-----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, VV0ihLRlwd2pVPv1czSunPEzlHCg1F2B1AzYHSLdpeDpc/xm5H2zn4c67yEP8Ffy fo+1zeR6OMfToZ1fhJOx0g== 0000912057-96-022909.txt : 19961017 0000912057-96-022909.hdr.sgml : 19961017 ACCESSION NUMBER: 0000912057-96-022909 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19961016 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORE MARK INTERNATIONAL INC CENTRAL INDEX KEY: 0001024726 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 911295550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-14217 FILM NUMBER: 96644011 BUSINESS ADDRESS: STREET 1: 395 OYSTER POINT BLVD STREET 2: SUITE 415 CITY: SAN FRANCISCO STATE: CA ZIP: 94080 BUSINESS PHONE: 4155899445 MAIL ADDRESS: STREET 1: 395 OYSTER POINT BLVD STREET 2: SUITE 415 CITY: SAN FRANCISCO STATE: CA ZIP: 94080 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CORE-MARK INTERNATIONAL, INC. (Exact name of registrant as specified in the charter) DELAWARE 5194 91-1295550 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization Classification Code Number) Identification No.)
-------------------------- 395 OYSTER POINT BOULEVARD, SUITE 415 SOUTH SAN FRANCISCO, CALIFORNIA 94080 (415) 589-9445 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------------------- LEO F. KORMAN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER CORE-MARK INTERNATIONAL, INC. 395 OYSTER POINT BOULEVARD, SUITE 415 SOUTH SAN FRANCISCO, CALIFORNIA 94080 (415) 589-9445 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- WITH A COPY TO: MITCHELL S. FISHMAN, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE 11 3/8% Senior Subordinated Notes due 2003.................. $75,000,000 100% $76,687,500 $23,239
(1) Determined solely for the purposes of calculating the registration fee in accordance with Rule 457 promulgated under the Securities Act of 1933, as amended and based upon the average of the bid and asked prices on October 10, 1996. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED OCTOBER 16, 1996 PRELIMINARY PROSPECTUS CORE-MARK INTERNATIONAL, INC. [LOGO] OFFER TO EXCHANGE ITS 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS OUTSTANDING 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1996, UNLESS EXTENDED. Core-Mark International, Inc., a Delaware corporation (the "Company") hereby offers to exchange up to $75,000,000 aggregate principal amount of its 11 3/8% Senior Subordinated Notes due 2003 (the "New Notes") for a like principal amount of its 11 3/8% Senior Subordinated Notes due 2003 outstanding on the date hereof (the "Existing Notes" and, together with the New Notes, the "Notes") upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The terms of the New Notes are identical in all material respects to those of the Existing Notes, except for certain transfer restrictions and registration rights relating to the Existing Notes. The New Notes will be issued pursuant to, and entitled to the benefits of, the indenture, dated as of September 27, 1996 (the "Indenture"), between the Company and Bankers Trust Company, as trustee, governing the Existing Notes. The Existing Notes and New Notes outstanding under the Indenture at any time are referred to collectively as the "Notes." The New Notes will be unsecured, will be subordinated to all existing and future Senior Indebtedness (as defined) of the Company and will be effectively subordinated to all obligations of the subsidiaries of the Company. The New Notes will rank PARI PASSU with all future Senior Subordinated Indebtedness (as defined) of the Company and will rank senior to all other subordinated indebtedness of the Company. The Company does not have outstanding, and does not have any firm arrangements to issue, any significant indebtedness that will be subordinated to the Notes and does not have any Senior Subordinated Indebtedness outstanding other than the Existing Notes. The Indenture permits the Company to incur additional indebtedness, including up to $175.0 million of Senior Indebtedness under the Senior Credit Facility (as defined), subject to certain limitations. See "Description of New Notes." As of June 30, 1996, on a pro forma basis, after giving effect to the Recapitalization (as defined) and the issuance of the Existing Notes, the aggregate amount of the Company's outstanding Senior Indebtedness would have been $98.2 million (exclusive of unused commitments), the liabilities of the Company's subsidiaries would have been approximately $12.0 million and the Company would have had no Senior Subordinated Indebtedness outstanding other than the Existing Notes. See "Description of New Notes--Ranking." The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Exchange and Registration Rights Agreement dated September 27, 1996 (the "Registration Rights Agreement") between the Company and Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, as the initial purchasers (the "Initial Purchasers") of the Existing Notes, with respect to the initial sale of the Existing Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date (as defined) for the Exchange Offer. The Company expressly reserves the right to terminate or amend the Exchange Offer and not to accept for exchange any Existing Notes not theretofore accepted for exchange upon the occurrence of any of the events specified under "The Exchange Offer--Conditions to the Exchange Offer." If any such termination or amendment occurs, the Company will notify the Exchange Agent and will either issue a press release or give oral or written notice to the holders of the Existing Notes as promptly as practicable. In the event the Company terminates the Exchange Offer and does not accept for exchange any Existing Notes with respect to the Exchange Offer, the Company will promptly return such Existing Notes to the holders thereof. See "The Exchange Offer." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivery of a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Existing Notes where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. Each of the Company and the Note Guarantors has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Prior to the Exchange Offer, there has been no public market for the Existing Notes. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Existing Notes being tendered for exchange pursuant to the exchange Offer. SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF EXISTING NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER. ------------------------------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1996. (THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.) NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES OR EXISTING NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE EXCHANGE PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. UNTIL , , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. AVAILABLE INFORMATION The Company filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-4 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement") under the Securities Act with respect to the New Notes being offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. For further information with respect to the Company and the New Notes, reference is made to the Registration Statement. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the Registration Statement, each such statement is qualified in all respects by the provisions in such exhibit, to which reference is hereby made. Copies of the Registration Statement may be examined without charge at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the Commission's Regional Offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the Registration Statement can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by the Commission. The Commission maintains a World Wide Web site (http://www.sec.gov) that contains such material regarding issuers that file electronically with the Commission. The Registration Statement has been so filed. The Company is not currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon completion of the Exchange Offer, the Company will be subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file periodic reports and other information with the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of any material so filed can be obtained from the Public Reference Section of the Commission at the address set forth above, upon payment of certain fees prescribed by the Commission. Pursuant to the Indenture, the Company has agreed to provide the Trustee and holders and prospective holders of the Notes with annual, quarterly and other reports at the times and containing in all material respects the information specified in Sections 13 and 15(d) of the Exchange Act and to file such reports with the Commission. 3 SUMMARY THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, THE TERMS THE "COMPANY" OR "CORE-MARK" MEAN, COLLECTIVELY, CORE-MARK INTERNATIONAL, INC. AND ITS SUBSIDIARIES. THE COMPANY The Company, with annual net sales of over $2.0 billion, is one of the two largest broad-line, full-service wholesale distributors of packaged consumer products to the convenience retail industry in North America. The Company's principal customers include traditional and petroleum convenience stores, grocery stores, drug stores, mass merchandisers and liquor stores. The Company offers its customers a wide variety of products--approximately 33,500 SKUs--including cigarettes, candy, snacks, fast food, groceries, health and beauty care products and other general merchandise. The Company's 19 distribution facilities employ state-of-the-art equipment and systems to efficiently serve over 29,000 customer locations throughout the western regions of the United States and Canada. Over the past five years, the Company has invested approximately 50% of its capital expenditures to introduce advanced distribution technology into its warehouse and delivery functions. The Company's sophisticated management information system ("MIS") utilizes proprietary software to integrate order entry, warehouse operations, routing, delivery and accounting. In addition, this advanced MIS allows for the electronic exchange of information with suppliers and customers, improving inventory management and operating efficiency. The Company believes that, principally as a result of its size and its state-of-the-art equipment and MIS capability, it is one of the lowest cost wholesale distributors focused on the convenience retail industry ("Wholesale Distributors"). Wholesale Distributors provide valuable services to both manufacturers of consumer products and convenience retailers. Manufacturers benefit from Wholesale Distributors' broad retail coverage, inventory management and efficient processing of small orders. Wholesale Distributors provide convenience retailers access to a broad product line, the ability to place small quantity orders, inventory management and access to trade credit. In addition, large full-service Wholesale Distributors such as the Company offer retailers the ability to participate in manufacturer-sponsored marketing programs, merchandising and category management services and systems focused on minimizing customers' investment in inventory. Total sales for United States Wholesale Distributors have grown at a compound annual rate of 4.4% over the past five years from approximately $59 billion in 1991 to approximately $70 billion in 1995, according to U.S. DISTRIBUTION JOURNAL, an industry publication. Management believes that this growth reflects: (i) continued strong revenue growth in the convenience store channel; (ii) a shift in cigarette purchases from carton outlets (principally grocery stores) to pack outlets (such as convenience retailers); (iii) an increase in the variety of products sold by convenience stores; and (iv) an expansion of the industry's retail customer base to encompass distribution to channels beyond convenience stores. The Wholesale Distribution industry is highly fragmented and has historically consisted of a large number of small, privately owned businesses and a small number of large, full-service Wholesale Distributors serving multiple geographic regions. Relative to smaller competitors, large distributors such as the Company benefit from several competitive advantages, including purchasing power, the ability to service chain accounts, economies of scale in sales and operations, the ability to spread fixed corporate costs over a larger revenue base and the resources to invest in MIS and other productivity enhancing technology. These factors have led to a consolidation of the Wholesale Distribution industry as companies either exit the industry or are acquired by large distributors seeking to further leverage their existing operations. Based on industry reports and management estimates, the Company believes the number of Wholesale Distributors in the United States has declined from more than 1,500 in 1985 to fewer than 1,000 in 1995. According to U.S. DISTRIBUTION JOURNAL, only ten of these distributors had revenues in 4 excess of $400 million in 1995. Management believes the Company will have significant opportunities to participate in the ongoing consolidation of the industry. BUSINESS STRATEGY The current senior management joined Core-Mark beginning in late 1990 and successfully initiated several measures to increase sales of core operations and enhance productivity and profitability. These measures included: (i) disposing of non-core operations; (ii) increasing the customer base; (iii) decentralizing certain operational responsibilities; (iv) strengthening financial controls; (v) improving operating systems and processes; and (vi) reconfiguring and upgrading facilities. Largely as a result of these initiatives, the Company's net sales and EBITDA increased at compound annual growth rates of 5% and 10%, respectively, from 1991 to 1995. During this same period, the Company also reduced its average monthly working capital (excluding cash and debt) from 5.7% of net sales to 3.0% of net sales. The Company's business strategy is to further increase net sales and improve operating margins. To achieve these goals, the Company intends to: (i) increase sales to existing customers, particularly of higher gross margin, non-cigarette products; (ii) add new customer locations in existing markets, particularly along existing routes; (iii) continue to implement distribution productivity enhancement programs; and (iv) make selective acquisitions. INCREASE SALES TO EXISTING CUSTOMERS. Because the Company generally carries many products that its typical retail store customer purchases from other suppliers, a primary element of its growth strategy is to increase sales to existing customers. The Company's typical customer purchases its products from the Company, from manufacturers who distribute directly to retailers and from a variety of smaller local distributors or jobbers. The Company is particularly focused on replacing local distributors and jobbers in order to increase sales of food, health and beauty care products and general merchandise products, all of which carry higher gross margins than cigarettes (cigarette sales constituted approximately 71% of the Company's net sales in 1995 and approximately 40% of gross profit). As part of this effort, the Company provides compensation incentives to its sales force and a number of value-added services and marketing programs to its customers. These programs include: (i) Convenience 2000-Registered Trademark- (which offers enhanced purchasing power and promotions to small, independent convenience stores); (ii) Smart Sets (which helps ensure that retailers display the right product in the right place); (iii) Profit Builder and Promo Power (regular Company publications which describe new products and manufacturer promotions); and (iv) the recently initiated Tully's To Go-TM- program (which offers retailers high margin fast food products without the franchise fees or ongoing royalty fees of typical franchises). ADD NEW CUSTOMER LOCATIONS IN EXISTING MARKETS. The Company is also seeking to leverage its existing distribution network by securing additional customers on existing routes. With 262 salespersons and 293 route drivers currently serving approximately 29,000 customer locations in 18 states and five Canadian provinces, the Company believes it has many opportunities to add additional customers at low marginal distribution costs. The Company is also beginning to focus on a number of new trade channels, including hotel gift shops, military bases, correctional facilities, college bookstores, movie theaters and video rental stores. In addition, some large retail chains such as Long's and Safeway are beginning to outsource the distribution of certain products that the Company can supply. The Company believes that there is significant opportunity to increase net sales and profitability by adding new customers and maximizing economies of scale. PRODUCTIVITY ENHANCEMENT PROGRAMS. During the past five years, the Company has devoted approximately 50% of its capital expenditures, or approximately $12.0 million, to a variety of productivity enhancement programs. The Company believes these programs were major contributors to a 2.7% per year reduction between 1991 and 1995 in distribution operating expenses per "cube" (or cubic foot of product, a common unit of measurement in Wholesale Distribution), despite annual increases in wages. These productivity enhancement programs include: (i) BOSS, a batch order selection system that increases the efficiency and reduces the cost of full-case order fulfillment; (ii) Pick-to-Light, a paperless 5 picking system that reduces the travel time for the selection of less-than-full-case order fulfillment; (iii) Radio Frequency, a hand-held wireless computer technology that eliminates paperwork and updates inventory receiving and stocking requirements on a real-time basis; (iv) Checker Automation, an on-line order verification system that has significantly reduced labor costs by automating inspection of order accuracy; and (v) fleet management tools such as Roadshow, a software program that optimizes the routing of customer deliveries. The Company intends to continue to pursue cost reductions by completing the roll-out of these and other programs. SELECTIVE ACQUISITIONS. The Wholesale Distribution industry is highly fragmented and comprised mainly of a large number of small, privately held businesses. Management believes that the consolidation that has taken place over the past five years will continue and that numerous attractive acquisition opportunities will arise. Given the current utilization rates of the Company's existing warehouse and distribution facilities as well as the quality of the Company's in-house MIS capability, management believes that a significant amount of incremental revenues can be integrated into the Company's operations without significant additions to fixed costs. The Company's management team has completed two acquisitions since April 1995, representing net sales of approximately $37 million for the six months ended June 30, 1996. The Company is incorporated in Delaware. Its principal executive offices are located at 395 Oyster Point Boulevard, Suite 415, South San Francisco, CA 94080 and its telephone number is (415) 589-9445. TRANSACTIONS RELATED TO THE OFFERING Prior to August 7, 1996, the Company was owned by six members of senior management ("Senior Management") and by three financial institutions (the "Institutional Shareholders"), including The Chase Manhattan Bank ("Chase Bank"), an affiliate of Chase Securities Inc. On August 7, 1996, the Company completed a recapitalization (the "Recapitalization") pursuant to which: 1. Jupiter Partners L.P. ("Jupiter") purchased for $41.3 million in cash newly issued common stock of the Company which, following the Recapitalization, represents 75% of the Company's outstanding common stock. 2. Jupiter purchased from the Company for $18.8 million a subordinated note due 2004 (the "Jupiter Note"). 3. The Company redeemed all of the common stock held by the Institutional Shareholders and a portion of the common stock held by Senior Management for $135.0 million in cash and $6.3 million initial value of subordinated notes due 2004 (the "Management Notes" and, together with the Jupiter Note, the "Existing Subordinated Notes," none of which were issued to the Institutional Shareholders). Of such cash amount, $10.0 million was placed in escrow as a reserve in respect of representations and warranties in connection with the sale of stock to Jupiter. As a result of the Recapitalization, Senior Management owns common stock representing in the aggregate 25% of the outstanding common stock. Such stock would have a value of $13.8 million if valued at the price per share paid by Jupiter for its common stock. In connection with the Recapitalization, the Company entered into a credit facility (the "Senior Credit Facility") with a group of banks led by Chase Bank, which provides for aggregate borrowings of up to $210.0 million, consisting of: (i) a $35.0 million term loan (the "Term Loan"), which was repaid out of the net proceeds of the issuance and sale of the Existing Notes on September 27, 1996 (the "Offering"), and (ii) a revolving credit facility (the "Revolving Credit Facility"), under which borrowings in the amount of up to $175.0 million are available, subject to compliance with a borrowing base, for working capital and general corporate purposes. Simultaneously with the closing of the stock purchase and the redemptions, the Company borrowed $135.0 million under the Senior Credit Facility. The following table sets forth a summary of the sources and uses of funds associated with the Recapitalization as if such transaction had occurred on June 30, 1996. The parties to the Recapitalization considered the aggregate value of the common stock of the Company immediately preceding the 6 Recapitalization to be $155.0 million. In the Recapitalization, Senior Management retained Company common stock representing approximately 8.9% of the total outstanding equity interests prior to the Recapitalization (and representing 25% of the common stock outstanding following the Recapitalization) valued, as described above, at $13.8 million. Therefore, the table below includes such retained common stock at such value as both a source and a use. SOURCES OF FUNDS
AMOUNT ----------- (DOLLARS IN MILLIONS) Term Loan........................................................ $ 35.0 Revolving Credit Facility (1).................................... 110.0 Existing Subordinated Notes (2).................................. 25.0 Sale and Retention of Common Stock (3)........................... 55.0 ----------- Total........................................................ $ 225.0 ----------- -----------
USES OF FUNDS Repurchase and Retention of Common Stock (4)..................... $ 155.0 Repayment of Existing Debt....................................... 62.4 Transaction Fees and Expenses.................................... 7.6 ----------- Total........................................................ $ 225.0 ----------- -----------
- ------------------------ (1) Borrowings of up to $175.0 million under the Revolving Credit Facility will be available, subject to a borrowing base, for working capital and general corporate purposes, including up to $40.0 million for letters of credit. See "Description of Senior Credit Facility." Actual borrowings at the closing of the Recapitalization on August 7, 1996 were $100.0 million because the existing debt actually repaid on August 7, 1996 was less than the amount outstanding on June 30, 1996. (2) Interest on the Existing Subordinated Notes accreted at the rate of 6.73% per annum. (3) Represents the sale of the common stock of the Company to Jupiter for $41.3 million (representing 75% of the outstanding common stock) plus the common stock of the Company retained by Senior Management valued at $13.8 million (representing the remaining 25% of the outstanding common stock). (4) Includes the repurchase of common stock by the Company for $141.3 million (which includes the Management Notes and the $10 million placed into escrow) and the retention of common stock by Senior Management valued at $13.8 million. The net proceeds of the Offering, after deducting estimated expenses incurred in connection with such sale, were approximately $71.8 million. Such net proceeds were used to repay the indebtedness under the Term Loan ($35.0 million principal amount plus accrued interest thereon), which was incurred in connection with the Recapitalization, and the Existing Subordinated Notes ($25.0 million initial value plus accreted interest thereon), which were issued in connection with the Recapitalization. The balance of the net proceeds (approximately $12.3 million) was used to reduce outstanding balances under the Revolving Credit Facility. 7 OWNERSHIP Upon completion of the Recapitalization, Jupiter and Senior Management owned 75% and 25%, respectively, of the common stock of the Company. Jupiter is a private investment firm organized to invest in management buyouts, industry consolidations and late stage venture capital opportunities. Since the firm's inception in 1994, Jupiter has completed six transactions representing a combined investment exceeding $280.0 million. The six members of Senior Management collectively have approximately 155 years of experience in the distribution industry, including experience in acquiring and integrating companies in the distribution industry. See "Management." THE EXCHANGE OFFER Securities Offered........... Up to $75,000,000 aggregate principal amount of 11 3/8% Senior Subordinated Notes due September 15, 2003 (the "New Notes"). The terms of the New Notes and those of the Existing Notes are identical in all material respects, except for certain transfer restrictions relating to the Existing Notes. The Exchange Offer........... The New Notes are being offered in exchange for a like principal amount of Existing Notes. Existing Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Rights Agreement. Expiration Date; Withdrawal The Exchange Offer will expire at 5:00 p.m., New York City of Tender................... time, on , 1996, or such later date and time to which it is extended by the Company. The tender of Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Existing Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Conditions to the Exchange The Exchange Offer is subject to certain customary Offer....................... conditions, which may be waived by the Company. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer--Conditions to the Exchange Offer." Procedures for Tendering Each holder of Existing Notes wishing to accept the Exchange Existing Notes.............. Offer must complete, sign and date a Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Existing Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer--Procedures for Tendering Existing Notes." Use of Proceeds.............. There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. Exchange Agent............... Bankers Trust Company is serving as the Exchange Agent in connection with the Exchange Offer.
8 CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain no action letters issued by the staff of the Commission to third parties in unrelated transactions, the Company believes that New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchases Notes from the Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Existing Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Existing Notes does not exchange such Existing Notes for New Notes pursuant to the Exchange Offer, such Existing Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Existing Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "The Exchange Offer--Consequences of Failure to Exchange; Resales of New Notes." The Existing Notes are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. Following commencement of the Exchange Offer but prior to its consummation, the Existing Notes may continue the be traded in the PORTAL market. Following consummation of the Exchange Offer, the New Notes will not be eligible for PORTAL trading. THE NEW NOTES Issuer....................... Core-Mark International, Inc. Securities Offered........... $75,000,000 principal amount of 11 3/8% Senior Subordinated Notes due 2003. Maturity..................... September 15, 2003. Interest Payment Dates....... March 15 and September 15 of each year, commencing on March 15, 1997. Optional Redemption.......... Except as described below, the Company may not redeem the New Notes prior to September 15, 2000. On or after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to September 15, 1999, the Company may, subject to certain requirements, redeem up to 30% of the original aggregate principal amount of the New Notes with the net cash proceeds of one or more Public Equity Offerings (as defined) by the Company following which
9 there is a Public Market (as defined) at a redemption price equal to 111.375% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, provided that at least 70% of the original aggregate principal amount of the New Notes remain outstanding immediately after each such redemption. See "Description of the New Notes--Optional Redemption." Change of Control............ Upon the occurrence of a Change of Control (as defined) (i) the Company will have the option at any time prior to September 15, 2000 to redeem the New Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined), together with accrued and unpaid interest, if any, to the date of redemption and (ii) if the Company does not redeem the New Notes, or if such Change of Control occurs after September 15, 2000, each holder will have the right to require the Company to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of the New Notes--Change of Control." Ranking...................... The New Notes will be unsecured, will be subordinated to all existing and future Senior Indebtedness (as defined) of the Company and, except as set forth below, will be effectively subordinated to all obligations of the subsidiaries of the Company. The New Notes will rank PARI PASSU with any future Senior Subordinated Indebtedness (as defined) of the Company and will rank senior to all other subordinated indebtedness of the Company. As of June 30, 1996, on a pro forma basis, after giving effect to the Recapitalization and the Offer- ing, the aggregate amount of the Company's outstanding Senior Indebtedness would have been $98.2 million (exclusive of unused commitments), the liabilities of the Company's subsidiaries would have been approximately $12.0 million and the Company would have had no Senior Subordinated Indebtedness outstanding other than the New Notes. The Company has agreed, subject to certain exceptions, not to transfer assets to any subsidiary unless it causes such subsidiary to guarantee the New Notes. Except in such event, the New Notes will be effectively subordinated to the claims of creditors, including trade creditors and preferred shareholders (if any), of the Company's existing subsidiaries and any subsidiary formed by the Company in the future. See "Description of the New Notes-- Ranking." Restrictive Covenants........ The Indenture limits (i) the incurrence of additional indebtedness by the Company, (ii) the payment of dividends on, and redemption of, capital stock of the Company and the redemption of certain subordinated obligations of the Company, (iii) investments, (iv) sales of assets and subsidiary stock, (v) transactions with affiliates, (vi) the creation of liens, (vii) the lines of business in which the Company may operate and (viii) consolidations, mergers and transfers of all or substantially all of the Company's assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. However, all of these limitations and prohibitions are subject to a number of
10 important qualifications and exceptions. See "Description of the New Notes--Certain Covenants." Absence of a Public Market for the New Notes.......... The New Notes are new securities and there is currently no established market for the New Notes. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Company does not intend to apply for listing on a securities exchange of the New Notes. Certain United States Tax Considerations............. Although the matter is not free from doubt, an exchange pursuant to the Exchange Offer should not be treated as an "exchange" or otherwise as a taxable event for federal income tax purposes. See "Certain United States Tax Considerations."
RISK FACTORS Holders of Existing Notes and prospective purchasers of New Notes should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" in connection with the Exchange Offer. 11 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA The following table presents summary historical and pro forma consolidated financial and other data for the Company. These were derived from the more detailed information and financial statements appearing elsewhere in this Offering Memorandum and should be read in conjunction therewith and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." The pro forma financial data assume that the Recapitalization and the Offering occurred on January 1, 1995 for income statement data for the year ended December 31, 1995, on January 1, 1996 for income statement data for the six months ended June 30, 1996, and on June 30, 1996 for balance sheet data. The pro forma financial data do not purport to represent what the Company's financial position or results of operations actually would have been if the Recapitalization and the Offering in fact had occurred at the beginning of the periods indicated or on the date indicated, or purport to project the Company's results of operations or financial position for any future period or at any future date.
UNAUDITED SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER 31, 30, ---------------------------------------------------------- ---------------------- 1991 1992 1993 1994 1995 1995 1996 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT EXPENSE PER CUBE DATA) STATEMENT OF INCOME DATA: Net sales(a)........... $1,688,611 $1,784,852 $1,868,932 $1,855,356 $2,047,187 $ 983,435 $1,068,575 Gross profit........... 114,190 125,559 163,950 135,357 145,583 70,627 78,967 Operating income....... 3,136 10,316 46,539 19,277 20,338 9,949 14,451 Interest expense, net.................. 10,358 5,983 4,887 5,773 6,987 3,759 2,971 Net income (loss)...... (8,202) 3,633 38,684 9,088 6,723 3,140 6,216 OTHER DATA: EBITDA(b).............. $ 20,203 $ 21,848 $ 29,309 $ 24,271 $ 29,696 $ 14,167 $ 18,448 LIFO (income) expense(c)........... 10,227 5,727 (22,967) (547) 3,415 1,133 727 Depreciation and amortization(d)...... 6,840 5,805 5,737 5,541 5,943 3,085 3,270 Capital expenditures... 2,470 4,295 5,501 5,376 7,286 3,256 2,423 Number of employees.... 1,817 1,800 1,885 1,906 2,012 2,085 2,122 Cubes of product distributed(000s)(e)... 15,500 16,161 17,867 19,359 20,550 9,765 11,070 Cubes per employee..... 8,531 8,978 9,479 10,157 10,214 4,683 5,217 Distribution operating expenses(f).......... $ 45,577 $ 46,930 $ 50,541 $ 51,874 $ 54,061 $ 25,968 $ 28,628 Distribution operating expenses per cube.... $ 2.94 $ 2.90 $ 2.83 $ 2.68 $ 2.63 $ 2.66 $ 2.59 PRO FORMA DATA (UNAUDITED): EBITDA................. $ 29,696 $ 18,448 Cash interest expense(g)........... 18,524 8,561 Ratio of EBITDA to cash interest expense(g)........... 1.6x 2.2x
UNAUDITED AS OF DECEMBER 31, AS OF JUNE 30, 1996 ---------------------------------------------------------- ---------------------- 1991 1992 1993 1994 1995 ACTUAL PRO FORMA ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Average net working capital(h)................ $ 96,327 $ 78,290 $ 79,160 $ 72,568 $ 61,341 $ 59,525 $ 60,787 Total assets................ 323,979 318,127 329,855 293,743 324,536 292,594 298,064 Total debt, including current maturities........ 149,445 142,432 127,053 84,627 101,598 62,404 173,204 Total common shareholders' equity (deficit)(i)....... 12,749 9,705 41,137 39,346 87,669 93,951 (10,117)
See Notes to Summary Consolidated Financial and Other Data. 12 NOTES TO SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA (a) In the second quarter of 1995, the Company completed two acquisitions which added approximately $62 million, $21 million and $37 million in net sales for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996, respectively. (b) EBITDA represents operating income plus depreciation, amortization and LIFO expense, and minus LIFO income (each defined below). EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. EBITDA is included because it is one measure used by certain investors to determine a company's ability to service its indebtedness. (c) The Company's U.S. inventories are valued at the lower of cost or market. Cost of goods sold is determined on a last-in, first-out (LIFO) basis using Producer Price Indices as determined by the U.S. Department of Labor Statistics. During periods of price inflation in the Company's product line, the LIFO methodology generally results in the impact of inflation on year end inventories being charged as additional expense to cost of goods sold while lower costs are retained in inventories. Conversely, during periods of price deflation, the LIFO methodology generally results in lower current costs being charged to cost of goods sold while higher costs are retained in inventories. During the year ended December 31, 1993, the Company's U.S. cigarette inventory quantities declined and the wholesale cost of U.S. premium cigarettes significantly declined. These factors resulted in a lower inventory cost being charged to cost of goods sold under the LIFO method of valuation compared to the FIFO method (in an amount of $23.0 million, "LIFO income"). This situation is in contrast to other periods in which the Company has more typically incurred "LIFO expense." See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (d) Depreciation and amortization includes depreciation on property and equipment, amortization of goodwill and other non-cash charges, and excludes amortization of debt refinancing costs. (e) The term "cube" refers to one cubic foot of product, a common unit of measurement in wholesale distribution. (f) Distribution operating expenses include the cost of receiving, warehousing, picking and delivering products purchased by the Company's customers, excluding depreciation and insurance. (g) Pro forma cash interest expense is defined as interest expense exclusive of bank agency fees and amortization of debt issuance costs. The pro forma cash interest calculation assumes (i) the elimination of historical interest expense under the previous credit facility, (ii) interest on the Notes at a rate of 11.375% per annum and (iii) interest on the borrowings under the Senior Credit Facility after giving effect to the Recapitalization and the Offering and the application of the net proceeds therefrom. The borrowings under the previous credit facility and under the Senior Credit Facility bear interest at the same rates, which for purposes of this calculation are 8.5% for 1995 and 8.0% for the six months ended June 30, 1996, the weighted average rates in effect under the previous credit facility during such periods. A 0.5% change in the interest rate under the Senior Credit Facility would result in a $0.5 million change to pro forma cash interest expense for the full year. (h) Average net working capital represents month-end averages of total current assets (excluding cash and cash equivalents) less month-end averages of total current liabilities (excluding current maturities of long-term debt). (i) As a result of the Recapitalization, the Company has a total common shareholders' deficit. In the Recapitalization, Jupiter paid $41.3 million for 75% of the common stock of the Company and Senior Management retained 25% of the common stock of the Company which, based on the price per share paid by Jupiter, had a value of $13.8 million. Thus, the total value of the common stock purchased and retained in the Recapitalization was $55.0 million. In addition, in the Recapitalization the Company repurchased common stock for a total of $141.3 million, consisting of $135.0 million in cash (including $10.0 million placed into escrow) and Existing Subordinated Notes with an initial value of $6.3 million. 13 RISK FACTORS HOLDERS OF EXISTING NOTES AND PROSPECTIVE PURCHASERS OF THE NEW NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS, WHICH MAY AFFECT A DECISION TO ACQUIRE THE NEW NOTES. FOR A DISCUSSION OF CERTAIN POTENTIAL TAX CONSEQUENCES OF SUCH INVESTMENT, SEE "CERTAIN UNITED STATES TAX CONSIDERATIONS." SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS The Company incurred substantial indebtedness in connection with the Recapitalization and the Offering. Following the consummation of the Exchange Offer, the Company will remain significantly leveraged. After giving pro forma effect to the Recapitalization and the Offering and the application of the net proceeds therefrom, at June 30, 1996, the Company's total outstanding indebtedness would have been approximately $173.2 million (exclusive of unused commitments), and the Company would have had a total common stockholders' deficit of $10.1 million. The degree to which the Company is leveraged could have important consequences to holders of the Notes, including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of interest on the Notes and its other existing indebtedness, thereby reducing the funds available to the Company for other purposes; (iii) the agreements governing the Company's long-term indebtedness contain certain restrictive financial and operating covenants which may limit the Company's ability to complete acquisitions and financings and restrict capital expenditures; (iv) the indebtedness under the Senior Credit Facility is at variable rates of interest, which may cause the Company to be vulnerable to increases in interest rates; (v) all of the indebtedness outstanding under the Senior Credit Facility is secured by substantially all the assets of the Company and will become due prior to the time the principal on the Notes will become due; (vi) the Company is substantially more leveraged than certain of its competitors, which might place the Company at a competitive disadvantage; (vii) the Company may be hindered in its ability to adjust rapidly to changing market conditions; and (viii) the Company's substantial degree of leverage could make it more vulnerable in the event of a downturn in general economic conditions or in its business. The Company's ability to pay the interest on and retire principal of the Notes and the Company's indebtedness senior in rank to the Notes ("Senior Indebtedness") is dependent upon its future operating performance, which in turn is subject to general economic conditions and to financial, business and other factors, many of which are beyond the Company's control. In the event that the Company is unable to generate cash flow that is sufficient to service its obligations in respect of the Notes and the Senior Indebtedness, the market value and marketability of the Notes could be significantly adversely affected. Moreover, the Company would be required to adopt one or more alternatives, such as reducing or delaying capital expenditures, attempting to refinance or restructure its indebtedness or selling material assets or operations. There can be no assurance that any of such actions could be effected on satisfactory terms, that they would enable the Company to satisfy its debt service requirements or that they would be permitted by the Senior Credit Facility or the Indenture. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company may be required to refinance all or a portion of the Senior Credit Facility at or prior to its maturity, which is prior to the maturity of the Notes. Potential measures to raise cash may include the sale of assets or equity. However, the Company's ability to raise funds by selling assets is restricted by the Senior Credit Facility, and its ability to effect equity financings is dependent on results of operations and market conditions. In the event that the Company is unable to refinance the Senior Credit Facility or raise funds through asset sales, sales of equity or otherwise, its ability to pay principal of and interest on the Notes would be adversely affected. 14 SUBORDINATION OF NOTES; ASSET ENCUMBRANCE At June 30, 1996, on a pro forma basis, after giving effect to the Recapitalization and the Offering (including the application of net proceeds therefrom), the Company would have had $98.2 million of Senior Indebtedness outstanding (exclusive of unused commitments), all of which would have been incurred under the Senior Credit Facility. The Indenture permits the Company to incur additional Senior Indebtedness, provided certain financial or other conditions are met. The Notes will be subordinated in right of payment to all existing and future Senior Indebtedness, including the principal, premium (if any) and interest with respect to the Senior Indebtedness under the Senior Credit Facility. The Notes will rank PARI PASSU with all future Senior Subordinated Indebtedness of the Company. Except in certain circumstances, the Notes will be effectively subordinated to the claims of creditors, including trade creditors and preferred shareholders (if any), of the Company's existing subsidiaries and any subsidiary formed by the Company in the future. See "Description of the New Notes--Ranking." The Company may not pay principal of, premium on (if any) or interest on the Notes, make any deposit pursuant to defeasance provisions or repurchase or redeem or otherwise retire any Notes (i) if any Senior Indebtedness is not paid when due or (ii) if any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived, any such acceleration has been rescinded or such Senior Indebtedness has been paid in full, except that the Company may pay the Notes upon the approval of the Representative of the relevant Designated Senior Indebtedness (as defined in the Indenture). In addition, if any other default exists with respect to the Designated Senior Indebtedness and certain other conditions are satisfied, the Company may not make any payments on the Notes for up to 179 days. Upon any payment or distribution of the assets of the Company in connection with a total or partial liquidation, dissolution or reorganization of or similar proceeding relating to the Company, the holders of Senior Indebtedness will be entitled to receive payment in full before the holders of the Notes are entitled to receive any payment. See "Description of the New Notes--Ranking." The Notes are unsecured and thus, in effect, will rank junior to any secured indebtedness of the Company. The indebtedness outstanding under the Senior Credit Facility is secured by liens on substantially all of the assets of the Company. The ability of the Company to comply with the provisions of the Senior Credit Facility may be affected by events beyond the Company's control. The breach of any of these covenants could result in a default under the Senior Credit Facility, in which case, depending on the actions taken by the lenders thereunder or their successors or assignees, such lenders could elect to declare all amounts borrowed under the Senior Credit Facility, together with accrued interest, to be due and payable, and the Company could be prohibited from making payments of interest and principal on the Notes until the default is cured or all Senior Indebtedness is paid or satisfied in full. If the Company were unable to repay such borrowings, such lenders could proceed against their collateral. If the indebtedness under the Senior Credit Facility were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full such indebtedness and the other indebtedness of the Company, including the Notes. See "Description of Senior Credit Facility" and "Description of the New Notes--Ranking." RESTRICTIVE LOAN COVENANTS The Senior Credit Facility includes a number of covenants that, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, prepay other indebtedness or amend certain other debt instruments, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by the Company or its subsidiaries, make capital expenditures or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the Senior Credit Facility, the Company is required to comply with specified financial ratios and tests, including minimum interest coverage ratios, maximum 15 leverage ratios, annual capital expenditures limitations, net worth tests and current ratio and EBITDA tests. There can be no assurance that these requirements will be met in the future. If they are not, the holders of the indebtedness under the Senior Credit Facility would be entitled to declare such indebtedness immediately due and payable. See "Description of Senior Credit Facility." DEPENDENCE ON CIGARETTE SALES During the period from 1991 through 1995, approximately 72% of the Company's net sales were derived from sales of cigarettes. Accordingly, any event which adversely affects the consumption of cigarettes in the Company's market area or the convenience retail channel could have a material adverse effect on the Company's results of operations. The unit volume of cigarettes sold in the United States and Canada has declined in recent years. A 1995 report issued by the United States government suggests that, while Americans' consumption of cigarettes stabilized between 1993 and 1994, consumption could ultimately continue to decline in the future if states or the federal government raise taxes and/or restrictions and prohibitions on smoking increase. Additional factors that could cause such decline include reports in the media concerning adverse health effects of smoking and diminishing social acceptance of smoking. The Company is particularly dependent on the leading producers of cigarettes, several of which also produce a variety of food products distributed by the Company. Approximately 28%, 15%, 14% and 9% of the Company's net sales in 1995 were attributable to the sale of products purchased from Philip Morris Incorporated ("Philip Morris"), R.J. Reynolds Tobacco Company ("R.J. Reynolds"), Imperial Tobacco Limited ("Imperial Tobacco") and Brown & Williamson Tobacco Corporation ("Brown & Williamson"), respectively. The loss of or a significant change in the Company's relationships with any of these manufacturers could have a material adverse effect on the Company's business and financial results. ADVERSE REGULATORY DEVELOPMENTS The tobacco industry is currently subject to significant regulatory restrictions, such as the requirement that product packages display warning labels, a prohibition on television and radio advertising and a prohibition on sales to minors. In recent years, proposals have been made for additional federal regulation of tobacco products, including proposals to require additional warning notices, to disallow advertising and promotional expenses as deductions under federal tax law, to impose further restrictions, or a complete ban, on advertising and promotion and to further regulate the production and distribution of cigarettes and smokeless tobacco. In August 1996, the United States Food and Drug Administration (the "FDA") determined that it had jurisdiction over cigarettes and smokeless tobacco products and issued regulations which restrict and limit the sale, distribution and advertising of cigarette and smokeless tobacco products, especially to minors. Included in the regulations are: (1) a federal ban on the sale of cigarettes and smokeless tobacco products to persons under the age of 18 and a requirement that retailers check photo identifications of all persons under age 26; (2) a prohibition against the sale of individual cigarettes or small amounts of smokeless tobacco products; (3) a ban on vending machine sales and self-service displays except in adult establishments; (4) a ban on the distribution of free samples of cigarettes and smokeless tobacco; (5) a limitation on tobacco advertising in all media, other than publications primarily read by adults, to black-and-white, text-only format; and (6) a ban on the sale and distribution of promotional items such as tee shirts and caps with tobacco product logos, and a ban on tobacco product sponsorship of musical, cultural, sports and other events. There can be no assurance that the regulations will not result in a material reduction of the consumption of tobacco products in the United States or will not have a material adverse effect on the Company's business and financial position. 16 The regulations are significant not only because of their content but also because the FDA has concluded that it has jurisdiction over cigarettes and smokeless tobacco as "combination products having both a drug component, including nicotine, and device components." The regulations regulate such products as "devices." Lawsuits have been filed in federal district court in Greensboro, North Carolina by cigarette manufacturers and others challenging the FDA's authority to regulate tobacco products. In addition, a number of bills were introduced during the last session of Congress that would have blocked the FDA from regulating the tobacco industry. If, however, the FDA's assertion of jurisdiction withstands challenge, the FDA might thereby establish its authority to issue regulations restricting the sale of cigarettes and smokeless tobacco products to adults. While no such regulations have been proposed, there can be no assurance they will not be proposed in the future or that any such proposed regulations would not have a material adverse effect on the Company's business and financial position. Over the past decade, various state and local governments have imposed significant regulatory restrictions on tobacco products, including sampling and advertising bans or restrictions, packaging regulations and prohibitions on smoking in restaurants, office buildings and public places. Additional state and local legislative and regulatory actions are being considered and are likely to be promulgated in the future. The Company is unable to assess the future effects that these various proposals may have on the sale of the Company's products. The FDA's regulation of cigarette and smokeless tobacco products would not preempt individual states from issuing more stringent state or local requirements, provided those state or local requirements do not conflict with the final FDA regulations. Any further regulatory restrictions could, among other things, accelerate the decline in the consumption of cigarettes and result in a material adverse effect on the Company. HEALTH LIABILITY AND LITIGATION In recent years, several plaintiffs have sued cigarette manufacturers, alleging that they have suffered lung and oral cancer and other diseases as a result of smoking or environmental tobacco smoke (ETS). Several of these actions purport to be class actions brought on behalf of thousands of claimants. Purported classes include flight attendants alleging personal injury from exposure to ETS in their workplace and individuals claiming to be addicted to cigarettes. In August 1996, a Florida jury awarded damages against a tobacco manufacturer based on a claim of addiction. It is expected that such claims will be asserted against tobacco manufacturers in the future, and there can be no assurance that such claims will not be asserted against the Company in the future. In May 1996, the Court of Appeals for the Fifth Circuit decertified a federal class action purportedly brought on behalf of all cigarette smokers in the United States. Following the decertification, lawyers for the class brought state class action lawsuits in a number of states, with the objective of filing such lawsuits in all fifty states, the District of Columbia and Puerto Rico. Several of these state lawsuits name cigarette distributors such as the Company as defendants. In June 1996, a subsidiary of the Company was named as a defendant in a class action lawsuit filed in state court in New Mexico. The action was later voluntarily dismissed without prejudice in order to permit a realignment of the parties. On September 10, 1996, the New Mexico lawsuit was refiled. A subsidiary of the Company is named as a defendant in the complaint, but has not yet been served. The other defendants include the principal U.S. tobacco manufacturers as well as other distributors. The case is brought on behalf of a putative class of smokers who reside in New Mexico, each of whom is allegedly nicotine dependent. The suit seeks, on behalf of the class, compensatory damages, punitive damages and equitable relief, including medical monitoring of the class members. On October 2, 1996, the Company was served with a summons and complaint in an action brought by the County of Los Angeles against major tobacco manufacturers, the Company and other distributors of tobacco products. The complaint seeks, inter alia, damages and restitution for monies expended by the County for the health care of smokers. 17 The Company does not believe that these actions will have a material adverse effect on the Company's financial condition. In addition to the class actions, a number of individual actions brought by several states are pending against cigarette manufacturers and certain other organizations. The Company has not been named as a defendant in any of these lawsuits. The lawsuits seek reimbursement of expenses incurred by the states for the care of citizens allegedly suffering from tobacco-related injuries, diseases or sickness. In light of the claimed health risks related to the use of cigarettes and other tobacco products, there can be no assurance that product liability claims will not be asserted against the tobacco industry or the Company in the future. Such lawsuits, if asserted against the tobacco industry or the Company and adversely determined, could have a material adverse effect on the Company's business and financial position. The Company carries general liability insurance but self-insures against liability in respect of health-related claims, which management believes is consistent with industry practice. CIGARETTE PRICING POLICIES In 1993, cigarette manufacturers decreased the wholesale price of premium cigarettes by approximately 25%, resulting in a decrease in the value of the Company's inventory of approximately $6.6 million. While the manufacturers reimbursed the Company for the decrease in 1993, cigarette manufacturers could reduce cigarette prices in the future, and there can be no assurance that manufacturers would again reimburse the Company for the resulting decrease in the value of the Company's cigarette inventory. The Company believes that demand for discount cigarettes, including Best Buy-Registered Trademark- (the Company's private label discount cigarette), has declined since 1993 due to the reductions in the differential between premium brand and discount prices as a result of the premium brand price decreases that occurred in that year. Aggressive pricing or marketing actions by any of the tobacco manufacturers may negatively affect the sale of Best Buy-Registered Trademark- products. In addition, demand for Best Buy-Registered Trademark- is highly sensitive to pricing actions by tobacco manufacturers with respect to competitive discount cigarettes. This risk is heightened because the wholesale price of Best Buy-Registered Trademark- to the Company is set by its manufacturer, Philip Morris, which also sells competing premium and discount products. See "Business--Products Distributed." Historically, a substantial portion of the Company's operating profits on cigarettes has been attributable to promotional programs sponsored by cigarette manufacturers. The reduction of these sources of income in the future, without any substitute incentive programs from manufacturers, could have a material adverse effect on the Company's business and financial position. IMPACT OF TOBACCO TAXES The sale of cigarettes is subject to substantial United States federal excise taxes as well as various state and local government excise taxes. In 1993, the Clinton administration proposed a new excise tax on cigarettes of $0.75 per pack, which would have raised the tax from $0.24 per pack to $0.99 per pack, a 300% increase. While that proposal was not adopted by Congress, there remains a possibility that similar proposals to increase federal excise taxes may be put forward in the future. In addition, excise and similar taxes on cigarettes, which are levied on and typically paid by the distributors, are in effect in the 50 states, the District of Columbia and several municipalities. Many states are currently weighing proposals for new excise taxes on tobacco products. For example, $0.25 and $0.40 per pack tax increases were enacted during 1994 and 1995 in Washington and Arizona, respectively. If a number of states or the federal government were to increase excise taxes, there could be a resulting acceleration of the decline in consumption of cigarettes and other tobacco products which could have a material adverse effect on the Company's business and financial position. 18 COMPETITION; LOW MARGINS The convenience retail distribution industry in the United States and Canada is highly competitive. The Company competes in the United States with one large national distribution company, McLane Co. Inc. ("McLane"), which is a subsidiary of Wal-Mart. McLane operates in substantially all of the Company's markets in the United States and has substantially greater financial resources than the Company. In Canada, the Company also faces one large national competitor that competes in each of the markets it serves. In the United States and Canada, the Company also competes with numerous regional and local distribution companies, some of which may be less highly leveraged than the Company and therefore less restricted by operating covenants imposed by lenders and other debt holders. In recent years, the Company has also been faced with competition from warehouse or wholesale clubs, which offer the Company's customers a limited selection of similar products at equivalent or lower prices but generally with limited services. In particular, the wholesale clubs have been aggressive in their promotion and pricing of cigarettes and candy. Competition in the convenience retail distribution industry is based on price and service, and the industry is characterized by high unit volumes and low profit margins. As a result, the Company's success is highly dependent upon effective financial controls, efficient volume purchasing of non-tobacco products and differentiating its services from those of its competitors. DEPENDENCE ON KEY PERSONNEL The Company's future performance is substantially dependent upon the continued services of Senior Management. See "Management." The loss of the services of such persons could have a material adverse effect on the Company's business and financial position. CONTROL BY JUPITER PARTNERS L.P.; CHANGE OF CONTROL Jupiter owns and has the power to vote approximately 75% of the outstanding capital stock of the Company. Accordingly, Jupiter is entitled to elect a majority of the directors of the Company, approve all amendments to the Company's Certificate of Incorporation and effect fundamental corporate transactions such as mergers and asset sales. See "Ownership of Voting Securities." A Change of Control (as defined in the Indenture) could require the Company to refinance substantial amounts of indebtedness. Upon the occurrence of a Change of Control, the holders of the Notes would be entitled to require the Company to repurchase the Notes at a purchase price equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of purchase. However, the Senior Credit Facility prohibits the purchase of the Notes by the Company in the event of a Change of Control, unless and until such time as the indebtedness under the Senior Credit Facility is repaid in full. The Company's failure to purchase the Notes would result in a default under the Indenture and the Senior Credit Facility. The Senior Credit Facility also provides that the indebtedness thereunder becomes due in the event of a "Change in Control" as defined therein. The inability to repay the indebtedness under the Senior Credit Facility, if accelerated, would also constitute an event of default under the Indenture, which could have adverse consequences to the Company and the holders of the Notes. In the event of a Change of Control, there can be no assurance that the Company would have sufficient assets to satisfy all of its obligations under the Senior Credit Facility and the Notes. See "Description of Senior Credit Facility" and "Description of the New Notes--Change of Control." FRAUDULENT CONVEYANCE If the court in a lawsuit brought by an unpaid creditor or representative of creditors, such as a trustee in bankruptcy or the Company as a debtor-in-possession, were to find under relevant federal or state fraudulent conveyance statutes that the Company did not receive fair consideration or reasonably 19 equivalent value for certain of the indebtedness, including the Notes, incurred by the Company in connection with the Recapitalization, and that, at the time of such incurrence, the Company (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence or grant, (iii) was engaged in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, such court, subject to applicable statutes of limitation, could void the Company's obligations under the Notes, subordinate the Notes to other indebtedness of the Company or take other action detrimental to the holders of the Notes. The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction being applied. Generally, however, a company will be considered insolvent for these purposes if the sum of that company's debts is greater than the fair value of all of that company's property, or if the present fair salable value of that company's assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. Moreover, regardless of solvency, a court could void an incurrence of indebtedness, including the Notes, if it determined that such transaction was made with intent to hinder, delay or defraud creditors, or a court could subordinate the indebtedness, including the Notes, to the claims of all existing and future creditors on similar grounds. There can be no assurance as to what standard a court would apply in order to determine whether the Company was "insolvent" upon consummation of the Recapitalization or the sale of the Notes. EXCHANGE OFFER PROCEDURES Issuance of the New Notes in exchange for Existing Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Exchange Agent of such Existing Notes, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of Existing Notes desiring to tender such Existing Notes in exchange for New Notes should allow sufficient time to ensure timely delivery. Neither the Company nor the Exchange Agent is under any duty to give notification of defects or irregularities with respect to the tenders of Existing Notes for exchange. Existing Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer certain registration rights under the Registration Rights Agreement will terminate. RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES Any holder of Existing Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. ADVERSE EFFECT ON MARKET FOR EXISTING NOTES To the extent that Existing Notes are tendered and accepted in the Exchange Offer, the trading market for the untendered and tendered but unaccepted Existing Notes could be adversely affected. See "The Exchange Offer." 20 USE OF PROCEEDS There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. This Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement. The net proceeds available to the Company from the sale of the Existing Notes, after deducting estimated expenses incurred in connection with such sale, were approximately $71.8 million. Such net proceeds were used to repay the indebtedness under the Term Loan ($35.0 million principal amount plus accrued interest thereon), which was incurred in connection with the Recapitalization, and the Existing Subordinated Notes ($25.0 million initial value plus accreted interest thereon), which were issued in connection with the Recapitalization. The balance of the net proceeds (approximately $12.3 million) was used to reduce outstanding balances under the Revolving Credit Facility. As of June 30, 1996, on a pro forma basis after giving effect to the Recapitalization, the Offering and the application of the net proceeds therefrom, availability under the Revolving Credit Facility after taking into account the borrowing base would have been $47.8 million. Such availability may be used for general corporate purposes, which may include future acquisitions. The Company presently does not have any agreements, commitments or arrangements with respect to any proposed material acquisitions and there can be no assurance that any acquisition will be consummated in the future. See "Summary-- Transactions Related to the Offering" and "Description of Senior Credit Facility" for a description of the terms of the indebtedness to be repaid. 21 CAPITALIZATION The following table sets forth, as of June 30, 1996, the capitalization of the Company (i) on an historical basis, (ii) on a pro forma basis to reflect the Recapitalization as if it occurred on such date and (iii) as further adjusted to reflect the Offering as if it occurred on such date. The table should be read in conjunction with the consolidated financial statements of the Company and the notes thereto contained elsewhere in this Offering Memorandum. See also "Summary--Transactions Relating to the Offering," "Use of Proceeds" and "Selected Historical and Pro Forma Consolidated Financial Data."
