicing Agreement, in accordance with the specific terms (and giving
effect to any grace periods) of any applicable supplement thereto, on the
date such other amount is due or such deposit is required to be made;
provided however that, solely in the case of clause (i) above, it shall not
-------- -------
be an Early Amortization Event if (1) all deposits into the Trust Accounts
are made pursuant to Article III of this Supplement, (2) the amounts in the
Trust Accounts equal or exceed the interest payments to be made, and (3)
the interest payments are made within one Business Day of the date such
amount is due;
(b) (i) failure on the part of the Company duly to observe or perform
in any material respect any of the covenants or agreements of the Company
set forth in Section 2.8 of the Agreement or (ii) failure on the part of
the Company duly to observe or perform in any material respect any other
covenants or agreements of the Company set forth in any Pooling and
Servicing Agreement, which failure continues unremedied 30 days after the
earlier of the date on which a Responsible Officer of the
<PAGE>
42
Company or the Servicer has knowledge thereof and the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Company by the Trustee, or to the Company and the Trustee by
the Agent and/or Purchasers representing 25% or more of the Series 1998-1
Invested Amount;
(c) any representation or warranty made or deemed made by the Company
in any Pooling and Servicing Agreement to or for the benefit of the Term
Certificateholders (i) proves to have been incorrect in any material
respect when made or when deemed made and (ii) continues to be incorrect 30
days after the earlier of the date on which a Responsible Officer of the
Company or the Servicer has knowledge thereof and the date on which notice
of such failure, requiring the same to be remedied, has been given to the
Company by the Trustee, or to the Company and the Trustee by the Agent
and/or Purchasers representing 25% or more of the Series 1998-1 Invested
Amount; provided, however, that an Early Amortization Event with respect
-------- -------
to the Series 1998-1 Certificates shall not be deemed to have occurred
under this paragraph if the incorrectness of such representation or
warranty gives rise to an obligation to repurchase the related Receivables
and the Company has repurchased the related Receivable or all such
Receivables, if applicable, in accordance with the provisions of any
Pooling and Servicing Agreement within ten Business Days of the day on
which the Company was obligated to do so;
(d) a Servicer Default with respect to the Servicer shall have
occurred and be continuing;
(e) a Purchase Termination Event (as defined in the Receivables Sale
Agreement) shall have occurred and be continuing under the Receivables Sale
Agreement;
(f) a Change in Control shall have occurred;
(g) at any time (i) the Series 1998-1 Allocated Receivables Amount
shall be less than the Series 1998-1 Target Receivables Amount or (ii) the
Series 1998-1 Invested Amount plus aggregate commercial paper discount on
outstanding related commercial paper shall exceed the Maximum Invested
Amount;
(h) any of the Agreement, the Servicing Agreement, this Supplement,
the Receivables Sale Agreement or the Servicer Guarantee shall cease, for
any reason, to be in full force and effect, or the Company,
<PAGE>
43
any Seller, the Servicer, any Sub-Servicer or any Affiliate of any thereof
shall so assert in writing;
(i) the Trust shall for any reason cease to have a valid and
perfected first priority undivided ownership or security interest in the
Trust Assets (subject to no other Liens other than Permitted Liens
described in clauses (i) and (v) of the definition thereof), or any of U.S.
Foodservice, the Company or any Affiliate of any thereof shall so assert;
(j) there shall have been filed against U.S. Foodservice, the Company
or the Trust (i) a notice of federal tax Lien from the Internal Revenue
Service, (ii) a notice of Lien from the PBGC under Section 412(n) of the
Internal Revenue Code or Section 302(f) of ERISA for a failure to make a
required installment or other payment to a plan to which either of such
sections applies or (iii) a notice of any other Lien the existence of which
could reasonably be expected to have a material adverse effect on the
business, operations or financial condition of such Person, and, in each
case, 40 days shall have elapsed without such notice having been
effectively withdrawn or such Lien having been released or discharged;
(k) any action, suit, investigation or proceeding at law or in equity
(including, without limitation, injunctions, writs or restraining orders)
shall be brought or commenced or filed by or before any arbitrator, court
or Governmental Authority against the Company, the Servicer or any
properties, revenues or rights of either thereof which could reasonably be
expected to have a Material Adverse Effect with respect to such Person;
(l) the average of the Dilution Ratios for any three consecutive
Settlement Periods exceeds four and one-half percent (4.5%);
(m) the average of the Loss-to-Liquidation Ratio for any three
consecutive Settlement Periods exceeds three and one-quarter percent
(3.25%);
(n) the Delinquency Ratio for any Settlement Period exceeds six
percent (6.0%);
(o) for any Settlement Period, Days Sales Outstanding shall be more
than 40 days;
(p) any of the following financial performance tests shall fail to be
satisfied with respect to U.S. Foodservice and its consolidated
Subsidiaries as of the relevant date set forth below (capitalized terms
used in this Section 5.1(p) and not otherwise defined herein shall have
<PAGE>
44
the meanings assigned to such terms in Annex I attached hereto (and, in the
event that a term is defined both elsewhere herein and in Annex I, the
definition contained in Annex I shall be the relevant definition for
purposes of this Section):
(i) On any Determination Date, the Fixed Charge Coverage Ratio
shall be less than 1.75 to 1.0;
(ii) The Consolidated Net Worth shall at any time be less than
the Net Worth Minimum as of such date; or
(iii) On any Determination Date occurring during any period
specified in the following table, the Total Debt Ratio shall exceed
the ratio set forth opposite such period on such table:
Period Ratio
------ -----
(both dates inclusive)
Closing Date through September 29, 1999 4.5 to 1.0
September 30, 1999 through September 29, 2000 4.0 to 1.0
September 30, 2000 and thereafter 3.75 to 1.0;
or
(q) (i) failure of any of U.S. Foodservice, the Company or the
Sellers, or any Affiliate of any thereof to pay when due (after giving
effect to any grace periods applicable thereto) any amounts due under any
agreement to which any such Person is a party and under which any
Indebtedness greater than $15,000,000 is governed or (ii) indebtedness of
any of U.S. Foodservice, the Company or the Sellers becomes due prior to
its stated maturity in an aggregate amount, with respect to such Person,
equal to or exceeding $15,000,000;
then, in the case of (x) any event described in Section 7.1 of the Agreement,
after the applicable grace period (if any) set forth in such Section,
automatically without any notice or action on the part of any of the Trustee,
the Agent or the Purchasers, an early amortization period shall immediately
commence or (y) any other event described above, after the applicable grace
period (if any) set forth in such subsection, the Trustee may, and at the
written direction of the Agent and/or Majority Purchasers voting as a single
class, the Trustee shall, by written notice then given to the Company and the
Servicer, declare that an early amortization period has commenced as of the date
of such notice with respect to Series 1998-1 (any such period commencing under
clause (x) or (y) above, an "Early Amortization Period").
-------------------------
<PAGE>
45
ARTICLE VI
SERVICING FEE
SECTION VI.1. Servicing Compensation. A monthly servicing fee (the
----------------------
"Series 1998-1 Monthly Servicing Fee") shall be payable to the Servicer on each
- ------------------------------------
Distribution Date for the immediately preceding Settlement Period in an amount
equal to the product of (a) the Servicing Fee and (b) a fraction (i) the
numerator of which is the Maximum Invested Amount as of the end of such
Settlement Period and (ii) the denominator of which is the sum of (A) the
Aggregate Invested Amount as of the end of such Settlement Period (calculated
without taking into account the Series 1998-1 Invested Amount or the Invested
Amount of any other Outstanding Series which is a variable funding certificate
series), plus (B) the Maximum Invested Amount as of the end of such Settlement
----
Period, plus (C) the aggregate maximum Invested Amounts as of the end of such
----
Settlement Period of all other Outstanding Series which are variable funding
certificate series; provided, however, that if an Early Amortization Event has
-------- -------
occurred and is continuing and U.S. Foodservice or any Affiliate thereof is
acting as Servicer, payment of the Series 1998-1 Monthly Servicing Fee shall be
deferred until the Series 1998-1 Invested Amount has been paid in full.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION VII.1. Representations and Warranties of the Company and the
-----------------------------------------------------
Servicer. The Company and the Servicer each hereby represents and warrants to
- --------
the Trustee, the Agent and each of the Purchasers that each and every one of
their respective representations and warranties contained in the Agreement is
true and correct in all material respects as of the Issuance Date.
SECTION VII.2. Covenants of the Company and the Servicer. The Company
-----------------------------------------
and the Servicer hereby agree, in addition to their obligations under the
Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in strict
compliance with the terms of the Agreement and each Supplement relating to
an Outstanding Series;
(b) for so long as any of the VFC Certificates and interests therein
are outstanding and are "restricted securities" within the meaning of
<PAGE>
46
Rule 144(a)(3) under the Securities Act, the Company will cause to be
provided to any Holder of VFC Certificates or interests therein and any
prospective purchaser of VFC Certificates or interests therein (which
prospective purchaser is designated by any Holder of VFC Certificates or
the Agent), upon the request of such holder or prospective purchaser, the
information required to be provided to such holder or prospective purchaser
by Rule 144A(d)(4) under the Securities Act; and
(c) they shall observe in all material respects each and every of
their respective covenants (both affirmative and negative) contained in the
Agreement, the Servicing Agreement, this Supplement and all other
Transaction Documents to which each is a party;
(d) they shall afford the Agent or any representative of the Agent
access to all records relating to the Receivables at any reasonable time
during regular business hours, upon reasonable prior notice, for purposes
of inspection and shall permit each Agent or any representative of such
Agent to visit any of the Company[_]s or the Servicer[_]s, as the case may
be, offices or properties during regular business hours and as often as may
reasonably be desired according to the Company[_]s or the Servicer[_]s, as
the case may be, normal security and confidentiality requirements and to
discuss the business, operations, properties, financial and other
conditions of the Company or the Servicer with their respective officers
and employees and with their independent certified public accountants;
provided that the Agent shall notify the Company or the Servicer, as the
--------
case may be, prior to any contact with such accountants and shall give the
Company or the Servicer the opportunity to participate in such discussions;
and
(e) neither the Company nor the Servicer shall take any action, nor
permit any Seller to take any action, requiring the satisfaction of the
Rating Agency Condition pursuant to any Transaction Document without the
prior written consent of the Majority Purchasers.
SECTION VII.3. Covenants of the Servicer. The Servicer hereby agrees
-------------------------
that:
(a) it shall observe each and all of its respective covenants (both
affirmative and negative) contained in the Pooling and Servicing Agreements in
all material respects;
(b) it shall provide to the Agent (i) no later than 45 days after the
Issuance Date and (ii) in the case of an addition of a Seller, prior to the
related Seller Addition Date (as defined
<PAGE>
47
in the Receivables Sale Agreement), evidence that each Seller, or such Seller,
as the case may be, maintains disaster recovery systems and back-up computer and
other information management systems that are reasonably satisfactory to the
Agent;
(c) it shall provide to the Agent, simultaneously with delivery to
the Trustee or the Rating Agencies, all reports, notices, certificates,
statements and other documents required to be delivered to the Trustee or the
Rating Agencies pursuant to the Agreement, the Servicing Agreement and the other
Transaction Documents and furnish to the Agent promptly after receipt thereof a
copy of each material notice, material demand or other material communication
(excluding routine communications) received by or on behalf of the Company or
the Servicer with respect to the Transaction Documents;
(d) it shall provide notice to the Agent of the appointment of a
Successor Servicer pursuant to Section 6.2 of the Servicing Agreement; and
(e) it shall operate in good faith to allow the Trustee to use the
Servicer's available facilities and expertise upon the Servicer's termination or
default.
SECTION VII.4. Covenant of the Trustee. Neither the Trustee nor any
-----------------------
agent of the Trustee (including the Authenticating Agent and the Paying Agent)
will knowingly take any action with the intent of facilitating (i) the
registration, listing or trading of the VFC Certificates or any interests
therein on any national, foreign, regional, local or other stock exchange or
PORTAL or (ii) the development or existence of an "over the counter" market for
the VFC Certificates (including an interdealer quotation system that regularly
disseminates firm buy or sell quotations by identified brokers or dealers by
electronic means or otherwise).
