-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QaLUXajsE55Df2azFhmOW8bdV/MXvRbcPpqrrKVaW5WVqumUztSw/tFsgbKpOz0j FdAcG4on/2tdFZJu2DXyqw== 0000893220-97-001386.txt : 19970814 0000893220-97-001386.hdr.sgml : 19970814 ACCESSION NUMBER: 0000893220-97-001386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERISOURCE DISTRIBUTION CORP CENTRAL INDEX KEY: 0000855042 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 232546940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20485 FILM NUMBER: 97659660 BUSINESS ADDRESS: STREET 1: PO BOX 959 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 2152964480 MAIL ADDRESS: STREET 1: P.O. BOX 959 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: ALCO HEALTH DISTRIBUTION CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AHSC HOLDINGS CORP DATE OF NAME CHANGE: 19920325 10-Q 1 FORM 10-Q AMERISOURCE HEALTH CORPORATION 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED JUNE 30, 1997 ------------------------ AMERISOURCE HEALTH CORPORATION (A DELAWARE CORPORATION) (FORMERLY AMERISOURCE DISTRIBUTION CORPORATION)
(REGISTRANT, STATE OF (COMMISSION INCORPORATION (IRS EMPLOYER FILE NUMBER) ADDRESS AND TELEPHONE NUMBER) IDENTIFICATION NO.) - --------------------------------------------------------------------------------------------- 33-27835-01 P.O. BOX 959, VALLEY FORGE, 23-2546940 PENNSYLVANIA 19482 (610) 296-4480
------------------------ 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 common stock of AmeriSource Health Corporation outstanding as of June 30, 1997 was: Class A -- 17,075,808, Class B -- 6,490,370, Class C -- 173,483. ================================================================================ 2 INDEX AMERISOURCE HEALTH CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated balance sheets -- June 30, 1997 and September 30, 1996 Consolidated statements of operations -- Three months ended June 30, 1997 and June 30, 1996 Consolidated statements of operations -- Nine months ended June 30, 1997 and June 30, 1996 Consolidated statements of cash flows -- Nine months ended June 30, 1997 and June 30, 1996 Management's Discussion and Analysis of Financial Condition and Results of Item 2. Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K
1 3 PART I. FINANCIAL INFORMATION ITEM 1. AMERISOURCE HEALTH CORPORATION FINANCIAL STATEMENTS (UNAUDITED) AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, SEPTEMBER 30, 1997 1996 ----------- ------------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents........................................ $ 83,925 $ 65,575 Restricted cash.................................................. 8,434 5,626 Accounts receivable less allowance for doubtful accounts: 6/97 -- $19,192, 9/96 -- $14,848.............................. 490,626 390,331 Merchandise inventories.......................................... 795,122 650,296 Prepaid expenses and other....................................... 5,179 3,236 ---------- ---------- Total current assets..................................... 1,383,286 1,115,064 Property and Equipment, at cost.................................... 111,167 91,508 Less accumulated depreciation.................................... 45,640 39,842 ---------- ---------- 65,527 51,666 Other assets....................................................... 53,523 21,230 ---------- ---------- $ 1,502,336 $ 1,187,960 ========== ==========
See notes to consolidated financial statements. 2 4 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, SEPTEMBER 30, 1997 1996 ----------- ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable................................................. $ 874,315 $ 714,984 Accrued expenses and other....................................... 41,518 29,446 Accrued income taxes............................................. 9,454 6,002 Deferred income taxes............................................ 39,579 35,350 ---------- ---------- Total current liabilities................................ 964,866 785,782 Long-Term Debt: Revolving credit facility........................................ 219,230 205,047 Receivables securitization financing............................. 303,904 226,878 Other debt....................................................... 9,201 1,768 ---------- ---------- 532,335 433,693 Other Liabilities.................................................. 11,180 5,293 Stockholders' Equity Common Stock, $.01 par value: Class A (Voting and convertible): 50,000,000 shares authorized; issued 6/97 -- 17,426,890 shares; 9/96 -- 17,291,100 shares.......................... 174 173 Class B (Non-voting and convertible): 15,000,000 shares authorized; issued 6/97 -- 9,440,370 shares; 9/96 -- 9,440,370 shares........................... 95 95 Class C (Non-voting and convertible): 2,000,000 shares authorized; issued 6/97 -- 173,483 shares; 9/96 -- 242,298 shares..................................... 2 2 Capital in excess of par value................................... 230,000 228,537 Retained earnings (deficit)...................................... (230,096) (259,395) Cost of common stock in treasury................................. (6,220) (6,220) ---------- ---------- (6,045) (36,808) ---------- ---------- $ 1,502,336 $ 1,187,960 ========== ==========
See notes to consolidated financial statements. 3 5 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, ------------------------- 1997 1996 ---------- ---------- (UNAUDITED) Revenues............................................................ $2,064,174 $1,420,006 Cost of goods sold.................................................. 1,963,714 1,339,475 ---------- ---------- Gross Profit........................................................ 100,460 80,531 Selling and administrative expenses................................. 76,211 51,378 Depreciation........................................................ 3,257 2,429 ---------- ---------- Operating income.................................................. 20,992 26,724 Interest expense.................................................... 10,611 9,088 ---------- ---------- Income before taxes and extraordinary item.......................... 10,381 17,636 Taxes on income..................................................... 4,049 7,231 ---------- ---------- Income before extraordinary item.................................... 6,332 10,405 Extraordinary charge-early retirement of debt, net of income tax benefit........................................................... -- (7,242) ---------- ---------- Net income........................................................ $ 6,332 $ 3,163 ========== ========== Earnings per share (fully diluted): Income before extraordinary item.................................. $ .26 $ .45 Extraordinary item................................................ -- (.31) ---------- ---------- Net income..................................................... $ .26 $ .14 ========== ==========
See notes to consolidated financial statements. 4 6 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED JUNE 30, ------------------------- 1997 1996 ---------- ---------- (UNAUDITED) Revenues............................................................ $5,596,578 $4,064,575 Cost of goods sold.................................................. 5,317,065 3,836,161 ---------- ---------- Gross Profit........................................................ 279,513 228,414 Selling and administrative expenses................................. 188,517 143,623 Depreciation........................................................ 8,427 6,393 ---------- ---------- Operating income.................................................. 82,569 78,398 Interest expense.................................................... 30,966 28,090 ---------- ---------- Income before taxes and extraordinary item.......................... 51,603 50,308 Taxes on income..................................................... 20,322 20,953 ---------- ---------- Income before extraordinary item.................................... 31,281 29,355 Extraordinary charge-early retirement of debt, net of income tax benefit........................................................... (1,982) (7,242) ---------- ---------- Net income........................................................ $ 29,299 $ 22,113 ========== ========== Earnings per share (fully diluted): Income before extraordinary item.................................. $ 1.29 $ 1.29 Extraordinary item................................................ (.08) (.32) ---------- ---------- Net income..................................................... $ 1.21 $ .97 ========== ==========
See notes to consolidated financial statements. 5 7 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED JUNE 30, -------------------------- 1997 1996 ----------- ---------- (UNAUDITED) OPERATING ACTIVITIES Net income....................................................... $ 29,299 $ 22,113 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation.................................................. 8,427 6,393 Amortization.................................................. 2,125 2,041 Provision for losses on accounts receivable................... 3,252 1,140 Gain on disposal of property and equipment.................... 2,929 (16) Deferred income taxes......................................... 6,025 8,815 Loss on early retirement of debt.............................. 3,250 11,142 Changes in operating assets and liabilities (net of effect of companies acquired): Restricted cash............................................. (2,808) 8,547 Accounts receivable......................................... (25,213) 7,094 Merchandise inventories..................................... (49,518) (179,122) Prepaid expenses............................................ (263) (657) Accounts payable, accrued expenses and income taxes......... 92,053 102,166 Miscellaneous................................................. 32 2,059 ----------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES...... 69,590 (8,285) INVESTING ACTIVITIES Capital expenditures............................................. (12,735) (12,008) Proceeds from sales of property and equipment.................... 1,967 527 Cost of companies acquired....................................... (138,652) (28,725) ----------- --------- NET CASH USED IN INVESTING ACTIVITIES.................... (149,420) (40,206) FINANCING ACTIVITIES Long-term debt borrowings........................................ 1,615,923 1,324,712 Long-term debt repayments........................................ (1,517,307) (1,298,166) Net proceeds from public offering................................ -- 49,300 Deferred financing costs and other............................... (1,900) -- Exercise of stock options........................................ 1,464 42 ----------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES................ 98,180 75,888 ----------- --------- Increase in cash and cash equivalents.............................. 18,350 27,397 Cash and cash equivalents at beginning of period................... 65,575 32,171 ----------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD......................... $ 83,925 $ 59,568 =========== =========
See notes to consolidated financial statements. 6 8 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The accompanying financial statements present the consolidated financial position, results of operations and cash flows of AmeriSource Health Corporation and its wholly-owned subsidiaries (the "Company") as of the dates and for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position as of June 30, 1997, the results of operations for the three and nine months ended June 30, 1997 and 1996 and the cash flows for the nine months ended June 30, 1997 and 1996 have been included. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles, but which are not required for interim reporting purposes, have been omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996. NOTE 2 -- LEGAL MATTERS AND CONTINGENCIES In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust, environmental, product liability and regulatory agency and other matters. In some of these proceedings, plaintiffs may seek to recover large and sometimes unspecified amounts and the matters may remain unresolved for several years. On the basis of information furnished by counsel and others, the Company does not believe that these matters, individually or in the aggregate, will have a material adverse effect on its business or financial condition. The Company is subject to contingencies pursuant to environmental laws and regulations at one of its former distribution centers that may require the Company to take remediation efforts. In fiscal 1994, the Company accrued $4.1 million to cover future consulting, legal, and remediation and ongoing monitoring costs. The accrued liability, which is reflected in other long-term liabilities on the accompanying consolidated balance sheet ($3.8 million at June 30, 1997), is based on an engineering analysis prepared by outside consultants and represents an estimate of the extent of contamination and choice of remedy, existing technology and presently enacted laws and regulations. However, changes in remediation standards, improvements in cleanup technology and discovery of additional information concerning the site could affect the estimated liability in the future. The Company is investigating the possibility of asserting claims against responsible parties for recovery of these costs. Whether or not any recovery may be forthcoming is unknown at this time, although the Company intends to vigorously enforce its rights and remedies. In November 1993, the Company, along with six other wholesale distributors and twenty-four pharmaceutical manufacturers, was named as a defendant in the United States District Court for the Southern District of New York, in a series of purported class action antitrust lawsuits alleging violations of various antitrust laws associated with the chargeback pricing system. In addition, the Company is a party to parallel suits filed in state courts in Minnesota, Mississippi and Alabama. Plaintiffs seek injunctive relief, treble damages, attorneys' fees, and costs. In October 1994, the Company entered into a Judgement Sharing Agreement with other wholesaler and pharmaceutical manufacturer defendants. Under the Judgement Sharing Agreement (a) the manufacturer defendants agreed to reimburse the wholesaler defendants for litigation costs incurred, up to an aggregate of $9 million; and (b) if a judgement is entered into against both manufacturers and wholesalers, the total exposure for joint and several liability of the Company is limited to the lesser of 1% of such judgement or $1 million. Pursuant to the Judgement Sharing Agreement, the Company has released any claims that it might have had against the manufacturers for the claims presented 7 9 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) by the plaintiffs in these lawsuits. The Judgement Sharing Agreement covers the federal court litigation as well as cases which have been filed in various state courts. On April 4, 1996, the federal court granted the wholesalers' motion for summary judgment. The plaintiffs are appealing the grant of summary judgement in favor of the wholesalers to the United States Court of Appeals for the Seventh Circuit. NOTE 3 -- EARNINGS PER SHARE Earnings per share is computed on the basis of the weighted average number of shares outstanding during the periods presented (23,739,661 and 22,733,126 for the three months ended June 30, 1997 and June 30, 1996, respectively; and 23,706,386 and 22,358,166 for the nine months ended June 30, 1997 and June 30, 1996, respectively) plus the dilutive effect of stock options (598,737 and 612,204 for the three and nine months ended June 30, 1997, respectively; and 401,142 and 355,737 for the three and nine months ended June 30, 1996, respectively on a fully diluted basis). NOTE 4 -- ACQUISITION In March 1997, the Company acquired all of the equity interests of Walker Drug Company, L.L.C. in a cash transaction. Walker Drug Company, L.L.C. is wholesale pharmaceutical distributor based in Pelham, Alabama with annualized revenues of approximately $800 million. The purchase price was $138.7 million. The acquisition was accounted for by the purchase method and, accordingly is included in the consolidated financial statements from the date of acquisition. The excess of the purchase price over net assets acquired of $28.2 million has been allocated to goodwill (which is included in other assets) and is being amortized on a straight line basis over 40 years. Changes in purchase accounting activities may result in a reallocation of the purchase price within one year of the acquisition. The acquisition was funded by borrowings under the Company's revolving credit agreement. The following table reflects financial results on a pro forma basis, assuming the acquisition had occurred at the beginning of the periods presented:
NINE MONTHS ENDED JUNE 30, ------------------------- 1997 1996 ---------- ---------- Revenues.................................................... $5,974,533 $4,584,332 Income before extraordinary items........................... 34,391 30,313 Net income.................................................. 32,409 23,071 Earnings per share (fully diluted): Income before extraordinary item.......................... $ 1.41 $ 1.34 Extraordinary item........................................ (.08) (.32) ---------- ---------- Net income........................................ $ 1.33 $ 1.02 ========== ==========
NOTE 5 -- LONG-TERM DEBT In January 1997, the Company entered into a new revolving credit agreement (the "Credit Agreement") with a syndicate of senior lenders providing a senior secured facility of $500 million. Among other things, the Credit Agreement: (1) is for a term of five years, expiring in January, 2002; (2) provides for interest rate step downs to as low as LIBOR plus 25 basis points upon the attainment of certain financial ratios; (3) provides for the release of security upon the attainment of certain financial ratios or once the Company achieves investment grade senior, unsecured debt ratings from two credit rating agencies; (4) provides for a borrowing base of 70% of the eligible inventory; and (5) provides higher limits for possible acquisitions. An extraordinary loss of $2.0 million (net of tax benefits of $1.3 million) was recorded in the second quarter of fiscal 1997, representing the write-off of the unamortized financing fees related to the retirement of the prior $380 million revolving credit facility. In connection with the Credit Agreement, the Company incurred approximately $3.0 8 10 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) million in financing fees which have been deferred and are being amortized on a straight-line basis over the five-year term of the Credit Agreement. Revolving loans made under the Credit Agreement may be prepaid during its term, without premium and may subsequently be reborrowed. Commitments under the Credit Agreement may be permanently reduced in full or in part at any time at the option of the Company upon prior written notice. Borrowings under the Credit Agreement bear interest at the rate of LIBOR plus an applicable margin (1.25% at June 30, 1997). Interest on loans under the Credit Agreement is payable quarterly. Under the terms of the Credit Agreement, the Company granted the senior lenders perfected first priority security on interest in the Company's inventory for collateral against borrowings under the Credit Agreement. The Company is required to pay a commitment fee on the average unused portion of the Credit Agreement (.31% per annum at June 30, 1997) plus an annual administration fee. At June 30, 1997, the $219.2 million outstanding under the Credit Agreement bore interest at the rate of 7.6% per annum. The indentures governing the Credit Agreement contain restrictions and covenants which include limitations on incurrence of additional indebtedness, restrictions on dividends and distributions to stockholders, the repurchase of stock and the making of certain other restricted payments, the issuance of preferred stock, the creation of certain liens, transactions with subsidiaries and other affiliates and certain corporate acts such as mergers, consolidation and the sale of substantially all assets. Additional covenants require compliance with financial tests, including maintenance of minimum net worth, leverage, and fixed charge coverage. Pursuant to its receivable securitization financing, the Company issued $90 million of Floating Rate Class A Trade Receivables Participation Certificates Series 1997-1 (the "Series 1997-1 Certificates") in April 1997. The Series 1997-1 Certificates consist of AAA rated fixed principal, variable rate certificates with a term of five years and a rate of LIBOR plus .20%. The proceeds from the issuance were used to pay down borrowings under the Credit Agreement. In connection with the Series 1997-1 Certificates, the Company incurred approximately $.7 million in financing fees which have been deferred and are being amortized on a straight-line basis over the five year term of the Series 1997-1 Certificates. NOTE 6 -- CHANGE IN ESTIMATE During its second quarter of fiscal 1997, the Company changed its method of estimating its interim LIFO inventory from a detailed quarterly index calculation method to a method which allocates a portion of the estimated annual LIFO provision to each quarter based on each quarter's actual inventory appreciation. The new method provides for a better match between current costs and revenues and reduces interim fluctuations caused by changes in product mix during the year. Prior to this change, substantially all of the Company's annual LIFO provision was recorded in its first six fiscal months. Approximately 80% of the Company's estimated annual LIFO provision was recorded in the first nine months of fiscal 1997 under the new estimation method. NOTE 7 -- RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share of $.01 for the three months ended June 30, 1997 and have no effect on the three months ended June 30, 1996; and increases of $.03 and $.02 for the nine months ended June 30, 1997 and June 30, 1996, respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these periods is not expected to be material. 9 11 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) In June 1997 the FASB issued Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information". Both Statements become effective for fiscal periods beginning after December 15, 1997 with early adoption permitted. The Company is evaluating the effects these Statements will have on its financial reporting and disclosures. The Statement is expected to have no effect on the Company's results of operations, financial position, capital resources or liquidity. NOTE 8 -- FACILITY CONSOLIDATIONS AND OTHER CHARGES The Company commenced cost reduction plans in the third quarter of fiscal 1997 to consolidate three of its pharmaceutical distribution facilities into other existing facilities and to restructure its sales force. The cost reduction initiatives will be completed by December 1997 and resulted in the following charges included in selling and administrative expense in the third quarter of fiscal 1997.