JUNE 30, 1996 ------------------------------------- PRO FORMA ACTUAL PRO FORMA AS ADJUSTED --------- ----------- ------------- (DOLLARS IN THOUSANDS) Debt: Previous credit facility............................ $ 62,404 $ -- $ -- Revolving Credit Facility........................... -- 110,004 98,204 Term Loan........................................... -- 35,000 -- 11 3/8% Senior Subordinated Notes due 2003.......... -- -- 75,000 Existing Subordinated Notes......................... -- 25,000 -- --------- ----------- ------------- Total debt...................................... 62,404 170,004 173,204 --------- ----------- ------------- Shareholders' equity: Common stock, $.01 par value; 10,000,000 shares authorized; 5,500,000 issued and outstanding (a)............................................... 1 55 55 Additional paid-in capital.......................... 128,350 26,121 26,121 Accumulated deficit (b)............................. (29,574) (31,467) (31,467) Cumulative foreign currency translation adjustments....................................... (1,247) (1,247) (1,247) Additional minimum pension liability................ (3,579) (3,579) (3,579) --------- ----------- ------------- Total shareholders' equity (deficit) (c)........ 93,951 (10,117) (10,117) --------- ----------- ------------- Total capitalization............................ $ 156,355 $ 159,887 $ 163,087 --------- ----------- ------------- --------- ----------- -------------
- ------------------------ (a) Prior to August 7, 1996, there were 100 shares of common stock outstanding and 3,000 shares authorized. As of August 7, 1996, after giving effect to the Recapitalization, there were 35.5 shares of common stock outstanding which were then split on a 155,000 to 1 basis. (b) In connection with the Recapitalization, the Company entered into a new Senior Credit Facility with a group of banks led by The Chase Manhattan Bank. As a result, the Company will expense the unamortized portion of the financing fees associated with its previous credit facility in the third quarter of 1996. This non-cash charge of $1.9 million, after estimated tax benefits, is reflected in the Pro Forma and Pro Forma As Adjusted columns as if the Recapitalization occurred on June 30, 1996. (c) As a result of the Recapitalization, the Company has a total shareholders' deficit. In the Recapitalization, Jupiter paid $41.3 million for 75% of the common stock of the Company and Senior Management retained 25% of the common stock of the Company which, based on the price per share paid by Jupiter, had a value of $13.8 million. Thus, the total value of the common stock purchased and retained in the Recapitalization was $55.0 million. In addition, in the Recapitalization the Company repurchased common stock for a total of $141.3 million, consisting of $135.0 million cash (including $10.0 million placed into escrow) and Existing Subordinated Notes with an initial value of $6.3 million. 22 SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth selected historical and pro forma consolidated financial and other data for the Company. The historical financial data as of the end of and for each year in the five year period ended December 31, 1995 have been derived from the Company's audited consolidated financial statements which have been audited by KPMG Peat Marwick LLP, independent accountants. Such financial statements for the three year period ended December 31, 1995 are included herein together with the report of such accountants thereon. The historical data for the six months ended June 30, 1995 and 1996 and as of June 30, 1996 have been derived from the Company's consolidated financial statements which have not been audited, but reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the information contained herein. Interim results are not necessarily indicative of results to be expected for any fiscal year. The pro forma financial data assume that the Recapitalization and the Offering had occurred on January 1, 1995 for income statement data for the year ended December 31, 1995, on January 1, 1996 for income statement data for the six months ended June 30, 1996, and on June 30, 1996 for balance sheet data. The pro forma financial data do not purport to represent what the Company's financial position or results of operations would actually have been if the Recapitalization and the Offering had occurred at the beginning of the period indicated or on the date indicated, or purport to project the Company's results of operations or financial position for any future period or at any future date. The consolidated financial data set forth below should be read in conjunction with the historical consolidated financial statements of the Company and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations," all contained elsewhere in this Offering Memorandum. 23 SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
UNAUDITED YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ------------------------------------------------------ -------------------------- 1991 1992 1993 1994 1995 1995 1996 ---------- ---------- ---------- ---------- ---------- -------------- ---------- (DOLLARS IN THOUSANDS, EXCEPT EXPENSE PER CUBE DATA) STATEMENT OF INCOME DATA: Net sales (a).................... $1,688,611 $1,784,852 $1,868,932 $1,855,356 $2,047,187 $ 983,435 $1,068,575 Cost of goods sold............... 1,574,421 1,659,293 1,704,982 1,719,999 1,901,604 912,808 989,608 ---------- ---------- ---------- ---------- ---------- -------------- ---------- Gross profit..................... 114,190 125,559 163,950 135,357 145,583 70,627 78,967 Operating and administrative expenses....................... 111,054 115,243 117,411 116,080 125,245 60,678 64,516 ---------- ---------- ---------- ---------- ---------- -------------- ---------- Operating income................. 3,136 10,316 46,539 19,277 20,338 9,949 14,451 Interest expense, net............ 10,358 5,983 4,887 5,773 6,987 3,759 2,971 Debt refinancing costs (b)....... -- -- -- 1,600 1,065 426 635 ---------- ---------- ---------- ---------- ---------- -------------- ---------- Income (loss) before income taxes and cumulative effects of changes in accounting principles..................... (7,222) 4,333 41,652 11,904 12,286 5,764 10,845 Income tax expense............... 980 700 2,472 2,816 5,563 2,624 4,629 ---------- ---------- ---------- ---------- ---------- -------------- ---------- Income (loss) before cumulative effects of changes in accounting principles.......... (8,202) 3,633 39,180 9,088 6,723 3,140 6,216 Cumulative effect of changes in accounting principles for: Income taxes................. -- -- 492 -- -- -- -- Postretirement benefits other than pensions.............. -- -- (988) -- -- -- -- ---------- ---------- ---------- ---------- ---------- -------------- ---------- Net income (loss)................ $ (8,202) $ 3,633 $ 38,684 $ 9,088 $ 6,723 $ 3,140 $ 6,216 ---------- ---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------- ---------- OTHER DATA: EBITDA (c)....................... $ 20,203 $ 21,848 $ 29,309 $ 24,271 $ 29,696 $ 14,167 $ 18,448 LIFO (income) expense (d)........ 10,227 5,727 (22,967) (547) 3,415 1,133 727 Depreciation and amortization (e)............................ 6,840 5,805 5,737 5,541 5,943 3,085 3,270 Capital expenditures............. 2,470 4,295 5,501 5,376 7,286 3,256 2,423 Ratio of earnings to fixed charges (f).................... -- 1.4x 5.8x 2.3x 2.0x 2.0x 3.0 x Number of employees.............. 1,817 1,800 1,885 1,906 2,012 2,085 2,122 Cubes of product distributed (000s) (g)..................... 15,500 16,161 17,867 19,359 20,550 9,765 11,070 Cubes per employee............... 8,531 8,978 9,479 10,157 10,214 4,683 5,217 Distribution operating expenses (h)............................ $ 45,577 $ 46,930 $ 50,541 $ 51,874 $ 54,061 $ 25,968 $ 28,628 Distribution operating expenses per cube....................... $ 2.94 $ 2.90 $ 2.83 $ 2.68 $ 2.63 $ 2.66 $ 2.59 PRO FORMA DATA (UNAUDITED): EBITDA........................... $ 29,696 $ 18,448 Cash interest expense (i) 18,524 8,561 Ratio of EBITDA to cash interest expense (i).................... 1.6x 2.2 x
UNAUDITED AS OF DECEMBER 31, AS OF JUNE 30, 1996 ------------------------------------------------------ -------------------------- 1991 1992 1993 1994 1995 ACTUAL PRO FORMA ---------- ---------- ---------- ---------- ---------- -------------- ---------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Average net working capital (j)............................ $ 96,327 $ 78,290 $ 79,160 $ 72,568 $ 61,341 $ 59,525 $ 60,787 Total assets..................... 323,979 318,127 329,855 293,743 324,536 292,594 298,064 Total debt, including current maturities..................... 149,445 142,432 127,053 84,627 101,598 62,404 173,204 Mandatorily redeemable preferred stock (k)...................... 24,347 29,146 34,890 41,767 -- -- -- Total common shareholders' equity (deficit) (l).................. 12,749 9,705 41,137 39,346 87,669 93,951 (10,117 )
See Notes to Selected Historical and Pro Forma Consolidated Financial and Other Data. 24 NOTES TO SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA (a) In the second quarter of 1995, the Company completed two acquisitions which added approximately $62 million, $21 million and $37 million in net sales for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996, respectively. (b) Debt refinancing costs include all costs associated with restructuring and refinancing debt and amortization of debt issuance costs. (c) EBITDA represents operating income plus depreciation, amortization and LIFO expense, and minus LIFO income (each defined below). EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. EBITDA is included because it is one measure used by certain investors to determine a company's ability to service its indebtedness. (d) The Company's U.S. inventories are valued at the lower of cost or market. Cost of goods sold is determined on a last-in, first-out (LIFO) basis using Producer Price Indices as determined by the U.S. Department of Labor Statistics. During periods of price inflation in the Company's product line, the LIFO methodology generally results in the impact of inflation on year end inventories being charged as additional expense to cost of goods sold while lower costs are retained in inventories. Conversely, during periods of price deflation, the LIFO methodology generally results in lower current costs being charged to cost of goods sold while higher costs are retained in inventories. During the year ended December 31, 1993, the Company's U.S. cigarette inventory quantities declined and the wholesale cost of U.S. premium cigarettes significantly declined. These factors resulted in a lower inventory cost being charged to cost of goods sold under the LIFO method of valuation compared to the FIFO method (in an amount of $23.0 million, "LIFO income"). This situation is in contrast to other periods in which the Company has more typically incurred "LIFO expense." See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (e) Depreciation and amortization includes depreciation on property and equipment, amortization of goodwill and other non-cash charges, and excludes amortization of debt refinancing costs. (f) For the purpose of computing the Company's ratio of earnings to fixed charges, "earnings" represent income (loss) before income taxes and before fixed charges. "Fixed charges" represent interest on all other indebtedness (including amortization of the SFAS No. 15 troubled debt restructuring deferred credit, amortization of debt financing costs and a portion of the operating lease rental expense that is representative of the interest factor therein (deemed to be one-third of rental expense)). For the year ended December 31, 1993, such ratio was significantly impacted by LIFO income of $23.0 million. The Company had a deficiency of earnings to fixed charges in 1991 of $7.2 million. (g) The term "cube" refers to one cubic foot of product, a common unit of measurement in wholesale distribution. (h) Distribution operating expenses include the cost of receiving, warehousing, picking and delivering products purchased by the Company's customers, excluding depreciation and insurance. (i) Pro forma cash interest expense is defined as interest expense exclusive of bank agency fees and amortization of debt issuance costs. The pro forma cash interest calculation assumes (i) the elimination of historical interest expense under the previous credit facility, (ii) interest on the Notes at a rate of 11.375% per annum and (iii) interest on the borrowings under the Senior Credit Facility after giving effect to the Recapitalization and the Offering and the application of the net proceeds therefrom. The borrowings under the previous credit facility and under the Senior Credit Facility bear interest at the same rates, which for purposes of this calculation are 8.5% for 1995 and 8.0% for the six months ended June 30, 1996, the weighted average rates in effect under the previous credit facility during such periods. A 0.5% change in the interest rate under the Senior Credit Facility would result in a $0.5 million change to pro forma cash interest expense for the full year. (j) Average net working capital represents month-end averages of total current assets (excluding cash and cash equivalents) less month-end averages of total current liabilities (excluding current maturities of long-term debt). (k) Series B Preferred Stock, with a $50.0 million stated value and a mandatory redemption date of December 31, 1995, was issued in conjunction with a restructuring in 1991 and was initially recorded at a discounted fair value and accreted through March 1995, at which time it was exchanged, along with warrants owned by the senior lenders, for equity in a holding company that was also owned by management. At that time, the carrying value of the Preferred Stock was reclassified into additional paid-in capital. (l) As a result of the Recapitalization, the Company has a total common shareholders' deficit. In the Recapitalization, Jupiter paid $41.3 million for 75% of the common stock of the Company and Senior Management retained 25% of the common stock of the Company which, based on the price per share paid by Jupiter, had a value of $13.8 million. Thus, the total value of the common stock purchased and retained in the Recapitalization was $55.0 million. In addition, in the Recapitalization the Company repurchased common stock for a total of $141.3 million, consisting of $135.0 million in cash (including $10.0 million placed into escrow) and Existing Subordinated Notes with an initial value of $6.3 million. 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the "Selected Historical and Pro Forma Consolidated Financial Data" and the consolidated financial statements of the Company and notes thereto included elsewhere in this Prospectus. The discussion that follows reflects reported results, and as such does not take into consideration the effects of the Recapitalization and the Offering on results of operations. GENERAL The Company is one of the two largest broad-line, full-service wholesale distributors of packaged consumer products to the convenience retail industry in North America. The products distributed by the Company include cigarettes, food products such as candy, fast food, snacks, groceries and non-alcoholic beverages, and non-food products such as film, batteries and other sundries, health and beauty care products and tobacco products other than cigarettes. In the year ended December 31, 1995, approximately 71%, 20% and 9% of the Company's net sales and approximately 40%, 41% and 19% of the Company's gross profit were derived from cigarettes, food products and non-food products, respectively. Although food and non-food products generally carry higher operating expenses to pick and handle than cigarettes, the Company believes that such products' net contribution to earnings, after expenses, is higher than for cigarettes. In addition, overall gross margins on cigarettes as well as other products are affected not only by wholesale price changes and volumes but also by amounts received under promotional programs offered by the manufacturers, which are recorded as reductions to cost of goods sold. IMPACT OF CIGARETTE PRICING Since 1993, the wholesale price of cigarettes has been affected by a number of factors including the following: "MARLBORO FRIDAY" In August 1993, the United States tobacco industry, led by Philip Morris, reduced the wholesale price of premium cigarettes (e.g., Marlboro, Winston, Salem, etc.) by $4.00 per carton, or approximately 25%. The Company believes the cigarette manufacturers took this action in order to reduce the pricing differential in the United States between premium and discount cigarettes. Following the $4.00 a carton price reduction, the Company immediately reduced the prices charged to its customers for premium cigarettes. In 1993, 1994 and 1995, the Company sold approximately 42 million, 47 million and 54 million cartons, respectively, of premium cigarettes and 20 million, 19 million and 20 million cartons, respectively, of discount cigarettes in the domestic market. REDUCTION OF CANADIAN FEDERAL TAXES In February 1994, the Canadian federal government substantially reduced the federal component of tobacco taxes by approximately U.S. $3.60 on all cartons of cigarettes. This reduction decreased the cost of cigarette products charged to the Company by the cigarette manufacturers, which in turn caused the Company to reduce the prices charged to its customers. In addition, the Company's inventory, trade accounts receivable, and trade accounts payable were reduced. In 1993, 1994 and 1995, the Company sold approximately 14 million, 15 million and 15 million cartons, respectively, of cigarettes in the Canadian market. 26 CIGARETTE PRICE INCREASES Prior to 1993, the United States cigarette manufacturers raised their prices approximately twice per year. During that time, cigarette distributors, including the Company, realized substantial earnings from incremental forward purchases of cigarette inventory prior to each price increase. During 1993, the Company realized substantial earnings from forward buying of cigarettes in advance of price increases. The decision by Philip Morris and other manufacturers to reduce premium cigarette prices in 1993 and their subsequent decision not to raise prices on any category of cigarettes in 1994 eliminated the Company's ability to profit from cigarette price increases. While price increases did occur in 1995 and again in 1996, the impact of these price increases on the Company's profitability was much less than in 1993, as the magnitude of the price increases per carton was smaller. Additionally, the Company's average cigarette inventory levels at the time of the price increases were much lower in 1995 and 1996 than in 1993. For the years ended December 31, 1993, 1994 and 1995 and the six months ended June 30, 1995 and 1996, the Company experienced operating profit attributable to cigarette price increases of $6.5 million, $0.0 million, $1.1 million, $1.1 million and $2.1 million, respectively. IMPACT OF LIFO INVENTORY VALUATION METHOD The Company's U.S. inventories are valued at the lower of cost or market. Cost of goods sold is determined on a last-in, first-out (LIFO) basis using Producer Price Indices as determined by the U.S. Department of Labor Statistics. The Company's Canadian inventories are valued on a first-in, first-out (FIFO) basis. The LIFO method of determining cost of goods sold has had a significant impact on the results of operations, which is quantified separately in the discussion below. During periods of price inflation in the Company's product line, the LIFO methodology generally results in the impact of inflation on year end inventories being charged as additional expenses to cost of goods sold while lower costs are retained in inventories. Historically, increases in the Company's cost of cigarettes resulted from a combination of cost increases by cigarette manufacturers and increases in federal and state excise taxes. During the year ended December 31, 1995 and the six month periods ended June 30, 1995 and 1996, the impact of using the LIFO method increased the cost of goods sold by $3.4 million, $1.1 million, and $0.7 million, respectively. In 1995, cigarette and candy manufacturers increased prices contributing to the LIFO expense of $3.4 million during 1995. For the six months ended June 30, 1995 and 1996, LIFO expense of $1.1 million and $0.7 million, respectively, is primarily the result of increases in cigarette prices during those periods. Conversely, during periods of price deflation, the LIFO methodology generally results in lower current costs being charged to cost of goods sold while higher costs are retained in inventories. In August 1993, U.S. cigarette manufacturers reduced the wholesale price of their premium cigarettes by approximately $4.00 per carton or approximately 25% (see "-- Impact of Cigarette Pricing -- 'Marlboro Friday' "). In addition, the Company's units of cigarette inventory at December 31, 1993 were 18% lower than at December 31, 1992 as a result of greater promotional activity by cigarette manufacturers at year end 1992. The impact of these two factors resulted in LIFO income of $23.0 million for the year ended December 31, 1993. In 1994 there were no cigarette price increases or decreases; however there were net changes in units which contributed to the LIFO income of $0.5 million for the year ended December 31, 1994. CURRENCY FLUCTUATIONS During the period 1993 to 1995, the Canadian dollar weakened against the U.S. dollar, thereby deflating the U.S. dollar value of Canadian revenues in the Company's consolidated financial statements. On average, the Canadian dollar weakened approximately 6% in 1993, 5% in 1994, and less than 27 1% in 1995 from the prior year. The change in the U.S./Canadian exchange rate had no impact on the overall financial results of the Canadian operations as virtually all revenues and expenses are Canadian dollar based. ACQUISITIONS In the second quarter of 1995, the Company acquired two Wholesale Distributors within its existing and contiguous markets: (i) two divisions of Flaks, Inc., with operations in Albuquerque, New Mexico and Denver, Colorado; and (ii) Humboldt Distributors, Inc., with operations in Northern California. These acquisitions were structured as asset purchases of inventory and accounts receivable. The aggregate consideration for these acquisitions was $9.6 million. RESULTS OF OPERATIONS The following table sets forth certain operating results as a percentage of net sales, for the periods indicated:
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, ------------------------------- -------------------- 1993 1994 1995 1995 1996 --------- --------- --------- --------- --------- Net sales......................................................... 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold (a)............................................ 91.2 92.7 92.9 92.8 92.6 --------- --------- --------- --------- --------- Gross profit (b).................................................. 8.8 7.3 7.1 7.2 7.4 Operating and administrative expenses............................. 6.3 6.3 6.1 6.2 6.0 --------- --------- --------- --------- --------- Operating income.................................................. 2.5% 1.0% 1.0% 1.0% 1.4% --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
- ------------------------ (a) LIFO (income) expense is included in cost of goods sold. (b) The Company earned $6.5 million in 1993, $0.0 million in 1994, $1.1 million in 1995, $1.1 million in the six months ended June 30, 1995 and $2.1 million in the six months ended June 30, 1996 from cigarette price increases. The following table sets forth gross profit and operating income as a percentage of net sales, after adjusting for LIFO (income) expense, for the periods indicated:
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, ------------------------------- -------------------- 1993 1994 1995 1995 1996 --------- --------- --------- --------- --------- Gross profit (a).................................................. 8.8% 7.3% 7.1% 7.2% 7.4% LIFO (income) expense............................................. (1.2) 0.0 0.2 0.1 0.1 --------- --------- --------- --------- --------- Adjusted gross profit............................................. 7.6 7.3 7.3 7.3 7.5 Operating and administrative expenses............................. 6.3 6.3 6.1 6.2 6.0 --------- --------- --------- --------- --------- Adjusted operating income......................................... 1.3% 1.0% 1.2% 1.1% 1.5% --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
- ------------------------ (a) The Company earned $6.5 million in 1993, $0.0 million in 1994, $1.1 million in 1995, $1.1 million in the six months ended June 30, 1995 and $2.1 million in the six months ended June 30, 1996 from cigarette price increases. 28 SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 NET SALES. Net sales for the six months ended June 30, 1996 were $1,068.6 million, an increase of $85.1 million or 8.7% compared to the same period in 1995. The increase was due to growth in all product categories of the Company's operations. In the second quarter of 1995, the Company acquired selected assets of two businesses, increasing net sales for the six months ended June 30, 1996 by approximately $16 million compared to the similar period in 1995. Cigarette net sales for the six months ended June 30, 1996 were $744.6 million, an increase of $51.8 million or 7.5% compared to the same period in 1995 as a result of increases in unit volumes and increases in prices of both U.S. and Canadian cigarettes. This increase was also partially due to the acquisitions described above (approximately $11 million). The Company's total cigarette unit sales for the six months ended June 30, 1996 were 45.4 million cartons, an increase of 2.7 million cartons or 6.3% compared to the same period in 1995. Of this increase, 0.7 million cartons were attributable to the acquisitions described above. The total increase reflected increases in unit volume sales of U.S. premium brand cigarettes (which increased by 1.9 million cartons or 7.5%), U.S. discount brand cigarettes (which increased by 0.3 million cartons or 2.6%), and Canadian cigarettes (which increased by 0.5 million cartons, or 6.9%). Net sales of food and non-food products for the six months ended June 30, 1996 were $323.9 million, an increase of $33.4 million or 11.5% compared to the same period in 1995. This increase was partially due to the acquisitions described above (which contributed approximately $5 million) and the Company's focus on increasing food and non-food product sales. The increase primarily occurred in candy sales, which increased $9.6 million or 9.5%, beverage sales, which increased by $4.8 million or 20.4% and general merchandise sales, which increased $4.9 million or 23.8%. GROSS PROFIT. Gross profit for the six months ended June 30, 1996 was $79.0 million, an increase of $8.3 million or 11.8% compared to 1995. For the six months ended June 30, 1996, the Company recognized LIFO expense of $0.7 million compared to $1.1 million for the same period in 1995. The following table illustrates the impact of the LIFO adjustment on the Company's gross profit margin:
1995 1996 ----- ----- Reported gross profit margin.................................................. 7.2% 7.4% Impact of LIFO expense........................................................ 0.1 0.1 -- -- Adjusted gross profit margin.................................................. 7.3% 7.5% -- -- -- --
The adjusted gross profit margin for the six months ended June 30, 1996 increased compared to the same period in 1995 primarily because there was $2.1 million of profits from cigarette price increases or 0.2% of net sales in 1996 compared to $1.1 million of profits from such increases or 0.1% of net sales in 1995. See " -- Impact of Cigarette Pricing -- Cigarette Price Increases." The adjusted gross profit margin on food and non-food sales increased slightly compared to the prior year, primarily as a result of a candy price increase in late 1995. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the six months ended June 30, 1996 were $64.5 million, an increase of $3.8 million or 6.3% compared to 1995. However, such expenses for the six months ended June 30, 1996 decreased to 6.0% of net sales as compared to 6.2% for the same period last year due to relatively flat general and administrative expenses, which are primarily fixed. OPERATING INCOME. As a result of the above, operating income for the six months ended June 30, 1996 was $14.5 million, an increase of $4.5 million or 45.3% as compared to the same period in 1995. As 29 a percentage of net sales, operating income for the six months ended June 30, 1996 was 1.4%, as compared to 1.0% for the same period in 1995. NET INTEREST EXPENSE. Net interest expense for the six months ended June 30, 1996 was $3.0 million, a decrease of $0.8 million or 21.0% compared to the same period in 1995. The net decrease resulted from a reduction in average interest rates and average debt levels. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 NET SALES. Net sales for 1995 were $2,047.2 million, an increase of $191.8 million or 10.3% compared to 1994. The increase was the result of growth in all categories of the Company's operations. Net sales increased by approximately $62 million compared to 1994 due to the acquisition in the second quarter of 1995 of two businesses described above. Cigarette net sales for 1995 were $1,446.7 million, an increase of $147.0 million or 11.3% compared to 1994. Cigarette net sales for 1995 in the U.S. increased in part due to the acquisitions described above which contributed approximately $42 million in net sales or approximately 3.3 million cartons. The Company's total cigarette unit volume in 1995 was 88.9 million cartons, an increase of 8.2 million cartons or 10.2% compared to 1994, reflecting increases in unit volume sales of U.S. premium brand cigarettes (7.3 million cartons or 15.6%) and U.S. discount brand cigarettes (0.9 million cartons or 4.7%), while unit volumes of Canadian cigarettes increased by 0.2%. During 1995, prices of U.S. premium and discount brand cigarettes and Canadian cigarettes increased slightly, contributing to an increase in cigarette net sales. Net sales of food and non-food products in 1995 were $600.5 million, an increase of $44.8 million or 8.1% compared to 1994. Food and non-food net sales in the U.S. increased in part due to the acquisitions described above which contributed approximately $20 million in net sales. The principal components of the total increase in 1995 were candy sales, which increased $13.3 million or 7.0% and beverage products which increased $7.2 million or 16.7%. GROSS PROFIT. Gross profit for 1995 was $145.6 million, an increase of $10.2 million or 7.6%, compared to 1994. The increase was primarily due to increased gross profits from food and non-food product categories. For 1995, the Company recognized LIFO expense of $3.4 million compared to LIFO income of $0.5 million in 1994, and as a result the adjusted gross profit margin in 1995 remained constant compared to 1994. The following table illustrates the impact of the LIFO adjustment on the Company's gross profit margin:
1994 1995 ----- ----- Reported gross profit margin.................................................. 7.3% 7.1% Impact of LIFO (income) expense............................................... 0.0 0.2 -- -- Adjusted gross profit margin.................................................. 7.3% 7.3% -- -- -- --
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for 1995 were $125.2 million, an increase of $9.2 million or 7.9% compared to 1994. Such expenses declined as a percentage of net sales from 6.3% to 6.1%. The decrease as a percentage of net sales was primarily due to a decrease in warehouse and delivery expenses as a percentage of net sales compared to 1994 which was the result of the Company's investment in productivity enhancements. OPERATING INCOME. As a result of the above, operating income for 1995 was $20.3 million, an increase of $1.1 million or 5.5% as compared to 1994. As a percentage of sales, operating income for 1995 was 1.0%, the same as in 1994. 30 NET INTEREST EXPENSE. Net interest expense for 1995 was $7.0 million, an increase of $1.2 million or 21.0% compared to 1994. The net increase resulted from a $0.8 million decrease in cash interest expense offset by a $2.0 million non-cash credit. The decrease in cash interest was due to a reduction in average borrowings due to lower working capital requirements, offset by higher average interest rates in 1995. The non-cash credit of $2.0 million in 1994 related to the 1991 restructuring of the Company's credit facility. As a result of such restructuring, $50.0 million of senior debt was converted into preferred stock and warrants to purchase common stock of the Company. The difference between the face value of the debt converted and the fair value assigned to the preferred stock and warrants was amortized as a reduction of interest expense on an effective yield basis, and amounted to $2.0 million for 1994. DEBT REFINANCING COSTS. The Company successfully completed a refinancing in March 1995. The costs directly related to such refinancing were being amortized over the term of such debt facility. Debt refinancing costs for 1995 were $1.1 million, compared to $1.6 million in 1994. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 NET SALES. Net sales for 1994 were $1,855.4 million, a decrease of $13.6 million or 0.7% compared to 1993. The decrease was primarily due to a decrease in cigarette net sales, partially offset by an increase in food and non-food net sales. Net sales for 1994 as compared to 1993 were negatively influenced by changes in foreign exchange rates. See "-- Currency Fluctuations." Cigarette net sales for 1994 were $1,299.7 million, a decrease of $45.0 million or 3.3% compared to 1993. This was despite a 4.0 million or 5.2% carton increase in the Company's total cigarette unit sales in 1994 compared to 1993. The decrease in cigarette net sales was due to the following factors: (i) a decrease in net sales of Canadian cigarettes of $53.7 million or 11.7% as a result of the February 1994 reduction of U.S. $3.60 per carton in federal taxes on such cigarettes (see "-- Impact of Cigarette Pricing -- Reduction of Canadian Federal Taxes") and negative foreign currency rate fluctuations, offset in part by an increase in unit volume sales of such cigarettes; (ii) an increase in net sales of U.S. premium brand cigarettes of $4.3 million or 0.6% as a result of an increase in unit volume sales of 4.5 million cartons or 10.6% which was substantially offset by the 25% reduction in August 1993 in the wholesale cost of such cigarettes (see "-- Impact of Cigarette Pricing -- 'Marlboro Friday' "); and (iii) an increase in net sales of U.S. discount brand cigarettes of $4.4 million or 2.1% as a result of increases in average prices for such cigarettes, despite a decrease in unit volume sales of such cigarettes of 1.1 million cartons or 5.5%. Net sales of food and non-food products for 1994 were $555.7 million, an increase of $31.4 million or 6.0% compared to 1993. The increase primarily occurred in candy sales, which increased $10.1 million or 5.6% and fast food sales, which increased $6.6 million or 13.9%. GROSS PROFIT. Gross profit for 1994 was $135.4 million, a decrease of $28.6 million or 17.4% compared to 1993. The decrease was attributable in part to much lower LIFO income for 1994 compared to 1993. For 1994, the Company recognized LIFO income of $0.5 million compared to LIFO income of $23.0 million for 1993. The following table illustrates the impact of the LIFO adjustment on the Company's gross profit margin:
1993 1994 ----- ----- Reported gross profit margin................................................... 8.8% 7.3% Impact of LIFO (income) expense................................................ (1.2) 0.0 -- --- Adjusted gross profit margin................................................... 7.6% 7.3% -- -- --- ---
The adjusted gross profit margin for 1994 decreased compared to 1993 primarily because there was $6.5 million of profits from cigarette price increases, or 0.3% of net sales, in 1993, and none in 1994. See "-- Cigarette Price Increases". In addition, the decrease in the adjusted gross profit margin was due 31 to a reduction in overall cigarette gross margins, which was attributable to a shift in the sales mix from higher margin discount cigarettes to lower margin premium cigarettes. These decreases in the adjusted gross profit margin were substantially offset by the 6.0% increase in net sales of food and non-food products, which carry higher gross profit margins than cigarettes. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for 1994 were $116.1 million, a decrease of $1.3 million or 1.1% compared to 1993. However, such expenses for 1994 remained constant at 6.3% of net sales as compared to 1993. OPERATING INCOME. As a result of the above, operating income for 1994 was $19.3 million, a decrease of $27.3 million or 58.6%, as compared to 1993. As a percentage of net sales, operating income for 1994 was 1.0%, as compared to 2.5% for the same period in 1993. NET INTEREST EXPENSE. Net interest expense for 1994 was $5.8 million, an increase of $0.9 million or 18.1% compared to 1993. The net increase resulted from a $0.6 million decrease in cash interest expense offset by a $1.5 million decrease (from $3.5 million in 1993 to $2.0 million in 1994) in the non-cash credit related to the 1991 restructuring of the Company's credit facility. The decrease in cash interest was due to a reduction in average borrowings due to lower working capital requirements, offset by a general increase in interest rates. DEBT REFINANCING COSTS. In 1994, the Company commenced a refinancing strategy that was terminated and the related costs of $1.6 million were expensed in 1994. LIQUIDITY AND CAPITAL RESOURCES Following the consummation of the Offering, the Company's liquidity needs will arise primarily from the funding of its working capital needs, capital expenditure programs and debt service requirements with respect to the Revolving Credit Facility and the Notes. After completion of the Offering, the Company expects to have outstanding approximately $175.0 million of indebtedness, primarily consisting of $75.0 million principal amount of the Notes and approximately $100.0 million of borrowings under the Revolving Credit Facility. On August 7, 1996, in connection with the Recapitalization, the Company replaced its existing credit facility with the Senior Credit Facility. The Senior Credit Facility provides for aggregate borrowings under the Revolving Credit Facility up to $175.0 million until June 30, 2001, subject to borrowing base limitations, based upon eligible levels of cash, accounts receivable, inventories and other assets. The Senior Credit Facility also provides for the $35.0 million Term Loan, which was drawn in its entirety on August 7, 1996, and which was fully repaid with a portion of the proceeds of the Offering. Borrowings under the Senior Credit Facility will bear interest at floating rates based upon the interest rate option selected by the Company. As of June 30, 1996, on a pro forma basis after giving effect to the Recapitalization and the Offering, the amount outstanding under the Revolving Credit Facility would have been $98.2 million, and an additional $47.8 million after taking into account the borrowing base would have been available to be drawn. For a more detailed description of the Senior Credit Facility, see "Description of Senior Credit Facility." The Company made capital expenditures of $5.5 million, $5.4 million, $7.3 million and $2.4 million in 1993, 1994, 1995, and for the six months ended June 30, 1996, respectively. The Company estimates that for the remaining six months of 1996, approximately $5.0 million of capital expenditures will be required. The Company's principal sources of liquidity are net cash provided by operating activities and its Revolving Credit Facility. For the six months ended June 30, 1996, net cash provided by operating activities was $30.0 million as compared to $28.6 million for the same period in 1995. This improvement was principally driven by a $4.5 million operating income increase for the first six months of 1996 as compared to the 1995 period, offset by changes in net working capital. During the fiscal year ended December 31, 1995, net cash provided by operating activities was $12.5 million compared to $54.7 32 million in 1994. Net cash flow provided by operating activities reflects, in part, changes in working capital. At year end, the Company typically builds inventories to maintain its LIFO position, which inventories are then liquidated in future periods. Therefore, net cash provided by operating activities is typically lower at the end of any fiscal year compared to interim periods. Net cash provided by operating activities in 1994 was positively impacted by a management decision to reduce inventories, principally cigarette inventories, by $24.2 million. The Company also benefited in 1994 from improved management of trade accounts receivable, reducing balances in 1994 by $6.7 million or 7.4% and a large increase in trade payables at December 31, 1994, which was primarily a timing benefit. For the six months ended June 30, 1995, $9.6 million was invested in the acquisition of two businesses, primarily consisting of inventory and receivables. See "--Acquisitions." IMPACT OF TOBACCO TAXES State and provincial tobacco taxes represent a significant portion of the Company's net sales and cost of goods sold attributable to cigarettes and other tobacco products. During 1995, such taxes on cigarettes represented approximately 26% of cigarette net sales in the U.S. and 48% in Canada. Under current law, almost all state and Canadian provincial taxes are payable by the Company under credit terms which, on the average, exceed the credit terms the Company has approved for its customers to pay for products which include such taxes. This practice has benefited the Company's cash flow. If the Company were required to pay such taxes at the time such obligation is incurred without the benefit of credit terms, the Company would incur a substantial permanent increase in its working capital requirements. Consistent with industry practices, the Company has secured a bond to guarantee its tax obligations to those states requiring such a surety (a majority of states in the Company's operating areas). INFLATION Historically, cigarette products have experienced higher inflation compared to the Company's other products. However, during 1993, cigarettes experienced significant price deflation. Following increases or decreases in prices with respect to any of the Company's products, the Company generally adjusts its selling prices, in order to maintain its gross profit, and therefore, inflation and deflation generally do not have a material impact on the Company's gross profit. During the past several years, low levels of overall inflation and resulting low interest rates have benefited the Company's results of operations because of the Company's high degree of leverage. If interest rates increase (as a result of increased inflation or otherwise), the Company could be adversely affected. See "Risk Factors--Substantial Leverage and Debt Service Obligations." FEDERAL NET OPERATING LOSSES At December 31, 1995, the Company had available for U.S. federal income tax return purposes net operating losses approximating $32.0 million, subject to certain limitations, which will expire between the years 2005 and 2007. NEW ACCOUNTING STANDARDS The Company adopted Statement of Financial Accounting Standard (SFAS) No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, effective January 1, 1993. Adoption of SFAS No. 106 resulted in a one-time charge to net income in 1993 of approximately $1.0 million, which represents the discounted present value of expected future retiree health benefits attributed to employee service rendered prior to that date. 33 The Company adopted SFAS No. 109, ACCOUNTING FOR INCOME TAXES, effective January 1, 1993. Under the asset and liability method required by SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company has reported the cumulative effect from the change in the method of accounting for income taxes in its consolidated results of operations for 1993, which had the impact of increasing consolidated net income by approximately $0.5 million. 34 THE EXCHANGE OFFER GENERAL The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), to exchange up to $75,000,000 aggregate principal amount of New Notes for a like aggregate principal amount of Existing Notes properly tendered on or prior to the Expiration Date and not withdrawn as permitted pursuant to the procedures described below. The Exchange Offer is being made with respect to all of the Existing Notes: the total aggregate principal amount of Existing Notes and New Notes will in no event exceed $75,000,000. As of the date of this Prospectus, $75.0 million aggregate principal amount of the Existing Notes was outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about , 1996, to all holders of Existing Notes known to the Company. The Company's obligation to accept Existing Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "--Conditions to the Exchange Offer" below. PURPOSE OF THE EXCHANGE OFFER The Existing Notes were issued by the Company on September 27, 1996 in a transaction exempt from the registration requirements of the Securities Act. Accordingly, the Existing Notes may not be reoffered, resold, or otherwise transferred in the United States unless so registered or unless an applicable exemption from the registration and prospectus delivery requirements of the Securities Act is available. In connection with the issuance and sale of the Existing Notes, the Company entered into an Exchange and Registration Rights Agreement, dated as of September 27, 1996 (the "Registration Rights Agreement"), which requires the Company to use its best efforts to file on or before November 11, 1996 (45 days after the date of issuance of the Existing Notes) a registration statement relating to the Exchange Offer (or a shelf registration statement relating to resales of the Existing Notes) and to cause the registration relating to the Exchange Offer or the shelf registration statement to become effective on or before January 10, 1997 (105 days after the date of issuance of the Existing Notes). The Exchange Offer is being made by the Company to satisfy its obligations with respect to the Registration Rights Agreement. Based on no-action letters issued by the staff of the Commission to third parties in unrelated transactions, the Company believes that the New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchases Notes from the Company to resell pursuant to Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. Any holder of Existing Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Thus, any New Notes acquired by such holders will not be freely transferable except in compliance with the Securities Act. See "--Consequences of Failure to Exchange; Resale of New Notes." 35 EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT The Exchange Offer will expire at 5:00 P.M., New York City time, on December , 1996, unless the Company, in its sole discretion, has extended the period of time for which the Exchange Offer is open (such date, as it may be extended, is referred to herein as the "Expiration Date"). The Expiration Date will be at least 20 business days after the commencement of the Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. In addition, the Company has agreed in the Registration Rights Agreement to keep the Exchange Offer open for not less than 30 days after the date that notice thereof is first mailed to the holders of the Existing Notes. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open (provided that the Exchange Offer will not be extended beyond the one hundred twentieth day following the commencement thereof), and thereby delay acceptance for exchange of any Existing Notes, by giving oral notice (promptly confirmed in writing) or written notice to Bankers Trust Company of New York (the "Exchange Agent") and by giving written notice of such extension to the holders thereof or by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a release through the Dow Jones News Service, in each case, no later than 9:00 A.M. New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Existing Notes previously tendered will remain subject to the Exchange Offer unless properly withdrawn. In addition, the Company expressly reserves the right to terminate or amend the Exchange Offer and not to accept for exchange any Existing Notes not theretofore accepted for exchange upon the occurrence of any of the events specified below under "--Conditions to the Exchange Offer." If any such termination or amendment occurs, the Company will notify the Exchange Agent and will either issue a press release or give oral or written notice to the holders of the Existing Notes as promptly as practicable. For purposes of the Exchange Offer, a "business day" means any day other than Saturday, Sunday or a date on which banking institutions are required or authorized by New York State law to be closed, and consists of the time period from 12:01 A.M. through 12:00 midnight, New York City time. PROCEDURES FOR TENDERING EXISTING NOTES The tender to the Company of Existing Notes by a holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. A holder of Existing Notes may tender the same by (i) properly completing and signing the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the Existing Notes being tendered and any required signature guarantees, to the Exchange Agent at its address set forth below on or prior to the Expiration Date (or complying with the procedure for book-entry transfer described below) or (ii) complying with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Existing Notes surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Existing Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the amount of an 36 Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a clearing agency, an insured credit union, a savings association or a commercial bank or trust company having an office or correspondent in the United States (collectively, "Eligible Institutions"). If Existing Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Existing Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. The Exchange Agent will make a request within two business days after the date of receipt of this Prospectus to establish accounts with respect to the Existing Notes at the book-entry transfer facility, The Depository Trust Company, for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of Existing Notes by causing such book-entry transfer facility to transfer such Existing Notes into the Exchange Agent's account with respect to the Existing Notes in accordance with the book-entry transfer facility's procedures for such transfer. Although delivery of Existing Notes may be effected through book-entry transfer into the Exchange Agent's account at the book-entry transfer facility, an appropriate Letter of Transmittal with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. If a holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or Existing Note to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if the Exchange Agent has received at its address set forth below on or prior to the Expiration Date a letter, telegram or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the names in which the Existing Notes are registered and, if possible, the certificate numbers of the Existing Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three business days after the Expiration Date the Existing Notes in proper form for transfer (or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the book-entry transfer facility), will be delivered by such Eligible Institution together with a properly completed and duly executed Letter of Transmittal (and any other required documents). Unless Existing Notes being tendered by the above-described method are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents), the Company may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent. A tender will be deemed to have been received as of the date when (i) the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Existing Notes (or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the book-entry transfer facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) from an Eligible Institution is received by the Exchange Agent. Issuances of New Notes in exchange for Existing Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the Letter of Transmittal (and any other required documents) and the tendered Existing Notes. 37 All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Existing Notes tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Existing Notes not properly tendered or to not accept any particular Existing Notes which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Existing Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Existing Notes for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Existing Notes for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal is signed by a person or persons other than the registered holder or holders of Existing Notes, such Existing Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders appear on the Existing Notes. If the Letter of Transmittal or any Existing Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. By tendering, each holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, that neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker-dealer that receives New Notes for its own account in exchange for Existing Notes, where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." WITHDRAWAL RIGHTS Tenders of Existing Notes may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal sent by telegram, facsimile transmission (receipt confirmed by telephone) or letter must be received by the Exchange Agent prior to the Expiration Date at its address set forth below. Any such notice of withdrawal must (i) specify the name of the person having tendered the Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing Notes to be withdrawn (including the certificate number or numbers and principal amount of such Existing Notes), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Existing Notes were tendered or as otherwise described above (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee under the Indenture register the transfer of such Existing Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Existing Notes are to be registered, if different from that of the depositor. All questions as to the validity, form and eligibility (including time of 38 receipt) of such notices will be determined by the Company in its sole discretion, which determination will be final and binding on all parties. Any Existing Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Existing Notes wthich have been tendered for exchange and which are properly withdrawn will be returned to the holder thereof without cost to such holder as soon as practicable after such withdrawal. Properly withdrawn Existing Notes may be retendered by following one of the procedures described under "--Procedures for Tendering Existing Notes" above at any time on or prior to the Expiration Date. ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Existing Notes properly tendered and will issue the New Notes promptly after acceptance of the Existing Notes. See "--Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Existing Notes for exchange when, as and if the Company has given oral and written notice thereof to the Exchange Agent. For each Existing Note accepted for exchange, the holder of such Existing Note will receive a New Note having a principal amount equal to that of the surrendered Existing Note. In all cases, issuance of New Notes for Existing Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Existing Notes or a timely Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Existing Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Existing Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Existing Notes will be returned without expense to the tendering holder thereof (or, in the case of Existing Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such non-exchanged Existing Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration of the Exchange Offer. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Existing Notes and may terminate or amend the Exchange Offer if at any time before the acceptance of such Existing Notes for exchange or the exchange of the New Notes for such Existing Notes any of the following events shall occur: (i) any injunction, order or decree shall have been issued by any court or any governmental agency that would prohibit, prevent or otherwise materially impair the ability of the Company to proceed with the Exchange Offer; or (ii) the Exchange Offer shall violate any applicable law or any applicable interpretation of the staff of the Commission. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 39 In addition, the Company will not accept for exchange any Existing Notes tendered, and no New Notes will be issued in exchange for any such Existing Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939 (the "TIA"). In any such event the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. The Exchange Offer is not conditioned upon any minimum principal amount of Existing Notes being tendered for exchange. EXCHANGE AGENT Bankers Trust Company has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows:
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc. Reorganization Unit Corporate Trust and Agency Group Corporate Trust and Agency Group P.O. Box 292737 Receipt & Delivery Window Reorganization Unit Nashville, TN 37229-2737 4 Albany Street 648 Grassmere Park Road New York, NY 10006 Nashville, TN 37211 For information, call: (800) 735-7777 Confirm: (615) 835-3572 Fax: (615) 835-3701
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. Bankers Trust Company also acts as Trustee under the Indenture. SOLICITATION OF TENDERS; FEES AND EXPENSES The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred by the Company in connection with the Exchange Offer will be paid by the Company. The estimated cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be approximately $ , which includes fees and expenses of the Exchange Agent, Trustee, registration fees, accounting, legal, printing and related fees and expenses. No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained in this Prospectus. If given or made, such information or representations should not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any exchange made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the respective dates as of which information is given herein. The Exchange Offer is not being made to (nor 40 will tenders be accepted from or on behalf of) holders of Existing Notes in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. TRANSFER TAXES Holders who tender their Existing Notes for exchange will not be obligated to pay any transfer taxes in connection therewith except that holders who instruct the Company to register New Notes in the name of, or request that Existing Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. ACCOUNTING TREATMENT The New Notes will be recorded at the carrying value of the Existing Notes as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company upon the exchange of New Notes for Existing Notes. Expenses incurred in connection with the issuance of the New Notes will be amortized over the term of the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES Holders of Existing Notes who do not exchange their Existing Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Existing Notes as set forth in the legend thereon as a consequence of the issuance of the Existing Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. Existing Notes not exchanged pursuant to the Exchange Offer will continue to remain outstanding in accordance with their terms. In general, the Existing Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Existing Notes under the Securities Act. However, (i) if the Initial Purchaser so requests with respect to Existing Notes not eligible to be exchanged for New Notes in the Exchange Offer and held by it following consummation of the Exchange Offer or (ii) if any holder of Existing Notes is not eligible to participate in the Exchange Offer or, in the case of any holder of Existing Notes that participates in the Exchange Offer, does not receive freely tradable New Notes in exchange for Existing Notes, the Company is obligated to file a registration statement on the appropriate form under the Securities Act relating to the Existing Notes held by such persons. Based on certain no-action letters issued by the staff of the Commission to third parties in unrelated transactions, the Company believes that New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchases Notes from the Company to resell pursuant to Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such New Notes. If any holder has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. A broker-dealer who holds Existing Notes that were acquired for its own account as a result of market making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the 41 Securities Act in connection with any resale of New Notes. Each such broker-dealer that receives New Notes for its own account in exchange for Existing Notes, where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. Participation in the Exchange Offer is voluntary, and holders of Existing Notes should carefully consider whether to participate. Holders of the Existing Notes are urged to consult their financial and tax advisors in making their own decision on what action to take. As a result of the making of, and upon acceptance for exchange of all validly tendered Existing Notes pursuant to the terms of, this Exchange Offer, the Company will have fulfilled a covenant contained in the Registration Rights Agreement. Holders of Existing Notes who do not tender their Existing Notes in the Exchange Offer will continue to hold such Existing Notes and will be entitled to all the rights, and limitations applicable thereto, under the Indenture, except for any such rights under the Registration Rights Agreement that by their terms terminate or cease to have further effectiveness as a result of the making of this Exchange Offer. See "Description of Exchange Notes." All untendered Existing Notes will continue to be subject to the restrictions on transfer set forth in the Indenture. To the extent that Existing Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Existing Notes could be adversely affected. The Company may in the future seek to acquire untendered Existing Notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plan to acquire any Existing Notes which are not tendered in the Exchange Offer. 42 BUSINESS GENERAL The Company, with annual net sales of over $2.0 billion, is one of the two largest broad-line, full-service wholesale distributors of packaged consumer products to the convenience retail industry in North America. The Company's principal customers include traditional and petroleum convenience stores, grocery stores, drug stores, mass merchandisers and liquor stores. The Company offers its customers a wide variety of products--approximately 33,500 stock keeping units (SKUs)--including cigarettes, candy, snacks, fast food, groceries, health and beauty care products and other general merchandise. The Company's 19 distribution facilities employ state-of-the-art equipment and systems to efficiently serve over 29,000 customer locations throughout the western regions of the United States and Canada. Over the past five years, the Company has invested approximately 50% of its capital expenditures to introduce advanced distribution technology into its warehouse and delivery functions. The Company's sophisticated management information system ("MIS") utilizes proprietary software to integrate order entry, warehouse operations, routing, delivery and accounting. In addition, this advanced MIS allows for the electronic exchange of information with suppliers and customers, improving inventory management and operating efficiency. The Company's principal markets in the United States encompass 13 western states, including California, Colorado and western Texas. The Company has also established a more limited presence in Nebraska, Kansas, Oklahoma, Arkansas and Missouri. The Company services its United States customers from 15 distribution facilities, seven of which are located in California. In Canada (which represented approximately 25% of net sales in 1995), the Company serves five provinces, British Columbia, Alberta, Saskatchewan, Manitoba and, on a limited basis, western Ontario from four distribution facilities. HISTORY The Company's origins date back to 1888, when Glaser Bros., a family-owned-and-operated candy and tobacco distribution business, was founded. In 1989, the Company was acquired by a financial buyer. In 1994, the Company repurchased such group's common stock ownership in the Company, and Senior Management and certain lenders acquired equity in a new holding company which held all of the stock of the Company. In August 1996, the Company underwent the Recapitalization. The Company's equity is now held by Jupiter and Senior Management, with Jupiter owning a controlling 75% stake and Senior Management owning the remaining 25%. See "Summary -- Transactions Related to the Offering." INDUSTRY OVERVIEW Wholesale Distributors provide valuable services to both manufacturers of consumer products and convenience retailers. Manufacturers benefit from Wholesale Distributors' broad retail coverage, inventory management and efficient processing of small orders. Wholesale Distributors provide convenience retailers access to a broad product line, the ability to place small quantity orders, inventory management and access to trade credit. In addition, large full-service Wholesale Distributors such as the Company offer retailers the ability to participate in manufacturer-sponsored marketing programs, merchandising and category management services and systems focused on minimizing customers' investment in inventory. Total sales for United States Wholesale Distributors have grown at a compound annual rate of 4.4% over the past five years from approximately $59 billion in 1991 to approximately $70 billion in 1995, according to U.S. DISTRIBUTION JOURNAL, an industry publication. Management believes that this growth reflects: (i) continued strong revenue growth in the traditional convenience store channel; (ii) a shift in cigarette purchases from carton outlets (principally grocery stores) to pack outlets (such as convenience retailers); (iii) an increase in the variety of products sold by convenience stores; and (iv) an 43 expansion of the industry's retail customer base to encompass distribution to channels beyond convenience stores. The Wholesale Distribution industry is highly fragmented and has historically consisted of a large number of small, privately owned businesses and a small number of large, full-service Wholesale Distributors serving multiple geographic regions. Relative to smaller competitors, large distributors such as the Company benefit from several competitive advantages, including purchasing power, the ability to service chain accounts, economies of scale in sales and operations, the ability to spread fixed corporate costs over a larger revenue base and the resources to invest in MIS and other productivity enhancing technology. These factors have led to a consolidation of the Wholesale Distribution industry as companies either exit the industry or are acquired by large distributors seeking to further leverage their existing operations. Based on industry reports, the number of Wholesale Distributors in the United States has declined from more than 1,500 in 1985 to fewer than 1,000 in 1995. According to U.S. DISTRIBUTION JOURNAL, only ten such distributors had net sales in excess of $400 million in 1995. Management believes Core-Mark will have significant opportunities to participate in the ongoing consolidation of the industry. BUSINESS STRATEGY The Company's current Senior Management joined the Company beginning in late 1990 and successfully initiated several measures to increase sales of core operations and enhance productivity and profitability. These measures included: (i) disposing of non-core operations; (ii) increasing the customer base; (iii) decentralizing certain operational responsibilities; (iv) strengthening financial controls; (v) improving operating systems and processes; and (vi) reconfiguring and upgrading facilities. Largely as a result of these initiatives, the Company's net sales and EBITDA increased at compound annual growth rates of 5% and 10%, respectively, from 1991 to 1995. During this same period, the Company also reduced its average monthly working capital (excluding cash and debt) from 5.7% of net sales to 3.0% of net sales. The Company's business strategy is to further increase net sales and improve operating margins. To achieve these goals, the Company intends to: (i) increase sales to existing customers, particularly of higher gross margin, non-cigarette products; (ii) add new customer locations in existing markets, particularly along existing routes; (iii) continue to implement distribution productivity enhancement programs; and (iv) make selective acquisitions. INCREASE SALES TO EXISTING CUSTOMERS. Because the Company generally carries many products that its typical retail store customer purchases from other suppliers, a primary element of its growth strategy is to increase sales to existing customers. The Company's typical customer purchases its products from the Company, from manufacturers who distribute directly to retailers and from a variety of smaller local distributors or jobbers. The Company is particularly focused on replacing local distributors and jobbers in order to increase sales of health and beauty care products and general merchandise products, all of which carry higher gross margins than cigarettes (cigarette sales constituted approximately 71% of the Company's net sales in 1995 and approximately 40% of gross profit). As part of this effort, the Company provides compensation incentives to its sales force and a number of value-added services and marketing programs to its customers. These programs include: (i) Convenience 2000-Registered Trademark- (which offers enhanced purchasing power and promotions to small, independent convenience stores); (ii) Smart Sets (which helps ensure that retailers display the right product in the right place); (iii) Profit Builder and Promo Power (regular Company publications which describe new products and manufacturer promotions); and (iv) the recently initiated Tully's To Go-TM- program (which offers retailers high margin fast food products without the franchise fees or ongoing royalty fees of typical franchises). ADD NEW CUSTOMER LOCATIONS IN EXISTING MARKETS. The Company is also seeking to leverage its existing distribution network by securing additional customers on existing routes. With 262 salespersons and 293 route drivers currently serving approximately 29,000 customer locations in 18 states and five Canadian provinces, the Company believes it has many opportunities to add additional customers at 44 low marginal distribution costs. The Company is also beginning to focus on a number of new trade channels, including hotel gift shops, military bases, correctional facilities, college bookstores, movie theaters and video rental stores. In addition, some large retail chains such as Long's and Safeway are beginning to outsource the distribution of certain products that the Company can supply. The Company believes that there is significant opportunity to increase net sales and profitability by adding new customers and maximizing economies of scale. PRODUCTIVITY ENHANCEMENT PROGRAMS. During the past five years, the Company has devoted approximately 50% of its capital expenditures, or approximately $12.0 million, to a variety of productivity enhancement programs. The Company believes these programs were major contributors to a 2.7% per year reduction between 1991 and 1995 in distribution operating expenses per "cube," (or cubic foot of product, a common unit of measurement in Wholesale Distribution), despite annual increases in wages. These productivity enhancement programs include: (i) BOSS, a batch order selection system that increases the efficiency and reduces the cost of full-case order fulfillment; (ii) Pick-to-Light, a paperless picking system that reduces the travel time for the selection of less-than-full-case order fulfillment; (iii) Radio Frequency, a hand-held wireless computer technology that eliminates paperwork and updates receiving inventory levels and stocking requirements on a real-time basis; (iv) Checker Automation, an on-line order verification system that has significantly reduced labor costs by automating inspection of order accuracy; and (v) fleet management tools such as Roadshow, a software program that optimizes the routing of customer deliveries. The Company intends to continue to pursue cost reductions by completing the roll-out of these and other programs. SELECTIVE ACQUISITIONS. The Wholesale Distribution industry is highly fragmented and comprised mainly of a large number of small, privately held businesses. Management believes that the consolidation that has taken place over the past five years will continue and that numerous attractive acquisition opportunities will arise. Given the current utilization rates of the Company's existing warehouse and distribution facilities as well as the quality of the Company's in-house MIS capability, management believes that a significant amount of incremental revenues can be integrated into the Company's operations without significant additions to fixed costs. The Company's management team has completed two acquisitions since April 1995, representing net sales of approximately $37 million for the six months ended June 30, 1996. PRODUCTS DISTRIBUTED The products distributed by the Company include cigarettes, food products such as candy, fast food, snacks, groceries and non-alcoholic beverages, and non-food products such as film, batteries and other sundries, health and beauty care products and tobacco products other than cigarettes. The products the Company offers its customers consist of approximately 33,500 SKUs from over 1,900 suppliers and manufacturers. Due to the different consumer preferences throughout the Company's markets, each distribution facility generally offers its customers between approximately 4,000 and 15,000 SKUs. 45 The following table indicates the categories of products the Company distributes and sets forth certain information regarding net sales derived from each product category for the periods ended as indicated:
SIX MONTHS COMPOUND ENDED YEAR ENDED DECEMBER 31, ANNUAL JUNE 30, -------------------------------------------------------------------- GROWTH RATE ---------- 1991 1992 1993 1994 1995 1991-1995 1995 ------------ ------------ ------------ ------------ ------------ ----------------- ---------- (DOLLARS IN THOUSANDS) Net sales(a): Cigarettes........ $ 1,237,562 $ 1,301,296 $ 1,344,707 $ 1,299,687 $ 1,446,697 4.0% $ 692,865 Food.............. 312,615 326,937 351,940 378,156 410,095 7.0% 198,738 Non-food.......... 138,434 156,619 172,285 177,513 190,395 8.3% 91,832 ------------ ------------ ------------ ------------ ------------ ---------- Subtotal........ 451,049 483,556 524,225 555,669 600,490 7.4% 290,570 ------------ ------------ ------------ ------------ ------------ ---------- Total......... $ 1,688,611 $ 1,784,852 $ 1,868,932 $ 1,855,356 $ 2,047,187 4.9% $ 983,435 ------------ ------------ ------------ ------------ ------------ ---------- ------------ ------------ ------------ ------------ ------------ ---------- Percent of net sales: Cigarettes........ 73.3% 72.9% 72.0% 70.1% 70.7% 70.5% Food.............. 18.5% 18.3% 18.8% 20.4% 20.0% 20.2% Non-food.......... 8.2% 8.8% 9.2% 9.5% 9.3% 9.3% ------------ ------------ ------------ ------------ ------------ ---------- Subtotal........ 26.7% 27.1% 28.0% 29.9% 29.3% 29.5% ------------ ------------ ------------ ------------ ------------ ---------- Total......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ------------ ------------ ------------ ------------ ------------ ---------- ------------ ------------ ------------ ------------ ------------ ---------- Total cigarette carton volume...... 73,453 73,427 76,740 80,703 88,933 42,688 % CHANGE 1996 6/95-6/96 ------------ ----------- Net sales(a): Cigarettes........ $ 744,634 7.5% Food.............. 217,019 9.2% Non-food.......... 106,922 16.4% ------------ Subtotal........ 323,941 11.5% ------------ Total......... $ 1,068,575 8.6% ------------ ------------ Percent of net sales: Cigarettes........ 69.7% Food.............. 20.3% Non-food.......... 10.0% ------------ Subtotal........ 30.3% ------------ Total......... 100.0% ------------ ------------ Total cigarette carton volume...... 45,359
- ------------------------------ (a) In the second quarter of 1995, the Company completed two acquisitions which added approximately $62 million, $21 million and $37 million in net sales for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996, respectively. CIGARETTE PRODUCTS In 1995, cigarette products accounted for approximately 71% of the Company's net sales. The Company offers substantially all brands of cigarettes from all of the major manufacturers, including approximately 750 SKUs of national premium labels such as Marlboro, Winston and Player, approximately 400 SKUs of national discount labels such as Viceroy and Doral, and deep discount labels such as the Company's private label brand, Best Buy-Registered Trademark-, as well as Basic, Best Value, Monarch and GPC. Net sales from cigarette products increased at a compound annual growth rate of 4.0% from $1,237.6 million in 1991 to $1,446.7 million in 1995. In 1995, the United States cigarette industry sold 487 billion sticks (individual cigarettes) compared to 510 billion sticks in 1991 according to the U.S. Department of Agriculture. This represents a compound annual decline of 1.1% in United States unit sales over this period. The Canadian cigarette industry has experienced a larger decline in unit sales, in large part due to retail prices that are two to three times higher than in the United States. In the Company's principal Canadian markets, unit sales of cigarettes declined by an average of 2.4% annually from 1991 to 1995 according to the National Association of Tobacco and Confectionary Distributors. 46 Despite the overall decline in total unit sales of cigarettes, United States convenience stores have actually increased their market share of cigarette unit sales from 1991 to 1995, primarily at the expense of grocery stores and supermarkets, according to independent surveys by two cigarette manufacturers. The Company has licensed Philip Morris as the exclusive manufacturer of Best Buy-Registered Trademark- brand cigarettes. This contract, extending until December 31, 1998, provides for a fixed annual payment to the Company. The Company has also licensed other wholesale distributors exclusively to sell Best Buy-Registered Trademark- in regions where the Company does not have a presence and earns a royalty on all such sales. FOOD AND NON-FOOD PRODUCTS In 1995, food and non-food products (including tobacco products other than cigarettes) accounted for approximately 29% of the Company's net sales. The Company offers its customers a wide variety of food and non-food products (over 32,000 SKUs), including candy, snacks, fast food, groceries, non-alcoholic beverages, health and beauty care products and general merchandise. The Company's strategy is to offer its convenience retail store customers a variety of food and non-food products at reasonable prices in flexible quantities. Net sales from food and non-food items increased at a compound annual growth rate of 7.4% from $451.0 million in 1991 to $600.5 million in 1995. FOOD PRODUCTS. The Company offers approximately 4,600 SKUs of candy products and 1,800 SKUs of snack products. The Company's candy products include such brand name items as Snickers, Hershey Kisses, M&M's, Lifesavers and Dentyne. The Company also offers its own private label "Cable Car"-Registered Trademark- candy line. The Company's snack products include brand names such as Keebler, Nabisco and Planters. In 1995, candy products and snack products together accounted for approximately 12% of the Company's net sales. Net sales from candy and snack products have increased by a compound annual growth rate of 8.3% from $173.7 million in 1991 to $238.6 million in 1995. The Company offers approximately 6,500 SKUs of grocery products, including national brand name items such as Del Monte, Carnation, Kellogg's and Purina ranging from canned vegetables, soups, cereals, baby food, frozen foods, soaps and paper products to pet foods. The Company offers approximately 1,100 SKUs of non-alcoholic beverages, including juices under brand names such as Tropicana, Veryfine and Gatorade. The Company also offers approximately 4,300 SKUs of fast food products, including prepared sandwiches, hot deli foods, slush drinks, hot beverages, pastries and pizza, as well as packaged supplies and paper goods, including brand name items such as Superior Coffee, Tyson chicken, Oscar Mayer meats and Kraft and Heinz condiments. Since 1994, the Company has targeted the fountain, slush, hot beverage (coffee and hot chocolate) and frozen food product categories, which present significant growth opportunities as sales in these product categories are among the fastest growing product offerings of the convenience store industry. In addition, the Company recently introduced Tully's To Go-TM-, a turnkey fast food program that gives the Company's convenience retail customers a cost-effective alternative to the franchised programs offered by national fast food chains. In 1995, fast food, grocery and non-alcoholic beverage products accounted for approximately 8% of the Company's net sales. Net sales from grocery products, non-alcoholic beverages and fast food products increased at a compound annual growth rate of 5.4% from $138.9 million in 1991 to $171.5 million in 1995. NON-FOOD PRODUCTS. The Company offers approximately 8,500 SKUs of general merchandise, approximately 4,200 SKUs of health and beauty care products and approximately 1,200 SKUs of tobacco products other than cigarettes. General merchandise products range from film, tape, batteries, cigarette lighters and glue to automotive products and include brand names such as Fuji, Kodak, Scotch and Mead Envelope. Health and beauty care products include analgesics, hair care, cosmetics, hosiery, dental products and lotions, from manufacturers of brand names such as Crest, Tylenol, Johnson & Johnson Band-Aid, Vicks, Gillette and Jergens. The Company's broad assortment of tobacco products 47 includes imported and domestic cigars, smokeless tobacco (snuff), chewing tobacco, smoking tobacco and smoking accessories. In 1995, general merchandise, health and beauty care products and non-cigarette tobacco products accounted for approximately 9% of the Company's net sales. From 1991 to 1995, net sales from general merchandise increased at a compound annual growth rate of 14.1%, from $26.1 million in 1991 to $44.3 million in 1995. During the same five-year period, net sales from health and beauty care products increased at a compound annual growth rate of 4.3%, from $30.2 million in 1991 to $35.8 million in 1995, and net sales from cigars and tobacco products increased at a compound annual growth rate of 7.7%, from $82.1 million in 1991 to $110.3 million in 1995. CUSTOMERS The Company serves over 29,000 customer locations. Approximately 50% of the Company's 1995 net sales were attributable to privately-owned stores and local chains serviced primarily by one of the Company's distribution facilities ("independents"), while the remainder were attributable to national chains and regional chains serviced by more than one of the Company's distribution facilities ("chains"). The Company's current customer base is comprised of a wide range of retailers, including traditional and petroleum convenience stores, grocery stores, drug stores, mass-merchandisers and liquor stores. Recently, the Company has begun to expand its distribution to hotel gift shops, military bases, correctional facilities, college bookstores, movie theaters and video rental stores, which, together with other customer segments, the Company classifies as "Other." (See table below.) In 1995, the Company's largest customer accounted for 3.7% of net sales, and the Company's ten largest customers accounted for approximately 25% of net sales. These top ten customers are all chains and approximately 75% of the net sales to this group constituted sales to petroleum convenience store chains. The following table indicates the Company's net sales from different customer segments for the years ended December 31, 1994 and 1995 (dollars in thousands):
1994 1995 -------------------------- -------------------------- AMOUNT % OF TOTAL AMOUNT % OF TOTAL ------------- ----------- ------------- ----------- Petroleum convenience stores............................... $ 791,504 42.66% $ 861,988 42.11% Traditional convenience stores............................. 254,911 13.74 271,250 13.25 Grocery stores............................................. 169,185 9.12 184,475 9.01 Drug stores................................................ 148,459 8.00 158,280 7.73 Mass merchandisers......................................... 133,197 7.18 142,427 6.96 Liquor stores.............................................. 104,773 5.65 104,207 5.09 Other...................................................... 253,327 13.65 324,560 15.85 ------------- ----------- ------------- ----------- Total................................................ $ 1,855,356 100.00% $ 2,047,187 100.00% ------------- ----------- ------------- ----------- ------------- ----------- ------------- -----------