SECTION VII.5. Obligations Unaffected. The obligations of the Company
----------------------
and the Servicer to the Agent and the Purchasers under this Supplement shall not
be affected by reason of any invalidity, illegality or irregularity of any of
the Receivables or any sale of any of the Receivables.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION VIII.1. Conditions Precedent to Effectiveness of the
--------------------------------------------
Supplement. This Supplement shall become effective on the date (the "Effective
- ---------- ---------
Date") on which the following conditions precedent have been satisfied:
- ----
<PAGE>
48
(a) Documents. The Agent shall have received an original copy for
---------
itself and each Purchaser, each executed and delivered in form and
substance satisfactory to the Agent, of (i) the Agreement, executed by a
duly authorized officer of each of the Company, the Servicer and the
Trustee, (ii) this Supplement, executed by a duly authorized officer of
each of the Company, the Servicer and the Trustee, (iii) the Certificate
Purchase Agreement, executed by a duly authorized officer of each of the
Company, the Servicer, each Conduit Purchaser, each Alternate Purchaser and
the Agent, and (iv) each of the other Transaction Documents, each duly
executed by the parties thereto.
(b) Corporate Documents; Corporate Proceedings of the Company and
-------------------------------------------------------------
Servicer. The Agent shall have received, with a copy for each Purchaser,
--------
from the Company, each Seller, the Servicer and each Subservicer, true and
complete copies of:
(i) the certificate of incorporation, including all
amendments thereto, of such Person, certified as of a recent date by
the Secretary of State or other appropriate authority of the state of
incorporation, as the case may be, and a certificate of compliance, of
status or of good standing, as and to the extent applicable, of each
such Person as of a recent date, from the Secretary of State or other
appropriate authority of such jurisdiction;
(ii) a certificate of the Secretary of such Person, dated
the Effective Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws of such Person, as in effect on the
Effective Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto
is a true and complete copy of the resolutions, in form and substance
reasonably satisfactory to the Agents, of the Board of Directors of
such Person or committees thereof authorizing the execution, delivery
and performance of the Transaction Documents to which it is a party
and the transactions contemplated thereby, and that such resolutions
have not been amended, modified, revoked or rescinded and are in full
force and effect, (C) that the certificate of incorporation of such
Person has not been amended since the date of the last amendment
thereto shown on the certificate of good standing (or its equivalent)
furnished pursuant to clause (i) above and (D) as to the incumbency
and specimen signature of each officer executing any Transaction
Documents or any other document delivered in connection herewith or
therewith on behalf of such Person; and
(iii) a certificate of another officer as to the incumbency
and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to clause (ii) above.
(c) Good Standing Certificates. The Agent shall have received copies
--------------------------
of certificates of compliance, of status or of good standing, dated as of a
recent date, from the Secretary of State or other appropriate authority of
such jurisdiction, with respect to the Company, the Servicer, each
Subservicer and each Seller, in each State where the
<PAGE>
49
ownership, lease or operation of property or the conduct of business
requires it to qualify as a foreign corporation, except where the failure
to so qualify would not have a material adverse effect on the business,
operations, properties or condition (financial or otherwise) of the
Company, the Servicer, such Subservicer or such Seller, as the case may be.
(d) Consents, Licenses, Approvals, Etc. The Agent shall have
----------------------------------
received, with a counterpart for itself and each Purchaser, certificates
dated the date hereof of a Responsible Officer of the Company, the
Servicer, each Subservicer and each Seller either (i) attaching copies of
all material consents, licenses and approvals required in connection with
the execution, delivery and performance by the Company, the Servicer, such
Subservicer or such Seller, as the case may be, of the Agreement, this
Supplement, the Servicing Agreement and/or the Receivables Sale Agreement,
as the case may be, and the validity and enforceability of the Agreement,
this Supplement, the Servicing Agreement and/or the Receivables Sale
Agreement against the Company, the Servicer, such Subservicer or such
Seller, as the case may be, and such consents, licenses and approvals shall
be in full force and effect or (ii) stating that no such consents, licenses
or approvals are so required.
(e) No Litigation. The Agent shall have received confirmation that
-------------
there is no pending or, to their knowledge after due inquiry, threatened
action or proceeding affecting U.S. Foodservice, the Company or any of
their respective Subsidiaries before any Governmental Authority that could
reasonably be expected to have a Material Adverse Effect with respect to
U.S. Foodservice, the Company or any of their respective Subsidiaries.
(f) Lien Searches. The Agent shall have received the results of a
-------------
recent search by a Person satisfactory to the Agent of UCC and other
filings with respect to the Company and such other parties as it deems
reasonably necessary.
(g) UCC Certificate. The Agent shall have received from each Seller
---------------
and the Company a UCC Certificate, completed in a manner satisfactory to
such Agent, duly executed by a Responsible Officer of such Seller or the
Company, as the case may be, and dated the Issuance Date.
(h) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, financing statements) required to be filed in order (i)
to perfect the sale of the Receivables by each Seller to the Company
pursuant to the Receivables Sale Agreement and (ii) to create, in favor of
the Trustee, a perfected ownership/security interest in the Trust Assets
under the Agreement with respect to which an ownership/security interest
may be perfected by a filing under the UCC or other comparable statute,
shall, in each case, have been properly prepared, executed and filed in
each office in each jurisdiction listed in the Agreement or the Receivables
Sale Agreement, as the case may be, and such filings are the only filings
required in order to perfect the sale of the Receivables to the Company
under the Receivables Sale Agreement, or to the Trust, under the Agreement,
as the case may be, in the jurisdictions listed therein. The Agent shall
have received
<PAGE>
50
evidence reasonably satisfactory to it of each such filing, registration or
recordation and reasonably satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto.
(i) Legal Opinions. The Agent shall have received, with a
--------------
counterpart for each Purchaser and the Trustee, opinions of counsel to the
Company and the Servicer, dated the Issuance Date, as to corporate, tax,
bankruptcy, perfection and other matters in form and substance acceptable
to the Agents and their counsel.
(j) Fees. The Agent and each Purchaser shall have received payment
----
of all fees and other amounts due and payable to it on or before the
Effective Date, pursuant to the Fee Letter.
(k) Establishment of Accounts. The Agent (x) shall have received
-------------------------
evidence reasonably satisfactory to it that the Collection Account, the
Lockbox Accounts and all other Trust Accounts shall have been or shall be,
within 30 days from the date of this Supplement, established in accordance
with the terms and provisions of the Pooling and Servicing Agreements, and
(y) shall otherwise be satisfied with the arrangements for collection of
the Receivables pursuant thereto.
(1) Agreed-Upon Procedures; Policies. The Agent shall have received,
--------------------------------
with sufficient copies for itself and each Purchaser, (i) a letter in form
and substance satisfactory to the Agent from Independent Public Accountants
to the effect that such accountants have performed certain agreed-upon
procedures relating to the Servicer and historical information with respect
to the Receivables and which describes such accountants* findings with
respect to such procedures and (ii) a copy of the Policies of each Seller,
which shall be satisfactory in form and substance to the Agent.
(m) Receivables Sale Agreement Conditions Satisfied. Each of the
-----------------------------------------------
conditions precedent set forth in Section 3.02 of the Receivables Sale
Agreement with respect to the addition of the Persons listed on Schedule 2
hereto as additional Sellers under the terms of the Receivables Sale
Agreement shall have been satisfied on or prior to the Effective Date, it
being understood that the Trustee, the Agents and the Purchasers shall be
entitled to rely on all certificates and other documents delivered
thereunder and all opinions delivered thereunder shall be addressed to each
of them.
(n) The Company shall have (i) delivered to the Trustee executed
copies of software licenses or sublicenses, in a form reasonably acceptable
to the Trustee, which grant to the Trustee the right to utilize any of the
software owned or licensed by the Servicer that is necessary to perform the
collection and administrative functions to be performed by the Trustee
under the Transaction Documents, (ii) delivered to the Trustee executed
copies of any landlord waivers, in a form reasonably acceptable to the
Trustee, that may be necessary to grant to the Trustee access to any leased
premises of the Servicer for which the Trustee may
<PAGE>
51
require access to perform the collection and administrative functions to be
performed by the Trustee under the Transaction Documents, except to the
extent the Company or the Servicer, as the case may be, owns such property
and (iii) taken all actions reasonably requested by the Trustee in
connection with, and have ensured completion of, each of the Servicer Site
Review and the Standby Liquidation System.
(o) The Company shall have a consolidated net worth, as determined in
accordance with GAAP, of at least $44,200,000.
ARTICLE IX
MISCELLANEOUS
SECTION IX.1. Ratification of Agreement. As supplemented by this
-------------------------
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION IX.2. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION IX.3. Further Assurances. Each of the Company, the Servicer
------------------
and the Trustee agrees, from time to time, to do and perform any and all acts
and to execute any and all further instruments required or reasonably requested
by the other more fully to effect the purposes of this Supplement and the sale
of the VFC Certificates and the interests therein under the Certificate Purchase
Agreement, including, without limitation, in the case of the Company and the
Servicer, the execution of any financing or registration statements or similar
documents or notices or continuation statements relating to the Receivables and
the other Trust Assets for filing or registration under the provisions of the
UCC or similar legislation of any applicable jurisdiction.
SECTION IX.4. No Waiver; Cumulative Remedies. No failure to exercise
------------------------------
and no delay in exercising, on the part of the Trustee or any Term
Certificateholder, any right, remedy, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
<PAGE>
52
SECTION IX.5. Amendments. This Supplement may be amended,
----------
supplemented or otherwise modified in writing from time to time only if such
amendment, supplement or modification is effected in accordance with the
provisions of Section 10.1 of the Agreement.
SECTION IX.6. Severability. If any provision hereof is void or
------------
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION IX.7. Notices. All notices, requests and demands to or upon
-------
any party hereto to be effective shall be given (i) in the case of the Company,
in the manner set forth in Section 10.5 of the Agreement, and to the following
address:
The Company: RS Funding Inc.
3773 Howard Hughes Parkway
Suite 300 N
Las Vegas, Nevada 89109
Attention: Jane Parr
Facsimile: (702)866-2244
with a copy to: RS Funding Inc.
850 North Hills Boulevard
Reno, Nevada 89506
Attention: Becky Benevides
Facsimile: (702)972-4666
(ii) in the case of the Servicer, in the manner set forth in Section 10.5 of
the Agreement, and to the following address:
The Servicer: U.S. Foodservice, Inc.
9755 Patuxent Woods Drive
Columbia, Maryland 21046
Attention: Robert W. Gillison, IV
Facsimile: (410) 309-6296
(iii) in the case of the Trustee, in the manner and to the address set forth in
Section 10.5 of the Agreement,
(iv) in the case of the Agent, in the manner set forth in clause (v) below, and
to the following address:
The Agent: NationsBank, N.A.
<PAGE>
53
NationsBank Corporate Center
10th Floor
Charlotte, NC 28255
Attn: Michelle M. Heath
Tel: (704) 386-7922
Fax: (704) 388-9169
and (v) in the case of any other party, in writing (including a confirmed
transmission by telecopy), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand or three
days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, addressed to such address as may be hereafter
notified by the respective parties hereto from time to time. Any notice
required or permitted to be mailed to a Purchaser shall be given as provided in
Section 4C.3 or as provided in Section 10.5 of the Agreement with respect to an
Investor Certificateholder.
SECTION IX.8. 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 taken together shall constitute one and the same agreement.
SECTION IX.9. Limitation on Addition and Termination of Sellers.
-------------------------------------------------
(a) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, the Company shall not consent to the addition of a
Seller or a Seller Division thereunder unless (subject to the proviso contained
in clause (iv) below) each of the following conditions shall have been
satisfied:
(i) (x) in the case of a proposed addition of a Seller, each of the
conditions set forth in Section 3.02 of the Receivables Sale Agreement, and
(y) in the case of a proposed addition of a Seller Division, the conditions
set forth in subsections 3.02(a)(ii), (e), (f), (g), (h), (j) and (k) (in
each case, applied to the applicable New Division as if it were a proposed
additional Seller) of the Receivables Sale Agreement, shall have been
satisfied.
(ii) Each of the Company and the Agent shall have received copies of the
Policies of such additional Seller (or such Seller Division, as the case
may be, if different from the Policies of the Seller of which it is a New
Division), which Policies shall be in form and substance satisfactory to
the Agent.
<PAGE>
54
(iii) The Company shall have received confirmation (A) that there is no
pending or, to its knowledge after due inquiry, threatened action or
proceeding affecting such additional Seller (or such Seller Division, as
the case may be) before any Governmental Authority (I) that could
reasonably be expected to have a Material Adverse Effect with respect to
such additional Seller (or such Seller Division, as the case may be, as if
it were an additional Seller) or (II) that purports to affect the legality,
validity or enforceability of this Supplement, the Agreement or any other
Transaction Document or any of the transactions contemplated hereby or
thereby.