(DOLLARS IN THOUSANDS) Write-downs of assets..................................... $3,857 Severance................................................. 1,832 Lease cancellations....................................... 727 ------ $6,416 ======
Write-downs of assets include buildings, warehouse and computer equipment, and other assets to be disposed of primarily related to the facility closings. Severance includes the termination costs of 240 warehouse and sales employees. Approximately 20 of these employees were terminated by June 30, 1997 and the remainder are expected to be terminated by December 1997. The above amounts exclude the shut-down costs of a facility acquired in the Walker Drug Company acquisition that was contemplated in the acquisition and accordingly, included in the purchase price allocation. In addition to the above charges, the Company incurred $5.2 million of charges related to the retirement of its former President and CEO as well as other executive terminations during the third quarter of fiscal 1997. 10 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenues for the three months ended June 30, 1997 increased 45% to $2.1 billion from $1.4 billion in the corresponding period in fiscal 1996. For the nine months ended June 30, 1997, revenues were $5.6 billion, an increase of 38% compared to the prior year. The year-to-year revenue gains reflect increases across all customer groups and all geographic regions. The acquisitions of Walker Drug Company, L.L.C. ("Walker Drug Company") in March 1997, and Gulf Distribution, Inc. in February 1996, resulted in an increase in revenues of 13% and 7% for the three and nine months ending June 30, 1997, respectively. During the nine months ended June 30, 1997, sales to hospitals increased 36%, sales to independent drug store customers increased 43%, and sales to the chain drug store customer group increased 32%, as compared with the prior period. Approximately 31% of the hospital revenue increase is due to the addition of one large mail order pharmacy customer. During the nine months ended June 30, 1997 sales to hospitals accounted for 48% of total revenues, while sales to independent drug stores accounted for 33% and sales to chain drug stores for 19% of the total. Gross profit of $100.5 million in the third quarter of fiscal 1997 increased by 25% over 1996 due to the increase in revenues. As a percentage of revenues, the gross profit in the third quarter of fiscal 1997 was 4.87% as compared to 5.67% in the prior year. For the nine months ended June 30, 1997, the gross profit percentage was 4.99% as compared to 5.62% in the prior year. Approximately 25% and 30% of the decline in gross profit percentage from the prior year quarter and nine months, respectively, was due to the addition of a large ($280 million in annualized revenues) mail order pharmacy customer at a gross profit percentage significantly lower than normal percentages. However, this customer is expected to provide the Company with its normal return on committed capital due to a low cost to service and a relatively low working capital requirement. The third quarter percentage was also impacted by less inventory appreciation profits than in the prior year as a percentage of revenue due to increased inventory turns and fewer manufacturer price increases. A reduction in selling margin percentage due to continuing price competition throughout the industry and the higher than average growth of the Company's largest customers also contributed to the decline. Gross profit may continue to be impacted by price competition and changes in customer and product mix. The Company commenced cost reduction plans in the third quarter of fiscal 1997 to consolidate three of its pharmaceutical distribution facilities into other existing facilities and to restructure its sales force. The cost reduction initiatives will be completed by December 1997 and resulted in a $6.4 million charge to selling and administrative expense in the third fiscal quarter of 1997. Write-downs of $3.9 million of assets includes buildings, warehouse and computer equipment, and other assets to be disposed of primarily related to the facility closings. Severance charges of $1.8 million were recorded for the termination of 240 sales and warehouse employees. Approximately 20 of these employees were terminated by June 30, 1997 and the remainder are expected to be terminated by December 31, 1997. Additionally, $0.7 million of costs related to lease terminations were recorded. The above amounts exclude the shut-down costs of a facility acquired in the Walker Drug Company acquisition that was contemplated in the acquisition, and accordingly, included in the purchase price allocation. In addition to the cost reduction initiatives, the Company incurred $5.2 million of charges related to the retirement of its former President and CEO as well as other executive terminations during the third quarter. Annualized cost savings of $6.0 to $8.0 million are expected as a result of the cost reduction initiatives. Operating expenses, including the $11.6 million of special charges discussed in the preceding paragraph, increased by $25.7 million or 48%, in the third quarter of fiscal 1997 compared with the prior year, and as a percentage of revenues, were 3.85% in 1997 and 3.79% in 1996. Excluding the $11.6 million of special charges, operating expenses as a percentage of revenues were 3.29% for the third quarter of fiscal 1997. For the first nine months of fiscal 1997, operating expenses increased 31% compared to the prior year and represented 3.52% of revenues versus 3.69% of revenues in the prior year. Excluding the special charges, operating expenses as a percentage of revenues were 3.31% for the nine months ended June 30, 1997. The increase in expenses was due to increased delivery and warehouse expense associated with the significant revenue increase. The decrease as a percentage of revenue in fiscal 1997 is primarily due to continued economies of 11 13 scale at the Company's established locations and the low service cost associated with the large mail order customer which has offset higher than anticipated integration costs of the Company's Orlando, FL facility. Operating income of $21.0 million in the third quarter of fiscal 1997 decreased by 21% from the prior year. For the nine months ended June 30, 1997 operating income increased by 5%. Excluding the effect of the special charges of $11.6 million in the third quarter of fiscal 1997, operating income increased 22% and 20% for the three and nine months ended June 30, 1997, respectively, as compared to the prior year. Excluding the special charges, the Company's operating margin declined to 1.58% and 1.68% for the three and nine months ended June 30, 1997, respectively, as compared to 1.88% and 1.93% for the comparable prior year periods. The decrease is due to the decrease in gross profit percentage discussed above, offset in part by reduced operating expenses as a percentage of revenues. Interest expense of $10.6 million in the third quarter of fiscal 1997 represents an increase of 17% compared to the prior year quarter. For the nine month period ended June 30, 1997 interest expense increased 10% versus the prior year period. The increase over the prior year was due to increased borrowings to fund the Company's strong revenue increase and the purchase of Walker Drug Company in March 1997. Average borrowings during the quarter ended June 30, 1997 were $619 million as compared to average borrowings of $489 million in the prior year third quarter. For the nine months ended June 30, 1997, average borrowings were $597 million versus average borrowings of $487 million in the prior year. The increased average indebtedness was offset in part by reduced borrowing rates compared to the prior year due to the redemption of the remaining $74.3 million of 11 1/4% senior debentures in the third quarter of fiscal 1996 and rate reductions under the Company's revolving credit facility and receivables securitization financing. The income tax provisions for the three and nine months ended June 30, 1997 were computed based on an estimate of the full year effective tax rate. The extraordinary charge in fiscal 1997 of $2.0 million, net of a tax benefit of $1.3 million, was due to the write-off of unamortized deferred financing fees related to the retirement of the prior $380 million revolving credit facility. During the second quarter the Company changed its method of estimating its interim LIFO inventory. The new estimation method better matches current costs and revenues and reduces interim fluctuations caused by changes in product mix during the year. Prior to this change, substantially all of the Company's annual LIFO provision was recorded in its first six fiscal months. Approximately 80% of the Company's estimated annual LIFO provision was recorded in the first nine months of fiscal 1997 under the new estimation method. LIQUIDITY AND CAPITAL RESOURCES During the nine-month period ended June 30, 1997, the Company's operating activities generated $69.6 million in cash. An increase in inventory turns, a reduction in days sales outstanding and an increase in days payables outstanding offset the increased working capital requirements of the significant revenue growth. Operating cash uses during the nine month period ended June 30, 1997 included $27.4 million in interest payments and $11.1 million in income tax payments. Capital expenditures for the nine months ended June 30, 1997 were $12.7 million and relate principally to investments in warehouse automation, warehouse improvements, and information technology which are expected to continue throughout the year. In March 1997, the Company acquired all of the equity interests of Walker Drug Company Inc. in a cash transaction. The transaction was funded by borrowings under the revolving credit facility. Walker Drug Company is a Pelham, Alabama-based pharmaceutical wholesaler with annualized revenues of approximately $800 million. The purchase price was $138.7 million and the transaction was accounted for by the purchase method. The excess of the purchase price over net assets acquired of $28.2 million has been allocated to goodwill and is being amortized over 40 years. Cash provided by financing activities during the first nine months of fiscal 1997 represents borrowings under the Company's revolving credit facility and its receivable securitization financing primarily to fund its 12 14 working capital requirements and the purchase of Walker Drug Company. In January 1997, the Company entered into a new revolving credit agreement (the "Credit Agreement") with a syndicate of senior lenders providing a senior secured facility of $500 million. Proceeds from borrowings under this Credit Agreement were used to retire the $380 million revolving credit facility. Among other things, the Credit Agreement (1) is for a term of five years, expiring in January 2002; (2) provides for interest rate step downs upon the attainment of certain financial ratios; (3) provides for the release of security upon the attainment of certain financial ratios or once the Company achieves investment grade senior, unsecured debt ratings from two credit rating agencies; (4) provides for a borrowing base of 70% of the eligible inventory; and (5) provides higher limits for potential acquisitions. At June 30, 1997, borrowings under the Company's $500 million revolving credit facility were $219 million (at an average interest rate of 7.6%) and borrowings under the $375 million Receivables Program were $304 million (at an average interest rate of 6.0%). In April 1997, the Company issued $90 million of Floating Rate Class A Trade Receivable Participation Certificates Series 1997-1 under its Receivable Program. These certificates consist of AAA rated fixed principal, variable rate certificates with a term of five years and a rate of LIBOR plus .20%. The proceeds from the issuance were used to pay down borrowings under the Credit Agreement. An increase in interest rates would adversely affect the Company's operating results and the cash flow available after debt service to fund operations and expansion and, if permitted to do so under its revolving credit facility, to pay dividends on its capital stock. The Company's operating results have generated sufficient cash flow which, together with borrowings under its debt agreements and credit terms from suppliers, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and interest currently payable on outstanding debt. The Company's primary ongoing cash requirements will be to fund payment of interest on indebtedness, finance working capital, and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund the Company's ongoing cash requirements. The Company is subject to certain contingencies pursuant to environmental laws and regulations at one of its former distribution centers that may require remediation efforts. In fiscal 1994, the Company accrued a liability of $4.1 million to cover future consulting, legal and remediation, and ongoing monitoring costs. The accrued liability ($3.8 million at June 30, 1997), which is reflected in other long-term liabilities on the accompanying consolidated balance sheet, is based on an estimate of the extent of contamination and choice of remedy, existing technology, and presently enacted laws and regulation, however, changes in remediation standards, improvements in cleanup technology, and discovery of additional information concerning the site could affect the estimated liability in the future. The Company is investigating the possibility of asserting claims against responsible parties for recovery of these costs. Whether or not any recovery may be forthcoming is unknown at this time. Certain information in this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as such term is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. Certain factors such as changes in interest rates, competitive pressures, customer and product mix, inventory investment buying opportunities, and capital markets could cause actual results to differ materially from those in forward-looking statements. 13 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 4.1 -- Amendment to Pooling and Servicing Agreement and Receivables Purchase Agreement, dated as of March 5, 1997 among AmeriSource Receivables Corporation, AmeriSource Corporation, and Manufacturers and Traders Trust Company, as Trustee. 4.2 -- Certificate Purchase Agreement, dated as of April 11, 1997, among AmeriSource Corporation, AmeriSource Receivables Corporation, BT Securities Corporation, Bankers Trust International PLC, and Bankers Trust Australia Limited. 4.3 -- Amendment to Pooling and Servicing Agreement and Receivables Purchase Agreement dated as of April 17, 1997 among AmeriSource Receivables Corporation, AmeriSource Corporation, and Manufacturers and Traders Trust Company, as Trustee. 4.4 -- Series 1997-1 Supplement to Pooling and Servicing Agreement dated as of April 17, 1997 among AmeriSource Receivables Corporation as Transferor, AmeriSource Corporation, as initial Servicer and Manufacturers and Traders Trust Company as Trustee. 27 -- Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended June 30, 1997. 14 16 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. AMERISOURCE HEALTH CORPORATION /s/ KURT J. HILZINGER -------------------------------------- Kurt J. Hilzinger Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Date: August 13, 1997 15 EX-1 2 AMENDMENT TO POOLING AND SERVICING AGREEMENT 1 EXHIBIT 1 2 - -------------------------------------------------------------------------------- AMENDMENT TO POOLING AND SERVICING AGREEMENT AND RECEIVABLES PURCHASE AGREEMENT dated as of March 5, 1997 among AMERISOURCE RECEIVABLES CORPORATION, AMERISOURCE CORPORATION, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee - -------------------------------------------------------------------------------- 3 This AMENDMENT dated as of March 5, 1997 (this "Amendment") is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware corporation, as transferor ("ARC"), AMERISOURCE CORPORATION, a Delaware corporation, as the initial Servicer ("AmeriSource"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as Trustee (in that capacity, together with any successor in that capacity, the "Trustee"). BACKGROUND 1. AmeriSource, ARC and the Trustee (together, the "Original Parties") have entered into the Pooling and Servicing Agreement, dated as of December 13, 1994 and amended as of April 4, 1995 (as so amended, the "Pooling Agreement"), pursuant to which they agreed to create certain Series and Classes of Certificates; and AmeriSource and ARC have entered into the Receivables Purchase Agreement, dated and amended as of the same dates (as so amended, the "Purchase Agreement"), pursuant to which AmeriSource agreed to sell and contribute, and ARC agreed to purchase and receive, certain Receivables. Except as otherwise defined herein, capitalized terms have the meanings that Appendix A to the Pooling Agreement assigns to them. 2. The Original Parties wish to amend the Pooling Agreement and the Purchase Agreement so as to revise certain definitions. NOW, THEREFORE, for good and valuable consideration (the receipt of which is acknowledged) the parties agree as follows: ARTICLE I AMENDMENTS SECTION 1.01 Definitions. Capitalized terms used but not otherwise defined herein have the meanings set forth in Appendix A to the Pooling Agreement. SECTION 1.02 Changes to Definitions. Appendix A to the Pooling Agreement and the Purchase Agreement is hereby amended as follows: (a) The definition of "Aged Receivables Ratio" is amended by adding the following new proviso, immediately prior to the end thereof: ; provided, however, that for purposes of calculating the Aged Receivables Ratio for any Calculation Period prior to March, 1998, the were 4 past due 121 to 150 days shall be deemed to equal the Walker/Pelham Aged Receivables Proxy for such Calculation Period. (b) The following new term is added, immediately following the definition of "Exchange Date": "Exempt Division" means a division of the Seller that is specified as an "Exempt Division" in a written notice from Servicer to the Trustee, the Rating Agencies and the Agent; provided that each of the following requirements must be satisfied with respect to such division: (i) such designation is made within thirty days after such Seller's acquisition of the operations conducted by such division, (ii) the Servicer shall have given the Trustee and the Applicable Rating Agencies written notice of such designation, (iii) the customers of such division have been instructed to make all payments in respect to receivables originated by such division to a location other than to any of the Bank Accounts, and (iv) none of the data included in the Daily Reports, Monthly Reports or other information supplied to the Trustee or Holders includes any information about such division or amounts owed to it; and provided further that, the designation of a division as an "Exempt Division" may be terminated at any time, by written notice from Servicer to the Trustee and the Applicable Rating Agencies. (c) The following new term is added, immediately following the definition of "PBGC": "Pelham Division" means the division of the Seller that conducts operations formerly conducted by the division of Walker based in Pelham, Alabama. (d) The following new terms are added, immediately following the definition of "Variable Amount": "Walker" means Walker Drug Company, L.L.C. "Walker/Pelham Aged Receivables Proxy" means, with respect to each of the Calculation Periods set forth below, the amount set opposite such Calculation Period:
Calculation Period Amount ------------------ ------ January, 1996 $ 832,000 February, 1996 $ 611,000 March, 1996 $ 703,000 April, 1996 $1,003,000 May, 1996 $ 679,000
page 2 5 June, 1996 $987,000 July, 1996 $871,000 August, 1996 $842,000 September, 1996 $833,000 October, 1996 $864,000 November, 1996 $899,000 December, 1996 $860,000 January, 1997 $832,000 February, 1997 $832,000