The Company strives to offer its customers greater flexibility, service and value than other distributors. The Company's willingness to work with retailers to arrive at a suitable delivery time, thereby allowing the store owner to schedule its labor requirements effectively, is an important facet of this flexibility. The Company believes that its ability to provide customized retail pricing, unique to an individual store's needs, bar-coded shelf labels to assist in effective shelf space management, timely communication of manufacturer price change information, seasonal and holiday special product/promotional offerings and salesperson assistance in order preparation are also important to the retailer in its selection of the Company as its supplier. As a result of its size and geographic coverage, the Company supplies a number of regional and national chain corporations and, therefore, is able to distribute products to all or substantially all such customers' individual store locations in the Company's market area. 48 SALES AND MARKETING The Company's sales and marketing strategy is to offer a broad range of services to its convenience retail customers intended to help them improve their sales and profitability. In so doing, the Company seeks to become the primary supplier to its customers and to persuade such customers to purchase as many of their SKUs from the Company as the Company distributes. SALES FORCE The Company has a well-trained and incentivized sales force to execute its sales and marketing strategy. As of August 1996, the Company employed over 700 sales and marketing personnel, of which approximately 178 were commissioned sales representatives, 84 were associate sales representatives, and the remainder were product merchandisers, product specialists, category managers, sales managers, national sales force and other sales personnel. The Company has made a significant commitment to professional training of its commissioned sales representatives. All entry-level personnel go through a formal, two week in-house training course covering industry concepts, selling skills, product knowledge and in-store merchandising techniques as well as three weeks of structured training at the division level. Experienced personnel attend training in advanced selling techniques, negotiation skills and sales analysis. The Company's commissioned sales representatives, who are located throughout the Company's distribution center network, are principally responsible for servicing specific customers in their assigned territories. Each commissioned sales representative's compensation is primarily composed of commissions which are based on the Company's gross profit on the sales made by such sales representative. The Company pays higher percentage commissions on sales of food and non-food products than on cigarette products so as to motivate its sales force to sell more higher gross margin food and non-food products. The Company's national sales group and other corporate sales and marketing personnel are assigned to service larger national or regional chain customers as well as to develop marketing programs and monitor the performance and consistency of the commissioned sales force and overall customer service levels. The Company's product specialists and category management specialists provide the sales representatives with information on marketing strategies relating to the Company's products and promotions and provide customers with tools to increase the customer's sales and profits by improving their merchandising. Sales representatives are supplemented by merchandisers, who conduct store resets, service merchandise-specific commodities, and maintain Smart Sets, which is the Company's category management system. MARKETING PROGRAMS Since 1993, the Company has sought to leverage its size by introducing to its customers a number of marketing programs and value-added services. The Company believes that most of its competitors lack the resources to match its marketing programs and value-added services. These programs are designed not only to increase customers' sales and profits, but also to strengthen customers' relationships with the Company and encourage them to buy more food and non-food products from the Company. The Company's goal is to increase its gross profits by increasing its net sales from sales of food and non-food products, which have significantly higher gross margins than cigarettes. Although food and non-food products also generally carry higher operating expenses to pick and handle than cigarettes, the Company believes that such products' net contribution to earnings, after expenses, is higher than for cigarettes. The Company offers marketing programs and value-added services in two areas, support programs and systems. 49 SUPPORT PROGRAMS PROFIT BUILDER is a monthly publication mailed directly to customers outlining new products and manufacturers' specials. This is the Company's main written communication vehicle with its customers. PROMO POWER is a bi-monthly promotional vehicle organized by the Company featuring off shelf and end-of-aisle displays of manufacturers' products at reduced costs to the retailer. CONVENIENCE 2000-REGISTERED TRADEMARK- ("C-2000") seeks to improve the competitiveness of certain independent convenience stores by linking retailers as if they were supported by the purchasing power, sales and marketing resources of a national chain organization. The Company's C-2000 program is designed to provide independent convenience stores with improved purchasing power with respect to regularly scheduled food and non-food product promotions arranged by the Company with its suppliers. The Company selects the products, quantities and retail price, and automatically ships the products to the retailers monthly, as well as providing point-of-service promotional materials. Approximately 1,000 individual customer locations are currently enrolled in the program. The Company's goal for C-2000 is for it to evolve into a national network of independent convenience store operators to which the Company would supply a wide array of programs and services. SMART SETS is the Company's category management system. The Company provides retailers with "plan-o-grams" for each commodity group using its internal data, along with information from supplier partners. The objective is to ensure that retailers have the right product in the right place. TULLY'S TO GO-TM- is the Company's recently introduced turnkey fast food program, which makes available to its convenience store customers an alternative to the franchised programs offered by national fast food chains, such as Taco Bell, Pizza Hut and Subway. These franchised programs have had success in the convenience store market, although they generally require significant up-front franchise fees and start-up costs as well as ongoing royalty payments. Tully's To Go-TM- requires no franchise fee or ongoing royalty payments from the customer, although it requires an initial equipment purchase by the customer. Like the franchise programs of the national chains, Tully's To Go-TM- includes all the equipment, supplies and food product required to start up a fast food operation within a convenience store. Since its introduction in 1996, Tully's has been installed in nine locations. The Company believes that Tully's To Go-TM- will have the effect of strengthening relationships with customers. In addition, the Company has enabled its suppliers and customers to participate in other programs in which the supplier provides a variety of fast food and other store equipment (such as coffee machines, microwave ovens, roller grills, etc.) at minimal or no up front cost to the customer. These programs are intended to incentivize the customers to purchase from the Company products that the supplier manufactures to use with the equipment. One such program, the Superior Coffee Program, was implemented beginning in January 1993 and currently includes approximately 950 customer locations. SYSTEMS The Company's scale has provided the necessary resources to invest in and develop MIS systems dedicated to customer value added services. SPACEVUES. The Company makes available to its customers a computerized shelf space management system called SpaceVUES. The Company's category management specialists utilize this system to design a shelf and store layout that seeks to maximize sales volume, profitability and efficient use of space based upon product movement information, local demographics, product package dimensions, gross profit margins and other variables. ELECTRONIC DATA INTERCHANGE (EDI). The Company's EDI capability enables it to process retailers' and suppliers' purchase orders, invoices and payments electronically, thereby reducing administrative work for the Company, customers and suppliers. 50 ADVANTAGE POS. In conjunction with NCR and COPES software, the Company has developed Advantage POS, a point-of-sale equipment program that provides bar code scanners, backroom computer systems and electronic check-out equipment. The system improves customers' inventory management, allows automatic ordering and reporting capabilities, ensures accuracy of retail pricing and improves retail customer service. In 1992, only about 2% of convenience retail stores had POS equipment, compared to approximately 16% in 1995. The Company arranges for the sale to its customers of hardware and software systems and introduces its customers to third parties who finance such purchases. The Advantage POS system facilitates additional purchases of the Company's products by increasing the customer's communications and strengthening its relationship with Core-Mark. INVENTORY CONTROL. The Company offers its retailers an inventory management program, which includes electronic order entry to expedite accurate order placement, permanent shelf labels that, by identifying a "home" for all products, reduce lost sales from out-of-stocks, and a monthly velocity report which tracks product movement and gross profit by department. OTHER SERVICES. The Company provides other services to its customers, including production of sales analyses, market and trend analysis information, order guides, full service merchandising, electronic price change notification and regular product promotions. SUPPLIERS AND MANUFACTURERS As of June 30, 1996 the Company purchased products for resale to its customers from over 1,900 suppliers and manufacturers located throughout the United States and Canada. Although the Company purchases cigarette and tobacco products from all major United States and Canadian manufacturers, in 1995, approximately 28%, 15%, 14% and 9% of the Company's net sales were derived from products purchased by the Company from Philip Morris, R.J. Reynolds, Imperial Tobacco and Brown & Williamson, respectively. No other supplier's products represented more than 10% of net sales. In addition, Philip Morris manufactures the Company's private label Best Buy-Registered Trademark- cigarettes. The Company generally has no long-term purchase agreements (other than for Best Buy-Registered Trademark- products) and buys substantially all its products as needed. The Company believes that it is an important customer to each of its principal suppliers. In addition, because of the size of its sales force, its technological capability and distribution expertise, the Company provides a key channel of distribution that many manufacturers could not otherwise serve economically. The Company's large sales force allows weekly contact with the vast majority of its customers, providing the manufacturers access on a more frequent basis than their own sales force would allow. Both food and non-food manufacturers routinely offer volume, promotional, advertising and other allowances to wholesale distributors. In addition, the Company often negotiates on a corporate-wide basis special arrangements with manufacturers under which the Company obtains volume discounts, additional allowances or rebates by leveraging its total purchasing power. CIGARETTE PRODUCTS The Company controls major purchases of cigarettes centrally in order to minimize inventory levels. Daily replenishment of cigarette inventory and brand selection is controlled by the local division based on demands of the local market. The U.S. cigarette manufacturers charge all wholesale customers the same price for national brand cigarettes regardless of volume purchased. However, cigarette manufacturers do offer certain structured incentive programs (including Philip Morris' Masters Program and R.J. Reynolds' Partners Program) to wholesalers instead of the routine allowances associated with non-cigarette products. These programs are based upon, among other things, purchasing volume and often include performance-based criteria related to the quality of the Company's efforts to keep certain brands and volumes of cigarettes on the retail shelves. 51 FOOD PRODUCTS Food products (other than frozen foods) are purchased directly from manufacturers by buyers in each of the Company's distribution facilities. Management believes that decentralized purchasing of food products results in higher service levels, improved product availability tailored to individual markets and reduced inventory investment. Although each division has individual buyers, the Company negotiates corporate pricing where possible to maximize purchasing power. In February 1996, the Company established a new division, Artic Cascade, a consolidated frozen warehouse which purchases frozen foods for all of the Company's divisions. By consolidating the frozen food purchases of all United States divisions, the Company is able to obtain such products at lower cost. Buying in one location also allows the Company to offer a wide selection of quality products to retailers at more competitive prices. The Company offers monthly specials so retailers can promote and compete more effectively. In addition, the Company offers schematics that show the retailer how best to arrange frozen food to promote sales in this fast growing category. NON-FOOD PRODUCTS The majority of the Company's non-food products other than cigarettes and tobacco products (primarily health and beauty care products and general merchandise) are purchased by Allied Merchandising Industry ("AMI"), one of the Company's operating divisions that specializes in these categories. This specialization seeks to ensure a better selection and more competitive wholesale costs and enables the Company to reduce its overall general merchandise and health and beauty care inventory levels. Tobacco products other than cigarettes, like food products, are purchased directly from the manufacturers by each of the divisions. MANAGEMENT INFORMATION SYSTEMS The Company has committed substantial resources to its MIS department. This commitment reflects the Company's belief that it can significantly enhance efficiency, profitability and competitiveness through investments in technology that smaller competitors find difficult to match. The Company's MIS function processes order entry, generates customer pick lists for the warehouse, controls inventory, generates purchase orders, routes customer deliveries, generates customer invoices, processes cash collections on accounts receivable and maintains the Company's accounting records. All the Company's divisions operate with state-of-the-art IBM AS/400s. In the United States, AS/400s are located at five "host" sites, and nine satellite divisions run their operations remotely from the host sites. In Canada, all four divisions run from two computers in Vancouver, B.C. At the center of the MIS system is the Company's self-developed, proprietary software, which integrates several commercial software packages such as Roadshow, Inven (E-3) and McCormick and Dodge general ledger system, and most recently, the Company is in the process of developing a data warehousing system. This software is maintained and continuously enhanced by the Company's MIS department, which is staffed by an experienced team of development and design professionals, with an average Core-Mark tenure of ten years. The Company believes that its MIS capabilities will serve the Company's needs for the foreseeable future. The proprietary software which links the Company's software packages, systems and equipment also allows the Company to accurately track labor productivity down to the worker level. The Company utilizes this information to make staffing decisions and reward productivity. EMPOWER, the Company's current incentive program, rewards warehouse and distribution employees for productivity improvements based on their historical performance. 52 DISTRIBUTION The Company has made substantial progress over the past five years in modernizing its operational capabilities. From 1991 through 1995, the Company's distribution operating expenses per cube have been reduced by approximately 2.7% per year, despite annual wage increases. While approximately 50% of capital expenditures have been made to maintain the Company's facilities and equipment, the remaining 50% have been made to improve productivity. WAREHOUSING The Company maintains 19 distribution facilities, of which 15 are located in the western United States and four are located in western Canada. These distribution facilities include two consolidating warehouse facilities, one of which services health and beauty care and general merchandise products (AMI) and the other of which services frozen food (Artic Cascade). Each day the average distribution facility receives 200 to 300 customer orders (primarily through hand-held computer devices known as Telxon units). During the night, these orders are picked and loaded into trucks in reverse order of scheduled delivery, either in full case boxes or in totes. Early the next morning an average of 14 trucks per distribution facility depart to deliver product to approximately 20 customers per truck. Dry, frozen and chilled products can be accommodated on each delivery. Each distribution facility is outfitted with modern equipment (including freezers and coolers as required) for receiving, stocking, order selection and loading a large volume of customer orders on trucks for delivery. Each facility provides warehouse, distribution, sales and support functions for its geographic area under the supervision of a division manager. In addition, the Company believes that the majority of its distribution facilities have the capacity to absorb significant future growth in net sales. The Company has implemented a number of technologically-driven programs that have had a major impact on the efficiency of warehouse operations. These programs are in various stages of roll-out across the Company's distribution facilities and include the following: BATCH ORDER SELECTION SYSTEM (BOSS). The Company is in the process of converting certain of its distribution facilities to a batch order selection system (BOSS), which permits more efficient handling of full cases of products. Approximately 50% of the Company's products are shipped in full case form. The basic concept of BOSS is that productivity and cost savings can be achieved by batch picking (multiple orders at the same time) instead of picking one order at a time. Batch picking reduces the amount of time pickers and loaders must spend traveling within the distribution facility. It is designed to reduce the amount of lifting required by warehouse personnel, thereby reducing the potential for injury, as well as to reduce product damage and wear and tear on equipment. Another of its functions is to expedite loading. As of June 30, 1996, ten of the Company 's facilities were using BOSS, and six divisions are scheduled to be converted over the next two years. PICK-TO-LIGHT. For orders placed in less than full case quantities, such as boxes of candy, cartons of cigarettes and cans of soup, the Company in 1995 installed the Pick-to-Light system, which guides the warehouse employee through the picking process via a system of computer-driven lights and L.E.D.s (light emitting diodes). When the employee has completed an order, the system also determines his location in the aisle and starts the next order at that location. This system eliminates paper pick lists and enables the employee to pick more product per work hour than is possible using traditional methods. As of June 30, 1996, three of the Company's facilities used the Pick-To-Light system and 11 facilities are scheduled to have the system installed over the next three years. PLANNED ITEM RETRIEVAL (PIR). Usually coupled with a BOSS installation, the PIR system uses five foot wide, instead of the conventional ten foot wide, aisles in order to improve warehouse space utilization. Instead of selecting product only from the two bottom levels of the rack, the system is designed to permit selection at all levels, from floor to ceiling. This configuration allows the Company to store slower moving product more efficiently and allows warehouse employees to avoid having to move 53 across the face of lower velocity product on every trip through the warehouse. While the concept of PIR is common in grocery wholesale warehouses, the Company believes it is one of the first to adopt this concept in the convenience distribution industry. Eleven divisions are presently equipped with PIR and four more are scheduled for conversion over the next two years. RADIO FREQUENCY (RF). RF is a radio frequency system which improves efficiency through paperless, real-time inventory management including inventory receiving, warehouse re-stocking and, in certain applications, customer order selection. RF connects hand-held computer devices carried by warehouse employees with a base station/host computer via radio waves. The Company believes it is one of the first distributors in the industry to embrace this technology. The system provides the Company with better inventory control utilizing less clerical labor than was previously possible. Ten distribution centers are presently equipped with RF technology and the Company plans to convert all the remaining divisions over the next three years. CHECKER AUTOMATION. The Company has significantly reduced labor costs in connection with the visual inspection of orders for accuracy through a system called Checker Automation. This system is an on-line verification system which tracks totes (containers in which customer product is packed) and cigarette carton counts using a computer terminal positioned at the end of each selection line. Checker Automation has significantly reduced the labor component of ensuring order accuracy by eliminating substantially all order checkers in the Company's distribution centers in which the system has been installed. Designed, developed and implemented by in-house resources, Checker Automation has been installed in 13 of the Company's distribution centers and plans to convert three more divisions by the end of 1996. INVENTORY CONTROL. The Company has significantly improved its inventory control systems over the last five years. Since 1990, annual inventory losses due to inventory shrinkage have declined significantly, from $3.9 million to approximately $0.2 million in 1995. Full physical inventories are taken twice a year at each facility, and cycle counts are taken continuously throughout the year. FLEET The Company's trucking system includes 47 straight trucks, 179 tractors and 202 trailers. Approximately 19% of the Company's trucks and tractors and 84% of trailers are owned by the Company; the remainder are leased. The Company's standard is to maintain its transportation fleet to an average age of five years or less. The Company has outsourced its maintenance requirements through fleet service providers, predominantly Ryder and Rollins. Service of power units (tractors, straight trucks and vans) is accomplished through "full service lease" programs. The maintenance is an integral part of the leasing program, which provides built-in cost incentives to assure the equipment is maintained according to manufacturer specifications. Under the current management team, the quality of the Company's fleet has been significantly upgraded in the past five years. In 1991, the Company's typical delivery vehicle was a 20/22 foot "dry box" straight truck. Today, the typical Company delivery vehicle is a tractor and 28-foot, dual-temperature, refrigerated trailer. This configuration provides the Company with a substantial increase in operating flexibility. For example, to service outlying areas, "doubles" (two trailers pulled behind one tractor) can be utilized to transport and split units between two delivery drivers, thus greatly increasing the efficiency of service from a single distribution center. The refrigerated capability of the fleet enables frozen and chilled product to be handled in a manner that is commensurate with quality standards employed by leading grocery wholesalers and food service distributors. The Company employs a state-of-the-art, computerized truck routing system generated by software called "Roadshow" to efficiently construct delivery routes. Before orders are dispatched, Roadshow automatically determines a route for the truck to accommodate delivery times requested by the customer in a manner that minimizes miles driven and/or driver labor costs. In addition, in certain locations 54 the Company has invested in various security and productivity measures, including Tele Trac, a technology which enables the Company to track truck locations on a computer screen on a real-time basis. Among other benefits, the system allows effective security monitoring and rapid response capability. The Company is currently exploring installation of on-board computer devices to monitor driver productivity, driving behavior and customer service. The Company backhauls product from suppliers' facilities on return trips from customer deliveries. Backhauling generated $1.0 million in 1995, which was applied to reduce net distribution expense. The Company expects to increase its backhauling efforts in the future. COMPETITION The convenience retail distribution business is comprised of one national distributor in the United States (McLane, a subsidiary of Wal-Mart) and several national distributors in Canada, a number of large, multi-regional competitors (participants with a presence in several contiguous regional markets) and a large number of small, privately owned businesses that compete in one or two markets. Multi-regionals include the Company in the west, GSC Enterprises in the south and southeast, EBY Brown in the midwest and Eli-Witt in the south. Relative to smaller competitors, multi-regional distributors such as the Company benefit from several competitive advantages, including greater purchasing power, the ability to service chain accounts, scale cost advantages in sales and warehouse operations, the ability to spread fixed corporate costs over a larger revenue base and the resources to invest in both MIS and productivity enhancing technology. These factors have led to a consolidation of the industry as small competitors exit the industry and some larger convenience retail distributors seek acquisitions to increase the utilization of their existing operations. Based on industry reports and management estimates, the Company believes the number of Wholesale Distributors in the United States has declined from more than 1,500 in 1985 to fewer than 1,000 in 1995. According to the U.S. DISTRIBUTION JOURNAL, only ten of these distributors had net sales in excess of $400 million in 1995. The Company also competes with wholesale clubs. Wholesale clubs have become a competitive factor in the industry, particularly in California markets. The wholesale clubs have been aggressive in their pricing of cigarettes and candy, and wholesalers have been forced to reduce margins to compete in densely populated markets with a large number of wholesale clubs. Wholesale clubs require the convenience store owner to take the time to travel, to shop at their location, pay cash and choose from a very limited selection. They also provide none of the merchandising support that Core-Mark routinely offers. Consequently, national chains do not purchase product at the wholesale clubs. The Company has grown sales even in territories with such clubs. The principal competitive factors in the Company's business include price, customer order fill rates, trade credit and the level and quality of value-added services offered. Management believes the Company competes effectively by offering a full product line, flexible delivery schedules, competitive prices, high levels of customer service and an efficient distribution network. EMPLOYEES As of June 30, 1996, the Company had 2,122 employees. The Company is a party to local collective bargaining agreements with the International Brotherhood of Teamsters covering clerical, warehouse and transportation personnel at its facilities in Hayward, California and covering warehouse and transportation personnel in Las Vegas, Nevada. The Company is party to a collective bargaining agreement with United Food Commercial Workers covering warehouse and transportation personnel in Calgary, Alberta. In addition, the Company is currently negotiating with the bargaining unit of employees at its Victoria, British Columbia facility. The agreements covering employees in Hayward and Las Vegas expire on January 15, 1997 and March 31, 1999, respectively. The agreement covering employees in Calgary expires on August 31, 1998. These agreements cover an aggregate of less than 10% of the Company's employees. Management believes that the Company's relations with its employees are satisfactory. 55 PROPERTIES The Company does not own any real property. The principal executive offices of the Company are located in South San Francisco, California, and consist of approximately 22,000 square feet of leased office space. In addition, the Company leases approximately 24,000 square feet in Vancouver, British Columbia for its Canadian regional corporate, tax and management information systems departments and 13 small offices for use by sales personnel in certain parts of the United States and Canada. The Company also leases its 19 distribution facilities, 15 of which are located in the western United States and four in western Canada. Each distribution facility is equipped with modern equipment (including freezers and coolers at 18 facilities) for receiving, stocking, order selection and shipping a large volume of customer orders. The Company believes that it currently has sufficient capacity at its distribution facilities to meet its anticipated needs and that its facilities are in satisfactory condition. The Company's leases expire on various dates between 1996 and 2005, and in many instances give the Company renewal options. The aggregate rent paid in connection with the Company's distribution facilities, regional sales offices and corporate and administrative offices was approximately $5.2 million in 1994 and $5.6 million in 1995. The Company's distribution facilities range from 19,000 to 200,000 square feet and account for approximately 1.5 million square feet in aggregate. Management believes that the Company's current utilization of warehouse facilities is approximately 70% in the aggregate. REGULATORY MATTERS The United States Food and Drug Administration has adopted a number of regulations restricting the sale distribution and advertising of cigarettes and smokeless tobacco products. See "Risk Factors-- Adverse Regulatory Developments." The Company is subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and the presence of hazardous substances in the workplace and establish standards for vehicle and employee safety and for the handling of solid and hazardous wastes. These laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act, the Hazardous Materials Transportation Act and the Occupational Safety and Health Act. Future developments, such as stricter environmental or employee health and safety laws and regulations thereunder, could affect the Company's operations. The Company does not currently anticipate that the cost of its compliance with or of any foreseeable liabilities under environmental and employee health and safety laws and regulations will have a material adverse affect on its business and financial condition. LEGAL MATTERS In May 1996, the Court of Appeals for the Fifth Circuit decertified a federal class action purportedly brought on behalf of all cigarette smokers in the United States. Following the decertification, lawyers for the class brought state class action lawsuits in a number of states, with the objective of filing such lawsuits in all fifty states, the District of Columbia and Puerto Rico. Several of these state lawsuits name cigarette distributors such as the Company as defendants. In June 1996, a subsidiary of the Company was named as a defendant in a class action lawsuit filed in state court in New Mexico. The action was later voluntarily dismissed without prejudice in order to permit a realignment of the parties. On September 10, 1996, the New Mexico lawsuit was refiled. A subsidiary of the Company is named as a defendant in the complaint, but has not yet been served. The other defendants include the principal U.S. tobacco manufacturers as well as other distributors. The case is brought on behalf of a putative class of smokers who reside in New Mexico, each of whom is allegedly nicotine dependent. The suit seeks, on behalf of the class, compensatory damages, punitive damages and equitable relief, including medical monitoring of the class members. 56 On October 2, 1996, the Company was served with a summons and complaint in an action brought by the County of Los Angeles against major tobacco manufacturers, the Company and other distributors of tobacco products. The complaint seeks, inter alia, damages and restitution for monies expended by the County for the health care of smokers. The Company does not believe that these actions will have a material adverse effect on the Company's financial condition. In addition, the Company is a party to other lawsuits incurred in the ordinary course of its business. The Company believes it is adequately insured with respect to such lawsuits or that such lawsuits will not result in losses material to its consolidated financial position or results of operations. 57 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company are as follows:
NAME AGE POSITION - ------------------------------------------- --- ------------------------------------------- Gary L. Walsh.............................. 54 Chairman and Chief Executive Officer and Director Robert A. Allen............................ 47 President and Chief Operating Officer and Director Leo F. Korman.............................. 49 Senior Vice President, Chief Financial Officer and Secretary Basil P. Prokop............................ 53 President, Canada Division J. Michael Walsh........................... 48 Senior Vice President, Distribution Leo Granucci............................... 58 Senior Vice President, Sales and Marketing Thomas A. Berglund......................... 36 Director Terry J. Blumer............................ 38 Director John F. Klein.............................. 33 Director John A. Sprague............................ 44 Director
GARY L. WALSH has been Chairman and Chief Executive Officer since 1990, and served as President from 1990 until 1996. He has been a director of the Company since 1990. Prior to 1990, he served as Chief Executive Officer of Food Services of America, a food distribution company. Mr. Walsh has more than 30 years of management experience in the food distribution industry. ROBERT A. ALLEN has been President and Chief Operating Officer since January 1996. Prior to that time, he served as Senior Vice President, Distribution from 1992 through 1996, and as Vice President, Distribution from 1989 to 1992. He has been a director of the Company since 1994. Before joining the Company, he served as Executive Vice President and Chief Operating Officer of Twin City Wholesale Drug Company of Minneapolis. LEO F. KORMAN has been Senior Vice President and Chief Financial Officer since January 1994 and served as Vice President and Chief Financial Officer from 1991 to 1994. BASIL P. PROKOP has been President of the Canada Division since 1992. Mr. Prokop joined the Company in 1984. J. MICHAEL WALSH has been Senior Vice President, Distribution since January 1996. Prior thereto, he served as Senior Vice President, Operations since 1992 and served as Vice President, Operations from 1991 to 1992. LEO GRANUCCI has been Senior Vice President, Sales and Marketing since 1994. Prior thereto, he served for seven years as Executive Vice President of Sales and Marketing at Bergen Brunswig, a wholesale pharmaceutical distribution company. THOMAS A. BERGLUND has been a director of the Company since August 1996. He has been a Vice President at Jupiter since 1994. Prior to that he served for three years as an employee of the Invus Group, a privately funded buy-out group specializing in food-related companies. 58 TERRY J. BLUMER has been a director of the Company since August 1996. Prior to co-founding Jupiter in 1994, Mr. Blumer was associated with Goldman, Sachs & Co. for over eight years, most recently as an Executive Director. JOHN F. KLEIN has been a director of the Company since August 1996. He has been an associate at Jupiter since November 1995. Prior to that, he served for three years as a consultant at Bain & Company, a management consulting firm, and as a manager in the Turnaround and Corporate Recovery Services Group at Price Waterhouse. JOHN A. SPRAGUE has been a director of the Company since August 1996. Prior to co-founding Jupiter in 1994, Mr. Sprague was associated with Forstmann Little & Co. for eleven years, most recently as a partner. He is a director of Heartland Wireless Communications, Inc. Directors are elected for one year terms and hold office until their successors are elected and qualified or until their earlier resignation or removal. Executive officers of the Company are appointed by and serve at the discretion of the Board of Directors. The only family relationship between any of the executive officers or directors is between Gary L. Walsh and J. Michael Walsh, who are brothers. COMPENSATION OF DIRECTORS Directors of the Company do not receive compensation for service as directors other than reimbursement for reasonable expenses incurred in connection with attending the meetings. EXECUTIVE COMPENSATION The following table summarizes the compensation paid to the Company's chief executive officer and its five other most highly compensated executive officers for the year ended December 31, 1995. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------------------------- OTHER ANNUAL ALL OTHER FISCAL SALARY BONUS COMPENSATION COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) - --------------------------------------------------------- ----------- ------------ ------------ -------------- -------------- Gary L. Walsh............................................ 1995 $ 311,539 $ 312,000 -- $ 35,621 Chairman and Chief Executive Officer Robert A. Allen.......................................... 1995 $ 183,601 $ 132,500 -- $ 38,490 Senior Vice President, Distribution Leo F. Korman............................................ 1995 $ 190,944 $ 110,000 -- $ 23,207 Senior Vice President and Chief Financial Officer Basil P. Prokop.......................................... 1995 $ 172,813 $ 38,909 -- $ 4,293 President, Canada Division(2) J. Michael Walsh......................................... 1995 $ 177,120 $ 126,500 -- $ 22,378 Senior Vice President, Operations Leo Granucci............................................. 1995 $ 192,923 $ 105,000 $ 48,677(3) $ 4,649 Senior Vice President, Sales and Marketing
- ------------------------ (1) Consists of the sum of: (i) Company matching contributions to the Savings Plan (defined below) in the following amounts: Mr. Allen, $4,620; Mr. Korman, $4,620; Mr. J.M. Walsh, $3,976; and Mr. Granucci, $1,415; (ii) Company matching contributions to the RRSP (defined below) for Mr. Prokop in the amount of $3,528; (iii) life and other insurance premiums in the following amounts: Mr. G.L. Walsh, $4,862; Mr. Allen, $3,111; Mr. Korman, $3,207; Mr. Prokop, $765; Mr. J.M. Walsh, $3,022; and Mr. Granucci, $3,234; and (iv) income received in connection with the cancellation of certain stock options in the following amounts: Mr. G.L. Walsh, $30,759; Mr. Allen, $30,759; Mr. Korman, $15,380; and Mr. J.M. Walsh, $15,380. (2) Represents Canadian dollars converted into U.S. dollars at an assumed rate of U.S. $0.73/Can. $1.00 ("Converted US Dollars"). (3) Consists of relocation expenses. 59 CERTAIN AGREEMENTS WITH MANAGEMENT Each member of Senior Management, constituting the Company's top six executive officers, has entered into a Severance and Non-Competition Agreement with the Company, dated as of August 7, 1996 (collectively, the "Severance and Non-Competition Agreements"), which provides that if the employment of such officer party thereto is terminated other than for Cause (as defined therein) or other than as a result of such officer's resignation for Good Reason (as defined therein), the Company may, in its sole discretion, continue to pay to such officer, for a period of up to one year following such termination, such officer's base salary as in effect on the effective date of such termination. Under the Severance and Non-Competition Agreements, each of such officers has agreed not to engage in activities that compete with those of the Company (i) while such officer is an employee of the Company and (ii) if the Company makes the severance payments described above to such officer, for an additional period of one year after such employment terminates if such officer's employment with the Company terminates for Cause or as a result of his resignation other than for Good Reason. STOCK OPTION PLAN The Company has adopted a Stock Option Plan pursuant to which stock options may be granted to officers, directors and key personnel of the Company and certain of its affiliates (the "Plan"). Under the Plan, a committee appointed by, and consisting of two or more members of, the board of directors of the Company is authorized to administer the Plan. Options granted under the Plan are generally exercisable through the eighth anniversary of the date of grant, vesting proportionately over a five-year period beginning on the date of grant. Options with respect to not more than 300,000 shares may be granted pursuant to the Plan. Special provisions are included in the Plan covering termination of employment, breach of any noncompetition or confidentiality agreement with the Company, and rights relating to the drag-along and tag-along of options in the event a tag-along right or drag-along right is exercised as provided in the Stockholders Agreement. See "Ownership of Voting Securities--Stockholders Agreement." The Plan also provides for acceleration of vesting of options in the event of a Deemed Change in Control of the Company (as defined in the Plan). No options have been granted under the Plan. THE SAVINGS PLAN The Company maintains the Core-Mark International, Inc. Nest Egg Savings Plan (the "Savings Plan"), which is a defined contribution plan with a cash or deferred arrangement (as described under Section 401(k) of the Internal Revenue Code of 1986, as amended). All non-union U.S. employees of the Company and its affiliates (unless a bargaining agreement expressly provides for participation) are eligible to participate in the Savings Plan after completing one year of service. Eligible employees may elect to contribute on a tax deferred basis from 1% to 10% of their compensation (as defined in the Savings Plan), subject to statutory limitations. A contribution of up to 6% is considered to be a "basic contribution" and the Company makes a matching contribution of $0.50 for each dollar of a participant's basic contribution (all of which may be subject to certain statutory limitations). Each participant has a fully vested (nonforfeitable) interest in all contributions made by the individual and all earnings thereon. Each participant must be employed at the end of each year to receive an allocation of matching contribution for the most recent calendar quarter. The amount of Company matching contributions that the following officers have accrued in the Savings Plan as of December 31, 1995 is as follows: Robert A. Allen $14,706.43; Leo Granucci $1,415.34; Leo F. Korman $14,093.12; and J. Michael Walsh $15,304.46. Gary L. Walsh is not a participant in the Savings Plan. 60 THE REGISTERED RETIREMENT SAVINGS PLAN (CANADA) The Company maintains the Core-Mark International, Inc. Group Retirement Savings Plan (Canada) (the "Registered Retirement Savings Plan" or "RRSP"), which is a defined contribution plan with a cash or deferred arrangement (as described under the Department of National Revenue Taxation Income Tax Act). All non-union Canadian employees of the Company and its affiliates (unless a bargaining agreement expressly provides for participation) are eligible to participate in the Registered Retirement Savings Plan after completing one year of service. Eligible employees may elect to contribute on a tax deferred basis from 1% to 10% of their compensation (as defined in the RRSP), subject to statutory limitations. A contribution of up to 6% is considered to be a "basic contribution" and the Company makes a matching contribution of $.50 for each dollar of a participant's basic contribution (all of which may be subject to certain statutory limitations). The amount of Company matching contributions that the following officers have accrued in the Registered Retirement Savings Plan as of December 31, 1995 is as follows: Basil P. Prokop $19,813.00 (in Converted US Dollars). 61 OWNERSHIP OF VOTING SECURITIES The following table set forth as of the date of this Offering Memorandum certain information regarding the beneficial ownership of the common stock of the Company (i) by each person who is known by the Company to own beneficially more than 5% of the outstanding shares of common stock of the Company, (ii) by each of the Company's directors and executive officers, and (iii) by all directors and executive officers as a group. The Company believes that the beneficial owners of the securities listed below, based on information furnished by such owners, have sole investment and voting power with respect to all the shares of common stock of the Company shown as being beneficially owned by them.
NUMBER OF SHARES OF COMMON STOCK OF PERCENTAGE OF THE COMPANY TOTAL SHARES OF NAME AND ADDRESS OF BENEFICIALLY COMMON STOCK OF BENEFICIAL OWNERS(A) OWNED THE COMPANY - ----------------------------------------------------------------------------- ------------------ ----------------- Jupiter...................................................................... 4,125,000 75.0% Robert A. Allen.............................................................. 281,875 5.1 Leo Granucci................................................................. 158,125 2.9 Leo F. Korman................................................................ 213,125 3.9 Basil P. Prokop.............................................................. 164,999 3.0 Gary L. Walsh................................................................ 343,751 6.2 J. Michael Walsh............................................................. 213,125 3.9 Thomas A. Berglund........................................................... 0 -- Terry J. Blumer (b).......................................................... 0 -- John F. Klein................................................................ 0 -- John A. Sprague (b).......................................................... 0 -- All directors and executive officers as a group (10 persons) (b).................................................. 1,375,000 25.0%
- ------------------------ (a) The address for Jupiter, Mr. Berglund, Mr. Blumer, Mr. Klein and Mr. Sprague is 30 Rockefeller Plaza, Suite 4525, New York, New York 10112. The address for Gary L. Walsh, Mr. Allen, Mr. Granucci, Mr. Korman, Mr. Prokop and J. Michael Walsh is 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94080. (b) Excludes the shares owned by Jupiter. Messrs. Sprague and Blumer exercise investment and voting power over the shares owned by Jupiter. STOCKHOLDERS AGREEMENT On August 7, 1996, the Company entered into a Stockholders Agreement (the "Stockholders Agreement") with Jupiter and the Senior Management (the "Management Stockholders"), which parties constitute all of the Company's common stockholders. The Stockholders Agreement (a) places significant restrictions on the ability of a Management Stockholder to transfer, pledge or otherwise dispose of 60% of his shares of common stock of the Company (the "Restricted Shares") prior to the Company's initial public offering of common stock, and limits the amount of Restricted Shares that may be sold by such Management Stockholder after such initial public offering, (b) restricts the ability of a Management Stockholder to pledge his shares of common stock that do not constitute Restricted Shares, (c) grants "tag-along" rights (i.e., rights to participate in a sale on a PRO RATA basis) to each stockholder in connection with the sale (i) by Jupiter of any of its common stock of the Company and (ii) by a Management Stockholder of any of his Restricted Shares, and (d) grants to Jupiter "drag-along" rights (i.e., the right to require Management Stockholders to participate on a PRO RATA basis in a sale by Jupiter) with respect to shares of common stock held by the Management Stockholders, whether or not Restricted Shares, in connection with a sale by Jupiter of common stock constituting at least 1% of the Company's common stock. The Stockholders Agreement also grants to the Company, first, and Jupiter, 62 second, certain call rights with respect to the purchase of Restricted Shares held by a Management Stockholder in the event that, prior to the fifth anniversary of the date of the Stockholders Agreement, such Management Stockholder's employment with the Company is terminated (other than as a result of death, disability or resignation for Good Reason (as defined therein)). The call provision also applies in the event such Management Stockholder breaches his obligations under the Severance and Non-Competition Agreement described under "Management-- Certain Agreements with Management". The purchase price with respect to such call rights under the Stockholders Agreement is the lower of $10 per share and a specified formula described therein (the "Repurchase Formula"), in the event the call right arises as a result of such Management Stockholder's termination for Cause (as defined therein), his resignation other than for Good Reason or a breach of his obligations under the Severance and Non-Competition Agreement to which he is a party. The purchase price with respect to a call right arising as a result of any other employment termination is the Repurchase Formula. Jupiter has agreed that neither it nor the Company will exercise their respective call rights with respect to the Restricted Shares held by Gary L. Walsh in the event that, after December 31, 1997, his employment with the Company is terminated without cause or he resigns without cause or for good reason. REGISTRATION RIGHTS AGREEMENT Pursuant to a Registration Rights Agreement, dated as of August 7, 1996 (the "Registration Rights Agreement"), the Company granted certain demand registration rights to Jupiter and certain "piggy-back" registration rights to Jupiter and the Management Stockholders with respect to the sale of common stock of the Company held by them. In addition to customary priority cut-back provisions relating to underwritten offerings, the Registration Rights Agreement imposes limitations on the number of shares of common stock of the Company that may be included in a "piggy-back" registration by a Management Stockholder. CERTAIN TRANSACTIONS In connection with a restructuring of the Company in 1994, Gary L. Walsh, Robert A. Allen, Leo F. Korman, Basil P. Prokop, J. Michael Walsh and Leo Granucci (together, "Senior Management") entered into an equity sharing arrangement with the Institutional Shareholders, which were the prior lenders to the Company. As a result of this arrangement and subsequent transactions, Senior Management owned approximately a 53% equity interest in the Company at the time of the Recapitalization. On August 7, 1996, in connection with the Recapitalization, the Company redeemed all of the common stock held by the Institutional Shareholders (representing approximately 47% of the total outstanding equity interests) and a portion of the common stock held by the Senior Management (representing approximately 44% of the total outstanding equity interests) on a pro rata basis for $135.0 million in cash and $6.3 million initial value of Management Notes, except that the Institutional Shareholders did not receive any Management Notes. Of such cash amount, $10.0 million was placed into escrow as a reserve in respect of representations and warranties in connection with the sale of the Company's common stock to Jupiter. The portion of the common stock previously held by Senior Management which was not redeemed represented 8.9% of the equity interests in the Company outstanding immediately prior to the Recapitalization and represents in the aggregate 25% of the outstanding common stock following the Recapitalization. Such stock would have a value of $13.8 million if valued at the price per share paid by Jupiter to the Company for its common stock. In connection with the Recapitalization, Jupiter Partners, Inc., an affiliate of Jupiter, received a $2.15 million transaction fee from the Company. 63 DESCRIPTION OF SENIOR CREDIT FACILITY The credit agreement dated as of August 7, 1996 (the "Senior Credit Facility") among the Company, the several lenders from time to time parties thereto (collectively, the "Lenders") and The Chase Manhattan Bank, as administrative agent and collateral agent (the "Agent"), provides for a $175.0 million Revolving Credit Facility as well as a $35 million Term Loan, which was repaid from the proceeds of the Offering. Chase Securities Inc. acted as advisor and arranger in connection with the Senior Credit Facility (the "Arranger"). The following is a summary description of the principal terms of the Senior Credit Agreement and is subject to and qualified in its entirety by reference to the definitive Senior Credit Facility and the other loan documents, which are available upon request from the Company. STRUCTURE. Loans under the Senior Credit Facility consist of a Revolving Credit Facility in the amount of up to $175.0 million subject to compliance with a borrowing base and customary conditions as set forth in the Senior Credit Facility. Of the total, $40.0 million is available in the form of letters of credit. $20 million of such letters of credit do not count against the borrowing base. In connection with the closing of the Recapitalization, the Company borrowed the full amount of the Term Loan and approximately $100.0 million under the Revolving Credit Facility, which amounts were used to fund redemptions, refinance existing debt and pay closing expenses as described under "Summary--Transactions Related to the Offering." In connection with the closing of the Offering, the proceeds of the Offering were used to repay the Term Loan ($35.0 million principal amount plus accrued interest thereon) and to reduce outstanding balances under the Revolving Credit Facility (approximately $12.3 million). At June 30, 1996, on a pro forma basis after giving effect to such borrowings and the Recapitalization and the Offering (including the application of the net proceeds therefrom), the amount that would have been available to be drawn under the Revolving Credit Facility after taking into account the borrowing base would have been approximately $47.8 million. The remaining availability under the Revolving Credit Facility may be utilized to meet the Company's working capital requirements, including issuance of stand-by and trade letters of credit. The Company also may utilize the remaining availability under the Revolving Credit Facility to fund acquisitions (subject to certain tests) and capital expenditures. SECURITY; GUARANTY. The obligations of the Company under the Senior Credit Facility are unconditionally guaranteed, jointly and severally, by each existing and subsequently acquired or organized active subsidiary of the Company. In addition, the Senior Credit Facility and the guarantees thereof are secured by substantially all the assets of the Company and the guarantors (collectively, the "Collateral"), including but not limited to (i) a first priority pledge of all the capital stock of each such subsidiary of the Company and (ii) perfected first priority security interests in substantially all tangible and intangible assets of the Company and the guarantors (including but not limited to accounts receivable, inventory, equipment, intellectual property, general intangibles, cash and proceeds of the foregoing), in each case subject to certain limited exceptions. AMORTIZATION; INTEREST. The Senior Credit Facility bears interest at a rate per annum equal (at the Company's option) to: (i) the Agent's Eurodollar Rate plus 2.5% or (ii) an Alternate Base Rate (equal to the highest of the Agent's prime rate, a certificate of deposit rate plus 1% or the Federal Funds effective rate plus 1/2 of 1%) plus 1.5%. Amounts relating to principal under the Senior Credit Facility not paid when due bear interest at a default rate equal to 2.0% above the otherwise applicable rate. The Revolving Credit Facility matures on June 30, 2001. PREPAYMENTS. The Senior Credit Facility permits the Company to prepay loans and to permanently reduce revolving credit commitments, in whole or in part, at any time. Any prepayment of Eurodollar loans other than at the end of an interest period will be subject to reimbursement of breakage costs. 64 FEES. The Company is required to pay the Lenders, on a quarterly basis, a commitment fee equal to 1/2 of 1% per annum on the undrawn portion of the Senior Credit Facility. The Company is also required to pay (i) a per annum letter of credit fee of 2.5% of the aggregate amount of outstanding letters of credit (less any fronting fee); (ii) a fronting bank fee for the letter of credit issuing bank equal to 1/4 of 1% per annum; (iii) annual administration fees and (iv) agent, arrangement and other similar fees. COVENANTS. The Senior Credit Facility contains a number of covenants that, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, prepay other indebtedness or amend certain other debt instruments, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by the Company or its subsidiaries, make capital expenditures or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the Senior Credit Facility, the Company is required to maintain specified financial ratios and tests, including minimum interest coverage ratios, maximum leverage ratios, annual capital expenditures limitations, net worth tests and current ratio and EBITDA tests. The Senior Credit Facility also contains provisions that prohibit any modifications of the Indenture in any manner adverse to the Lenders and that limit the Company's ability to refinance the Notes without the consent of the Lenders. EVENTS OF DEFAULT. The Senior Credit Agreement contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults and cross-acceleration to certain other indebtedness, certain events of bankruptcy and insolvency, ERISA, judgment defaults, actual or asserted invalidity of any security interest and Change of Control of the Company (as defined in the Senior Credit Facility) in certain circumstances as set forth therein. DESCRIPTION OF CAPITAL STOCK The authorized common stock of the Company consists of 10,000,000 shares of common stock, par value $.01 per share ("Common Stock"). At the date hereof, there are 5,500,000 shares of Common Stock issued and outstanding, 4,125,000 of which are held by Jupiter and 1,375,000 of which are held by the Senior Management. Each share of Common Stock entitles the holder thereof to one vote on all matters to be voted on by shareholders of the Company. Pursuant to the restrictions contained in the Senior Credit Facility and the Indenture, the Company is not expected to be able to pay dividends on its Common Stock for the foreseeable future, other than certain limited dividends permitted by the Senior Credit Facility and the Indenture. In the event of a liquidation, dissolution or winding-up of the Company, the holders of the Common Stock are entitled to share in the remaining assets of the Company after payment of all liabilities (including payments required to be made to holders of the Notes) and after all other shares of stock ranking senior to the Common Stock in respect of any distribution upon the liquidation, dissolution or winding-up of the Company. The Common Stock does not provide holders thereof with any pre-emptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of the Common Stock are fully paid and non-assessable. See also "Management--Certain Agreements With Management." 65 DESCRIPTION OF THE NEW NOTES GENERAL The Company (which for purposes of this Description of the New Notes refers solely to Core-Mark International, Inc.) issued $75,000,000 aggregate principal amount of Existing Notes on September 27, 1996 (the "Issue Date") pursuant to an Indenture dated as of such date (the "Indenture"), between the Company and Bankers Trust Company, as trustee (the "Trustee"). The New Notes will also be issued under the Indenture which will be qualified under the Trust Indenture Act upon effectiveness of the Registration Statement of which this Prospectus is a part. The form and terms of the New Notes are the same as the form and terms of the Existing Notes except that the New Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer pursuant to the Securities Act. The New Notes and the Existing Notes are collectively referred to as the "Notes." The terms of the New Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act as in effect on the date of the Indenture. The New Notes are subject to all such terms, and holders of New Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. Certain capitalized terms used herein and not otherwise defined have the meanings set forth in the section "Certain Definitions". The following summary of certain provisions of the Indenture and the Notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all provisions of the Indenture, including the definitions of certain terms therein and those terms made a part thereof by the Trust Indenture Act of 1939, as amended. A copy of the Indenture has been filed with the Commission as an exhibit to the Registration Statement of which this Prospectus is a part and is incorporated herein by reference. The Notes may be exchanged or transferred at the office or agency of the Company in the Borough of Manhattan, The City of New York (which initially shall be the corporate trust office of the Trustee, Bankers Trust Company, at Four Albany Street, New York, New York 10006; Corporate Trust Department). The New Notes will be issued only in fully registered form, without coupons, in principal denominations of $1,000 and any integral multiple of $1,000. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. TERMS OF THE NOTES The Notes are and will be unsecured senior subordinated obligations of the Company, limited to $75.0 million aggregate principal amount, and will mature on September 15, 2003. Each Note will bear interest at a rate per annum shown on the front cover of this Offering Memorandum from September 27, 1996, or from the most recent date to which interest has been paid or provided for, payable semiannually to Holders of record at the close of business on the March 1 or September 1 immediately preceding the interest payment date on March 15 and September 15 of each year, commencing March 15, 1997. OPTIONAL REDEMPTION The Notes will be redeemable, at the Company's option, in whole or in part, at any time on or after September 15, 2000, and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at the following redemption prices (expressed as a percentage of principal amount), plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the 66 relevant interest payment date), if redeemed during the 12-month period commencing on September 15 of the years set forth below:
REDEMPTION PERIOD PRICE - -------------------------------------------------------------------------------- ------------ 2000............................................................................ 105.688% 2001............................................................................ 102.844% 2002 and thereafter............................................................. 100.000%
In addition, at any time and from time to time prior to September 15, 1999, the Company may redeem in the aggregate up to 30% of the original aggregate principal amount of the Notes with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount thereof) of 111.375% plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) upon not less than 30 nor more than 60 days' prior notice mailed to each Holder's registered address; PROVIDED, HOWEVER, that at least 70% of the original aggregate principal amount of the Notes must remain outstanding after each such redemption. At any time on or prior to September 15, 2000, the Notes may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' prior notice (but in no event more than 90 days after the occurrence of such Change of Control) mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption (the "Redemption Date") (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). MANDATORY REDEMPTION Except as set forth under "--Change of Control" and "--Certain Covenants--Limitation on Sale of Assets", the Company is not obligated to make any mandatory redemption of or sinking fund payments with respect to the Notes. SELECTION In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. RANKING The indebtedness evidenced by the Notes is unsecured Senior Subordinated Indebtedness, is subordinated in right of payment, as set forth in the Indenture, to all existing and future Senior Indebtedness, ranks PARI PASSU in right of payment with all existing and future Senior Subordinated Indebtedness and is senior in right of payment to all existing and future Subordinated Obligations. The Notes are also effectively subordinated to any Secured Indebtedness to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described under "Defeasance" below is not subordinated to any Senior Indebtedness or subject to the restrictions described herein. 67 Certain of the operations of the Company are conducted through its Subsidiaries. Claims of creditors of such Subsidiaries, including trade creditors, and claims of preferred stockholders (if any) of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of creditors of the Company, including holders of the Notes. The Notes, therefore, are effectively subordinated to creditors (including trade creditors) and preferred stockholders (if any) of Subsidiaries of the Company. At June 30, 1996, the total liabilities of the Company's Subsidiaries were approximately $12.0 million, including Trade Payables. Although the Indenture limits the incurrence of Indebtedness and preferred stock of certain of the Company's Subsidiaries, such limitation is subject to a number of significant qualifications. At June 30, 1996, after giving effect to the Recapitalization, the issuance and sale of the Notes and the application of the net proceeds therefrom as described herein under "Use of Proceeds," the outstanding Senior Indebtedness would have been $98.2 million, all of which would have been Secured Indebtedness. Although the Indenture contains limitations on the amount of additional Indebtedness which the Company may Incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "Certain Covenants--Limitation on Indebtedness" below. "Senior Indebtedness" means all principal of, premium (if any), accrued interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and other amounts owing with respect to all Indebtedness of the Company, including all Bank Indebtedness, whether outstanding on the Issue Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Notes; PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes owed or owing by the Company, (3) any Trade Payables, (4) any Indebtedness or obligation of the Company which is subordinate or junior in any respect to any other Indebtedness or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock, or (6) any Indebtedness Incurred in violation of the Indenture. Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the Notes in accordance with the provisions of the Indenture. The Notes in all respects rank PARI PASSU with all other Senior Subordinated Indebtedness. The Company has agreed in the Indenture that it will not Incur, directly or indirectly, any Indebtedness which is subordinate or junior in ranking in any respect to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured. The Company may not pay principal of, premium (if any) or interest on, the Notes or make any deposit pursuant to the provisions described under "Defeasance" below and may not otherwise purchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when due or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full. However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated 68 immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee and the Company of written notice (a "Blockage Notice") of such default from the Representative of the Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness will be entitled to receive payment in full of the Senior Indebtedness before the Noteholders are entitled to receive any payment and until the Senior Indebtedness is paid in full, any payment or distribution to which Noteholders would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness as their interests may appear. If a distribution is made to Noteholders that due to the subordination provisions should not have been made to them, such Noteholders are required to hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness or the Representative of such holders of the acceleration. The Company may not pay the Notes until five Business Days after such holders or the Representative of the Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. By reason of such subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the Noteholders, and creditors of the Company who are not holders of Senior Indebtedness or of Senior Subordinated Indebtedness (including the Notes) may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of Senior Subordinated Indebtedness. SAME DAY PAYMENT The Indenture requires that payments in respect of Notes (including principal, premium and interest) be made by wire transfer of immediately available funds to the accounts specified by the Holders or, if no such account is specified, by mailing a check to each Holder's registered address. 69 CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), each Holder will have the right to require the Company to repurchase all or any part of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); PROVIDED, HOWEVER, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Notes pursuant to this covenant in the event that it has exercised its right to redeem all of the Notes as described under "--Optional Redemption": (i) prior to the first public offering of Voting Stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities or otherwise (for purposes of this clause (i), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a corporation (the "specified corporation") held by any other corporation (the "parent corporation") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent corporation); (ii) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, which right is subject to no conditions other than passage of time and conditions substantially within the control of the parties to such acquisition)), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company and (B) the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (ii), such other person shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if such other person "beneficially owns" (as defined in this clause (ii)), directly or indirectly, a majority of the voting power of the Voting Stock of such parent corporation; (iii) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (in each case, other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either 70 directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. Subject to the provision in the first paragraph under "--Change of Control", within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchasers. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company also may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. CERTAIN COVENANTS The Indenture contains covenants including, among others, the following: LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness; PROVIDED, HOWEVER, that the Company (but not any Restricted Subsidiary) may Incur Indebtedness if on the date of such Incurrence the Consolidated Coverage Ratio would be greater than 2.0:1, if such Indebtedness is Incurred on or prior to September 30, 1999, and 2.5:1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness of the Company and its Restricted Subsidiaries outstanding from time to time pursuant to the Credit Agreement or otherwise in an amount not to exceed 71 (A) the sum (the "Maximum Amount") of (x) 85% of the net book value of the consolidated Total Receivables of the Company and its Restricted Subsidiaries (other than the Receivables Subsidiary) and (y) 80% of the net book value of the consolidated inventory of the Company and its Restricted Subsidiaries (other than the Receivables Subsidiary), determined in accordance with GAAP, and (B) $20 million but only in respect of letters of credit; (ii) Indebtedness of the Receivables Subsidiary Incurred pursuant to Receivables Financings; (iii) Indebtedness of the Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness represented by the Notes (and the Note Guarantees), any Indebtedness (other than the Indebtedness described in clauses (i) and (iii) above) outstanding on the Issue Date and any Refinancing Indebtedness Incurred in respect of any Indebtedness described in clause (i), this clause (iv) or paragraph (a); (v) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary or was otherwise acquired by the Company); PROVIDED, HOWEVER, that at the time such Restricted Subsidiary is acquired by the Company, the Company would have been able to Incur $1.00 of additional Indebtedness pursuant to paragraph (a) after giving effect to the Incurrence of such Indebtedness pursuant to this clause (v) and (B) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (v); (vi) Indebtedness (A) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company and its Restricted Subsidiaries in the ordinary course of their business and which do not secure other Indebtedness, and (B) under Currency Agreements and Interest Rate Agreements; PROVIDED, HOWEVER, that, in the case of Currency Agreements and Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; or (vii) Indebtedness of the Company (but not of a Restricted Subsidiary) in an aggregate principal amount on the date of Incurrence which, when added to all other Indebtedness Incurred pursuant to this clause (vii) and then outstanding, will not exceed $10 million. (c) Notwithstanding the foregoing, the Company may not Incur any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness will be subordinated to the Notes to at least the same extent as such Subordinated Obligations. The Company may not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company may not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted 72 Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to its other shareholders on a pro rata basis in accordance with their respective ownership of the class of Capital Stock affected), (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default will have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from October 1, 1996, to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment and as to which financial results have been made publicly available (but in no event ending more than 135 days prior to the date of such Restricted Payment) (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) and the amount received in cash as voluntary contributions to the capital of the Company, subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Restricted Subsidiaries); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and (D) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments. (b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any purchase or redemption of Capital Stock of the Company or Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Restricted Subsidiaries); PROVIDED, HOWEVER, that (A) such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale will be excluded from clause (3)(B) of paragraph (a) above; (ii) any purchase or redemption of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to the covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that such purchase or redemption will be excluded 73 in the calculation of the amount of Restricted Payments; (iii) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; PROVIDED, HOWEVER, that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (iv) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; PROVIDED, HOWEVER, that such dividend will be included in the calculation of the amount of Restricted Payments; or (v) the repurchase of shares of common stock of the Company from, or the payment of the stock appreciation on any options to purchase common stock of the Company held by, any officer or employee of the Company or any of its Subsidiaries pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; PROVIDED, HOWEVER, that the aggregate amount of such repurchases shall not exceed $2.5 million in any calendar year and $7.5 million in the aggregate from the Issue Date; PROVIDED FURTHER, HOWEVER, that such repurchases shall be included in the calculation of the amount of Restricted Payments. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to applicable law or an agreement in effect at or entered into on the Issue Date including those arising under the Credit Agreement; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this covenant or this clause (3) or contained in any amendment to an agreement referred to in clause (1) or (2) of this covenant or this clause (3); PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any such refinancing agreement or amendment are no less favorable to the Noteholders than encumbrances and restrictions contained in such agreements; (4) in the case of clause (iii), any encumbrance or restriction (A) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, (B) contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restrictions restrict the transfer of the property subject to such security agreements or mortgages, (C) arising in connection with any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or asset not otherwise prohibited by the Indenture, or (D) arising or agreed to in the ordinary course of business, PROVIDED that such encumbrance or restriction does not, individually or in the aggregate together with other similar encumbrances and restrictions, impair the value of the property or assets of the Company or any Restricted Subsidiary in any material manner; (5) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and (6) any encumbrance or restriction with respect to the Receivables Subsidiary pursuant to an agreement relating to Indebtedness of the Receivables Subsidiary which is permitted under the covenant described under "-- Limitation on Indebtedness" or pursuant to an agreement relating to a Financing Disposition to or by the Receivables Subsidiary in connection with a Receivables Financing. 74 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors (including as to the value of all noncash consideration), of the shares and assets subject to such Asset Disposition; (ii) at least 80% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that in respect of an Asset Disposition, more than 20% of the consideration may consist of consideration other than cash or cash equivalents if (A) the portion of such consideration that does not consist of cash or cash equivalents consists of assets of a type ordinarily used in the operation of the Company's distribution business (including Capital Stock of a Person that becomes a Restricted Subsidiary and that holds such assets) to be used by the Company or a Restricted Subsidiary in the conduct of the Company's business, (B) the terms of such Asset Disposition have been approved by a majority of the members of the Board of Directors having no personal stake in such transaction, and (C) if the value of the assets being disposed of by the Company or such Restricted Subsidiary in such transaction (as determined in good faith by such members of the Board of Directors) is at least $15 million, the Board of Directors has received a written opinion of a nationally recognized investment banking firm to the effect that such Asset Disposition is fair, from a financial point of view, to the Company and the Company has delivered a copy of such opinion to the Trustee; and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the Company elects (or is required by the terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness or such Indebtedness (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 360 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) SECOND, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 360 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) THIRD, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined below) to purchase Notes pursuant to and subject to the conditions set forth in paragraph (b) of this covenant, and (D) FOURTH, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to fund (to the extent consistent with any other applicable provision of the Indenture) any corporate purpose; PROVIDED, HOWEVER that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this covenant exceed $500,000. For the purposes of this covenant, the following are deemed to be cash: (x) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. 75 (b) In the event of an Asset Disposition that requires the purchase of Notes pursuant to clause (a)(iii)(C) of this covenant, the Company will be required to purchase Notes tendered pursuant to an offer by the Company for the Notes (the "Offer") at a purchase price of 100% of their principal amount plus accrued interest to the date of purchase in accordance with the procedures (including prorationing in the event of oversubscription) set forth in the Indenture. If the aggregate purchase price of Notes tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes, the Company will apply the remaining Net Available Cash in accordance with clause (a)(iii)(D) of this covenant. The Company will not be required to make an Offer for Notes pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (a)(iii)(A) and (a)(iii)(B) of this covenant) is less than $5 million (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. (d) The Company will not, and will not permit any Restricted Subsidiary to, make any Financial Disposition in connection with a Receivables Financing unless the Board of Directors shall have determined in good faith, which determination will be conclusive and evidenced by a resolution of the Board of Directors, that such Financing Disposition is made at fair market value. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $1 million, are not in writing and have not been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction. In addition, if such Affiliate Transaction involves an amount in excess of $5 million (other than fees to investment banking firms constituting customary underwriting discounts for offerings of securities or customary advisory fees for merger and acquisition or recapitalization transactions) a fairness opinion must be provided by a nationally recognized appraisal or investment banking firm. (b) The provisions of the foregoing paragraph (a) will not prohibit (i) any Restricted Payment permitted to be paid pursuant to the covenant described under "--Limitation on Restricted Payments," (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, or other employee benefit arrangements with any officer, director or employee of the Company entered into in the ordinary course of business consistent with past practices of the Company, (iii) loans or advances to employees in the ordinary course of business consistent with past practices of the Company, (iv) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries or (v) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. 76 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell any shares of Capital Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock except (i) subject to the covenant described under "--Limitation on the Disposition of Assets of the Company to Restricted Subsidiaries", to the Company or a Wholly Owned Subsidiary, (ii) pursuant to arrangements entered into prior to the time a Person becomes a Restricted Subsidiary (other than arrangements entered into in contemplation of the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary) or (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. The proceeds of any sale of such Capital Stock permitted under this covenant will be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock." LIMITATION ON LIENS. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist any Lien (other than Liens on Receivables that are the subject of a Receivables Financing) on any of its property or assets (including Capital Stock), whether owned on the Issue Date or thereafter acquired, securing any Indebtedness other than Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) such obligation for so long as such obligation is so secured. SEC REPORTS. Notwithstanding that the Company may not be required to be or remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC, if permitted by the SEC, and provide the Trustee and Noteholders and prospective Noteholders (upon request) with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the other provisions of TIA Section 314(a). LIMITATION ON THE DISPOSITION OF ASSETS OF THE COMPANY TO RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Guarantor Subsidiary to, sell, lease, transfer or make any other disposition of any property or assets (including shares of Capital Stock of a Subsidiary) (each referred to for the purposes of this covenant as a "disposition") to a Restricted Subsidiary other than (i) a disposition to a Restricted Subsidiary that at the time of such disposition is or becomes a Guarantor Subsidiary pursuant to a Note Guarantee, (ii) dispositions (other than a Financing Disposition in connection with a Receivables Financing) with a fair market value of less than $2.5 million in the aggregate for all Restricted Subsidiaries in any fiscal year, (iii) a Financing Disposition in connection with a Receivables Financing, (iv) a disposition permitted by the covenant described under "--Limitation on Restricted Payments" and (v) dispositions of inventory in the ordinary course of business. LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business, other than those businesses in which the Company or its Restricted Subsidiaries are engaged on the Issue Date or which are reasonably related thereto. MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation, partnership, limited liability company or business trust organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (ii) immediately after 77 giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default will have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under "--Limitation on Indebtedness"; (iv) immediately after giving effect to such transaction, the Successor Company will have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the Notes. DEFAULTS An Event of Default is defined in the Indenture as (i) a default in any payment of interest on any Note when due, whether or not prohibited by the provisions described under "Ranking" above, continued for 30 days, (ii) a default in the payment of principal of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "Ranking" above, (iii) the failure by the Company to comply with its obligations under the covenant described under "Merger and Consolidation" above, (iv) the failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under "Change of Control" or "Certain Covenants" above (in each case, other than a failure to purchase Notes), (v) the failure by the Company to comply for 60 days after notice with its other agreements contained in the Indenture, (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $5 million or its foreign currency equivalent (the "cross acceleration provision"), (vii) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"), (viii) the rendering of any judgment or decree for the payment of money in excess of $5 million or its foreign currency equivalent against the Company or a Significant Subsidiary and (A) an enforcement proceeding thereon is commenced which is not promptly stayed or (B) such judgment or decree remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the "judgment default provision") or (ix)(A) any Note Guaranty ceases to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Note Guaranty and such default continues for 10 days or (B) any Guarantor Subsidiary fails to comply for 60 days after notice with any of its obligations in its Note Guarantee. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (iv) or (v) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the outstanding Notes notify the Company of the default and 78 the Company does not cure such default within the time specified in clauses (iv) and (v) after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have made a written request to the Trustee to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the outstanding Notes and any past default or its consequences may be waived with the consent of the Holders of a majority in principal amount of the Notes (other than a default in the payment of principal of or interest on the Notes, which may not be waived without the consent of 79 each Holder affected) then outstanding. However, without the consent of each Holder of an outstanding Note affected, no amendment may, among other things, (i) reduce the amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate of or extend the time for payment of interest on any Note, (iii) reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "--Optional Redemption" above, (v) make any Note payable in money other than that stated in the Note, (vi) make any change to the subordination provisions of the Indenture that adversely affects the rights of any Holder, (vii) impair the right of any Holder to receive payment of principal of and interest on such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes or (viii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions. Without the consent of any Holder, the Company and Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to change the subordination provisions to limit or terminate the benefits to any holder of Senior Indebtedness, to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Noteholders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder, to provide for the issuance and authorization of Exchange Notes or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. The consent of the Noteholders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Noteholders a notice briefly describing such amendment. However, the failure to give such notice to all Noteholders, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER AND EXCHANGE A Noteholder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the registrar and the Trustee may require a Noteholder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Noteholder to pay any taxes required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption or to transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed. The Notes will be issued in registered form and the registered holder of a Note will be treated as the owner of such Note for all purposes. DEFEASANCE The Company at any time may terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under the covenants described under "--Certain Covenants", the 80 operation of the cross acceleration provision, the bankruptcy provisions with respect to Subsidiaries, the judgment default provision described under "Defaults" above, the provisions with respect to Guarantor Subsidiary defaults and the limitations contained in clauses (iii) and (iv) under "--Merger and Consolidation" above ("covenant defeasance"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (iv), (vi), (vii) (with respect only to Subsidiaries) or (viii) under "--Defaults" above or because of the failure of the Company to comply with clause (iii) or (iv) under "--Merger and Consolidation" above. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). THE TRUSTEE Bankers Trust Company is to be the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. GOVERNING LAW The Indenture provides that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS "Additional Assets" means (i) any tangible property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "Adjusted Operating Income" for any period means (a) the sum of (x) the Operating Income for such period, plus (y) the following to the extent deducted in calculating such Operating Income: (i) Consolidated Non-Cash Charges and (ii) LIFO expense, if any, for such period, minus (b) LIFO income, if any, for such period. Notwithstanding the foregoing, the depreciation and amortization of a Subsidiary of the Company shall be added to Operating Income to compute Adjusted Operating Income only to the extent (and in the same proportion) that the operating income of such Subsidiary was included in calculating Operating Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that 81 has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "--Certain Covenants-- Limitation on Transactions with Affiliates" and "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Applicable Premium" means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess of (A) the present value at such time of (1) the redemption price of such Note at September 15, 2000 (such redemption price being described under "--Optional Redemption") plus (2) all required interest payments (excluding accrued but unpaid interest) due on such Note through September 15, 2000, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (B) the principal amount of such Note. "Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) in one transaction or in a series of related transactions which shall be viewed as one transaction other than (i) a disposition (other than a Financing Disposition in connection with a Receivables Financing) by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in the ordinary course of business, (iii) dispositions (other than a Financing Disposition in connection with a Receivables Financing) with a fair market value of less than $500,000 in the aggregate in any fiscal year, (iv) a Financing Diposition in connection with a Receivables Financing provided that immediately after such Financing Disposition the Indebtedness (other than Indebtedness in respect of letters of credit) outstanding pursuant to clause (b)(i) of the covenant described under "Certain Covenants--Limitation on Indebtedness" is equal to or less than the Maximum Amount, (v) for purposes of the provisions described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a disposition subject to the covenant described under "-- Certain Covenants--Limitation on Restricted Payments" and (vi) the disposition of all or substantially all the assets of the Company permitted by the covenant described under "Merger and Consolidation". "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement, as amended or modified from time to time, and any Refinancing Indebtedness Incurred in respect thereof, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim 82 for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of Adjusted Operating Income for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination and as to which financial statements have been made publicly available (but in no event ending more than 135 days prior to such date of determination) to (ii) Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that in the case of Indebtedness to finance seasonal fluctuations in working capital needs Incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four quarter period), (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the Adjusted Operating Income for such period shall be reduced by an amount equal to the Adjusted Operating Income (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period or increased by an amount equal to the Adjusted Operating Income (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or an Investment in or acquisition of any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition or Investment occurring in connection 83 with a transaction causing a calculation to be made under the Indenture, which constitutes all or substantially all of an operating unit of a business, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to the transaction (including the Incurrence of any Indebtedness and repayment of then existing debt) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of Operating Income relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total consolidated interest expense of the Company and its Restricted Subsidiaries, plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense, (i) interest expense attributable to capital leases, (ii) amortization of debt discount, (iii) capitalized interest, (iv) noncash interest expense, (v) commissions, discounts and other fees and charges with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries and Disqualified Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) the interest portion of any deferred payment obligation, (ix) interest actually paid on any Indebtedness of any other Person, (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust and (ix) the earned discount or yield with respect to the sale of Receivables (without duplication of amounts included in Operating Income) but in no event shall Consolidated Interest Expense include the amortization of fees incurred on or prior to the Issue Date in respect of the Credit Agreement or the issuance of the Notes or bank agency fees under the Credit Agreement. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income, (ii) any net income (loss) of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition, (iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such 84 Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (iv) any gain or loss realized upon the sale or other disposition of any asset of the Company or its consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (v) any extraordinary gain or loss, and (vi) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of the covenant described under "Certain Covenants--Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and the Restricted Subsidiaries, determined on a Consolidated basis, as of the end of the most recent fiscal quarter of the Company ending prior to the taking of any action for the purpose of which the determination is being made and as to which financial results have been made publicly available (but in no event ending more than 135 days prior to such date of determination), as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such person and its Consolidated Subsidiaries for such period, on a consolidated basis, as determined in accordance with GAAP (excluding any such other non-cash charge to the extent it requires an accrual or reserve for cash charges for any future period). "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; PROVIDED, HOWEVER, that "Consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary will be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Credit Agreement" means the Credit Agreement dated as of August 7, 1996, among Core-Mark International, Inc., the several lenders from time to time parties thereto and The Chase Manhattan Bank, as Administrative Agent, as in effect on the Issue Date. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. 85 "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof, are committed to lend, at least $10 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to 180 days after the Stated Maturity of the Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require the Company to purchase or redeem such Capital Stock upon the occurrence of a change of control occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the change of control provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions of the covenant described under "--Change of Control" are to the holders of the Notes and such Capital Stock specifically provides that the Company will not purchase or redeem any such Capital Stock pursuant to such provisions prior to the Company's purchase of the Notes as are required to be purchased pursuant to the covenant described under "--Change of Control." "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Financing Disposition" means any sale of Receivables, or interests therein, by the Company or any Subsidiary to the Receivables Subsidiary, or by the Receivables Subsidiary. "Foreign Subsidiary" means any Restricted Subsidiary of the Company which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantor Subsidiary" means any Person that has issued a Note Guarantee. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. 86 "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such person at the time it becomes a Subsidiary. "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (i) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (ii) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto) (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i), (ii) and (v)) entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such person of a demand for reimbursement following payment on the letter of credit); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (v) all Capitalized Lease Obligations of such Person; (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, Hedging Obligations of such Person. Notwithstanding the foregoing, Indebtedness shall not include any liability for Federal, state, local or other taxes owed or owing by the Company to any governmental entity. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the Person making such loan or advance) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "--Certain Covenants--Limitation on Restricted Payments," (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted 87 Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Notes are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means Gary L. Walsh, Robert A. Allen, Leo F. Korman, Leo Granucci, J. Michael Walsh and Basil P. Prokop. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment pursuant to, or monetization (but not for less than fair market value) of, a note or installment receivable or otherwise (other than amounts constituting interest thereon), but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other noncash form) therefrom, in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required or estimated in good faith to be required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms or the terms of any related instrument or agreement, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition (including without limitation amounts reserved for the cost of any indemnification payments (fixed or contingent) attributable to the seller's indemnities to the purchaser in respect of such Asset Disposition). "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Guarantee" means any guarantee that may from time to time be executed and delivered by a Subsidiary of the Company pursuant to which such Subsidiary will Guarantee payment of the Notes. Each Note Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by that Subsidiary without rendering the Note Guarantee, as it relates to such Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each such Note Guarantee will be in the form prescribed in the Indenture. "Officer" means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, the President, any Vice President, the Controller, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. 88 "Operating Income" means, with respect to the Company and its Restricted Subsidiaries for any period, operating income determined in accordance with GAAP and Rule 5-03 under Regulation S-X promulgated by the Commission (as interpreted in good faith by the Company and its independent public accountants and in a manner consistent with the Company's historical audited financial statements as of the Issue Date); PROVIDED, HOWEVER, that there shall not be included in Operating Income: (i) any operating income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (ii) below, the Company's proportionate share of the operating income of any such Restricted Subsidiary for such period shall be included in such Operating Income up to the amount that is proportionate to the net income that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary in cash as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's proportionate share of an operating loss of any such Restricted Subsidiary for such period shall be included in determining such Operating Income, (ii) any gain or loss realized upon the sale or other disposition of any asset of the Company or its consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, and (iii) the cumulative effect of a change in accounting principles. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means (i) each of the Management Investors, (ii) Jupiter Partners L.P. and (iii) (a) any spouse or lineal descendant (including by adoption) of any Person described in clause (i) or any spouse of any such lineal descendant; (b) in the event of the incompetence or death of any Person described in clause (i) or in subclause (a) of this clause (iii), such Person's estate, executor, administrator or other legal representative; (c) any trust 100% in interest of the beneficiaries of which consists of Persons described in clause (i) or in subclause (a) of this clause (iii); or (d) any limited liability company, corporation or partnership 100% of the members, stockholders or partners of which are Persons described in clause (i) or in subclause (a) of this clause (iii); PROVIDED, HOWEVER, that no Person described in this clause (iii) shall be a Permitted Holder if such Person is the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) directly or indirectly of more than 10% of the voting power of the Voting Stock of the applicable company. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (vii) loans to employees for the payment of the exercise price of options to purchase Capital Stock of the Company or loans to satisfy federal or state income tax withholding requirements relating to the issuance of Capital Stock of the Company pursuant 89 to the Company's employee stock plans, in an aggregate amount with respect to all loans described in this clause (vii) not to exceed $500,000 outstanding at any one time; (viii) stock, obligations or securities received in settlement of debts (including payment obligations of customers) created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) a Person to the extent such Investment represents the non-cash consideration otherwise permitted to be received by the Company or its Restricted Subsidiaries in connection with an Asset Disposition; (x) prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of the Company and its Restricted Subsidiaries; (xi) payments to customers in consideration for such customers' agreements with the Company to purchase goods and inventory made in the ordinary course of business consistent with past practices of the Company and its Restricted Subsidiaries and (xii) performance bonds or similar Investments in connection with pledges, deposits or payments made or given in the ordinary course of business in connection with or to secure statutory, regulatory or similar obligations, including obligations under health, safety or environmental obligations. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Receivable" means a right to receive payment arising from a sale or lease of goods or services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit, as determined in accordance with GAAP. "Receivables Financing" means any financing by the Receivables Subsidiary secured substantially by Receivables of the Company and its Subsidiaries that have been transferred to the Receivables Subsidiary in a Financing Disposition, provided that (i) all sales of Receivables to or by the Receivables Subsidiary are made at fair market value (as determined in good faith by the Board of Directors), (ii) the interest rate applicable to such Receivables Financing shall be a market interest rate (as determined in good faith by the Board of Directors) as of the time such financing is entered into and (iii) such financing is non-recourse to the Company and its Subsidiaries (other than the Receivables Subsidiary) except to a limited extent customary for such financings. "Receivables Subsidiary" means a bankruptcy-remote, special purpose Wholly Owned Subsidiary formed for the purposes of a Receivables Financing that (a) is engaged solely in the business of acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code) and other accounts and receivables (including any thereof constituting or evidenced 90 by chattel paper, instruments or general intangibles), all proceeds thereof and all rights (contractual and other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and (b) is designated as a "Receivables Subsidiary" by the Board of Directors. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness existing on the date of the Indenture or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in the Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced and (iii) the Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "Related Business" means any business related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or such Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank PARI PASSU with the Notes and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such 91 security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person. "Temporary Cash Investments" means any of the following: (i) any investment in securities maturing within one year from the date of acquisition thereof issued or Guaranteed or insured by the United States of America or any agency thereof, (ii) investments in certificates of deposit and eurodollar time deposits maturing within one year of the date of acquisition thereof issued by any commercial bank having capital surplus in excess of $500,000,000, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper issued by a corporation organized and in existence under the laws of the United States of America with a rating at the time as of which any investment therein is made of "P-2" (or higher) according to Moody's Investors Service, Inc. or "A-2" (or higher) according to Standard and Poor's Corporation, (v) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof or by any foreign government and rated at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc., (vi) investments in securities maturing within one year from the date of acquisition thereof backed by standby letters of credit issued by a bank meeting the qualifications described in clause (ii) above, (vii) shares of money market mutual or similar funds which invest primarily in assets satisfying the requirements of clauses (i) through (vi) above, (vii) investments in any term deposit receipts of the Bank of Montreal maturing within 90 days from the date of acquisition thereof, (ix) investments in cash owned by the Company or any of its Subsidiaries and denominated in Canadian dollars, (x) investments in readily marketable direct obligations of the Government of Canada or any province thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of Canada maturing within 90 days from the date of acquisition thereof, (xi) investments in insured certificates of deposit, deposit notes or term deposit receipts, maturing within 90 days from the date of acquisition thereof, of any commercial bank listed on Schedule 1 of the Bank Act (Canada), and (xii) investments in commercial paper maturing within 90 days from the date of acquisition thereof in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of Canada or any province thereof and rated at least A-1 or better (or the then equivalent grade) by Canada Bond Rating Service or R-2 (middle) or better (or the then equivalent grade) by Dominion Bond Rating Service. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SectionSection 77aaa-77bbbb) as in effect on the date of the Indenture. "Total Receivables" means all receivables of a Person as determined in accordance with GAAP, other than Receivables that are the subject of a Receivables Financing. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. 92 "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to September 15, 2000; PROVIDED, HOWEVER, that if the period from the Redemption Date to September 15, 2000, is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury Securities for which such yields are given, except that if the period from the Redemption Date to September 15, 2000 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "--Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Limitation on Indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 93 BOOK-ENTRY; DELIVERY AND FORM Except as set forth below, the New Notes will be issued in the form of one or more registered notes in global form without coupons (each a "Global Note"). Each Global Note will be deposited with, or on behalf of, The Depository Trust Company (the "Depository") and registered in the name of Cede & Co., as nominee of the Depository, or will remain in the custody of the Trustee pursuant to the FAST Balance Certificate Agreement between the Depository and the Trustee. The Depository has advised the Company that it is (i) a limited purpose trust company organized under the laws of the State of New York, (ii) a member of the Federal Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of the Exchange Act. The Depository was created to hold securities for its participants (collectively, the "Participants") and facilitates the clearance and settlement of securities transactions between Participants through electronic book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer and delivery of certificates. The Depository's Participants include securities brokers and dealers (including the Initial Purchaser), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. The Company expects that pursuant to procedures established by the Depository (i) upon deposit of the Global Notes, the Depository will credit the accounts of Participants with an interest in the Global Note and (ii) ownership of the New Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository (with respect to the Interest of Participants), the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that security interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. Consequently, the ability to transfer New Notes or to pledge the New Notes as collateral will be limited to such extent. So long as the Depository or its nominee is the registered owner of a Global Note, the Depository or such nominee, as the case may be, will be considered the sole owner or Holder of the New Notes represented by the Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have New Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Securities, and will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instruction or approval to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in New Notes represented by a Global Note to pledge such interest to persons or entities that do not participate in the Depository's system or to otherwise take action with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. Accordingly, each Person owning a beneficial interest in a Global Note must rely on the procedures of the Depository and, if such Person is not a Participant or an Indirect Participant, on the procedures of the Participant through which such Person owns its interest, to exercise any rights of a Holder under the Indenture or such Global Note. The Company understands that under existing industry practice, in the event the Company requests any action of Holders or a Person that is an owner of a beneficial interest in a Global Note desires to take any action that the Depository, as the Holder of such Global Note, is entitled to take, the Depository would authorize the Participants to take such action and the Participant would authorize Persons owning through such Participants to take such action or would otherwise act upon the instruction of such Persons. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by the 94 Depository, or for maintaining, supervising or reviewing any records of the Depository relating to such Notes. Payments with respect to the principal of, premium, if any, and interest on any New Notes represented by a Global Note registered in the name of the Depository or its nominee on the applicable record date will be payable by the Trustee to or at the direction of the Depository or its nominee in its capacity as the registered Holder of the Global Note representing such New Notes under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the New Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payment and for any and all other purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of New Notes (including principal, premium, if any, and interest), or to immediately credit the accounts of the relevant Participants with such payment, in amounts proportionate to their respective holdings in principal amount of beneficial interest in the Global Note as shown on the records of the Depository. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. CERTIFICATED SECURITIES If (i) the Company notifies the Trustee in writing that the Depository is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of New Notes in definitive form under the Indenture, then, upon surrender by the Depository of its Global Notes, Certificated Securities will be issued to each person that the Depository identifies as the beneficial owner of the New Notes represented by the Global Note. Neither the Company nor the Trustee shall be liable for any delay by the Depository or any Participant or Indirect Participant in identifying the beneficial owners of the related New Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from the Depository for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued). ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain copies of the Indenture without charge by writing to: Core-Mark International, Inc., 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94080. 95 DESCRIPTION OF THE EXISTING NOTES On September 27, 1996, the Company issued and sold $75,000,000 aggregate principal amount of the Existing Notes. The form and terms of the Existing Notes are the same as the form and terms of the New Notes except that the Existing Notes are not registered under the Securities Act and bear legends restricting the transfer thereof. See "Description of the New Notes." In connection with the issuance of the Existing Notes, the Company and Chase Securities Inc. and Donaldson Lufkin & Jenrette Securities Corporation, the initial purchasers of the Existing Notes (the "Initial Purchasers"), entered into an Exchange and Registration Rights Agreement (the "Registration Rights Agreement") to provide for the Exchange Offer. The Registration Rights Agreement also obligates the Company under certain circumstances to file with the Commission a so-called "shelf" Registration Statement to register the resale of the Notes under the Securities Act (a "Shelf Registration Statement"). The Registration Rights Agreement further provides that if the Company fails to complete the Exchange Offer, and/or to have the Shelf Registration Statement become effective under the Securities Act, within and for certain specified time periods, the Company would become obligated to pay to the Holders of affected Notes liquidated damages at a rate of 1% per annum of the principal amount of the affected Notes. Except as described under "Plan of Distribution," completion of the Exchange Offer by the Company on or before February 9, 1999 will satisfy the Company's obligations under the Registration Rights Agreement with respect to the Exchange Offer. Following completion of the Exchange Offer, the Company will be obligated to file and cause to become effective under the Securities Act a Shelf Registration Statement only if (i) any Holder of Existing Notes (other than exchanging dealer) is not permitted by applicable law to participate in the Exchange Offer (such Holder being an "Ineligible Holder") or (ii) a participant in the Exchange Offer (other than an exchanging dealer) does not receive a freely tradable New Note in exchange for such Holder's Existing Note (an "Affected Holder"). If a Shelf Registration Statement is required to be filed under the Registration Rights Agreement, only those Notes held by an Ineligible Holder or an Affected Holder will be required to be included therein. Liquidated damages under the Registration Rights Agreement for failure to cause any such Shelf Registration Statement to become and remain effective under the Securities Act will only be payable in respect of Notes held by an Ineligible Holder on an Affected Holder. HOLDERS OF EXISTING NOTES WHO DO NOT PARTICIPATE IN THE EXCHANGE OFFER BUT WHO ARE NOT PROHIBITED BY APPLICABLE LAW OR INTERPRETATION FROM PARTICIPATING IN THE EXCHANGE OFFER WILL NOT HAVE ANY RIGHT TO HAVE THEIR EXISTING NOTES INCLUDED IN A SHELF REGISTRATION STATEMENT, NOR WILL ANY SUCH HOLDER BE ENTITLED TO RECEIVE LIQUIDATED DAMAGES FOR FAILURE BY THE COMPANY TO INCLUDE THEIR NOTES IN ANY SHELF REGISTRATION STATEMENT OR FOR FAILURE TO HAVE A SHELF REGISTRATION STATEMENT BECOME AND REMAIN EFFECTIVE UNDER THE SECURITIES ACT WITHIN THE TIME PERIOD SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT. 96 CERTAIN UNITED STATES TAX CONSIDERATIONS The federal income tax discussion set forth below is intended only as a summary and does not purport to be a complete analysis or listing of all potential tax considerations that may be relevant to holders of the Notes. The discussion deals only with Notes held as capital assets by United States citizens and residents ("United States Holders") and does not include special rules that may apply to certain holders (including insurance companies, tax-exempt organizations, financial institutions or broker-dealers and foreign corporations), and does not address the tax consequences of the laws of any state, locality or foreign jurisdiction. The discussion is based upon currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury regulations promulgated thereunder and current administrative rulings and court decisions. All of the foregoing are subject to change and any such change could affect the continuing validity of this discussion. EXCHANGE PURSUANT TO EXCHANGE OFFER Although the matter is not free from doubt, an exchange of Existing Notes for New Notes of the Company with terms identical to those of the Existing Notes should not be a taxable event to holders of Notes, and holders should not recognize any taxable gain or loss or any interest income as a result of such an exchange. The Company is obligated to pay liquidated damages to the holder under certain circumstances described under "Description of the Existing Notes" above. Such payments should be treated for tax purposes as additional interest, taxable to holders as such payments become fixed and determinable. MARKET DISCOUNT If a United States Holder purchases a Note for an amount that is less than its principal amount, the amount of the difference will be treated as "market discount" for federal income tax purposes, unless such difference is less than a specified de minimis amount. Under the market discount rules, a United States Holder will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, a Note as ordinary income to the extent of the market discount which has not previously been included in income and is treated as having accrued on such a Note at the time of such payment or disposition. In addition, the United States Holder may be required to defer, until the maturity of the Note or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such Note. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Note, unless the United States Holder elects to accrue on a constant interest method. A United States Holder of a Note may elect to include market discount in income currently as it accrues (on either a ratable or constant interest method), in which case the rule described above regarding deferral of interest deductions will not apply. This election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service (the "IRS"). AMORTIZABLE BOND PREMIUM A United States Holder that purchases a Note for an amount in excess of the sum of its principal amount will be considered to have purchased the Note at a "premium." A United States Holder generally may elect to amortize the premium over the remaining term of the Note on a constant yield method. The amount amortized in any year will be treated as a reduction of the United States Holder's interest income from the Note. Bond premium on a Note held by a United States Holder that does not make such an election will decrease the gain or increase the loss otherwise recognized on disposition of the Note. The election to amortize premium on a constant yield method once made applies to all debt obligations held 97 or subsequently acquired by the electing United States Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. SALE, EXCHANGE AND RETIREMENT OF NOTES A United States Holder's tax basis in a Note will, in general, be the United States Holder's cost therefor, increased by market discount previously included in income by the United States Holder and reduced by any amortized premium. Upon the sale, exchange or retirement of a Note, a United States Holder will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange or retirement (less any accrued interest, which will be taxable as such) and the adjusted tax basis of the Note. Except as described above with respect to market discount, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange or retirement the Note has been held for more than one year. Under current law, long-term capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. BACKUP WITHHOLDING In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on Notes and to the proceeds of sale of a Note made to United States Holders other than certain exempt recipients (such as corporations). A 31% backup withholding tax will apply to such payments if the United States Holder fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against such holder's U.S. federal income tax liability provided the required information is furnished to the IRS. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF NOTES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF. ERISA CONSIDERATIONS Sections 406 and 407 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code prohibit certain employee benefit plans, individual retirement accounts, individual retirement annuities, and employee annuity plans ("Plans") from engaging in certain transactions with persons who, with respect to such Plan, are "parties in interest" under ERISA or "disqualified persons" under the Code. A violation of these "prohibited transactions" rules may generate excise taxes under the Code and other liabilities under ERISA for such persons. Possible violations of the prohibited transaction rules could occur if the Notes are purchased with the assets of any Plan if the Company or any of its affiliates is a party in interest or disqualified person with respect to such Plan, unless such acquisition is subject to a statutory or administrative exemption. The foregoing discussion is general in nature and is not intended to be all-inclusive. Any fiduciary of a Plan considering the purchase of the Notes should consult its legal advisors regarding the consequences of such purchases under ERISA and the Code. If the Plan is not subject to ERISA, the fiduciary should consult its legal advisors regarding the consequences of any state law or Code considerations. 98 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Existing Notes where such Existing Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 1997, all dealers effecting transactions in the New Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the close of the Exchange Offer the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Existing Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Existing Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the New Notes offered hereby will be passed upon for the Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. INDEPENDENT AUDITORS The financial statements of the Company as of December 31, 1995 and 1994 and for each of the years ended in the three-year period ended December 31, 1995 have been included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants included elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 99 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE --------- ANNUAL CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report............................................................................... F-2 Consolidated Balance Sheets as of December 31, 1994 and 1995............................................... F-3 Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995..................... F-4 Consolidated Statements of Common Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995..................................................................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995................. F-6 Notes to Consolidated Financial Statements................................................................. F-7 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996............................ F-18 Condensed Consolidated Statements of Income for the six months ended June 30, 1995 and 1996................ F-19 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996............ F-20 Notes to Condensed Consolidated Financial Statements....................................................... F-21
F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors Core-Mark International, Inc.: We have audited the accompanying consolidated balance sheets of Core-Mark International, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1994, and the related consolidated statements of income, common shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Core-Mark International, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP San Francisco, California February 23, 1996 F-2 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1995 (IN THOUSANDS OF DOLLARS)
1994 1995 ---------- ---------- ASSETS Current assets: Cash.................................................................................... $ 17,080 $ 24,447 Receivables: Trade accounts, less allowance for doubtful accounts of $2,692 and $3,600, respectively........................................................................ 84,647 91,858 Other................................................................................. 10,432 13,332 Inventories, net of LIFO allowance of $7,661 and $11,076, respectively.................. 92,732 96,703 Prepaid expenses and other.............................................................. 3,248 4,542 ---------- ---------- Total current assets................................................................ 208,139 230,882 ---------- ---------- Property and equipment: Equipment............................................................................... 26,530 33,000 Leasehold improvements.................................................................. 6,833 7,746 ---------- ---------- 33,363 40,746 Less accumulated depreciation and amortization.......................................... (16,508) (20,217) ---------- ---------- Net property and equipment.............................................................. 16,855 20,529 Other assets.............................................................................. 346 6,700 Goodwill, net of accumulated amortization of $11,264 and $13,242, respectively............ 68,403 66,425 ---------- ---------- $ 293,743 $ 324,536 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable.................................................................. $ 50,026 $ 47,205 Cigarette and tobacco taxes payable..................................................... 37,205 40,613 Income taxes payable.................................................................... 3,605 3,057 Deferred income taxes................................................................... 8,029 7,274 Other accrued liabilities............................................................... 20,228 28,503 ---------- ---------- Total current liabilities........................................................... 119,093 126,652 ---------- ---------- Long-term debt............................................................................ 84,627 101,598 Other accrued liabilities and deferred income taxes....................................... 8,910 8,617 ---------- ---------- Total liabilities....................................................................... 212,630 236,867 ---------- ---------- Commitments and contingencies: Preferred shareholders' equity: Mandatorily redeemable preferred stock; 50,000,000 shares authorized, issued and outstanding; $50,000 redemption value................................................. 41,767 -- ---------- ---------- Common shareholder's equity: Common stock; $.001 par value; 100,000,000 shares authorized; 5,297 shares issued and outstanding in 1994................................................................... -- -- Common stock; $.01 par value; 3,000 shares authorized; 100 shares issued and outstanding in 1995............................................................................... -- -- Additional paid-in capital................................................................ 87,579 128,351 Accumulated deficit....................................................................... (42,513) (35,790) Cumulative currency translation adjustments............................................... (1,954) (1,313) Additional minimum pension liability...................................................... (3,766) (3,579) ---------- ---------- Total common shareholder's equity................................................... 39,346 87,669 ---------- ---------- $ 293,743 $ 324,536 ---------- ---------- ---------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. F-3 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (IN THOUSANDS OF DOLLARS)
1993 1994 1995 ------------- ------------- ------------- Net sales........................................................... $ 1,868,932 $ 1,855,356 $ 2,047,187 Cost of goods sold.................................................. 1,704,982 1,719,999 1,901,604 ------------- ------------- ------------- Gross profit...................................................... 163,950 135,357 145,583 Operating and administrative expenses............................... 117,411 116,080 125,245 ------------- ------------- ------------- Operating income.................................................. 46,539 19,277 20,338 Interest expense, net............................................... 4,887 5,773 6,987 Debt refinancing costs.............................................. -- 1,600 1,065 ------------- ------------- ------------- Income before income taxes and cumulative effects of changes in accounting principles........................................... 41,652 11,904 12,286 Income tax expense.................................................. 2,472 2,816 5,563 ------------- ------------- ------------- Income before cumulative effects of changes in accounting principles...................................................... 39,180 9,088 6,723 Cumulative effects on prior years of changes in accounting principles for: Income taxes........................................................ 492 -- -- Postretirement benefits other than pensions......................... (988) -- -- ------------- ------------- ------------- Net income.......................................................... $ 38,684 $ 9,088 $ 6,723 ------------- ------------- ------------- ------------- ------------- -------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. F-4 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
COMMON STOCK CUMULATIVE ADDITIONAL TOTAL ------------------------- ADDITIONAL CURRENCY MINIMUM COMMON SHARES PAID-IN ACCUMULATED TRANSLATION PENSION SHAREHOLDERS' OUTSTANDING AMOUNT CAPITAL DEFICIT ADJUSTMENTS LIABILITY EQUITY ------------ ----------- ----------- ------------- ------------- ----------- -------------- Balance, December 31, 1992....... 670,000 $ 1 $ 103,567 $ (90,285) $ (714) $ (2,864) $ 9,705 Net income....................... -- -- -- 38,684 -- -- 38,684 Additional minimum pension liability...................... -- -- -- -- -- (1,056) (1,056) Capital contribution for compensation................... -- -- 94 -- -- -- 94 Foreign currency translation adjustment..................... -- -- -- -- (546) -- (546) Increase in carrying value of preferred stock................ -- -- (5,744) -- -- -- (5,744) ------------ ----------- ----------- ------------- ------------- ----------- -------------- Balance, December 31, 1993....... 670,000 1 97,917 (51,601) (1,260) (3,920) 41,137 Net income....................... -- -- -- 9,088 -- -- 9,088 Additional minimum pension liability...................... -- -- -- -- -- 154 154 Capital contribution for compensation................... -- -- 38 -- -- -- 38 Foreign currency translation adjustment..................... -- -- -- -- (694) -- (694) Increase in carrying value of preferred stock................ -- -- (6,877) -- -- -- (6,877) Purchases of common shares....... (664,703) (1) (3,499) -- -- -- (3,500) ------------ ----------- ----------- ------------- ------------- ----------- -------------- Balance, December 31, 1994....... 5,297 -- 87,579 (42,513) (1,954) (3,766) 39,346 Net income....................... -- -- -- 6,723 -- -- 6,723 Reduction in additional minimum pension liability.............. -- -- -- -- -- 187 187 Increase in carrying value of preferred stock................ -- -- (1,271) -- -- -- (1,271) Recapitalization................. (5,197) -- 42,043 -- -- -- 42,043 Foreign currency translation adjustment..................... -- -- -- -- 641 -- 641 ------------ ----------- ----------- ------------- ------------- ----------- -------------- Balance, December 31, 1995....... 100 $ -- $ 128,351 $ (35,790) $ (1,313) $ (3,579) $ 87,669 ------------ ----------- ----------- ------------- ------------- ----------- -------------- ------------ ----------- ----------- ------------- ------------- ----------- --------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. F-5 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (IN THOUSANDS OF DOLLARS) CASH PROVIDED BY OPERATING ACTIVITIES:
1993 1994 1995 --------- --------- --------- Net income....................................................................... $ 38,684 $ 9,088 $ 6,723 Adjustments to reconcile net income to net cash provided by operating activities: LIFO (income) expense........................................................ (22,967) (547) 3,415 Amortization of goodwill..................................................... 1,978 1,978 1,978 Depreciation and amortization................................................ 3,759 3,563 3,965 Amortization of debt refinancing fees........................................ -- -- 1,065 Amortization of debt premium................................................. (3,454) (1,972) -- Deferred income taxes........................................................ 1,081 (72) (769) Provision for postretirement benefits........................................ 861 63 64 Other adjustments for non-cash and non-operating activities.................. (361) (403) 805 Changes in operating assets and liabilities, net of acquisitions: (Increase) decrease in trade accounts receivable............................. (3,329) 6,731 (3,789) (Increase) decrease in other receivables..................................... (7,317) 2,649 (2,699) (Increase) decrease in inventories........................................... 28,476 24,181 (3,285) (Increase) decrease in prepaid expenses and other............................ (1,047) 96 (2,122) Increase (decrease) in trade accounts payable................................ (25,428) 9,396 (3,303) Increase in accrued liabilities and income taxes payable..................... 749 3,502 7,506 Increase (decrease) in cigarette and tobacco taxes payable................... 9,491 (3,545) 2,975 --------- --------- --------- Net cash provided by operating activities........................................ 21,176 54,708 12,529 --------- --------- --------- INVESTING ACTIVITIES: Additions to property and equipment............................................ (5,501) (5,376) (7,286) Net assets of acquired businesses.............................................. -- -- (9,610) Other.......................................................................... (1,305) (598) -- --------- --------- --------- Net cash used in investing activities............................................ (6,806) (5,974) (16,896) --------- --------- --------- FINANCING ACTIVITIES: Net (payments) borrowings under revolving credit agreement..................... (7,896) (37,783) 16,971 Principal payments under term loan agreements.................................. (3,510) (2,303) -- Debt refinancing fees.......................................................... -- -- (5,379) Purchases of common shares..................................................... -- (3,500) (195) --------- --------- --------- Net cash (used in) provided by financing activities.............................. (11,406) (43,586) 11,397 --------- --------- --------- Effects of changes in foreign exchange rates..................................... (510) (519) 337 --------- --------- --------- Increase in cash................................................................. 2,454 4,629 7,367 Cash, beginning of year.......................................................... 9,997 12,451 17,080 --------- --------- --------- CASH, END OF YEAR................................................................ $ 12,451 $ 17,080 $ 24,447 --------- --------- --------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash payments during the year for: Interest....................................................................... $ 8,393 $ 7,384 $ 6,739 Income taxes................................................................... 528 920 6,903
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. F-6 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 1. ORGANIZATION AND FORM OF BUSINESS Core-Mark International, Inc. and subsidiaries (the "Company") is a full-service wholesale distributor of tobacco, food and other consumer products to convenience stores, grocery stores, mass merchandisers and liquor and drug stores in western North America. On December 16, 1994, the Company purchased all of the common stock owned by its previous majority shareholder, leaving management as the sole common shareholder as of December 31, 1994. On March 2, 1995, the Company's capital structure was modified as described in Note 4. As a result, management and the former preferred shareholders beneficially own all of the outstanding common stock of the Company through a newly formed limited liability company, Core-Mark L.L.C. ("LLC"). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes any differences resulting from estimates will not have a material effect on the Company's consolidated financial position. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated. FOREIGN CURRENCY Assets and liabilities of the Company's Canadian operations are translated at exchange rates in effect at year-end. Income and expenses have been translated at average rates for the year. Adjustments resulting from such translation are included in cumulative currency translation adjustments, a separate component of common shareholder's equity. EXCISE TAXES State and provincial excise taxes paid by the Company on cigarettes were $404,890,000, $435,018,000, and $466,533,000, for the years ended December 31, 1993, 1994, and 1995, respectively, and are included in net sales and cost of goods sold. INVENTORIES Inventories are valued at the lower of cost or market. In the U.S., cost is determined on a last-in, first-out (LIFO) basis (using Producer Price Indices as determined by the Department of Labor and Statistics). Under LIFO, current costs of goods sold are matched against current sales. Inventories in Canada amount to $19,634,000 and $20,227,000 at December 31, 1994 and 1995, respectively, and are valued on a first-in, first-out (FIFO) basis. F-7 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of owned assets. The estimated useful lives for equipment are principally 4 to 10 years. Leasehold improvements are amortized over the estimated useful life of the property or over the term of the lease, whichever is shorter. GOODWILL Goodwill, which is the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over a forty-year period. Amortization expense for each of the years ended December 31, 1993, 1994 and 1995 was $1,978,000. The Company annually evaluates its carrying value and expected period of benefit of goodwill in relation to results of operations. The Company's review of goodwill includes an analysis of past operating results and future projections related to the specific operations acquired. INCOME TAXES On January 1, 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The cumulative effect of the change in accounting principle on the Company's consolidated statement of income for the year ended December 31, 1993 was a benefit of $492,000. The Company previously provided for income taxes in accordance with SFAS No. 96. See Note 7. PENSION COSTS Pension costs charged to earnings are determined on the basis of annual valuations by an independent actuary. Adjustments arising from plan amendments, changes in assumptions and experience gains and losses are amortized over the expected average remaining service life of the employee group. See Note 6. POSTRETIREMENT BENEFITS OTHER THAN PENSION In December 1990, the Financial Accounting Standards Board issued SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", which establishes accounting and reporting standards for such benefits. SFAS No. 106 requires accrual of the expected cost of these benefits during the employees' years of service. The assumptions and calculations involved in determining the accrual closely parallel pension plan accounting requirements. The Company adopted SFAS No. 106 effective January 1, 1993. The cumulative effect of the change in accounting principal on the Company's F-8 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) consolidated statement of income for the year ended December 31, 1993 was a charge of $988,000. The Company previously recognized these costs on a cash basis. See Note 6. RECLASSIFICATIONS Prior years' amounts in the consolidated financial statements have been reclassified where necessary to conform to the current year's presentation. 3. FINANCING Long-term debt consisted of the following at December 31 (in thousands):
1994 1995 --------- ----------- U.S. credit facility: Term loan.......................................................... $ 37,127 $ -- Revolving credit facility.......................................... 47,500 101,598 --------- ----------- Long-term debt....................................................... $ 84,627 $ 101,598 --------- -----------
EXISTING CREDIT FACILITY On March 2, 1995, the Company entered into the existing credit facility which replaced the previously existing credit facility. The existing credit facility provides for aggregate borrowings up to $175,000,000 until December 31, 1998 subject to borrowing base limitations based upon levels of eligible inventories and accounts receivable. Included in this facility are letters of credit up to a maximum of $40,000,000. Under the existing credit facility, Base Rate Advances bear interest at 1.25% above the bank's Base Rate. The Company has the option to borrow under Eurodollar Rate Advances which bear interest at 2.5% above the bank's Eurodollar Rate. The bank's Base Rate and Eurodollar Rate was 8.5% and 5.72%, respectively, at December 31, 1995. There is a commitment fee of 0.5% on the unused portion of the working capital revolving credit facility. The obligations are secured by all assets of the Company, including inventories, trade accounts receivable and property and equipment. Under the existing credit facility, the Company must maintain certain financial covenants, including, but not limited to, working capital, tangible net worth, leverage and fixed charge coverage. The existing credit facility limits certain activities of the Company, including, but not limited to, indebtedness, creation of liens, acquisitions and dispositions, capital expenditures, investments and dividends. The Canadian credit facility allows for borrowings up to $16,000,000 for general corporate use subject to and secured by letters of credit under the existing credit facility. The Canadian dollar advances bear interest at the Canadian bank's prime rate which was 7.5% at December 31, 1995. There were no borrowings under this facility at December 31, 1994 and 1995. The Company had letters of credit of $30,861,000 and $18,719,000 outstanding at December 31, 1994 and 1995, respectively, of which $5,000,000 and $1,000,000, respectively, were issued as security F-9 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 3. FINANCING (CONTINUED) for the Canadian credit facility. The remaining letters of credit are issued primarily to secure the Company's bond and insurance programs. The Company pays fees of 2.25% per annum on the outstanding portion of letters of credit. The Company incurred approximately $4,900,000 for legal, professional, and other costs related to the structuring of the existing credit facility. These costs were capitalized and classified as other assets and are being amortized on a straight-line basis over the term of the existing credit facility. Amortization for the year ended December 31, 1995 was approximately $1,065,000. PREVIOUSLY EXISTING CREDIT FACILITY Under the terms of the facility which was in place through March 2, 1995, total credit available at December 31, 1994 was approximately $132,337,000, comprised of a $37,127,000 term loan and $95,210,000 under a revolving credit facility. Included in this credit facility were letters of credit up to a maximum of $55,000,000. Borrowings under this facility bore interest at the bank's base rate plus 1.5%. Additionally, a commitment fee of 0.5% per annum was charged on the unused portion. The obligations were collateralized by all asset of the Company, including inventories, trade accounts receivable, and property and equipment. 1991 DEBT AND CAPITAL RESTRUCTURING In April 1991, the Company's U.S. credit facility was restructured, resulting in the previously existing credit facility described above. Pursuant to this restructuring, debt was converted into mandatorily redeemable preferred stock and warrants to purchase common stock of the Company. The difference between the face value of the debt converted and the fair value assigned to the preferred stock and warrants was amortized as a reduction of interest expense on an effective yield basis and amounted to $3,454,000 and $1,972,000 for the years ended December 31, 1993 and 1994, respectively. The preferred stock was initially recorded at its 1991 estimated fair value and has been increased to its redemption value by charges to additional paid-in capital which amounted to $5,744,000, $6,877,000 and $1,271,000 for the years ended December 31, 1993, 1994 and 1995, respectively. On March 2, 1995, the preferred shareholders' stock and warrants were replaced pursuant to the recapitalization described in Note 4. 4. RECAPITALIZATION The Company changed its capital structure on March 2, 1995, simultaneously with the execution of the existing credit facility described in Note 3. The Company's common and preferred shareholders contributed their equity interest in the Company in exchange for the equity interest in the LLC. Accordingly, the LLC became the Company's sole common shareholder. Additionally, the Company reincorporated in the State of Delaware and issued 100 shares of new $.01 par value common stock to the LLC, in exchange for the old $.001 par value common stock, preferred stock and warrants. As a result of this recapitalization, the carrying value of the preferred stock was reclassified to additional paid-in capital, increasing total common shareholder's equity. Approximately $800,000 of legal, professional and other costs related to this recapitalization were charged to additional paid-in capital. F-10 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 4. RECAPITALIZATION (CONTINUED) In December 1995 the Company loaned a shareholder of the LLC $635,000 to acquire another shareholder's equity interest in the LLC. This note bears interest at the Company's average cost of funds and is due on or before December 2005. 5. COMMITMENTS AND CONTINGENCIES LEASES The Company leases the majority of its sales and warehouse distribution facilities, automobiles and trucks under lease agreements expiring at various dates through 2005, excluding renewal options. The leases generally require the Company to pay taxes, maintenance and insurance. Management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases. Future minimum rental payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) were as follows as of December 31, 1995 (in thousands): 1996.............................................................. $ 9,436 1997.............................................................. 7,639 1998.............................................................. 5,515 1999.............................................................. 3,957 2000.............................................................. 3,261 Thereafter........................................................ 8,010 --------- Total minimum lease payments.................................. 37,818 Less minimum sublease rental income........................... (2,730) --------- $ 35,088 --------- ---------
Rental expense for operating leases was $11,118,000, $11,247,000 and $11,308,000 for the years ended December 31, 1993, 1994 and 1995, respectively. CLAIMS AND ASSESSMENTS The Company and its subsidiaries are defendants to claims arising in the ordinary course of business. Management has provided reserves it believes are adequate and is of the view that the disposition of these matters will not have a material adverse effect on the Company's consolidated financial position. 6. EMPLOYEE BENEFIT PLANS PENSION PLAN The Company sponsors a defined benefit pension plan for qualified employees. As of September 30, 1986, the plan was frozen and plan participants ceased accruing benefits as of that date. The most recent actuarial valuation of the plan was performed as of January 1, 1995. F-11 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 6. EMPLOYEE BENEFIT PLANS (CONTINUED) The following table sets forth the funded status of the plan and amounts recognized in the Company's consolidated balance sheets as of December 31 (in thousands):
1994 1995 --------- --------- Interest cost.......................................................... $ 1,086 $ 1,100 Return on assets....................................................... 155 (2,178) Net other components................................................... (757) 1,413 --------- --------- Net periodic pension cost.......................................... 484 335 --------- --------- --------- --------- Accumulated benefit obligation......................................... 13,372 14,972 Plan assets at estimated fair value.................................... 10,018 12,864 --------- --------- 3,354 2,108 Prepaid pension cost................................................... 412 1,471 --------- --------- Additional minimum pension liability (a reduction of common shareholder's equity)............................................ $ 3,766 $ 3,579 --------- --------- --------- --------- Weighted average discount rate......................................... 8.50% 7.50% Expected long-term rate of return on assets............................ 7.50% 7.50%
The additional minimum pension liability is equal to the accumulated benefit obligation in excess of plan assets at estimated fair value, plus prepaid pension costs. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company sponsors a defined benefit postretirement health care plan for qualified employees. As of September 30, 1986, the plan was frozen and is only available to those who qualify for the pension plan as described previously in this note. The plan pays stated percentages of most necessary medical expenses incurred by retirees, after subtracting payments by Medicare or other providers and after a stated deductible has been met. Participants become eligible for the benefit if they retire from the Company after reaching age 55 with 5 or more years of service and qualify under the Company defined benefit pension plan. The plan is contributory, with retiree contributions adjusted annually. The Company does not fund this plan. The components of the expense under SFAS No. 106 are summarized in the following table for the years ended December 31 (in thousands):
1994 1995 --------- --------- Service cost--benefits attributed to service during the period................ $ 29 $ 28 Interest cost on accumulated postretirement benefit obligation................ 135 154 Other components.............................................................. 53 54 --------- --------- Net postretirement health care cost....................................... $ 217 $ 236 --------- --------- --------- ---------
F-12 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 6. EMPLOYEE BENEFIT PLANS (CONTINUED) The accumulated postretirement benefit obligation is summarized in the following table at December 31 (in thousands):
1994 1995 --------- --------- Retirees................................................................. $ 1,106 $ 1,379 Other fully eligible participants........................................ 244 268 Other active participants................................................ 342 513 --------- --------- Total................................................................ 1,692 2,160 Prior service cost....................................................... -- 219 Unrecognized net loss.................................................... (768) (1,455) --------- --------- Accrued postretirement benefit liability............................. $ 924 $ 924 --------- --------- --------- ---------
For measurement purposes, a 13% annual rate of increase in the per capita cost of covered health care claims was assumed for 1995; the rate was assumed to decrease gradually to 6% for 2002, and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $393,000 and the aggregate of the service and interest cost components of net postretirement health care cost for the year ended December 31, 1995 by $34,000. The weighted-averaged discount rate used in determining the accumulated postretirement benefit obligation was 7.5%. 7. INCOME TAXES On January 1, 1993, the Company adopted SFAS No. 109 and has reported the cumulative benefit of $492,000 of this change in accounting principle in the year ended December 31, 1993 consolidated statement of income. The Company's income tax expense consists of the following for the years ended December 31 (in thousands):
1993 1994 1995 --------- --------- --------- Current: Federal.......................................................................... $ 634 $ 675 $ 4,625 State............................................................................ 215 1,102 1,218 Foreign.......................................................................... 50 1,111 489 --------- --------- --------- 899 2,888 6,332 Deferred: Federal.......................................................................... (271) 59 (990) State............................................................................ 1,844 (353) 53 Foreign.......................................................................... -- 222 168 --------- --------- --------- 1,573 (72) (769) --------- --------- --------- Income tax expense................................................................. $ 2,472 $ 2,816 $ 5,563 --------- --------- --------- --------- --------- ---------
F-13 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 7. INCOME TAXES (CONTINUED) A reconciliation between the Company's income tax expense and income taxes computed by applying the statutory federal income tax rate to income before income taxes and cumulative effects of changes in accounting principles is as follows for the years ended December 31 (in thousands):
1993 1994 1995 --------- --------- --------- Expected federal income tax expense at the statutory rate........................ $ 14,578 $ 4,166 $ 4,300 Increase (decrease) in taxes resulting from: Goodwill amortization.......................................................... 692 692 692 State income tax expense, net of federal taxes................................. 1,339 487 684 Alternative minimum tax........................................................ 1,030 707 -- Utilization of loss carryforwards.............................................. (11,610) (8,432) (980) Net operating loss and timing differences not tax effected..................... (3,639) 4,206 946 Other, net..................................................................... 82 990 (79) --------- --------- --------- Income tax expense............................................................... $ 2,472 $ 2,816 $ 5,563 --------- --------- --------- --------- --------- ---------
The tax effects of significant temporary differences which comprise deferred tax assets and liabilities are as follows at December 31 (in thousands):
1994 1995 ---------- --------- Deferred tax assets: Net operating loss carryforwards.................................... $ 11,990 $ 10,822 Employee benefits, including postretirement benefits................ 4,508 4,768 Other............................................................... 4,269 5,196 ---------- --------- Total deferred tax assets......................................... 20,767 20,786 Less valuation allowance............................................ (11,842) (10,824) Net deferred tax assets........................................... 8,925 9,962 ---------- --------- Deferred tax liabilities: Inventories......................................................... 9,420 9,001 Other............................................................... 7,681 8,374 ---------- --------- Total deferred tax liabilities.................................... 17,101 17,375 ---------- --------- Net deferred tax liability........................................ $ 8,176 $ 7,413 ---------- --------- ---------- ---------
The Company established a valuation allowance as of January 1, 1993 in accordance with the requirements of SFAS No. 109 against tax benefits that are potentially available to the Company but have not yet been recognized. This valuation allowance relates to the amount of net operating loss carryforwards in excess of existing net taxable temporary differences and to certain deductible temporary differences that may not reverse during periods in which the Company may generate net taxable income. During 1994 and 1995, the Company recorded a reduction of $4,015,000 and $1,018,000, respectively, in the valuation allowance primarily as a result of net taxable income generated during both years. F-14 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 7. INCOME TAXES (CONTINUED) At December 31, 1995, the Company has available for U.S. federal income tax return purposes net operating losses totaling approximately $32,000,000, subject to certain limitations, which will expire between the years 2005 and 2007. The Company also has available for U.S. income tax return purposes investment tax credits and alternative minimum credits totaling $500,000 and $1,100,000 respectively. The investment tax credits expire by the year 2000 while the alternative minimum tax credits have an indefinite utilization period. 8. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS The carrying amount for the Company's cash, trade accounts receivable, other receivables, trade accounts payable, cigarette and tobacco taxes payable and other accrued liabilities approximates fair market value because of the short maturity of these financial instruments. The carrying amount of the Company's long-term debt approximates fair market value as the debt is a variable rate instrument. The rate of interest, which is tied to either the bank's Base Rate or Eurodollar Rate, fluctuates with market changes. 9. SUPPLEMENTARY FINANCIAL DATA During periods of rising prices, the LIFO method of costing inventories generally results in higher current costs being charged against income while lower costs are retained in inventories. An increase in cost of goods sold and a decrease in inventories of $3,415,000 resulted from using the LIFO method for the year ended December 31, 1995. Conversely, in periods of decreasing prices, the LIFO method generally results in a reduction of current costs charged against income while higher costs are retained in inventories. In 1993, cigarette prices decreased significantly, contributing to a net decrease in cost of goods sold and an increase in inventories using the LIFO method of $22,967,000 for the year ended December 31, 1993. In 1994, although cigarette prices remained flat, a reduction in cigarette inventories contributed to a net decrease in cost of goods sold and an increase in inventories using the LIFO method of $547,000 for the year ended December 31, 1994. The cumulative effect of the LIFO adjustments on inventories at December 31, 1994 and 1995 is $7,661,000 and $11,076,000, respectively. F-15 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 9. SUPPLEMENTARY FINANCIAL DATA (CONTINUED) The FIFO information below is presented in order to provide a basis for comparison to the financial position and operating results of those companies within the distribution industry which do not use the LIFO method. The following table presents the Company's FIFO financial information as of and for the years ended December 31 (in thousands):
1994 1995 ----------- ----------- Balance Sheet Data: Inventories............................................................................. $ 100,393 $ 107,779 Current assets.......................................................................... 215,800 241,958 Total assets............................................................................ 301,404 335,612 Current liabilities..................................................................... 119,093 126,652 Total liabilities....................................................................... 212,630 236,867 Total shareholders' equity.............................................................. 88,774 98,745
1993 1994 1995 ------------- ------------- ------------- Income Statement Data: Net sales........................................................... $ 1,868,932 $ 1,855,356 $ 2,047,187 Cost of goods sold.................................................. 1,727,949 1,720,546 1,898,189 ------------- ------------- ------------- Gross profit........................................................ 140,983 134,810 148,998 Operating and administrative expenses............................... 117,411 116,080 125,245 ------------- ------------- ------------- Operating income.................................................... 23,572 18,730 23,753 Interest expense and debt refinancing costs......................... 4,887 7,373 8,052 ------------- ------------- ------------- Income before income taxes and cumulative effects of changes in accounting principles............................................. 18,685 11,357 15,701 Net income.......................................................... 15,717 8,541 10,138
F-16 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 10. SEGMENT INFORMATION The Company has substantially all of its operations in the distribution business. Its revenues are generated from the distribution of cigarettes, tobacco products, candy, food, health and beauty aids, and general merchandise. The Company operates principally in the United States and Canada. Foreign and domestic net sales, operating income, and identifiable assets are as follows (in thousands):
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1993 1994 1995 ------------- ------------- ------------- Net Sales: United States..................................................... $ 1,297,494 $ 1,343,911 $ 1,538,816 Canada............................................................ 571,438 511,445 508,371 ------------- ------------- ------------- Total............................................................. $ 1,868,932 $ 1,855,356 $ 2,047,187 ------------- ------------- ------------- ------------- ------------- ------------- Operating Income: United States..................................................... $ 43,736 $ 16,590 $ 19,411 Canada............................................................ 2,803 2,687 927 ------------- ------------- ------------- Total............................................................. $ 46,539 $ 19,277 $ 20,338 ------------- ------------- ------------- ------------- ------------- ------------- Identifiable Assets: United States..................................................... $ 272,282 $ 237,558 $ 257,755 Canada............................................................ 50,958 48,898 49,284 Corporate......................................................... 6,615 7,287 17,497 ------------- ------------- ------------- Total............................................................. $ 329,855 $ 293,743 $ 324,536 ------------- ------------- ------------- ------------- ------------- -------------
F-17 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
DECEMBER 31, JUNE 30, 1995 1996 ----------- ----------- ASSETS (UNAUDITED) Current Assets: Cash............................................................... $ 24,447 $ 12,911 Receivables: Trade accounts, less allowance for doubtful accounts of $3,600 and $3,958, respectively....................................... 91,858 95,506 Other............................................................ 13,332 13,815 Inventories, net of LIFO allowance of $11,076 and $11,803, respectively..................................................... 96,703 72,933 Prepaid expenses and other......................................... 4,542 5,240 ----------- ----------- Total current assets............................................. 230,882 200,405 ----------- ----------- Property and equipment............................................. 40,746 42,922 Less accumulated depreciation and amortization................... (20,217) (22,051) ----------- ----------- Net property and equipment....................................... 20,529 20,871 Other assets....................................................... 6,700 5,882 Goodwill, net of accumulated amortization of $13,242 and $14,231, respectively..................................................... 66,425 65,436 ----------- ----------- $ 324,536 $ 292,594 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Trade accounts payable........................................... $ 47,205 $ 49,052 Cigarette and tobacco taxes payable.............................. 40,613 42,003 Income taxes payable............................................. 3,057 3,099 Deferred income taxes............................................ 7,274 6,975 Other accrued liabilities........................................ 28,503 26,581 ----------- ----------- Total current liabilities.................................... 126,652 127,710 ----------- ----------- Long-term debt..................................................... 101,598 62,404 Other accrued liabilities and deferred income taxes................ 8,617 8,529 ----------- ----------- Total liabilities................................................ 236,867 198,643 ----------- ----------- Commitments and contingencies Common shareholder's equity: Common stock; $.01 par value; 3,000 shares authorized; 100 shares issued and outstanding......................................... -- -- Additional paid-in capital......................................... 128,351 128,351 Accumulated deficit................................................ (35,790) (29,574) Cumulative currency translation adjustments........................ (1,313) (1,247) Additional minimum pension liability............................... (3,579) (3,579) ----------- ----------- Total common shareholder's equity............................ 87,669 93,951 ----------- ----------- $ 324,536 $ 292,594 ----------- ----------- ----------- -----------
See Notes to Condensed Consolidated Financial Statements. F-18 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------- 1995 1996 ------- ---------- Net sales......................................... $983,435 $1,068,575 Cost of good sold................................. 912,808 989,608 ------- ---------- Gross profit.................................... 70,627 78,967 Operating and administrative expenses............. 60,678 64,516 ------- ---------- Operating income................................ 9,949 14,451 Interest expense, net............................. 3,759 2,971 Debt refinancing costs............................ 426 635 ------- ---------- Income before income taxes...................... 5,764 10,845 Income tax expense................................ 2,624 4,629 ------- ---------- Net income........................................ $ 3,140 $ 6,216 ------- ---------- ------- ----------
See Notes to Condensed Consolidated Financial Statements. F-19 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) (UNAUDITED)
1995 1996 ------- ------- SIX MONTHS ENDED JUNE 30, ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES............................ $28,560 $30,016 INVESTING ACTIVITIES: Additions to property and equipment............. (3,256) (2,423) Net assets of acquired businesses............... (9,151) -- Other........................................... 19 (8) ------- ------- Net cash used in investing activities............. (12,388) (2,431) FINANCING ACTIVITIES: Net borrowings (payments) under revolving credit agreement..................................... 5,790 (39,194) Debt refinancing fees........................... (5,353) -- Purchase of common shares....................... (154) -- ------- ------- Net cash provided by (used in) financing activities...................................... 283 (39,194) ------- ------- Effects of changes in foreign exchange rates...... 263 73 ------- ------- Increase (decrease) in cash....................... 16,718 (11,536) Cash, beginning of period......................... 17,080 24,447 ------- ------- CASH, END OF PERIOD............................... $33,798 $12,911 ------- ------- ------- ------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash payments during the period for: Interest........................................ $ 3,345 $ 3,062 Income taxes.................................... 3,067 4,849
See Notes to Condensed Consolidated Financial Statements. F-20 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) 1. BASIS OF PRESENTATION The condensed consolidated balance sheet as of June 30, 1996, the condensed consolidated statements of income for the six-month periods ended June 30, 1995 and 1996, and the statements of cash flows for the six-month periods ended June 30, 1995 and 1996, have been prepared by the Company. In the opinion of management, all adjustments (which included only normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 1996, and for all periods presented, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full year. The condensed consolidated balance sheet as of December 31, 1995, is derived from the audited financial statements but does not include all disclosures required by generally accepted accounting principles. The notes accompanying the consolidated financial statements in the Offering Memorandum include accounting policies and additional information pertinent to an understanding of both the December 31, 1995 balance sheet and the interim financial statements. 2. EXCISE TAXES State and provincial excise taxes paid by the Company on cigarettes were $221,975,000 and $237,793,000 for the six months ended June 30, 1995 and 1996, respectively. These amounts are included in net sales and cost of goods sold for the periods indicated. 3. SUPPLEMENTARY FINANCIAL DATA During periods of rising prices, the LIFO method of costing inventories generally results in higher current costs being charged against income while lower costs are retained in inventories. An increase in cost of goods sold and a decrease in inventories resulted using the LIFO method of $1,133,000 and $727,000 for the six months ended June 30, 1995 and 1996, respectively. The cumulative effect of the LIFO adjustments on inventories at December 31, 1995, and June 30, 1996 was $11,076,000 and $11,803,000, respectively. F-21 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) 3. SUPPLEMENTARY FINANCIAL DATA (CONTINUED) The FIFO information below is presented in order to provide a basis for comparison to the financial position and operating results of those companies within the distribution industry which do not use the LIFO method. The following table presents FIFO financial information as of December 31, 1995 and June 30, 1996 and for the six months ended June 30, 1995 and 1996 (in thousands):
DECEMBER 31, JUNE 30, 1995 1996 -------------- ----------- Balance Sheet Data: Inventories...................................................... $ 107,779 $ 84,736 Current assets................................................... 241,958 212,208 Total assets..................................................... 335,612 304,397 Current liabilities.............................................. 126,652 127,710 Total liabilities................................................ 236,867 198,643 Total common shareholders' equity................................ 98,745 105,754
SIX MONTHS ENDED JUNE 30, --------------------- 1995 1996 --------- ---------- Income Statement Data: Net Sales............................................ $ 983,435 $1,068,575 Gross Profit......................................... 71,760 79,694 Operating income..................................... 11,082 15,178 Income before income taxes........................... 6,897 11,572 Net income........................................... 4,273 6,943
4. SUBSEQUENT EVENTS On August 7, 1996, a series of transactions were consummated to effect a recapitalization of the Company, including (i) the issuance of common stock to Jupiter Partners L.P. ("Jupiter") for $41.3 million, (ii) the issuance of a subordinated note to Jupiter for $18.8 million and (iii) the redemption of common shares for $135 million in cash and $6.3 million of subordinated notes. In connection with the recapitalization, the Company entered into a credit facility which provides for aggregate borrowings of up to $210 million, upon which the Company borrowed $135 million to fund the redemptions described above, refinance existing debt and pay other expenses of the transaction. The Company also effected a 155,000 to 1 stock split on August 7, 1996 in connection with the recapitalization. On September 27, 1996, the Company issued and sold $75 million of senior subordinated notes in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The proceeds of the offering were used to repay a portion of the borrowings under the credit facility and the subordinated notes described above and for other general corporate purposes. F-22 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. - ------------------------------------------------ TABLE OF CONTENTS Available Information..................... 3 Prospectus Summary........................ 4 Summary Financial and Other Data.......... 12 Risk Factors.............................. 14 The Company............................... Use of Proceeds........................... 21 Capitalization............................ 22 Selected Historical and Pro Forma Consolidated Financial and Other Data.... 23 Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 26 The Exchange Offer........................ Business.................................. 43 Management................................ 58 Recapitalization and Related Transactions............................. Certain Relationships and Related Transactions............................. Ownership of Voting Securities............ 61 Certain Transactions...................... 62 Description of Senior Credit Facility..... 63 Description of Capital Stock.............. 64 Description of the New Notes.............. 65 Description of the Existing Notes......... 95 Certain United States Tax Considerations........................... 97 ERISA Considerations...................... 98 Plan of Distribution...................... 99 Legal Matters............................. 99 Independent Auditors...................... 99 Index to Consolidated Financial Statements............................... F-1
------------------------ UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. PROSPECTUS $75,000,000 CORE-MARK INTERNATIONAL, INC. OFFER TO EXCHANGE $75,000,000 OF ITS 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR $75,000,000 OF ITS OUTSTANDING 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003. [LOGO] , 1996 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses payable by the Company in connection with the offering of New Notes. All amounts are estimates except the registration fees. Registration fees................................................ $ 23,239 Printing......................................................... * Legal expenses................................................... * Trustee's and Exchange Agent's fees.............................. 3,000 Accounting fees.................................................. * Miscellaneous.................................................... * --------- Total........................................................ $ * --------- ---------
- ------------------------ * To be supplied by amendment. ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company is a Delaware corporation. Subsection (b)(7) of Section 102 of the Delaware General Corporation Law (the "DGCL"), enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director to the corporation or its stockholders for monetary damages for violations of the director's fiduciary duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. Article Seventh of the Company's Certificate of Incorporation has eliminated the personal liability of directors to the fullest extent permitted by Subsection (b)(7) of Section 102 of the DGCL. Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding provided that such director or officer acted in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, provided further that such director or officer had no reasonable cause to believe his conduct was unlawful. Subsection (b) of Section 145 of the DGCL empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided that such director or officer acted in II-1 good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director or officer shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such director or officer is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or such other court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 or in the defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonable incurred by such person in connection therewith; that indemnification and advancement of expenses provided for, by, or granted pursuant to, Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and empowers the corporation to purchase and maintain insurance on behalf of any person who is or was a director of officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. Article SEVENTH of the Company's Certificate of Incorporation provides, in relevant part, as follows: "(a) A director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, or (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) under Section 174 of the DGCL or any successor provision thereto or (iv) for any transaction from which the director shall have derived an improper personal benefit. Neither amendment nor repeal of this paragraph (a) nor the adoption of any provision of the Certificate of Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in respect of any matter occurring, or any cause of action, suit or claim that, but for this paragraph (a) of this Article SEVENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee, agent, stockholder or a holder of any ownership interest in any stockholder of the Corporation (each, an "Indemnitee"), or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise (an "Other Entity"), against expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law. Persons who are not Indemnitees of the Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board of Directors at any time specifies that such persons are entitled to the benefits of this Article SEVENTH, and the Corporation may adopt By-Laws or enter into agreements with any such person for the purpose of providing for such indemnification." II-2 ITEM 21. EXHIBITS
EXHIBIT NUMBER EXHIBIT - ---------- ------------------------------------------------------------------------------------------------------ 2.1 Stock Subscription Agreement, dated June 17, 1996, by and among Jupiter Partners, L.P., as amended 2.2 Stock Purchase Agreement, dated June 17, 1996, by and between Core-Mark L.L.C. and the Company, as amended 3.1 Articles of Incorporation of the Company 3.2 By-laws of the Company 4.1 Indenture, dated as of September 27, 1996, between the Company and Bankers Trust Company as Trustee 4.2 Exchange and Registration Rights Agreement, dated September 27, 1996, among the Company, Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation 4.3 Form of Face of Initial Security 4.4 Form of Face of Exchange Security 4.5 Form of Letter of Transmittal 4.6 Form of Notice of Guaranteed Delivery 4.7 Guidelines for Certification of Taxpayer Identification Number or Substitute Form W-9 5 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison re the legality of the Notes being registered 10.1 Manufacturing Rights Agreement by and among Famous Value Brands, the Company, Core-Mark Interrelated Companies, Inc. and C/M Products, Inc.* 10.2 Manufacturing Agreement for "Best Buy" Cigarettes by and between Famous Value Brands and C/M Products, Inc.* 10.3 Trademark License Agreement by and between Famous Value Brands and Core-Mark Interrelated Companies, Inc.* 10.4 The Credit Agreement, dated August 7, 1996, among the Company, several lenders parties thereto and The Chase Manhattan Bank 10.5 Stockholders Agreement dated as of August 7, 1996, by and among the Company and all of the holders of its Common Stock 10.6.1 Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Gary L. Walsh 10.6.2 Schedule of Agreements omitted pursuant to Instruction no. 2 to Item 601 of Regulation S-K 10.7 Letter, dated August 7, 1996, from Jupiter Partners LP to Gary L. Walsh 10.8 Purchase Agreement, dated September 24, 1996, between the Company, Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation 12 Statements re computation of ratios 21 List of Subsidiaries of the Company 23.1 Consent of KPMG Peat Marwick LLP 23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5) 24 Power of attorney (included on signature pages) 25 Statement of eligibility of Trustee 27 Financial Data Schedule
- ------------------------ * To be filed by amendment. II-3 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of South San Francisco, State of California, on October 15, 1996. CORE-MARK INTERNATIONAL, INC. By /s/ LEO F. KORMAN ----------------------------------------- Leo F. Korman, Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the persons who appear below appoint and constitute each of Gary L. Walsh and Leo F. Korman such person's true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in this Form S-4 Registration Statement filed under the Securities Act of 1933, as amended, and to file the same, together with all exhibits thereto, with the Securities and Exchange Commission and such other agencies, offices and persons as may be required by applicable law, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as each such person might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------------------ ------------------------------- ------------------------ /s/ GARY L. WALSH ------------------------------------------- Chairman, Chief Executive October 15, 1996 Gary L. Walsh Officer and Director /s/ ROBERT A. ALLEN ------------------------------------------- President, Chief Operating October 15, 1996 Robert A. Allen Officer and Director /s/ LEO F. KORMAN Senior Vice President, Chief ------------------------------------------- Financial Officer and October 15, 1996 Leo F. Korman Principal Accounting Officer /s/ THOMAS A. BERGLUND ------------------------------------------- Director October 15, 1996 Thomas A. Berglund /s/ TERRY J. BLUMER ------------------------------------------- Director October 15, 1996 Terry J. Blumer /s/ JOHN F. KLEIN ------------------------------------------- Director October 15, 1996 John F. Klein /s/ JOHN A. SPRAGUE ------------------------------------------- Director October 15, 1996 John A. Sprague
II-4 SCHEDULE II CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (IN THOUSANDS)
COLUMN C COLUMN B ADDITIONS COLUMN E ---------- ----------------------- ---------- COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT - ------------------------------ BEGINNING COSTS AND OTHER ---------- END OF DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR - ------------------------------ ---------- ---------- ---------- ---------- ---------- ALLOWANCE FOR DOUBTFUL ACCOUNTS Year Ended December 31, 1993........................ $ 3,478 $ 2,515 -- $ (2,971)(a) $ 3,022 1994........................ 3,022 1,159 -- (1,489)(a) 2,692 1995........................ 2,692 1,720 -- (812)(a) 3,600
(a) Deductions consist of accounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged off. - -------------------------------------------------------------------------------- DEFERRED TAX ASSET VALUATION ALLOWANCE Year Ended December 31, 1993........................ $29,139 -- -- $(13,282)(b) $15,857 1994........................ 15,857 -- -- (4,015)(b) 11,842 1995........................ 11,842 -- -- (1,018)(b) 10,824
(b) Deductions are primarily the result of the utilization of net operating loss carryforwards. EXHIBIT INDEX
EXHIBIT SEQUENTIALLY NUMBER EXHIBIT NUMBERED PAGE - ---------- ---------------------------------------------------------------------------------------- --------------- 2.1 Stock Subscription Agreement, dated June 17, 1996, by and among Jupiter Partners, L.P., as amended............................................................................ 2.2 Stock Purchase Agreement, dated June 17, 1996, by and between Core-Mark L.L.C. and the Company, as amended ......................................... 3.1 Articles of Incorporation of the Company................................................ 3.2 By-laws of the Company.................................................................. 4.1 Indenture, dated as of September 27, 1996, between the Company and Bankers Trust Company as Trustee............................................................................ 4.2 Exchange and Registration Rights Agreement, dated September 27, 1996, among the Company, Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation......... 4.3 Form of Face of Initial Security........................................................ 4.4 Form of Face of Exchange Security....................................................... 4.5 Form of Letter of Transmittal........................................................... 4.6 Form of Notice of Guaranteed Delivery................................................... 4.7 Guidelines for Certification of Taxpayer Identification Number or Substitute Form W-9... 5 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison re the legality of the Notes being registered............................................................................ 10.1 Manufacturing Rights Agreement by and among Famous Value Brands, the Company, Core-Mark Interrelated Companies, Inc. and C/M Products, Inc.*.................................. 10.2 Manufacturing Agreement for "Best Buy" Cigarettes by and between Famous Value Brands and C/M Products, Inc.*................................................................... 10.3 Trademark License Agreement by and between Famous Value Brands and Core-Mark Interrelated Companies, Inc.*......................................................... 10.4 The Credit Agreement, dated August 7, 1996, among the Company, several lenders parties thereto and The Chase Manhattan Bank.................................................. 10.5 Stockholders Agreement dated as of August 7, 1996, by and among the Company and all of the holders of its Common Stock....................................................... 10.6.1 Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Gary L. Walsh......................................................................... 10.6.2 Schedule of Agreements omitted pursuant to Instruction no. 2 to Item 601 of Regulation S-K................................................................................... 10.7 Letter, dated August 7, 1996, from Jupiter Partners LP to Gary L. Walsh................. 10.8 Purchase Agreement, dated September 24, 1996, between the Company, Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation............................... 12 Statements re computation of ratios..................................................... 21 List of Subsidiaries of the Company..................................................... 23.1 Consent of KPMG Peat Marwick LLP........................................................ 23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5)............................................................... 24 Power of attorney (included on signature pages)......................................... 25 Statement of eligibility of Trustee..................................................... 27 Financial Data Schedule.................................................................