(iv) The Company and the Trustee shall have received evidence that the
Rating Agency Condition shall have been satisfied with respect to the
addition of such Seller (or addition of such Seller Division, as the case
may be); provided that such satisfaction of the Rating Agency Condition
--------
(and such receipt of evidence thereof) shall not be required with respect
to the addition of up to three Subsidiaries of U.S. Foodservice (and/or New
Divisions) as Sellers (or Seller Divisions) during any calendar year, each
of which Subsidiaries (or New Divisions) meets the following criteria: (x)
such Subsidiary (or New Division) is in the same line of business as the
existing Sellers as of the related Seller Addition Date (as defined in the
Receivables Sale Agreement) and (y) as of such date, immediately prior to
giving effect to such addition (the "Measurement Date"), the ratio
----------------
(expressed as a percentage) of (I) (A) the aggregate Principal Amount of
what would constitute all Eligible Receivables of such Subsidiary (or New
Division) at the end of the Business Day immediately preceding the
Measurement Date if it were a Seller (or Seller Division) minus the amount
-----
which would constitute the Overconcentration Amount applicable to such
Receivables on the Measurement Date if such Subsidiary (or New Division)
were a Seller (or Seller Division) minus (B) the product of the amount
-----
calculated pursuant to the foregoing clause (A) and the PACA Percentage
which would be applicable on such date to such Subsidiary (or New Division)
if it were a Seller (or Seller Division), calculated solely with respect to
it, to (II) the Aggregate Receivables Amount on such date (before giving
effect to such addition), is less than five percent (5%).
(v) The Company and the Trustee shall have received a certificate
prepared by a Responsible Officer of the Servicer certifying that after
giving effect to the addition of such Seller (or such Seller Division, as
the case may be), the Aggregate Target Receivables Amount shall equal the
Aggregate Allocated Receivables Amount on the related Seller Addition Date.
<PAGE>
55
(vi) Notwithstanding anything to the contrary contained in the Receivables
Sale Agreement, the Company shall not consent to any request made to
terminate a Seller under the Receivables Purchase Agreement, nor shall any
Seller which is the subject of such request be terminated under the
Receivables Sale Agreement, in each case unless (i) no Early Amortization
Event, Potential Early Amortization Event or Potential Purchase Termination
Event (as defined in the Receivables Sale Agreement) (other than with
respect to the Seller to be so terminated) will have occurred and be
continuing after giving effect to such termination and (ii) the Trustee
shall have received prior notice of such termination (which notice shall be
accompanied by a pro forma Daily Report confirming that the Aggregate
--- -----
Target Receivables Amount equals the Aggregate Allocated Receivables
Amount, each calculated after giving effect to such termination and
excluding all Receivables originated by the Seller to be terminated).
(b) Upon the termination of a Seller pursuant to the Receivables Sale
Agreement and the foregoing paragraph (b), the calculation (including,
without limitation, for purposes of the pro forma calculations pursuant to
--- -----
paragraph (b) above) of the Aggregate Target Receivables Amount, the
Aggregate Allocated Receivables Amount, the Series 1998-1 Required Reserves
and all other amounts from which each such amount is directly or indirectly
derived shall exclude in each case the Receivables originated by such
terminated Seller.
ARTICLE X
FINAL DISTRIBUTIONS
SECTION X.1. Certain Distributions. (a) Not later than 2:00 p.m.,
---------------------
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to subsection 7.2(b)
of the Agreement are deposited into the Series 1998-1 Non-Principal Collection
Sub-subaccount and the Series 1998-1 Principal Collection Sub-subaccount, the
Trustee shall distribute such amounts pursuant to Article III of this
Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section 10.1 shall be
deemed to be a final distribution pursuant to Section 9.3 of the Agreement with
respect to the VFC Certificates.
<PAGE>
56
ARTICLE XI
MISCELLANEOUS
SECTION XI.1. Servicing Party Transactions. In order to clarify the
----------------------------
provisions in Section 5.1 of the Servicing Agreement which permits Servicing
Parties to merge and transfer its properties and assets to Persons other than
corporations (such as limited liability companies and limited partnerships), by
their acceptance of the VFC Certificates, the VFC Certificateholders agree to
restate the provisions of Section 5.1 of the Servicing Agreement as follows:
(a) the corporation or other Person formed by such consolidation or
into which such Servicing Party is merged or the Person which acquires by
conveyance or transfer the properties and assets of such Servicing Party
substantially as an entirety shall be a corporation or Person organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia, and, if such Servicing Party is not the surviving
entity, such corporation or Person shall assume, without the execution or filing
of any paper or any further act on the part of any of the parties hereto (except
as may be required in the context of an acquisition by conveyance or transfer of
the properties and assets of such Servicing Party substantially as an entirety
to such other Person), the performance of every covenant and obligation of such
Servicing Party hereunder; and
SECTION 11.2. Lockbox Concentration Accounts. In order to eliminate
------------------------------
the need for multiple wire transfers (and to minimize the Company's expenses
resulting therefrom) on the same Business Day from the same Lockbox Processor to
the Collection Concentration Account, by their acceptance of the VFC
Certificates, the VFC Certificateholders agree to permit each Lockbox Processor
to consolidate all funds received by such Lockbox Processor into one account
used by such Lockbox Processor prior to their transfer to the Collection
Concentration Account. Accordingly:
(a) The following definitions in the Pooling Agreement are restated
as follows:
"Lockbox Account" shall mean the intervening account used by a Lockbox
Processor for deposit of funds received in a Lockbox, another Lockbox
Account or an Eligible Segregated Account prior to their transfer to the
Collection Concentration Account.
<PAGE>
57
"Lockbox Agreement" shall mean, with respect to each Lockbox
Processor, a lockbox agreement in either of the forms set forth as Exhibits
A-1 and A-2 hereto or as otherwise permitted by the Servicing Agreement.
(b) The first sentence in Section 2.3(b)(i) of the Servicing Agreement
is restated as follows:
Each Lockbox Agreement shall provide that the Lockbox Processor
thereunder is irrevocably directed, and such Lockbox Processor
irrevocably agrees, to (i) deposit funds received in the Lockbox
directly into the Lockbox Account and (ii) transfer immediately
available funds on deposit in the Lockbox Account within one Business
Day of receipt thereof to the Trustee for deposit in the Collection
Concentration Account; provided, that any Lockbox Processor shall be
permitted to consolidate funds from one or more Lockbox Accounts and
Eligible Segregated Accounts into one Lockbox Account for deposit in
the Collection Concentration Account
SECTION 11.3. Effectiveness. The consents and amendments set forth in
-------------
Sections 11.1 and 11.2 shall become effective only after the Company shall have
received the consent of Investor Certificateholders evidencing more than 50% of
the Invested Amount of each other Series issued and outstanding.
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Series 1998-1 Supplement to be duly executed by their respective
officers as of the day and year first above written.
RS FUNDING INC.
By: /s/ Robert W. Gillison, IV
--------------------------------
Name: Robert W. Gillison, IV
Title: Treasurer
U.S. FOODSERVICE, INC., in its individual capacity
and as Servicer
By: /s/ Robert W. Gillison, IV
--------------------------------
Name: Robert W. Gillison, IV
Title: Treasurer
THE CHASE MANHATTAN BANK, not in its individual
capacity but solely as Trustee
By: /s/ JoAnn Manieri
--------------------------------
Name: JoAnn Manieri
Title: Trust Officer
<PAGE>
Schedule 2
New Additional Sellers
----------------------
Continental Food Service, Inc., a division of John Sexton & Co.
E&H Distributing Co.
Harrison's Prime Meats & Provisions, Inc.
Illinois Fruit & Produce Corp.
JP Foodservice Distributors, Inc.
Nevada Baking Company, Inc.
Outwest Meat Company
Sorrento Food Service, Inc.
Squeri Food Service, Inc.
U.S. Foodservice - Knoxville L.P.
Westlund Provisions, Inc.
<PAGE>
Annex I
Financial Covenant Definitions
------------------------------
The following terms shall have the following meanings solely for the purpose of
their use in Section 5.1(p) of this Supplement:
"Capital Lease Obligation" shall mean, as at any date, with respect to
------------------------
any capital lease, the amount of the obligation of the lessee thereunder
which would, in accordance with GAAP, appear on a balance sheet of such
lessee or in the notes thereto in respect of such capital lease.
"Consolidated Net Worth" shall mean, as of any date, (a) the sum of
----------------------
capital stock (but excluding capital stock subscribed for but unissued) and
surplus (including retained earnings, additional paid-in capital and the
balance of the current profit and loss account not transferred to surplus)
accounts of U.S. Foodservice and its Restricted Subsidiaries appearing on a
consolidated balance sheet of U.S. Foodservice and its Restricted
Subsidiaries prepared in accordance with GAAP as of such date, after
eliminating all amounts properly attributable to outside minority interests
in Restricted Subsidiaries plus (b) the amount of the aggregate
----
amortization of Effective Date Intangibles in accordance with GAAP
subsequent to the Credit Agreement Effective Date to and including such
date of determination to the extent such amortization has reduced the
surplus accounts of U.S. Foodservice and its Restricted Subsidiaries
appearing on a balance sheet of U.S. Foodservice and its Restricted
Subsidiaries prepared in accordance with GAAP as of the Credit Agreement
Effective Date (after giving effect to the consummation of the Merger
Transaction).
"Credit Agreement Effective Date" shall mean December 23, 1997.
-------------------------------
"Debt" shall mean, as applied to any Person, as of any date of
----
determination (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by
bonds, debentures, notes, drafts or similar instruments, or upon which
interest payments are customarily made except for all such obligations of
each Restricted Subsidiary or U.S. Foodservice to one or more of U.S.
Foodservice and the other Restricted Subsidiaries;
(b) all obligations of such Person for all or any part of the
deferred purchase price of property or services (other than trade accounts
payable arising in the ordinary course of business which are not overdue by
more than 45 days or which are being contested in good faith by appropriate
proceedings) or for the cost of property constructed or of improvements;
<PAGE>
2
(c) all obligations secured by any Lien other than a Lien deemed to
exist in connection with any receivables securitization (including the
securitization contemplated by this Agreement) permitted pursuant to the
Five Year Credit Agreement (including any related filings of financing
statements);
provided that for purposes of calculating the Total Debt Ratio, the
--------
Aggregate Invested Amount (and any similar amounts under any other such
receivables securitization to which Distributors or any of its Restricted
Subsidiaries is a party) shall be included in this amount;
(d) all Capital Lease Obligations of such Person;
(e) all preferred stock issued by such Person or required by the
terms thereof to be redeemed, or for which mandatory sinking fund payments
are due, by a fixed date;
(f) the aggregate amount of the net liability exposure of such Person
under all hedging agreements relating to speculative hedge arrangements
(those hedge arrangements which are required to be marked-to-market under
GAAP) as determined under GAAP; and
(g) all Guaranties by such Person of or with respect to obligations
of the character referred to in the foregoing clauses (a) through (f) of
another Person;
provided, however, that in determining the Debt of U.S. Foodservice, so long as
- -------- -------
the Sara Lee Offset Agreement shall remain in full force and effect and shall be
effective to permit the offset of principal and interest due under the Sara Lee
Note against principal and interest due under PYA's Note (or to establish U.S.
Foodservice's obligation in respect of the indebtedness evidenced by the Sara
Lee Note from and after a prepayment in full of PYA's Note as the remaining
principal balance of the Sara Lee Note after offset against amounts owing
thereon of the principal of and accrued and unpaid interest to the date of
prepayment on the PYA Note), the Debt evidenced by the Sara Lee Note shall be
deemed equal to the net amounts for which U.S. Foodservice is obligated under
the Sara Lee Offset Agreement.
"Determination Date" shall mean the last day of each fiscal quarter of
------------------
U.S. Foodservice and the Sellers.
"Effective Date Intangibles" shall mean all goodwill and other
--------------------------
intangible assets that appear on a consolidated balance sheet of U.S.
Foodservice and its Restricted Subsidiaries prepared in accordance with
GAAP as of the Credit Agreement Effective Date immediately after giving
effect to the Merger Transaction.
"Everett Facility" shall mean the facility owned by JPFDI on November
----------------
10, 1994 located in Everett, Massachusetts.
"Five Year Credit Agreement" shall mean the Five Year Credit Agreement
--------------------------
dated as of December 23, 1997 among Rykoff-Sexton, Inc. (as predecessor to
<PAGE>
3
U.S. Foodservice) and JP Foodservice Distributors, Inc. as lenders,
NationsBank, N.A., as administrative agent, NationsBanc Montgomery
Securities, Inc. and Chase Securities, Inc., as co-arrangers, Chase
Manhattan Bank, as syndication agent and Bank of America, NT & SA, as
documentation agent.