"Walker Excess" means, at any time, the excess (if any) of (a) the aggregate Unpaid Balance of Eligible Receivables originated by Walker, over (b) 20% of the aggregate Unpaid Balance of all Eligible Receivables. (e) The definition of "Net Eligible Receivables" is amended by adding the following new clause, immediately prior to the end thereof: , minus (in the case of any determination made with respect to a Calculation Period prior to the March, 1998 Calculation Period) the Walker Excess. (f) The definition of "Receivables" is amended by adding the following new proviso, immediately prior to the end thereof: ; provided that "Receivable" shall not include any such right to payment owed solely to an Exempt Division. (g) The following new defined term is added, immediately following the definition of "Majority Investors": "Manufacturer Obligations" means all obligations of suppliers to make payments or other accommodations to the Seller on account of special pricing arrangements or other arrangements with Obligors, returns of inventory or other circumstances relating to the sale, marketing or distribution of such supplier's products. (h) The definition of "Related Security" is amended by adding the following sentence thereto: Without limiting the foregoing, it is understood and agreed that Related Security includes all Manufacturer Obligations, payments in respect thereof and other proceeds thereof. page 3 6 The Seller hereby sells, transfers, assigns, sets over and otherwise conveys to ARC, all of the Seller's right, title and interest in, to and under all Manufacturer Obligations, all payments in respect thereof and all other proceeds thereof. ARC hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust, for the benefit of the Certificateholders, all of its right, title and interest in, to and under all Manufacturer Obligations, all payments in respect thereof and all other proceeds thereof. It is understood and agreed that Manufacturer Obligations will not be classified as "Receivables" or "Eligible Receivables" for purposes of the Transaction Documents. SECTION 1.03 Changes to Purchase Agreement. Section 8.2 of the Purchase Agreement is amended by adding the following new proviso, immediately prior to the end thereof: ; provided, further, that if, at any time prior to the Liquidation Commencement Date, the Internal Revenue Service or the PBGC shall file notice of one or more Involuntary Adverse Claims (other than Permitted Adverse Claims), then on and after the date on which an Authorized Officer of ARC obtains knowledge of such filing until the date on which ARC receives a written release of such Involuntary Adverse Claims (which release shall be satisfactory to the Applicable Rating Agencies) from the Internal Revenue Service or the PBGC, ARC shall not purchase Receivables and Related Purchased Assets from the Seller. SECTION 1.04 Changes to Pooling Agreement. (a) Clause (h) of the first sentence of Section 9.01 of the Pooling Agreement is amended to read in its entirety as follows: (h) the Internal Revenue Service or the PBGC shall file notice of one or more Involuntary Adverse Claims (other than Permitted Adverse Claims);. (b) The definition of "Carrying Cost Reserve" in Section 4.03(a) of the Pooling Agreement is amended by adding the following new clause, immediately prior to the end thereof: , plus (iii) an amount equal to (A) the aggregate Unpaid Balance of the Receivables, multiplied by (B) one-twelfth of 2.5% multiplied by a fraction the numerator of which is the product of 1.75 and the number of Turnover Days and the denominator of which is 360. page 4 7 SECTION 1.05 Designation of Exempt Division. All of the Seller's divisions that conduct operations formerly conducted by Walker (other than Pelham Division) are hereby designated as Exempt Divisions. ARTICLE II CONDITIONS, REPRESENTATIONS AND WARRANTIES SECTION 2.01 Conditions Precedent. This Amendment shall be effective from and after the later of (a) March 5, 1997 or (b) the date upon which all of the conditions precedent specified below have been satisfied (the "Effective Date"). The conditions precedent are: (i) The Trustee shall have received from each of AmeriSource and ARC a certificate, dated as of the date hereof, of an Authorized Officer as to: (A) resolutions of its board of directors then in full force and effect authorizing the execution, delivery and performance of this Amendment, (B) the incumbency and signature of those of its officers authorized to act with respect to this Amendment, upon which certificate the Trustee may conclusively rely. (ii) The Trustee shall have received an opinion of counsel to AmeriSource and ARC that the modifications to the Pooling Agreement and the Purchase Agreement made pursuant to this Amendment are legal, valid and binding upon each of AmeriSource and ARC and that such amendments are permitted under the terms of the Pooling Agreement and the Purchase Agreement. (iii) The representations and warranties of AmeriSource and ARC as set forth in the Transaction Documents shall continue to be true and correct, and the Trustee shall have received the certificate of an Authorized Officer of each of AmeriSource and ARC to the effect that the representations and warranties continue to be true and correct. (iv) Pursuant to Section 10.1(a) of the Purchase Agreement and Section 13.01(a) of the Pooling Agreement, ARC shall have delivered this Amendment to the Applicable Rating Agencies at least ten Business Days (or such shorter time as shall be acceptable to each of them) prior to the execution and delivery hereof and the Rating Agency Condition shall have been met. SECTION 2.02 Representations and Warranties. Each of AmeriSource and ARC represents and warrants to the Trustee that: page 5 8 (a) The execution and delivery by it of this Amendment, and the performance of its obligations under the Pooling Agreement and the Purchase Agreement as modified by this Amendment, are within its corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approvals other than Assignment of Claims Act filings (if any shall be required), and other consents or approvals and do not and will not contravene or conflict with, or create any Adverse Claim under, (i) any provision of law, (ii) its constituent documents, (iii) any court or administrative decree applicable to it or (iv) any contractual restriction binding upon it or its property which conflict or adverse claim would have a substantial likelihood of having Material Adverse Affect. (b) This Amendment has been duly executed and delivered by it, and the Pooling Agreement and the Purchase Agreement, as amended, are its legal, valid and binding obligations, enforceable against it in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and by general principles of equity. (c) The warranties made by it in the Pooling Agreement and the Purchase Agreement are true and correct as of the date hereof as though made on that date, except to the extent that the warranties specifically relate to an earlier date. (d) After giving effect to this Amendment, no Liquidation Event or Unmatured Liquidation Event shall have occurred and be continuing. SECTION 2.03 Representations and Warranties of Trustee. The Trustee represents and warrants that: (a) it is a banking corporation organized, existing and in good standing under the laws of the State of New York, (b) it has full power, authority and right to execute, deliver and perform this Amendment, and has taken all necessary action to authorize the execution, delivery and performance by it of this Amendment, and (c) this Amendment has been duly executed and delivered by the Trustee, and is a legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. page 6 9 ARTICLE III MISCELLANEOUS SECTION 3.01 Miscellaneous. (a) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. (b) This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which together shall constitute one and the same agreement. (c) Any reference to the Pooling Agreement or the Purchase Agreement contained in any notice, request, certificate or other document executed concurrently with or after the Effective Date shall be deemed to be a reference to the Pooling Agreement or the Purchase Agreement as amended hereby. Except as expressly modified hereby, the Transaction Documents hereby are ratified and confirmed by the parties hereto. The amended Pooling Agreement, the amended Purchase Agreement and the other Transaction Documents remain in full force and effect. page 7 10 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute this Amendment as of the day and year first above written. AMERISOURCE RECEIVABLES CORPORATION, as transferor By: ____________________________________________ Title: _________________________________________ Address: P.O. Box 1735 Southeastern, Pennsylvania 19399-1735 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 AMERISOURCE CORPORATION, as initial Servicer By: ____________________________________________ Title: _________________________________________ Address: 300 Chester Field Parkway Malvern, Pennsylvania 19355 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By: ____________________________________________ Title: _________________________________________ Address: One M&T Plaza Buffalo, New York 14203 Attention: Russell Whitley Telephone: (716) 842-5602 Facsimile: (716) 842-4474 EX-2 3 CERTIFICATE PURCHASE AGREEMENT 1 EXHIBIT 2 2 - -------------------------------------------------------------------------------- CERTIFICATE PURCHASE AGREEMENT dated as of April 11, 1997 among AMERISOURCE CORPORATION, AMERISOURCE RECEIVABLES CORPORATION, BT SECURITIES CORPORATION, BANKERS TRUST INTERNATIONAL PLC, and BANKERS TRUST AUSTRALIA LIMITED - -------------------------------------------------------------------------------- 3 AMERISOURCE RECEIVABLES CORPORATION CERTIFICATE PURCHASE AGREEMENT as of April 11, 1997 BT SECURITIES CORPORATION Bankers Trust Plaza 130 Liberty Street New York, New York 10006 BANKERS TRUST INTERNATIONAL PLC One Appold Street Broadgate London EC2A 2HE England BANKERS TRUST AUSTRALIA LIMITED c/o Bankers Trust International PLC One Appold Street Broadgate London EC2A 4HE England Ladies and Gentlemen: AmeriSource Corporation, a Delaware corporation ("AmeriSource"), and AmeriSource Receivables Corporation, a Delaware corporation and a wholly owned subsidiary of AmeriSource ("ARC"), hereby confirm their agreement with each of you (each an "Initial Purchaser," and collectively the "Initial Purchasers"), as set forth below. SECTION 1. The Certificates. (a) Subject to the terms and conditions herein contained, ARC proposes to sell to the Initial Purchasers, $90,000,000 aggregate principal amount of its Series 1997-1 Certificates (the "Certificates"), as more fully described in Section 3. The terms of the Certificates are more fully set forth in the Offering Memorandum (as hereinafter defined). (b) The Certificates are to be issued under (a) a Pooling and Servicing Agreement, dated as of December 13, 1994 (as amended or otherwise modified from time to time, the 4 "Pooling Agreement"), among ARC, as transferor, AmeriSource, as initial Servicer, and Manufacturers and Traders Trust Company, as Trustee, and (b) a supplement to the Pooling Agreement, to be entered into on or about April 17, 1997 (the "Series Supplement"), among ARC, AmeriSource, as Servicer, and the Trustee. Capitalized terms used but not defined in this Purchase Agreement (the "Agreement") have the meanings assigned to them in Appendix A to the Pooling Agreement. (c) The Certificates will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended (the "Act"), in reliance on exemptions therefrom. (d) In connection with the sale of the Certificates, ARC has prepared a preliminary offering memorandum dated March 14, 1997 (the "Preliminary Offering Memorandum") and a final offering memorandum dated April 11, 1997 (the "Offering Memorandum"), each of which will be in form and substance satisfactory to each of the Initial Purchasers. All references to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to include all their attachments. (e) Each of AmeriSource and ARC hereby expressly authorizes the Initial Purchasers to use the Preliminary Offering Memorandum and the Offering Memorandum, as they may at any time have been amended or supplemented, in connection with the offer and sale of the Certificates. AmeriSource and ARC hereby ratify and affirm all distributions of the Preliminary Offering Memorandum by the Initial Purchasers prior to the date of this Agreement and authorize the Initial Purchasers to distribute the Preliminary Offering Memorandum and the Offering Memorandum in connection with the initial resale of the Certificates. Each of AmeriSource and ARC also hereby expressly authorizes the Initial Purchasers to distribute (i) AmeriSource Health Corporation's 1996 Annual Report on Form 10K, (ii) AmeriSource Health Corporation's Quarterly Report on Form 10Q for the quarter ending December 31, 1996 and (iii) any other document filed by AmeriSource Health Corporation with the Securities and Exchange Commission (the "Commission") after December 31, 1996, and (iv) copies of the Transaction Documents and of opinions and other documents delivered in connection with the execution of the Transaction Documents (collectively, the "Additional Disclosure Documents") in connection with the sale of the Certificates. (f) Each of AmeriSource and ARC understands that the Initial Purchasers propose to make an offering of the Certificates, as soon as they deem advisable after this Agreement has been executed and delivered, on the terms and in the manner set forth in the Offering Memorandum and Section 3 to Persons whom the Initial Purchasers reasonably believe to be -2- 5 qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Act, as such rule may be amended from time to time ("Rule 144A"), in transactions under Rule 144A and to a limited number of other institutional "accredited investors" ("Accredited Investors"), as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act in private sales exempt from registration under the Act, and outside the United States of America to certain Persons in reliance upon Regulation S under the Act ("Regulation S"). SECTION 2. Representations and Warranties of AmeriSource and ARC. AmeriSource and ARC represent and warrant, jointly and severally, to the Initial Purchasers that: (a) None of the Preliminary Offering Memorandum, the Offering Memorandum or any amendment thereof or supplement thereto as of the respective dates thereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this subsection do not apply to statements or omissions made in reliance upon and in conformity with the information described in Section 12 and any other information that is furnished to ARC in writing by the Initial Purchasers after the date hereof expressly for use in any amendment or supplement to the Offering Memorandum. (b) The Certificates, the Transaction Documents and the businesses of each of AmeriSource and ARC each conforms in all material respects to the respective descriptions thereof contained in the Offering Memorandum. (c) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources that AmeriSource and ARC believe to be reliable and accurate in all material respects. The information concerning the Receivables that is included in the Offering Memorandum presents fairly in all material respects the information purported to be stated therein. There has been no material adverse change in the delinquency, dilution, loss and other information with respect to the Receivables from that set forth in the Offering Memorandum. (d) Each of AmeriSource and ARC is a corporation duly organized and validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full power and authority to own its properties and to conduct its business as the properties presently are owned and the business presently is conducted. Each of AmeriSource and ARC had at all relevant times, and now has, all necessary power, authority and legal right to acquire, own and transfer, in the manner contemplated by the Transaction Documents, (i) in the case of AmeriSource, the Receivables and the Related Assets and (ii) in the case of ARC, the Receivables and the Related Transferred Assets. -3- 6 (e) Each of AmeriSource and ARC is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business requires qualification, licenses or approvals and where the failure so to qualify, to obtain such licenses and approvals or to preserve and maintain the qualification, licenses or approvals could have a Material Adverse Effect. (f) ARC has all necessary power and authority to execute and deliver the Certificates. Each Certificate has been duly and validly authorized by ARC and, from and after the date on which such Certificate is executed by ARC and authenticated by the Trustee in accordance with the terms of the Pooling Agreement and the Series Supplement and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will be validly issued and outstanding and will constitute a valid and legally binding obligation of the Trust entitled to the benefits of the Pooling Agreement and the Series Supplement and enforceable against the Trust in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law. (g) Each of AmeriSource and ARC has (i) all necessary corporate power and authority to (A) execute and deliver this Agreement and the Transaction Documents to which it is a party, and (B) perform its obligations under this Agreement and the Transaction Documents to which it is a party, and (ii) duly authorized by all necessary corporate action the execution, delivery and performance of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions provided for in the Agreement and the Transaction Documents to which it is a party. (h) Each of the Transaction Documents to which AmeriSource or ARC, as the case may be, is a party, when executed and delivered by it (and assuming the due authorization, execution and delivery thereof by the other parties thereto), will constitute its legal, valid and binding agreement, enforceable against it in accordance with the terms thereof, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law. (i) This Agreement has been duly and validly executed and delivered by AmeriSource and by ARC. (j) All authorizations, consents, orders and approvals of, or other action by, any Governmental Authority that are required to be obtained by either AmeriSource or ARC, and all notices to and filings with any Governmental Authority that are required to be made by either AmeriSource or ARC, in the case of each of the foregoing in connection with the due -4- 7 execution, delivery and performance by AmeriSource and ARC of this Agreement and the Transaction Documents to which they are a party and the consummation of the transactions contemplated by this Agreement and the Transaction Documents to which they are a party, have been obtained or made and are in full force and effect except (i) filings under the Assignment of Claims Act or any analogous state or local law, (ii) filings under any state "Blue Sky" laws and (iii) where the failure to obtain or make any such authorization, consent, order, approval, notice or filing, individually or in the aggregate for all such failures, would not reasonably be expected to have a Material Adverse Effect. (k) The execution, delivery and performance of, and the consummation of the transactions contemplated by, this Agreement and the Transaction Documents and the fulfillment of the terms hereof and thereof by each of AmeriSource and ARC will not (i) conflict with, violate, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, (A) the certificate of incorporation or the by-laws of AmeriSource or ARC, or (B) any indenture, loan agreement, mortgage, deed of trust or other agreement or instrument to which AmeriSource or ARC is a party or by which AmeriSource or ARC or any of their respective properties is bound, (ii) result in the creation or imposition of any Adverse Claim (other than any Permitted Adverse Claim or any Adverse Claim created in favor of ARC pursuant to the Purchase Agreement or in favor of the Trustee pursuant to the Pooling Agreement) upon any of the properties of AmeriSource or ARC, or (iii) conflict with or violate any federal, state, local or foreign law or any decision, decree, order, rule or regulation applicable to AmeriSource or ARC or any of their respective properties of any Governmental Authority, which, in the case of each of clauses (i)(B), (ii) and (iii), conflict, violation, breach, default or Adverse Claim, individually or in the aggregate, would have a substantial likelihood of having a Material Adverse Effect. (l) The financial statements and schedules included in the Additional Disclosure Documents (the "Financial Statements") present fairly in all material respects the financial position, results of operations and cash flows of AmeriSource at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. Ernst & Young (the "Independent Accountants") is an independent public accounting firm within the meaning of the Act. (m) Except as disclosed in the notes to the Financial Statements or in the Preliminary Offering Memorandum, since the date of the Financial Statements, (i) there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects of AmeriSource or ARC, whether or not arising in the ordinary course of business, and (ii) there have been no transactions entered into by AmeriSource or ARC that are material with respect to AmeriSource or ARC and that would be required to be disclosed under applicable law in connection with the offering, sale or resale of the Certificates. -5- 8 (n) (i) There is no action, suit, proceeding or investigation pending or, to the knowledge of either AmeriSource or ARC, threatened against them before any court, regulatory body, arbitrator, administrative agency or other tribunal or governmental instrumentality, and (ii) neither AmeriSource nor ARC is subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court or other Governmental Authority that, in the case of each of clauses (i) and (ii), (A) asserts the invalidity of this Agreement or the Transaction Documents, (B) seeks any determination or ruling that would materially and adversely affect the performance by AmeriSource or ARC of its obligations under this Agreement or any Transaction Document or the validity or enforceability of this Agreement or any Transaction Document, (C) seeks to affect adversely the income tax attributes of the transfers occurring pursuant to the Purchase Agreement or the Pooling Agreement under the United States Federal income tax system or any state income tax system or (D) except as described in Schedule I, individually or in the aggregate for all such actions, suits, proceedings and investigations would have a substantial likelihood of having a Material Adverse Effect. For purposes of the foregoing, the "knowledge of either AmeriSource or ARC" means the knowledge of Kurt J. Hilzinger, Michael D. DiCandilo, Teresa Ciccotelli or any other executive officer of AmeriSource or ARC. (o) Neither this Agreement nor any transaction contemplated herein or in the Offering Memorandum will result in a violation of, or give rise to an obligation on the part of any purchaser to register, file or give notice under, Regulations G, T, U or X of the Federal Reserve Board or any other regulation issued by the Federal Reserve Board pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case as in effect on the Closing Date. (p) AmeriSource, ARC and the Trust are not, and are not controlled by, an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"). (q) None of AmeriSource, ARC or any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Act) that is or will be integrated with the sale of the Certificates in a manner that would require the registration under the Act of the offering of the Certificates or (ii) assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8, engaged in any form of general solicitation or general advertising in connection with the offering of the Certificates (as those terms are used in Regulation D under the Act) or in any manner involving a public offering of the Certificates within the meaning of Section 4(2) of the Act. (r) None of AmeriSource, ARC, any of their respective Affiliates or any Person acting on their behalf has engaged in any directed selling efforts (as that term is defined in Regulation -6- 9 S) with respect to any Certificates, and AmeriSource, ARC and their respective Affiliates or otherwise made offers or sales of securities under circumstances that would require registration of the Certificates under the Act and any Person acting on its or their behalf have complied with the offering restrictions requirement of Regulation S. (s) Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8, it is not necessary in connection with the offer, sale and delivery of the Certificates in the manner contemplated by this Agreement to register any of the Certificates under the Act or to qualify the Pooling Agreement under the Trust Indenture Act of 1939, as amended. (t) On the Closing Date, (i) each of the representations and warranties of AmeriSource and ARC that is set forth in the Purchase Agreement, the Pooling Agreement and the other Transaction Documents will be true and correct, subject to any materiality standards contained therein and except such representations and warranties that speak as of a particular date (which were true as of that date), and (ii) subject to any materiality standards contained therein, neither AmeriSource nor ARC will be in breach of any covenant or agreement set forth in the Purchase Agreement, the Pooling Agreement or any other Transaction Document. (u) No event (including without limitation the inclusion in the Trust of receivables originated by the Pelham Division of Walker) has occurred and is continuing that constitutes or gives rise to, or with the passage of time or the giving of notice or both would constitute or give rise to, a Liquidation Event or a Servicer Default. (v) The Certificates meet the eligibility requirements of Rule 144A(d)(3) under the Act. (w) Set forth on Schedule IV hereto is a list of each employee pension or benefit plan with respect to which AmeriSource or AmeriSource Health Corporation is a party in interest or disqualified person. The execution and delivery of this Agreement, the other Transaction Documents and the sale of the Certificates to be purchased by the Initial Purchasers will not involve any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. The representation made by AmeriSource in the preceding sentence is made in reliance upon and subject to the accuracy of, and compliance with, the representations and covenants made or deemed made by the Initial Purchasers of Certificates as set forth in the Offering Memorandum under the Section entitled "Notice to Investors." (x) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all of the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act. -7- 10 SECTION 3. Purchase, Sale and Delivery of the Certificates. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, ARC agrees to sell to the Initial Purchasers, and each Initial Purchaser agrees to purchase, severally and not jointly, Certificates in the principal amount set forth opposite the name of each Initial Purchaser on Schedule II at the purchase price specified in Schedule II. The discount reflected in the purchase price shall constitute compensation to each Initial Purchaser in addition to, and not in substitution for, the other amounts referred to in Section 6 and any other amount payable by AmeriSource or ARC to any Initial Purchaser or its affiliate in connection with the transactions contemplated by the Transaction Documents except that the discount will be credited against the success fee referred to in Section 6(c) of this Agreement. The Certificates that each Initial Purchaser has agreed to purchase in such denominations and registered in such name or names as the Initial Purchasers shall designate two Business Days prior to the Closing Date, shall be delivered to the holder against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer (same day funds) to the account or accounts that ARC shall specify not less than one Business Day prior to the Closing Date. The delivery of and payment for the Certificates shall be made at the New York offices of Mayer, Brown & Platt, at 10:00 a.m., New York City time, on April 17, 1997 or at such other place, time or date as the Initial Purchasers, AmeriSource and ARC may agree upon, such time and date of delivery against payment being herein referred to as the "Closing Date." ARC will make copies of the Certificates available for checking by the Initial Purchasers at the offices in New York, New York of BT Securities Corporation at least 24 hours prior to the Closing Date. SECTION 4. Offering by the Initial Purchasers. (a) The Initial Purchasers propose to make an offering of the Certificates, upon the terms set forth in the Offering Memorandum, as soon as practicable after this Agreement is entered into and as in their judgment is advisable. During the period from the date of this Agreement until the Initial Purchasers have sold all of the Certificates, ARC and AmeriSource agree to assist the Initial Purchasers in any marketing of the Certificates and (promptly upon request) to provide all information reasonably deemed necessary by the Initial Purchasers in such marketing. In addition, during such period ARC and AmeriSource will use their best efforts to make appropriate officers and representatives of ARC and AmeriSource available to participate in the information meetings for potential investors at such times and places as the Initial Purchasers may reasonably request. Further, each of ARC and AmeriSource agrees, upon the request of an Initial Purchaser, to use reasonable efforts to cause the Independent Accountants to deliver to any potential purchaser of a Certificate an agreed upon procedures letter comparable to the agreed upon procedures letter described in Section 7(l). SECTION 5. Covenants of AmeriSource and ARC. Each of AmeriSource and ARC jointly and severally covenants and agrees with the Initial Purchasers that: -8- 11 (a) Neither AmeriSource nor ARC will amend or supplement the Offering Memorandum or any amendment thereof or supplement thereto unless each of the Initial Purchasers previously shall have been advised thereof and been furnished a copy thereof prior to the proposed amendment or supplement and shall not have reasonably objected in writing within 5 business days after being furnished a copy thereof. AmeriSource and ARC will, promptly upon the reasonable request by any of the Initial Purchasers, prepare any amendments of or supplements to the Offering Memorandum that, in the opinion of the Initial Purchaser, may be necessary or advisable in connection with the resale of the Certificates by the Initial Purchasers. During the period beginning on the date hereof and ending on the earlier of (i) the date on which the Initial Purchasers shall have transferred or sold the Certificates and (ii) 10 days after the Closing Date, AmeriSource and ARC shall, to the extent practicable (taking into account the disclosure requirements and restrictions imposed by applicable law), supply the initial Purchasers drafts or duplicate copies of any reports required to be filed by them with the Commission at least two Business Days prior to any such filing, and in any event will supply such reports to the Initial Purchasers concurrently with any such filing thereof; provided, that AmeriSource and ARC shall not be required to supply such drafts or reports to the Initial Purchasers if (x) such reports do not contain information that reflect circumstances that would have a material adverse effect on the financial condition of AmeriSource or ARC, taken as a whole, or (y) such reports do not contain information that, taken as a whole, would cause the information disclosed in the Preliminary Offering Memorandum, the Offering Memorandum or the Additional Disclosure Documents to be materially incomplete or misleading; provided, further that the Initial Purchasers agree that they shall in no event use or disclose such reports or drafts or the information contained therein in a manner that could violate any applicable laws. (b) AmeriSource and ARC will take any action for the qualification or exemption of the Certificates for offer, sale and resale under the securities or "Blue Sky" laws of any jurisdictions that any of the Initial Purchasers shall reasonably request and will pay all reasonable expenses (including reasonable fees and disbursements of counsel) in connection with the qualification or exemption and in connection with the determination of the eligibility of the Certificates for investment under the laws of the jurisdictions that the Initial Purchasers may designate, provided that in no event shall AmeriSource or ARC be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than arising out of the offering or sale of the Certificates, in any jurisdiction where it is not now so subject. Thereafter, while any of the Certificates remain outstanding, AmeriSource and ARC will arrange for the filing and making of, and will pay all fees applicable to, any statements and reports and renewals of registration necessary in order to continue to qualify or exempt the Certificates for secondary market transactions in the various jurisdictions in which the Certificates were originally registered or exempted for sale. If any of the Initial Purchasers shall pay any of the fees or expenses referred to in this subsection, AmeriSource and ARC shall promptly reimburse the Initial -9- 12 Purchaser; it being understood and agreed that the reimbursement shall not be subject to any limitations on reimbursement set forth in Section 6. (c) If, at any time prior to the completion of the distribution of the Certificates, any event occurs or condition exists as a result of which it is necessary or desirable, in the opinion of the Initial Purchasers, AmeriSource or ARC, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made or existing at the time the Offering Memorandum is delivered to a prospective purchaser of any legal or beneficial interest in the Certificates, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Offering Memorandum to comply with applicable law, AmeriSource and ARC will promptly notify the Initial Purchasers thereof and will prepare and deliver to the Initial Purchasers, at the expense of AmeriSource and ARC, an amendment of or supplement to the Offering Memorandum that corrects the statement or omission or effects such compliance. (d) AmeriSource and ARC will, without charge, provide to the Initial Purchasers as many copies of the Offering Memorandum and any amendment thereof or supplement thereto as the Initial Purchasers may reasonably request. (e) AmeriSource will, and will cause ARC to, apply the net proceeds from the sale of the Certificates as set forth in the "Use of Proceeds" section of the Offering Memorandum. Neither AmeriSource nor ARC will use the proceeds of the sale of the Certificates or any part thereof, directly or indirectly, to purchase or carry any "margin security" (as defined in Regulations G, T, U or X issued by the Federal Reserve Board) or to reduce or retire any indebtedness originally incurred to purchase any margin security. (f) None of AmeriSource, ARC or any of their respective Subsidiaries or Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) that could be integrated with the sale of the Certificates in a manner that would require the registration of the Certificates under the Act. (g) None of AmeriSource, ARC, any of their respective Subsidiaries or Affiliates or any Person acting on its or their behalf will engage in any directed selling efforts (as that term is defined in Regulation S) with respect to any Certificates, and each of AmeriSource, ARC, any of their respective Subsidiaries or Affiliates and any Person acting on its or their behalf will comply with the offering restrictions requirement of Regulation S. (h) AmeriSource and ARC will not, and will not permit any of their respective Subsidiaries or Affiliates to, solicit any offer to buy or offer to sell the Certificates by means of any form of general solicitation or general advertising (as those terms are used in -10- 13 Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (i) None of AmeriSource, ARC or any of their respective Subsidiaries or Affiliates shall contact or solicit potential investors to purchase any Certificate, engage any Person to assist in the placement or sale of the Certificates or sell any Certificates to any Person, in the case of each of the foregoing, other than the Initial Purchasers except as consented to by the Initial Purchasers. (j) So long as any of the Certificates are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, ARC shall, unless it becomes subject to and complies with the reporting requirements of Section 13 or 15(d) of the Exchange Act, provide to any holder of such restricted securities, or to any prospective purchaser of such restricted securities designated by a Holder), upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and prospective purchasers designated by such holders, from time to time of such restricted securities. (k) AmeriSource and ARC will use their best efforts to (i) permit the Certificates to be eligible for clearance and settlement through DTC, and (ii) permit the Certificates to be eligible for clearance and settlement through Cedel S.A. and the Euroclear System. (l) Until all Obligations under the Certificates shall have been finally and fully paid and performed, ARC shall deliver to the Initial Purchasers each Settlement Statement (and, if requested by the Initial Purchasers, each Daily Report) contemporaneously with the delivery thereof to the Trustee pursuant to the Pooling Agreement. (m) Neither ARC nor AmeriSource shall, nor shall they permit any of their respective affiliates to, resell any Certificates that have been acquired by any of them. (n) During the period commencing on the date hereof and ending on the issuance of the Certificates, AmeriSource and ARC shall not cause any other borrowings or debt instruments or securities similar to the Certificates (whether issued or guaranteed by AmeriSource or ARC) are either placed or syndicated by AmeriSource, ARC or their Affiliates in the international or U.S. capital markets, directly or on their behalf, in any manner which would in the reasonable judgment of the Initial Purchasers have a detrimental effect on the successful placement of the Certificates unless mutually agreed to in writing by the Initial Purchasers, ARC and AmeriSource. (o) None of AmeriSource, ARC, any of their respective Affiliates or Subsidiaries, or any person acting on its or their behalf shall make offers or sales of securities under circumstances that would require the registration of the Certificates under the Act or permit -11- 14 ARC or the Trust to become an "investment company" registered or required to be registered under the Investment Company Act. SECTION 6. Expenses; Fees. (a) Each of AmeriSource and ARC agrees, jointly and severally, to pay all reasonable costs and expenses incident to the purchase and initial resale of the Certificates by the Initial Purchasers and the transactions contemplated by this Agreement and the Transaction Documents, whether or not the transactions contemplated herein or therein are consummated or this Agreement is terminated pursuant to Section 11, including (without limitation) all costs and expenses incident to (i) the preparation, printing, word processing or other production of documents with respect to such transactions, including any costs in respect of the Transaction Documents, the Preliminary Offering Memorandum and the Offering Memorandum and any amendment thereof or supplement thereto, and any "Blue Sky" memorandum, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the reasonable fees and disbursements of one firm of attorneys retained by the Initial Purchasers, (iv) the reasonable fees and expenses of outside tax, accounting and other consultants and advisors to the Initial Purchasers, (v) travel expenses, out-of-pocket audit fees and expenses, and other out-of-pocket fees and expenses of the Initial Purchasers, (vi) the fees and disbursements of counsel, accountants and other consultants, experts and advisors retained by AmeriSource or ARC, (vii) preparation, issuance and delivery of the Certificates, (viii) trustee's fees and expenses, including expenses of counsel retained by the Trustee, (ix) the qualification of the Certificates under state securities and "Blue Sky" laws (including filing fees and fees and disbursements of counsel for the Initial Purchasers relating thereto), (x) expenses in connection with any meetings with prospective investors in the Certificates, (xi) all expenses and fees incurred in connection with the application for use of any clearing or similar system, quotation of the Certificates on any market and (xii) fees charged by S&P, Duff & Phelps and any other rating agencies and their counsel for the rating of the Certificates. AmeriSource and ARC acknowledge that the Initial Purchasers are not responsible for the fees, costs and expenses set forth in this subsection. (b) AmeriSource and ARC further agree, jointly and severally, to pay or reimburse, on a timely basis, the Initial Purchasers for all out-of-pocket fees, costs and expenses incurred by them or a third party selected by them (which may include an Affiliate of an Initial Purchaser) in connection with the conduct of a due diligence examination of the Receivables and of the activities of AmeriSource, its Subsidiaries and Affiliates with respect to the Receivables whether or not the transactions contemplated herein are consummated. Each of AmeriSource and ARC agrees that these fees may include (without limitation) fees and expenses incurred in connection with time spent at the offices of AmeriSource and Walker and in the preparation of a limited scope examination report. Further, it is understood that the due diligence examination will not preclude the need for the agreed upon procedures letters to be issued by Ernst & Young and Arthur Andersen as is described in Section 7(n) in respect of information contained in the Offering Memorandum. -12- 15 (c) ARC shall pay to the Initial Purchasers a success fee, concurrently with the issuance of the Certificates, equal to $400,000. The Initial Purchasers are hereby authorized to deduct such fee from the proceeds of the Certificates prior to the remittance of such proceeds to ARC. (d) The amounts payable under each clause of this section shall be cumulative, and payment of amounts referred to in one clause shall not reduce amounts payable under another clause. SECTION 7. Conditions of the Initial Purchasers' Obligations. The obligations of the Initial Purchasers to purchase and pay for the Certificates shall, in their sole discretion, be subject to the following conditions: (a) AmeriSource shall, at or before the Closing Date, have fully completed a statutory merger with Walker. (b) The Trust shall have good and marketable title to the Receivables and Related Security, free and clear of all Adverse Claims (other than Permitted Adverse Claims). (c) ARC shall have (i) caused all Uniform Commercial Code financing statements required to perfect (A) the first priority ownership interest of ARC in the Receivables and Related Security under the Purchase Agreement and (B) the first priority ownership interest granted by ARC to the Trustee pursuant to the Pooling Agreement in the Receivables and other Transferred Assets, in each case, to be duly filed in the manner required by the laws of each appropriate jurisdiction, and (ii) paid, or caused to be paid, all transfer taxes, documentary stamp taxes and filing fees incurred in connection therewith. (d) All corporate and other proceedings in connection with the transactions contemplated herein and in the Transaction Documents and all documents and certificates incident thereto shall be satisfactory in form and substance to the Initial Purchasers and their counsel, and the Initial Purchasers shall have received any other documents and certificates incident to the transactions that any of the Initial Purchasers or their counsel shall reasonably request. The Initial Purchasers or their counsel shall have received on the Closing Date certified copies of all documents evidencing corporate action taken by each of AmeriSource, ARC and the Trustee to approve the execution and delivery of the Transaction Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby. (e) The Transaction Documents and the Certificates shall conform in all material respects to the descriptions thereof contained in the Offering Memorandum. Immediately prior to the sale of the Certificates to the Initial Purchasers, the Certificates shall have been executed by ARC and authenticated by or on behalf of the Trustee, and each of the Pooling Agreement, -13- 16 the Purchase Agreement, this Agreement, the Series Supplement and the other Transaction Documents that are to be executed and delivered on or prior to the Closing Date shall have been executed and delivered. The Initial Purchasers and the Trustee shall have received on the Closing Date a fully executed counterpart original and any required conformed copies of all Transaction Documents delivered on or prior to the Closing Date, and the Trustee shall have received the Certificates. (f) The Initial Purchasers or their counsel shall have received on the Closing Date signature and incumbency certificates executed by Authorized Officers of AmeriSource, ARC and the Trustee certifying the identities and signatures of those officers who executed each of the Transaction Documents to which AmeriSource, ARC or the Trustee, as the case may be, is a party. (g) Upon consummation of the transactions contemplated in the Transaction Documents that are to occur on or prior to the Closing Date, ARC shall have a net worth of not less than the amount required by the Pooling Agreement as certified by the Chief Financial Officer, Treasurer or similar Authorized Officer of ARC. (h) The purchase of the Certificates by the Initial Purchasers shall be permitted by the laws and regulations to which the Initial Purchasers are subject. (i) ARC shall have delivered on the Closing Date to the Initial Purchasers or their counsel evidence of acceptance by Prentice-Hall Corporation Systems, Inc. of its appointment by ARC and AmeriSource as agent for service of process in New York. (j) The Certificates shall have been rated "AAA" by S&P and Duff & Phelps Credit Rating Co., Inc. ("Duff Phelps" and, together with S&P, the "Rating Agencies"), the ratings shall be in full force and effect and the Initial Purchasers shall have received on the Closing Date a letter from the Rating Agencies dated on or before the Closing Date to such effect. (k) Subsequent to the respective dates as of which information is given in the Offering Memorandum, there shall not have occurred (i) any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise) or in the earnings, business, operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or of ARC, whether or not arising in the ordinary course of business, (ii) any other event or occurrence that could have a Material Adverse Effect, (iii) a suspension or material limitation in trading in any securities issued by AmeriSource or any of its Affiliates, or in securities generally, on any securities exchange or the establishment of minimum prices on any such exchange, (iv) a general moratorium on commercial banking activities declared by either Federal, Pennsylvania or New York State authorities, (v) any downgrading in the rating accorded securities issued by AmeriSource or any of its Affiliates by any "nationally recognized statistical rating organization," as that term -14- 17 is defined for purposes of Rule 436(g) under the Act, or any public announcement that any such organization has under surveillance or review its rating of any debt securities of AmeriSource or its Affiliates (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of the rating), (vi) any outbreak or escalation of major hostilities in which the United States of America is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency that in the judgment of the Initial Purchasers makes it inadvisable to proceed with the solicitation of offers to purchase Certificates, or (vii) any material adverse change in financial, political or economic conditions that in the judgment of the Initial Purchasers makes it inadvisable to purchase the Certificates or to proceed with the solicitation of offers to purchase Certificates. (l) On the Closing Date, the Initial Purchasers shall have received opinions, dated the Closing Date, addressed to the Initial Purchasers and satisfactory to their counsel, of (i) Dechert Price & Rhoads, special counsel to AmeriSource and ARC, (A) as to perfection of the Trustee's interest in the Receivables and other Transferred Assets and other UCC matters, (B) as to "true sale" and substantive consolidation, (C) as to corporate, securities and other matters, (D) as to certain securities laws matters, and (E) such other matters as were addressed in the opinions delivered by such firm in connection with the issuance of the Series 1995-1 Certificates by the Trust, (ii) Hodgson, Russ, Andrews, Woods & Goodyear, special counsel to the Trustee, as to certain matters relating to the Trustee and (iii) such opinion letters, if any, as shall be delivered to the Rating Agencies with respect to matters not addressed in clauses (i) and (ii) above. (m) On or before the Closing Date, the Initial Purchaser shall have received letters from counsel for AmeriSource and ARC allowing the Initial Purchasers to rely upon any opinions delivered in connection with the acquisition by AmeriSource of Walker, the transaction merging AmeriSource and Walker and the related amendment to the Transaction Documents, as if such opinions