- ------------------------ * To be filed by amendment. EX-2.1 2 EXHIBIT 2.1 STOCK SUBSCRIPTION AGREEMENT BY AND BETWEEN CM/J ACQUISITION, LLC AND CORE-MARK INTERNATIONAL, INC. DATED: JUNE 17, 1996 TABLE OF CONTENTS Page 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Sale of Shares; Purchase Price. . . . . . . . . . . . . . . . . . . . . 8 3. Representations and Warranties of the Company . . . . . . . . . . . . . 9 (a) Organization and Good Standing . . . . . . . . . . . . . . . . . . 9 (b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (c) Scheduled Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 10 (d) Execution of Agreement . . . . . . . . . . . . . . . . . . . . . . 11 (e) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 12 (f) No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . 12 (g) No Material Adverse Change; No Dividends . . . . . . . . . . . . . 13 (h) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (i) Patents, Trademarks and Copyrights . . . . . . . . . . . . . . . . 16 (j) Real Property; Leases of Real Property . . . . . . . . . . . . . . 17 (k) Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . 18 (l) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 (m) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . 19 (n) Title to Properties; Absence of Encumbrances . . . . . . . . . . . 21 (o) No Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (p) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (q) Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 22 (r) Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 22 (s) Collective Bargaining Agreements and Labor . . . . . . . . . . . . 23 (t) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (u) Absence of Changes or Events . . . . . . . . . . . . . . . . . . . 27 (v) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 27 (w) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 28 4. Representations and Warranties of Purchaser . . . . . . . . . . . . . . 28 (a) Organization and Good Standing . . . . . . . . . . . . . . . . . . 28 (b) Execution and Effect of Agreement. . . . . . . . . . . . . . . . . 28 (c) No Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (d) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (e) Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 29 (f) Investment Representation. . . . . . . . . . . . . . . . . . . . . 29 i (g) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 (h) Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . 31 (a) Access to Documents; Opportunity to Ask Questions. . . . . . . . . 31 (b) Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 32 (c) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (d) Consents; Conditions Precedent . . . . . . . . . . . . . . . . . . 34 (e) Hart-Scott-Rodino Filings. . . . . . . . . . . . . . . . . . . . . 34 (f) Company/LLC Purchase Agreement . . . . . . . . . . . . . . . . . . 35 (g) Delivery of Financial Statements . . . . . . . . . . . . . . . . . 35 (h) Notification of Certain Matters. . . . . . . . . . . . . . . . . . 35 (i) No Inconsistent Activities . . . . . . . . . . . . . . . . . . . . 36 6. Covenants of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . 36 (a) Representations and Warranties . . . . . . . . . . . . . . . . . . 36 (b) Consents; Conditions Precedent . . . . . . . . . . . . . . . . . . 37 (c) Hart-Scott-Rodino Filings. . . . . . . . . . . . . . . . . . . . . 37 7. Conditions Precedent to the Company's and the Purchaser's Obligations . 37 8. Conditions Precedent to Purchaser's Obligation. . . . . . . . . . . . . 39 9. Conditions Precedent to the Company's Obligation. . . . . . . . . . . . 40 10. Closing Date; Closing . . . . . . . . . . . . . . . . . . . . . . . . . 41 11. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 12. Survival of Representations and Warranties. . . . . . . . . . . . . . . 44 13. Indemnification and Limitation of Liability . . . . . . . . . . . . . . 44 14. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 49 15. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 16. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 17. Confidentiality; Press Releases . . . . . . . . . . . . . . . . . . . . 50 ii 18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 19. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 20. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 21. Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 22. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 23. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 24. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 25. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . 55 iii LIST OF SCHEDULES AND EXHIBITS SCHEDULES 3(b) Management Employees 3(c) Subsidiaries 3(h) Tax Matters 3(i) Patents, Trademarks and Copyrights 3(j) Material Leases 3(l) Insurance Policies 3(m) Material Contracts 3(n) Encumbrances 3(o) Restrictions 3(p) Litigation 3(q) Governmental Consents 3(r) Environmental Matters 3(s) Collective Bargaining Agreements and Labor 3(t) ERISA 3(u) Certain Changes 3(w) Affiliate Transactions 7(c) Escrow Agreement Term Sheet 7(d) Term Sheet for Certain Employee/Shareholder Arrangements iv EXHIBITS A Company/LLC Purchase Agreement v STOCK SUBSCRIPTION AGREEMENT AGREEMENT, made this 17th day of June, 1996, by and among CM/J Acquisition, LLC, a Delaware limited liability company ("Purchaser"), and Core- Mark International, Inc., a Delaware corporation (hereinafter referred to as the "Company"). W I T N E S S E T H : WHEREAS, the Company is an independent wholesaler to the convenience retail industry in the western United States and western Canada and distributes, as part of its wholesale business, among other things, candy and snack products, other food products, non-food products, health and beauty care products and cigarettes and other tobacco products; and WHEREAS, Core-Mark L.L.C., a Delaware limited liability company ("LLC"), currently owns 100 shares of common stock, par value $0.01 per share, of the Company (the "LLC Shares"), which, as of the date hereof, represents all of the issued and outstanding capital stock of the Company; and WHEREAS, the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from the Company, 38.70968 shares of the common stock, par value $.01 per share, of the Company (the "Purchaser Shares"), which Purchaser Shares will represent, upon consummation of the transactions contemplated by this Agreement and the Company/LLC Purchase Agreement (as hereinafter defined), 75% of the issued and outstanding capital stock 1 of the Company, for the purchase price and upon the terms and conditions hereinafter set forth; and WHEREAS, immediately following the sale and purchase of the Purchaser Shares provided for herein, the Company, pursuant to the terms of the Stock Purchase Agreement, dated the date hereof, between LLC and the Company, a copy of which is attached as Exhibit A hereto (the "Company/LLC Purchase Agreement"), will purchase from LLC 87.09677 of the LLC Shares, and the 12.90323 shares not purchased from the LLC will represent, upon consummation of the transactions contemplated by this Agreement, 25% of the issued and outstanding capital stock of the Company and such retained shares will be immediately distributed by LLC and CMI Partnership to the individuals and in the amounts set forth in Schedule 3(b) hereto; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the indicated meanings, which meanings shall be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and plural forms of such terms. Any agreement referred to below shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. "ADDITIONAL CONSIDERATION" has the meaning specified in Section 2(d) hereof. 2 "AFFILIATED GROUP" means any group of corporations with respect to which a Consolidated Tax Return has been filed. "BALANCE SHEET" shall mean the audited Consolidated Balance Sheet of the Company and its Subsidiaries as at December 31, 1995. "BALANCE SHEET DATE" shall mean December 31, 1995. "BEST EFFORTS" shall mean reasonable good faith efforts but shall in no event require the commencement of litigation against any third party or the payment of any fees (other than nominal fees) to any third party. "BUSINESS DAY" shall mean any weekday on which commercial banks in New York City are open. Any action, notice or right which is to be exercised or lapses on or by a given date which is not a Business Day may be taken, given or exercised, and shall not lapse, until the end of the next Business Day. "CLOSING" has the meaning specified in Section 10(a) of this Agreement. "CLOSING DATE" has the meaning specified in Section 10(a) of this Agreement. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMPANY/LLC PURCHASE AGREEMENT" has the meaning specified in the recitals of this Agreement. "COMPANY PLAN" has the meaning specified in Section 3(t)(i) of this Agreement. "COMPANY'S KNOWLEDGE" or "KNOWLEDGE OF THE COMPANY" shall mean the knowledge of a Management Employee. 3 "CONFIDENTIALITY AGREEMENT" shall mean that certain letter agreement, heretofore executed, between the Company and Purchaser with respect to, among other things, the treatment of confidential information regarding the Company. "CONSOLIDATED TAX RETURN" means any Tax Return that has been filed on a consolidated, combined or unitary basis. "ENCUMBRANCES" shall mean any lien, security interest, mortgage, pledge, hypothecation, easement, conditional sale or other title retention agreement, right of first refusal other similar encumbrances; provided, however, that Encumbrances shall not include any Permitted Encumbrance. "ENVIRONMENTAL LAWS" shall mean any federal, state, or local law, ordinance, regulation, order or permit pertaining to the environment, natural resources or health or safety. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ESCROW AGREEMENT" has the meaning set forth in Section 7(c) of this Agreement. "FINANCIAL STATEMENTS" shall mean (1) the audited Consolidated Balance Sheets of the Company and its Subsidiaries as at December 31, 1994 and 1995 and the audited Consolidated Statements of Income and Cash Flows of the Company and its Subsidiaries for the years ended December 31, 1995, 1994 and 1993, certified by KPMG Peat Marwick LLP, and (ii) the unaudited Consolidated Balance Sheet of the Company and its Subsidiaries as at 4 April 30, 1996 and the related unaudited Consolidated Statement of Income of the Company and its Subsidiaries for the four-month period then ended. "HART-SCOTT-RODINO ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "HAZARDOUS MATERIALS" shall mean hazardous wastes as presently defined by the Resource Conservation and Recovery Act of 1976, 42 U.S.C. SECTION 609 ET. SEQ., as amended, and regulations promulgated thereunder and hazardous substances as presently defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. SECTION 9601 ET. SEQ., as amended ("CERCLA" or "Superfund") and regulations promulgated thereunder, and any other substance or waste regulated under or defined by Environmental Laws. "LLC SHARES" has the meaning specified in the recitals of this Agreement. "MANAGEMENT EMPLOYEES" has the meaning specified in Section 3(b) of this Agreement. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, operations, assets or financial condition of the Company and its Subsidiaries taken as a whole. "MATERIAL LEASE" OR "MATERIAL LEASES" has the meaning specified in Section 3(j) of this Agreement. "MULTIEMPLOYER PLAN" has the meaning specified in Section 3(t)(i) of this Agreement. 5 "PERMITTED ENCUMBRANCE" shall mean, (a) encumbrances imposed by any governmental authority for Taxes, assessments or charges not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries in accordance with generally accepted accounting principles; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like encumbrances arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries in accordance with generally accepted accounting principles; (c) pledges or deposits in connection with worker's compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of any or all of the following: bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances on real property incurred in the ordinary course of business and encroachments (whether or not in the ordinary course of business) which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business thereon; and (f) all the exceptions to title reflected in Schedule 3(n). 6 "PERSON" shall mean any individual, corporation, partnership, limited liability company, association, trust or other entity. "PURCHASER" has the meaning specified in the first paragraph of this Agreement. "PURCHASER SHARES" has the meaning specified in the recitals of this Agreement. "STOCKHOLDERS AGREEMENT" has the meaning specified in Section 7(e) of this Agreement. "SUBSIDIARY" shall mean each corporation, partnership, limited liability company or other entity, fifty percent (50%) or more of the outstanding voting shares of which or other voting interests or equity interests in the case of a partnership are owned or controlled directly or indirectly by the Company. "TAX" OR "TAXES" means all taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, transfer gains, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, real or personal property, and estimated taxes, water, rent and sewer service charges, customs duties, fees, assessments and charges of any kind whatsoever, together with any interest and any penalties, fines, additions to tax or additional amounts thereon, imposed by any taxing authority (federal, state, local or foreign) and shall include any transferee liability in respect of Taxes. 7 "TAX RETURN" means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes. 2. SALE OF SHARES; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, the Company hereby agrees to issue, sell and deliver to Purchaser, and Purchaser hereby agrees to purchase from the Company, at the Closing, the Purchaser Shares. (b) The per share purchase price to be paid by Purchaser for the Purchaser Shares shall be $1,550,000, for a total purchase price of $60,000,000, which shall be payable in U.S. dollars in immediately available funds as hereinafter provided. (c) The Company hereby directs Purchaser to pay, on the Closing Date, by wire transfer in U.S. dollars in immediately available federal funds $60,000,000 to an account specified on or prior to the Closing Date by the Company. Immediately following the sale and purchase of the Purchaser Shares, the Company will transfer to an account designated by LLC $125,000,000, payable in U.S. dollars in immediately available funds, in payment of the purchase price for the 87.09677 LLC shares to be purchased by the Company pursuant to the Company/LLC Purchase Agreement. (d) On the Closing Date, the Company shall pay, by wire transfer in U.S. dollars in immediately available federal funds, $10,000,000 (the "Additional Consideration") to an account specified on or prior to the Closing Date to the escrow agent mutually selected by the Company and Purchaser to be held in accordance with the Escrow Agreement. 8 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Purchaser as follows: (a) ORGANIZATION AND GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to own its properties and carry on its business as it is now being conducted. The Company is duly qualified to transact business as a foreign corporation under the laws of (i) each jurisdiction in which it owns real property and (ii) each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, other than for failures to be so qualified that in the aggregate have no reasonable likelihood of having a Material Adverse Effect. The copies of the Company's Certificate of Incorporation and By-Laws (together with all amendments thereto) that have been previously delivered or made available to Purchaser are correct and complete and the transfer books are and the minute books of the Company will be on the Closing Date true and complete in all material respects. (b) CAPITALIZATION. The authorized capital stock of the Company consists of 3,000 shares of common stock, par value $.01 per share, of which 100 shares are issued and outstanding as of the date hereof. All of the issued and outstanding shares of the Company are owned, beneficially and of record, by LLC and have been validly issued and are fully paid and non-assessable and free of preemptive rights. Other than this Agreement, there is no existing option, warrant, call, commitment or other right or agreement of any kind which obligates the 9 Company to issue, transfer or sell, and there are no convertible securities of the Company outstanding which upon conversion would require, the issuance, transfer or sale, of any additional shares of capital stock of the Company or other securities convertible, exchangeable or exercisable into shares of capital stock or any debt or equity security of the Company of any kind. Upon the consummation of the transactions contemplated by this Agreement and the Company/LLC Purchase Agreement, including the liquidation of LLC and CMI Partnership, Purchaser and the management employees of the Company identified on Schedule 3(b) hereto (the "Management Employees") shall be the owners of 75% and 25%, respectively, of the total issued and outstanding capital stock of the Company and such stock shall be owned as among the Management Employees in the amounts set forth on Schedule 3(b). (c) SCHEDULED SUBSIDIARIES. The Company does not have any active Subsidiaries, except as listed on Schedule 3(c) hereto (the "Scheduled Subsidiaries"). The authorized and outstanding capital stock or equity interests of each Scheduled Subsidiary and record and beneficial owners thereof are as set forth on Schedule 3(c) hereto and, except as set forth on Schedule 3(c) hereto, there are no shares of capital stock or other equity securities of any Subsidiary outstanding. All of such outstanding capital stock or equity interests have been validly issued and are fully paid, non-assessable and free of preemptive rights and, except as set forth on Schedule 3(c), owned by the Company as indicated thereon, free and clear of any and all Encumbrances. There is no existing option, warrant, call, commitment or other agreement of any kind which obligates the Company or any Subsidiary to issue, transfer or 10 sell, and there are no convertible securities of any Subsidiary outstanding which upon conversion would require, the issuance, transfer or sale of any additional shares of capital stock or equity interests of any Subsidiary or other securities convertible into shares of capital stock or any other debt or equity security of any kind of any Subsidiary. Each Scheduled Subsidiary is duly incorporated or organized and validly existing in good standing under the laws of its state of incorporation or organization. Each Scheduled Subsidiary is duly qualified to transact business as a foreign corporation under the laws of (i) each jurisdiction in which it owns real property and (ii) each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, other than for failures to be so qualified that in the aggregate have no reasonable likelihood of having a Material Adverse Effect. Each Scheduled Subsidiary has all requisite corporate or partnership power and authority to own its properties and carry on its business as presently conducted. There have been delivered or made available to Purchaser complete and correct copies of the Certificate of Incorporation and By-Laws (together with all amendments thereto) or other organizational documents of non-corporate persons of each Scheduled Subsidiary and the transfer books and minute books thereof are true and complete in all material respects. Neither the Company nor any of the Subsidiaries is a member of or participant in any partnership, joint venture or similar person. (d) EXECUTION OF AGREEMENT. The Company has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, including, without limitation, to issue, sell 11 and deliver the Purchaser Shares as provided herein, and such issuance, sale and delivery will convey to Purchaser good and valid title to the Purchaser Shares, free and clear of any and all Encumbrances. The execution and delivery of this Agreement and the consummation of the sale of the Purchaser Shares to Purchaser and purchase from LLC of 87.09677 of the LLC shares contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of Company, enforceable against it in accordance with its terms. (e) FINANCIAL STATEMENTS. The Company has delivered to Purchaser copies of the Financial Statements. Each of the Financial Statements is in accordance with the books and records of the Company and its Subsidiaries as of the dates and for the periods therein indicated, has been prepared in conformity with generally accepted accounting principles consistently applied (except as heretofore otherwise disclosed in writing to Purchaser) and presents fairly the financial position, results of operations and (with respect to the audited statements only) cash flows of the Company and its Subsidiaries as at the dates and for the periods indicated, subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments, the absence of footnotes and their not having been prepared on a full "Last-In-First-Out" basis. (f) NO UNDISCLOSED LIABILITIES. As at the Balance Sheet Date, neither the Company nor any Subsidiary had any indebtedness or liabilities (whether accrued, absolute, 12 contingent or otherwise, and whether due or to become due) required to be shown on a consolidated balance sheet of the Company and the Subsidiaries prepared in accordance with generally accepted accounting principles that are not shown on the Balance Sheet or disclosed herein or in a schedule hereto or in any document referred to in a schedule hereto or in the Financial Statements (including the footnotes thereto), other than those which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. Since the Balance Sheet Date, neither the Company nor any Subsidiary has incurred any indebtedness or liability required to be shown on a consolidated balance sheet of the Company and the Subsidiaries prepared in accordance with generally accepted accounting principles, other than those incurred in the ordinary course of business and not in violation of this Agreement or disclosed herein or in a schedule hereto or in any document referred to in a schedule hereto or in the Financial Statements (including the footnotes thereto), and those that in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (g) NO MATERIAL ADVERSE CHANGE; NO DIVIDENDS. Since the Balance Sheet Date there has been no material adverse change in the business, operations, assets or financial condition of the Company and its Subsidiaries taken as a whole. No dividends or distributions have been declared or paid on or made with respect to the shares of capital stock or other equity interests of the Company nor have any such shares been repurchased or redeemed during the 12 months preceding the date hereof. 13 (h) TAXES. (i) Except as set forth on Schedule 3(h) hereto, (A) all material Tax Returns required to be filed by or on behalf of the Company or the Subsidiaries or any Affiliated Group of which the Company or the Subsidiaries is or was a member have been filed with the appropriate taxing authorities in all jurisdictions in which such Tax Returns are required to be filed and are true, correct and complete in all material respects, (B) all amounts shown on such Tax Returns as due from the Company or the Subsidiaries either directly, as part of a Consolidated Tax Return, or otherwise, have been fully and timely paid and (C) no waivers of statutes of limitation or extension of time within which to file any franchise, income or other material Tax Return which has not yet been filed have been given or requested with respect to the Company or the Subsidiaries in connection with any such income, franchise or other material tax returns covering the Company or the Subsidiaries. (ii) Except as set forth on Schedule 3(h) hereto, all deficiencies asserted or assessments made as a result of examination by the Internal Revenue Service or any other taxing authority of the income Tax Returns of or covering the Company or any of the Subsidiaries have been fully paid, and there are no unpaid deficiencies asserted or assessments made in excess of $100,000 in the aggregate by any such taxing authority against the Company or any of the Subsidiaries. (iii) Except as set forth on Schedule 3(h) hereto, neither the Company nor any of the Subsidiaries, and no other person on their behalf, has filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any 14 disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any of the Subsidiaries. (iv) Except as set forth on Schedule 3(h) hereto, no property owned by the Company or any of the Subsidiaries (A) is property required to be treated as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986, (B) constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of the Code or (C) is tax-exempt bond financed property within the meaning of Section 168(g) of the Code. (v) Schedule 3(h) sets forth the status of all actual, pending, or to the knowledge of the Tax Director of the Company, threatened Federal, state, local and foreign Tax audits of the Tax Returns of the Company and the Subsidiaries other than those involving less than $100,000 in the aggregate, including the amounts of any deficiencies and additions to Tax (other than interest and penalties) indicated on any notice from any taxing authority, and the amounts of any payments made with respect thereto. No other audits or investigations are under way, pending or to the knowledge of the Tax Director of the Company or the Company threatened with respect to the Company's or any of the Subsidiaries' Tax Returns or Taxes not shown on a Tax Return. (vi) Except as set forth on Schedule 3(h), since 1984, neither the Company nor any of its Subsidiaries has been a member of or was acquired from any group of affiliated corporations that file consolidated returns for Federal income tax purposes other than 15 in (a) a transaction in which the common parent of such affiliated group was acquired or (b) the affiliated group in which the Company was the common parent. (vii) Except as set forth on Schedule 3(h), neither the Company nor any Subsidiary has agreed to or is required to make any adjustment under section 481(a) of the Code by reason of a change in accounting method or otherwise. (viii) Schedule 3(h) sets forth all material Federal, state, local and foreign Tax elections under the Code and other applicable provisions of law that are in effect with respect to the Company and the Subsidiaries for calendar year ended December 31, 1995. (ix) Neither the Company nor any of the Subsidiaries will have any liability on or after the Closing Date under any Tax sharing agreement to which they have been a party, and all such Tax sharing agreements in effect before the Closing Date shall terminate and be of no further force and effect as of the Closing Date. (x) There are no tax rulings or requests for rulings relating to the Company or any of the Subsidiaries which could affect its liability for Taxes for any period after the Closing. (xi) Except as set forth on Schedule 3(h), no power of attorney has been granted by the Company or any of the Subsidiaries with respect to any matter relating to Taxes which is currently in force. (i) PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 3(i) hereto contains a complete and correct list of each material patent, trademark, trade name, service mark and copyright owned or used by the Company or a Subsidiary and all pending applications 16 therefor, and each license or other agreement relating thereto (the "Intellectual Property"). Except as set forth on Schedule 3(i) or 3(m) hereto, the Intellectual Property is owned by the party shown on such Schedule as owning the same, free and clear of all licenses and other Encumbrances. With respect to registered trademarks, Schedule 3(i) hereto sets forth a list of all jurisdictions in which such trademarks are registered or applied for and all registrations and application numbers. There have been no claims asserted in writing, which are still pending, with respect to the ownership, validity, enforceability, effectiveness or use of any Intellectual Property. The Intellectual Property does not infringe on the intellectual property rights of any person and, to the knowledge of the Company, no third party is infringing upon or otherwise violating the intellectual property rights of the Company or any Subsidiary. The Company and the Subsidiaries have taken all necessary action to maintain and protect each item of Intellectual Property owned or used by the Company and any Subsidiary, except where failure to take such action in the aggregate would have no reasonable likelihood of having a Material Adverse Effect. (j) REAL PROPERTY; LEASES OF REAL PROPERTY. Neither the Company nor any of its Subsidiaries owns any real property. Schedule 3(j) hereto contains a complete and correct list in all material respects of all leases, subleases, license agreements or other rights of possession or occupancy of real property to which the Company or any Subsidiary is a party (as tenant, occupier or possessor) (each such lease or agreement, a "Material Lease" and, collectively, the "Material Leases"). All of the Material Leases are in full force and effect. 17 Complete and correct copies of each Material Lease have been furnished or made available to Purchaser. Except as set forth in Schedule 3(j) hereto, neither the Company nor any of its Subsidiaries is in default beyond any applicable notice or grace period or has received written notice of default still outstanding on the date hereof under any such Material Lease, and to the Company's knowledge, on the date hereof, there exists no uncured default thereunder by any third party, other than, in either case, those which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. Except as disclosed on Schedule 3(j) hereto, no consent is required of any landlord or other third party to any Material Lease to consummate the transactions contemplated hereby, and upon consummation of the transactions contemplated hereby, each Material Lease will continue to entitle the Company or its Subsidiary, as the case may be, to the use and possession of the real property specified in such Material Lease and for the purposes for which such real property is now being used by the Company or its Subsidiary, respectively. (k) GOVERNMENTAL PERMITS. The Company and its Subsidiaries have all necessary permits, licenses and governmental authorizations required for the ownership or occupancy of their respective properties and assets and the carrying on of their respective businesses (collectively, "Permits"), except for those which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (l) INSURANCE. Schedule 3(1) hereto contains a complete and correct list in all material respects of all policies of insurance of any kind or nature covering the Company or 18 its Subsidiaries, including, without limitation, policies of life, fire, theft, employee fidelity and other casualty and liability insurance, and such policies are in full force and effect. Complete and correct copies of each such policy have been furnished or made available to Purchaser. (m) MATERIAL CONTRACTS. Except as listed in Schedule 3(m) hereto or any other Schedule hereto, neither the Company nor any Subsidiary is a party to any (i) material contract not made in the ordinary course of business or, to the knowledge of the Company, any other contract not made in the ordinary course of business; (ii) contract for the employment of any officer or employee; (iii) contract for the future purchase of materials, supplies, services, merchandise or equipment not capable of being fully performed or not terminable within a period of one year from the date hereof or, except for purchase orders executed in the ordinary course of business, involving annual payments in excess of $1 million (in the case of merchandise contracts) and $250,000 (in the case of all other such contracts) or in excess of normal operating requirements; (iv) agreement for the sale or lease of any of its assets other than in the ordinary course of business; (v) contract or commitment for capital expenditures in excess of $250,000; (vi) mortgage, pledge, conditional sales contract, security agreement, factoring agreement or other similar agreement with respect to any of its real or personal property; (vii) lease of machinery or equipment involving annual payments in excess of $1,000,000; (viii) loan agreement, promissory note issued by it, guarantee, subordination or similar type of agreement; (ix) stock option, retirement, severance, pension, bonus, profit sharing, group insurance, medical or other fringe benefit plan or program providing employee 19 benefits; or (x) municipal or other governmental franchise agreements; (xi) agreement or contract with any shareholder, officer, director, employee, member, consultant or agent of LLC, the Company or any Subsidiary (other than employment agreements covered by clause (ii) above); (xii) lease or similar agreement under which the Company or any Subsidiary is a lessor or sublessor of, or makes available for use by any third party, any real property leased by the Company or any Subsidiary or any portion of premises otherwise occupied by the Company or any Subsidiary; or (xiii) any tax sharing agreement. Complete and correct copies of each agreement set forth in Schedule 3(m) hereto have been furnished or made available to Purchaser. Except as set forth in Schedule 3(m) hereto, the Company and the Subsidiaries have performed all of the obligations required to be performed by them to date and are not in default under any of the agreements, leases, contracts or other documents to which they are a party listed on Schedule 3(m) hereto, other than for those failures to perform and defaults which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. Except as set forth in Schedule 3(m) hereto, to the Company's knowledge, no party with whom the Company or any of the Subsidiaries has such a scheduled agreement is in default thereunder, other than those defaults which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. Except as disclosed herein or in Schedule 3(m) hereto, neither the Company nor any of the Subsidiaries is a party to any non-compete or similar agreement. Except as disclosed on Schedule 3(m) hereto, no consent is required of any party with whom the Company or any of its Subsidiaries has an agreement required to be listed on a 20 schedule hereto to consummate the transactions contemplated hereby and, upon consummation of the transactions contemplated hereby, each scheduled agreement will continue to entitle the Company and the Subsidiaries to the rights and benefits specified in such agreements. (n) TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. The Company and the Subsidiaries have good and valid title to all of their respective assets shown as owned on the Balance Sheet (except for assets disposed of in the ordinary course of business since the Balance Sheet Date or as set forth in Schedule 3(n) hereto), free and clear of any and all Encumbrances, except as set forth in Schedule 3(n) hereto. (o) NO RESTRICTION. Except as set forth in Schedules 3(j), 3(m) or 3(o) hereto, neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby, will conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by, any terms of any agreement to which the Company or any of the Subsidiaries is a party, or constitute a default thereunder, or result in the creation of any Encumbrance upon any of their respective assets, except for such conflicts, breaches, rights of termination or acceleration, defaults and Encumbrances that in the aggregate have no reasonable likelihood of having a Material Adverse Effect, nor will it violate any of the provisions of their respective Certificates of Incorporation or By-Laws or, as to non-corporate Subsidiaries, organizational documents, or violate any judgment, order or decree by which any of them are bound or, except for violations that in the aggregate have no 21 reasonable likelihood of having a Material Adverse Effect, any statute, law, rule or regulation applicable to any of them. (p) LITIGATION. Except as disclosed in Schedule 3(p) hereto, there is no action, suit or proceeding pending or, to the Company's knowledge, threatened against the Company or any of the Subsidiaries which seeks to restrain or prohibit or otherwise challenges the consummation, legality or validity of the transactions contemplated hereby. Except as disclosed in Schedule 3(p) hereto, there is no action, suit or proceeding pending or, to the Company's knowledge, threatened against the Company or any of the Subsidiaries other than those which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (q) GOVERNMENTAL CONSENTS. Except with respect to local governmental permits or licenses and the applicable requirements of the Hart-Scott-Rodino Act, no consent, approval or authorization of, or filing with, any governmental authority on the part of the Company or any Subsidiary is required in connection with the execution and delivery of this Agreement or the consummation of any of the transactions contemplated hereby. (r) ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3(r) hereto, (i) the operations of the Company and the Subsidiaries are in compliance with applicable Environmental Laws, except for such noncompliances that in the aggregate have no reasonable likelihood of having a Material Adverse Effect, (ii) neither the Company nor any of the Subsidiaries is subject to any judicial or administrative proceeding alleging the violation of any 22 Environmental Law, (iii) neither the Company nor any of the Subsidiaries has received any written notice from any governmental authority that it is a potentially responsible party at any State or Federal Superfund site and (iv) neither the Company nor any of the Subsidiaries has disposed of or released Hazardous Materials, or generated or transported Hazardous Materials which are or have been disposed of or released, on, in or at any real property in any quantity which hereafter will require investigation or remediation pursuant to Environmental Laws for which the Company or any of the Subsidiaries will be liable having any reasonable likelihood of having a Material Adverse Effect. (s) COLLECTIVE BARGAINING AGREEMENTS AND LABOR.(i) Except as set forth in Schedule 3(s) hereto, none of the Company or any of the Subsidiaries is a party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or the Subsidiary. (ii) Except as set forth in Schedule 3(s) hereto, there are no pending or, to the Company's knowledge, threatened strikes, work stoppages, slowdowns, lockouts or other material labor disputes against the Company or any of the Subsidiaries which in the aggregate have any reasonable likelihood of having a Material Adverse Effect. (iii) Except as set forth in Schedule 3(s) hereto, the Company and the Subsidiaries are in compliance with all laws, regulations and orders relating to the employment of labor, including all such laws, regulations and orders relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health, workers' compensation and the 23 collection and payment of employee withholding and/or social security Taxes and any similar Tax, except for such non-compliance as in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (iv) There is no unfair labor practice charge or complaint against the Company or any Subsidiary pending, or to the knowledge of the Company, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission or any similar state or local governmental agency, and there are no pending or, to the knowledge of the Company, threatened, union grievances against the Company or any Subsidiary except for all such cases those which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (t) ERISA. (i) Schedule 3(t) hereto sets forth all "employee benefit plans", as defined in Section 3(3) of ERISA, and all other material plans maintained by the Company, any of the Subsidiaries or any Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and (o) of the Code) or to which the Company, any of the Subsidiaries or any Commonly Controlled Entity contributes or is obligated to contribute for current or former employees of the Company, such Subsidiary or such Commonly Controlled Entity (the "Company Plans"). Schedule 3(t) hereto separately identifies each Company Plan which is a multiemployer plan, as defined in Section 3(37) of ERISA ("Multiemployer Plan"). (ii) True, correct and complete copies of the following documents (where applicable), with respect to each of the Company Plans (other than the Multiemployer Plans), 24 have been made available or delivered to Purchaser by the Company or the Subsidiaries: (a) plans and related trust documents, including amendments thereto; (b) summary plan descriptions; (c) the most recent annual reports, Form 5500s; (d) the most recent annual and periodic accounting of plan assets; (e) the most recent determination letter received from the Internal Revenue Service; and (f) the most recent actuarial valuation. (iii) With respect to each Company Plan other than the Multiemployer Plan: (a) if intended to qualify under Code section 401(a) or 403(a), such Company Plan so qualifies, and its related trust is exempt from taxation under Code section 501(a); (b) such Company Plan has been administered in accordance with its terms and applicable law in all material respects; (c) no event has occurred and there exists no circumstance under which the Company could directly, or indirectly through a Commonly Controlled Entity, incur any material liability under ERISA, the Code or otherwise (other than routine claims for benefits); and (d) there are no material actions, suits or claims pending (other than routine claims for benefits) or, to the knowledge of the Company, threatened with respect to any Company Plan or against the assets of any Company Plan. (iv) With respect to each Company Plan other than a Multiemployer Plan, no "prohibited transaction" (as defined in ERISA section 406 or in Code section 4975) nor "reportable event" (as defined in ERISA section 4043) has occurred which has any reasonable likelihood of causing any material liability to the Company. 25 (v) With respect to each Company Plan, all contributions and premiums have been made on a timely basis and all required contributions that have not been made have been properly recorded on the books of the Company or a Commonly Controlled Entity in accordance with GAAP. (vi) Except as set forth in Schedule 3(t) hereto, with respect to each Company Plan (other than a Multiemployer Plan) that is subject to Title IV of ERISA: (a) as of the most recent actuarial valuation, the present value of all benefit liabilities (as defined in ERISA section 4001(a)(16)) will not exceed the then current fair market value of the assets of such plan (determined by using the actuarial assumptions used for the most recent actuarial valuation) and (b) the Company has not incurred or is expected to incur directly, or indirectly through a Commonly Controlled Entity, any liability arising from a plan termination or a plan withdrawal. (vii) Except as set forth in Schedule 3(t) hereto, with respect to each Company Plan that is a "welfare plan" (as defined in ERISA section 3(1)): (a) no such plan provides medical or death benefits (whether or not insured) with respect to current or former employees beyond their termination of employment (other than coverage mandated by law) and (b) the Company and each Commonly Controlled entity are in good faith compliance with the requirements of Code section 4980B. (viii) The consummation of the transactions contemplated by this Agreement will not entitle any individual to severance pay, or accelerate the time of payment, vesting or 26 increase the amount of compensation due to any individual, or result in the payment of an amount subject to the requirements of Section 280G of the Code. (ix) To the knowledge of the Company, there would be no withdrawal liability under Section 4219 of ERISA as a result of a complete or partial withdrawal from any of the Multiemployer Plans listed in Schedule 3(t) hereto. (u) ABSENCE OF CHANGES OR EVENTS. Since the Balance Sheet Date, there has not been (i) any payment of or commitment to pay by or on behalf of the Company or any of the Subsidiaries any severance or termination payment to any officer, director, employee, consultant, agent or other representative of the Company or any of the Subsidiaries other than in the ordinary course of business or (ii) except as described on Schedule 3(u) hereto, a grant or any agreement to make a grant of any general increase in the compensation of its officers or employees or any increase in the compensation payable or to become payable to any Management Employee and, except in the ordinary course of business, any other employee. Since the Balance Sheet Date, the Company and the Subsidiaries have conducted their respective businesses only in the ordinary course. (v) COMPLIANCE WITH LAWS. The Company and the Subsidiaries are in compliance with all applicable statutes, laws, ordinances, rules, orders and regulations of any governmental entity (whether domestic or foreign) and all Permits, except for such noncompliances which in the aggregate have no reasonable likelihood of having a Material Adverse Effect. 27 (w) TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule 3(w) hereto or any other Schedule to this Agreement, there are no agreements, contracts or other arrangements between the Company or any Subsidiary, on the one hand, and LLC or any of its affiliates (including, without limitation, any member of LLC) on the other hand, and neither the Company nor any Subsidiary will have any liability under any of such items after the Closing Date. 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and warrants to the Company as follows: (a) ORGANIZATION AND GOOD STANDING. Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware, and has the requisite power and authority to own its properties and carry on its business as it is now being conducted. (b) EXECUTION AND EFFECT OF AGREEMENT. Purchaser has all requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby, and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable against it in accordance with its terms. 28 (c) NO RESTRICTION. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a breach of any terms of any agreement to which Purchaser is a party, except for such conflicts and breaches that in the aggregate have no reasonable likelihood of having a material adverse effect on Purchaser's ability to consummate the transactions contemplated by this Agreement or a Material Adverse Effect, nor will it violate any of the provisions of Purchaser's organizational documents. (d) LITIGATION. There is no action, suit, proceeding or formal governmental inquiry or investigation pending or, to Purchaser's knowledge, threatened against Purchaser or any of its affiliates which seeks to restrain or prohibit or otherwise challenges the consummation, legality or validity of the transactions contemplated hereby. (e) GOVERNMENTAL CONSENTS. Except in connection with the applicable requirements under the Hart-Scott-Rodino Act, no consent, approval or authorization of, or filing with, any governmental authority on the part of Purchaser is required in connection with the execution and delivery of this Agreement or the consummation of the transaction contemplated hereby. (f) INVESTMENT REPRESENTATION. Purchaser possesses such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Purchaser Shares. Purchaser is acquiring the Purchaser Shares for its own account, for investment purposes only and not with a view to the distribution thereof in 29 violation of the Securities Act of 1933, as amended (the "Securities Act"). Purchaser is an "accredited investor" as defined in Regulation D under the Securities Act. Purchaser acknowledges that the Purchaser Shares are not registered under the Securities Act, any applicable state securities laws or any applicable foreign securities laws, and that the Purchaser Shares may not be transferred or sold except pursuant to the registration provisions of or applicable exemptions from such laws. (g) ACCESS. Purchaser acknowledges and agrees that Purchaser and its representatives have had access to such of the records and documents and properties of the Company and its Subsidiaries as Purchaser and its representatives shall have requested to see and/or review; that Purchaser and its representatives have had an opportunity to meet with appropriate management and employees of the Company to discuss the business and assets of the Company, it being understood that nothing in this Section 4(g) is intended to diminish or otherwise impair the ability of Purchaser to rely on and enforce its rights with respect to the breach by the Company of any of the representations, warranties or covenants made by it herein. (h) FINANCING. Purchaser has, or has access to, sufficient funds and financing to consummate the transactions contemplated hereby (subject to the conditions specified in the Commitment Letter referred to below). Purchaser has delivered to the Company a true and complete copy of a Commitment Letter executed by Chemical Bank and 30 Chase Securities, Inc. relating to, among other matters, the financing of such transactions (the "Commitment Letter"). 5. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees that: (a) ACCESS TO DOCUMENTS; OPPORTUNITY TO ASK QUESTIONS. From and after the date hereof and until the Closing Date, the Company and its Subsidiaries shall make available for inspection by Purchaser, the financial institution referred to in Section 4(h) hereof, and their representatives, upon reasonable advance notice and during normal business hours, the Company's and its Subsidiaries' corporate or comparable records, books of account, contracts and all other documents reasonably requested by Purchaser, as well as physical access to the properties owned, leased or operated by the Company and its Subsidiaries, including access for the purposes of taking soil, air, surfacewater and groundwater samples, in order to permit Purchaser, such financial institution and such representatives to make reasonable inspection and examination of the business and affairs of the Company and the Subsidiaries. Company shall make available upon reasonable advance notice managerial employees, counsel and regular independent certified public accountants of the Company and its Subsidiaries to answer questions of Purchaser, such financial institution and their respective representatives concerning the business and affairs of the Company and its Subsidiaries and shall further cause them to make available all relevant books and records in connection with such inspection and examination. 31 (b) CONDUCT OF BUSINESS. From and after the date hereof and until the Closing Date, the Company and its Subsidiaries shall conduct their business only in the ordinary course, consistent with the present conduct of their business and shall make all reasonable efforts consistent with past practices to preserve their relationships with customers, suppliers, employees and others with whom the Company or any Subsidiary deals. During such period of time, except upon the prior written consent of Purchaser, the Company shall not permit the Company or its Subsidiaries to (a) amend its Certificate of Incorporation or By-Laws or comparable organizational documents, (b) issue any additional shares of capital stock or issue, sell or grant any option or right to acquire or otherwise dispose of or commit to dispose of any of its authorized but unissued capital stock or other corporate securities, (c) declare or pay any dividends or declare or make any other distribution in cash or property on its capital stock or other equity interests, (d) repurchase or redeem any shares of its stock or other equity interests (except on the Closing Date pursuant to the terms of the Company/LLC Purchase Agreement), (e) voluntarily incur any obligation or liability, except current obligations and except liabilities incurred in the ordinary course of business, (f) enter into any employment agreement or become liable for any bonus, profit-sharing or incentive payment to any of its officers or directors, except pursuant to presently existing plans, arrangements or agreements disclosed herein or in a schedule hereto or in the ordinary course of business, (g) mortgage, pledge, or otherwise encumber any part of its assets, tangible or intangible, except for Permitted Encumbrances, (h) sell, transfer or acquire any properties or assets, tangible or 32 intangible, other than in the ordinary course of business and, except as set forth in Schedule 3(n) hereto, (i) make any material changes in its customary method of operations, including marketing and pricing policies, collection of receivables, purchasing or payment of payables and maintenance of business premises, fixtures, furniture and equipment, (j) modify, amend or cancel any of its existing Material Leases or enter into any contracts, agreements, leases or understandings, other than in the ordinary course of business, (k) enter into any collective bargaining agreement, (l) merge or consolidate with any corporation or other person, acquire control or (except in the ordinary course of business or for transactions involving the acquisition of assets from another distributor for not more than $3,000,000 in the aggregate), acquire the assets of, or acquire any capital stock or other securities of, any other corporation or business entity, (m) modify the Company/LLC Purchase Agreement, (n) take any other action that would cause any of the representations and warranties made by the Company in this Agreement not to be true and correct in all material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date, (o) make or incur capital expenditures not currently budgeted which in the aggregate are in excess of $300,000, (p) enter into any lease of real property or any renewals of existing leases, except with respect to the renewal of the lease of the Company's corporate headquarters on terms previously disclosed to Purchaser, (q) make any material federal, state, local or foreign Tax elections under the Code or other applicable provision of law that are in effect with respect to the Company and the Subsidiaries, except to the extent 33 consistent with past practices, or (r) agree, whether in writing or otherwise, to do any of the foregoing. (c) TAXES. From and after the date hereof and until the Closing Date, all Tax Returns required to be filed by or with respect to the Company or any of the Subsidiaries shall be prepared in a manner consistent with prior years, timely filed and shall be true, correct and complete in all material respects and the Company or any of the Subsidiaries, as the case may be, shall use its reasonable efforts to deliver drafts of any Federal income or material franchise tax returns to the Purchaser for its review no later than 10 business days prior to the date, including extensions, on which such federal income and franchise tax returns are required to be filed and shall make any changes to such federal income and franchise tax returns as Purchaser may reasonably request. (d) CONSENTS; CONDITIONS PRECEDENT. From and after the date hereof and until the Closing Date, the Company shall use its Best Efforts to obtain the consents of those parties indicated on Schedules 3(j), 3(m) and 3(o) in connection with the transactions contemplated hereby and to cause the conditions precedent to the consummation of the transactions contemplated hereby to be satisfied. (e) HART-SCOTT-RODINO FILINGS. The Company shall make all required filings as promptly as possible with the Federal Trade Commission and the U.S. Department of Justice-Antitrust Division pursuant to the Hart-Scott-Rodino Act, and shall cooperate with Purchaser in connection with such filings. 34 (f) COMPANY/LLC PURCHASE AGREEMENT. The Company shall cause the transactions contemplated by the Company/LLC Purchase Agreement to be consummated immediately following the Closing hereunder. (g) DELIVERY OF FINANCIAL STATEMENTS. From the date hereof and until the Closing Date, the Company shall deliver to Purchaser copies of the monthly unaudited consolidated financial statements of the Company and the Subsidiaries, which monthly statements shall be prepared on the same basis as the unaudited statements included in the Financial Statements, promptly following the time that such monthly statements become available. (h) NOTIFICATION OF CERTAIN MATTERS. From the date hereof and until the Closing Date, the Company shall give prompt notice to Purchaser of (i) any notice of, or other communication relating to, a default or event which, with notice or lapse of time or both, would become a default, received by the Company or any of the Subsidiaries after the date of this Agreement under any agreement that is required to be listed in a Schedule to this Agreement; (ii) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement; (iii) any notice or other communication from any governmental entity or any customer material to the business of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement; (iv) any event or circumstance that becomes known to the Company after the date hereof that has a 35 reasonable likelihood of having a Material Adverse Effect; and (v) any claim, action, proceeding or investigation commenced or, to the Company's knowledge, threatened, involving or affecting the Company or any of its Subsidiaries or any of their property or assets which, if pending on the date of this Agreement, would have been required to have been disclosed to Purchaser. (i) NO INCONSISTENT ACTIVITIES. From the date hereof and until the Closing Date, (i) the Company will not, and will direct its officers, directors and other representatives not to, directly or indirectly, solicit, encourage, or participate in any way in discussions or negotiations with, or provide any information or assistance to any third party concerning the acquisition of shares of capital stock of the Company or a substantial portion of the total assets of the Company and the Subsidiaries on a consolidated basis (whether by merger, purchase of assets or otherwise), (ii) the Company will promptly communicate to Purchaser the terms of any proposal or contact it may receive in respect of any such transaction and (iii) the Company shall not release any third party from any confidentiality or standstill agreement to which the Company is a party without Purchaser's consent. 6. COVENANTS OF PURCHASER. Purchaser hereby covenants and agrees that: (a) REPRESENTATIONS AND WARRANTIES. From and after the date hereof and until the Closing Date, Purchaser will not take any action that would cause any of the representations and warranties made by it in this Agreement not to be true and correct in all 36 material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. (b) CONSENTS; CONDITIONS PRECEDENT. From and after the date hereof and until the Closing Date, Purchaser shall use its Best Efforts to obtain any consents required in connection with the transactions contemplated hereby and to cause the conditions precedent to the consummation of the transactions contemplated hereby to be satisfied. (c) HART-SCOTT-RODINO FILINGS. Purchaser shall make all required filings as promptly as possible with the Federal Trade Commission and the U.S. Department of Justice-Antitrust Division pursuant to the Hart-Scott-Rodino Act, and it shall cooperate with the Company in connection with such filings. 7. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE PURCHASER'S OBLIGATIONS. The respective obligations of the Company and the Purchaser to consummate the sale and purchase of the Purchaser Shares on the Closing Date is, at the respective option of the Company or the Purchaser, subject to the satisfaction on or prior to the Closing Date of the following conditions: (a) The waiting periods under the Hart-Scott-Rodino Act shall have expired or been terminated. (b) There shall not be in effect an order of a governmental body of competent jurisdiction enjoining, restraining or otherwise prohibiting the consummation of the transactions contemplated hereby or by the Company/LLC Purchase Agreement. 37 (c) The Company, Purchaser and an escrow agent mutually chosen by the Company and Purchaser shall have executed and delivered an escrow agreement having customary terms and such other terms set forth on Schedule 7(c) hereto (the "Escrow Agreement"). (d) Each Management Employee shall have executed and delivered an agreement with the Company with respect to severance arrangements and non- competition in form reasonably acceptable to Purchaser having the principal terms set forth on Schedule 7(d) hereto. (e) The Management Employees, the Company and Purchaser shall have executed and delivered a stockholders agreement having the principal terms set forth on Schedule 7(d) hereto (the "Stockholders Agreement"). (f) The Board of Directors of the Company shall have been reconstituted to consist of the people listed on Schedule 7(d) hereto. (g) The Company shall have adopted a stock option plan for the benefit of certain employees of the Company reasonably acceptable to Purchaser and having the principal terms set forth in Schedule 7(d) hereto. 8. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION. The obligation of Purchaser to consummate the purchase of the Purchaser Shares on the Closing Date is, at the option of Purchaser, also subject to the satisfaction of the following conditions: 38 (a) Each of the representations and warranties of the Company contained in Section 3 hereof that does not have a materiality qualification shall be true and correct in all material respects as of the Closing Date and each of the other representations and warranties of the Company contained in Section 3 hereof shall be true and correct as of the Closing Date, in each case with the same force and effect as though the same had been made on and as of the Closing Date. (b) The Company shall have performed and complied in all material respects with the covenants and provisions in this Agreement required herein to be performed or complied with by the Company between the date hereof and the Closing Date. (c) Purchaser shall have received an opinion of Weil, Gotshal & Manges LLP, counsel for the Company, dated the Closing Date and in form and substance reasonably satisfactory to Purchaser and its counsel covering such matters as are customary for transactions of the type contemplated by this Agreement. Such opinion also shall be addressed to the Purchaser's financing source. (d) Purchaser shall have received certificates to the effect set forth in subsections (a) and (b) above, dated the Closing Date, signed by a duly authorized officer of the Company. (e) The consents of all persons who are parties to the agreements with the Company, or its Subsidiaries identified on Schedules 3(j), 3(m) or 3(o) with an asterisk (*) shall have been obtained, and signed copies thereof shall have been delivered to Purchaser. 39 (f) All employment and severance agreements in effect on the date hereof between the Management Employees and the Company shall have been terminated. (g) The $635,000 loan by the Company to CMI Partnership shall have been paid in full. (h) All conditions to the availability of the financing contemplated by the Commitment Letter shall have been met and such financing shall be available; PROVIDED that Purchaser may rely on this condition only if it has used all reasonable and diligent efforts to obtain such financing upon the terms set forth in the Commitment Letter. (i) There shall not have occurred any material adverse change in the prospects of the Company since the date hereof. 9. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION. The obligation of the Company to consummate the issuance, sale and assignment to Purchaser of the Purchaser Shares is, at the option of the Company, also subject to the satisfaction of the following conditions: (a) Each of the representations and warranties of Purchaser contained in Section 4 hereof shall be true and correct as of the Closing Date with the same force and effect as though the same had been made on and as of the Closing Date. (b) Purchaser shall have performed and complied in all material respects with the covenants and provisions in this Agreement required herein to be performed or complied with by Purchaser between the date hereof and the Closing Date. 40 (c) The Company shall have received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for Purchaser, dated the Closing Date, in form and substance reasonably satisfactory to the Company and its counsel covering such matters as are customary for transactions of the type contemplated by this Agreement. (d) The Company shall have received certificates to the effect set forth in subsections (a) and (b) above, dated the Closing Date, signed by a duly authorized officer of Purchaser. 10. CLOSING DATE; CLOSING. (a) The closing hereunder (herein called the "Closing") shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, N.Y. 10153 at 10:00 A.M. on the date that is three (3) Business Days after each of the conditions precedent to the Closing shall have been satisfied or waived, but not later than August 15, 1996, unless otherwise mutually agreed to in writing by Purchaser and the Company. The date of the Closing is referred to in this Agreement as the "Closing Date". (b) All proceedings to be taken and all documents to be executed and delivered by the Company in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Purchaser and its counsel. All proceedings to be taken and all documents to be executed and delivered by Purchaser in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Company and its counsel. All proceedings to be taken and all documents to be executed and delivered by all parties at the Closing shall be 41 deemed to have been taken and executed simultaneously and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered. (c) At the Closing, the Company shall deliver, or shall cause to be delivered, to Purchaser the following: (i) Certificates representing the Purchaser Shares duly registered on the books of the Company in the name of Purchaser. (ii) An opinion of counsel for the Company, dated the Closing Date, as required by Section 8(c) hereof. (iii) The certificate signed by the Company as referred to in Section 8(d) hereof. (iv) An incumbency certificate setting forth the names of officers of the Company who are authorized to execute this Agreement and all documents executed by the Company pursuant hereto, together with their respective signatures, signed by a duly authorized officer of the Company. (v) An executed counterpart to each of the Escrow Agreement, each of the agreements and the Stockholders Agreement referred to in Sections 7(c), 7(d) and 7(e) hereof, respectively. (vi) Director resignations as required to comply with Section 7(f) hereof. 42 (d) At the Closing, Purchaser shall deliver to the Company the following: (i) The wire transfers of funds provided in Section 2 hereof. (ii) An opinion of counsel for Purchaser, dated the Closing Date, setting forth the matters required pursuant to Section 9(c) hereof. (iii) The certificate signed by a duly authorized officer of Purchaser referred to in Section 9(d) hereof. (iv) An incumbency certificate setting forth the names of officers of Purchaser who are authorized to execute this Agreement and all documents executed by Purchaser pursuant hereto, together with their respective signatures, signed by a duly authorized officer of Purchaser. (v) An executed counterpart to each of the Escrow Agreement and the Stockholders Agreement referred to in Sections 7(c) and 7(e), respectively. 11. NO BROKERS. The Company represents to Purchaser, and Purchaser represents to the Company, that they respectively have had no dealings with any broker or finder in connection with the transactions contemplated by this Agreement, other than, with respect to the Company, Lazard Freres & Co. LLC. As set forth in the Company/LLC Purchase Agreement, LLC will indemnify and hold Purchaser harmless from and against any and all liability to which Purchaser may be subjected by reason of any broker's, finder's or similar fee with respect to the transactions contemplated by this Agreement to the extent such fee is attributable to any action undertaken by or on behalf of LLC or the Company. 43 Purchaser agrees to indemnify and hold the Company and LLC harmless from and against any and all liability to which the Company and LLC may be subjected by reason of any broker's, finder's or similar fee with respect to the transactions contemplated by this Agreement to the extent such fee is attributable to any action undertaken by or on behalf of Purchaser. 12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties hereto agree that the representations and warranties set forth in this Agreement shall survive for a period ending three years after the filing of the Company's federal income tax return for fiscal 1995 and thereafter shall expire. The sole remedy for any breach of any representation or warranty set forth in this Agreement shall be as set forth in Section 13 hereof. 13. INDEMNIFICATION AND LIMITATION OF LIABILITY. (a) The Company agrees to indemnify and hold Purchaser, its affiliates and each of their respective officers, directors, employees, stockholders, partners, agents and representatives in their capacities as such (collectively, "Purchaser Indemnitees") harmless from and against any and all liabilities, obligations, damages, deficiencies and expenses (including, without limitation, expenses associated with contesting any proposed adjustment relating to Taxes, and fees and disbursements of counsel incurred by any Purchaser Indemnitee in any action or proceeding between the Company and such Purchaser Indemnitee in which such Purchaser Indemnitee prevails pursuant to a final non-appealable judgment or between such Purchaser Indemnitee and any third party or otherwise) directly incurred by any of the Purchaser Indemnitees (including, without limitation, by reason of a diminishment of value of 44 the Purchaser's interest in the Company; for example, and without giving effect to Section 13(d), if the Company suffered a $100,000 loss, the Purchaser would be entitled to an indemnification payment of $75,000) resulting from (i) any misrepresentation or breach of warranty set forth in this Agreement on the part of the Company, it being agreed by the Company that for purposes of this Section 13 only, the materiality exceptions set forth in the Company's representations and warranties shall be given no effect and (ii) any liability for Taxes incurred by Purchaser or its affiliates pursuant to Treasury Regulation SECTION 1.1502-6(a) or comparable provision of State, local or foreign law. (b) Purchaser agrees to indemnify and hold the Company, its affiliates and each of their respective officers, directors, employees, stockholders, partners, agents and representatives in their capacities as such (collectively, the "Company Indemnitees") harmless from and against any and all liabilities, obligations, damages, deficiencies and expenses (including, without limitation, fees and disbursements of counsel incurred by a Company Indemnitee in any action or proceeding between Purchaser and such Company Indemnitee in which such Company Indemnitee prevails pursuant to a final non-appealable judgment or between such Company Indemnitee and any third party or otherwise) directly incurred by the Company Indemnitees resulting from any misrepresentation or breach of warranty set forth in this Agreement on the part of Purchaser, it being agreed by Purchaser that for purposes of this Section 13 only, the materiality exceptions set forth in Purchaser's representations and warranties shall be given no effect. 45 (c) The indemnification by the Company set forth in subsection (a) above and any and all liabilities and obligations of and causes of action against the Company, and any recovery in respect thereof, arising out of or relating to this Agreement and the transactions contemplated hereby (i) shall be effective only if, and to the extent that, the aggregate of such losses, liabilities, damages, deficiencies or expenses (including reasonable attorneys' fees) indemnified against shall exceed $350,000, in which event such indemnification shall be effective with respect to all such losses, liabilities or damages in excess of such amount, and shall be limited to an aggregate payment of no more than $10,000,000 as provided in subsection (g) below. (d) If any legal proceedings shall be instituted or any claim or demand shall be asserted by any person in respect of which payment may be sought by an indemnified party from an indemnifying party pursuant to the provisions of this Section 13, regardless in the case of the Company of the $350,000 minimum referred to in subsection (c) above, the indemnified party promptly shall cause written notice of the assertion of any claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party, and the indemnifying party shall have the right, at its option and at its own expense, to be represented by counsel of its choice (which counsel shall be reasonably acceptable to the indemnified parties) and to defend against, negotiate, settle or otherwise deal with any third-party proceeding, claim or demand which relates to any loss, liability, damage or deficiency indemnified against hereunder. The parties hereto agree to cooperate fully with each other in 46 connection with the defense, negotiation or settlement of any such legal proceeding, claim or demand, and an indemnified party may elect to participate in the defense, negotiation or settlement thereof with counsel of its choice at its expense. An indemnifying party shall not settle any proceeding, claim or demand for which indemnification is available hereunder without the indemnified party's prior written consent; PROVIDED, HOWEVER, if such consent is withheld with respect to a settlement which involves (i) only the payment of cash, (ii) provides a complete release to all indemnified parties and (iii) does not exceed the amount in the escrow held pursuant to the Escrow Agreement, then the indemnifying party shall not be required to indemnify the indemnified party hereunder for any expense or costs to settle the matter in excess of cost of the settlement rejected by the indemnified party. Purchaser hereby acknowledges and agrees that the defense or settlement of any third party claim for which Purchaser seeks indemnification from the Company hereunder pursuant to the terms of this Section 13(d) shall be exclusively controlled on behalf of the Company by the Management Employees. Notwithstanding anything contained herein to the contrary, the indemnities provided for in this Section 13 shall exist with respect to any loss, liability, damage or deficiency whether or not the actual amount thereof shall have been ascertained prior to the conclusion of the three-year period referred to in Section 12 hereof, as long as written notice of the matter as to which indemnification has been asserted shall have been given to the 47 Company by Purchaser, or to Purchaser by the Company, as the case may be, prior to the conclusion of such three-year period. (e) Any indemnity payments otherwise due and payable hereunder shall be decreased to the extent of any reduction of tax liability that is actually realized by the indemnified party upon payment of an indemnifiable loss net of all insurance proceeds and other recoveries actually received by the indemnified party in respect of the indemnified matter. (f) Any payments under this Section 13 shall be treated by the parties hereto for federal, state, local and foreign income tax purposes either as a non-taxable reimbursement or capital contribution or as a purchase price adjustment, as the case may be, except to the extent that another treatment is required by law. (g) Each of the parties agree that any amounts payable by the Company to Purchaser pursuant to this Section 13 shall be paid solely from the funds held in escrow pursuant to the Escrow Agreement and that Purchaser shall not have any recourse for any such amounts against the Company, its directors, officers, employees, direct or indirect stockholders or control persons. 14. SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable damage would result if this Agreement is not specifically enforced. Therefore, the parties hereto agree that the rights and obligations of the parties under this Agreement, including, without limitation, their respective rights and obligations to issue and to purchase the Purchaser 48 Shares, shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 15. TERMINATION. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated: (a) At any time on or prior to the Closing Date, by the mutual consent in writing of Purchaser and the Company; or (b) By either Purchaser or the Company if the Closing shall not have occurred on or before August 15, 1996 (or such later date as may be agreed upon in writing by the parties hereto). (c) By either the Company or Purchaser if there shall be in effect a final nonappealable order of a governmental body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby or by the Company/LLC Purchase Agreement; it being agreed that the parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence). In the event that this Agreement shall be terminated pursuant to this Section 15, all further obligations of the parties under this Agreement (other than Sections 17 and 23) shall 49 terminate without further liability of either party to the other, provided that nothing herein shall relieve any party from liability for its breach of this Agreement. 16. FURTHER ASSURANCES. The parties hereto each agree to execute such other documents or agreements as may be necessary or desirable for the implementation of this Agreement and the consummation of the transactions contemplated hereby. 17. CONFIDENTIALITY; PRESS RELEASES. (a) As more specifically set forth in the Confidentiality Agreement, prior to the Closing, Purchaser agrees to keep proprietary information regarding the Company and its Subsidiaries confidential and agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to Purchaser's directors, officers, employees, representatives, advisors, and agents (including financing sources) who are or may be involved with the transactions contemplated by this Agreement,(ii) to the extent such information presently is or hereafter becomes available, on a non- confidential basis, from a source other than the Company or Purchaser, and (iii) the extent disclosure is required by law, regulation or judicial order by any governmental authority. (b) The Company agrees to keep proprietary information regarding Purchaser confidential and agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to the Company's directors, officers, employees, representatives and agents who are involved with the transactions contemplated by this Agreement, (ii) to the extent such 50 information presently is or hereafter becomes available, on a non-confidential basis, from a source other than the Company or Purchaser, and (iii) to the extent disclosure is required by law, regulation or judicial order by any governmental authority. (c) Prior to any disclosure required by law, regulation or judicial order, Purchaser or the Company, as the case may be, shall advise the other of such requirement so that it may seek a protective order. (d) Prior to Closing or thereafter, neither Purchaser nor the Company shall make any press release or public announcement in connection with the transactions contemplated hereby without the prior written consent of the other party or, if required by law, without prior consultation with the other party. 18. NOTICES. Any notice or other communication hereunder may be given to a party at its address set forth below or to such other address as such party shall have given notice of pursuant hereto. Any notice shall be in writing and or sent by registered or certified mail, postage prepaid, return receipt requested, by facsimile, by personal delivery or reputable overnight courier. Notices shall be deemed to have been given (i) in case of personal delivery, when receipt has been confirmed, (ii) in the case of delivery to a reputable overnight courier, on the next day, (iii) in the case of mail, on the third Business Day following deposit in the mails and (iv) in the case of facsimile, when telecopied with confirmation of transmission. 51 In the case of Purchaser: c/o Jupiter Partners L.P. 30 Rockefeller Plaza Suite 4525 New York, New York 10112 Attention: John A. Sprague Telecopy: 212-332-2820 With a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Richard S. Borisoff, Esq. Telecopy: 212-373-2523 In the case of the Company: Core-Mark International, Inc. 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94060 Attention: Leo F. Korman Telecopy: 415-952-4284 With copies to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Ronald F. Daitz, Esq. Telecopy: 212-310-8007 19. ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed 52 by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. 20. SUCCESSORS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement and all rights and obligations hereunder may not be assigned or transferred without the prior written consent of the other party hereto. 21. SECTION HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 22. APPLICABLE LAW. This Agreement shall be governed by, construed and enforced in accordance with the law of the State of New York. 23. EXPENSES. Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses. Notwithstanding the foregoing, (i) all transaction-related fees and expenses incurred by the Company and/or LLC, including, without limitation, the fees and expenses for services by Weil, Gotshal & Manges LLP, Keesal, Young & Logan, Lazard Freres & Co. and the Company's accountants, and any other advisor of LLC or the Company shall be borne by LLC and not by the Company or the Purchaser and, simultaneously with the Closing, LLC will reimburse the Company for any of 53 such fees and expenses paid by the Company and (ii) if the Closing does not occur notwithstanding that Purchaser has used all reasonable and diligent efforts to consummate the transactions contemplated by this Agreement and is not in breach of its obligations in this Agreement, all transaction-related fees and expenses incurred by Purchaser (including, without limitation, all commitment and other fees payable in connection with the financing of the purchase price hereunder, all legal fees and expenses, and all fees and expenses payable to Jupiter Advisor Inc.) up to a maximum amount of $1,000,000 shall be reimbursed to Purchaser by the Company. 24. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 25. NO THIRD PARTY BENEFICIARIES. Except as expressly provided in Section 13 hereof, no provision of this Agreement is for the benefit of or shall confer any rights upon any person who is not a party to this Agreement. 54 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. CM/J ACQUISITION, LLC By: /s/ John A. Sprague ------------------------------ Name: John A. Sprague Title: Authorized Signatory CORE-MARK INTERNATIONAL, INC. By: /s/ Gary L. Walsh ------------------------------ Name: Gary L. Walsh Title: Chairman And Chief Executive Officer 55 GUARANTY The undersigned, Jupiter Partners, L.P., hereby unconditionally guarantees the due and punctual payment and performance of all obligations of CM/J Acquisition, LLC under the foregoing Agreement. The liabilities of Jupiter Partners, L.P. under this Guaranty shall in no event exceed $60,000,000. JUPITER PARTNERS, L.P. By: Ganymede, L.P., its General Partner By: Europa, L.P., its General Partner By: /s/ John A. Sprague ------------------------------------- General Partner 56 AMENDMENT NO. 1, dated as of August 6, 1996, between CM/J Acquisition, LLC, a Delaware limited liability company ("Purchaser"), and Core-Mark International, Inc., a Delaware corporation (the "Company"). The Purchaser and the Company are parties to the Stock Subscription Agreement dated June 17, 1996 (the "Agreement"). The Purchaser and the Company wish to amend the Agreement in certain respects and, accordingly, the parties hereto hereby agree as follows: 1. DEFINITIONS. Except as otherwise defined in this Amendment No. 1, terms defined in the Agreement are used herein as defined therein. 