"Fixed Charge Coverage Ratio" shall mean, for U.S. Foodservice and its
---------------------------
Restricted Subsidiaries as of any Determination Date, the number obtained
by dividing (a) Net Income Available for Fixed Charges for the period
("Coverage Period") of four consecutive fiscal quarters ended on such
---------------
Determination Date by (b) Fixed Charges for such Coverage Period.
"Fixed Charges" shall mean, for any period, the sum of the following
-------------
amounts: (a) Interest Expense for such period, plus (b) the aggregate
----
amount of Operating Lease Rentals accrued (whether or not actually paid)
during such period.
"Interest Expense" shall mean, as applied to any Person, for any
----------------
period, the sum of the following amounts for all such Persons of: (a) the
aggregate amount of all interest accrued (whether or not actually paid)
during such period on Debt (including, without limitation, (i) imputed
interest on Capital Lease Obligations and (ii) all imputed interest,
whether in the form of "yield", "discount" or other similar item, that
accrues in respect of any receivables securitization permitted under the
Five Year Credit Agreement entered into by such Person (or by any
Subsidiary of such Person or any other Person "controlled" (as such term is
defined in the Securities Act of 1933 and the rules and regulations
thereunder)), together with any fees payable thereunder, plus (b)
----
amortization of debt discount and expense during such period (excluding
deferred financing amortization), plus (c) all fees and commissions payable
----
in connection with any letters of credit during such period. Unless
otherwise specified, any reference to Interest Expense for any period is
intended as a reference to the sum for such period of said amounts for U.S.
Foodservice and its Restricted Subsidiaries on a consolidated basis in
accordance with GAAP after eliminating all amounts properly attributable to
outside minority interests in Restricted Subsidiaries.
"JPFDI" shall mean JP Foodservice Distributors, Inc.
-----
"Lien" shall mean, as to any Person, any mortgage, lien (statutory or
----
other), pledge, assignment, hypothecation, adverse claim, charge, security
interest or other encumbrance in or on, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under
any conditional sale, trust receipt or other title retention agreement or
capital lease with respect to, any property or asset of such Person, or the
signing or filing of a financing statement
<PAGE>
4
which names such Person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to file any
financing statement which names such Person as debtor. For purposes of
Section 5.1(p) of this Supplement, a Person shall be deemed to be the owner
of any property which it has placed in trust for the benefit of holders of
Debt of such Person which Debt is deemed to be extinguished under GAAP but
for which such Person remains legally liable, and such trust shall be
deemed to be a Lien.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
----------------
as of June 30, 1997, as amended as of September 3, 1997 and November 5,
1997, together with all exhibits and schedules thereto, by and among JP
Foodservice, Inc., Hudson Acquisition Corp., a wholly owned subsidiary of
the JP Foodservice, Inc., and Rykoff-Sexton, Inc.
"Merger Transaction" shall mean the transaction in which, among other
------------------
things, (i) Rykoff-Sexton, Inc. was merged with and into Hudson Acquisition
Corp., a wholly owned subsidiary of JP Foodservice, Inc., and (ii) each
issued and outstanding share of common stock of Rykoff-Sexton, Inc., other
than shares, if any, owned by Rykoff-Sexton, Inc., JP Foodservice, Inc. or
Hudson Acquisition Corp. were converted into the right to receive 0.775 of
a share of common stock of JP Foodservice, Inc., all upon the terms and
conditions set forth in the Merger Agreement.
"Net Income Available for Fixed Charges" shall mean, for any period,
--------------------------------------
(a) the net income (or deficit) of U.S. Foodservice and its Restricted
Subsidiaries determined on a consolidated basis in accordance with GAAP
after eliminating all non-cash or nonrecurring items (whether cash or non-
cash and whether or not deemed extraordinary in accordance with GAAP) for
such period, plus (b) the sum of the following amounts, in each case to the
----
extent deducted in arriving at the amount determined in accordance with the
foregoing subdivision (a): (i) Interest Expense, (ii) provisions for taxes
imposed on or measured by income or excess profits, (iii) Operating Lease
Rentals accrued (whether or not actually paid), and (iv) provisions for
depreciation and amortization of Effective Date Intangibles; provided,
--------
however, that in determining the net income (or deficit) of U.S.
-------
Foodservice and its Restricted Subsidiaries pursuant to the foregoing
subdivision (a) for any period during which U.S. Foodservice shall have
sold or otherwise disposed of the Everett Facility, losses from such sale
or other disposition shall be disregarded to the extent the aggregate
amount of all such losses (computed without regard to Effective Date
Intangibles attributable to such facility) does not exceed $3,300,000 on an
after tax basis.
"Net Worth Minimum" shall mean, as of any date, the sum of (i) eighty-
-----------------
five percent (85%) of Consolidated Net Worth as of December 31, 1997 (after
giving effect to the consummation of the Merger Transaction and after
giving effect to all costs associated with the Merger Transaction) plus
----
(ii) on the last day of each fiscal quarter to occur after the Credit
<PAGE>
5
Agreement Effective Date an amount (but not less than zero) equal to fifty
percent (50%) of the Consolidated Net Income of U.S. Foodservice and its
Restricted Subsidiaries for such fiscal quarter, such increases to be
cumulative, plus (iii) eighty percent (80%) of the effect (positive or
----
negative) on Consolidated Net Worth from acquisitions permitted hereunder.
"Operating Cash Flow" shall mean, for any period, (a) the net income
-------------------
(or deficit) of U.S. Foodservice and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP after eliminating all non-
cash or nonrecurring items (whether cash or non-cash and whether or not
deemed extraordinary in accordance with GAAP) for such period; plus (b) the
----
sum of the following amounts, in each case to the extent deducted in
arriving at such amount determined in accordance with the foregoing
subdivision (a):
(i) Interest Expense,
(ii) provisions for taxes imposed on or measured by income or excess
profits, and
(iii) provisions for depreciation and amortization;
plus (c) the sum (without duplication) of the following items to the extent
----
not included in the amounts determined pursuant to subdivisions (a) and (b)
above (such sum being herein called the "Acquired Unit Adjustment"):
------------------------
(i) the net income (or net deficit) for such period of each Person
which shall have become a Restricted Subsidiary during such period (an
"Acquired Subsidiary") after eliminating all non-cash or nonrecurring items
-------------------
(whether cash or non-cash and whether or not deemed extraordinary in
accordance with GAAP),
(ii) the net income (or net deficit) derived during such period from
any operating assets acquired by U.S. Foodservice or a Restricted
Subsidiary during such period ("Acquired Assets"), and
---------------
(iii) the sum (without duplication) of the following items to the
extent deducted in determining net income of any Acquired Subsidiary or
derived from any Acquired Assets for such period: (A) Interest Expense of
such Acquired Subsidiary or associated with such Acquired Assets, (B)
provisions for taxes imposed on or measured by income or excess profits of
such Acquired Subsidiary or associated with such Acquired Assets, and (C)
provisions for depreciation and amortization of such Acquired Subsidiary or
associated with such Acquired Assets;
<PAGE>
6
minus (d) the sum of the following items to the extent included in the
-----
amounts determined pursuant to subdivisions (a), (b) and (c) above (such
sum being herein called the "Disposed Unit Adjustment"):
------------------------
(i) the net income (or net deficit) for such period of each Person
which shall have ceased to be a Restricted Subsidiary during such period (a
"Disposed Subsidiary") after eliminating all non-cash or nonrecurring items
-------------------
(whether cash or non-cash and whether or not deemed extraordinary in
accordance with GAAP),
(ii) the net income (or net deficit) derived during such period from
any assets which were sole or otherwise disposed of by U.S. Foodservice or
a Restricted Subsidiary during such period ("Disposed Assets"), and
---------------
(iii) the sum (without duplication) of the following items to the
extent deducted in determining net income of any Disposed Subsidiary or
derived from any Disposed Assets for such period: (A) Interest Expense of
such Disposed Subsidiary or associated with such Disposed Assets, (B)
provisions for taxes imposed on or measured by income or excess profits of
such Disposed Subsidiary or associated with such Disposed Assets for such
period, and (C) provisions for depreciation and amortization of such
Disposed Subsidiary or associated with such Disposed Assets;
provided, however, that (1) for purposes of determining Operating Cash Flow
-------- -------
for any period, the Acquired Unit Adjustment and the Disposed Unit
Adjustment shall be determined by U.S. Foodservice in accordance with sound
financial practice (and on the basis, to the extent available, of
appropriate financial statements and tax returns for such period), and (2)
no amount shall in any event be includable in Operating Cash Flow pursuant
to subdivision (c) of this definition for any period in respect of any
Acquired Unit Adjustment unless the amount and calculation thereof shall
also be includable pursuant to the Five Year Credit Agreement; and provided
--------
further, that in determining the net income (or deficit) of U.S.
-------
Foodservice and its Restricted Subsidiaries pursuant to the foregoing
subdivision (a) for any period during which U.S. Foodservice shall have
sold or otherwise disposed of the Everett Facility, losses from such sale
or other disposition shall be disregarded to the extent the aggregate
amount of all such losses (computed without regard to Effective Date
Intangibles attributable to such facility) does not exceed $3,300,000 on an
after tax basis.
"Operating Lease" shall mean an operating lease of property in
---------------
accordance with GAAP (real, personal or mixed) having an original term
(including terms of renewal or extension at the option of the lessor or the
<PAGE>
7
lessee, whether or not any such option has been exercised) of more than one
year, other than (a) a capital lease and (b) in the case of any subsidiary
of U.S. Foodservice, any such lease under which U.S. Foodservice is the
lessor.
"Operating Lease Rentals" shall mean, as applied to U.S. Foodservice
-----------------------
and its Restricted Subsidiaries for any period, the total amount (whether
designated as rentals or additional or supplemental rentals or otherwise)
payable as lessee under all Operating Leases during such period, including
amounts so payable during such period by reason of a lease termination or a
surrender of property but excluding amounts so payable on account of
maintenance, ordinary repairs, insurance, taxes, assessments and other
charges which cover the cost of, or reimburse the lessor for, costs related
to the applicable Operating Lease or the property subject thereto or to the
use, holding or operation thereof.
"PYA" shall mean PYA/Monarch, Inc. a Delaware corporation.
---
"PYA's Note" shall mean that certain promissory note of PYA, dated
----------
March 10, 1989, in the original principal amount of $110,000,000 and
payable to JPFDI which bears interest at rates between 10.35% and 10.8% per
annum, as such note shall be in effect on the Credit Agreement Effective
Date.
"Restricted Subsidiary" shall mean each subsidiary of U.S. Foodservice
---------------------
which has not been designated as an "Unrestricted Subsidiary" under and in
accordance with the Five Year Credit Agreement.
"Sara Lee Note" shall mean that certain promissory note of JPFDI dated
-------------
August 19, 1989, made in the original principal amount of $112,000,000 and
payable to PYA, which bears interest at the per annum rate of 11%, as such
note shall be in effect on the Credit Agreement Effective Date.
"Sara Lee Offset Agreement" shall mean the amended and Restated Note
-------------------------
Offset Agreement, dated as of July 3, 1989, by and between PYA and JPFDI,
providing, among other things, for the settlement of maturities of
principal and accrued interest under the Sara Lee Note, on the one hand,
and under PYA's Note, on the other hand by offsetting the respective
amounts due thereunder.
"Total Debt" shall mean, as of any date, the aggregate amount of all
----------
Debt of U.S. Foodservice and its Restricted Subsidiaries outstanding on
such date (including, without limitation, Debt evidenced by any Note),
determined on a consolidated basis.
"Total Debt Ratio" shall mean, for U.S. Foodservice and its Restricted
----------------
Subsidiaries as of any date, the number obtained by dividing (a) Total Debt
as of such date by (b) Operating Cash
<PAGE>
8
Flow for the period ("Cash Flow Period") of four consecutive fiscal
quarters ended on such date or (if such date shall not be a Determination
Date) most recently prior to such date.
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
SPC RECEIVABLES SALE AGREEMENT
------------------------------
SPC RECEIVABLES SALE AGREEMENT, dated as of December 31, 1998 (this
"Agreement"), among JPFD FUNDING COMPANY, a Delaware corporation ("JPFD
- ---------- ----
Funding"), and RS FUNDING INC., a Nevada corporation (the "Company").