were addressed to the Initial Purchasers. (n) The Initial Purchasers shall have received from Ernst & Young and Arthur Andersen agreed upon procedures letters with respect to the Offering Memorandum dated the date hereof and the Closing Date, addressed to the Initial Purchasers and in form and substance satisfactory to the Initial Purchasers and their counsel. (o) The Initial Purchasers shall have received an opinion from Mayer, Brown & Platt, in form and substance satisfactory to the Initial Purchasers, as to such matters that they require. (p) The representations and warranties of each of AmeriSource and ARC contained in this Agreement and in the Transaction Documents to which it is a party shall be true and correct as of the date hereof and as of the Closing Date; AmeriSource and ARC shall have -15- 18 performed all covenants and agreements and satisfied all conditions on their respective parts to be performed or satisfied hereunder and under the Transaction Documents on or prior to the Closing Date; and no event shall have occurred and no condition shall exist that would constitute a Liquidation Event or a Servicer Default under the Pooling Agreement, either with or without notice or lapse of time or both. (q) Subsequent to the respective dates as of which information is given in the Offering Memorandum, other than as contemplated by the Offering Memorandum, none of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC shall have entered into any transactions that are material to the business, condition (financial or otherwise) or results of operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC. (r) The Initial Purchasers shall have received a certificate of each of AmeriSource and ARC, dated the Closing Date, signed on behalf of AmeriSource and ARC (as applicable) by its President or any Vice President and its Chief Financial Officer, to the effect that: (i) The representations and warranties of each of AmeriSource and ARC contained in this Agreement and in the Transaction Documents to which each is a party are true and correct as of the Closing Date as if made on such date, subject to any materiality standards contained therein and except such representations and warranties that speak as of a particular date; subject to any materiality standards contained therein, AmeriSource and ARC have performed all covenants and agreements and satisfied all conditions on their respective parts to be performed or satisfied hereunder and under the Transaction Documents on or prior to the Closing Date; subsequent to the date of the Financial Statements, there has been no material adverse change in the business, condition (financial or otherwise) or results of operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC; and no event has occurred and no condition exists that would constitute a Liquidation Event or a Servicer Default, either with or without notice or lapse of time or both. (ii) Upon consummation of the transactions contemplated in the Transaction Documents that are to occur on or prior to the Closing Date, ARC shall have a net worth of not less than the amount required by the Pooling Agreement. (iii) Subsequent to the respective dates as of which information is given in the Offering Memorandum, there has not occurred (A) any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise) or in the earnings, business, operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC, whether or not arising in the ordinary course of business, or (B) any other event or occurrence that would have a Material Adverse Effect. -16- 19 (iv) Subsequent to the respective dates as of which information is given in the Offering Memorandum, other than as contemplated by the Offering Memorandum, none of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC has entered into any transactions that are material and adverse to the business, condition (financial or otherwise) or results of operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC. (v) As of the Closing Date, neither the Offering Memorandum nor any amendment thereof or supplement thereto, contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the certificate will not apply to statements or omissions made in reliance upon and in conformity with the information described in Section 12 and any other information that is furnished to ARC in writing by the Initial Purchasers after the date hereof expressly for use in any amendment or supplement to the Offering Memorandum. (s) The Initial Purchasers shall have received confirmation, in the case of Certificates of a Series represented by a Registered Book Entry Certificate, that the Certificates have been accepted for clearance of secondary market trading by The Depositary Trust Company, the Euroclear System and Cedel S.A. (t) The Offering Memorandum shall have been printed and copies distributed to the Initial Purchasers not later than 9:00 a.m., New York City time on April 17, 1997 or at such later date and time as you may approve in writing. (u) All conditions to the issuance of the Certificates in the Pooling Agreement (including without limitation the delivery of a Tax Opinion and the satisfaction of the Rating Agency Condition with respect to each outstanding Series) shall have been satisfied, AmeriSource and ARC shall have delivered a certificate to that effect to the Initial Purchasers, and all opinions delivered in connection with the satisfaction of such conditions shall be addressed to the Initial Purchasers. AmeriSource and ARC shall furnish to the Initial Purchasers (x) such other agreements, instruments, documents, opinions, certificates, letters and schedules as the Initial Purchasers or their counsel reasonably may request and (y) originals and conformed copies of all opinions, certificates, letters, schedules, agreements, documents and instruments delivered pursuant to this Agreement in the quantities that any of the Initial Purchasers shall reasonably request. SECTION 8. Offering of Certificates; Restrictions on Transfer; Listing. Each of the Initial Purchasers represents and warrants to AmeriSource and ARC that it is an Accredited Investor. Each of the Initial Purchasers represents and warrants to AmeriSource and ARC that -17- 20 it has not offered or sold, and will not offer or sell, any Certificates within the United States except in accordance with Rule 903 of Regulation S or, in the case of BT Securities Corporation, to Persons reasonably believed by them to be Qualified Institutional Buyers in reliance on the exemption from registration provided by Rule 144A and to a limited number of other institutional Accredited Investors. Accordingly, each Initial Purchaser agrees that neither it, its affiliates nor any Persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to the Certificates being sold in reliance upon Regulation S. Each of the Initial Purchasers recognizes its responsibility for compliance with applicable securities laws in connection with its own activities undertaken in connection with the sale of the Certificates. Each Initial Purchaser further represents and warrants that it has not entered into and will not enter into any contractual arrangement with respect to the distribution of the Certificates, except with its Affiliates or with the prior written consent of ARC. Each Initial Purchaser agrees that, at or prior to confirmation of sale of the Certificates pursuant to Regulation S, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Certificates from it during the restricted period a confirmation or notice to substantially the following effect: "The Certificates covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S under the Securities Act. Terms used above have the means given to them by Regulation S." Terms used in the preceding two paragraphs shall have the meanings given to them by Regulation S. Each Initial Purchaser represents and agrees that (A) it has not offered or sold and will not offer or sell any Certificates in the United Kingdom, by means of any document, other than to persons whose ordinary activities involve them in acquiring, holding, managing and disposing of investments (as principal or agent) for purposes of their businesses or otherwise in circumstances which have not resulted and do not result in an offer to the public in the United Kingdom within the meaning of the Financial Services Act 1986 (Investment Advertisement) (Exemptions) Order 1996, as amended, (B) it has complied and will comply with all applicable provisions of the Financial Services Act of 1986 with respect to anything done by it in relation to the Certificates in, from or otherwise involving the United Kingdom, and (C) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Certificates if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 -18- 21 (Investment Advertisement) (Exemptions) Order 1988 or a person to whom the document may otherwise lawfully be issued or passed on. Each Initial Purchaser acknowledges that no action has been or will be taken in any jurisdiction by ARC that would permit a public offering of the Certificates, or possession or distribution of the Offering Circular or any other offering material, in any country or jurisdiction where action for that purpose is required. Each Initial Purchaser will comply with all applicable laws and regulations in each jurisdiction in which it purchases, offers, sells or delivers Certificates or has in its possession or distributes any Offering Materials or any other offering material, in all cases at its own expense. Each Initial Purchaser will obtain by consent, approval or permission required by it for the acquisition, offer, sale or delivery by it of Certificates under the laws and regulations in force in any jurisdiction in which it makes any such acquisition, offer, sale or delivery. SECTION 9. Indemnification and Contribution. (a) AmeriSource and ARC, jointly and severally, agree to indemnify and hold harmless each of the Initial Purchasers, their respective Affiliates, directors, officers, employees, agents, representatives and each Person who controls any of the Initial Purchasers (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) against any losses, claims, damages or other liabilities, costs and expenses to which any of the Initial Purchasers or any other indemnified party may become subject, insofar as any losses, claims, damages or liabilities (or actions in respect thereof) relate to, arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in (A) any Preliminary Offering Memorandum, the Offering Memorandum or any amendment of or supplement to any of the foregoing, (B) any Additional Disclosure Document or (C) any application or other document, or any amendment thereof or supplement thereto, executed by AmeriSource or ARC or based upon written information furnished by or on behalf of AmeriSource or ARC filed in any jurisdiction in order to qualify the Certificates under the securities or "Blue Sky" laws thereof or filed with any securities association or securities exchange (each an "Application"), or (ii) the omission or alleged omission to state, in any Preliminary Offering Memorandum, the Offering Memorandum or any amendment of or supplement to any of the foregoing, any Additional Disclosure Document or any Application, a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and in each case will reimburse, as incurred, each indemnified party for any legal or other out-of-pocket expenses incurred in connection with investigating, defending against or appearing as a third-party witness in connection with any loss, claim, damage, liability or action; provided, however, that AmeriSource and ARC will not be liable in any case under clause (i) -19- 22 or (ii) to the extent that any loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto, or any Application that, in the case of each of the foregoing, is made in reliance upon and in conformity with the information described in Section 12 or any other information that is furnished to ARC in writing by the Initial Purchasers after the date hereof expressly for use in any amendment or supplement to the Offering Memorandum; provided, further, that the foregoing indemnity, insofar as it relates to the Preliminary Offering Memorandum or any amendments or supplements thereto issued prior to the Offering Memorandum, shall not inure to the benefit of the Initial Purchasers or their respective employees, directors, agents, officers and representatives or to any Person who controls an Initial Purchaser if the person asserting the loss, claim, damage or liability which gives rise to such indemnity (the "Underlying Claimant") purchased Certificates from an Initial Purchaser and if a copy of the Offering Memorandum and any available amendments or supplements thereto were not sent or given by such Initial Purchaser or on such Initial Purchaser's behalf to such Underlying Claimant at or prior to the written confirmation of the sale of Certificates to such Underlying Claimant (unless such failure to so send or give the Offering Memorandum and/or such amendments or supplements results from the failure of AmeriSource and ARC to comply with Section 5(c)), and if the Offering Memorandum together with any then available amendments or supplements thereto would have cured the defect giving rise to such losses, claims, damages or liabilities. AmeriSource and ARC shall not be liable under this section for any settlement of any claim or action effected without their prior written consent, which shall not be unreasonably withheld. AmeriSource and ARC shall not, without the prior written consent of the Initial Purchasers, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought under this section (whether or not the Initial Purchasers or any other indemnified party is an actual or potential party to the claim, action, suit or proceeding) unless the settlement, compromise or consent includes an unconditional release of the Initial Purchasers and each other indemnified party described in this clause from all liability arising out of the claim, action, suit or proceeding. (b) Each Initial Purchaser will indemnify and hold harmless each of AmeriSource, ARC, their directors, officers, employees, agents and representatives and each Person who controls AmeriSource or ARC (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) against any losses, claims, damages or liabilities to which AmeriSource, ARC or any other indemnified party may become subject, insofar as the losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment thereof or supplement thereto, or any Application, or (ii) the omission or the alleged omission to state therein a -20- 23 material fact required to be stated in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment thereof or supplement thereto, or any Application, necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with the information described in Section 12 and any other written information concerning the Initial Purchaser that is furnished to AmeriSource or ARC after the date hereof by the Initial Purchasers specifically for use in any amendment or supplement to the Offering Memorandum; and, subject to the limitation set forth immediately preceding this clause, each Initial Purchaser will reimburse, as incurred, any legal or other expenses incurred by AmeriSource or ARC or any other indemnified party in connection with investigating or defending against or appearing as a third-party witness in connection with any loss, claim, damage, liability or action in respect thereof. An Initial Purchaser shall not be liable under this section for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld. Notwithstanding any other provision of this subsection, each Initial Purchaser's indemnification obligations shall be limited in amount to the aggregate of total discounts, commissions and other compensation received by it under this Agreement. (c) Promptly after receipt by an indemnified party under this section of notice of the commencement of any action or proceeding for which an indemnified party is entitled to indemnification under this section, the indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this section, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability under subsection (a) or (b) (as applicable) unless and to the extent that the failure to notify results in the forfeiture by the indemnifying party of substantial rights and defenses. If any action or proceeding is brought that involves any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to the indemnified party; provided, however, that if (i) such counsel shall have advised the indemnified party that the rules of professional responsibility would preclude, under the circumstances on the date of such determination, one firm of attorneys from representing both the indemnified and the indemnifying party, or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of the action or proceeding, then, in each case, (A) the indemnifying party shall not have the right to direct the defense of the action on behalf of the indemnified party or parties, (B) the indemnified party or parties shall have the right to select separate counsel to defend the action on behalf of the indemnified party or parties and (C) all costs and expenses of each indemnified party in connection with the action or proceeding shall be paid by the indemnifying party pursuant to subsection (a) or (b) (as applicable). Notwithstanding the -21- 24 foregoing, in no event shall an indemnifying party, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all indemnified parties, together with any necessary local counsel. After notice from the indemnifying party to the indemnified party of the indemnifying party's election so to assume the defense thereof and approval by the indemnified party of counsel appointed to defend the action, the indemnifying party will not be liable to the indemnified party under this section for any legal or other expenses, other than reasonable legal and other out-of-pocket costs of investigation, subsequently incurred by the indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso at the end of the immediately preceding paragraph or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party assumes the defense of any action or proceeding, the indemnified party shall have the right to employ separate counsel therein, and to participate in the defense thereof, but the fees and expenses of its counsel shall be borne exclusively by the indemnified party without any right or entitlement to reimbursement by an indemnifying party or its Affiliates except as otherwise provided in the preceding sentence and in the preceding paragraph. (d) In circumstances in which the indemnity agreement provided for in the preceding subsections is unavailable (other than by reason of the application of one of the provisos to the first grammatical paragraph of Section 9(a)) or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by the indemnified party as a result of losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Certificates or (ii) if the allocation provided by clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in losses, claims, damages or liabilities (or actions in respect thereof). It is the parties' intention that, to the maximum extent permitted by applicable law, (A) the relative benefits received by AmeriSource and ARC on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by or on behalf of ARC bear to the total discounts and commissions received by the Initial Purchasers with respect to the offering, and (B) the relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission -22- 25 or alleged omission to state a material fact relates to information supplied by AmeriSource or ARC on the one hand, or the Initial Purchasers on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. AmeriSource, ARC and the Initial Purchasers agree that it would not be equitable if the amount of contribution pursuant to this section were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the preceding paragraph. Notwithstanding any other provision of this subsection, no Initial Purchaser shall be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by it under this Agreement, less the aggregate amount of any damages that it otherwise has been required to pay by reason of the untrue or alleged untrue statements, or the omissions or alleged omissions to state, a material fact. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this subsection, each affiliate, director, officer, employee, agent and representative of each of the Initial Purchasers and each Person who controls any Initial Purchaser (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) shall have the same rights to contribution as the Initial Purchasers, and each affiliate, director, officer, employee, agent and representative of AmeriSource and ARC and each Person who controls AmeriSource or ARC (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), shall have the same rights to contribution as AmeriSource and ARC. SECTION 10. Survival; Scope of Liability. The respective representations, warranties, agreements, covenants, indemnities and other statements of AmeriSource, ARC, their respective officers and the Initial Purchasers set forth in this Agreement or made by or on behalf of any of them, respectively, pursuant to this Agreement shall remain in full force and effect, regardless of (a) any investigation made by or on behalf of AmeriSource, ARC, the Initial Purchasers or any of their respective officers or directors, or any controlling Person referred to in Section 9 and (b) delivery of and payment for the Certificates. The respective agreements, covenants, indemnities and other statements set forth in Sections 6 and 9 shall remain in full force and effect regardless of any termination or cancellation of this Agreement. SECTION 11. Termination. (a) This Agreement may be terminated in the sole discretion of the Initial Purchasers by notice to AmeriSource and ARC given on or prior to the Closing Date in the event that AmeriSource or ARC shall have failed, refused or been unable to perform all obligations and satisfy all conditions on their respective parts to be performed or satisfied hereunder at or prior thereto or if, on or prior to the Closing Date: (i) there shall have been, in the sole judgment of the Initial Purchasers, any material adverse change, or any development involving a material adverse change, in -23- 26 the business, condition (financial or otherwise) or results of operations or business prospects of AmeriSource and its Subsidiaries and Affiliates, taken as a whole, or ARC, except in each case as described in or contemplated by the Offering Memorandum (exclusive of any amendment or supplement thereto), (ii) trading in any securities issued by AmeriSource or its Affiliates, or in securities generally, on the New York Stock Exchange, American Stock Exchange or NASDAQ National Market shall have been suspended or minimum or maximum prices shall have been established on any such exchange, (iii) a banking moratorium shall have been declared by New York, Pennsylvania or United States authorities, or (iv) there shall have been (A) an outbreak or escalation of hostilities between the United States of America and any foreign power, or (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States of America or any other national or international calamity or emergency, or (C) any material change in the financial markets that, in the sole judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Certificates as contemplated by the Offering Memorandum. Termination of this Agreement pursuant to this section (a) shall be without liability of any party to any other party except that the Initial Purchasers shall be entitled to any fees and expenses payable, in each case in accordance with Section 6. (b) If, on the closing date, any of the Initial Purchasers shall fail or refuse to purchase Certificates that it has agreed to purchase hereunder on such date and arrangements satisfactory to the non defaulting Initial Purchasers and the Issuer for the purchase of the Certificates are not made within 36 hours after such default, the Agreement shall terminate without liability on the part of the non defaulting Initial Purchasers or the Issuer. In any such case, either of the non defaulting Initial Purchasers or the Issuer shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Offering Memorandum or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Purchaser under this Agreement. SECTION 12. Information Supplied by the Initial Purchasers. The statements set forth in Schedule III (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to AmeriSource and ARC for purposes of inclusion in the Preliminary Offering Memorandum, the supplements thereto and the Offering Memorandum. -24- 27 SECTION 13. Notices. Unless otherwise provided herein, all notices required under the terms and provisions hereof shall be in writing and either delivered by hand, by mail or by facsimile, and any notice shall be effective when received at the address or facsimile number (as applicable) specified below: If to ARC: AmeriSource Receivables Corporation 300 Chester Field Parkway Malvern, PA 19355 Attention: Kurt J. Hilzinger Facsimile No.: (610) 993-9085 If to AmeriSource: AmeriSource Corporation 300 Chester Field Parkway Malvern, Pennsylvania 19355 Attention: Kurt J. Hilzinger Facsimile No.: (610) 993-9085 If to the Initial Purchasers: BT Securities Corporation 130 Liberty Street New York, New York 10015 Attention: Sebastiano Riva Facsimile No.: (212) 250-7590 with a copy to: BT Securities Corporation 130 Liberty Street New York, New York 10015 Attention: Salvatore Palazzolo Facsimile No.: (212) 250-5063 -25- 28 Bankers Trust International PLC One Appold Street Broadgate London EC2A 2HE England Attention: Paul Sennett Facsimile No.: 011-44-171-982-5814 or at such other address or facsimile number as any party may designate from time to time by notice duly given to the other parties in accordance with the terms of this section. SECTION 14. Successors; Joint or Several Obligations. (a) This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, AmeriSource, ARC and their respective successors and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person, other than the parties hereto, their respective successors and the controlling Persons, Affiliates, directors, officers, employees, agents and representatives referred to in Section 9 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto, their respective successors and said controlling Persons, Affiliates, directors, officers, employees, agents and representatives and their heirs and legal representatives, and for the benefit of no other Person. No purchaser of a beneficial interest in the Certificates from any of the Initial Purchasers will be deemed a successor because of such purchase. (b) It is understood and agreed that (i) the obligations of AmeriSource and ARC under this Agreement are joint and several obligations, and (ii) the obligations of the Initial Purchasers under this Agreement are several but not joint obligations. SECTION 15. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement. SECTION 16. No Petition. Each of the Initial Purchasers covenant and agree that, prior to the date that is one year and one day after the date on which all Certificates are paid in full, it will not institute against, or join any other Person in instituting against, ARC any insolvency proceeding (namely, any proceeding of the type referred to in the definition of Event of Bankruptcy in Appendix A to the Pooling Agreement). The foregoing shall not limit the right of the Initial Purchasers to file any claim in or otherwise take any action with respect to any such insolvency proceeding that was instituted against ARC by any Person other than the Initial Purchasers. -26- 29 SECTION 17. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. SECTION 18. Submission to Jurisdiction. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR PROCEEDING, AND (C) IN THE CASE OF AMERISOURCE AND ARC, IRREVOCABLY APPOINTS THE PROCESS AGENT AS ITS AGENT TO RECEIVE ON BEHALF OF IT AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS THAT MAY BE SERVED IN ANY ACTION OR PROCEEDING. THE SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF THE PROCESS TO AMERISOURCE OR ARC (AS APPLICABLE) IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ADDRESS, AND EACH OF AMERISOURCE AND ARC HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT THE SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE PARTIES ALSO IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO THE PARTIES (AS APPLICABLE) AT THEIR ADDRESSES SPECIFIED HEREIN. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY HERETO TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OR ALL OF THE OTHER PARTIES OR ANY OF THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 19. Amendments. This Agreement may be amended at any time upon the written consent of each of the parties hereto. SECTION 20. Severability of Provisions. If any one or more of the agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then the unenforceable agreements, provisions or terms shall be deemed severable from the remaining agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other agreements, provisions or terms of this Agreement. -27- 30 If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among AmeriSource, ARC and the Initial Purchasers. Very truly yours, AMERISOURCE CORPORATION By: ________________________________ Title: _____________________________ AMERISOURCE RECEIVABLES CORPORATION By: ________________________________ Title: _____________________________ Accepted and agreed to April 11, 1997: BT SECURITIES CORPORATION By: ___________________________________ Authorized Signatory BANKERS TRUST INTERNATIONAL PLC By: ___________________________________ Authorized Signatory BANKERS TRUST AUSTRALIA LIMITED By: ___________________________________ Authorized Signatory 31 SCHEDULE I to Purchase Agreement LITIGATION and OTHER PROCEEDINGS Litigation described under "Special Considerations - Legal Proceedings" in the Offering Memorandum. 32 SCHEDULE II to Purchase Agreement
Principal Amount Name of Initial of Class A Certificate Purchaser to be Purchased Purchase Price - --------------- ----------------------- -------------- BT Securities Corporation $33,000,000 $33,000,000 Bankers Trust International PLC $37,000,000 $37,000,000 Bankers Trust Australia Limited $20,000,000 $20,000,000
33 SCHEDULE III to Purchase Agreement Section 12 of the Purchase Agreement shall refer to the following information in the Offering Memorandum: The last two sentences of the first paragraph and second sentence of the ninth paragraph under the heading PLAN OF DISTRIBUTION and the third sentence under the heading SPECIAL CONSIDERATIONS--Limited Liquidity and Restrictions on Transfer. 34 SCHEDULE IV to Purchase Agreement DEFINED BENEFIT PLANS PLAN E.I.N. P.I.N. AmeriSource Corporation Participating Companies Pension Plan 23-2353106 001 AmeriSource Corporation Toledo Union Employees Pension Plan 23-2353106 011 Walker Drug Company 401(k) Plan 63-0242624 DEFINED CONTRIBUTION PLANS PLAN E.I.N. P.I.N. AmeriSource Corporation Employee Investment Plan 23-2353106 010 AmeriSource Corporation Defined Contribution Plan (frozen) 23-2353106 015 Rita-Ann Distributors, Inc. Pension Plan (frozen) 23-2353106 008 WELFARE BENEFIT PLANS PLAN E.I.N. P.I.N. AmeriSource Corporation Group Life Plan 23-2353106 620 AmeriSource Corporation Group Health Plan 23-2353106 625 AmeriSource Corporation Long Term Disability Plan 23-2353106 635 Walker Drug Company Employee Benefit Plan and Trust 63-0242624 Walker Drug Company Group Term Life, Additional Contribution Life Insurance, Accidental Death and Dismemberment, Long Term Disability 63-0242624 Albers Drug Co. Life AD&D Plan 62-0111400 Albers Drug Co. Life and AD&D Thrift Plan 62-0111400
35 Albers Health Insurance Plan 62-0111400 Albers Inc. and Affiliates Flexible Benefits Plan 62-0111400 EX-3 4 AMENDMENT TO POOLING AND SERVICING AGREEMENT 1 EXHIBIT 3 2 AMENDMENT TO POOLING AND SERVICING AGREEMENT AND RECEIVABLES PURCHASE AGREEMENT dated as of April 17, 1997 among AMERISOURCE RECEIVABLES CORPORATION, AMERISOURCE CORPORATION, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee 3 This AMENDMENT dated as of April 17, 1997 (this "Amendment") is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware corporation, as transferor ("ARC"), AMERISOURCE CORPORATION, a Delaware corporation, as the initial Servicer ("AmeriSource"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as Trustee (in that capacity, together with any successor in that capacity, the "Trustee"). BACKGROUND 1. AmeriSource, ARC and the Trustee (together, the "Original Parties") have entered into the Pooling and Servicing Agreement, dated as of December 13, 1994 and amended prior to the date hereof (as so amended, the "Pooling Agreement"), pursuant to which they agreed to create certain Series and Classes of Certificates; and AmeriSource and ARC have entered into the Receivables Purchase Agreement, dated as of the same date and amended prior to the date hereof (as so amended, the "Purchase Agreement"), pursuant to which AmeriSource agreed to sell and contribute, and ARC agreed to purchase and receive, certain Receivables. 2. AmeriSource and ARC wish to amend the Pooling Agreement and the Purchase Agreement as provided herein, as the Trustee is willing to consent (by its execution hereof) to such amendments subject to the conditions specified herein. NOW, THEREFORE, for good and valuable consideration (the receipt of which is acknowledged) the parties agree as follows: ARTICLE I AMENDMENTS SECTION 1.01 Definitions. Capitalized terms used but not otherwise defined herein have the meanings set forth in Appendix A to the Pooling Agreement. SECTION 1.02 New Definitions. The following new defined terms are added to Appendix A to the Pooling Agreement and the Purchase Agreement, each in the proper alphabetical spot: "Class A Benchmark Percentage" means, with respect to any Obligor, the percentage set forth below for the category of Persons to which such Obligor belongs: (a) 19.8% for any Tier-1 Obligor; 4 (b) 9.9% for (i) any Tier-2 Obligor or (ii) all Receivables owing from any foreign Obligor, payment of which is fully supported by a direct pay letter of credit line is (A) issued by a domestic banking institution rated at least "A" by the Applicable Rating Agencies and (B) assigned to the Trustee; (c) 6.6% for any Tier-3 Obligor; (d) 4.95% for any Tier-4 Obligor; and (e) 3.3% for any Tier-5 Obligor; provided, that ARC may, by notice in any Settlement Statement (and after satisfying the Rating Agency Condition) increase or decrease any Class A Benchmark Percentage. Any change to a Class A Benchmark Percentage may result in a corresponding change to the Class A Concentration Factor and hence in the Minimum Required Reserve Ratio. "Class A Multiplier" means, with respect to any Tier of Obligors set forth below, the number set opposite such Tier:
Tier Multiplier ---- ---------- Tier-1 1 Tier-2 2 Tier-3 3 Tier-4 4 Tier-5 6
"Class B Benchmark Percentage" means, with respect to any Obligor, the percentage set forth below for the category of Persons to which such Obligor belongs: (a) 100% for any Tier-1 Obligor and any Federal Obligor; (b) 100% for (i) any Tier-2 Obligor or (ii) all Receivables owing from any foreign Obligor, payment of which is fully supported by a direct pay letter of credit that is (A) issued by a domestic banking institution rated at least "A" by the Applicable Rating Agencies and (B) assigned to the Trustee; (c) 11% for any Tier-3 Obligor; (d) 5.5% for any Tier-4 Obligor; and (e) 3.66% for any Tier-5 Obligor; page 2 5 provided, that ARC may, by notice in any Settlement Statement (and after satisfying the Rating Agency Condition) increase or decrease any Class B Benchmark Percentage. Any change to a Class B Benchmark Percentage may result in a corresponding change to the Class B Concentration Factor and hence in the Minimum Required Reserve Ratio, as set forth in the definitions thereof. "Class B Multiplier" means, with respect to any Tier of Obligors set forth below, the number set opposite such Tier:
Tier Number ---- ------ 3 1 4 2 5 3
"Measured Class A Obligors" means, at any time: (i) with respect to Tier-1 Obligors, the Tier-1 Obligor that owes the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Class A Incremental Concentration Balance, (ii) with respect to Tier-2 Obligors, the two Tier-2 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Class A Incremental Concentration Balance, (iii) with respect to Tier-3 Obligors, the three Tier-3 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Class A Incremental Concentration Balance, (iv) with respect to Tier-4 Obligors, the four Tier-4 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Class A Incremental Concentration Balance, and (v) with respect to Tier-5 Obligors, the six Tier-5 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Class A Incremental Concentration Balance. "Measured Class B Obligors" means, at any time: (i) with respect to Tier-3 Obligors, the Tier-3 Obligor that owes the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Excess Concentration Balance; page 3 6 (ii) with respect to Tier-4 Obligors, the two Tier-4 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Excess Concentration Balance; and (iii) with respect to Tier-5 Obligors, the three Tier-5 Obligors that owe the highest amount of Eligible Receivables included in the Base Amount, after giving effect to the proviso to the definition of Excess Concentration Balance. "Tier" means a category of Obligors, which category includes all Tier-1 Obligors, all Tier-2 Obligors, all Tier-3 Obligors, all Tier-4 Obligors, or all Tier-5 Obligors, as the context shall indicate. SECTION 1.03 Changes to Definitions. The definitions of "Class A Concentration Factor", "Class A Incremental Concentration Balance", "Class B Concentration Factor" and "Excess Concentration Balance", in Appendix A to the Pooling Agreement and the Purchase Agreement, are amended and restated to read as follows: "Class A Concentration Factor" means, as of any Cut-Off Date, the greatest of the results obtained by multiplying the Class A Benchmark Percentage for each Tier by the Class A Multiplier for such Tier. "Class A Incremental Concentration Balance" means, at any time, the excess, if any, of (a) the sum of the amounts computed with respect to all Obligors pursuant to the following sentence over (b) the sum of the Excess Concentration Balances. The amount to be calculated for purposes of clause (a) with respect to each Obligor (other than any Federal Obligor, for which such amount shall be zero) on any day equals the amount of otherwise Eligible Receivables due from the Obligor that, expressed as a percentage of the Adjusted Eligible Receivables, exceeds the Class A Benchmark Percentage for the category of Persons to which such Obligor belongs; provided that the percentage used to calculate such excess for any Obligor in any Tier may be increased at any time if there is a corresponding decrease in the percentage used to calculate such excess for other Obligors in the same Tier so that the aggregate amount of Eligible Receivables owed by the Measured Class A Obligors of any Tier (expressed as a percentage of Adjusted Eligible Receivables) shall not exceed the product of the Class A Benchmark Percentage for such Tier times the Class A Multiplier for such Tier. "Class B Concentration Factor" means, as of any Cut-Off Date, the greatest of the results obtained by multiplying the Class B Benchmark Percentage for Tier-3 Obligors, Tier- 4 Obligors or Tier-5 Obligors by the Class B Multiplier for such Tier. "Excess Concentration Balance" means, for any Obligor, the aggregate outstanding balances of Eligible Receivables it owes that, expressed as a percentage of Adjusted Eligible Receivables, exceeds the Class B Benchmark Percentage for the category of Persons to which such Obligor belongs; provided that the percentage used to calculate such excess for any Obligor in a Tier may be increased at any time if there is a corresponding decrease in the page 4 7 percentage used to calculate such excess for other Obligors in the same Tier so that the aggregate amount of Eligible Receivables owed by the Measured Class B Obligors of any Tier (expressed as a percentage of Adjusted Eligible Receivables) shall not exceed the product of the Class B Benchmark Percentage for such Tier times the Class B Multiplier for such Tier. SECTION 1.04 Changes to Purchase Agreement. (a) Clause (c) of Section 3.3 of the Purchase Agreement is amended in its entirety to read as follows: (c) third, in such order as ARC may elect, (A) to repay amounts owed by ARC to the Seller under the ARC Note provided, however, that no Liquidation Event or Unmatured Liquidation Event has occurred, (B) to pay amounts owed pursuant to Section 3.1(f), (C) to declare and pay dividends to the Seller to the extent permitted by law, so long as ARC shall be in compliance with Section 7.02(o) of the Pooling Agreement after giving effect to the dividends, or (D) to invest in Eligible Investments, provided that any such Eligible Investment shall have been liquidated within five Business Days and applied by ARC to one of the other purposes specified in this clause third. (b) Clause (h) of Section 6.3 of the Purchase Agreement requiring the Seller to account for the transactions contemplated by the Purchase Agreement as a sale of the Purchased Assets by Seller to ARC is deleted in its entirety. ARTICLE II CONDITIONS, REPRESENTATIONS AND WARRANTIES SECTION 2.01 Conditions Precedent. This Amendment shall be effective from and after the later of (a) April 17, 1997 or (b) the date upon which all of the conditions precedent specified below have been satisfied (the "Effective Date"). The conditions precedent are: (i) The Trustee shall have received from each of AmeriSource and ARC a certificate, dated as of the date hereof, of an Authorized Officer as to: (A) resolutions of its board of directors then in full force and effect authorizing the execution, delivery and performance of this Amendment, (B) the incumbency and signature of those of its officers authorized to act with respect to this Amendment, upon which certificate the Trustee may conclusively rely. page 5 8 (ii) The Trustee shall have received an opinion of counsel to AmeriSource and ARC that the modifications to the Pooling Agreement and the Purchase Agreement made pursuant to this Amendment are legal, valid and binding upon each of AmeriSource and ARC and that such amendments are permitted under the terms of the Pooling Agreement and the Purchase Agreement. (iii) The representations and warranties of AmeriSource and ARC as set forth in the Transaction Documents shall continue to be true and correct, and the Trustee shall have received the certificate of an Authorized Officer of each of AmeriSource and ARC to the effect that the representations and warranties continue to be true and correct. (iv) Pursuant to Section 10.1(a) of the Purchase Agreement and Section 13.01(a) of the Pooling Agreement, ARC shall have delivered this Amendment to the Applicable Rating Agencies at least ten Business Days (or such shorter time as shall be acceptable to each of them) prior to the execution and delivery hereof and the Rating Agency Condition shall have been met. SECTION 2.02 Representations and Warranties. Each of AmeriSource and ARC represents and warrants to the Trustee that: (a) The execution and delivery by it of this Amendment, and the performance of its obligations under the Pooling Agreement and the Purchase Agreement as modified by this Amendment, are within its corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approvals other than Assignment of Claims Act filings (if any shall be required), and other consents or approvals and do not and will not contravene or conflict with, or create any Adverse Claim under, (i) any provision of law, (ii) its constituent documents, (iii) any court or administrative decree applicable to it or (iv) any contractual restriction binding upon it or its property which conflict or adverse claim would have a substantial likelihood of having Material Adverse Affect. (b) This Amendment has been duly executed and delivered by it, and the Pooling Agreement and the Purchase Agreement, as amended, are its legal, valid and binding obligations, enforceable against it in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and by general principles of equity. (c) The warranties made by it in the Pooling Agreement and the Purchase Agreement are true and correct as of the date hereof as though made on that date, except to the extent that the warranties specifically relate to an earlier date. page 6 9 (d) After giving effect to this Amendment, no Liquidation Event or Unmatured Liquidation Event shall have occurred and be continuing. SECTION 2.03 Representations and Warranties of Trustee. The Trustee represents and warrants that: (a) it is a banking corporation organized, existing and in good standing under the laws of the State of New York, (b) it has full power, authority and right to execute, deliver and perform this Amendment, and has taken all necessary action to authorize the execution, delivery and performance by it of this Amendment, and (c) this Amendment has been duly executed and delivered by the Trustee, and is a legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. ARTICLE III MISCELLANEOUS SECTION 3.01 Miscellaneous. (a) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. (b) This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which together shall constitute one and the same agreement. (c) Any reference to the Pooling Agreement or the Purchase Agreement contained in any notice, request, certificate or other document executed concurrently with or after the Effective Date shall be deemed to be a reference to the Pooling Agreement or the Purchase Agreement as amended hereby. Except as expressly modified hereby, the Transaction Documents hereby are ratified and confirmed by the parties hereto. The amended Pooling Agreement, the amended Purchase Agreement and the other Transaction Documents remain in full force and effect. page 7 10 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute this Amendment as of the day and year first above written. AMERISOURCE RECEIVABLES CORPORATION, as transferor By: --------------------------------------------- Title: ---------------------------------------- Address: P.O. Box 1735 Southeastern, Pennsylvania 19399-1735 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 AMERISOURCE CORPORATION, as initial Servicer By: --------------------------------------------- Title: ---------------------------------------- Address: 300 Chester Field Parkway Malvern, Pennsylvania 19355 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 The Trustee joins in this Amendment for purposes of evidencing its consent thereto. MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By: --------------------------------------------- Title: ---------------------------------------- Address: One M&T Plaza Buffalo, New York 14203 Attention: Russell Whitley Telephone: (716) 842-5602 Facsimile: (716) 842-4474 page 8 EX-4 5 SERIES 1997-1 SUPPL. TO POOLING AND SERVICING AGMT 1 EXHIBIT 4 2 SERIES 1997-1 SUPPLEMENT TO POOLING AND SERVICING AGREEMENT dated as of April 17, 1997 among AMERISOURCE RECEIVABLES CORPORATION, as Transferor, AMERISOURCE CORPORATION, as initial Servicer, and MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee AMERISOURCE RECEIVABLES MASTER TRUST $90,000,000 SERIES 1997-1 CERTIFICATES 3 TABLE OF CONTENTS ARTICLE I DEFINITIONS; INCORPORATION OF TERMS OF POOLING AGREEMENT SECTION 1.01 Definitions............................................................ 1 SECTION 1.02 Incorporation of Terms and Conditions of the Pooling Agreement......... 4 ARTICLE II DESIGNATION; TRANSFER RESTRICTIONS SECTION 2.01 Designation............................................................ 4 SECTION 2.02 Form of Certificates................................................... 4 SECTION 2.03 Restrictions on Transfer............................................... 5 ARTICLE III CONDITIONS TO ISSUANCE OF CERTIFICATES SECTION 3.01 Conditions to Issuance................................................. 7 ARTICLE IV PAYMENTS SECTION 4.01 Payments............................................................... 7 SECTION 4.02 Interest............................................................... 7 SECTION 4.03 Principal Payments..................................................... 7 SECTION 4.04 Optional Prepayment; Certain Liquidation Events........................ 8 SECTION 4.05 Application of Payments................................................ 8 ARTICLE V PAY-OUT EVENTS SECTION 5.01 Pay-Out Events......................................................... 9 ARTICLE VI OPTIONAL REPURCHASE OF INVESTOR INTERESTS SECTION 6.01 Optional Repurchase of Investor Interests.............................. 9