2. AMENDMENTS. Effective as of the date hereof, the Agreement is hereby amended as follows: (a) The third and fourth "WHEREAS" clauses in the recitals to the Agreement are hereby amended to read, in their entirety, as follows: "WHEREAS, the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from the Company, (i) 26.61290 shares of the common stock, par value $.01 per share, of the Company (the "Purchaser Shares"), which Purchaser Shares will represent, upon consummation of the transactions contemplated by this Agreement and the Company/LLC Purchase Agreement (as hereinafter defined), 75% of the issued and outstanding capital stock of the Company, and (ii) a Subordinated Note (as hereinafter defined), each for the purchase price and upon the terms and conditions hereinafter set forth; and "WHEREAS, immediately following the sale and purchase of the Purchaser Shares provided for herein, the Company, pursuant to the terms of the Stock Purchase Agreement, dated June 17, 1996, between LLC (or assigns) and the Company, as amended on the date hereof, a copy of which agreement, as amended, is attached as Exhibit A hereto (the "Company/LLC Purchase Agreement"), will purchase from LLC or its assigns 91.12903 of the LLC Shares, and the 8.87097 shares not so purchased will represent, upon 2 consummation of the transactions contemplated by this Agreement, 25% of the issued and outstanding capital stock of the Company and such retained shares will, as a consequence of the liquidation of LLC and CMI Partnership, be issued to the individuals and in the amounts set forth in Schedule 3(b) hereto;" (b) Section 1 of the Agreement is hereby amended by adding the following definitions: "'SUBORDINATED DEBT' shall mean indebtedness of the Company having the principal terms set forth on Schedule 1." "'SUBORDINATED NOTE' shall mean a promissory note of the Company evidencing Subordinated Debt." (c) Section 2 of the Agreement is hereby amended to read, in its entirety, as follows: "2. SALE OF SHARES AND NOTE; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, the Company hereby agrees to issue, sell and deliver to Purchaser, and Purchaser hereby agrees to purchase from the Company, at the Closing, (i) the Purchaser Shares and (ii) a Subordinated Note with an original issue price of $18,750,000. (b) The per share purchase price to be paid by Purchaser for the Purchaser Shares shall be $1,550,000, for a total purchase price of $41,250,000, which shall be payable in U.S. dollars in immediately available funds as hereinafter provided. (c) The purchase price for the Subordinated Note shall be $18,750,000, which shall be payable in U.S. dollars in immediately available funds as provided herein. (d) The Company hereby directs Purchaser to pay, on the Closing Date, by wire transfer in U.S. dollars in immediately available federal funds $60,000,000 to an account specified on or prior to the Closing Date by the Company. Immediately following the sale and purchase of the Purchaser Shares, the Company will transfer to an account designated by LLC $125,000,000, payable in U.S. dollars in immediately available funds, and will issue and deliver Subordinated Notes to LLC (or assigns) with an aggregate 3 original issue price of $6,250,000, and such Notes as a consequence of the liquidation of LLC and CMI Partnership will be issued to the individuals and in the amounts specified in Schedule 3(b), in payment of the purchase price for the 91.12903 LLC shares to be purchased by the Company pursuant to the Company/LLC Purchase Agreement. (e) On the Closing Date, the Company shall pay, by wire transfer in U.S. dollars in immediately available federal funds, $10,000,000 (the "Additional Consideration") to an account specified on or prior to the Closing Date to the escrow agent mutually selected by the Company and Purchaser to be held in accordance with the Escrow Agreement." (d) Schedule 3(b) to the Agreement is hereby deleted and replaced with Schedule 3(b) hereto. (e) Section 3(d) of the Agreement is hereby amended by changing, in the second sentence thereof, "87.09677" to "91.12903." (f) Section 4(f) of the Agreement is hereby amended by adding, after the words "Purchaser Shares," as such words appear once in the first and second sentences thereof and twice in the fourth sentence thereof, the words "and the Subordinated Notes acquired hereunder." (g) Section 10(c)(i) of the Agreement is hereby amended to read, in its entirety, as follows: "(i)(x) Certificates representing the Purchaser Shares duly registered on the books of the Company in the name of Purchaser, and (y) a Subordinated Note payable to the order of Purchaser with an original issue price of $18,750,000." (h) The Company/LLC Purchase Agreement set forth as Exhibit A of the Agreement shall be amended as follows: 4 (1) The second "WHEREAS" clause in the recitals to the Company/LLC Purchase Agreement shall be amended to read, in its entirety, as follows: "WHEREAS, immediately following the issuance and sale by Purchaser to CM/J Acquisition, LLC, a Delaware limited liability company (hereinafter referred to as "CAC"), of 26.61290 shares of its Common Stock and a Subordinated Note (as defined in the CAC Subscription Agreement) with an original issue price of $18,750,000, pursuant to the terms of the Stock Subscription Agreement, dated the date hereof, between Purchaser and CAC (the "CAC Subscription Agreement"), Seller (or assigns) will sell to Purchaser, and Purchaser will purchase from Seller (or assigns), 91.12903 shares of Common Stock (the "Seller Shares"), for the purchase price and upon the terms and conditions hereinafter set forth; (2) Section 1 of the Company/LLC Purchase Agreement shall be amended to read, in its entirety, as follows: "1. PURCHASE AND SALE OF SHARES; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, at the Closing (as hereinafter defined), the Seller Shares. (b) The total purchase price to be paid by Purchaser for the Seller Shares (the "Purchase Price") shall be $131,250,000 plus the Additional Consideration (as hereinafter defined), which Purchase Price shall be payable (i) $125,000,000 in U.S. dollars in immediately available funds, and (ii) the remainder by delivery of Subordinated Notes with an original issue price of $6,250,000. (c) Any funds held pursuant to the Escrow Agreement (as defined in the CAC Subscription Agreement) at the termination thereof following the distribution to CAC of all payments therefrom to which it is entitled shall be distributed by the escrow agent in the manner to be determined by the members of Seller, which distribution of the remaining funds held pursuant to the Escrow Agreement shall constitute additional consideration for the Seller Shares (the "Additional Consideration")." (3) Section 5(c) of the Company/LLC Purchase Agreement shall be amended to read, in its entirety, as follows: 5 "(c) At the Closing, Purchaser shall (i) cause the wire transfer of $125,000,000 in U.S. dollars in immediately available funds to be made to an account specified by Seller and shall issue and deliver Subordinated Notes with an aggregate original issue price of $6,250,000 as specified on Schedule 3(b) to the CAC Subscription Agreement." 3. EFFECTIVENESS. This Amendment No. 1 shall become effective upon the amendment of the Company/LLC Agreement as provided herein, which the Company represents has occurred concurrently with the execution of this Amendment No. 1. 4. MISCELLANEOUS. Except as provided herein, the Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 shall be governed by, and construed and enforced in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment No. 1 as of the day and year first above written. CM/J ACQUISITION, LLC By /s/ Gary L. Walsh ------------------------------ CORE-MARK INTERNATIONAL, INC. By /s/ Leo F. Korman ------------------------------ Schedule 3(b) Management Employees Shares Subordinated Note ------ ----------------- Gary L. Walsh 2.21775 $1,562,505 Robert A. Allen 1.81855 1,281,251 Leo F. Korman 1.37500 968,750 J. Michael Walsh 1.37500 968,750 Basil P. Prokop 1.06451 749,995 Leo Granucci 1,02016 718,749 ------- ---------- 8.87097 $6,250,000 Schedule 1 CORE-MARK INTERNATIONAL, INC. SUBORDINATED DEBT TERM SHEET Ownership Pro-rata by common shareholders according to their common interests Principal Amount To be computed at closing on the basis of a deemed annual interest rate of 6.73%, compounded semi-annually, for the period commencing on the closing and ending on July 1, 2001 Original Issue Price $25 million Interest Rate 0% through July 1, 2001 (deemed annual interest to be added to original issue price to determine principal amount); 6.73% per annum thereafter on the then outstanding principal amount, payable semi-annually Maturity Date July 31, 2004; single payment maturity Optional Redemption Callable at any time at original issue price plus accrued OID. Ranking Subordinated to all present and future indebtedness for borrowed money and like debt Restrictive Covenants None EX-2.2 3 EXHIBIT 2.2 STOCK PURCHASE AGREEMENT BY AND BETWEEN CORE-MARK L.L.C. AND CORE-MARK INTERNATIONAL, INC. JUNE 17, 1996 STOCK PURCHASE AGREEMENT AGREEMENT, made this 17th day of June, 1996, by and between Core-Mark L.L.C., a Delaware limited liability company (hereinafter referred to as "Seller"), and Core-Mark International, Inc., a Delaware corporation (hereinafter referred to as "Purchaser"). W I T N E S S E T H : WHEREAS, Seller currently owns 100 shares of common stock, par value $0.01 per share, of Purchaser (the "Common Stock"), which, as of the date hereof, represents all of the issued and outstanding capital stock of Purchaser; and WHEREAS, immediately following the issuance and sale by Purchaser of 38.70968 shares of its Common Stock to CM/J Acquisition, LLC, a Delaware limited liability company (hereinafter referred to as "CAC"), pursuant to the terms of the Stock Subscription Agreement, dated the date hereof, between Purchaser and CAC (the "CAC Subscription Agreement"), Seller will sell to Purchaser, and Purchaser will purchase from Seller, 87.09677 shares of Common Stock (the "Seller Shares"), for the purchase price and upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties hereto agree as follows: 1. PURCHASE AND SALE OF SHARES; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, at the Closing (as hereinafter defined), the Seller Shares. (b) The total purchase price to be paid by Purchaser for the Seller Shares (the "Purchase Price") shall be $125,000,000 plus the Additional Consideration (as hereinafter defined), which Purchase Price shall be payable in U.S. dollars in immediately available funds. (c) Any funds held pursuant to the Escrow Agreement (as defined in the CAC Subscription Agreement) at the termination thereof following the distribution to CAC of all payments therefrom to which it is entitled shall be distributed by the escrow agent in the manner to be determined by the members of Seller, which distribution of the remaining funds held pursuant to the Escrow Agreement shall constitute additional consideration for the Seller Shares (the "Additional Consideration"). 2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and warrants to Seller as follows: (a) ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to own its properties and carry on its business as it is now being conducted. (b) EXECUTION OF AGREEMENT. Purchaser has the corporate power and authority to enter into this Agreement and to carry out the transaction contemplated hereby. The 2 execution and delivery of this Agreement and the consummation of the transaction contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable against it in accordance with its terms. (c) NO RESTRICTION. The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby will not conflict with or result in a breach of any applicable law or judicial or administrative order or decree or any terms of any agreement to which Purchaser is a party, except for such conflicts and breaches of any agreement that in the aggregate have no reasonable likelihood of having a material adverse effect on Purchaser's ability to consummate the transaction contemplated by this Agreement, nor will it violate any of the provisions of Purchaser's organizational documents. (d) GOVERNMENTAL CONSENTS. No consent, approval or authorization of, or filing with, any governmental authority on the part of Purchaser is required in connection with the execution and delivery of this Agreement or the consummation of the transaction contemplated hereby. 3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and warrants to Purchaser as follows: (a) ORGANIZATION AND GOOD STANDING. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and 3 has the requisite power and authority to own its properties and carry on its business as it is now being conducted. (b) EXECUTION OF AGREEMENT. Seller has the requisite power and authority to enter into this Agreement and to carry out the transaction contemplated hereby. The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby have been duly authorized by all necessary action on the part of Seller. This Agreement has been duly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms. (c) NO RESTRICTION. The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby will not conflict with or result in a breach of any applicable law or judicial or administrative order or decree or any terms of any agreement to which Seller is a party, except for such conflicts and breaches of any agreement that in the aggregate have no reasonable likelihood of having a material adverse effect on Seller's ability to consummate the transaction contemplated by this Agreement, nor will it violate any of the provisions of Seller's organizational documents. (d) GOVERNMENTAL CONSENTS. No consent, approval or authorization of, or filing with, any governmental authority on the part of Seller is required in connection with the execution and delivery of this Agreement or the consummation of the transaction contemplated hereby. (e) OWNERSHIP OF SELLER SHARES. Seller owns and has good and valid title to the Seller Shares free and clear of all security interests, liens, claims and similar encumbrances. 4 4. CONDITIONS PRECEDENT TO PURCHASER'S AND SELLER'S OBLIGATIONS. The obligations of Purchaser and Seller to consummate the sale and purchase of the Seller Shares on the Closing Date is conditioned only upon the occurrence of the consummation of the transactions contemplated by the CAC Subscription Agreement. 5. CLOSING DATE; CLOSING. (a) The closing hereunder (herein called the "Closing") shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, N.Y. 10153 immediately following the consummation of the transactions contemplated by the CAC Subscription Agreement. The date of the Closing is referred to in this Agreement as the "Closing Date". (b) At the Closing, Seller shall deliver, or shall cause to be delivered, to Purchaser certificates representing the Seller Shares duly endorsed in blank or accompanied by duly executed stock powers as requested by Purchaser. (c) At the Closing, Purchaser shall cause the wire transfer of $125,000,000 in U.S. dollars in immediately available funds to be made to an account specified by Seller. 6. EXPENSES. Provided that the transactions contemplated by this Agreement and the CAC Subscription Agreement are consummated, Seller hereby agrees to be responsible for and to pay all costs and expenses incurred by it and Purchaser in connection with the transactions contemplated by the CAC Subscription Agreement and this Agreement, including without limitation, the fees and expenses of Lazard Freres & Co. LLC, Weil, Gotshal & Manges LLP, Kessal, Young & Logan and Purchaser's accountants and advisors. All such costs and expenses shall be paid to Purchaser simultaneously with the Closing. From and after 5 the time the transactions contemplated by this Agreement and the CAC Subscription Agreement are consummated, Seller will indemnify and hold Purchaser and CAC harmless from and against any and all liability to which Purchaser or CAC may be subjected by reason of any broker's, finder's or similar fee with respect to the transactions contemplated by this Agreement or the CAC Subscription Agreement to the extent such fee is attributable to any action undertaken by or on behalf of Seller or Purchaser. If the CAC Subscription Agreement and this Agreement are terminated without the consummation of the transactions contemplated thereby and hereby, Purchaser will be responsible for and pay the expenses incurred by it and Seller pursuant to the CAC Subscription Agreement and this Agreement. 7. NO INCONSISTENT ACTIVITIES. Seller will not solicit, and will direct its members, officers and other representatives not to, directly or indirectly encourage, or participate in any way in discussions or negotiations with, or provide any information or assistance to any third party concerning the acquisition of shares of capital stock of Purchaser or a substantial portion of the total assets of Purchaser (whether by merger, purchase of assets or otherwise). Seller will promptly communicate to Purchaser and CAC the terms of any proposal or contact it may receive in respect of any such transaction. Seller shall not release any third party from any confidentiality or standstill agreement to which Seller is a party without the prior written consent of CAC. 8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable damage would result to the parties and to CAC if this Agreement is not specifically enforced. Therefore, the rights and obligations of the parties under this Agreement, including, without 6 limitation, their respective rights and obligations to sell and to purchase the Seller Shares, shall be enforceable by the parties and by CAC a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 9. TERMINATION. This Agreement may be terminated only if the CAC Subscription Agreement is terminated, in which event this Agreement automatically shall terminate. In the event that this Agreement shall be terminated pursuant to this Section 9, all further obligations of the parties under this Agreement shall terminate without further liability of either party to the other. 10. NOTICES. Any notice or other communication hereunder may be given to a party at its address set forth below or to such other address as such party shall have given notice of pursuant hereto. Any notice shall be in writing and sent by registered or certified mail, postage prepaid, return receipt requested, by facsimile, by personal delivery or reputable overnight courier. Notices shall be deemed to have been given in case of personal delivery when receipt has been confirmed, in the case of delivery to a reputable overnight courier, on the next day, in the case of mail, on the third business day following deposit in the mails and in the case of facsimile, when telecopied with confirmation of transmission. 7 In the case of Purchaser: Core-Mark L.L.C. 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94060 Attention: Gary L. Walsh Telecopy: 415-952-4284 In the case of Purchaser: Core-Mark International, Inc. 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94060 Attention: Leo F. Korman Telecopy: 415-952-4284 11. ENTIRE AGREEMENT. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. 12. SUCCESSORS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement and all rights and obligations hereunder may not be assigned or transferred without the prior written consent of the other party hereto. 13. SECTION HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 8 14. APPLICABLE LAW. This Agreement shall be governed by, construed and enforced in accordance with the law of the State of New York. 15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 16. PRESS RELEASE. Prior to the Closing or thereafter, Seller shall not make any press release or public announcement in connection with the transactions contemplated hereby without the prior written consent of Purchaser and CAC or, if disclosure is required by law, without prior consultation with Purchaser and CAC. 17. THIRD PARTY BENEFICIARY; AMENDMENT. This Agreement is for the benefit of the parties hereto and for the benefit of CAC. The parties acknowledge and agree that CAC, as a third party beneficiary of this Agreement, is executing the CAC Subscription Agreement in reliance on this Agreement and CAC may enforce this Agreement as if it were a party hereto. The parties agree that this Agreement will not be amended without the prior written consent of CAC. 9 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. CORE-MARK L.L.C. By: /s/ Gary L. Walsh ------------------------------ Name: Gary L. Walsh Title: Managing General Partner of CMI Parntership, Holder of all the Class A Interests CORE-MARK INTERNATIONAL, INC. By: /s/ Leo F. Korman ------------------------------ Name: Leo F. Korman Title: Senior Vice President 10 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT BY AND BETWEEN CORE-MARK L.L.C. AND CORE-MARK INTERNATIONAL, INC. AUGUST 6, 1996 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT AMENDMENT NO. 1, made this 6th day of August, 1996, by and between Core-Mark L.L.C., a Delaware limited liability company (hereinafter referred to as "Seller"), and Core-Mark International, Inc., a Delaware corporation (hereinafter referred to as "Purchaser"). W I T N E S S E T H : WHEREAS, Seller and Purchaser are parties to the Stock Purchase Agreement, dated June 17, 1996 (the "Agreement"); and WHEREAS, Seller and Purchaser wish to amend the Agreement in certain respects, upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties hereto agree as follows: 1. DEFINITIONS. Except as otherwise defined in this Amendment No. 1, terms defined in the Agreement are used herein as defined therein. 2. AMENDMENTS. Effective as of the date hereof, the Agreement is hereby amended as follows: (a) The second "WHEREAS" clause in the recitals to the Agreement shall be amended to read, in its entirety, as follows: "WHEREAS, immediately following the issuance and sale by Purchaser to CM/J Acquisition, LLC, a Delaware limited liability company (hereinafter referred to as "CAC"), of 26.61290 shares of its Common Stock and a Subordinated Note (as defined in the CAC Subscription Agreement) with an original issue price of $18,750,000, pursuant to the terms of the Stock Subscription Agreement, dated the date hereof, between Purchaser and CAC (the "CAC Subscription Agreement"), Seller (or assigns) will sell to Purchaser, and Purchaser will purchase from Seller (or assigns), 91.12903 shares of Common Stock (the "Seller Shares"), for the purchase price and upon the terms and conditions hereinafter set forth; (b) Section 1 of the Agreement shall be amended to read, in its entirety, as follows: "1. PURCHASE AND SALE OF SHARES; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, at the Closing (as hereinafter defined), the Seller Shares. (b) The total purchase price to be paid by Purchaser for the Seller Shares (the "Purchase Price") shall be $131,250,000 plus the Additional Consideration (as hereinafter defined), which Purchase Price shall be payable (i) $125,000,000 in U.S. dollars in immediately available funds, and (ii) the remainder by delivery of Subordinated Notes with an original issue price of $6,250,000. (c) Any funds held pursuant to the Escrow Agreement (as defined in the CAC Subscription Agreement) at the termination thereof following the distribution to CAC of all payments therefrom to which it is entitled shall be distributed by the escrow agent in the manner to be determined by the members of Seller (or assigns)n, which distribution of the remaining funds held pursuant to the Escrow Agreement shall constitute additional consideration for the Seller Shares (the "Additional Consideration")." (c) Section 5(c) of the Agreement shall be amended to read, in its entirety, as follows: "(c) At the Closing, Purchaser shall (i) cause the wire transfer of $125,000,000 in U.S. dollars in immediately available funds to be made to an account specified by Seller and shall issue and deliver Subordinated Notes with an aggregate original issue price of $6,250,000 as specified on Schedule 3(b) to the CAC Subscription Agreement." 2 3. EFFECTIVENESS. This Amendment No. 1 shall become effective upon the amendment of the CAC Subscription Agreement as provided herein, which the Company represents has occurred concurrently with the execution of this Amendment No. 1. 4. MISCELLANEOUS. Except as provided herein, the Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 shall be governed by, and construed and enforced in accordance with, the law of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment No. 1 to Stock Purchase Agreement on the day and year first above written. CORE-MARK L.L.C. By: /s/ Gary L. Walsh ------------------------------ Name: Gary L. Walsh Title: Managing General Partner of CMI Partnership, holder of all the Class A Interests CORE-MARK INTERNATIONAL, INC. By: /s/ Leo F. Korman ------------------------------ Name: Leo F. Korman Title: Senior Vice President 4 EX-3.1 4 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF CORE-MARK INTERNATIONAL, INC. THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware ("DGCL"), hereby certifies that: FIRST: The name of the Corporation is: Core-Mark International, Inc. (the "CORPORATION"). SECOND: The address of the registered office of the Corporation in the State of Delaware is: 32 Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19904. The name of the registered agent of the Corporation in the State of Delaware at such address is: The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage in and conduct any lawful act or activity for which corporations may be organized under the DGCL. FOURTH: The total number of shares of capital stock that the Corporation shall have authority to issue is 3,000, all of which shall be shares of Common Stock having a par value of $.01 per share. FIFTH: The name and mailing address of the sole incorporator are: Brian B. Margolis, Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, By-Laws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any By-Laws of the Corporation adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: (a) A director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, or (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) under Section 174 of the DGCL or any successor provision thereto or (iv) for any transaction from which the director shall have derived an improper personal benefit. Neither amendment nor repeal of this paragraph (a) nor the adoption of any provision of the Certificate of Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in respect of any matter occurring, or any cause of action, suit or claim that, but for this paragraph (a) of this Article SEVENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee, agent, stockholder or a holder of any ownership interest in any stockholder of the Corporation (each, an "INDEMNITEE"), or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise (an "OTHER ENTITY"), against expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law. Persons who are not Indemnitees of the Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board of Directors at any time specifies that such persons are entitled to the benefits of this Article SEVENTH, and the Corporation may adopt By-Laws or enter into agreements with any such person for the purpose of providing for such indemnification. (c) The Corporation shall, from time to time, reimburse or advance to any Indemnitee or other person entitled to indemnification under this Article SEVENTH the 2 funds necessary for payment of expenses (including attorney's fees and disbursements) actually and reasonably incurred by such person in defending or testifying in a civil, criminal, administrative or investigative action, suit or proceeding; PROVIDED, HOWEVER, that the Corporation may pay such expenses in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined by final judicial decision that such Indemnitee is not entitled to be indemnified by the Corporation against such expenses as authorized by this Article SEVENTH, and the Corporation may adopt By-Laws or enter into agreements with such persons for the purpose of providing for such advances. (d) The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an Indemnitee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article SEVENTH or otherwise. (e) The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article SEVENTH shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under any statute, this Certificate of Incorporation, the By-Laws, any agreement, any vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (f) The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article SEVENTH shall continue as to a person who has ceased to be an Indemnitee (or other person indemnified hereunder) and shall inure to the benefit of the executors, administrators, legatees and distributees of such person. (g) The provisions of this Article SEVENTH shall be a contract between the Corporation, on the one hand, and 3 each Indemnitee who serves in such capacity at any time while this Article SEVENTH is in effect and any other person indemnified hereunder, on the other hand, pursuant to which the Corporation and each such Indemnitee or other person intend to be legally bound. No repeal or modification of this Article SEVENTH shall affect any rights or obligations with respect to any state of facts then or theretofore existing or thereafter arising or any proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. (h) The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article SEVENTH shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction. The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part, in any such proceeding. (i) Any Indemnitee of the Corporation serving in any capacity for (a) another corporation of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation or (b) any employee benefit plan of the Corporation or any corporation referred to in clause (a) shall be deemed to be doing so at the request of the Corporation. (j) Any person entitled to be indemnified or to reimbursement or advancement of expenses as a matter of right pursuant to this Article SEVENTH may elect to have the right to indemnification or reimbursement or advancement of 4 expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the applicable action, suit or proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time such indemnification or reimbursement or advancement of expenses is sought. Such election shall be made, by a notice in writing to the Corporation, at the time indemnification or reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is given, the right to indemnification or reimbursement or advancement of expenses shall be determined by the law in effect at the time indemnification or reimbursement or advancement of expenses is sought. EIGHTH: (a) For purposes of this Article EIGHTH of this Certificate of Incorporation, the following capitalized terms shall have the following meanings: "AFFILIATE" of a Person means a Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the subject Person. "CONTROL", "CONTROLS" or "CONTROLLED" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, contract, or otherwise, and, in any event, any Person owning fifteen percent (15%) or more of the outstanding Voting Stock of another Person shall be deemed to control that Person. "CREDIT AGREEMENT" means that certain Credit Agreement, dated as of March 2, 1995, among Core-Mark International, Inc., the lenders party thereto, Citibank, N.A., as U.S. and Canadian Letter of Credit Issuing Bank, Citicorp USA, Inc. as Swing Line Bank and as Agent, and Citicorp Securities, Inc., as Arranger. "INDEBTEDNESS" means, as to any Person, (i) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or the issuance and sale of debt securities); (ii) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are 5 delivered or respective services rendered; (iii) indebtedness of others secured by a lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (iv) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (v) capital lease obligations of such Person; (vi) indebtedness of others guaranteed by such Person; and (vii) obligations of such Person in respect of any interest rate swap, cap, collar, floor or other interest rate protection agreement. "INVESTMENT" means (i) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of another Person; and (ii) any deposit with, or advance, loan or other extension of credit to, such Person (other than any such advance, loan or extension of credit having a term not exceeding 90 days representing the purchase price of inventory or supplies purchased in the ordinary course of business) or guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such Person and (without duplication) any amount committed to be advanced, loaned or extended to such Person. "LLC" means Core-Mark L.L.C., a limited liability company organized under the Delaware Limited Liability Company Law. "LLC AGREEMENT" means the Limited Liability Company Agreement of Core-Mark L.L.C. "MEMBER" means each of the Persons party to the LLC Agreement. "PERMITTED ACQUISITIONS" means any purchase, lease or other acquisition by Core-Mark or any Subsidiary of Core-Mark of any business or assets from, or capital stock or other securities of, or other ownership or profit interests in, any other Person for a purchase price which, alone or when added to the aggregate purchase prices paid by Core-Mark or any of its Subsidiaries in respect of all such acquisitions consummated during the same fiscal year of Core-Mark, is less than (i) $5,000,000 or (ii) $20,000,000 if the director designated by the Required B Holders votes in favor of the resolution of the Board of Directors of 6 Core-Mark approving and authorizing such purchase, lease or other acquisition. "PERMITTED DISPOSITION" means (i) any sale of inventory of Core-Mark or any of its Subsidiaries in the ordinary course of business, (ii) dispositions of property and assets by Core-Mark or any of its Subsidiaries in connection with any transaction otherwise permitted by Section 6.06(a) of the LLC Agreement; (iii) dispositions of damaged, worn-out or obsolete equipment of Core-Mark or any of its Subsidiaries that is no longer used or useful in the conduct of business; (iv) sales of assets of Core- Mark or its Subsidiaries for an aggregate purchase price not exceeding $5,000,000 in any calendar year; and (v) any sale for cash to a third party which is not an Affiliate of any of Core-Mark, the LLC, any Member or any partner of CMI Partnership, a California general partnership ("CMI PARTNERSHIP"), of all or substantially all the assets or capital stock of Core-Mark in which the resulting net cash proceeds to Core-Mark or the LLC, as the case may be (cash proceeds, net of transactions expenses, including legal, accounting, registration, filing or other expenses and taxes paid (or reasonably expected to be incurred or payable) in connection therewith), are at least $30,000,000, in the case of any sale consummated prior to December 31, 1995, $40,000,000, in the case of any sale consummated on or after December 31, 1995 to and including December 30, 1996, $50,000,000, in the case of any sale consummated on or after December 31, 1996 to and including December 30, 1997, or $60,000,000, in the case of any sale consummated on or after December 31, 1997. "PERMITTED INVESTMENT" means (i) direct obligations of the United States or Canada, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States or Canada, or of any agency thereof, in either case maturing not more than 90 days from the date of acquisition thereof; (ii) certificates of deposit issued by The Chase Manhattan Bank (National Association) ("CHASE") or Citibank, N.A. and certificates of deposit rated A-1 or better or P-1 or better by Standard & Poor's Corporation or Moody's Investors Service, respectively, issued by any bank or trust company organized under the laws of the United States or any state thereof or Canada or any province thereof and having capital, surplus and undivided profits of at least $500,000,000 (or the Canadian Dollar equivalent), maturing not more than 90 days from the date of acquisition thereof; (iii) commercial paper issued 7 by Chase or Citibank, N.A. and commercial paper rated A-1 or better or P-1 by Standard & Poor's Corporation or Moody's Investors Service, respectively, maturing not more than 90 days from the date of acquisition thereof; (iv) Investments existing on the date hereof; (v) Investments by Core-Mark in wholly-owned Subsidiaries, including any Subsidiary created in contemplation of a structured financing of receivables; (vi) loans and advances to employees in an aggregate principal amount not to exceed $60,000 individually and $300,000 in the aggregate; (vii) Investments permitted under the Credit Agreement as in effect on the date hereof; (viii) obligations of Core-Mark in respect of any interest rate swap, cap, collar, floor or other interest rate protection agreement; and (ix) stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to Core-Mark or its Subsidiaries pursuant to a reorganization or a bona fide workout of any account debtor applicable to the creditors of such account debtor generally. "PERSON" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity or organization, including any government or political subdivision or any agency or instrumentality thereof. "SUBSIDIARY" of a Person means (i) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or Controlled by such Person and/or one or more of the Subsidiaries of such Person, or (ii) any partnership of which at least a majority of the partnership or other ownership interests having by the terms thereof ordinary voting power to direct or cause the direction of management or policies of such partnership is at the time directly or indirectly owned by such Person and/or with respect to which such Person has the power, directly or indirectly, to direct or cause the direction of certain or all of the management and policies thereof. "VOTING STOCK" means, with respect to any Person, securities with respect to any class or classes of capital stock of such Person entitling the holders thereof at the 8 time to vote for the election of a majority of the board of directors (or persons performing similar functions) of such Person, whether or not the right to so vote exists by reason of the happening of a contingency. "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, (i) any corporation all of the shares of capital stock of which, other than directors' qualifying shares, are owned or Controlled, directly or indirectly, by such Person, or (ii) any partnership all of the partnership or other ownership interests of which are owned or Controlled, directly or indirectly, by such Person. (b) In addition to any other vote that may be required by law, for all periods of time during which the LLC Agreement, or any successor instrument among the beneficial owners of a majority of the outstanding Common Stock of the Corporation, providing for special restrictions relating to the voting of the capital stock of the Corporation with respect to the matters set forth in this Article EIGHTH, shall remain in full force and effect, a vote of the stockholders of the Corporation shall be required for the Corporation to: (1) enter, or cause or permit any of its Subsidiaries to enter, into any merger or consolidation, or to liquidate, wind up or dissolve itself, other than any merger, consolidation or liquidation (A) of any Wholly Owned Subsidiary with or into (x) Core-Mark or (y) any other Wholly Owned Subsidiary and (B) for the purpose of engaging in any Permitted Acquisition; (2) amend its Certificate of Incorporation or By-Laws; (3) authorize, or cause or permit any of its Subsidiaries to authorize, the creation or issuance of any capital stock of Core-Mark or any of its Subsidiaries, or any options, warrants or other rights exercisable for any such stock, or any other securities convertible into or exchangeable for any such stock, other than issuances of any such securities to the LLC; (4) effect, or cause or permit any of its Subsidiaries to effect, any change in the shares of capital stock of Core-Mark or any of its Subsidiaries 9 by reclassification, recapitalization, subdivision, consolidation, combination or reorganization; (5) purchase, lease or otherwise acquire, or cause or permit any of its Subsidiaries to purchase, lease or otherwise acquire, any business or assets from, or capital stock or other securities of, or other ownership or profit interests in, any Person, or otherwise be a party to any such purchase, lease or other acquisition, other than (A) Permitted Investments and (B) Permitted Acquisitions; (6) convey, sell, lease, transfer or otherwise dispose of, or cause or permit any of its Subsidiaries to convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of related transactions, any asset or capital stock, other than in respect of Permitted Dispositions and Permitted Investments; (7) engage, or cause or permit any of its Subsidiaries to engage, in any line of business, other than the business of wholesale distribution of consumer packaged goods and related services to vendors and customers and any other reasonably related business and related services, PROVIDED, HOWEVER, that this restriction shall not apply to any other line of business activity in which Core-Mark and its Subsidiaries may engage that does not constitute, individually and together with any other such activity, a material portion of the business and operations of Core-Mark and its Subsidiaries taken as a whole; (8) engage, or cause or permit any of its Subsidiaries to engage, in any transaction with an Affiliate other than (A) loans and advances to employees in the ordinary course of the business of Core-Mark and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $60,000 to any individual or $300,000 in the aggregate at any time outstanding, (B) in the event of the death of any partner of CMI Partnership, loans or advances by Core-Mark to CMI Partnership or the estate of such partner made for the purpose of assisting in the payment of estate taxes in respect of the death of such partner (which loans or advances shall provide, in addition to any other repayment terms, for repayment thereof receipt by CMI Partnership of any distributions from, 10 or in respect of its interests in, the LLC, to the extent of such partner's share thereof, and shall otherwise be on commercially reasonable terms), (C) transactions with, by and among Wholly Owned Subsidiaries, (D) employment agreements and arrangements (other than those in effect on the date hereof) which have been approved by the Compensation Committee of the Board of Directors of Core-Mark and (E) the payment of bonuses to employees of Core-Mark, not to exceed $250,000 in the aggregate for all employees from and after the date hereof, to enable such employees to pay any taxes subsequently asserted in connection with the exercise of certain stock options; or (9) incur, or cause or permit any of its Subsidiaries to incur, any Indebtedness (other than Indebtedness of Core-Mark and its Subsidiaries under the Credit Agreement, as in effect from time to time, and any refinancings, refundings, renewals, replacements or modifications thereof, in an aggregate principal amount not exceeding $200,000,000) in an aggregate principal amount which, when added to the aggregate principal amount of the then existing Indebtedness of Core-Mark, is greater than $20,000,000. 11 IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 1st day of March 1995. Brian B. Margolis Sole Incorporator 12 EX-3.2 5 EXHIBIT 3.2 BY-LAWS OF CORE-MARK INTERNATIONAL, INC. (A DELAWARE CORPORATION) ARTICLE I STOCKHOLDERS SECTION 1.1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 1.2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 1.3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 1.4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 1.5. QUORUM. Except as otherwise provided by law, the Corporation's Certificate of Incorporation or these By-Laws, a majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of the stockholders. If there is no quorum, a majority of the shares entitled to vote at the meeting, present in person or represented by proxy, may adjourn the meeting from time to time without further notice until a quorum shall be obtained. When a quorum is obtained, it is not broken by the subsequent withdrawal of any stockholder. SECTION 1.6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman's absence the Vice Chairman, if any, or if none or in the Vice Chairman's absence the President, or if none or in the President's absence a Vice President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 1.7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-Laws. At 2 all elections of directors taken at any meeting of stockholders, the voting may be, but need not be, by written ballot. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, whether or not a quorum is present when the vote is taken. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice, and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 1.8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stock- 3 holders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 2.1. GENERAL POWERS. The business, property, and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2.2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be eight, or such other number as may be fixed from time to time by resolution of the Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 2.3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law or by agreement of the stockholders, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 4 SECTION 2.4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 2.5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 2.6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 2.7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the President, or by a majority of the directors then in office. SECTION 2.8. NOTICE OF MEETINGS. A notice of the place, date, and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least five business days before the meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than two days before the day of the meeting. SECTION 2.9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman, if any, or, if none or in the Chairman's absence or inability to act, the President, or in the President's absence or inability to act, any Vice President who is a member of the Board of Directors, or in such Vice President's absence or inability to act, a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 2.10. RESIGNATION. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or the Secretary, unless otherwise 5 specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. SECTION 2.11. VACANCIES. Unless otherwise provided in these By-Laws or in an agreement among or binding upon the stockholders, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors, or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors; PROVIDED, HOWEVER, that the director (the "Required B Holders Director") designated by the Required B Holders (as defined in the Limited Liability Company Agreement (the "LLC Agreement") of Core-Mark L.L.C., a limited liability company organized under the laws of Delaware, dated as of March 2, 1995 among CMI Partnership, Post-Mark, Inc., The Nippon Credit Bank, Ltd., Van Kampen Merritt Prime Rate Income Trust and Westpac Investment Capital Corp.) pursuant to Section 6.06 of the LLC Agreement may only be removed, without cause, by the affirmative vote of the Required B Holders (as defined in the LLC Agreement). SECTION 2.12. ABSENCE FROM MEETINGS. If the Required B Holders Director is unable, for any reason, to attend a meeting of the Board of Directors, such Required B Holders Director may send an observer to attend such Board meeting; PROVIDED, HOWEVER, that under no circumstances will such observer be able to vote on any matter brought to a vote of the directors. SECTION 2.13. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. ARTICLE III COMMITTEES SECTION 3.1. APPOINTMENT; MEMBERSHIP. (a) In addition to the committees established under Section 3.6 hereof, from time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or 6 purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. (b) As long as no Change in Control Event (as defined in the LLC Agreement) has occurred, each committee of the Board shall be comprised of three members: a director who is also an executive officer of the Corporation, the Required B Holders Director and the Independent Director (each as defined in the LLC Agreement). SECTION 3.2. PROCEDURES, QUORUM, AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3.3. NOTICE OF MEETINGS. Notice of the place, date and time and the purpose or purposes of each meeting of any committee of the Board of Directors shall be given to each member of such committee the same at least five business days before the meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than two days before the day of the meeting. SECTION 3.4. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 3.5. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. SECTION 3.6. STANDING COMMITTEES. (a) COMPENSATION COMMITTEE. There shall be a committee of the Board of Directors, which shall be the Compensation Committee. As long as no Change in Control Event shall have occurred, the Compensation Committee shall be comprised of the Chairman of the Board of Directors, the 7 Required B Holders Directors and the Independent Director. The Compensation Committee shall have the authority and responsibility for considering, adopting, authorizing and implementing the salary, bonus and other benefits, direct and indirect, of, and any employment, severance, termination, bonus, benefit or other similar agreements or plans with or for the benefit of, the officers of the Corporation and shall have the authority and responsibility for considering, authorizing and acting upon such other matters as may be designated to such committee from time to time by the Board of Directors. The vote of the majority of the members of the Compensation Committee present at a meeting at which a quorum is present shall be the act of the Compensation Committee. (b) AUDIT COMMITTEE. There shall be a committee of the Board of Directors, which shall be the Audit Committee. As long as no Change in Control Event shall have occurred, the Audit Committee shall be comprised of the Chairman of the Board of Directors, the Required B Holders Directors and the Independent Director. The Audit Committee shall have the authority and responsibility for considering and recommding to the Board of Directors the process for producing the Corporation's financial data, internal controls and the independence of the Corporation's external auditors and shall have the authority and responsibility for considering and recommending to the Board of Directors such other matters as may be designated to such committee from time to time by the Board of Directors. The vote of the majority of the members of the Audit Committee present at a meeting at which a quorum is present shall be the act of the Audit Committee. ARTICLE IV OFFICERS SECTION 4.1. ELECTION AND QUALIFICATIONS. The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and may include, by election or appointment, one or more Vice Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer, and such Assistant Secretaries, such Assistant Treasurers, and such other officers as the Board may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these By-Laws and as may be assigned by the Board of Directors or the President. Any two or more offices may be held by the same person. 8 SECTION 4.2. TERM OF OFFICE AND REMUNERATION. Except as otherwise provided in an employment agreement, the term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide. SECTION 4.3. RESIGNATION; REMOVAL. Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or the Secretary, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board. SECTION 4.4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors, if there be one, shall be the chief executive officer of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors. SECTION 4.5. PRESIDENT. The President shall be the chief operating officer of the Corporation, and shall have such duties as customarily pertain to that office. The President shall have general management and supervision of the property, business, and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees; and may execute and deliver, in the name of the Corporation, powers of attorney, contracts, bonds, and all other obligations and instruments. In the absence of the Chairman of the Board or in the event of his inability or refusal to act, or if the Board has not designated a Chairman, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all of the powers of, and be subject to all of the restrictions upon, the Chairman of the Board. SECTION 4.6. VICE PRESIDENT. A Vice President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President. 9 SECTION 4.7. TREASURER. The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President. SECTION 4.8. SECRETARY. The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President. SECTION 4.9. ASSISTANT OFFICERS. Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe. ARTICLE V INDEMNIFICATION SECTION 5.1. INDEMNITY. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee, agent, stockholder or a holder of any ownership interest in any stockholder of the Corporation (each, an "INDEMNITEE"), or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise (an "OTHER ENTITY"), against expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law. Persons who are not Indemnitees of the Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board at any time specifies that such persons are entitled to the benefits of this Article V, and the Corporation may enter into agreements with any such person for the purpose of providing for such indemnification. SECTION 5.2. ADVANCEMENT OF EXPENSES. The Corporation shall, from time to time, reimburse or advance to any Indemnitee or other person entitled to indemnification under this Article V the funds necessary for payment of expenses (including attorney's fees and disbursements) actually and reasonably incurred by such person in defending or testifying in a civil, criminal, administrative or 10 investigative action, suit or proceeding; PROVIDED, HOWEVER, that the Corporation may pay such expenses in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined by final judicial decision that such Indemnitee is not entitled to be indemnified by the Corporation against such expenses as authorized by this Article V, and the Corporation may enter into agreements with such persons for the purpose of providing for such advances. SECTION 5.3. INSURANCE. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an Indemnitee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article V or otherwise. SECTION 5.4. RIGHTS NOT EXCLUSIVE. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under any statute, the Certificate of Incorporation, these By-Laws, any agreement, any vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. SECTION 5.5. CONTINUATION OF BENEFITS. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article V shall continue as to a person who has ceased to be an Indemnitee (or other person indemnified hereunder) and shall inure to the benefit of the executors, administrators, legatees and distributees of such person. SECTION 5.6. BINDING EFFECT. The provisions of this Article V shall be a contract between the Corporation, on the one hand, and each Indemnitee who serves in such capacity at any time while this Article V is in effect and any other person indemnified hereunder, on the other hand, pursuant to which the Corporation and each such Indemnitee or other person intend to be legally bound. No repeal or modification of this Article V shall affect any rights or 11 obligations with respect to any state of facts then or theretofore existing or thereafter arising or any proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. SECTION 5.7. PROCEDURAL RIGHTS. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article V shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction. The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part, in any such proceeding. SECTION 5.8. SERVICE DEEMED AT CORPORATION'S REQUEST. Any Indemnitee of the Corporation serving in any capacity for (a) another corporation of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation or (b) any employee benefit plan of the Corporation or any corporation referred to in clause (a) shall be deemed to be doing so at the request of the Corporation. SECTION 5.9. ELECTION OF APPLICABLE LAW. Any person entitled to be indemnified or to reimbursement or advancement of expenses as a matter of right pursuant to this Article V may elect to have the right to indemnification or reimbursement or advancement of expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the applicable action, suit or proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time such indemnification or reimbursement or advancement of expenses is sought. Such election shall be made, by a notice in writing to the 12 Corporation, at the time indemnification or reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is given, the right to indemnification or reimbursement or advancement of expenses shall be determined by the law in effect at the time indemnification or reimbursement or advancement of expenses is sought. ARTICLE VI BOOKS AND RECORDS SECTION 6.1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each, and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-Laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 6.2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 6.3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining the stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. 13 (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VII CERTIFICATES REPRESENTING STOCK SECTION 7.1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that 14 some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 7.2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 7.3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. 15 SECTION 7.4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate theretofore issued by it that is alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of any allegedly lost, stolen, or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. ARTICLE VIII DIVIDENDS SECTION 8.1. Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders. The division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall determine to be in the best interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE IX RATIFICATION SECTION 9.1. Any transaction questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer, or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. 16 Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. ARTICLE X CORPORATE SEAL SECTION 10.1. The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping, or otherwise making, placing, or affixing, or causing to be printed, engraved, lithographed, stamped, or otherwise made, placed, or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile, or other reproduction of said corporate seal. ARTICLE XI FISCAL YEAR SECTION 11.1. The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XII WAIVER OF NOTICE SECTION 12.1. Whenever notice is required to be given by these By-Laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XIII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 13.1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such 17 bank accounts to be opened or maintained in the name and on behalf of the Corporation as may be deemed necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 13.2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts, and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 13.3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney, and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 13.4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. 18 ARTICLE XIV AMENDMENTS SECTION 14.1. The Board of Directors shall have power to adopt, amend, or repeal by-laws. Any by-laws adopted by the Board of Directors may be repealed or changed, and new by-laws made, by the stockholders, and the stockholders may prescribe that any by-law made by them shall not be altered, amended, or repealed by the Board of Directors. 19 EX-4.1 6 EXHIBIT 4.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CORE-MARK INTERNATIONAL, INC. 11-3/8% Senior Subordinated Notes due 2003 ------------------------- INDENTURE ------------------------- Dated as of September 27, 1996 ------------------------- BANKERS TRUST COMPANY, Trustee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . 27 SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . 27 SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . 28 ARTICLE 2 THE SECURITIES SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . 29 SECTION 2.02. Execution and Authentication. . . . . . . . . . . . 31 SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . 32 SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . 33 SECTION 2.05 Securityholder Lists. . . . . . . . . . . . . . . . 33 SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . 33 SECTION 2.07. Replacement Securities. . . . . . . . . . . . . . . 42 SECTION 2.08. Outstanding Securities. . . . . . . . . . . . . . . 43 SECTION 2.09 Temporary Securities. . . . . . . . . . . . . . . . 43 SECTION 2.10 Cancelation . . . . . . . . . . . . . . . . . . . . 43 SECTION 2.11 Defaulted Interest. . . . . . . . . . . . . . . . . 44 SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . 44 ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . 44 SECTION 3.02. Selection of Securities To Be Redeemed. . . . . . . . . . . . . . . . . . 45 SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . 45 SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . 46 SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . 46 SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . 47 SECTION 3.07 Optional Redemption . . . . . . . . . . . . . . . . 47 2 Page ---- ARTICLE 4 COVENANTS SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . 48 SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . 48 SECTION 4.03. Limitation on Indebtedness. . . . . . . . . . . . . 48 SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . 51 SECTION 4.05. Limitation on Restrictions on Distributions from Subsidiaries . . . . . . . . . 54 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. . . . . . . . . . . . . . . . . 56 SECTION 4.07. Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 60 SECTION 4.08. Change of Control . . . . . . . . . . . . . . . . . 61 SECTION 4.09. Compliance Certificate. . . . . . . . . . . . . . . 63 SECTION 4.10. Further Instruments and Acts. . . . . . . . . . . . 63 SECTION 4.11. Limitation on Liens . . . . . . . . . . . . . . . . 63 SECTION 4.12. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. . . . . 63 SECTION 4.13. Limitation on Lines of Business . . . . . . . . . . 64 Section 4.14. Limitation on the Disposition of Assets of the Company to Restricted Subsidiaries . . . . 64 ARTICLE 5 SUCCESSOR COMPANY SECTION 5.01. When Company May Merge or Transfer Assets. . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . 66 SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . 68 SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . 69 SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . 69 SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . 69 SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . 70 SECTION 6.07. Rights of Holders To Receive Payment. . . . . . . . 70 SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . 71 3 Page ---- SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . 71 SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . 71 SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . 72 SECTION 6.12. Waiver of Stay or Extension Laws. . . . . . . . . . 72 ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . 72 SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . 74 SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . 74 SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . 75 SECTION 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . 75 SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . 75 SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . 75 SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . 77 SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . 78 SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . 78 SECTION 7.11. Preferential Collection of Claims Against Company . 78 ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Discharge of Liability on Securities; Defeasance. . . . . . . . . . . . . . . . . . . . 79 SECTION 8.02. Conditions to Defeasance. . . . . . . . . . . . . . 80 SECTION 8.03. Application of Trust Money. . . . . . . . . . . . . 81 SECTION 8.04. Repayment to Company. . . . . . . . . . . . . . . . 81 SECTION 8.05. Indemnity for Government Obligations. . . . . . . . 82 SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . 82 ARTICLE 9 AMENDMENTS SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . 82 SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . 83 SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . 85 SECTION 9.04. Revocation and Effect of Consents and Waivers . . . 85 4 Page ---- SECTION 9.05. Notation on or Exchange of Securities . . . . . . . 85 SECTION 9.06. Trustee To Sign Amendments. . . . . . . . . . . . . 86 SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . 86 ARTICLE 10 SUBORDINATION SECTION 10.01. Agreement To Subordinate. . . . . . . . . . . . . . 86 SECTION 10.02. Liquidation, Dissolution, Bankruptcy. . . . . . . . 87 SECTION 10.03. Default on Senior Indebtedness. . . . . . . . . . . 87 SECTION 10.04. Acceleration of Payment of Securities . . . . . . . 88 SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . 88 SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . 88 SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . 89 SECTION 10.08. Subordination May Not Be Impaired by Company. . . . 89 SECTION 10.09. Rights of Trustee and Paying Agent. . . . . . . . . 89 SECTION 10.10. Distribution or Notice to Representative. . . . . . 90 SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate . . . . . 90 SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . 90 SECTION 10.13. Trustee Entitled To Rely. . . . . . . . . . . . . . 90 SECTION 10.14. Trustee to Effectuate Subordination . . . . . . . . 91 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . 91 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. . . . . 91 SECTION 10.17. Trustee's Compensation Not Prejudiced . . . . . . . 92 ARTICLE 11 MISCELLANEOUS SECTION 11.01. Trust Indenture Act Controls. . . . . . . . . . . . 92 SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . 92 SECTION 11.03. Communication by Holders with Other Holders . . . . 93 SECTION 11.04. Certificate of Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 93 SECTION 11.05. Statements Required in Certificate or Opinion . . . 93 5 Page ---- SECTION 11.06. When Securities Disregarded . . . . . . . . . . . . 94 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. . . . 94 SECTION 11.08. Legal Holidays. . . . . . . . . . . . . . . . . . . 94 SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . 95 SECTION 11.10. No Recourse Against Others. . . . . . . . . . . . . 95 SECTION 11.11. Successors. . . . . . . . . . . . . . . . . . . . . 95 SECTION 11.12. Multiple Originals. . . . . . . . . . . . . . . . . 95 SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . 95 Exhibit A - Form of Initial Security Exhibit B - Form of Exchange Security Exhibit C - Form of Transferee Letter of Representation Exhibit D - Form of Note Guarantee CROSS-REFERENCE TABLE TIA Indenture Section Section ------- --------- 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10 (c) . . . . . . . . . . . . . . . . . . . . . . . N.A 311(a) . . . . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.05 (b) . . . . . . . . . . . . . . . . . . . . . . . 11.03 (c) . . . . . . . . . . . . . . . . . . . . . . . 11.03 313(a) . . . . . . . . . . . . . . . . . . . . . . . 7.06 (b)(1) . . . . . . . . . . . . . . . . . . . . . . . N.A. (b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06 (c) . . . . . . . . . . . . . . . . . . . . . . . 11.02 (d) . . . . . . . . . . . . . . . . . . . . . . . 7.06 314(a) . . . . . . . . . . . . . . . . . . . . . . . 4.02; 4.12; 11.02 (b) . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(1) . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . 11.05 (f) . . . . . . . . . . . . . . . . . . . . . . . 4.12 315(a) . . . . . . . . . . . . . . . . . . . . . . . 7.01 (b) . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02 (c) . . . . . . . . . . . . . . . . . . . . . . . 7.01 (d) . . . . . . . . . . . . . . . . . . . . . . . 7.01 (e) . . . . . . . . . . . . . . . . . . . . . . . 6.11 316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . 11.06 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 6.05 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 6.04 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . 6.07 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.08 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09 (b) . . . . . . . . . . . . . . . . . . . . . . . 2.04 318(a) . . . . . . . . . . . . . . . . . . . . . . . 11.01 N.A. means Not Applicable. - ---------------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. INDENTURE dated as of September 27, 1996, 1996, between CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "Company"), and BANKERS TRUST COMPANY, a New York banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 11-3/8% Senior Subordinated Notes due 2003 (the "Initial Securities") and, if and when issued pursuant to a registered exchange for Initial Securities, the Company's 11-3/8% Senior Subordinated Notes due 2003. ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "Additional Assets" means (i) any tangible property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "Adjusted Operating Income" for any period means (a) the sum of (x) the Operating Income for such period, plus (y) the following to the extent deducted in calculating such Operating Income: (i) Consolidated Non-Cash Charges and (ii) LIFO expense, if any, for such period, minus (b) LIFO income, if any, for such period. Notwithstanding the foregoing, the depreciation and amortization of a Subsidiary of the Company shall be added to Operating Income to compute Adjusted Operating Income only to the extent (and in the same proportion) that the operating income of such Subsidiary was included in calculating Operating Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, 2 statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Section 4.07 and Section 4.06 only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Applicable Premium" means, with respect to a Security at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Security and (ii) the excess of (A) the present value at such time of (1) the redemption price of such Security at September 15, 2000 (such redemption price set forth in Section 3.07) plus (2) all required interest payments (excluding accrued but unpaid interest) due on such Security through September 15, 2000, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (B) the principal amount of such Security. "Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) in one transaction or in a series of related transactions which shall be viewed as one transaction other than (i) a disposition (other than a Financing Disposition in connection with a Receivables Financing) by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in the ordinary course of business, (iii) dispositions (other than a Financing Disposition in connection with a Receivables Financing) with a fair market 3 value of less than $500,000 in the aggregate in any fiscal year, (iv) a Financing Disposition in connection with a Receivables Financing provided that immediately after such Financing Disposition the Indebtedness (other than Indebtedness in respect of letters of credit) outstanding pursuant to Section 4.03(b)(i) is equal to or less than the Maximum Amount, (v) for purposes of Section 4.06 only, a disposition subject to Section 4.04 and (vi) the disposition of all or substantially all the assets of the Company permitted by the Section 5.01. "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement, as amended or modified from time to time, and any Refinancing Indebtedness Incurred in respect thereof, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. 4 "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Change of Control" means the occurrence of any of the following events: (i) prior to the first public offering of Voting Stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities or otherwise (for purposes of this clause (i), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a corporation (the "specified corporation") held by any other corporation (the "parent corporation") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent corporation); (ii) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, which right is subject to no conditions other than passage of time and conditions substantially within the control of the parties to such acquisition)), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company and (B) the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the 5 Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (ii), such other person shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if such other person "beneficially owns" (as defined in this clause (ii)), directly or indirectly, a majority of the voting power of the Voting Stock of such parent corporation; (iii) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (in each case, other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, 6 means the successor and, for purposes of any provision contained herein and required by the TIA, such other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of Adjusted Operating Income for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination and as to which financial statements have been made publicly available (but in no event ending more than 135 days prior to such date of determination) to (ii) Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that in the case of Indebtedness to finance seasonal fluctuations in working capital needs Incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four quarter period), (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the Adjusted Operating Income for such period shall be reduced by an amount equal to the Adjusted Operating Income (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period or increased by an amount equal to the Adjusted Operating Income (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing 7 Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or an Investment in or acquisition of any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition or Investment occurring in connection with a transaction causing a calculation to be made under the Indenture, which constitutes all or substantially all of an operating unit of a business, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to the transaction (including the Incurrence of any Indebtedness and repayment of then existing debt) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, Adjusted Operating Income and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of Operating Income relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total consolidated interest expense of the Company and its Restricted Subsidiaries, plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense, (i) interest expense attributable to capital leases, 8 (ii) amortization of debt discount, (iii) capitalized interest, (iv) noncash interest expense, (v) commissions, discounts and other fees and charges with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries and Disqualified Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) the interest portion of any deferred payment obligation, (ix) interest actually paid on any Indebtedness of any other Person, (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust and (ix) the earned discount or yield with respect to the sale of Receivables (without duplication of amounts included in Operating Income) but in no event shall Consolidated Interest Expense include the amortization of fees incurred on or prior to the Issue Date in respect of the Credit Agreement or the issuance of the Securities or bank agency fees under the Credit Agreement. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income, (ii) any net income (loss) of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition, 9 (iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (iv) any gain or loss realized upon the sale or other disposition of any asset of the Company or its consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (v) any extraordinary gain or loss, and (vi) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04(a)(3)(D). "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and the Restricted Subsidiaries, determined on a Consolidated basis, as of the end of the most recent fiscal quarter of the Company ending prior to the taking of any action for the purpose of which the determination is being made and as to which financial results have been made publicly available (but in no event ending more than 135 days prior to such 10 date of determination), as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such person and its Consolidated Subsidiaries for such period, on a consolidated basis, as determined in accordance with GAAP (excluding any such other non-cash charge to the extent it requires an accrual or reserve for cash charges for any future period). "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; PROVIDED, HOWEVER, that "Consolidation" shall not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary shall be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group or at any other time at such other address as the Trustee may designate from time to time by notice to the Company and the Holders. "Credit Agreement" means the Credit Agreement dated as of August 7, 1996, among Core-Mark International, Inc., the several lenders from time to time parties thereto and The Chase Manhattan Bank, as Administrative Agent, as in effect on the Issue Date. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. 11 "Definitive Securities" means Securities that are in the form of Exhibit A or Exhibit B attached hereto that do not include the information called for by footnote 1 thereof. "Depository" means, with respect to the Securities issuable or issued in whole or in part in global form, the person specified in Section 2.03 as the Depository with respect to the Securities, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depository" shall mean or include such successor. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof, are committed to lend at least $10 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to 180 days after the Stated Maturity of the Securities; PROVIDED, HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require the Company to purchase or redeem such Capital Stock upon the occurrence of a change of control occurring prior to the Stated Maturity of the Securities shall not constitute Disqualified Stock if the change of control provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions of Section 4.08 are to the holders of the Securities and such Capital Stock specifically provides that the Company shall not purchase or redeem any such Capital Stock pursuant to such provisions prior to the Company's purchase of the Securities as are required to be purchased pursuant to Section 4.08. 12 "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of September 27, 1996, by and between the Initial Purchasers and the Company, as such agreement may be amended, modified, or supplemented from time to time in accordance with the terms thereof. "Exchange Offer Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Exchange Securities" means the 11-3/8% Senior Subordinated Notes due 2003 to be issued pursuant to this Indenture in connection with the offer to exchange Securities for the Initial Securities that may be made by the Company pursuant to the Exchange and Registration Rights Agreement. "Financing Disposition" means any sale of Receivables, or interests therein, by the Company or any Subsidiary to the Receivables Subsidiary, or by the Receivables Subsidiary. "Foreign Subsidiary" means any Restricted Subsidiary of the Company which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP. "Global Security" means a Security that is in the form of Exhibit A or Exhibit B hereto that includes the information called for by footnote 1 thereof. 13 "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantor Subsidiary" means any Person that has issued a Note Guarantee. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such person at the time it becomes a Subsidiary. "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (i) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (ii) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; 14 (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto) (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i), (ii) and (v)) entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such person of a demand for reimbursement following payment on the letter of credit); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (v) all Capitalized Lease Obligations of such Person; (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, Hedging Obligations of such Person. Notwithstanding the foregoing, Indebtedness shall not include any liability for Federal, state, local or other taxes owed or owing by the Company to any governmental entity. 15 The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Initial Securities" means the 11-3/8% Senior Subordinated Notes due 2003, issued under this Indenture on or about the date hereof. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the Person making such loan or advance) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the 16 time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means Gary L. Walsh, Robert A. Allen, Leo F. Korman, Leo Granucci, J. Michael Walsh and Basil P. Prokop. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment pursuant to, or monetization (but not for less than fair market value) of, a note or installment receivable or otherwise (other than amounts constituting interest thereon), but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other noncash form) therefrom, in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required or estimated in good faith to be required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms or the terms of any related instrument or agreement, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition (including without limitation amounts reserved for the cost of any indemnification payments (fixed or contingent) 17 attributable to the seller's indemnities to the purchaser in respect of such Asset Disposition). "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Guarantee" means any guarantee that may from time to time be executed and delivered by a Subsidiary of the Company pursuant to which such Subsidiary shall Guarantee payment of the Securities. Each Note Guarantee shall be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by that Subsidiary without rendering the Note Guarantee, as it relates to such Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each such Note Guarantee shall be in the form of Exhibit D hereto. "Officer" means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, the President, any Vice President, the Controller, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Operating Income" means, with respect to the Company and its Restricted Subsidiaries for any period, operating income determined in accordance with GAAP and Rule 5-03 under Regulation S-X promulgated by the SEC (as interpreted in good faith by the Company and its independent public accountants and in a manner consistent with the Company's historical audited financial statements as of the Issue Date); PROVIDED, HOWEVER, that there shall not be included in Operating Income: (i) any operating income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (ii) below, the Company's proportionate share of the operating income of any such Restricted Subsidiary for such period shall be included in such Operating Income up to the amount that is proportionate to the net income 18 that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary in cash as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's proportionate share of an operating loss of any such Restricted Subsidiary for such period shall be included in determining such Operating Income, (ii) any gain or loss realized upon the sale or other disposition of any asset of the Company or its consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, and (iii) the cumulative effect of a change in accounting principles. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means (i) each of the Management Investors, (ii) Jupiter Partners L.P. and (iii) (a) any spouse or lineal descendant (including by adoption) of any Person described in clause (i) or any spouse of any such lineal descendant; (b) in the event of the incompetence or death of any Person described in clause (i) or in subclause (a) of this clause (iii), such Person's estate, executor, administrator or other legal representative; (c) any trust 100% in interest of the beneficiaries of which consists of Persons described in clause (i) or in subclause (a) of this clause (iii); or (d) any limited liability company, corporation or partnership 100% of the members, stockholders or partners of which are Persons described in clause (i) or in subclause (a) of this clause (iii); PROVIDED, HOWEVER, that no Person described in this clause (iii) shall be a Permitted Holder if such Person is the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) directly or indirectly of more than 10% of the voting power of the Voting Stock of the applicable company. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which shall, upon the making of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as 19 a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (vii) loans to employees for the payment of the exercise price of options to purchase Capital Stock of the Company or loans to satisfy federal or state income tax withholding requirements relating to the issuance of Capital Stock of the Company pursuant to the Company's employee stock plans, in an aggregate amount with respect to all loans described in this clause (vii) not to exceed $500,000 outstanding at any one time; (viii) stock, obligations or securities received in settlement of debts (including payment obligations of customers) created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) a Person to the extent such Investment represents the non-cash consideration otherwise permitted to be received by the Company or its Restricted Subsidiaries in connection with an Asset Disposition; (x) prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of the Company and its Restricted Subsidiaries; (xi) payments to customers in consideration for such customers' agreements with the Company to purchase goods and inventory made in the ordinary course of business consistent with past practices of the Company and its Restricted Subsidiaries and (xii) performance bonds or similar Investments in connection with pledges, deposits or payments made or given in the ordinary course of business in connection with or to secure statutory, regulatory or similar obligations, including obligations under health, safety or environmental obligations. "Person" means any individual, corporation, partnership, limited liability company, joint venture, 20 association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Receivable" means a right to receive payment arising from a sale or lease of goods or services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit, as determined in accordance with GAAP. "Receivables Financing" means any financing by the Receivables Subsidiary secured substantially by Receivables of the Company and its Subsidiaries that have been transferred to the Receivables Subsidiary in a Financing Disposition, provided that (i) all sales of Receivables to or by the Receivables Subsidiary are made at fair market value (as determined in good faith by the Board of Directors), (ii) the interest rate applicable to such Receivables Financing shall be a market interest rate (as determined in good faith by the Board of Directors) as of the time such financing is entered into and (iii) such financing is non-recourse to the Company and its 21 Subsidiaries (other than the Receivables Subsidiary) except to a limited extent customary for such financings. "Receivables Subsidiary" means a bankruptcy-remote, special purpose Wholly Owned Subsidiary formed for the purposes of a Receivables Financing that (a) is engaged solely in the business of acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code) and other accounts and receivables (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), all proceeds thereof and all rights (contractual and other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and (b) is designated as a "Receivables Subsidiary" by the Board of Directors. "Redemption Date" means the date on which the Securities are optionally redeemed pursuant to Section 3.07. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness existing on the date of the Indenture or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in the Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced and (iii) the Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. 22 "Registered Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Related Business" means the business conducted by the Company and the Restricted Subsidiaries on the Issue Date and any business related, ancillary or complementary thereto. "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Securities Legend" means the legend set forth in Section 2.06 hereof. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or such Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Securities" means, collectively, the Initial Securities and, when and if issued as provided in the Exchange and Registration Rights Agreement, the Exchange Securities. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Security (as appointed by the Depository), or any successor entity thereto and shall initially be the Trustee. "Senior Indebtedness" means all principal of, premium (if any), accrued interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company 23 whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and other amounts owing with respect to all Indebtedness of the Company, including all Bank Indebtedness, whether outstanding on the Issue Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Securities; PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes owed or owing by the Company, (3) any Trade Payables, (4) any Indebtedness or obligation of the Company which is subordinate or junior in any respect to any other Indebtedness or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock, or (6) any Indebtedness Incurred in violation of the Indenture. "Senior Subordinated Indebtedness" means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank PARI PASSU with the Securities and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Shelf Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or 24 thereafter Incurred) which is subordinate or junior in right of payment to the Securities pursuant to a written agreement. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person. "Temporary Cash Investments" means any of the following: (i) any investment in securities maturing within one year from the date of acquisition thereof issued or Guaranteed or insured by the United States of America or any agency thereof, (ii) investments in certificates of deposit and eurodollar time deposits maturing within one year of the date of acquisition thereof issued by any commercial bank having capital surplus in excess of $500,000,000, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper issued by a corporation organized and in existence under the laws of the United States of America with a rating at the time as of which any investment therein is made of "P-2" (or higher) according to Moody's Investors Service, Inc. or "A-2" (or higher) according to Standard and Poor's Corporation, (v) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof or by any foreign government and rated at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc., (vi) investments in securities maturing within one year from the date of acquisition thereof backed by standby letters of credit issued by a bank meeting the qualifications described in clause (ii) above, (vii) shares of money market mutual or similar funds which invest primarily in assets satisfying the requirements of clauses (i) through (vi) above, (vii) investments in any term deposit receipts of the Bank of Montreal maturing within 90 days from the date of acquisition thereof, (ix) investments in cash owned by the Company or any of its Subsidiaries and denominated in Canadian dollars, 25 (x) investments in readily marketable direct obligations of the Government of Canada or any province thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of Canada maturing within 90 days from the date of acquisition thereof, (xi) investments in insured certificates of deposit, deposit notes or term deposit receipts, maturing within 90 days from the date of acquisition thereof, of any commercial bank listed on Schedule 1 of the Bank Act (Canada), and (xii) investments in commercial paper maturing within 90 days from the date of acquisition thereof in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of Canada or any province thereof and rated at least A-1 or better (or the then equivalent grade) by Canada Bond Rating Service or R-2 (middle) or better (or the then equivalent grade) by Dominion Bond Rating Service. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture. "Total Receivables" means all receivables of a Person as determined in accordance with GAAP, other than Receivables that are the subject of a Receivables Financing. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Transfer Restricted Securities" means Securities that bear or are required to bear the legend set forth in Section 2.06 hereof. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to September 15, 2000; PROVIDED, HOWEVER, that if the period from the Redemption Date to September 15, 2000, is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be 26 obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury Securities for which such yields are given, except that if the period from the Redemption Date to September 15, 2000 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means when used with respect to the Trustee, any officer within the Corporate Trust Office of the Trustee including any vice president, assistant vice president, assistant secretary, treasurer, assistant treasurer, managing director or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04 The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to 27 the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 28 SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section ---- ---------- "Affiliate Transaction" . . . . . . . . . . . . . . . . 4.07 "Agent Members" . . . . . . . . . . . . . . . . . . . . 2.01(b) "Bankruptcy Law". . . . . . . . . . . . . . . . . . . . 6.01 "Blockage Notice" . . . . . . . . . . . . . . . . . . . 10.03 "covenant defeasance option". . . . . . . . . . . . . . 8.01(b) "Custodian" . . . . . . . . . . . . . . . . . . . . . . 6.01 "Event of Default". . . . . . . . . . . . . . . . . . . 6.01 "Initial Purchasers". . . . . . . . . . . . . . . . . . 2.01(a) "legal defeasance option" . . . . . . . . . . . . . . . 8.01(b) "Legal Holiday" . . . . . . . . . . . . . . . . . . . . 11.08 "Maximum Amount". . . . . . . . . . . . . . . . . . . . 4.03(b) "Non-Global Purchaser". . . . . . . . . . . . . . . . . 2.01(c) "Offer" . . . . . . . . . . . . . . . . . . . . . . . . 4.06 "Offer Amount". . . . . . . . . . . . . . . . . . . . . 4.06 "Offer Period". . . . . . . . . . . . . . . . . . . . . 4.06 "pay the Securities". . . . . . . . . . . . . . . . . . 10.03 "Paying Agent". . . . . . . . . . . . . . . . . . . . . 2.03 "Payment Blockage Period" . . . . . . . . . . . . . . . 10.03 "Purchase Agreement". . . . . . . . . . . . . . . . . . 2.01(a) "Purchase Date" . . . . . . . . . . . . . . . . . . . . 4.06 "QIBs". . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a) "Registrar" . . . . . . . . . . . . . . . . . . . . . . 2.03 "Restricted Certificated Securities . . . . . . . . . . 2.01(c) "Restricted Global Security". . . . . . . . . . . . . . 2.01(a) "Restricted Payment". . . . . . . . . . . . . . . . . . 4.04 "Rule 144A" . . . . . . . . . . . . . . . . . . . . . . 2.01(a) "Successor Company" . . . . . . . . . . . . . . . . . . 5.01 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. 29 "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP and accretion of principal on such security shall be deemed to be the Incurrence of Indebtedness; and (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. 30 ARTICLE 2 THE SECURITIES SECTION 2.01. FORM AND DATING. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. Any Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B, which is incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibits A and B are part of the terms of this Indenture. (a) GLOBAL SECURITIES. The Initial Securities are being offered and sold by the Company pursuant to a Purchase Agreement (the "Purchase Agreement"), dated September 24, 1996, between the Company and Chase Securities Inc. and Donaldson Lufkin & Jenrette Securities Corporation (the "Initial Purchasers"). Initial Securities offered and sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") in accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued initially in the form of a single, permanent Global Security in definitive, fully registered form without interest coupons with the Restricted Securities Legend and the legend set forth in footnote 1 to Exhibit A hereto (the "Restricted Global Security"), which shall be deposited on behalf of the Initial Purchasers of the Initial Securities represented thereby with the Trustee, as Securities Custodian for the Depository, and registered in the name of the Depository or a registered nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Restricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Securities Custodian, and the Depository or its nominee as hereinafter provided. 31 (b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to Global Securities deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(b), authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depository for such Global Security or Global Securities or the registered nominee of such Depository and (ii) shall be held by the Trustee as Securities Custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) CERTIFICATED SECURITIES. Except as otherwise provided herein, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Securities who are not QIBs (referred to herein as the "Non-Global Purchasers") shall receive certificated Initial Securities bearing the Restricted Securities Legend set forth in Exhibit A hereto ("Restricted Certificated Securities"); PROVIDED, HOWEVER, that upon transfer of such Restricted Certificated Securities to a QIB or in accordance with Regulation S under the Securities Act, such Restricted Certificated Securities shall, unless the relevant Global Security has previously been exchanged, be exchanged for an interest in a Global Security pursuant to the provisions of Section 2.06 hereof. Restricted Certificated Securities shall include the Restricted Securities Legend set forth in Exhibit A unless removed in accordance with this Section 2.01(c) or Section 2.06(g) hereof. 32 After a transfer of any Initial Securities during the period of the effectiveness of, and pursuant to, a Shelf Registration Statement with respect to the Initial Securities, all requirements pertaining to legends on such Initial Securities shall cease to apply, the requirements requiring that any such Initial Securities issued to certain Holders be issued in global form shall cease to apply, and certificated Initial Securities without legends shall be made available to the Holders of such Initial Securities. Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form shall cease to apply and certificated Initial Securities with the Restricted Securities Legend set forth in Exhibit A hereto shall be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated form shall be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and deliver (1) Initial Securities for original issue in an aggregate principal amount of $75,000,000, and (2) Exchange Securities for issue only in a Registered Exchange Offer, pursuant to the Exchange and Registration Rights Agreement for Initial Securities for a like principal amount of Initial Securities exchanged pursuant thereto, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary 33 of the Company. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $75,000,000 except as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and in such capacity shall be entitled to (i) all of the rights, duties, immunities and protections of the Trustee hereunder and (ii) compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee at its Corporate Trust Office as Registrar and Paying Agent in connection with the Securities. 34 The Company initially appoints The Depository Trust Company to act as Depository with respect to the Global Securities. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to 2:00 p.m. New York time on each due date of the principal on any Security and at least one Business Day prior to each due date of the interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When Definitive Securities are presented to the Registrar or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, 35 the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) in the case of Transfer Restricted Securities that are Definitive Securities, are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Transfer Restricted Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form set forth on the reverse of the Security); or (B) if such Transfer Restricted Securities are being transferred to the Company or to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (C) if such Transfer Restricted Securities are being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 or Regulation S under the Securities Act; or (x) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $250,000 for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act; or (y) in reliance on another exemption from 36 the registration requirements of the Securities Act: (i) a certification to that effect (in substantially the form set forth on the reverse of the Security), (ii) if the Company or Registrar so requests, an Opinion of Counsel reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act and (iii) in the case of clause (x), a signed letter substantially in the form of Exhibit C hereto. (b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) if such Definitive Security is a Transfer Restricted Security, certification, substantially in the form set forth on the reverse of the Security, that such Definitive Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act; and (ii) whether or not such Definitive Security is a Transfer Restricted Security, written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased accordingly. If no Global Securities are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount. 37 The Trustee or Registrar has no duties to obtain certificates or other documentation with respect to the transfer or exchange between or among any depositary participants, members or beneficial owners in any global security and shall have no liability or responsibility with respect to the legality thereof. (c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. (d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A DEFINITIVE SECURITY. (i) Any person having a beneficial interest in a Global Security that is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A),(B) or (C) below may upon request, and if accompanied by the information specified below, exchange such beneficial interest for a Definitive Security of the same aggregate principal amount. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest in a Transfer Restricted Security only, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the owner of a beneficial interest in a Global Security, a certification from such Person to that effect (in substantially the form set forth on the reverse of the Security); or (B) if such beneficial interest is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities 38 Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (C) if such beneficial interest is being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 or Regulation S under the Securities Act; or (x) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $250,000 for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities; or (y) in reliance on another exemption from the registration requirements of the Securities Act: (i) a certification to that effect from the transferee or transferor (in substantially the form set forth on the reverse of the Security), (ii) if the Company or Registrar so requests, an Opinion of Counsel from the transferee or transferor reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act, and (iii) in the case of clause (x), a signed letter substantially in the form of Exhibit C hereto, then the Trustee or the Securities Custodian, at the direction of the Trustee, shall cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of the Global Security to be reduced on its books and records and, following such reduction, the Company shall execute and the Trustee shall authenticate and deliver to the transferee a Definitive Security. (ii) Definitive Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 2.06(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Securities to the persons in whose names such Securities are so 39 registered in accordance with the written instructions of the Depository. (e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. Notwithstanding any other provisions of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.06), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF DEPOSITORY. If at any time: (i) the Depository for the Securities notifies the Company that the Depository is unwilling or unable to continue as Depository for the Global Securities and a successor Depository for the Global Securities is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Securities under this Indenture, then the Company shall execute, and the Trustee, upon receipt of an Officers' Certificate requesting the authentication and delivery of Definitive Securities to the Persons designated by the Company, shall authenticate and deliver Definitive Securities in exchange for such Global Securities. (g) LEGEND. (i) Except as permitted by the following paragraph (ii), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR 40 OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." 41 (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) any such Transfer Restricted Security represented by a Global Security shall not be subject to the provisions set forth in clause (i) of this Section 2.06(g) (such sales or transfers being subject only to the provisions of Section 2.06(c) hereof); PROVIDED, HOWEVER, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Security for a Definitive Security that does not bear a legend, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form set forth on the reverse of the Security). (h) CANCELATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF SECURITIES. 42 (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's written request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith. (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any Definitive Security selected for redemption in whole or in part pursuant to Article 3, except the unredeemed portion of any Definitive Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (j) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any 43 notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security in global form shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may conclusively rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including without limitation any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i) satisfies the Company or the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (ii) so requests the Company or the Trustee prior to the Security being acquired by a bona fide purchaser and (iii) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may 44 charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. TEMPORARY SECURITIES. Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. CANCELATION. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment 45 or cancelation and deliver a certificate of such destruction to the Company, unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture. SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE 3 REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to Section 3.07, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption shall occur. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents in writing to a 46 shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption shall comply with the conditions herein. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; 47 (5) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Securities pursuant to which the Securities called for redemption are being redeemed; (8) the CUSIP number, if any, printed on the Securities being redeemed; and (9) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest, if any, to the redemption date; PROVIDED that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Securityholder of the redeemed Securities registered on the relevant record date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to 2:00 p.m. New York time on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be 48 redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancelation. SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to September 15, 2000. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on or after September 15 of the years set forth below: Redemption Period Price ------ ---------- 2000 105.688% 2001 102.844% 2002 and thereafter 100.000% (b) Notwithstanding the foregoing, at any time prior to September 15, 1999, the Company may redeem in the aggregate up to 30% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 111.375% plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); PROVIDED, HOWEVER, that at least 70% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. (c) At any time on or prior to September 15, 2000, the Securities may be redeemed as a whole at the option of the Company within 90 days after a Change of Control, at a redemption price equal to the sum of (i) 100% 49 of the principal amount thereof plus (ii) the Applicable Premium plus (iii) accrued but unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC REPORTS. Notwithstanding that the Company may not be or remain required to be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC, if permitted by the SEC, and provide the Trustee and Securityholders and prospective Securityholders (upon request) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Section 13 or 15(d) of the Exchange Act. In addition, following a Public Equity Offering, the Company shall furnish to the Trustee and the Securityholders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its public shareholders generally. The Company also shall comply with the other provisions of TIA Section 314(a). SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness; PROVIDED, HOWEVER, that the Company (but not any Restricted 50 Subsidiary) may Incur Indebtedness if on the date of such Incurrence the Consolidated Coverage Ratio would be greater than 2:1, if such Indebtedness is Incurred on or prior to September 30, 1999, and 2.5:1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness of the Company and its Restricted Subsidiaries outstanding from time to time pursuant to the Credit Agreement or otherwise in an amount not to exceed (A) the sum (the "Maximum Amount") of (x) 85% of the net book value of the consolidated Total Receivables of the Company and its Restricted Subsidiaries (other than the Receivables Subsidiary) and (y) 80% of the net book value of the consolidated inventory of the Company and its Restricted Subsidiaries (other than the Receivables Subsidiary), determined in accordance with GAAP, and (B) $20 million but only in respect of letters of credit; (ii) Indebtedness of the Receivables Subsidiary Incurred pursuant to Receivables Financings; (iii) Indebtedness of the Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness represented by the Securities (and the Note Guarantees), any Indebtedness (other than the Indebtedness described in clauses (i) and (iii) above) outstanding on the Issue Date and any Refinancing Indebtedness Incurred in respect of any Indebtedness described in clause (i), this clause (iv) or paragraph (a); (v) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on 51 which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary or was otherwise acquired by the Company); PROVIDED, HOWEVER, that at the time such Restricted Subsidiary is acquired by the Company, the Company would have been able to Incur $1.00 of additional Indebtedness pursuant to paragraph (a) after giving effect to the Incurrence of such Indebtedness pursuant to this clause (v) and (B) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (v); (vi) Indebtedness (A) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company and its Restricted Subsidiaries in the ordinary course of their business and which do not secure other Indebtedness, and (B) under Currency Agreements and Interest Rate Agreements; PROVIDED, HOWEVER, that, in the case of Currency Agreements and Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; or (vii) Indebtedness of the Company (but not of a Restricted Subsidiary) in an aggregate principal amount on the date of Incurrence which, when added to all other Indebtedness Incurred pursuant to this clause (vii) and then outstanding, shall not exceed $10 million. (c) Notwithstanding any other provision of this Section 4.03, the Company may not Incur any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. The Company may not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless 52 such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company may not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (d) For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this Section 4.03, (i) Indebtedness permitted by this Section need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this provision permitting such Indebtedness and (ii) in the event that Indebtedness or any portion thereof meets the criteria of more than one of the types of Indebtedness described in this section, the Company, in its sole discretion, shall classify such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses. SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to its other shareholders on a pro rata basis in accordance with their respective ownership of the class of Capital Stock affected), (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, 53 distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from October 1, 1996, to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment and as to which financial results have been made publicly available (but in no event ending more than 135 days prior to the date of such Restricted Payment) (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) and the amount received in cash as voluntary contributions to the capital of the Company, subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Restricted Subsidiaries); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock 54 (other than Disqualified Stock) of the Company (less the amount of any cash or other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and (D) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments. (b) The provisions of the foregoing paragraph (a) shall not prohibit: (i) any purchase or redemption of Capital Stock of the Company or Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Restricted Subsidiaries); PROVIDED, HOWEVER, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from clause (3)(B) of paragraph (a) above; (ii) any purchase or redemption of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 4.03; PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (iii) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; PROVIDED, HOWEVER, that such 55 purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (iv) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this Section; PROVIDED, HOWEVER, that such dividend shall be included in the calculation of the amount of Restricted Payments; or (v) the repurchase of shares of common stock of the Company from, or the payment of the stock appreciation on any options to purchase common stock of the Company held by, any officer or employee of the Company or any of its Subsidiaries pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; PROVIDED, HOWEVER, that the aggregate amount of such repurchases shall not exceed $2.5 million in any calendar year and $7.5 million in the aggregate from the Issue Date; PROVIDED FURTHER, HOWEVER, that such repurchases shall be included in the calculation of the amount of Restricted Payments. SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to applicable law or an agreement in effect at or entered into on the Issue Date including those arising under the Credit Agreement; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, 56 in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section or this clause (3) or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section or this clause (3); PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any such refinancing agreement or amendment are no less favorable to the Securityholders than encumbrances and restrictions contained in such agreements; (4) in the case of clause (iii), any encumbrance or restriction (A) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, (B) contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restrictions restrict the transfer of the property subject to such security agreements or mortgages, (C) arising in connection with any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or asset not otherwise prohibited by this Indenture, or (D) arising or agreed to in the ordinary course of business, PROVIDED that such encumbrance or restriction does not, individually or in the aggregate together with other similar encumbrances and restrictions, impair the value of the property or assets of the Company or any Restricted Subsidiary in any material manner; (5) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and (6) any encumbrance or restriction with respect to the Receivables Subsidiary pursuant to an agreement relating to Indebtedness of the Receivables Subsidiary 57 which is permitted under Section 4.03 or pursuant to an agreement relating to a Financing Disposition to or by the Receivables Subsidiary in connection with a Receivables Financing. SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors (including as to the value of all noncash consideration), of the shares and assets subject to such Asset Disposition; (ii) at least 80% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that in respect of an Asset Disposition, more than 20% of the consideration may consist of consideration other than cash or cash equivalents if (A) the portion of such consideration that does not consist of cash or cash equivalents consists of assets of a type ordinarily used in the operation of the Company's distribution business (including Capital Stock of a Person that becomes a Restricted Subsidiary and that holds such assets) to be used by the Company or a Restricted Subsidiary in the conduct of the Company's business, (B) the terms of such Asset Disposition have been approved by a majority of the members of the Board of Directors having no personal stake in such transaction, and (C) if the value of the assets being disposed of by the Company or such Restricted Subsidiary in such transaction (as determined in good faith by such members of the Board of Directors) is at least $15 million, the Board of Directors has received a written opinion of a nationally recognized investment banking firm to the effect that such Asset Disposition is fair, from a financial point of view, to the Company and the Company has delivered a copy of such opinion to the Trustee; and 58 (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the Company elects (or is required by the terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness or such Indebtedness (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 360 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) SECOND, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 360 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) THIRD, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined below) to purchase Securities pursuant to and subject to the conditions set forth in section (b) of this Section, and (D) FOURTH, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to fund (to the extent consistent with any other applicable provision of this Indenture) any corporate purpose; PROVIDED, HOWEVER, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this Section, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this Section except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this Section exceed $500,000. For the purposes of Section 4.06(a)(ii), the following are deemed to be cash: (x) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release 59 of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of Securities pursuant to Section (a)(iii)(C), the Company shall be required to purchase Securities tendered pursuant to an offer by the Company for the Securities (the "Offer") at a purchase price of 100% of their principal amount plus accrued interest to the date of purchase in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 4.06(c). If the aggregate purchase price of Securities tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities, the Company shall apply the remaining Net Available Cash in accordance with Section 4.06(a)(iii)(D). The Company shall not be required to make an Offer for Securities pursuant to this Section if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $5 million (which lesser amount shall be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c)(1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes shall enable such Holders to make an informed decision (which at a minimum shall include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current 60 Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee) shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered by the Holder for purchase and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities 61 surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. (e) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Financing Disposition in connection with a Receivables Financing unless the Board of Directors shall have determined in good faith, which determination shall be conclusive and evidenced by a resolution of the Board of Directors, that such Financing Disposition is made at fair market value. SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that, in the 62 event such Affiliate Transaction involves an aggregate amount in excess of $1 million, are not in writing and have not been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction. In addition, if such Affiliate Transaction involves an amount in excess of $5 million (other than fees to investment banking firms constituting customary underwriting discounts for offerings of securities or customary advisory fees for merger and acquisition and recapitalization transactions) a fairness opinion must be provided by a nationally recognized appraisal or investment banking firm. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, or other employee benefit arrangements with any officer, director or employee of the Company entered into in the ordinary course of business consistent with past practices of the Company, (iii) loans or advances to employees in the ordinary course of business consistent with past practices of the Company, (iv) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries or (v) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. SECTION 4.08. CHANGE OF CONTROL. (a) Upon a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on a record date to receive interest due on the relevant interest payment date), in accordance with the terms contemplated in Section 4.08(b); PROVIDED, HOWEVER, that notwithstanding the occurrence of a Change in Control, the Company shall not be obligated to purchase the Securities pursuant to this Section 4.08 in the event that it has exercised its right to redeem all the Securities under Section 3.07 hereof. (b) Within 30 days following any Change of Control (except as provided in the proviso to the first 63 sentence of Section 4.08(a)), the Company shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on a record date to receive interest due on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered to the Trustee for cancelation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable 64 securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.09. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided hereunder. SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.11. LIMITATION ON LIENS. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist any Lien (other than Liens on Receivables that are the subject of a Receivables Financing) on any of its property or assets (including Capital Stock), whether owned on the Issue Date or thereafter acquired, securing any Indebtedness other than Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities) such obligation for so long as such obligation is so secured. SECTION 4.12 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not sell any shares of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock except: (i) subject to Section 4.14, to the Company or a Wholly Owned Subsidiary, 65 (ii) pursuant to arrangements entered into prior to the time a Person becomes a Restricted Subsidiary (other than arrangements entered into in contemplation of the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary) or (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. The proceeds of any sale of such Capital Stock permitted hereby shall be treated as Net Available Cash from an Asset Disposition and shall be applied in accordance with the terms of Section 4.06. SECTION 4.13. LIMITATION ON LINES OF BUSINESS. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business, other than a Related Business. SECTION 4.14. LIMITATION ON THE DISPOSITION OF ASSETS OF THE COMPANY TO RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any Guarantor Subsidiary to, sell, lease, transfer or make any other disposition of any property or assets (including shares of Capital Stock of a Subsidiary) (each referred to for the purposes of this Section as a "disposition") to a Restricted Subsidiary other than (i) a disposition to a Restricted Subsidiary that at the time of such disposition is or becomes a Guarantor Subsidiary pursuant to a Note Guarantee, (ii) dispositions (other than a Financing Disposition in connection with a Receivables Financing) with a fair market value of less than $2.5 million in the aggregate for all Restricted Subsidiaries in any fiscal year, (iii) a Financing Disposition in connection with a Receivables Financing, (iv) a disposition permitted by Section 4.04 and (v) dispositions of inventory in the ordinary course of business. 66 ARTICLE 5 SUCCESSOR COMPANY SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation partnership, limited liability company or business trust organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); (iv) immediately after giving effect to such transaction, the Successor Company shall have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. 67 Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Securities. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10; (3) the Company fails to comply with Section 5.01; (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13 or 4.14 (other than a failure to purchase Securities), and such failure continues for 30 days after the notice specified in the penultimate paragraph of this Section; (5) the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified in the penultimate paragraph of this Section; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace 68 period after final maturity or the acceleration by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5 million or its foreign currency equivalent at the time; (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $5 million or its foreign currency equivalent at the time is entered against the Company or any Significant Subsidiary and is not discharged, waived or stayed and either (A) an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed or 69 (B) there is a period of 60 days following the entry of such judgment or decree during which such judgment or decree is not discharged, waived or the execution thereof stayed; or (10) (A) any Note Guarantee shall cease to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor Subsidiary or person acting by or on behalf of such Guarantor Subsidiary shall deny or disaffirm its obligations under this Indenture or any Note Guarantee and such Default continues for 10 days or (B) any Guarantor Subsidiary fails to comply with any of its agreements in its Note Guarantee and such failure continues for 60 days after the notice specified in the penultimate paragraph of this Section. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) or (5) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clauses (3), (6), (7) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (8) or (9), its status and what action the Company is taking or proposes to take with respect thereto. 70 SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in principal amount of the Securities by written notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. 71 SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, 72 on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents and take such other actions, including participating as a member, voting or otherwise, of any committee of creditors appointed in the matter, as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, any Subsidiary, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. PRIORITIES. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and 73 FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. 74 (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they substantially conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 75 (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. RIGHTS OF TRUSTEE. Subject to Section 7.01: (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same 76 with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in the Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is actually known to a Trust Officer of the Trustee, the Trustee shall mail to each Securityholder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in payment of principal of, premium (if any) or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA Section 313(a). The Trustee shall also comply with TIA Section 313(b) and TIA Section 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee, Paying Agent and Registrar from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, 77 including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disburse- ments and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee, Paying Agent, Registrar, and each of their officers, directors, agents and employees (each in their respective capacities), for and hold each of them harmless against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by them without negligence or bad faith on their part arising out of or in connection with the acceptance or the administration of this trust and the performance of their duties hereunder. The Trustee, Paying Agent and Registrar shall notify the Company of any claim for which they may seek indemnity promptly upon obtaining actual knowledge thereof; PROVIDED that any failure so to notify the Company shall not relieve the Company of its indemnity obligations hereunder except to the extent the Company shall have been adversely affected thereby. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company shall pay the fees and expenses of such counsel; PROVIDED that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and such parties in connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. When the Trustee incurs expenses or renders services in connection with a Default or an Event of Default such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally. 78 The Company's payment obligations pursuant to this Section shall survive the discharge or termination of this Indenture or the earlier resignation or removal of the Trustee. When the Trustee, Paying Agent or Registrar incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal 79 amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. The retiring Trustee shall not be liable for the acts or omissions of any successor Trustee hereunder. All fees, charges and expenses of the retiring Trustee shall become immediately due and payable upon the appointment of a successor Trustee hereunder. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of 80 TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds or U.S. Government Obligations on which payment of principal and interest when due shall be sufficient to pay at maturity or upon redemption all outstanding Securities, including premium (if any) and interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 5.01(iii) and 5.01(iv) and the operation of Section 6.01(4), 6.01(6), 6.01(7) (with respect to Subsidiaries of the Company only), 6.01(8) (with respect to Subsidiaries of the Company only), 6.01(9) and 6.01(10) ("covenant defeasance option"). The Company may exercise 81 its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Subsidiaries of the Company only), 6.01(8) (with respect to Subsidiaries of the Company only), 6.01(9) and 6.01(10) or because of the failure of the Company to comply with Sections 5.01(iii) and 5.01(iv). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment shall provide cash at such times and in such amounts as shall be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in 82 Section 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders shall not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders shall not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and shall be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. 83 SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. 84 ARTICLE 9 AMENDMENTS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; PROVIDED, HOWEVER, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article 10 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10; (5) to add Guarantees with respect to the Securities or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (8) to make any change that does not adversely affect the rights of any Securityholder; or (9) to provide for the issuance and authorization of the Exchange Securities. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or 85 representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. WITH CONSENT OF HOLDERS. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities. However, without the consent of each Securityholder affected, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Article 10 that adversely affects the rights of any Securityholder under Article 10; (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (8) impair the right of any Securityholder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of 86 any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective once the requisite number of consents are received by the Company or the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders 87 after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and complies with the provisions hereof (including Section 9.03). SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the 88 prior payment in full of all Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness. The Securities shall in all respects rank PARI PASSU with all other Senior Subord- inated Indebtedness of the Company and only Indebtedness of the Company that is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. For purposes of these subordination provisions, the Indebtedness evidenced by the Securities is deemed to include the liquidat- ed damages payable pursuant to the provisions set forth in the Securities and the Exchange and Registration Rights Agreement. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness shall be entitled to receive payment in full of the Senior Indebtedness before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and (2) until the Senior Indebtedness is paid in full, any payment or distribution to which Securityholders would be entitled but for this Article 10 shall be made to holders of Senior Indebtedness as their interests may appear. SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not pay the principal of, premium (if any) or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Senior Indebtedness is not paid when due or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; PROVIDED, HOWEVER, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated 89 Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) by repayment in full of such Designated Senior Indebtedness or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Blockage Notice within such period; PROVIDED FURTHER, HOWEVER, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representative) of the acceleration. If any Designated Senior Indebtedness is outstanding, the Company may not pay the Securities until five Business Days after such holders or the Representative of the Designated 90 Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if this Article 10 otherwise permits payment at that time. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear. SECTION 10.06. SUBROGATION. After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 10 to holders of Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on Senior Indebtedness. SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders. SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of 91 facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness (or a Representative of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or Representative thereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities 92 shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to conclusively rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. 93 SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 10.17. TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in this Article shall apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE 11 MISCELLANEOUS SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. 94 SECTION 11.02. NOTICES. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Core-Mark International, Inc. 395 Oyster Point Boulevard Suite 415 San Francisco, CA 94080 Attention of: Chief Financial Officer if to the Trustee: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street, 4th Floor New York, New York 10006 Attention of: Corporate Market Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). 95 SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of such counsel, all such conditions precedent have been complied with. In furnishing such opinion, such counsel shall be permitted to rely on the Officers' Certificate required by clause (1) of this Section 11.04, on certificates of government agencies or authorities and on any other certificate, instrument or opinion delivered pursuant to the terms of this Indenture. SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. 96 SECTION 11.06. WHEN SECURITIES DISREGARDED. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. GOVERNING LAW. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 97 SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 98 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. CORE-MARK INTERNATIONAL, INC., by /s/ Leo F. Korman --------------------------- Name: Leo F. Korman Title: Senior Vice President and Chief Financial Officer BANKERS TRUST COMPANY, as Trustee, by /s/ Kevin Weeks ---------------------------- Name: Kevin Weeks Title: Assistant Treasurer 99 STATE OF CALIFORNIA ) ) SS COUNTY OF SAN MATEO ) On September 25, 1996, before me personally came Leo Korman, to me known, who, being by me duly sworn, did depose and say that he is the of Core-Mark International, Inc., a Delaware corporation and that he signed his name thereto on behalf of such corporation. /s/ James G. Douglas --------------------------- Notary Public in and for the State of California Name: James G. Douglas My commission expires: December 3rd, 1999 --------------------------- 100 STATE OF NEW YORK ) ) SS COUNTY OF NEW YORK ) On September 26, 1996, before me personally came Kevin Weeks, to me known, who, being by me duly sworn, did depose and say that she is the Assistant Treasurer of Bankers Trust Company, a New York banking corporation and that she signed her name thereto on behalf of such corporation. /s/ Margaret Bereza --------------------------- Notary Public in and for the State of New York Name: Maraget Bereza My commission expires: 2/22/98 --------------------------- EXHIBIT A [FORM OF FACE OF INITIAL SECURITY] [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR 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.] 1/ -- THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE 1/To be included only if note is in global form. -- 2 SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND Shall BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. CORE-MARK INTERNATIONAL, INC. 11-3/8% SENIOR SUBORDINATED NOTE DUE 2003 No. CUSIP No. $ CORE-MARK INTERNATIONAL, INC., a Delaware corporation, promises to pay to , or registered assigns, the principal sum of $75,000,000 on September 15, 2003. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. 3 Additional provisions of this Security are set forth on the other side of this Security. Dated: , 1996 CORE-MARK INTERNATIONAL, INC. by _______________________ Name: Title: _______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION BANKERS TRUST COMPANY as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by _____________________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11-3/8% Senior Subordinated Note due 2003 1. INTEREST Core-Mark International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall use its best efforts to have the Exchange Offer Registration Statement and, if applicable, a Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. If (i) the applicable Registration Statement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Issue Date, (iii) the Registered Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company shall pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages shall cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. 5 For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Security until (i) the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company shall pay interest and liquidated damages, if any, semiannually on March 15 and September 15 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 27, 1996. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. METHOD OF PAYMENT The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) shall be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 6 3. PAYING AGENT AND REGISTRAR Initially, BANKERS TRUST COMPANY, a New York banking corporation ("Trustee"), shall act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. INDENTURE The Company issued the Securities under an Indenture dated as of September 27, 1996 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $75,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; the disposition of assets of the Company to Restricted Subsidiaries; and consolidations, mergers and transfers of all or substantially all of the 7 Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. 5. OPTIONAL REDEMPTION Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to September 15, 2000. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning on or after September 15 of the years set forth below: Period Redemption Period Price - ------ ---------- 2000......................................... 105.688% 2001......................................... 102.844% 2002 and thereafter.......................... 100.000% Notwithstanding the foregoing, at any time prior to September 15, 1999, the Company may redeem in the aggregate up to 30% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 111.375% plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); PROVIDED, HOWEVER, that at least 70% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time on or prior to September 15, 2000, the Securities may also be redeemed as a whole at the option of the Company within 90 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the principal amount thereof plus (ii) the Applicable Premium plus (iii) accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record 8 on the relevant record date to receive interest due on the relevant interest payment date). 6. NOTICE OF REDEMPTION Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. PUT PROVISIONS Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities shall have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. SUBORDINATION The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give such provisions effect and appoints the Trustee as attorney-in-fact for such purpose. 9 9. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. PERSONS DEEMED OWNERS The registered Holder of this Security may be treated as the owner of it for all purposes. 11. UNCLAIMED MONEY If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. DISCHARGE AND DEFEASANCE Subject to certain conditions, the Company at any time may terminate substantially all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least 10 a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the Subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 14. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon declaration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $5,000,000 and (vii) a Note Guarantee ceasing to be in full force and effect (other than in accordance with its terms). If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which shall result in the Securities being due and payable immediately upon the occurrence of such Events of Default. 11 Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 12 18. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY SHALL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: CORE-MARK INTERNATIONAL, INC. 395 OYSTER POINT BOULEVARD, SUITE 415 SAN FRANCISCO, CA 94080 ATTENTION OF CHIEF FINANCIAL OFFICER 13 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: _______________________________ Your Signature: _________________________ Signature Guarantee:___________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) _______________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 14 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): / / has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); / / has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is three years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being: CHECK ONE BOX BELOW: (1) / / acquired for the undersigned's own account, without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of the Indenture); or (2) / / transferred to the Company; or (3) / / transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (4) / / transferred pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or 15 (5) / / transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Exhibit C to the Indenture; or (6) / / transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee shall refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; PROVIDED, HOWEVER, that if box (4), (5) or (6) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in its sole discretion, such legal opinions, certifications and other information as the Trustee or Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act. ______________________________ Signature Signature Guarantee: _________________________ ______________________________ Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) _______________________________________________________________________________ 16 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: ___ / / --- If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: ____________________ Your Signature: ___________________________________ (Sign exactly as your name appearson the other side of the Security) Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 1/ CORE-MARK INTERNATIONAL, INC. 11-3/8% SENIOR SUBORDINATED NOTE SERIES A DUE 2003 No. Cusip No. [ ] $[ ] CORE-MARK INTERNATIONAL, INC., a Delaware corporation, promises to pay to , or registered assigns, the principal sum of on September 15, 2003. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. ________________________ 1/ This paragraph should only be added if the Security is issued in global form. 2 Additional provisions of this Security are set forth on the other side of this Security. Dated: CORE-MARK INTERNATIONAL, INC., by ______________________ Name: Title: ______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION BANKERS TRUST COMPANY, as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by _________________________ Authorized Signatory 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 11-3/8% Senior Subordinated Note due 2003 1. INTEREST Core-Mark International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 15 and September 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 27, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. METHOD OF PAYMENT The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 4 3. PAYING AGENT AND REGISTRAR Initially, BANKERS TRUST COMPANY, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. INDENTURE The Company issued the Securities under an Indenture dated as of September 27, 1996 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $75,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; the disposition of assets of the Company to Restricted Subsidiaries; and consolidations, mergers and transfers of all or substantially all of the 5 Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. 5. OPTIONAL REDEMPTION Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to September 15, 2000. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning on or after September 15 of the years set forth below: Redemption Period Price - ------ ---------- 2000................................................... 105.688% 2001................................................... 102.844% 2002 and thereafter.................................... 100.000% Notwithstanding the foregoing, at any time prior to September 15, 1999, in the aggregate up to 30% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 111.375% plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 70% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time on or prior to September 15, 2000, the Notes may also be redeemed as a whole at the option of the Company within 90 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the principal amount thereof plus (ii) the Applicable Premium plus (iii) accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record 6 on the relevant record date to receive interest due on the relevant interest payment date). 6. NOTICE OF REDEMPTION Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. PUT PROVISIONS Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. SUBORDINATION The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give such provisions effect and appoints the Trustee as attorney-in-fact for such purpose. 7 9. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. PERSONS DEEMED OWNERS The registered Holder of this Security may be treated as the owner of it for all purposes. 11. UNCLAIMED MONEY If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. DISCHARGE AND DEFEASANCE Subject to certain conditions, the Company at any time may terminate substantially all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least 8 a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the Subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon declaration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $5,000,000 and (vii) a Note Guarantee ceasing to be in full force and effect (other than in accordance with its terms). If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. 9 Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 10 18. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: COREMARK INTERNATIONAL, INC. 395 OYSTER POINT BOULEVARD, SUITE 415 SAN FRANCISCO, CA 94080 ATTENTION OF CHIEF FINANCIAL OFFICER 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: _____________________ Your Signature: ___________________________________ Signature Guarantee:___________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) _______________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: ____________________ Your Signature: ____________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:___________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) EXHIBIT C Transferee Letter of Representation Core-Mark International, Inc. c/o Bankers Trust Company Dear Sirs: This certificate is delivered to request a transfer of $ principal amount of the 11-3/8% Senior Subordinated Notes due 2003 (the "Notes") of Core-Mark International, Inc. (the "Company"). Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor," and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes and invest in or purchase securities similar to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on 2 behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date which is three years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor", in each case in a minimum principal amount of Notes of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Notes pursuant 3 to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE:___________________ BY____________________________ EXHIBIT D FORM OF NOTE GUARANTEE NOTE GUARANTEE, dated as of , , made by (the "Guarantor"), the undersigned subsidiary of Core-Mark International, Inc., in favor of the Holders and the Trustee (as defined in the Indenture referred to below). Reference is made to the Indenture dated as of September 27, 1996 (as amended, restated, supplemented, modified or waived from time to time, the "Indenture"), between Core-Mark International, Inc. (the "Company") and the Trustee. W I T N E S S E T H: WHEREAS the Company is a party to the Indenture; WHEREAS the Company owns directly all of or a majority interest in the Guarantor; WHEREAS the Guarantor shall derive substantial direct and indirect benefit from the transactions contemplated by the Indenture; NOW, THEREFORE, in consideration of the promises thereby, the Guarantor hereby agrees with and for the benefit of the Holders as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Note Guarantee, terms defined in the Indenture or in the preamble or recitals hereto are used herein as therein defined, except that the term "Holders" in this guarantee shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders. 2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR SECTION 2.01. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and warrants to the Holders as follows: (a) DUE EXISTENCE; COMPLIANCE. The Guarantor is a corporation or limited partnership duly organized, validly existing and in good standing, where applicable, under the laws of the jurisdiction in which it was incorporated or organized and has all requisite power and authority under such laws to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and to execute, deliver and perform its obligations under this Note Guarantee. The Guarantor is duly qualified or licensed to do business as a foreign corporation or entity and is in good standing, where applicable, in all jurisdictions in which it owns or leases property, or proposes to own or lease property, or in which the conduct of its business requires it to so qualify or be licensed, except to the extent that the failure to so qualify or be in good standing would have no material adverse effect on the business, operations, properties, prospects or condition (financial or otherwise) of the Guarantor. The Guarantor is in compliance in all material respects with all applicable law, rules, regulations and orders. (b) CORPORATE AUTHORITIES; NO CONFLICTS. The execution, delivery and performance by the Guarantor of this Guarantee is within its corporate or limited partnership powers and has been duly authorized by all necessary corporate and stockholder approvals or partnership approvals and (i) does not contravene its organizational documents or any law, rule, regulation, judgment, order or decree applicable to or binding on the Guarantor and (ii) does not contravene, and shall not result in the creation of any lien under, any provision of any contract, indenture, mortgage or agreement to which the Guarantor is a party, or by which it or any of its properties are bound. (c) GOVERNMENT APPROVALS AND AUTHORIZATIONS. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by or enforcement against the Guarantor of this 3 Note Guarantee (except such governmental approvals or authorizations as have been duly obtained or made and remain in full force and effect). (d) LEGAL, VALID AND BINDING. This Note Guarantee is the legal valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms. (e) LITIGATION. There is no pending or threatened action or proceeding affecting the Guarantor by or before any court, governmental agency or arbitrator, which may materially adversely affect the condition, operations, business, prospects, properties or assets of the Guarantor, or prohibit, limit in any way or materially adversely affect the ability of the Guarantor to perform its obligations under this Guarantee. (f) IMMUNITIES. Neither the Guarantor nor its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under applicable law. (g) NO DEFAULTS. There does not exist any event of default, or any event that with notice or lapse of time or both would constitute an event of default, under any agreement to which the Guarantor is a party or by which it may be bound, or to which any of its properties or assets may be subject which default would have a material adverse effect on the Guarantor, or would materially adversely affect the Guarantor's ability to perform its obligations under this Note Guarantee. (h) SOLVENCY. The Guarantor is on the date hereof solvent. ARTICLE III GUARANTEE SECTION 3.01. GUARANTEE. The Guarantor hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and 4 all other monetary obligations of the Company under the Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company whether for expenses, indemnification or otherwise under the Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). The Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it shall remain bound under this Article III notwithstanding any extension or renewal of any Obligation. The Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. The Guarantor waives notice of any default under the Securities or the Obligations. The obligations of the Guarantor hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other person under the Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Indenture, the Securities or any other agreement; (d) the failure of any Holder to exercise any right or remedy against any other Guarantor of the Obligations; (e) the release of any security held by any Holder or the Trustee for the Obligations of any of them; or (f) any change in the ownership of such Guarantor, except as provided in Section 3.02(b). The Guarantor further agrees that its Note Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Obligations. Except as otherwise provided herein, the obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the 5 obligations of the Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder to assert any claim or demand or to enforce any remedy under the Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity. The Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, the Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee or the Holders of a majority of the Securities (the "Majority Securityholders"), forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. The Guarantor further agrees that, as between the Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated for the purposes of the Guarantor's Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Section. 6 The Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 3.02. LIMITATION ON LIABILITY. (a) Any term or provision of this Note Guarantee to the contrary notwithstanding, the maximum aggregate amount of the Obligations guarantied hereunder by the Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Note Guarantee, as it relates to the Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer. (b) This Note Guarantee shall terminate and be of no further force or effect upon the sale or other transfer (i) by the Guarantor of all or substantially all of its assets or (ii) by the Company of all of its stock or other equity interests in the Guarantor, to a Person that is not an Affiliate of the Company; provided, however, that such sale or transfer constitutes an Asset Disposition (as defined in the Indenture). Upon notice to the Trustee that such a sale or transfer described in this clause 3.02(b) has occurred, the Trustee shall return the original Note Guarantee to the Guarantor. SECTION 3.03. SUCCESSORS AND ASSIGNS. Subject to Section 3.02(b) hereof, this Article III shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Holders and, in the event of any transfer or assignment of rights by any Holder, the rights and privileges conferred upon that party in this Note Guarantee and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Note Guarantee. SECTION 3.04. NO WAIVER, ETC. Neither a failure nor a delay on the part of the Holders or the Trustee in exercising any right, power or privilege under this Article III shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Holders and the Trustee herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article III at law, in equity, by statute or otherwise. 7 SECTION 3.05. MODIFICATION, ETC. No modification, amendment or waiver of any provision of this Article, nor the consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Securityholders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor or any other guarantor to any other or further notice or demand in the same, similar or other circumstances. ARTICLE IV SUBORDINATION SECTION 4.01. SUBORDINATION. The Obligations of the Guarantor under this Note Guarantee are subordinate to the obligations of the Guarantor under any Guarantee of the Credit Agreement and any other Senior Indebtedness to the extent and in the manner that the Indebtedness evidenced by the Securities is subordinate to the obligations of the Company under the Credit Agreement and other Senior Indebtedness under Article X of the Indenture. By acceptance of this Note Guarantee, the Holders agree to be bound by the foregoing provisions. ARTICLE V MISCELLANEOUS SECTION 5.01. NOTICES. All notices and other communications pertaining to this Note Guarantee or any Security shall be in writing and shall be deemed to have been duly given upon the receipt thereof. Such notices shall be delivered by hand, or mailed, certified or registered mail with postage prepaid (a) if to the Guarantor, at its address set forth below, and (b) if to the Holders or the Trustee, as provided in the Indenture. SECTION 5.02. PARTIES. Nothing expressed or mentioned in this Note Guarantee is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee and the holders of any Senior Indebtedness, any legal or equitable right, remedy or 8 claim under or in respect of this Note Guarantee or any provision herein contained. SECTION 5.03. GOVERNING LAW. This Note Guarantee shall be governed by the laws of the State of New York regardless of the laws that might otherwise govern under applicable principles of conflict of laws thereof. SECTION 5.04. SEVERABILITY CLAUSE. In case any provision in this Note Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 5.05. WAIVERS, AMENDMENTS AND REMEDIES. The failure to insist in any one or more instances upon strict performance of any of the provisions of this Note Guarantee or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect. Except as otherwise expressly limited in this Guarantee, all remedies under this Note Guarantee shall be cumulative and in addition to every other remedy provided for herein or by law. SECTION 5.06. ENTIRE AGREEMENT. This Note Guarantee is intended by the parties to be a final expression of their agreement in respect of the subject matter contained herein and supersedes all prior agreements and understandings between the parties with respect to such subject matter. SECTION 5.07. HEADINGS. The headings of the Articles and the sections in this Note Guarantee are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. 9 IN WITNESS WHEREOF, the Guarantor has duly executed this Note Guarantee as of the date first above written. [NAME OF GUARANTOR], By ____________________________ Name: Title: Address: EX-4.2 7 EXHIBIT 4.2 Exhibit 4.2 CORE-MARK INTERNATIONAL, INC. $75,000,000 11-3/8% SENIOR SUBORDINATED NOTES DUE 2003 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT September 27, 1996 CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 DONALDSON, LUFKIN, & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, NY 10072 Dear Sirs: Core-Mark International Inc., a Delaware corporation (the "Company"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement dated September 24, 1996 (the "Purchase Agreement"), $75,000,000 principal amount of its Senior Subordinated Notes due 2003 (the "Notes"). The Notes are to be issued pursuant to an Indenture dated as of September 27, 1996 (the "Indenture"), between the Company and Bankers Trust Company, as trustee (the "Trustee"). Capitalized terms used but not specifically defined herein are defined in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Company agrees with you, for the benefit of the holders of the Notes (including the Initial Purchasers) (the "Holders"), as follows: 1. REGISTERED EXCHANGE OFFER. The Company shall prepare and, not later than 45 days following the Closing Date, shall file with the Commission a registration 2 statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer (the "Registered Exchange Offer") to the Holders to issue and deliver to such Holders, in exchange for the Notes, a like aggregate principal amount of debt securities of the Company (the "Exchange Notes") identical in all material respects to the Notes, except for the transfer restrictions relating to the Notes, shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act within 105 days of the Closing Date and shall keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Notes will be issued under the Indenture or an indenture (the "Exchange Notes Indenture") between the Company and the Trustee or such other bank or trust company reasonably satisfactory to you, as trustee (the "Exchange Notes Trustee"), such indenture to be identical in all material respects with the Indenture except for the transfer restrictions relating to the Notes (as described above). Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any person to participate in the distribution of the Exchange Notes) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, (i) each Holder which is a broker-dealer electing to exchange Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and in Annex C hereto in the 3 "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to sell Exchange Notes acquired in exchange for Notes constituting any portion of an unsold allotment it is required to deliver a prospectus, containing the information required by Items 507 and/or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such a sale. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (c) utilize the services of a Depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all applicable laws applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (a) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (b) deliver to the Trustee for cancellation all Notes so accepted for exchange; and 4 (c) cause the Trustee or the Exchange Notes Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Notes, Exchange Notes equal in principal amount to the Notes of such Holder so accepted for exchange. The Company shall make available for a period of 180 days after the consummation of the Registered Exchange Offer, a copy of the prospectus forming part of the Exchange Offer Registration Statement to any broker-dealer for use in connection with any resale of any Exchange Notes. Interest on each Exchange Note issued pursuant to the Registered Exchange Offer will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the date of original issue of the Notes. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes or the Exchange Notes within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company within the meaning of the Securities Act. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5 2. SHELF REGISTRATION. If, (a) because of any change in law or applicable interpretations thereof by the Commission's staff, the Company determines that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (b) if for any other reason the Registered Exchange Offer is not consummated within 135 days of the date hereof (unless the Company has commenced such Registered Exchange Offer prior to such 135th day and completes such offer within 30 days thereafter), or (c) if any Initial Purchaser so requests with respect to Notes not eligible to be exchanged for Exchange Notes in a Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer, or (d) if any applicable laws or applicable interpretations do not permit any Holder (including an Initial Purchaser, but excluding any Exchanging Dealer) to participate in such Registered Exchange Offer, or (e) any Holder that participates in the Registered Exchange Offer (other than an Exchanging Dealer), does not receive freely tradeable Exchange Notes in exchange for tendered Notes upon the consummation of such offer or (f) if the Company so elects, then the following provisions shall apply: (a) The Company shall use its best efforts as promptly as practicable to file with the Commission and thereafter shall use its best efforts to cause to be declared effective a registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes (as defined below) by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be usable by Holders for a period of three years from the Closing Date or such shorter period that will terminate when all the Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Notes 6 covered thereby not being able to offer and sell such Notes during that period, unless such action, in the opinion of the Company after consulting with legal counsel, is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the Holders of Notes will suffer damages if the Company fails to fulfill its obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 45 days after the Closing Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Closing Date, (iii) the Exchange Offer is not consummated on or prior to 135 days after the Closing Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Closing Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will pay liquidated damages to each holder of Transfer Restricted Notes (as defined below) in an amount equal to $0.192 per week per $1,000 principal amount of the Notes constituting Transfer Restricted Notes held by such holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Registration Statement is declared effective and the Exchange Offer is consummated, 7 (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. "Transfer Restricted Notes" means each Note until (i) the date on which such Note has been exchanged for a freely transferrable Exchange Notes in the Exchange Offer, (ii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay liquidated damages to the holder of Transfer Restricted Notes if such holder: (a) failed to comply with its obligations to make the representations in the second to last paragraph of Section 1; or (b) failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company shall pay the liquidated damages due on the Transfer Restricted Notes by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m. New York City time on the next interest payment date specified by the Indenture and the Notes, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Notes to the record holder entitled to receive this interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by holders of Transfer Restricted Notes by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to be declared effective or to remain effective, or (iii) the Exchange Offer Registration Statement to be 8 declared effective and the Exchange Offer to be consummated, to the extent required by this Agreement. 