-------
W I T N E S S E T H:
WHEREAS, pursuant to the Receivables Purchase Agreement, dated as of
May 30, 1996 (as amended, restated, supplemented or otherwise modified form time
to time, the "JPFD RPA"), among JPFD Funding, a Delaware corporation, JP
--------
Foodservice Distributors, Inc., a Delaware corporation ("Distributors"),
------------
Illinois Fruit & Produce Corp., an Illinois corporation (as the surviving entity
following merger with Sky Bros., Inc., a Pennsylvania corporation and
collectively with Distributors, the "JP Sellers") and U.S. Foodservice, f/k/a JP
----------
Foodservice, Inc., a Delaware corporation ("U.S. Foodservice"), as the "Parent"
----------------
therein, JPFD Funding has been purchasing JP Receivables and JP Receivables
Property (both as hereinafter defined) from the JP Sellers on the terms and
subject to the conditions set forth in the JPFD RPA;
WHEREAS, pursuant to the Receivables Sale Agreement, dated as of
November 15, 1996 (as amended, restated, supplemented or otherwise modified, the
"RSA"), among certain Sellers party thereto (collectively, the "U.S. Sellers"),
--- ------------
U.S. Foodservice, Inc. (in its individual capacity, f/k/a Rykoff-Sexton, Inc.,
"Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a US
- ------------
Foodservice Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and the Company, the Company has been purchasing "Receivables" and
- ---------
"Receivables Property" (each as hereinafter defined) from the U.S. Sellers on
the terms and subject to the conditions set forth in the RSA;
WHEREAS, the JP Sellers have become parties to the RSA as "Sellers"
(as defined therein) pursuant to Section 9.13 thereof, whereby the Company will
be purchasing from the JP Sellers and the U.S. Sellers, "Receivables" and
"Receivables Property" (each as hereinafter defined) created after the Effective
Date on the terms and subject to the conditions set forth in the RSA;
WHEREAS, the Company desires to purchase from JPFD Funding all of the
JP Receivables and JP Receivables Property with respect thereto existing on the
date hereof on the terms and subject to the conditions set forth herein;
WHEREAS, JPFD Funding and the Company desire the sale of such JP
Receivables and JP Receivables Property from JPFD Funding to the Company to be a
true sale providing the Company with the full benefits of ownership of such JP
Receivables; and
<PAGE>
WHEREAS, to obtain a portion of the necessary funds to purchase such
JP Receivables and JP Receivables Property, the Company has entered into the
Series 1998-1 Supplement to the Pooling Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 Certain Defined Terms. As used in this Agreement,
---------------------
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Code" shall mean the Internal Revenue Code of 1986, and
----
regulations promulgated thereunder or any successor statute and related
regulations.
"Contract" means, with respect to any Receivable, a contract
--------
between the originator of such Receivable and any Person pursuant to or under
which such Person shall be obligated to make payments to such originator.
"Effective Date" means the date of this Agreement.
--------------
"Existing JP Subordinated Notes" has the meaning assigned to such
------------------------------
term in the JP Transition Agreement.
"Foodservice" has the meaning specified in the recitals hereto.
-----------
"JP Collections" has the meaning assigned to the term
--------------
"Collections" in the JPFD RPA.
"JP Persons" means each JP Seller and each of its Affiliates
----------
other than the Company.
"JP Receivables" has the meaning assigned to such term in Section
--------------
2.01(a) of the JPFD RPA.
"JP Receivables Property" has the meaning assigned to the term
-----------------------
"Related Assets" in the JPFD RPA.
"JP Sellers" has the meaning specified in the recitals hereto.
----------
2
<PAGE>
"JP Transition Agreement" means the JP Receivables Program
-----------------------
Transition Agreement, dated as of the date hereof, among the JP Sellers, JPFD
Funding and the Company.
"JPFD RPA" has the meaning specified in the recitals hereto.
--------
"Lien" shall mean, with respect to any asset, (a) any mortgage,
----
deed of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset (including, without limitation, any lien which may arise under PACA,
the Packers and Stockyards Act of 1921, as amended, or the Poultry Producers
Financial Protection Act of 1987, as amended), (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention
agreement relating to such asset and (c) in the case of securities, any purchase
option, call or other similar right of a third party with respect to such
securities; provided, however, that if a lien is imposed under Section 412(n) of
-------- -------
the Code or Section 302(f) of ERISA for a failure to make a required installment
or other payment to a plan to which Section 412(n) of the Code or Section 302(f)
of ERISA applies, then such lien shall not be treated as a "Lien" from and after
the time any Person who is obligated to make such payment pays to such plan the
amount of such lien determined under Section 412(n)(3) of the Code or Section
302(f)(3) of ERISA, as the case may be, and provides to the Trustee and each
Rating Agency written evidence reasonably satisfactory to the Rating Agencies of
the release of such lien, or such lien expires pursuant to Section 412(n)(4)(B)
of the Code or Section 302(f)(4)(B) of ERISA.
"Material Adverse Effect" means, with respect to JPFD Funding,
-----------------------
(a) a materially adverse effect on the business, operations, property or
condition (financial or otherwise) of JPFD Funding and its Subsidiaries taken as
a whole, (b) a material impairment of the ability of JPFD Funding to perform its
obligations under the Transaction Documents, (c) a material impairment of the
validity or enforceability of any of the Transaction Documents against JPFD
Funding or (d) a material impairment of the interests, rights or remedies of the
Company under the Transaction Documents.
"Pooling Agreement" means the Pooling Agreement, dated as of
-----------------
November 15, 1996, among the Company, the Servicer, and the Trustee on behalf of
the Certificateholders, as such agreement may be amended, supplemented, waived,
or otherwise modified from time to time, including, without limitation, the
Series 1998-1 Supplement.
"Purchased Receivable" means any JP Receivable sold to the
--------------------
Company by JPFD Funding pursuant to, and in accordance with the terms of, this
Agreement.
"Purchase Price" has the meaning specified in Section 2.02.
-------------- ------------
"Receivables" has the meaning assigned to such term in the RSA.
-----------
3
<PAGE>
"Receivables Property" has the meaning assigned to such term in
--------------------
the RSA.
"Relevant UCC State" means each jurisdiction in which the filing
------------------
of a UCC financing statement is necessary or desirable to perfect the Company's
interest in the JP Receivables.
"RSA" has the meaning specified in the recitals hereto.
---
"Specified Bankruptcy Opinion Provisions" shall mean the factual
---------------------------------------
assumptions and the actions to be taken by JPFD Funding, as specified in the
legal opinion of Richards & O'Neil, LLP relating to certain bankruptcy matters
and delivered on the date of this Agreement.
"UCC Certificate" means a certificate substantially in the form
---------------
of Exhibit C to the RSA.
"U.S. Foodservice" has the meaning specified in the recitals
----------------
hereto.
"U.S. Sellers" has the meaning specified in the recitals hereto.
------------
All capitalized terms used herein and not otherwise defined have
the meanings assigned such terms in Section 1.1 of the Pooling Agreement.
Section 1.02. Accounting and UCC Terms. All accounting terms now
------------------------
specifically defined herein shall be construed in accordance with GAAP; and all
terms used in Article 9 of the UCC that are used but not specifically defined
herein are used herein as defined therein.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
--------------------------------
Section 2.01. Purchase and Sale of Receivables. (a) JPFD Funding
--------------------------------
hereby sells, assigns, transfers and conveys to the Company, without recourse
(except to the limited extent provided herein), all its right, title and
interest in, to and under (i) all JP Receivables existing on the date hereof in
which JPFD Funding has an interest and all JP Receivables Property in respect of
such JP Receivables and (ii) the JPFD RPA, including in respect of such
agreement, (A) all property assigned thereunder and all rights of JPFD Funding
to receive monies due and to become due under or pursuant to such agreement,
whether payable as fees, expenses, costs or otherwise, (B) all rights of JPFD
Funding to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to such agreement, (C) claims of JPFD
4
<PAGE>
Funding for damages arising out of or for breach of or default under such
agreement, (D) the right of JPFD Funding to amend, waive or terminate such
agreement, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder, (E) all other rights, remedies, powers,
privileges and claims of JPFD Funding under or in connection with such agreement
(whether arising pursuant to such agreement or otherwise available to JPFD
Funding at law or in equity), including the rights of JPFD Funding to enforce
such agreement and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or in connection therewith
and (F) all monies due or to become due and all amounts received with respect to
the items listed in clauses (A) through (E) and all proceeds (including, without
limitation, whatever is received upon the sale, exchange, collection or other
disposition of the foregoing and all "proceeds" as defined in Section 9-306 of
the UCC as in effect in the State of New York) thereof.
(b) On the Effective Date, all of JP Funding's right, title and
interest in, to and under all then existing JP Receivables and all JP
Receivables Property in respect of such JP Receivables shall be immediately and
automatically sold, assigned, transferred and conveyed to the Company pursuant
to Section 2.01 (a) without any further action by JPFD Funding or any other
----------------
Person.
(c) The parties to this Agreement intend that the transactions
contemplated by Sections 2.01 (a) and (b) hereby shall be, and shall be treated
----------------- ---
as, a purchase by the Company and a sale by the JPFD Funding of the Purchased
Receivables and the JP Receivables Property in respect thereof and not a lending
transaction. All sales of JP Receivables and JP Receivables Property by JPFD
Funding hereunder shall be without recourse to, or representation or warranty of
any kind (express or implied) by, JPFD Funding, except as otherwise specifically
provided herein. The foregoing sale, assignment, transfer and conveyance does
not constitute and is not intended to result in a creation or assumption by the
Company of any obligation of JPFD Funding or any other Person in connection with
the JP Receivables, the JP Receivables Property or any agreement or instrument
relating thereto, including any obligation to any Obligor. If this Agreement
does not constitute a valid sale, assignment, transfer and conveyance of all
right, title and interest of JPFD Funding in, to and under the Purchased JP
Receivables and the JP Receivables Property in respect thereof despite the
intent of the parties hereto, JPFD Funding hereby grants a "security interest"
(as defined in the UCC as in effect in the State of New York) in the Purchased
Receivables, the JP Receivables Property in respect thereof and all proceeds
thereof to the Company and the parties agree that this Agreement shall
constitute a security agreement under the UCC in effect in New York.
(d) In connection with the foregoing conveyances, JPFD Funding
agrees to record and file, at its own expense, financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the JP Receivables and JP Receivables Property
acquired hereunder by the Company from JPFD Funding meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
5
<PAGE>
to perfect the Company's ownership interests in the JP Receivables and JP
Receivables Property from JPFD Funding, and to deliver evidence of such filings
to the Company on or prior to the Effective Date.
(e) In connection with the foregoing conveyances, JPFD Funding
agrees at its own expense, as agent of the Company, to indicate, or cause to be
indicated, on the computer files containing a master database of JP Receivables
that all JP Receivables included in such files and all JP Receivables Property
have been sold to the Company.
Section 2.02. Payment of Purchase Price. (a) The amount payable
-------------------------
by the Company to JPFD Funding for JP Receivables and JP Receivables Property on
the Effective Date under this Agreement shall be equal to an amount, with
respect to each JP Receivable, equal to the purchase price originally paid by
JPFD Funding in respect of such JP Receivable to the applicable JP Seller
pursuant to the JPFD RPA less JP Collections in respect of such Receivable
----
received from and after the date of such original purchase to but excluding the
date of this Agreement (the aggregate amount payable by the Company to JPFD
Funding being the "Purchase Price").
--------------
Upon the fulfillment of the conditions set forth in Article III, the Purchase
-----------
Price for JP Receivables and the JP Receivables Property shall be paid by the
Company to JPFD Funding (x) in part, in the form of the Company's assumption of
JPFD Funding's obligations under the Existing JP Subordinated Notes pursuant to
the JP Transition Agreement, and (y) net of the amounts paid pursuant to the
foregoing clause (x), in immediately available funds.
Section 2.03. No Repurchase. Except to the extent expressly set
-------------
forth in the JPFD RPA (applied to the Company as if it were JPFD Funding), JPFD
Funding shall not have any right or obligation hereunder or thereunder, by
implication or otherwise, to repurchase from the Company any Purchased
Receivables or JP Receivables Property or to rescind or otherwise retroactively
affect any purchase of any Purchased Receivables or JP Receivables Property
after the Effective Date.
Section 2.04. Obligations Unaffected. The obligations of JPFD
----------------------
Funding to the Company under this Agreement shall not be affected by reason of
any invalidity, illegality or irregularity of any Receivable or any sale of a
Receivable.