4 ARTICLE VII MISCELLANEOUS SECTION 7.01 Governing Law.......................................................... 10 SECTION 7.02 Counterparts........................................................... 10 SECTION 7.03 Severability of Provisions............................................. 10 SECTION 7.04 Amendment, Waiver, Etc................................................. 10 SECTION 7.05 The Trustee............................................................ 11 SECTION 7.06 Instructions in Writing................................................ 11 SECTION 7.07 Certificate to Applicable Rating Agencies.............................. 11 SECTION 7.08 Duff & Phelps.......................................................... 11 SECTION 7.09 Rule 144A.............................................................. 12 SECTION 7.10 ERISA.................................................................. 13 SECTION 7.11 Monthly Reports to Certificateholders.................................. 13
EXHIBITS EXHIBIT A Form of Series 1997-1 Certificate 5 This SERIES 1997-1 SUPPLEMENT, dated as of April 17, 1997 (this "Supplement"), is made among AMERISOURCE RECEIVABLES CORPORATION, a Delaware corporation, as transferor ("ARC"), AMERISOURCE CORPORATION, a Delaware corporation, as the initial Servicer (in that capacity, together with any successor in that capacity, the "Servicer"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, as Trustee (in that capacity, together with any successor in that capacity, the "Trustee"). Pursuant to the Pooling and Servicing Agreement, dated as of December 13, 1994, (as it may be amended, supplemented or otherwise modified from time to time, and as supplemented hereby, the "Pooling Agreement"), among ARC, the Servicer and the Trustee, ARC may from time to time direct the Trustee to issue, on behalf of the Trust, one or more Series of Investor Certificates representing undivided interests in the Trust. Certain terms applicable to a Series are to be set forth in a Supplement. This Supplement is a Supplement as such is defined in the Pooling Agreement. Pursuant to this Supplement, ARC and the Trustee shall create a Series of Fixed Principal Certificates and specify certain of their terms. ARTICLE I DEFINITIONS; INCORPORATION OF TERMS OF POOLING AGREEMENT SECTION 1.01 Definitions. (a) Except as otherwise defined herein, capitalized terms have the meanings that Appendix A to the Pooling Agreement assigns to them, and this Supplement shall be interpreted in accordance with the conventions set forth in Parts B, C and D of that Appendix A. (b) Each capitalized term defined herein relates only to the Series 1997-1 Certificates and to no other Series of Certificates issued by the Trust. Whenever used in this Supplement, the following words and phrases shall have the following meanings: "Accumulation Commencement Date" means the first day of the December 2001 Calculation Period. "Benefit Plan" means a pension, profit sharing or other employee benefit plan subject to ERISA or the Code. "Book-Entry Series 1997-1 Certificates" is defined in Section 2.02(b) of this Supplement. page 1 6 "Cede" means Cede & Co. "CEDEL" means CEDEL, societe anonyme. "Code" means the Internal Revenue Code of 1986, as amended. "DTC" means The Depository Trust Company. "Eligible Institution" means a bank that: (a) has a long-term debt rating of at least "A-1+" or "AAA" by S&P and, if rated by them, a comparable rating from Duff & Phelps, or (b) otherwise is approved by the Applicable Rating Agencies. "Expected Final Payment Date" means the Scheduled Principal Payment Date. "First Principal Payment Date" means the earliest to occur of (i) if the Pay-Out Period for the Series 1997-1 Certificates has commenced due to the occurrence of a Pay-Out Event, the first Distribution Date occurring after the Calculation Period in which such Pay-Out Event occurs, (ii) the first Distribution Date occurring after the commencement of the Liquidation Period, and (iii) the Scheduled Principal Payment Date. "Institutional Accredited Investor" has the meaning given to an institutional "accredited investor" within Rule 5.01(a)(1), (2), (3) or (7) of the Securities Act. "Interest Period" means (a) the period from the Closing Date to the first Distribution Date falling after the Closing Date (b) thereafter, each period from one Distribution Date to the next Distribution Date. "Issuance Date" means the date on which the Series 1997-1 Certificates are issued and authenticated by the Trustee. "LIBOR" means, with respect to any Distribution Date, the rate per annum for deposits in Dollars having a one-month maturity that appears on Telerate Page 3750 as of 11:00 a.m., London time, two London Business Days prior to that Distribution Date (as determined by the Trustee and promptly notified to the Servicer). For purposes of the foregoing, "Telerate Page 3750" means the display page so designated on the Dow Jones Telerate Service (or such other pages as may replace that page on that service or such other service or services as may be nominated by the British Banker's Association for the purpose of displaying London interbank offered rates for Dollar deposits), and "London Business Day" means a day upon which dealings in deposits in Dollars are transacted in the London interbank market. Notwithstanding the foregoing, in the event that no rate for one-month Dollar deposits appears on Telerate Page 3750 on the applicable date for determining LIBOR with respect to any Distribution Date, then LIBOR shall be determined as the arithmetic mean (rounded upwards page 2 7 to the next highest 1/16th of 1%) of the rates at which one-month Dollar deposits are offered to prime banks in the London interbank market by four major banks in that market selected by the Trustee as of the determination date and time specified above. If fewer than two quotations are provided by such banks, then LIBOR shall be determined as the arithmetic mean (rounded upwards as above) of the rates at which one-month loans in Dollars are offered to leading European banks by three major banks in New York City selected by the Trustee as of 11:00 a.m. New York City time on the determination date specified above. "Pay-Out Event" is defined in Section 5.01 of this Supplement. "Pay-Out Period Commencement Date" means, with respect to the Series 1997-1 Certificates (and notwithstanding the definition of this term in the Pooling Agreement) the earlier to occur of the Accumulation Commencement Date and the date on which a Pay-Out Event occurs. "Qualified Institutional Buyer" has the meaning specified in Rule 144A. "Regulation S" means Regulation S under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Sale Date" means, with respect to the Series 1997-1 Certificates, the December, 2002 Distribution Date. "Scheduled Final Payment Date" means, for the Series 1997-1 Certificates, the Sale Date for such Certificates. "Scheduled Principal Payment Date" means for the Series 1997-1 Certificates, the March, 2002 Distribution Date. "Series 1997-1 Certificate Rate" means, with respect to the interest payment to be made on any Distribution Date, LIBOR for the preceding Distribution Date plus 0.20% per annum, calculated on the basis of a 360-day year and the number of days in the Interest Period ending on that Distribution Date. "Series 1997-1 Certificates" means any one of the Class of floating rate and Fixed Principal Certificates executed by ARC and authenticated by or on behalf of the Trustee that is substantially in the form of Exhibit A and is issued pursuant to this Supplement. "Series 1997-1 Initial Invested Amount" means $90,000,000. page 3 8 "Series 1997-1 Invested Amount" means, at any time, the Series 1997-1 Initial Invested Amount reduced (but not below zero) by (a) the aggregate amount of all distributions that have been made to the Holders of Series 1997-1 Certificates on account of the principal of the Series 1997-1 Certificates, (b) the amount of all Investor Allocable Charged-Off Amounts that have been allocated to Series 1997-1 Certificates (net of Investor Net Recoveries that have been allocated to Series 1997-1 Certificates) and (c) the amount of funds on deposit in the Defeasance Account with respect to Series 1997-1 Certificates. SECTION 1.02 Incorporation of Terms and Conditions of the Pooling Agreement. This Supplement hereby incorporates by reference the terms and provisions of the Pooling Agreement as if they were set forth in full herein. As supplemented by this Supplement, the Pooling Agreement is hereby in all respects ratified and confirmed and both together shall be read, taken and construed as one and the same agreement. In the event of any conflict or inconsistency between the terms of this Supplement and the terms of the Pooling Agreement as the terms apply to any of the Series 1997-1 Certificates, the terms of this Supplement shall control with respect to the Series 1997-1 Certificates. ARTICLE II DESIGNATION; TRANSFER RESTRICTIONS SECTION 2.01 Designation. There is hereby created a series of Fixed Principal Certificates to be issued pursuant to the Pooling Agreement and this Supplement to be known as "Series 1997-1 Certificates." Subject to the conditions set forth in Article III, the Trustee shall authenticate and deliver the Series 1997-1 Certificates, to or upon the order of ARC, in an aggregate principal amount equal to the Series 1997-1 Initial Invested Amount. The Series 1997-1 Certificates shall be authenticated and delivered in the manner and at the times for authentication and delivery of Fixed Principal Certificates that are specified in Article VI of the Pooling Agreement. The Series 1997-1 Certificates are a Senior Class. Notwithstanding the terms of Section 6.01 of the Pooling Agreement, the Series 1997-1 Certificates shall be in minimum denominations of $100,000 and in integral multiples thereof. SECTION 2.02 Form of Certificates. (a) Series 1997-1 Certificates sold in reliance on Rule 144A will be represented by permanent 144A Book-Entry Certificates in registered form without interest coupons, which will be deposited with the Trustee on behalf of DTC and registered in the name of Cede as nominee for DTC. (b) Until the 40th day following the later of the commencement of the offering of the Series 1997-1 Certificates and the Issuance Date, Series 1997-1 Certificates sold in offshore transactions in reliance on Regulation S under the Securities Act will be represented by a Regulation S Temporary Book-Entry Certificate in definitive, fully registered form page 4 9 without interest coupons, which will be deposited with the Trustee on behalf of DTC and registered in the name of Cede as nominee for DTC. Transfers of interests in the Regulation S Temporary Book-Entry Certificate only may be made through Euroclear and CEDEL. At the end of such 40-day period, holders of interests in the Regulation S Temporary Book-Entry Certificate will be required to make certain certifications described in Section 6.12 of the Pooling Agreement in order to exchange their interests in the Regulation S Temporary Book-Entry Certificates for interests in Unrestricted Book-Entry Certificates, which shall be in registered form without interest coupons, and which will be deposited upon the order of ARC with the Trustee on behalf of DTC and registered in the name of Cede as nominee for DTC. Beneficial interests in the 144A Book-Entry Certificates, the Regulation S Temporary Book-Entry Certificates and the Unrestricted Book-Entry Certificates (collectively, the "Book-Entry Series 1997-1 Certificates") will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants, including Euroclear and CEDEL. After the initial issuance of such Book-Entry Series 1997-1 Certificates, Series 1997-1 Certificates in certificated form will be issued in exchange for the Book-Entry Series 1997-1 Certificates only as set forth in the Pooling Agreement. (c) Series 1997-1 Certificates sold to Institutional Accredited Investors (other than pursuant to Rule 144A or Regulation S) will be in registered form without coupons. Such Certificates will initially be registered in the name of Cede as nominee for DTC and deposited with the Trustee on behalf of DTC. Beneficial owners of such Certificates, however, may request registration of such Certificates in their names or the names of their nominees. SECTION 2.03 Restrictions on Transfer (a) The Series 1997-1 Certificates have not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to or for the account of any U.S. person (as such terms are defined in Regulation S) except in a transaction that is exempt from or not subject to the registration requirements of the Securities Act. Accordingly, each Series 1997-1 Certificateholder whose interest is represented by a global certificate will be deemed to have represented that it is purchasing the Certificates for its own account or for an account with respect to which it exercises sole investment discretion and that it or such account is (a) a Qualified Institutional Buyer aware that the sale is being made to it in reliance on Rule 144A, (b) an Institutional Accredited Investor or (c) a foreign purchaser that is outside the United States for purposes of Regulation S. (b) Each purchaser of Series 1997-1 Certificates will be deemed to have acknowledged and agreed as follows (terms used in this paragraph that are defined in Rule 144A or Regulation S are used herein as defined therein): (i) The purchaser (x) is (A) a Qualified Institutional Buyer, (B) aware that the sale to it is being made in reliance on Rule 144A and (C) acquiring such Series 1997-1 Certificates for its own account or for the account of a Qualified Institutional Buyer, page 5 10 (y) is a person who is acquiring the Series 1997-1 Certificates in an offshore transaction in accordance with Rule 903 of Regulation S under the Securities Act or (z) is an Institutional Accredited Investor that is, concurrently with its purchase, executing and delivering a letter in the form required by the private placement memorandum for the Series 1997-1 Certificates. (ii) In the case of a purchaser to whom a sale is made pursuant to Rule 144A, it understands that such Series 1997-1 Certificate has not been and will not be registered under the Securities Act, and that (x) if in the future it decides to resell, pledge or otherwise transfer such Series 1997-1 Certificate, such Series 1997-1 Certificate may be resold, pledged or transferred without registration only (A) to a person whom the seller reasonably believes is a Qualified Institutional Buyer in a transaction meeting the requirements under Rule 144A, (B) to certain non-U.S. persons outside the United States in accordance with Rule 904 of Regulation S, (C) to ARC, or (D) pursuant to an effective registration statement under the Securities Act, and in the case of each of the foregoing clauses (A) through (D) in accordance with any applicable securities laws of any State of the United States or any applicable jurisdictions and (y) it will, and each subsequent holder will be required to, notify any purchaser of any Series 1997-1 Certificate from it of the resale restrictions referred to in clause (x) above. (iii) It understands that each Series 1997-1 Certificate will, unless otherwise agreed by ARC and the holder thereof, bear a legend of the type specified in Exhibit A. (c) Each investor that purchases a Series 1997-1 Certificate from any of the Initial Purchasers will be required to certify in writing either that (a) it is not acquiring the Series 1997-1 Certificates for or on behalf of, and will not transfer the Series 1997-1 Certificates to, a Benefit Plan or any entity that includes the assets of any Benefit Plan, or (b) if the foregoing is not the case, that the acquisition and holding of the Series 1997-1 Certificates, and the operations of the Trust (to the extent affected by the acquisition or holding of the Series 1997-1 Certificate by that purchaser) nevertheless will not result in a nonexempt prohibited transaction under ERISA or the Code (in which case the investor will be required to specify the exemption upon which it is relying). Each subsequent purchaser of a Series 1997-1 Certificate (by its purchase of the Series 1997-1 Certificate) will be deemed to have represented and agreed that either (a) it is not acquiring the Series 1997-1 Certificates for or on behalf of, and will not transfer the Series 1997-1 Certificates to, a Benefit Plan or any entity that includes the assets of any Benefit Plan, or (b) if the foregoing is not the case, that the acquisition and holding of the Series 1997-1 Certificates, and the operations of the Trust (to the extent affected by the acquisition or holding of the Series 1997-1 Certificate by that purchaser) nevertheless will not result in a nonexempt prohibited transaction under ERISA or the Code. page 6 11 (d) Transfers of the Series 1997-1 Certificates may only be made in accordance with the Pooling Agreement (including without limitation Section 6.12 thereof). ARTICLE III CONDITIONS TO ISSUANCE OF CERTIFICATES SECTION 3.01 Conditions to Issuance. The Trustee will not authenticate any Series 1997-1 Certificates unless: (a) all conditions to the issuance of the Series 1997-1 Certificates under Section 6.10 of the Pooling Agreement shall have been satisfied, and (b) the Series 1997-1 Certificates shall have been rated "AAA" by S&P and by Duff & Phelps. ARTICLE IV PAYMENTS SECTION 4.01 Payments. Except as expressly provided otherwise in this Supplement, interest and principal shall be distributed in respect of the Series 1997-1 Certificates at the times described in, and in the amounts calculated pursuant to, Articles IV and V of the Pooling Agreement for payments that are to be made with respect to Fixed Principal Certificates. SECTION 4.02 Interest. The Series 1997-1 Certificates shall bear interest on and after the Closing Date at the Series 1997-1 Certificate Rate. Interest with respect to the Series 1997-1 Certificates due but not paid on any Distribution Date will be due on the next Distribution Date with additional interest on such amount at the applicable Certificate Rate plus 2% per annum to the extent permitted by law. For the purpose of calculating interest, Investor Allocable Charged-Off Amounts that were applied on a Settlement Date to reduce Investor Invested Amounts will not be given effect until the next Distribution Date. SECTION 4.03 Principal Payments. On each Business Day during the Pay-Out Period for the Series 1997-1 Certificates (until the Series 1997-1 Invested Amount has been provided for in full), the Servicer shall, pursuant to Section 4.03(g) of the Pooling Agreement, allocate a portion of the Collections available in the Master Collection Account, after making any required transfers to the Carrying Cost Account, to the Series 1997-1 Invested Amount page 7 12 and transfer it to the Defeasance Account. The portion of Collections so allocated and transferred shall equal the balance of collected funds on deposit in the Master Collection Account multiplied by the applicable Defeasance Allocation Percentage. The amounts allocated to the Defeasance Account during each Calculation Period shall be distributed to the Holders of the Series 1997-1 Certificates in accordance with Section 4.05 below on the First Principal Payment Date and on each Distribution Date thereafter. If a Liquidation Period commences while the Series 1997-1 Certificates remain outstanding, principal will be allocated and paid to the Holders of those Certificates in accordance with the terms of Sections 4.03(h) and 5.01 of the Pooling Agreement. SECTION 4.04 Optional Prepayment; Certain Liquidation Events. (a) On any Distribution Date prior to the earlier of the commencement of the Liquidation Period or a Pay-Out Period, ARC shall have the right, upon not less than 35 days' notice to the Trustee, to cause the Series 1997-1 Certificates to be prepaid in full, or in part in a minimum amount of $9,000,000 or in higher integral multiples of $1,000,000, in each case without premium or penalty. The Trustee shall notify the Series 1997-1 Certificateholders to be prepaid within five Business Days of receiving notice of a voluntary prepayment. Commencing upon the date specified in the notice to the Trustee (until an amount equal to the amount to be prepaid has been accumulated), the Servicer shall allocate a portion of the Collections available in the Master Collection Account, after making any required transfers to the Carrying Cost Account, to the Defeasance Account for purposes of the prepayment. The portion of Collections so allocated and transferred shall equal (A) the Defeasance Allocation Percentage for the Series 1997-1 Certificates multiplied by (B) the amount of the available Collections. Any voluntary prepayment shall be made on the later to occur of (x) the Distribution Date specified in the notice of prepayment and (y) the Distribution Date on which sufficient funds have been accumulated in the Defeasance Account. (b) In the event of any partial prepayment of the Series 1997-1 Certificates, the