ARTICLE III
CONDITIONS TO PURCHASE
----------------------
Section 3.01. Conditions Precedent to Company's Purchase. The
------------------------------------------
obligation of the Company to purchase JP Receivables and JP Receivables Property
hereunder on
6
<PAGE>
the Effective Date from JPFD Funding is subject to the satisfaction of the
following conditions precedent:
(a) The conditions precedent set forth in Sections 3.02, with
respect to the JP Sellers, and 3.03 of the RSA shall have been satisfied.
(b) The Company shall have received from JPFD Funding on or
before the date of such purchase the following, each (unless otherwise
indicated) dated the day of such sale and in form and substance satisfactory to
the Company:
(i) Resolutions. Copies of the resolutions of the Board of
-----------
Directors of JPFD Funding approving this Agreement and the other
Transaction Documents to be delivered by JPFD Funding and the
transactions contemplated thereby, certified by the Secretary or
Assistant Secretary of JPFD Funding;
(ii) Secretary's Certificate. A certificate of the Secretary or
-----------------------
Assistant Secretary of JPFD Funding certifying the names and true
signatures of the officers authorized on behalf of JPFD Funding to
sign this Agreement and the other Transaction Documents to be
delivered by it (on which certificates the Company may conclusively
rely until such time as the Company shall receive from JPFD Funding a
revised certificate with respect to JPFD Funding meeting the
requirements of this Section 3.01(b));
---------------
(iii) Corporate Documents. The Articles of Incorporation of JPFD
-------------------
Funding, duly certified by the secretary of state Delaware, as of a
recent date acceptable to the Company, together with a copy of the By-
laws of JPFD Funding, duly certified by the Secretary or an Assistant
Secretary of JPFD Funding;
(iv) UCC Certificate; UCC Financing Statements. (i) A UCC
-----------------------------------------
Certificate duly executed by a Responsible Officer of JPFD Funding and
dated such date of purchase and (ii) executed copies of such proper
financing statements, filed prior to the Effective Date, naming JPFD
Funding as the seller and the Company as the purchaser of the
Receivables and the Receivables Property, in proper form for filing in
each jurisdiction in which the Company (or any of its assignees) deems
it necessary or desirable to perfect the Company's ownership interest
in all JP Receivables and JP Receivables Property under the UCC or any
comparable law of such jurisdiction;
(v) UCC Searches. A written search report listing all
------------
effective financing statements that name JPFD Funding as debtor or
assignor and that are filed in the jurisdictions in which filings were
made pursuant to Section
-------
7
<PAGE>
3.01(b)(iv) and in any other jurisdictions that the Company determines
-----------
are necessary or appropriate, together with copies of such financing
statements (none of which, except for those described in Section
--------
3.01(b)(iv) shall cover any JP Receivables or JP Receivables
-----------
Property), and tax and judgment lien searches showing no such liens
that are not permitted by the Transaction Documents;
(vi) Consents. Copies of all consents with respect to JPFD
--------
Funding, if any (including, without limitation, consents under loan
agreements and indentures to which JPFD Funding or its Affiliates are
parties), necessary to consummate the transactions contemplated by the
Transaction Documents; and
(vii) Legal Opinions. (A) One or more legal opinions from
--------------
counsel to each JP Seller and JPFD Funding and counsel to the Company to the
effect that:
(I) the sale of JP Receivables by JPFD Funding to the
Company pursuant to this Agreement, in each case constitutes
a "true sale" and that such JP Receivables would not be
property of JPFD Funding's bankruptcy estate; and
(II) a court should not order the substantive
consolidation of the assets and liabilities of the Company
with those of JPFD Funding.
(B) One or more legal opinions from counsel to each JP
Seller and JPFD Funding and counsel to the Company:
(I) to the effect that each of JPFD Funding and the
Company, as applicable, has all approvals, judicial,
regulatory, legal or otherwise, needed to execute, deliver
and perform each Transaction Document to which it is a party
and that no conflict or default will occur as a result of
the execution, delivery and performance thereof;
(II) to the effect that the Company has a perfected,
first priority security interest in the JP Receivables and
JP Receivables Property; and
(III) addressing other customary matters.
All of the legal opinions referred to in this Section 3.01(b)(vii)
--------------------
shall be addressed to the Trustee and any other Person reasonably
requested by the Company.
(c) The following statement shall be true (and the
acceptance by JPFD Funding of its portion of the Purchase Price on the Effective
Date shall constitute a representation and warranty by JPFD Funding that on such
date such statement is true): The
8
<PAGE>
representations and warranties of JPFD Funding contained in Section 4.02 are
------------
true and correct in all material respects on and as of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.01. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants as to itself for the benefit of JPFD Funding as
follows:
(a) It (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect, (ii) has the requisite
corporate power and authority to effect the transactions contemplated
hereby, and (iii) has all requisite corporate power and authority and
the legal right to own, pledge, mortgage and operate its properties,
and to conduct its business as now or currently proposed to be
conducted.
(b) The execution, delivery and performance by it of this
Agreement and all instruments and documents to be delivered hereunder by it, and
the transactions contemplated hereby and thereby, (i) are within its corporate
powers, have been duly authorized by all necessary corporate action, including
the consent of shareholders where required, and do not (A) contravene its
charter or by-laws, (B) violate any law or regulation or any order or decree of
any court or governmental instrumentality, (C) conflict with or result in the
breach of, or constitute a default under, any indenture, mortgage or deed of
trust or any material lease, agreement or other instrument binding on or
affecting it or any of its respective subsidiaries or any of its properties or
(D) result in or require the creation or imposition of any Lien except as
created or imposed hereunder or under the Pooling Agreement, and no transaction
contemplated hereby requires compliance on its part with any bulk sales act or
similar law, and (ii) do not require the consent of, authorization by or
approval of or notice to or filing or registration with, any governmental body,
agency, authority, regulatory body or any other Person other than those which
have been obtained or made except for the filing of the Financing Statements
referred to in Article III hereof, which filings JPFD Funding hereby represents
-----------
shall have been duly made prior to or substantially contemporaneously with any
purchases of JP Receivables and other JP Receivables Property and shall at all
times be in full force and effect (except as they may be terminated by the
Company). This Agreement has been duly executed and delivered by the Company
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors' rights
in general, and (B) as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
9
<PAGE>
Section 4.02. Representations and Warranties of JPFD Funding.
----------------------------------------------
JPFD Funding hereby represents and warrants for the benefit of the Company and
its assigns on and as of the Effective Date as follows:
(a) Organization and Good Standing. JPFD Funding is a
------------------------------
corporation duly organized and validly existing as a corporation in
good standing under the laws of the state of its incorporation, has
full corporate power, authority and legal right to own its properties
and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement, and is duly qualified
and in good standing as a foreign corporation to do business in the
jurisdiction in which its chief executive office is located and every
other jurisdiction where such qualification is necessary, except where
failure so to qualify would not reasonably be likely to have a
Material Adverse Effect.
(b) Due Authorization. The execution and delivery of this
-----------------
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions provided for herein and therein have been duly
authorized by JPFD Funding by all necessary corporate action on its part.
(c) No Default. JPFD Funding is not in default under or with
----------
respect to any of its Contractual Obligations in any respect which
would be reasonably likely to have a Material Adverse Effect with
respect to JPFD Funding.
(d) Valid Sale; Binding Obligations. The transfer by JPFD
-------------------------------
Funding of JP Receivables and JP Receivables Property made pursuant to this
Agreement shall constitute a valid sale, transfer and assignment of the JP
Receivables and the JP Receivables Property to the Company which is perfected
and of first priority under applicable law, enforceable against creditors of,
and purchasers from, JPFD Funding; and this Agreement constitutes, and each
other Transaction Document to be signed by JPFD Funding when duly executed and
delivered will constitute, an enforceable obligation of JPFD Funding in
accordance with its terms, except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors' rights
in general, and (B) as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
(e) No Violation. The execution, delivery and performance of,
------------
and the consummation of the transactions contemplated by, this Agreement and the
other Transaction Documents and the fulfillment of the terms hereof and thereof
will not (i) conflict with, 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, the articles of incorporation or by-laws of JPFD Funding or any
10
<PAGE>
contract, indenture, loan agreement, mortgage, deed of trust, or other agreement
or instrument to which JPFD Funding is a party or by which JPFD Funding or any
of its properties is bound, (ii) result in the creation or imposition of any
Lien 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) violate any law or any order, rule, or regulation of any court or of any
federal, state, local or other regulatory body, administrative agency, or other
governmental instrumentality of the United States of America having jurisdiction
over JPFD Funding or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the knowledge of JPFD Funding, threatened against JPFD Funding
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any other Transaction Document, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or any other Transaction
Document, (iii) seeking any determination or ruling that, in the reasonable
judgment of JPFD Funding, would materially and adversely affect the performance
by JPFD Funding of its obligations under this Agreement or any other Transaction
Document or (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or any other
Transaction Document.
(g) Bulk Sales Act. No transaction contemplated by this
--------------
Agreement or any other Transaction Document with respect to JPFD
Funding requires compliance with, or will be subject to avoidance
under, any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval or other
--------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body in the United States of America is required for the due
execution, delivery and performance by JPFD Funding of this Agreement or any
other Transaction Document to which it is a party except for the filing of the
UCC financing statements referred to in Article III, all of which, at the time
-----------
required in Article III, shall have been duly made and shall be in full force
-----------
and effect.
(i) Office. The principal place of business and the chief
------
executive office of JPFD Funding and the offices where JPFD Funding keeps its
records concerning the JP Receivables are as indicated for JPFD Funding on
Schedule 1 hereto.
- ----------
(j) Margin Regulations. No use of any funds obtained by JPFD
------------------
Funding under this Agreement or the other Transaction Documents will
conflict with or contravene any of Regulations T, U and X promulgated
by the Board of Governors of the Federal Reserve System from time to
time.
11
<PAGE>
(k) Quality of Title. JPFD Funding is the legal and beneficial
----------------
owner of each JP Receivable and all JP Receivables Property which is to be
transferred to the Company by JPFD Funding, and such JP Receivables and JP
Receivables Property shall be transferred by JPFD Funding free and clear of any
Lien (other than any Lien arising under any other Transaction Document or
arising solely as the result of any action taken by the Company hereunder or
pursuant hereto); prior to such transfer JPFD Funding shall have made all
filings under applicable law in each relevant jurisdiction in order to protect
and perfect the Company's ownership interest in all JP Receivables and JP
Receivables Property against all creditors of, and purchasers from, JPFD
Funding; and the Company shall have acquired and shall continue to have
maintained a valid and perfected first priority ownership interest in each JP
Receivable and the JP Receivables Property free and clear of any Lien (other
than any Lien arising solely as the result of any action taken by the Company
hereunder or pursuant hereto or by the Trustee); and no effective financing
statement or other instrument similar in effect covering any JP Receivable, any
interest therein or any JP Receivables Property with respect thereto is on file
in any recording office except such as may be filed (i) in favor of the
originator of such JP Receivable in accordance with the Contract with respect
thereto, (ii) in favor of the Company pursuant to this Agreement, and (iii) in
favor of the Trustee.
(l) Valid Transfers. No transfer of any JP Receivables or any JP
---------------
Receivables Property to the Company by JPFD Funding constitutes a
fraudulent transfer or fraudulent conveyance or is otherwise void or
voidable under similar laws or principles, the doctrine of equitable
subordination or for any other reason. The transfer of JP Receivables
and JP Receivables Property by JPFD Funding to the Company pursuant to
this Agreement is being made in good faith and without intent to
hinder, delay or defraud creditors of JPFD Funding, and JPFD Funding
acknowledges that it is receiving fair consideration and reasonably
equivalent value for the purchase by the Company of JP Receivables and
JP Receivables Property hereunder. The purchase of Receivables and
Receivables Property by the Company from JPFD Funding constitutes a
true sale of such JP Receivables and JP Receivables Property under
applicable state law.
(m) Compliance with Applicable Laws. JPFD Funding 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, without limitation, environmental laws), a breach of any of which,
individually or in the aggregate, would be reasonably likely to have a material
adverse effect on (i) the business, operations, business prospects or condition
(financial or other) of JPFD Funding or (ii) the ability of JPFD Funding to
perform its obligations under this Agreement and the other Transaction
Documents.
(n) Accounting Treatment. JPFD Funding will not prepare any
--------------------
financial statements that shall account for the transactions
contemplated hereby in a manner which is, nor will it in any other
respect (except for tax purposes)
12
<PAGE>
account for the transactions contemplated hereby in a manner which is,
inconsistent with the Company's ownership interest in the JP
Receivables and JP Receivables Property.
(o) Solvency. Both prior to and after giving effect to the
--------
transactions contemplated hereby, (i) the assets of JPFD Funding, at
fair valuation, will exceed its liabilities (including contingent
liabilities), (ii) the capital of JPFD Funding will not be
unreasonably small to conduct its business, and (iii) JPFD Funding
will not have incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature.
(p) Investment Company Act. Neither JPFD Funding nor any of its
----------------------
Subsidiaries is (i) an "investment company" registered or required to
be registered under the 1940 Act, or (ii) a "holding company", or a
"subsidiary company" or an "affiliate" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(q) Ownership. All of the issued and outstanding capital stock
---------
of JPFD Funding is owned, directly or indirectly, by U.S.
Foodservice.
(r) Indebtedness to Company. Immediately prior to consummation
-----------------------
of the transactions contemplated hereby on the Effective Date, JPFD Funding had
no outstanding Indebtedness to the Company.
The representations and warranties set forth in this Section 4.02
------------
shall survive the transfer and assignment of the JP Receivables to the
Company pursuant to this Agreement.
ARTICLE V
GENERAL COVENANTS
-----------------
Section 5.01. Affirmative Covenants of JPFD Funding. JPFD Funding
-------------------------------------
covenants that, until the date that is six months after the date of this
Agreement:
(a) Further Action Evidencing Purchases.
-----------------------------------
(i) JPFD Funding agrees that from time to time, at its expense,
it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable or that the Company may reasonably request, to protect or
more fully evidence the Company's
13
<PAGE>
ownership, right, title and interest in the JP Receivables and JP
Receivables Property sold by JPFD Funding and its rights under the
Contracts with respect thereto, or to enable the Company to exercise
or enforce any of its rights hereunder or under any other Transaction
Document. Without limiting the generality of the foregoing, JPFD
Funding will upon the request of the Company (A) execute and file such
financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or, in the
reasonable opinion of the Company, desirable and (B) indicate on its
books and records (including, without limitation, master data
processing records) that the JP Receivables and JP Receivables
Property have been sold and assigned to the Company and, in turn, the
Company has sold and assigned its interest therein to the Trustee, and
provide to the Company, upon request, copies of any such records.
(ii) JPFD Funding hereby irrevocably authorizes the Company to
file and the Trustee to execute one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
JP Receivables and JP Receivables Property sold by JPFD Funding,
without the signature of JPFD Funding where permitted by law.
(iii) If JPFD Funding fails to perform any of its agreements or
obligations under this Agreement, the Company or its assignees may
(but shall not be required to) perform, or cause performance of, such
agreements or obligations, and the expenses of the Company incurred in
connection therewith shall be payable by JPFD Funding.
(iv) JPFD Funding agrees that:
(A) the Company (and its assignees) shall have the right
at any time to notify, or require that JPFD Funding at its own expense notify,
the respective Obligors of the Company's ownership of the Purchased Receivables
and JP Receivables Property and may direct that payment of all amounts due or to
become due under the Purchased Receivables be made directly to the Company or
its designee;
(B) JPFD Funding shall, upon the Company's written
request and at JPFD Funding's expense, (I) assemble all of JPFD
Funding's documents, instruments and other records (including
credit files and computer tapes or disks) that (A) evidence or
record JP Receivables sold by JPFD Funding and (B) are otherwise
necessary or desirable to effect Collections of such Purchased
Receivables (collectively, the "Documents") and (II) deliver the
Documents to the Company or its designee at a place designated by
---------
the Company;
14
<PAGE>
(C) JPFD Funding hereby grants to the Company an
irrevocable power of attorney (coupled with an interest) to take
any and all steps in JPFD Funding's name necessary or desirable,
in the reasonable opinion of the Company, to collect all amounts
due under the Purchased Receivables, including, without
limitation, endorsing JPFD Funding's name on checks and other
instruments representing Collections, enforcing the Purchased
Receivables and exercising all rights and remedies in respect
thereof; and
(D) upon written request of the Company, JPFD Funding will
(I) deliver to the Company or a party designated by the Company
all licenses, rights, computer programs, related material,
computer tapes, disks, cassettes and data necessary to the
immediate collection of the Purchased Receivables by the Company,
with or without the participation of JPFD Funding (excluding
software licenses which by their terms are not permitted to be so
delivered, provided that JPFD Funding shall use reasonable
--------
efforts to obtain consent of the relevant licensor to such
delivery) and (II) make such arrangements with respect to the
collection of the Purchased Receivables as may be reasonably
required by the Company.
(b) Separate Corporate Existence of the Company. JPFD Funding hereby
-------------------------------------------
acknowledges that the Trustee and the Investor Certificateholders are
entering into the transactions contemplated by the Transaction Documents in
reliance upon the Company's identity as a legal entity separate from JPFD
Funding and all other JP Persons and that the Trustee and the Investor
Certificateholders would be prejudiced by any substantive consolidation of
the Company with JPFD Funding. Therefore, from and after the date of this
Agreement until the date that is six months after such date, JPFD Funding
will take (or refrain from taking, as the case may be) such actions, and
will cause each other JP Person it controls to take (or refrain from
taking, as the case may be) such actions, as shall be required in order
that:
(i) No JP Person will pay the Company's operating expenses and
liabilities, recognizing, however, that certain organizational expenses of the
Company and expenses relating to creation and initial implementation of the
securitization program contemplated by the Transaction Documents have been or
shall be paid by JPFD Funding.
(ii) Each JP Person will conduct its business at offices
segregated from the Company's offices. If office space is leased from any JP
Person, a separate written lease on arm's-length terms will be in effect at a
market rental rate.
15
<PAGE>
(iii) Each JP Person will maintain corporate records and books
of account separate from those of the Company and telephone numbers, mailing
addresses, stationery and other business forms that are separate and distinct
from those of the Company.
(iv) Any financial statements of any JP Person which are
consolidated to include the Company will contain a detailed note substantially
in the form, and to the effect, of the note set forth on Annex 1.
--------
(v) The Company's assets will be maintained in a manner that
facilitates their identification and segregation from those of JPFD
Funding and the other JP Persons.
(vi) Each JP Person will strictly observe corporate
formalities in its dealings with the Company, and funds or other
assets of the Company will not be commingled or pooled with those of
any JP Person. No JP Person will maintain joint bank accounts with the
Company or other depository accounts with the Company to which any JP
Person has independent access.
(vii) Any transaction between the Company and any JP Person
will be fair and equitable to the Company, will be the type of
transaction which would be entered into by a prudent Person in the
position of the Company with an JP Person, and will be on terms which
are at least as favorable to the Company as may be obtained from a
Person which is not an JP Person, it being understood and agreed that
the transactions contemplated in the Transaction Documents meet the
requirements of this clause (vii).
------------
(viii) No JP Person will hold itself out, or permit itself to be
held out, as having agreed to pay or be liable for the debts of the Company.
(ix) The duly elected Board of Directors of the Company and the
Company's duly appointed officers shall at all times have sole authority to
control decisions and actions with respect to the daily business affairs of the
Company.
(x) JPFD Funding shall comply with those procedures described
in the Specified Bankruptcy Opinion Provisions which are applicable to JPFD
Funding, except, in each case above, for such failure to take actions or refrain
from taking actions that are, in the aggregate, not material.
(c) Legend Requirement For Chattel Paper. JPFD Funding agrees
------------------------------------
(i) at all times, with respect to chattel paper, to comply with the
procedures set forth in Schedule 3 to the Pooling Agreement and (ii) that
any JP Receivable that constitutes or is evidenced by "chattel paper" as
defined in Article 9 of the UCC as in effect in the
16
<PAGE>
Relevant UCC State shall bear a legend stating that such Receivable has
been sold to the Company and conveyed to the "Trust" created pursuant to
the Pooling Agreement.
Section 5.02. Negative Covenants of JPFD Funding. JPFD Funding
----------------------------------
covenants that, until the date that is six months after the date of this
Agreement, JPFD Funding shall not:
(a) Accounting of Transfers. Prepare any financial statements
-----------------------
which shall account for the transactions contemplated hereby in any manner other
than as a sale of JP Receivables and JP Receivables Property by JPFD Funding to
the Company or in any other respect account for or treat the transactions under
this Agreement (including for financial accounting purposes, except as required
by law) in any manner other than as transfers of JP Receivables and JP
Receivables Property by JPFD Funding to the Company; provided, however, that
-------- -------
this Section 5.02(a) shall not apply for any tax or tax accounting purposes.
--------------
(b) Limitation on Conduct of Business and Fundamental Changes.
---------------------------------------------------------
(i) Enter into any business or activity or transaction, either directly or
indirectly, other than the business in which JPFD Funding is engaged on the date
hereof or (ii) enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or make any material change in its present method of conducting
business, or convey, sell, lease, assign, transfer or otherwise dispose of, all
or substantially all of its property, business or assets other than the
assignments and transfers contemplated hereby and other than any merger,
consolidation or amalgamation with, or conveyance, sale, lease, assignment,
transfer or other disposition to or with, U.S. Foodservice or any of its
Subsidiaries.
ARTICLE VI
INDEMNIFICATION
---------------
Section 6.01. Indemnities by JPFD Funding. Without limiting any
---------------------------
other rights that the Company may have hereunder or under applicable law, JPFD
Funding hereby agrees to pay, indemnify and hold the Company harmless from and
against any and all claims, losses, liabilities, obligations, damages,
penalties, actions, judgments, suits, costs (including reasonable attorneys'
fees), expenses and disbursements of any kind or nature whatsoever (a) which may
at any time be imposed on, incurred by or asserted against the Company in any
way relating to, arising out of or resulting from this Agreement or any other
Transaction Document or the transactions contemplated hereby or thereby or any
action taken or omitted by the Company under or in connection with any of the
foregoing or in respect of any JP Receivable or (b) which would not have been
imposed on, incurred by or asserted against the Company but for its having
purchased the JP Receivables hereunder (all such claims, losses, liabilities,
obligations, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements being collectively referred to as "Indemnified Amounts"), provided
------------------- --------
that JPFD Funding shall have no obligation under this
17
<PAGE>
Section 6.01 to the Company with respect to Indemnified Amounts (i) to the
- ------------
extent resulting from gross negligence or willful misconduct on the part of the
Company, its agents or its assignees or (ii) resulting from any Obligor's
inability to pay an amount due and payable with respect to a JP Receivable for
credit reasons (it being understood that this clause (ii) shall not limit
paragraph 3 of the JP Transition Agreement). Without limiting or being limited
by the foregoing, JPFD Funding shall pay on demand to the Company any and all
amounts necessary to indemnify the Company from and against any and all
Indemnified Amounts relating to or resulting from:
(a) the transfer by JPFD Funding of any interest in any JP
Receivable or JP Receivables Property or proceeds thereof;
(b) reliance on any representation or warranty or statement made
or deemed made by JPFD Funding (or any of its officers) under or in connection
with this Agreement or in any certificate or report delivered pursuant hereto
that, in either case, shall have been false or incorrect in any material respect
when made or deemed made;
(c) the failure by JPFD Funding to comply with any applicable
law, rule or regulation of any governmental authority with respect to any JP
Receivable or Receivables Property, or the nonconformity of any JP Receivable or
JP Receivables Property with any such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an
ownership interest in any JP Receivable or JP Receivables Property, free and
clear of any Lien, other than a Lien arising under the Transaction Documents,
whether existing at the time of the purchase of such JP Receivable or JP
Receivables Property or at any time thereafter;
(e) 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 JP
Receivables or JP Receivables Property transferred to the Company by JPFD
Funding;
(f) any failure of JPFD Funding to perform its duties or
obligations under this Agreement or the Transaction Documents;
(g) any claim involving environmental liability that relates to
any property that has been, is now or hereafter will be owned, leased, operated
or otherwise used by JPFD Funding;
(h) any tax or governmental fee or charge (but not including
franchise taxes and taxes upon or measured by net income of the Company), all
interest and penalties thereon or with respect thereto, and all out-of-pocket
costs and expenses, including the reasonable fees and
18
<PAGE>
expenses of counsel in defending against the same, which may arise by reason of
the purchase or ownership of any JP Receivable or JP Receivables Property, or
any interest therein or in any goods which secure any such JP Receivables, any
JP Receivables Property or any other rights or assets transferred hereunder; or
(i) any investigation, litigation or proceeding related to this
Agreement or in respect of any JP Receivable or JP Receivables Property
transferred to the Company by JPFD Funding.