Holders of those Certificates shall be paid their pro rata share of the partial prepayment calculated in accordance with the outstanding principal amount of each Series 1997-1 Certificate as of the related Record Date. SECTION 4.05 Application of Payments. On each Distribution Date prior to the Liquidation Period, the Trustee, acting upon instructions from the Servicer, will make the following distributions to the Series 1997-1 Certificateholders in the following order of priority from amounts available for allocation: (a) to Holders of the Series 1997-1 Certificates, (i) interest accrued on their Certificates during the immediately preceding Interest Period plus (ii) the aggregate amount of shortfalls in distributions of interest to them as provided in clause (i) for all prior Distribution Dates, together with interest thereon at the applicable Certificate Rate during which the shortfall was outstanding plus 2% per annum, and page 8 13 (b) to Holders of the Series 1997-1 Certificates in reduction of the outstanding principal amount of their Certificates, on the First Principal Payment Date and each Distribution Date thereafter until the principal amount of the Series 1997-1 Certificates has been repaid in full, in an amount equal to the lesser of (i) the funds on deposit in the Defeasance Account allocable to the Series 1997-1 Certificates and (ii) the unpaid principal amount of the Series 1997-1 Certificates. If a Liquidation Period commences while the Series 1997-1 Certificates remain outstanding, distributions will be made to the Holders of those Certificates in accordance with the terms of Sections 4.03(h) and 5.01 of the Pooling Agreement. ARTICLE V PAY-OUT EVENTS SECTION 5.01 Pay-Out Events. Any of the following shall be a "Pay-Out Event" with respect to the Series 1997-1 Certificates: (a) the Majority Investors waive a Liquidation Event described in Section 9.01(a), (e), (h) or (k) of the Pooling Agreement, in which case a Pay-Out Event shall be deemed to have occurred automatically unless the occurrence of the Pay-Out Period Commencement Date is waived by Holders of the Series 1997-1 Certificates representing more than 50% of the Series 1997-1 Invested Amount, by notice to the Trustee, ARC and the Servicer, given within the applicable grace period; (b) the Majority Investors do not declare a Liquidation Commencement Date with respect to a Liquidation Event described in Section 9.01(b), (f), (g) or (l) of the Pooling Agreement, and Holders of the Series 1997-1 Certificates representing more than 50% of the Series 1997-1 Invested Amount declare that a Pay-Out Event has occurred; or (c) the Series 1997-1 Invested Amount shall not have been reduced to zero on or prior to the Scheduled Principal Payment Date. ARTICLE VI OPTIONAL REPURCHASE OF INVESTOR INTERESTS SECTION 6.01 Optional Repurchase of Investor Interests. On any Distribution Date occurring during the Liquidation Period or a Pay-Out Period with respect to the Series 1997-1 page 9 14 Certificates on or after the date that the Series 1997-1 Invested Amount is reduced to five percent or less of the initial aggregate principal amount of the Investor Certificates of the Series, ARC shall have the option to repurchase the undivided interests in the Trust Assets represented by the Series 1997-1 Certificates on the Distribution Date. The purchase price will be an amount equal to the Series 1997-1 Invested Amount plus accrued and unpaid interest (and accrued and unpaid interest with respect to interest that was due but not paid on any prior Distribution Date) through the day preceding the Distribution Date at the Certificate Rate applicable to the Series plus the amount of all Investor Allocable Charged-Off Amounts that have been allocated to the Series 1997-1 Certificates (net of Investor Net Recoveries that have been allocated to the Series 1997-1 Certificates). Upon the tender of all of the outstanding Certificates of the Series by the Certificateholders, the Trustee shall distribute the amounts, together with all funds on deposit in the Defeasance Account that are allocable to the Series 1997-1 Certificates, to the Certificateholders of the Series on the next Distribution Date in repayment of the principal amount and accrued and unpaid interest owing to the Certificateholders. Following any repurchase, the Certificateholders of the Series shall have no further rights with respect to the Receivables. In the event that ARC fails for any reason to deposit in the Principal Funding Account the aggregate purchase price for the Series 1997-1 Certificates, payments shall continue to be made to the Certificateholders of the Series in accordance with the terms of the Pooling Agreement and this Supplement. ARTICLE VII MISCELLANEOUS SECTION 7.01 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. SECTION 7.02 Counterparts. This Supplement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which together shall constitute one and the same instrument. SECTION 7.03 Severability of Provisions. If any one or more of the provisions or terms of this Supplement shall for any reason whatsoever be held invalid, then the unenforceable provision(s) or term(s) shall be deemed severable from the remaining provisions or terms of this Supplement and shall in no way affect the validity or enforceability of the other provisions or terms of this Supplement. SECTION 7.04 Amendment, Waiver, Etc. This Supplement may be amended, subject to Section 13.01 of the Pooling Agreement, from time to time by the Servicer, ARC and the page 10 15 Trustee by a written instrument signed by each of them, without the consent of any Holders of the Series 1997-1 Certificates; provided, however, that such action shall not adversely affect in any material respect the interests of any Holder of a Series 1997-1 Certificate; and provided further, that for purposes of this Supplement, any decrease in an applicable Certificate Rate or any postponement of the Scheduled Principal Payment Date shall be deemed to materially adversely affect the interests of a Holder of a Series 1997-1 Certificate. This Supplement also may be amended, modified or waived from time to time by the Servicer, ARC and the Trustee with the consent of the Required Series Holders of the Series 1997-1 Certificates to the extent permitted by Section 13.01 of the Pooling Agreement, and the terms of that section shall apply to any such amendment, modification or waiver. SECTION 7.05 The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplement or for or in respect of the recitals contained herein, all of which recitals are made solely by ARC and the Servicer. SECTION 7.06 Instructions in Writing. All instructions given by the Servicer to the Trustee pursuant to this Supplement shall be in writing, and may be included in a Daily Report or Settlement Statement. SECTION 7.07 Certificate to Applicable Rating Agencies. During the first week of each year, the Trustee shall provide the Applicable Rating Agencies with a certificate, signed by a Responsible Officer, to the effect that the Trustee is not aware of any Liquidation Events. SECTION 7.08 Duff & Phelps. (a) Any reference to S&P in any Transaction Document that relates to the Series 1997-1 Certificates shall be deemed also to refer to Duff & Phelps, and any requirement that a Person's short-term or long-term debt have any rating shall be deemed to include a requirement that, if such Person's short-term or long-term debt has been rated by Duff & Phelps, it has received at least the equivalent rating from Duff & Phelps. (b) Regardless of the terms of any other Transaction Document, for so long as Duff & Phelps rates the Series 1997-1 Certificates: (i) the Trustee, in the case of an entity that is subject to risk-based capital adequacy requirements, shall have risk-based capital of at least $250,000,000 or, in the case of an entity that is not subject to risk-based capital adequacy requirements, a combined capital and surplus of at least $250,000,000; and in either case the Trustee must have a long-term unsecured debt rating of at least "A" from Duff & Phelps or, if not rated by Duff & Phelps, by S&P, page 11 16 (ii) the bank at which the Trust Accounts are located must have a long-term unsecured debt rating of at least "A" rating from Duff & Phelps, or, if not rated by Duff & Phelps, by S&P, (iii) the accounting firm engaged to review AmeriSource's and ARC's financial results and perform the obligations of accountants required by the Transaction Documents shall be one of the accounting firms generally recognized as belonging to the "big 6," (iv) the Servicer will notify Duff & Phelps upon any change in the Trustee ten days before such change becomes effective (or, in the case of involuntary assignments upon merger, when the Servicer obtains actual knowledge, if later); provided, however, that the failure to provide such notice shall not deem such change of Trustee invalid, (v) the Trustee promptly will forward all reports it receives in connection with the Transaction Documents (other than Daily Reports) to Duff & Phelps, (vi) AmeriSource will maintain insurance equivalent to its current crime coverage, so long as such coverage is commercially available, (vii) AmeriSource may not cease to be a Seller under the Purchase Agreement unless the Rating Agency Condition is satisfied in connection with such removal, (viii) within two Business Days of its receipt of a Settlement Statement, the Trustee will verify the mathematical computations contained in such report and shall notify the Servicer and each of the Applicable Rating Agencies of any discrepancies therein, whereupon the Servicer shall deliver to the Applicable Rating Agencies within 5 Business Days thereafter a certificate describing the nature and cause of such discrepancies and the action that the Servicer proposes to take with respect thereto; provided, however, that the above is not to be understood as requiring the Trustee to make an affirmative certification during those months in which the mathematical computations contained in the Settlement Statement are found to be correct, (ix) any Successor Servicer shall be required, in addition to its other obligations, to service the Receivables in accordance with standards of reasonable commercial prudence, and (x) the second line of Section 7.02(n)(ii) of the Pooling Agreement will have added after the word "not" the words "and never has been". page 12 17 SECTION 7.09 Rule 144A. So long as any of the Series 1997-1 Certificates are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, ARC shall, unless it becomes subject to and complies with the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder, provide to any Holder of such restricted securities, or to any prospective purchaser of such restricted securities designated by a Holder, upon the request of such Holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. SECTION 7.10 ERISA. By the acceptance of a Series 1997-1 Certificate, each Holder will be deemed to represent and warrant that either (a) it is not purchasing such Certificate or an interest herein, in whole or in part, with funds that are "plan assets" within the meaning of U.S. Department of Labor Regulation Section 2510.3-101 or (b) if the foregoing is not the case, that the acquisition or holding of such Certificate, and the operation of the Trust (to the extent affected by the acquisition or holding of such Certificate by the Holder), nevertheless will not result in a non-exempt prohibited transaction under ERISA or the Code. SECTION 7.11 Monthly Reports to Certificateholders. Copies of the Settlement Statement delivered pursuant to Section 5.03(a) of the Pooling Agreement shall be provided free of charge by the Trustee to purchasers of beneficial interests in the Series 1997-1 Certificates in connection with the initial distribution thereof and may be obtained free of charge upon request from the Trustee (and presentation of a confirmation evidencing the purchase of such beneficial interest) by subsequent purchasers. page 13 18 IN WITNESS WHEREOF, ARC, the Servicer and the Trustee have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERISOURCE RECEIVABLES CORPORATION, as transferor By: ----------------------------------------- Title: ------------------------------------ Address: P.O. Box 1735 Southeastern, Pennsylvania 19399-1735 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 AMERISOURCE CORPORATION, as initial Servicer By: ----------------------------------------- Title: ------------------------------------ Address: 300 Chester Field Parkway Malvern, Pennsylvania 19355 Attention: Kurt Hilzinger Telephone: (610) 296-4480 Facsimile: (610) 993-9085 MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By: ----------------------------------------- Title: ------------------------------------ Address: One M&T Plaza Buffalo, New York 14203 Attention: Russell Whitley Telephone: (716) 842-5602 page 14 19 Facsimile: (716) 842-4474 page 15 20 EXHIBIT A to the Series 1997-1 Supplement FORM OF SERIES 1997-1 CERTIFICATE [INCLUDE IF CERTIFICATE IS A BOOK-ENTRY CERTIFICATE DEPOSITED WITH DTC OR A CUSTODIAN ON BEHALF OF DTC -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] [INCLUDE IF CERTIFICATE IS A 144A BOOK-ENTRY CERTIFICATE OR CERTIFICATE ISSUED IN EXCHANGE THEREFOR -- THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THE CERTIFICATEHOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE CERTIFICATEHOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, AND WHOM THE CERTIFICATEHOLDER HAS INFORMED, IN EACH CASE, THAT THE OFFER, RESALE, PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT PROVIDES CERTAIN REPRESENTATIONS AND AGREEMENTS TO THE TRUSTEE, AND, IF THE page 1 21 TRUSTEE SO REQUIRES, AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE WITH RESPECT TO THE AVAILABILITY OF SUCH EXEMPTION PRIOR TO THE RESALE OR TRANSFER. WITH RESPECT TO CLAUSES (1), (2) AND (3), SUBJECT TO THE RECEIPT BY THE TRUSTEE OF OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT THE OFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES OF AMERICA OR OTHER APPLICABLE JURISDICTION AND SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE UNITED STATES OF AMERICA. THE CERTIFICATEHOLDER OF THIS CERTIFICATE AGREES THAT IT WILL, AND EACH SUBSEQUENT CERTIFICATEHOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS CERTIFICATE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.] [INCLUDE IF CERTIFICATE IS AN UNRESTRICTED BOOK-ENTRY CERTIFICATE OR CERTIFICATE ISSUED IN EXCHANGE THEREFOR -- THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THE CERTIFICATEHOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.] [INCLUDE IF CERTIFICATE IS A REGULATION S TEMPORARY BOOK-ENTRY CERTIFICATE OR CERTIFICATE ISSUED IN EXCHANGE THEREFOR -- THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THIS CERTIFICATE IS A REGULATION S TEMPORARY BOOK-ENTRY CERTIFICATE WITHIN THE MEANING OF THE POOLING AGREEMENT. THE CERTIFICATEHOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT INTERESTS IN THIS REGULATION S TEMPORARY BOOK-ENTRY CERTIFICATE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXCHANGE DATE (AS DEFINED IN THE POOLING AGREEMENT), AND NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS REGULATION S TEMPORARY BOOK-ENTRY CERTIFICATE MAY BE MADE FOR AN INTEREST IN THE 144A BOOK-ENTRY CERTIFICATE OR IN THE UNRESTRICTED BOOK-ENTRY CERTIFICATE UNTIL AFTER THE LATER OF THE EXCHANGE DATE AND THE DATE ON WHICH CERTAIN CERTIFICATIONS RELATING TO THE INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE POOLING AGREEMENT, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS page 2 22 OF SUCH INTEREST ARE NOT U.S. PERSONS. THE CERTIFICATEHOLDER OF THIS CERTIFICATE AGREES THAT IT WILL, AND EACH SUBSEQUENT CERTIFICATEHOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS CERTIFICATE OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.] [INCLUDE IF THE CERTIFICATE IS A RESTRICTED CERTIFICATE IN DEFINITIVE FORM -- THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN CONTRAVENTION OF THAT ACT. THIS CERTIFICATE WILL BE NOT ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT HAVE BEEN COMPLIED WITH.] AMERISOURCE RECEIVABLES MASTER TRUST SERIES 1997-1 CERTIFICATE CUSIP Number: ________ Initial Stated Amount: $________ Percentage Interest evidenced by this Certificate: ___% THIS CERTIFIES THAT CEDE & CO. is the registered owner of a nonassessable, fully-paid, fractional undivided interest in the AmeriSource Receivables Master Trust (the "Trust") that was created pursuant to (a) the Pooling and Servicing Agreement, dated as of December 13, 1994 (as the same may be amended, supplemented, amended and restated or otherwise modified from time to time, the "Pooling Agreement"), among AmeriSource Receivables Corporation, a Delaware corporation, as transferor ("ARC"), AmeriSource Corporation, a Delaware corporation, as initial Servicer (in such capacity, the "Servicer"), and Manufacturers and Traders Trust Company, a New York banking corporation, as trustee (together with its successors and assigns in such capacity, the "Trustee") and (b) the Supplement dated as of April 17, 1997 relating to the Series 1997-1 Certificates (the "Supplement"). This Certificate is one of the duly authorized Series 1997-1 Certificates designated and issued under the Pooling Agreement and the Supplement. Except as otherwise defined herein, capitalized terms have the meanings that Appendix A to the Pooling Agreement assigns to them. This Certificate is subject to the terms, provisions and conditions of, and is entitled to the benefits afforded by, the Pooling Agreement, to which terms, provisions and conditions the Holder of this Certificate by virtue of the acceptance hereof assents and by which the Holder is bound. The Series 1997-1 Certificates are a Senior Class. page 3 23 The Holder hereof shall and is hereby authorized to record on the grid attached to this Certificate (or at the Holder's option, in its internal books and records) the date and amount of each repayment of the principal amount represented by this Certificate and any reductions to the Stated Amount of this Certificate; provided, however, that failure to make any such recordation on the grid or records or any error in the grid or records shall not adversely affect the Holder's rights with respect to its interest in the assets of the Trust and its right to receive Fixed Principal Yield in respect of the outstanding principal amount of this Certificate. Fixed Principal Yield shall accrue on this Certificate as set forth in the Pooling Agreement and the Supplement. This Certificate is subject to prepayment prior to the maturity hereof to the extent set forth in the Pooling Agreement and the Supplement. The Pooling Agreement and the Supplement may be amended and the rights and obligations of the parties thereto and of the Holder of this Certificate modified as set forth in the Pooling Agreement and the Supplement. Unless the certificate of authentication hereon shall have been executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, this Certificate shall not entitle the Holder hereof to any benefit under the Transaction Documents or be valid for any purpose. This Certificate does not represent a recourse obligation of, or an interest in, ARC, any Seller, the Servicer, the Trustee or any Affiliate of any of them. This Certificate is limited in right of payment to the Trust Assets. As provided in the Pooling Agreement, and subject to the restrictions on sale, transfer and disposition set forth in the Transaction Documents, upon surrender for registration of transfer of this Certificate at any office or agency of the Transfer Agent and Registrar maintained for that purpose, ARC shall execute and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same Class and Series that is/are in authorized denominations of like aggregate fractional interests in the Fixed Principal Interest of the Series 1997-1 Certificates, and that bear(s) a number that is not contemporaneously outstanding. As provided in the Pooling Agreement, and subject to the restrictions on exchange set forth in the Transaction Documents, at the option of the Holder, this Certificate may be exchanged for other Certificates of the same Class and Series of authorized denominations of like aggregate fractional interests in the Fixed Principal Interest of the Series 1997-1 Certificates and bearing numbers that are not contemporaneously outstanding, upon surrender of this Certificate to be exchanged at any such office or agency. If this Certificate is so surrendered for exchange, ARC shall execute, and the Trustee shall authenticate and deliver, the appropriate number of Certificates of the same Class and Series. page 4 24 If this Certificate is presented or surrendered for registration of transfer or exchange, it shall be accompanied by a written instrument of transfer in a form satisfactory to the Trustee and the Transfer Agent and Registrar duly executed by the Holder hereof or his attorney-in-fact duly authorized in a writing delivered to the Transfer Agent and Registrar. By its acceptance of this Certificate, each Holder hereof (a) acknowledges that it is the intent of ARC, and agrees that it is the intent of the Holder that, for Federal, state and local income and franchise tax purposes only, the Investor Certificates (including this Certificate) will be treated as evidence of indebtedness secured by the Trust Assets and the Trust not be characterized as an association taxable as a corporation, (b) agrees to treat this Certificate for Federal, state and local income and franchise tax purposes as indebtedness and (c) agrees that the provisions of the Transaction Documents shall be construed to further these intentions of the parties. This Certificate shall be construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles, and all obligations, rights and remedies under or arising in connection with this Certificate shall be determined in accordance with the laws of the State of New York. IN WITNESS WHEREOF, ARC has caused this Certificate to be executed by its officer thereunto duly authorized. AMERISOURCE RECEIVABLES CORPORATION By: ------------------------------- Title: -------------------------- page 5 25 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Series 1997-1 Certificates referred to in the Pooling Agreement. MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee By: ------------------------------------- Title: -------------------------------- Dated: April 17, 1997 page 6 26 REPAYMENTS OF PRINCIPAL Outstanding Amount Principal Stated Certificate Reduction Repaid Balance Amount Rate Made By Date - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- page 7 27 CALCULATION OF OUTSTANDING PRINCIPAL Notwithstanding the Stated Amount of this Certificate, the outstanding principal amount under this Certificate is as stated below. Outstanding Principal Transfers to Transfers from Amount of this Certificate Certificate Certificate Date - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- page 8 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 9-MOS SEP-30-1997 OCT-01-1997 JUN-30-1997 1 83,925 0 490,626 19,192 795,122 1,385,286 111,167 45,640 1,502,336 964,866 532,335 0 0 271 (6,316) 1,502,336 5,596,578 5,596,578 5,317,065 5,317,065 196,944 3,232 30,966 51,603 20,322 31,281 0 (1,982) 0 29,299 1.21 1.21
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