Notwithstanding the foregoing, JPFD Funding shall not under any
circumstances be required to indemnify the Company for any Indemnified Amounts
that result from any delay in the collection of any JP Receivables or any
default by an Obligor with respect to any JP Receivables. The agreements set
forth in this Section 6.01 shall survive the collection of all JP Receivables,
------------
the termination of this Agreement and the payment of all amounts payable
hereunder.
Section 6.02. Indemnities by the Company. Without limiting any
--------------------------
other rights that JPFD Funding may have hereunder or under applicable law, the
Company hereby agrees to indemnify JPFD Funding from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) arising
out of or resulting from JPFD Funding's reliance on any representation or
warranty made by the Company in this Agreement or in any certificate delivered
pursuant hereto that, in either case, shall have been false or incorrect in any
material respect when made or deemed made. Any and all indemnifications due and
owing by the Company pursuant to this Section 6.02 shall be paid solely from
------------
funds available to the Company which are not otherwise needed to be applied to
the payment of any amounts pursuant to the Pooling and Servicing Agreements,
shall be non-recourse other than with respect to proceeds in excess of the
proceeds necessary to make such payment, and shall not constitute a claim
against the Company to the extent that insufficient proceeds exist to make such
payment.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01. Amendment. Neither this Agreement nor any of the
---------
terms hereof may be amended, supplemented or modified except in a writing signed
by the Company and JPFD Funding. Any amendment, supplement or modification shall
not be effective until the Rating Agency Condition, if applicable, has been
satisfied.
Section 7.02. 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
19
<PAGE>
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
such party in a written notice to the other parties hereto given in accordance
with this Section 9.02. All notices and communications provided for hereunder
------------
shall be effective, (a) if personally delivered by express mail or courier, when
received, (b) if sent by certified mail, three Business Days after having been
deposited in the mail, postage prepaid and (c) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means.
Section 7.03. No Waiver; Remedies. No failure on the part of the
-------------------
Company to exercise, and no delay in exercising, any right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
Section 7.04. Binding Effect. This Agreement shall be binding
--------------
upon and inure to the benefit of JPFD Funding and the Company and their
respective successors and assigns, except that JPFD Funding shall have the right
to assign their rights hereunder or any interest herein without the prior
written consent of the Company.
Section 7.05. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 7.06. Waiver of Jury Trial; Submission to Jurisdiction;
--------------------------------------------------
Other Waivers. (a) 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 THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF ANY OF THE
PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
(b) Each of the Company and JPFD Funding hereby irrevocably and
unconditionally:
20
<PAGE>
(i) submits itself and its property in any legal action or
proceeding relating to this Agreement and the other Transaction Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Person at its
address set forth in Section 7.02 or at such other address of which JPFD Funding
------------
or the Company, as the case may be, shall have been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section 7.07(b) any special, exemplary, punitive or
---------------
consequential damages.
Section 7.07. Integration. This Agreement and the other Transaction
-----------
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
Section 7.08. Captions and Cross References. The various captions
-----------------------------
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise provided
herein, references in this Agreement to any "Section," "Exhibit," "Annex" or
"Schedule" are to such Section of or Exhibit or Annex or Schedule to this
Agreement, as the case may be.
Section 7.09. Execution in 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 when taken together shall constitute one and the same
agreement.
21
<PAGE>
Section 7.10. Acknowledgment of Assignments. JPFD Funding hereby
-----------------------------
acknowledges and consents to the assignment by the Company of JP Receivables and
JP Receivables Property and the rights of the Company under this Agreement
pursuant to the Pooling and Servicing Agreements. JPFD Funding acknowledges
that the Company will grant a security interest in the Lockbox Accounts, the
Eligible Segregated Accounts, the Collection Concentration Account and the
Collection Account to the Trust for the benefit of the Certificateholders. JPFD
Funding agrees to take any action that the Company or the Trust may reasonably
request in connection with such assignment or security interest.
Section 7.11. No Petition in Bankruptcy. JPFD Funding covenants and
-------------------------
agrees that it will not institute against or join any other Person in
instituting against the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any State of the United States.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
JPFD FUNDING CORPORATION
By: /s/ Robert W. Gillison, IV
----------------------------------
Name: Robert W. Gillison, IV
Title: Treasurer
Address: c/o U.S. Foodservice, Inc.
9755 Patuxent Woods Drive
Columbia, Maryland 21046
Attention: Robert W. Gillison, IV
Telephone: (410) 309-6468
Facsimile: (410) 309-6296
Signature Page
to
SPC Receivables Agreement
<PAGE>
RS FUNDING INC., as the Company
By: /s/ Robert W. Gillison, IV
----------------------------------
Name: Robert W. Gillison, IV
Title: Treasurer
Address: RS Funding Inc.
3773 Howard Hughes Parkway
Suite 300 N
Las Vegas, Nevada 89109
Attention: Jane Parr
Facsimile: (702) 866-2238
with a copy to:
Address: RS Funding Inc.
850 North Hills Boulevard
Reno, Nevada 89506
Attention: Becky Benevides
Facsimile: (702) 972-4666
Signature Page
to
SPC Receivables Agreement
<PAGE>
ANNEX I
-------
RS Funding Inc. is a separate, wholly-owned, bankruptcy remote subsidiary of
U.S. Foodservice established to purchase accounts receivable from U.S.
Foodservice, Inc. and certain of its other subsidiaries.
Signature Page
to
SPC Receivables Agreement
<PAGE>
EXHIBIT 10.4
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
JP Foodservice Distributors, Inc., a
Delaware corporation
By: /s/ Robert W. Gillison, IV
-----------------------------
Title: Treasurer
------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
------------------------------
Title: Treasurer
-------------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
------------------------------
Title: Treasurer
-------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
------------------------------
Title: Trust Officer
-------------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Nevada Baking Company, Inc., a Nevada
corporation
By: /s/ Robert W. Gillison, IV
-----------------------------
Title: Treasurer
------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
------------------------------
Title: Treasurer
-------------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
------------------------------
Title: Treasurer
-------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
------------------------------
Title: Trust Officer
-------------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Illinois Fruit & Produce Corp., an Illinois
corporation
By: /s/ Robert W. Gillison, IV
----------------------------
Title: Treasurer
-----------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
--------------------------------
Title: Treasurer
---------------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
---------------------------------
Title: Treasurer
----------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
---------------------------------
Title: Trust Officer
----------------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Sorrento Food Service, Inc., a New York
corporation
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
-------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
-------------------------------
Title: Trust Officer
--------------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
E&H Distributing Co., a Nevada corporation
By: /s/ Robert W. Gillison, IV
--------------------------------
Title: Treasurer
---------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
-----------------------------
Title: Treasurer
------------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
-----------------------------
Title: Treasurer
------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
----------------------------
Title: Trust Officer
-----------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Outwest Meat Company, a Nevada corporation
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
----------------------------
Title: Treasurer
-----------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
----------------------------
Title: Treasurer
-----------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
---------------------------
Title: Trust Officer
----------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
- --------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of the
Receivables Sale Agreement and the Servicing Agreement applicable to a Seller
and a Sub-Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company, become (a) in the case of the
Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Harrison's Prime Meats & Provisions, Inc., a
Nevada corporation
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
---------------------------
Title: Trust Officer
----------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
-------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of
the Receivables Sale Agreement and the Servicing Agreement applicable to a
Seller and a Sub-Servicer, respectively, thereunder and agrees that it shall, on
the date this Supplement is accepted by the Company, become (a) in the case of
the Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Squeri Food Service, Inc., an Ohio corporation
By: /s/ Robert W. Gillison, IV
---------------------------------
Title: Treasurer
----------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
---------------------------
Title: Trust Officer
----------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
-------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder .
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of
the Receivables Sale Agreement and the Servicing Agreement applicable to a
Seller and a Sub-Servicer, respectively, thereunder and agrees that it shall, on
the date this Supplement is accepted by the Company, become (a) in the case of
the Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
Westlund Provisions, Inc., a Minnesota corporation
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
---------------------------
Title: Treasurer
----------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
--------------------------
Title: Trust Officer
---------------------
<PAGE>
ADDITIONAL SELLER/SERVICER SUPPLEMENT
SUPPLEMENT, dated December 31, 1998, to (i) the Receivables Sale
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the Sellers
--------------------------
from time to time party thereto (collectively, the "Sellers"), U.S. Foodservice,
-------
Inc., a Delaware corporation (in its individual capacity, f/k/a Rykoff-Sexton,
Inc., "Foodservice"), as successor by merger to U.S.F. Distributors, Inc., f/k/a
-----------
US Foodservice, Inc., a Delaware corporation, in its capacity as servicer (the
"Servicer"), and RS Funding Inc., a Nevada corporation (the "Company") and (ii)
-------- -------
the Servicing Agreement, dated as of November 15, 1996 (as amended, supplemented
or otherwise modified from time to time, the "Servicing Agreement") among the
-------------------
Company, the Servicer, the Sub-Servicers from time to time party thereto and The
Chase Manhattan Bank, a New York banking corporation, as Trustee (the
"Trustee").
-------
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any Subsidiary
of Foodservice, although not originally a Seller thereunder, may become a Seller
under the Receivables Sale Agreement, with (i) the consent of the Company and
(ii) the satisfaction of each of the conditions precedent set forth in Section
3.02 of the Receivables Sale Agreement (one of which is the delivery to the
Company of a supplement in substantially the form of this Supplement); and
WHEREAS, with respect to the Servicing Agreement, any Subsidiary of
Foodservice, although not originally a Sub-Servicer thereunder, may become a
Sub-Servicer under the Servicing Agreement, with (i) the consent of the Company,
(ii) delivery to the Company of a supplement in substantially the form of this
Supplement and (iii) the satisfaction of each of the conditions precedent set
forth in Section 3.02 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement or an original Sub-Servicer under the Servicing
Agreement but now desires to become a Seller and a Sub-Servicer, respectively,
thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by all of the provisions of
the Receivables Sale Agreement and the Servicing Agreement applicable to a
Seller and a Sub-Servicer, respectively, thereunder and agrees that it shall, on
the date this Supplement is accepted by the Company, become (a) in the case of
the Receivables Sale Agreement, a Seller and (b) in the case of the Servicing
Agreement, a Sub-Servicer, for all purposes of the Receivables Sale
<PAGE>
Agreement and the Servicing Agreement, respectively, to the same extent as if
originally a party thereto.
2. Terms defined in the Receivables Sale Agreement and the Servicing
Agreement shall have their defined meanings when used herein.
3. This Supplement 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 when taken together
shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
U.S. Foodservice-Knoxville L.P., a Tennessee
limited partnership
By: /s/ Robert W. Gillison, IV
-------------------------------
Title: Treasurer
--------------------------
Accepted as of the date first
above written:
RS FUNDING INC.,
as the Company under the Servicing Agreement
By: /s/ Robert W. Gillison, IV
----------------------------
Title: Treasurer
-----------------------
U.S. FOODSERVICE, INC.,
on its own behalf as the Servicer under the
Servicing Agreement and on behalf of the
Sub-Servicers thereunder
By: /s/ Robert W. Gillison, IV
----------------------------
Title: Treasurer
-----------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee under the Servicing Agreement
By: /s/ JoAnn Manieri
----------------------------
Title: Trust Officer
-----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUL-03-1999 JUN-27-1998
<PERIOD-START> SEP-26-1998 SEP-27-1997
<PERIOD-END> DEC-26-1998 DEC-27-1997
<CASH> 69,486 0
<SECURITIES> 0 0
<RECEIVABLES> 303,909 0
<ALLOWANCES> 0 0
<INVENTORY> 377,125 0
<CURRENT-ASSETS> 951,354 0
<PP&E> 440,997 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,021,191 0
<CURRENT-LIABILITIES> 473,653 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 674,102 0
<TOTAL-LIABILITY-AND-EQUITY> 2,021,191 0
<SALES> 1,533,089 1,373,258
<TOTAL-REVENUES> 1,533,089 1,373,258
<CGS> 1,251,007 1,116,761
<TOTAL-COSTS> 230,833 324,054
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16,476 20,319
<INCOME-PRETAX> 34,733 (87,876)
<INCOME-TAX> 14,165 (17,254)
<INCOME-CONTINUING> 20,608 (70,622)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 2,748 9,712
<CHANGES> 0 0
<NET-INCOME> 17,860 (80,334)
<EPS-PRIMARY> 0.37 (1.78)
<EPS-DILUTED> 0.37 (1.78)
</TABLE>