4. REGISTRATION PROCEDURES. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to you, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that any of the Initial Purchasers (with respect to any portion of an unsold allotment from the original offering) are participating in the Registered Exchange Offer or the Shelf Registration, shall use reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably may propose; (ii) with respect to an Exchange Offer Registration Statement, include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise you and, in the case of a Shelf Registration Statement, the Holders (if applicable), and, if requested by you or any such Holder, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any posteffective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement 9 or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes or the Exchange Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in the Registration Statement or the prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company will use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (d) The Company will furnish to each Holder of Notes included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). (e) The Company will deliver to each Holder of Notes included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of Notes in connection with the offering and sale of the Notes covered by the prospectus or any amendment or supplement thereto. 10 (f) The Company will furnish to each Exchanging Dealer or Initial Purchaser, as applicable, which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Exchanging Dealer or Initial Purchaser, as applicable, so requests in writing, all exhibits (including those incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Exchanging Dealer or Initial Purchaser, as applicable, without charge, as many copies of the prospectus included in such Exchange Offer Registration Statement or Shelf Registration Statement, as applicable, and any amendment or supplement thereto as such Exchanging Dealer or Initial Purchaser, as applicable, may reasonably request for delivery by (i) such Exchanging Dealer in connection with a sale of Exchange Notes received by it pursuant to the Registered Exchange Offer or (ii) such Initial Purchaser in connection with a sale of Exchange Notes received by it in exchange for Notes constituting any portion of an unsold allotment; and the Company consents to the use of the prospectus or any amendment or supplement thereto by any such Exchanging Dealer or Initial Purchaser, as applicable, as aforesaid. (h) Prior to any public offering of Notes or Exchange Notes pursuant to any Registration Statement, the Company will use its best efforts to register or qualify or cooperate with the Holders of Notes included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Notes or Exchange Notes covered by such Registration Statement; PROVIDED, HOWEVER, that the Company (or any subsidiary or affiliate of the Company) will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company will cooperate with the Holders of Notes to facilitate the timely preparation and delivery of certificates representing Notes or Exchange Notes to be 11 sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing prior to sales of Notes or Exchange Notes pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (b)(ii) through (v) above during the period for which the Company is required to maintain an effective Registration Statement, the Company will promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as so amended or supplemented, the prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Notes or Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depositary Trust Company. (l) The Company will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders not later than 90 days after the end of the 12 month period beginning at the end of the fiscal quarter in which the applicable Registration Statement first became effective under the Securities Act, an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act. (m) The Company will cause the Indenture or the Exchange Notes Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Notes to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such Notes as the Company may from time to time reasonably require for inclusion in such Registration Statement, and the Company may exclude from such registration the Notes of any Holder that unreasonably 12 fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of Notes or Exchange Notes being sold or the managing underwriters (if any) shall reasonably request in order to facilitate the disposition of Notes pursuant to any Shelf Registration Statement. (p) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined) acting for, a majority in aggregate principal amount of the Holders, and any underwriter participating in any disposition pursuant to a Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and the Subsidiaries and (ii) use reasonable efforts to have Company's and the Subsidiaries' officers, directors, employees, accountants and auditors supply all relevant information reasonably requested by such representative, counsel or any such underwriter (an "Inspector") in connection with any such Registration Statement, subject to executing a confidentiality undertaking in customary form with respect to confidential or proprietary information of the Company or such Subsidiary. (q) In the case of a Shelf Registration Statement, the Company, if requested by Holders of a majority in aggregate principal amount of the Notes and Exchange Notes being sold, their Special Counsel, or the managing underwriters (if any) in connection with any Shelf Registration Statement, shall use its best efforts to cause (w) its counsel to deliver an opinion relating to the Registration Statement and the Notes or the Exchange Notes, as applicable, in customary form, (x) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Notes and Exchange Notes being sold, their Special Counsel, or the managing underwriters (if any) and (y) its independent public accountants to provide a comfort letter in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 13 (r) The Company will use reasonable efforts to cause the Notes or the Exchange Notes, as applicable, covered by a Registration Statement to be rated with an appropriate rating agency, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement or the Exchange Notes, as the case may be, or by the managing underwriters, if any. (s) The Company will use reasonable efforts to cause the Notes or the Exchange Notes, as applicable, relating to such Registration Statement to be listed on each securities exchange, if any, on which debt securities issued by the Company are then listed, if so requested by Holders of a majority in aggregate principal amount of Notes covered by such Registration Statement or the Exchange Notes, as the case may be, or by the managing underwriters, if any. (t) In the case of a Shelf Registration Statement, each Holder of Notes agrees by acquisition of such Notes that, upon receipt of any notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such Holder will discontinue disposition of such Notes covered by such Registration Statement until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) hereof, or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Notes covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). 5. REGISTRATION EXPENSES. The Company will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 hereof and the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to local counsel) chosen by the Holders of a majority in aggregate principal amount of the Notes and the Exchange Notes to be sold pursuant to a Registration Statement (the "Special Counsel") acting for 14 the Initial Purchasers or Holders in connection therewith. The Holders shall be responsible for all underwriting commissions and discounts in the case of a Shelf Registration Statement. 6. INDEMNIFICATION. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Exchanging Dealer or Initial Purchaser, as applicable, as contemplated in Section 4(g) above, the Company shall indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, (promptly following receipt of a statement or statements therefor in reasonable detail) arising out of any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ii) against any and all expense whatsoever, as incurred (promptly following receipt of a statement or statements therefor in reasonable detail) (including, subject to Section 6(c) hereof, the reasonable fees and disbursements of counsel chosen by the indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental or regulatory agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; PROVIDED, HOWEVER, that (i) this indemnity shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by you or the indemnified party expressly for use in such Registration Statement and (ii) this indemnity with respect to any untrue statement or alleged untrue statement 15 or omission or alleged omission in any related preliminary prospectus shall not enure to the benefit of any indemnified party from whom the person asserting any such loss, claim damage or liability received Notes or Exchange Notes if such persons did not receive a copy of the final prospectus at or prior to the confirmation of the sale of such Notes or Exchange Notes to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of material fact contained in the related preliminary prospectus was corrected in the final prospectus unless such failure to deliver the final prospectus was a result of noncompliance by the Company with Sections 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder agrees to indemnify and hold harmless the Company, each of its respective directors, officers, agents and employees and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the directors, officers, agents and employees of such controlling persons against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 6(a) hereof, as incurred, arising out of or based upon any untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment or supplement thereto) in reliance on and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or in such amendment or supplement); PROVIDED, HOWEVER, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Notes or Exchange Notes pursuant to the Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any claim or action commenced against it in respect of which indemnity may be sought hereunder; PROVIDED, HOWEVER, that failure to so notify an indemnifying party shall not relieve such indemnifying party from any obligation that it may have pursuant to this Section except to the extent it has been materially prejudiced by such failure; PROVIDED FURTHER, HOWEVER, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than on account of this Section. If any such claim or action shall be brought against an indemnified party, the 16 indemnified party shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that an indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent, but if settled with its written consent (which consent shall not be unreasonably withheld) or if there be a final judgment for the plaintiff in any such action, the 17 indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If a claim by an indemnified party for indemnification under this Section 6 is found unenforceable in a final judgment by a court of competent jurisdiction (not subject to further appeal or review) even though the express provisions hereof provide for indemnification in such case, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions, statements or omissions that resulted in such losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any losses shall be deemed to include, subject to the limitations set forth in Section 6(c) herein, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section, an indemnifying party that is a holder of Transfer Restricted Notes or Exchange Notes shall not be required to 18 contribute any amount in excess of the amount by which the total price at which the Notes or Exchange Notes sold by such indemnifying party and distributed to the public were offered to the public exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to any contribution from any person who was not guilty of such fraudulent misrepresentation. 7. RULES 144 AND 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any holder of Transfer Restricted Notes, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any holder of Transfer Restricted Notes may reasonably request, all to the extent required from time to time to enable such holder to sell Transfer Restricted Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any holder of Transfer Restricted Notes, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the holders of a majority in aggregate principal amount of such Transfer Restricted Notes included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed). The Holders shall be responsible for all underwriting commissions and discounts. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Notes on the basis 19 reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Notes and the Exchange Notes, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holders of Notes whose Notes or Exchange Notes are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Notes or Exchange Notes being sold by such Holders pursuant to such Registration Statement. (b) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 9(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Chase Securities Inc.; (2) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (3) if to the Company, initially at the address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; when answered back, if faxed; and 20 when receipt is acknowledged by the recipient's telecopier machine, if telecopied. (c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Company and its successors and assigns. (d) COUNTERPARTS. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopies) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A TRANSFER RESTRICTED NOTE TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. (g) REMEDIES. In the event of a breach by the Company, or by a holder of Transfer Restricted Notes, of any of their obligations under this Agreement, each holder of Transfer Restricted Notes or the Company, as the case may 21 be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company of its obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company and each holder of Transfer Restricted Notes agree that, except for such liquidated damages, when payable monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (h) NO INCONSISTENT AGREEMENTS. The Company has not, nor shall the Company on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the holders of Transfer Restricted Notes in this Agreement or otherwise conflicts with the provisions hereof. The Company has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person. Without limiting the generality of the foregoing, without the written consent of the holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Notes, the Company shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights of the holders of Transfer Restricted Notes set forth herein, and are not otherwise in conflict or inconsistent with the provisions of the Agreement. (i) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its securityholders (other than the holders of Transfer Restricted Notes in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Exchange Offer other than Transfer Restricted Notes. (j) SEVERABILITY. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set 22 forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 22 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, CORE-MARK INTERNATIONAL, INC. By: /s/ Leo F. Korman _________________________ Name: Leo F. Korman Title: Senior Vice President and Chief Financial Officer Accepted in New York, New York CHASE SECURITIES INC. By: /s/ Stephen J. Eichenberger ______________________________ Name: Stephen J. Eichenberger Title: Managing Director DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ Daniel K. Flatley _____________________________ Name: Daniel K. Flatley Title: Managing Director 23 ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Existing Notes where such Existing Notes were acquired by such broker-dealer as a result of market- making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Existing Notes where such Existing Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. */ The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that _______________________ */ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 3 it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Notes (including any broker- dealers) against certain liabilities, including liabilities under the Securities Act. ANNEX D ____ /____/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ____________________________________________ Address: _________________________________________ _________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.3 8 EXHIBIT 4.3 EXHIBIT 4.3 [FORM OF FACE OF INITIAL SECURITY] [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR 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.] 1/ THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE 1/ To be included only if note is in global form. 2 SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND Shall BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. CORE-MARK INTERNATIONAL, INC. 11-3/8% SENIOR SUBORDINATED NOTE DUE 2003 No. CUSIP No. $ CORE-MARK INTERNATIONAL, INC., a Delaware corporation, promises to pay to , or registered assigns, the principal sum of $75,000,000 on September 15, 2003. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. 3 Additional provisions of this Security are set forth on the other side of this Security. Dated: , 1996 CORE-MARK INTERNATIONAL, INC. by _______________________ Name: Title: _______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION BANKERS TRUST COMPANY as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by _____________________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11-3/8% Senior Subordinated Note due 2003 1. INTEREST Core-Mark International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall use its best efforts to have the Exchange Offer Registration Statement and, if applicable, a Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. If (i) the applicable Registration Statement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Issue Date, (iii) the Registered Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company shall pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages shall cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. 5 For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Security until (i) the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company shall pay interest and liquidated damages, if any, semiannually on March 15 and September 15 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 27, 1996. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. METHOD OF PAYMENT The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) shall be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 6 3. PAYING AGENT AND REGISTRAR Initially, BANKERS TRUST COMPANY, a New York banking corporation ("Trustee"), shall act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. INDENTURE The Company issued the Securities under an Indenture dated as of September 27, 1996 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $75,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; the disposition of assets of the Company to Restricted Subsidiaries; and consolidations, mergers and transfers of all or substantially all of the 7 Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. 5. OPTIONAL REDEMPTION Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to September 15, 2000. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning on or after September 15 of the years set forth below: Redemption Period Price - ------ ---------- 2000 . . . . . . . . . . . . . . . . . . . . . . . 105.688% 2001 . . . . . . . . . . . . . . . . . . . . . . . 102.844% 2002 and thereafter . . . . . . . . . . . . . . . . 100.000% Notwithstanding the foregoing, at any time prior to September 15, 1999, the Company may redeem in the aggregate up to 30% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 111.375% plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); PROVIDED, HOWEVER, that at least 70% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time on or prior to September 15, 2000, the Securities may also be redeemed as a whole at the option of the Company within 90 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the principal amount thereof plus (ii) the Applicable Premium plus (iii) accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record 7 on the relevant record date to receive interest due on the relevant interest payment date). 6. NOTICE OF REDEMPTION Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. PUT PROVISIONS Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities shall have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. SUBORDINATION The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give such provisions effect and appoints the Trustee as attorney-in-fact for such purpose. 9 9. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. PERSONS DEEMED OWNERS The registered Holder of this Security may be treated as the owner of it for all purposes. 11. UNCLAIMED MONEY If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. DISCHARGE AND DEFEASANCE Subject to certain conditions, the Company at any time may terminate substantially all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least 10 a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the Subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 14. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon declaration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $5,000,000 and (vii) a Note Guarantee ceasing to be in full force and effect (other than in accordance with its terms). If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which shall result in the Securities being due and payable immediately upon the occurrence of such Events of Default. 11 Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 12 18. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY SHALL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: CORE-MARK INTERNATIONAL, INC. 395 OYSTER POINT BOULEVARD, SUITE 415 SAN FRANCISCO, CA 94080 ATTENTION OF CHIEF FINANCIAL OFFICER 13 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: ________________________ Your Signature: ________________________________ Signature Guarantee:___________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) _______________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 14 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): / / has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); / / has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is three years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being: CHECK ONE BOX BELOW: (1) / / acquired for the undersigned's own account, without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of the Indenture); or (2) / / transferred to the Company; or (3) / / transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (4) / / transferred pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or 15 (5) / / transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Exhibit C to the Indenture; or (6) / / transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee shall refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; PROVIDED, HOWEVER, that if box (4), (5) or (6) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in its sole discretion, such legal opinions, certifications and other information as the Trustee or Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act. ______________________________ Signature Signature Guarantee: _________________________ ______________________________ Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) ____________________________________________________________ 16 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: ___ / / --- If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: __________________ Your Signature: ______________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:___________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) EX-4.4 9 EXHIBIT 4.4 EXHIBIT 4.4 [FORM OF FACE OF EXCHANGE SECURITY] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1) CORE-MARK INTERNATIONAL, INC. 11-3/8% SENIOR SUBORDINATED NOTE SERIES A DUE 2003 No. Cusip No. [ ] $[ ] CORE-MARK INTERNATIONAL, INC., a Delaware corporation, promises to pay to , or registered assigns, the principal sum of on September 15, 2003. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. --------------- (1)This paragraph should only be added if the Security is issued in global form. 2 Additional provisions of this Security are set forth on the other side of this Security. Dated: CORE-MARK INTERNATIONAL, INC., by ______________________ Name: Title: ______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION BANKERS TRUST COMPANY, as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by _________________________ Authorized Signatory 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 11-3/8% Senior Subordinated Note due 2003 1. Interest -------- Core-Mark International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 15 and September 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 27, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are regis- tered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 4 3. Paying Agent and Registrar -------------------------- Initially, BANKERS TRUST COMPANY, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co- registrar. 4. Indenture --------- The Company issued the Securities under an Inden- ture dated as of September 27, 1996 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $75,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; the disposition of assets of the Company to Restricted Subsidiaries; and consolidations, mergers and transfers of all or substantially all of the 5 Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. 5. Optional Redemption ------------------- Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to September 15, 2000. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date): if redeemed during the 12-month period beginning on or after September 15 of the years set forth below: Redemption Period Price ------ ---------- 2000 105.688% 2001 102.844% 2002 and thereafter 100.000% Notwithstanding the foregoing, at any time prior to September 15, 1999, in the aggregate up to 30% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 111.375% plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 70% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time on or prior to September 15, 2000, the Notes may also be redeemed as a whole at the option of the Company within 90 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the principal amount thereof plus (ii) the Applicable Premium plus (iii) accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record 6 on the relevant record date to receive interest due on the relevant interest payment date). 6. Notice of Redemption -------------------- Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions -------------- Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Subordination ------------- The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give such provisions effect and appoints the Trustee as attorney-in-fact for such purpose. 7 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorse- ments or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Regis- trar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate substantially all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least 8 a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the Subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to para- graph 5 of the Securities, upon declaration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $5,000,000 and (vii) a Note Guarantee ceasing to be in full force and effect (other than in accordance with its terms). If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. 9 Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securi- ties unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may with- hold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securi- ties and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may other- wise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their crea- tion. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication -------------- This Security shall not be valid until an author- ized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 10 18. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITY- HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: COREMARK INTERNATIONAL, INC. 395 OYSTER POINT BOULEVARD, SUITE 415 SAN FRANCISCO, CA 94080 ATTENTION OF CHIEF FINANCIAL OFFICER 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) EX-4.5 10 EXHIBIT 4.5 LETTER OF TRANSMITTAL CORE MARK INTERNATIONAL, INC. OFFER TO EXCHANGE ITS 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 (THE "NEW NOTES") WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 (THE "EXISTING NOTES") PURSUANT TO THE PROSPECTUS, DATED , 1996 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER , OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE. TO: Bankers Trust Company of New York, EXCHANGE AGENT
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER: BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc. Reorganization Unit Corporate Trust and Agency Group Corporate Trust and Agency Group P.O. Box 292737 Receipt & Delivery Window Reorganization Unit Nashville, TN 37229-2737 4 Albany Street 648 Grassmere Park Road New York, NY 10006 Nashville, TN 37211 For information, call: (800) 735-7777 Confirm: (615) 835-3572 Fax: (615) 835-3701
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW ------------------------ List below the Existing Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Existing Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF EXISTING NOTES (1) (2) (3) PRINCIPAL AMOUNT OF EXISTING NOTES NAME(S) AND ADDRESS(ES) OF REGISTERED PRINCIPAL TENDERED HOLDER(S) CERTIFICATE AMOUNT OF (IF LESS THAN (PLEASE FILL IN, IF BLANK) NUMBER(S)(*) EXISTING NOTES ALL)(**) * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Existing Notes.
The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated , 1996 (the "Prospectus"), of Core-Mark International, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange up to $75,000,000 aggregate principal amount of its 11 3/8% Senior Subordinated Notes due 2003 (the "New Notes"), for a like principal amount of the Company's issued and outstanding 11 3/8% Senior Subordinated Notes due 2003 (collectively, the "Existing Notes"). The undersigned has completed the appropriate boxes above and below and signed this Letter to indicated the action the undersigned desires to take with respect to the Exchange Offer. This Letter is to be used either if certificates of Existing Notes are to be forwarded herewith or if delivery of Existing Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company, pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus. Delivery of this Letter and any other required documents should be made to the Exchange Agent. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. Holders whose Existing Notes are not immediately available or who cannot deliver their Existing Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date must tender their Existing Notes according to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Existing Notes." See Instruction 1. / / CHECK HERE IF EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution - -------------------------------------- / / The Depository Trust Company Account Number - -------------------------------------------------------------------------------- Transaction Code Number - ---------------------------------------------------------------------------- / / CHECK HERE IF EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVER AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) - ------------------------------------------------------------------------ Name of Eligible Institution that Guaranteed Delivery - --------------------------------------------------- If delivered by book-entry transfer: Account Number - -------------------------------------------------------------------------------- Date of execution of Notice of Guaranteed Delivery - ------------------------------------------------------ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Existing Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Existing Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Existing Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Existing Notes as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Existing Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the sale, assignment and transfer of the Existing Notes tendered hereby. The undersigned also acknowledges that this Exchange Offer is being made in reliance on the Company's belief, based on interpretations by the staff of the Securities and Exchange Commission (the "SEC") to third parties in unrelated transactions, that the New Notes issued in exchange for the Existing Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than (i) any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Securities Act") or (ii) any broker-dealer that purchase Notes from the Company to resell pursuant to Rule 144A under the Securities Act "Rule 144A") or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. The undersigned acknowledges that any holder of Existing Notes using the Exchange Offer to participate in a distribution of the New Notes (i) cannot rely on the position of the staff of the SEC enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or similar letters and (ii) must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale transaction. The undersigned represents that (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such holder's business, (ii) such holder has no arrangements with any person to participate in the distribution of such New Notes, and (iii) such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or, if such holder is an affiliate, that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Existing Notes that were acquired as a result of market-making activities or other trading as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned, if a California resident, hereby further represents and warrants that the undersigned (or the beneficial owner of the Existing Notes tendered hereby, if not the undersigned) (i) is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the Company, a self-employed individual retirement plan, or individual retirement account), or a corporation which has a net worth on a consolidated basis according to its most recent audited financial statement of not less than $14,000,000, and (ii) is acquiring the New Notes for its own account for investment purposes (or for the account of the beneficial owner of such New Notes for investment purposes). All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the instructions contained in this Letter. The undersigned understands that tenders of the Existing Notes pursuant to any one of the procedures described under "The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company in accordance with the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange Offer," the Company may not be required to accept for exchange any of the Existing Notes tendered. Existing Notes not accepted for exchange or withdrawn will be returned to the undersigned at the address set forth below unless otherwise indicated under "Special Delivery Instructions" below. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please issue the New Notes (and, if applicable, substitute certificates representing Existing Notes for any Existing Notes not exchanged) in the name of the undersigned. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Existing Notes for any Existing Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Existing Notes." THE BOOK-ENTRY TRANSFER FACILITY, AS THE HOLDER OF RECORD OF CERTAIN EXISTING NOTES, HAS GRANTED AUTHORITY TO BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS WHOSE NAMES APPEAR ON A SECURITY POSITION LISTING WITH RESPECT TO SUCH EXISTING NOTES AS OF THE DATE OF TENDER OF SUCH EXISTING NOTES TO EXECUTE AND DELIVER THE LETTER OF TRANSMITTAL AS IF THEY WERE THE HOLDERS OF RECORD. ACCORDINGLY, FOR PURPOSES OF THIS LETTER OF TRANSMITTAL, THE TERM "HOLDER" SHALL BE DEEMED TO INCLUDE SUCH BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF EXISTING NOTES" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH NOTES AND THIS LETTER TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE EXISTING NOTES AS SET FORTH IN SUCH BOX ABOVE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (Complete Accompanying Substitute Form W-9) Dated:.......................................................................... X ................................................ .................................................. X ................................................ .................................................. SIGNATURE(S) OF OWNER(S)/OR AUTHORIZED SIGNATORY DATE
Area Code and Telephone Number . . . . . . . . . . . If a holder is tendering any Existing Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Existing Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s) ........................................................................ .................................................................. (PLEASE TYPE OR PRINT) Capacity: ...................................................................... Address ....................................................................... ................................................................ (INCLUDE ZIP CODE) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: ....................................................... (AUTHORIZED SIGNATURE) ............................................................................... (TITLE) ............................................................................... (NAME OF FIRM) Dated:.......................................................................... SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for To be completed ONLY if certificates for New New Notes are to be issued in the name of and Notes are to be sent to someone other than sent to someone other than the person or the person or persons whose signature(s) persons whose signature(s) appear on this appear(s) on this Letter above or to such Letter above. person or persons at an address other than shown in the box entitled "Description of Existing Notes" on this Letter above. ISSUE: NEW NOTES TO: MAIL: NEW NOTES TO: NAME(S):..................................... NAME(S):..................................... (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) ...................................... ............................................. (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) ADDRESS:..................................... ADDRESS:..................................... ...................................... ............................................. (ZIP CODE) (ZIP CODE) SOCIAL SECURITY NUMBER:...................... (COMPLETE SUBSTITUTE FORM W-9)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND EXISTING NOTES; GUARANTEED DELIVERY PROCEDURE. This Letter is to be used to forward, and must accompany, all certificates representing Existing Notes tendered pursuant to the Exchange Offer. Certificates representing the Existing Notes in proper form for transfer (or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the book-entry transfer facility) must be received by the Exchange Agent at its address set forth herein on or before the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER, THE EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. If a holder desires to tender Existing Notes and such holder's Existing Notes are not immediately available or time will not permit such holder's Letter of Transmittal, Existing Notes (or a confirmation of book-entry transfer of Existing Notes into the Exchange Agent's account at the book-entry transfer facility) or other required documents to reach the Exchange Agent on or before the Expiration Date, such holder's tender may be effected if: (a) such tender is made by or through an Eligible Institution (as defined below); (b) on or prior to the Expiration Date, the Exchange Agent has received a telegram, facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or letter from such Eligible Institution setting forth the name and address of the holder of such Existing Notes tendered and stating that the tender is being made thereby and guaranteeing that, within three business days after the Expiration Date, a duly executed Letter of Transmittal, or facsimile thereof, together with the Existing Notes (or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the book-entry transfer facility), and any other documents required by this Letter and the instructions hereto, will be deposited by such Eligible Institution with the Exchange Agent; and (c) this Letter, or a facsimile hereof, and Existing Notes in proper form for transfer (or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the book-entry transfer facility) and all other required documents are received by the Exchange Agent within three business days after the Expiration Date. See "The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus. 2. WITHDRAWALS. Any holder who has tendered Existing Notes may withdraw the tender by delivering written notice of withdrawal (which may be sent by telegram, facsimile (receipt confirmed by telephone and an original delivered by guaranteed overnight courier)) to the Exchange Agent prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at its address set forth herein. Any such notice of withdrawal must (i) specify the name of the person having tendered the Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing Notes to be withdrawn (including the certificate number or numbers and principal amount of such Existing Notes), (iii) be timely received and signed by the holder in the same manner as the original signature on the Letter by which such Existing Notes were tendered or as otherwise set forth in Instruction 3 below (including any required signature guarantees), or be accompanied by documents of transfer sufficient to have the Trustee (as defined in the Prospectus) register the transfer of such Existing Notes pursuant to the terms of the Indenture into the name of the person withdrawing the tender and (iv) specify the name in which any such Existing Notes are to be registered, if different from that of the Depositor. If Existing Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Existing Notes or otherwise comply with the book-entry transfer facility's procedures. See "The Exchange Offer--Withdrawal Rights" in the Prospectus. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of the Existing Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Existing Notes are owned of record by two or more joint owners, all such owners must sign this Letter. If any tendered Existing Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. The signatures on this Letter or a notice of withdrawal, as the case may be, must be guaranteed unless the Existing Notes surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Existing Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in this Letter or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., a clearing agency, an insured credit union, a savings association or by a commercial bank or trust company having an office or correspondent in the United States (collectively, "Eligible Institutions"). If Existing Notes are registered in the name of a person other than the signer of this Letter, the Existing Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Existing Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. If no such instructions are given, any New Notes will be issued in the name of, and delivered to, the name or address of the person signing this Letter and any Existing Notes not accepted for exchange will be returned to the name or address of the person signing this Letter. 5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the federal income tax laws, payments that may be made by the Company on account of New Notes issued pursuant to the Exchange Offer may be subject to backup withholding at the rate of 31%. In order to avoid such backup withholding, each tendering holder should complete and sign the Substitute Form W-9 included in this Letter and either (a) provide the correct taxpayer identification number ("TIN") and certify, under penalties of perjury, that the TIN provided is correct and that (i) the holder has not been notified by the Internal Revenue Service (the "IRS") that the holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the IRS has notified the holder that the holder is no longer subject to backup withholding; or (b) provide an adequate basis for exemption. If the tendering holder has not been issued a TIN and has applied for one, or intends to apply for one in the near future, such holder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, sign and date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I, the Company (or the Paying Agent under the Indenture governing the New Notes) shall retain 31% of payments made to the tendering holder during the sixty (60) day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent or the Company with his or her TIN within sixty (60) days after the date of the Substitute Form W-9, the Company (or the Paying Agent) shall remit such amounts retained during the sixty (60) day period to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent or the Company with his or her TIN within such sixty (60) day period, the Company (or the Paying Agent) shall remit such previously retained amounts to the IRS as backup withholding. In general, if a holder is an individual, the taxpayer identification number is the Social Security number of such individual. If the Exchange Agent or the Company is not provided with the correct taxpayer identification number, the holder may be subject to a $50 penalty imposed by the IRS. Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such holder must submit a statement (generally, IRS Form W-8), signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Exchange Agent. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Existing Notes are registered in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Failure to complete the Substitute Form W-9 will not, by itself, cause Existing Notes to be deemed invalidly tendered, but may require the Company (or the Paying Agent) to withhold 31% of the amount of any payments made on account of the New Notes. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 6. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the transfer of Existing Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Existing Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Existing Notes tendered hereby, or if tendered Existing Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Existing Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Existing Notes specified in this Letter. 7. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Existing Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Existing Notes for exchange. Neither the Company nor any other person is obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 9. INADEQUATE SPACE. If the space provided herein is inadequate, the aggregate principal amount of Existing Notes being tendered and the certificate number or numbers (if available) should be listed on a separate schedule attached hereto and separately signed by all parties required to sign this Letter. 10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. If any certificate has been lost, mutilated, destroyed or stolen, the holder should promptly notify Bankers Trust Company of New York, as Trustee, B.T. Services Tennessee, Inc. Corporate Trust & Agency Group, Securities Replacement Unit, 648 Grassmere Park Road, Nashville, TN 37211, Telephone (800) 735-7777. The holder will then be instructed as to the steps that must be taken to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the Existing Notes have been replaced. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent at the address and telephone number indicated above. TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5) PAYER'S NAME: CORE-MARK INTERNATIONAL, INC. PART I--TAXPAYER IDENTIFICATION NUMBER SUBSTITUTE _____________________________ ENTER YOUR TAXPAYER IDENTIFICATION NUMBER IN THE FORM W-9 SOCIAL SECURITY NUMBER APPROPRIATE BOX. FOR MOST INDIVIDUALS, THIS IS YOUR DEPARTMENT OF THE TREASURY SOCIAL SECURITY NUMBER. IF YOU DO NOT HAVE A NUMBER, OR INTERNAL REVENUE SERVICE SEE HOW TO OBTAIN A "TIN" IN THE ENCLOSED GUIDELINES. _____________________________ NOTE: IF THE ACCOUNT IS IN MORE THAN ONE NAME, SEE EMPLOYER IDENTIFICATION NUMBER THE CHART ON PAGE 2 OF THE ENCLOSED GUIDELINES TO DETERMINE WHAT NUMBER TO GIVE. PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE ENCLOSED GUIDELINES) PAYER'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: IDENTIFICATION NUMBER (TIN) (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING AND CERTIFICATION FOR A NUMBER TO BE ISSUED TO ME), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. SIGNATURE __________________________________________ DATE __ CERTIFICATION GUIDELINES--YOU MUST CROSS OUT ITEM (2) OF THE ABOVE CERTIFICATION IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING OF INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER NOTIFICATION FROM THE IRS THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT ITEM (2). CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY, UNDER PENALTIES OF PERJURY, THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND THAT I MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE (OR I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE). I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYER, 31 PERCENT OF ALL PAYMENTS MADE TO ME ON ACCOUNT OF THE NEW NOTES SHALL BE RETAINED UNTIL I PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYER AND THAT, IF I DO NOT PROVIDE MY TAXPAYER IDENTIFICATION NUMBER WITHIN SIXTY (60) DAYS, SUCH RETAINED AMOUNTS SHALL BE REMITTED TO THE INTERNAL REVENUE SERVICE AS BACKUP WITHHOLDING AND 31 PERCENT OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD AND REMITTED TO THE INTERNAL REVENUE SERVICE UNTIL I PROVIDE A TAXPAYER IDENTIFICATION NUMBER. SIGNATURE ________________________________ DATE ________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. EX-4.6 11 EXHIBIT 4.6 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 IN EXCHANGE FOR NEW 11 3/8% SENIOR SUBORDINATED NOTES DUE 2003 REGISTERED UNDER THE SECURITIES ACT OF 1933 OF CORE-MARK INTERNATIONAL, INC. Registered holders of outstanding 11 3/8% Senior Subordinated Notes due 2003 (the "Existing Notes") who wish to tender their Existing Notes in exchange for a like principal amount of new 11 3/8% Senior Subordinated Notes due 2003 (the "New Notes") and whose Existing Notes are not immediately available or who cannot deliver their Existing Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Bankers Trust Company of New York (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or letter to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering Existing Notes" in this Prospectus. The Exchange Agent for the Exchange Offer is: BANKERS TRUST COMPANY OF NEW YORK BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER: BT Services Tennessee, Bankers Trust Company BT Serivces Tennessee, Inc. Inc. Corporate Trust and Agency Group Corporate Trust and Agency Group Reorganization Unit Receipt & Delivery Window Reorganization Unit P.O. Box 292737 4 Albany Street 648 Grassmere Park Road Nashville, TN 37229-2737 New York, NY 10006 Nashville, TN 37211 For Information, call: (800) 735-7777 Confirm: (615) 835-3572 Fax: (615) 835-3701
Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentleman: The undersigned hereby tenders the principal amount of Existing Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus dated , 1996 of Core-Mark International, Inc. (the "Prospectus"), receipt of which is hereby acknowledged. DESCRIPTION OF SECURITIES TENDERED
NAME AND ADDRESS OF REGISTERED HOLDER AS IT APPEARS ON THE 11 3/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL PRINCIPAL AMOUNT 2003 ("EXISTING NOTES") OF EXISTING AMOUNT REPRESENTED BY OF EXISTING NOTES (PLEASE PRINT) NOTES TENDERED EXISTING NOTES TENDERED
THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch, agency or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the certificates representing the Existing Notes, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery. NAME OF FIRM: (AUTHORIZED SIGNATURE) ADDRESS: TITLE: NAME: (ZIP CODE) (PLEASE TYPE OR PRINT) AREA CODE AND TELEPHONE NUMBER: DATE:
NOTE: DO NOT SEND EXISTING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. EXISTING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-4.7 12 EXHIBIT 4.7 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------- GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------- - ------------------------------------------------------- GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - -------------------------------------------------------
1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Husband and wife The actual owners of the (joint account) account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor The adult or, if the (joint account) minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent person(3) minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under state law 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, or pension The legal entity (Do not trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other The organization tax-exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- ------------------------------------------------------- - -------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show your individual name. You may also enter your business name. You may use either your Social Security number or your Employer Identification number. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5. Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entitles), at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan or a custodial account under Section 403(b)(7) of the Code. - The United States or any agency or instrumentality thereof. - A State, the Disctrict of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a) of the Code. - An exempt charitable remainder trust, or a non-exempt trust described in Section 4947(a)(1) of the Code. - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441 of the Code. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852 of the Code). - Payments described in Section 6049(b)(5) of the Code to non-resident aliens. - Payments on tax-free covenant bonds under Section 1451 of the Code. - Payments made by certain foreign organizations. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH THE PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049, and 6050A and 6050N of the Code and the regulations promulgated thereunder. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-5 13 EXHIBIT 5 PAUL, WEISS, RIFKIND WHARTON & GARRISON 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 (212) 373-3000 October 15, 1996 Core-Mark International, Inc. 395 Oyster Point Boulevard, Suite 415 South San Francisco, CA 94080 Registration Statement on Form S-4 Ladies and Gentlemen: In connection with the Registration Statement on Form S-4 (the "Registration Statement") being filed today by Core-Mark International, Inc. (the "Company") with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules and regulations promulgated thereunder, we have been requested to render our opinion as to the legality of the securities being registered thereunder. The Registration Statement relates to the registration under the Act of the Company's 11-3/8% Senior Subordinated Notes due 2003 (the "New Notes"). The New Notes are to be offered in exchange for the 2 11-3/8% Senior Subordinated Notes due 2003 (the "Existing Notes") issued and sold by the Company on September 27, 1996 in an offering exempt from registration under the Act. The New Notes will be issued by the Company pursuant to the terms of the Indenture (the "Indenture"), dated as of September 27, 1996, between the Company and Bankers Trust Company of New York, as trustee (the "Trustee"). In this connection we have examined (i) originals, photocopies or conformed copies of the Registration Statement (including the exhibits and amendments thereto), (ii) the Indenture filed as an exhibit to the Registration Statement, (iii) the Certificate of Incorporation of the Company and (iv) records of certain of the Company's corporate proceedings relating, among other things, to the proposed issuance and sale of the New Notes. In addition, we have made such other examinations of law and fact as we considered necessary in order to form a basis for the opinions hereinafter expressed. In connection with such investigation, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as photocopies or conformed copies and the legal capacity of natural persons executing such documents, none of which facts we have independently verified. In rendering the opinions set forth below, we have assumed that the New Notes will be issued as described in the Registration Statement. 3 Based on the foregoing, we are of the opinion that: 1. The Indenture represents a valid and binding obligation of the Company under the laws of the State of New York, enforceable against the Company in accordance with its terms, except as such enforceability may be subject to (a) bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization, moratorium or other similar laws affecting creditors' rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). 2. When issued, authenticated and delivered, the New Notes will be legal, valid and binding obligations of the Company under the laws of the State of New York enforceable against the Company in accordance with their terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization, moratorium and other similar laws affecting creditors' rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). Our opinions expressed above are limited to the laws of the State of New York and the federal laws of the United States. Our opinions are rendered only with respect to the laws, and the rules, regulations and orders thereunder, that are currently in effect. 4 We hereby consent to the use of our name in the Registration Statement and in the prospectus therein as the same appears in the caption "Legal Matters" and to the use of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required by the Act or by the rules and regulations promulgated thereunder. Very truly yours, /s/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON PAUL, WEISS, RIFKIND, WHARTON & GARRISON EX-10.4 14 EXHIBIT 10.4 $210,000,000 CREDIT AGREEMENT among CORE-MARK INTERNATIONAL, INC., The Several Lenders from Time to Time Parties Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of August 7, 1996 TABLE OF CONTENTS SECTION 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Definitional Provisions 24 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 25 2.1 Revolving Credit Commitments 25 2.2 Procedure for Revolving Credit Borrowing 25 2.3 Fees 26 2.4 Termination or Reduction of Commitments 26 2.5 Term Loans 26 2.6 Procedure for Term Loan Borrowing 26 2.7 Repayment of Loans; Evidence of Debt 26 2.8 Optional Prepayments 28 2.9 Mandatory Prepayments 28 2.10 Mandatory Prepayments and Other Reductions of Revolving Credit Loans 29 2.11 Conversion and Continuation Options 30 2.12 Maximum Number of Tranches 31 2.13 Interest Rates and Payment Dates 31 2.14 Computation of Interest and Fees 31 2.15 Inability to Determine Interest Rate 32 2.16 Pro Rata Treatment and Payments 32 2.17 Illegality 33 2.18 Requirements of Law 34 2.19 Taxes 34 2.20 Indemnity 36 2.21 Change of Lending Office 37 SECTION 3. LETTERS OF CREDIT 37 3.1 L/C Commitment. 37 3.2 Procedure for Issuance of Letters of Credit 37 3.3 Fees, Commissions and Other Charges 38 3.4 L/C Participations 38 3.5 Reimbursement Obligation of the Borrower 39 3.6 Obligations Absolute 40 3.7 Letter of Credit Payments 40 3.8 Application 40 SECTION 4. REPRESENTATIONS AND WARRANTIES 41 4.1 Financial Condition 41 4.2 No Change 42 4.3 Corporate Existence; Compliance with Law 42 4.4 Corporate Power; Authorization; Enforceable Obligations 42 4.5 No Legal Bar 42 4.6 No Material Litigation 43 4.7 No Default 43 4.8 Ownership of Property; Liens 43 - i - 4.9 Intellectual Property 43 4.10 No Burdensome Restrictions 43 4.11 Taxes 43 4.12 Federal Regulations 44 4.13 ERISA 44 4.14 Investment Company Act; Other Regulations 44 4.15 Subsidiaries 44 4.16 Purpose of Loans 44 4.17 Environmental Matters 45 4.18 Accuracy of Information 46 4.19 Security Documents 46 4.20 Solvency 47 SECTION 5. CONDITIONS PRECEDENT 47 5.1 Conditions to Initial Extension of Credit 47 5.2 Conditions to Each Extension of Credit 50 SECTION 6. AFFIRMATIVE COVENANTS 51 6.1 Financial Statements 51 6.2 Certificates; Other Information 52 6.3 Payment of Obligations 54 6.4 Conduct of Business and Maintenance of Existence 54 6.5 Maintenance of Property; Insurance 54 6.6 Inspection of Property; Books and Records; Discussions 54 6.7 Semi-Annual Reviews 54 6.8 Notices 55 6.9 Environmental Laws 56 6.10 Further Assurances 56 6.11 Cash Management System 56 6.12 Additional Collateral 56 6.13 Tax Stamp Bonding. 57 6.14 Compliance with Terms of Leaseholds. 57 SECTION 7. NEGATIVE COVENANTS 58 7.1 Financial Condition Covenants 58 7.2 Limitation on Indebtedness 60 7.3 Limitation on Liens 61 7.4 Limitation on Guarantee Obligations 62 7.5 Limitation on Fundamental Changes 62 7.6 Limitation on Sale of Assets 63 7.7 Limitation on Speculative Transactions 64 7.8 Limitation on Dividends 64 7.9 Limitation on Capital Expenditures 64 7.10 Limitation on Investments, Loans and Advances 64 7.11 Limitation on Optional Payments and Modifications of Debt Instruments 65 7.12 Limitation on Transactions with Affiliates 65 7.13 Limitation on Sales and Leasebacks 66 7.14 Limitation on Changes in Fiscal Year 66 7.15 Limitation on Negative Pledge Clauses 66 - ii - 7.16 LIMITATION ON LINES OF BUSINESS 66 SECTION 8. EVENTS OF DEFAULT 66 SECTION 9. THE ADMINISTRATIVE AGENT 69 9.1 Appointment 69 9.2 Delegation of Duties 70 9.3 Exculpatory Provisions 70 9.4 Reliance by Administrative Agent 70 9.5 Notice of Default 70 9.6 Non-Reliance on Administrative Agent and Other Lenders 71 9.7 Indemnification 71 9.8 Administrative Agent in Its Individual Capacity 72 9.9 Successor Administrative Agent 72 SECTION 10. MISCELLANEOUS 72 10.1 Amendments and Waivers 72 10.2 Notices 73 10.3 No Waiver; Cumulative Remedies 74 10.4 Survival of Representations and Warranties 74 10.5 Payment of Expenses and Taxes 74 10.6 Successors and Assigns; Participations and Assignments 75 10.7 Adjustments; Set-off 77 10.8 Counterparts 78 10.9 Severability 78 10.10 Integration 78 10.11 GOVERNING LAW 78 10.12 Submission To Jurisdiction; Waivers 78 10.13 Acknowledgements 79 10.14 WAIVERS OF JURY TRIAL 79 10.15 Judgment Currency 79 10.16 Confidentiality 80 - iii - SCHEDULES 1.1(a) Commitments 4.2 Changes 4.4 Consents 4.6 Litigation 4.8 Ownership of Property; Liens 4.9 Intellectual Property 4.11 Taxes 4.13 ERISA 4.15 Subsidiaries 4.17 Environmental Matters 4.19(b) Security Documents; Offices 7.2 Indebtedness 7.3 Liens 7.4 Guarantee Obligations EXHIBITS Exhibit A Form of Revolving Credit Note Exhibit B Form of Term Note Exhibit C Form of Security Agreement Exhibit D Form of Borrower Stock Pledge Agreement Exhibit E Form of Subsidiaries Guarantee Exhibit F Form of Borrowing Base Certificate Exhibit G Form of Borrowing Certificate Exhibit H Form of Responsible Officer's Certificate Exhibit I Form of Supplemental Reporting Exhibit J-1 Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison Exhibit J-2 Form of Opinion of Sheppard, Mullin, Richter & Hampton, LLP Exhibit J-3 Form of Opinion of Stoel, Rives, Boley Fraser & Wyse Exhibit J-4 Form of Opinions of Stikeman, Elliott; and Thompson Dorfman Sweatman Exhibit K Form of Assignment and Acceptance - iv - 1 CREDIT AGREEMENT, dated as of August 7, 1996, among CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties to this Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as administrative agent for the Lenders hereunder. The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chase Manhattan Bank in connection with extensions of credit to debtors); "BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "BOARD") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in 2 the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ABR LOANS": Loans the rate of interest applicable to which is based upon the ABR. "ACCOUNT": as defined in Section 9-106 of the UCC. "ADMINISTRATIVE AGENT": Chase, together with its affiliates, as the arranger of the Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents. "AFFILIATE": as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "AGGREGATE COVERED OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": at any date of determination, the excess of (a) the Aggregate Outstanding Revolving Extensions of Credit over (b) the lesser of the L/C Obligations then outstanding and the Uncovered L/C Amount. "AGGREGATE OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans then outstanding and (b) the L/C Obligations then outstanding. "AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "APPLICATION": an application, in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to open a Letter of Credit. "ASSIGNEE": as defined in subsection 10.6(c). "AVAILABLE REVOLVING CREDIT COMMITMENTS": at any time, an amount equal to the excess, if any, of (a) the Revolving Credit Commitments over (b) the Aggregate Outstanding Revolving Extensions of Credit. "BORROWER SECURITY DOCUMENTS": the collective reference to the Security Agreement and the Borrower Stock Pledge Agreement. "BORROWER STOCK PLEDGE AGREEMENT": the Borrower Stock Pledge Agreement to be executed and delivered by the Borrower, substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time. 3 "BORROWING BASE": on any date of determination thereof, the sum (without duplication) of: a. 85% of the aggregate Eligible Accounts Receivable; b. 90% of the aggregate Uncleared US Checks; c. 85% of the excess of the aggregate Eligible Canadian Cash Equivalents over the Canadian Cash Adjustment; d. 75% of the aggregate Eligible Vendor Receivables; e. 85% of the aggregate Eligible Cigarette Inventory purchased by the Borrower on zero day EFT terms; f. 65% of the aggregate Eligible Cigarette Inventory purchased by the Borrower on terms other than zero day EFT terms; g. 80% of the aggregate Eligible Tobacco and Cigar Inventory; h. 65% of the aggregate Eligible Other Inventory; and i. 100% of the aggregate cash held by the Administrative Agent in the US Cash Collateral Account. All determinations in connection with the Borrowing Base shall be (i) made by the Borrower in conjunction with the Borrowing Base Certificates and Supplemental Reportings to be provided by the Borrower to the Administrative Agent pursuant to subsection 6.2(f), (ii) made by the Borrower in Dollars, and any amounts determined in Canadian dollars shall, for purposes of calculating the Borrowing Base, be converted into Dollars at the Spot Rate and (iii) certified to the Administrative Agent by a Responsible Officer of the Borrower, provided, however, that the Administrative Agent shall have the final right to review and adjust, in its reasonable judgment, any such determination to the extent such determination is not in accordance with this Agreement. The Administrative Agent may also decrease any of the foregoing percentages upon ten Business Days' written notice to the Borrower if, in the judgment of the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7, a material adverse change shall have occurred in any of the items included in the Borrowing Base. "BORROWING BASE CERTIFICATE": a certificate delivered by the Borrower to the Administrative Agent pursuant to subsection 6.2(f) and certified by a Responsible Officer of the Borrower, substantially in the form of Exhibit F. "BORROWING DATE": any Business Day specified in a notice pursuant to subsection 2.2 or 2.6 as a date on which the Borrower requests the Lenders to make Loans hereunder. "BUSINESS": as defined in subsection 4.17. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. 4 "CANADIAN CASH ADJUSTMENT": as of any date of determination, the aggregate total of all checks written and outstanding, payable to Canadian government cigarette tax jurisdictions, for amounts owing to them related to cigarette sales or purchases. "CANADIAN CASH COLLATERAL ACCOUNT": has the meaning specified in the Security Agreement. "CANADIAN CASH EQUIVALENTS": means (i) any term deposit receipts of the Bank of Montreal having a maturity of not greater than 90 days from the date of acquisition thereof, (ii) cash owned by the Borrower or any of its Subsidiaries and denominated in Canadian dollars and (iii) subject to the receipt by the Administrative Agent of a written legal opinion in form and substance and from a firm satisfactory to the Administrative Agent and its counsel to the effect that the Administrative Agent and the Lenders would have a perfected security interest in such items, the following items having a maturity of not greater than 90 days from the date of acquisition thereof: (a) readily marketable direct obligations of the Government of Canada or any province thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of Canada; (b) insured certificates of deposit, deposit notes or term deposit receipts of any commercial bank listed on Schedule 1 of the Bank Act (Canada); or (c) commercial paper in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of Canada or any province thereof and rated at least A-1 or better (or the then equivalent grade) by Canada Bond Rating Service or R-2 (middle) or better (or the then equivalent grade) by Dominion Bond Rating Service. "CAPITAL STOCK": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "CASH INTEREST EXPENSE": of any Person for any period, Interest Expense of such Person for such period (a) minus, in each case to the extent included in determining such Interest Expense for such period, the sum of the following: (i) non-cash expenses for interest payable in kind and (ii) amortization of debt discount and fees and (iii) the fees described in subsections 2.3 and 3.3 and (b) plus the sum of the following in each case to the extent previously subtracted pursuant to clause (a) of this definition: cash payments made by such Person or any Subsidiary of such Person during such period in respect of the items referred to in such clause (a)(i). "C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable 5 successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any successor)for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States. "C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) (the "Board"), for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "CHASE": The Chase Manhattan Bank. "CIGARETTE INVENTORY": the cigarette Inventory of the Borrower and its Subsidiaries, including all tax stamps (whether affixed or unaffixed) in respect thereof. "CLOSING DATE": the date on which the conditions precedent set forth in subsection 4.1 shall be satisfied. "CMIC": Core-Mark Interrelated Companies, Inc., a California corporation and a wholly-owned Subsidiary of the Borrower. "CM MIDCONTINENT": Core-Mark Midcontinent, Inc., an Arkansas corporation and a wholly-owned Subsidiary of the Borrower. "C/M PRODUCTS": C/M Products, Inc., a California corporation and a wholly-owned Subsidiary of the Borrower. "CODE": the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL": all assets of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "COLLECTION ACCOUNTS": has the meaning specified in the Security Agreement. "COLLECTION ACCOUNTS LETTERS": has the meaning specified in the Security Agreement. "COMMERCIAL LETTER OF CREDIT": as defined in subsection 3.1(b)(1)(B). "COMMITMENT PERIOD": the period from and including the date hereof to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "COMMITMENTS": the collective reference to the Revolving Credit Commitments and the Term Loan Commitments. 6 "COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "CONSOLIDATED": when used in connection with any defined term, and not otherwise defined, means such term as it applies to the Borrower and its Subsidiaries on a consolidated basis, after eliminating all intercompany items. "CONSOLIDATED WORKING CAPITAL": as of the date of determination, Current Assets of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in conformity with GAAP, minus Current Liabilities of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in conformity with GAAP. "CONTRACTUAL OBLIGATION": as to any Person, any provision of any security issued by such Person or any provision applicable to such Person of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "CONTROL PERCENTAGE": means 51%, provided that such percentage may be reduced but not below 35%, if prior to or concurrently with such reduction, the following conditions have been satisfied: (1) there has been an initial public offering of the common stock of the Borrower, (2) the Term Loans shall have been repaid in full, (3) the Uncovered L/C Amount shall have been permanently reduced to zero, (4) the Overadvance Limit shall have been permanently reduced to zero and (5) the lesser of (x) the available Borrowing Base and (y) the Available Revolving Credit Commitments shall be at least $15,000,000 determined on a pro forma basis giving effect to the transaction that causes such reduction on the basis of the average amount of the Borrowing Base and the Aggregate Outstanding Revolving Extensions of Credit, respectively, during the calendar month preceding the month in which such transaction occurs. "CURRENT ASSETS": of any Person, at the date of determination, all assets of such Person which would, in accordance with GAAP (using the first-in, first-out inventory valuation method), be classified on a balance sheet of such Person as current assets, other than deferred taxes. "CURRENT LIABILITIES": of any Person, at the date of determination, all liabilities of such Person which would, in accordance with GAAP (using the first-in, first-out inventory valuation method), be classified on a balance sheet of such Person as current liabilities, other than deferred taxes and the current portion of any long-term Indebtedness of such Person. "CUSTOMER REBATE RESERVES": $100,000 for rebates to customers subject to change by the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7. 7 "DEFAULT": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DEPOSIT ACCOUNT LETTERS": has the meaning specified in the Security Agreement. "DEPOSIT ACCOUNTS": has the meaning specified in the Security Agreement. "DEPOSITORY LETTERS": has the meaning specified in the Security Agreement. "DOLLARS" and "$": dollars in lawful currency of the United States of America. "EBITDA": means with respect to any Person, for any period, the Net Income of such Person for such period determined on a consolidated basis, plus, to the extent deducted in determining such Net Income, (i) Interest Expense, (ii) depreciation, (iii) depletion, (iv) amortization, (v) all Federal, state, local and foreign income taxes and (vi) any extraordinary and unusual losses, and, minus, to the extent added in determining such Net Income, any extraordinary and unusual gains, all as determined on a consolidated basis in accordance with GAAP using the first-in, first-out inventory valuation method. "EFT": electronic funds transfer. "ELIGIBLE ACCOUNTS RECEIVABLE": at a particular date, the total outstanding balance of accounts receivable before bad debt reserves historically recorded by the Borrower, determined in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower as of the date thereof (but excluding in any event any material delivery charges, freight charges, finance charges, late fees and other fees and less the value of any accrual which has been recorded by the Borrower with respect to downward price adjustments) of the Borrower or any of its Subsidiaries (excluding Vendor Receivables): (a) which are accounts within the meaning of Section 9-106 of the New York Uniform Commercial Code (or any successor provisions thereto), (b) which are bona fide, valid and legally enforceable obligations of the parties thereto or the account debtor in respect thereof and arise from the actual sale of goods in the ordinary course of business to such account debtor or parties, (c) with respect to which all consents, licenses, approvals or authorizations of, or registrations or declarations with, any Governmental Authority required to be obtained, effected or given in connection with the execution, delivery and performance of such accounts receivable have been duly obtained, effected or given, are in full force and effect and do not subject the scope of such Accounts to any materially adverse limitation, either specific or general in nature, (d) which conform in all other respects to the representations and warranties contained herein and in the Security Agreement, (e) which have been invoiced by the Borrower or any of its Subsidiaries and which are not more than 45 days past due, (f) which are not owed by an obligor which is (i) a Governmental Authority, or (ii) an Affiliate or Subsidiary of the Borrower, (g) which are not owed by an obligor which has taken any of the actions or suffered any of the events of the kind described in subsection 8(f), (h) which are not owed by an obligor 8 25% or more of the outstanding balance of accounts receivable of which do not constitute Eligible Accounts Receivable hereunder, (i) which are assignable and subject to a perfected, first-priority Lien in favor of the Administrative Agent pursuant to the Security Agreement and which are not subject to any other Liens except Liens permitted under subsection 7.3(a), (b) or (h), (j) which are not owed by an obligor with terms greater than 45 days, (k) which the Borrower is not required to perform any additional services or perform or incur any additional obligations to the account debtor in order to collect such accounts receivable, (l) which are not subject to any defense, setoff, recoupment or counterclaim, (m) to which the Borrower or any of its Subsidiaries has good, valid and marketable title as sole owner and as to which no other Person has asserted in writing any claim to right of possession or dominion, (n) the obligor in respect of which is located in the United States of America or in Canada, (o) which is denominated in Dollars or in Canadian dollars, and (p) which the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7 has not otherwise determined to be unacceptable, EXCLUDING the aggregate amount of Receivable Offsets and Customer Rebate Reserves and the aggregate amount owing to any obligor who is a supplier or creditor of the Borrower or any of its Subsidiaries to the extent that there is a receivable balance due from such obligor that would otherwise constitute an Eligible Accounts Receivable. "ELIGIBLE CANADIAN CASH EQUIVALENTS": at a particular date, the total value of Canadian Cash Equivalents credited to the Canadian Cash Collateral Account and the Deposit Accounts in accordance with subsection 6.11. "ELIGIBLE CIGARETTE INVENTORY": at a particular date, the total value of the Cigarette Inventory of the Borrower and its Subsidiaries (calculated as the lower of (x) cost, determined on a first in first out basis in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower on the date hereof before inventory reserves historically recorded by the Borrower and (y) fair market value) (a) which conforms in all respects to the representations and warranties contained herein and in the Security Agreement, (b) which is located in the United States of America, (c) which is subject to a perfected, first-priority Lien in favor of the Administrative Agent pursuant to the Security Agreement and which is not subject to any other Liens except Liens permitted under subsection 7.3 (a), (b) or (h), (d) which is stored in the Borrower's or any of its Subsidiaries' warehouses, which has been placed in the Borrower's or any of its Subsidiaries' storage area or allocated to the Borrower or any of its Subsidiaries in a third-party warehouse and identified separately from the inventory of others, or which is in transit between such third-party warehouses and Borrower's or any of its Subsidiaries' warehouses, (e) to which the Borrower or any of its Subsidiaries has good, valid and marketable title as sole owner and as to which no other Person has asserted in writing any claim to right of possession or dominion, (f) which is not raw materials, supplies, work-in- process or packaging, packing or shipping materials, and (g) which the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7 has not otherwise determined to be unacceptable, excluding the aggregate amount of the Inventory Reserves, Tax Reserves and Landlord Lien Reserves allocable to such Inventory. 9 "ELIGIBLE OTHER INVENTORY": at a particular date, the total value of Inventory of the Borrower and its Subsidiaries (calculated as the lower of (x) cost, determined on a first in a first out basis in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower on the date hereof before inventory reserves historically recorded by the Borrower, and (y) fair market value: (a) which does not consist of Tobacco Products Inventory, (b) which does not consist of fresh produce, fresh meat or dairy products in an aggregate amount in excess of $250,000, (c) which conforms in all respects to the representations and warranties contained herein and in the Security Agreement, (d) which is located in the United States of America, (e) which is subject to a perfected, first- priority Lien in favor of the Administrative Agent pursuant to the Security Agreement and which is not subject to any other Liens except Liens permitted under subsection 7.3 (a), (b) or (h), (f) which is stored in the Borrower's or any of its Subsidiaries' warehouses, which has been placed in the Borrower's or any of its Subsidiaries' storage area or allocated to the Borrower or any of its Subsidiaries in a third-party warehouse and identified separately from the inventory of others, or which is in transit between such third-party warehouses and Borrower's or any of its Subsidiaries' warehouses, (g) to which the Borrower or any of its Subsidiaries has good, valid and marketable title as sole owner and as to which no other Person has asserted in writing any claim to right of possession or dominion, (h) which is not raw materials, supplies, work-in- process or packaging, packing or shipping materials, and (i) which the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7 has not otherwise determined to be unacceptable, excluding the aggregate amount of the Inventory Reserves, Tax Reserves and Landlord Lien Reserves allocable to such Inventory. "ELIGIBLE TOBACCO AND CIGAR INVENTORY": at a particular date, the total value of the Tobacco and Cigar Inventory of the Borrower and its Subsidiaries (calculated as the lower of (x) cost, determined on a first in first out basis in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower on the date hereof before inventory reserves historically recorded by the Borrower, and (y) fair market value): (a) which is not Eligible Cigarette Inventory, (b) which conforms in all respects to the representations and warranties contained herein and in the Security Agreement, (c) which is located in the United States of America, (d) which is subject to a perfected, first-priority Lien in favor of the Administrative Agent pursuant to the Security Agreement and which is not subject to any other Liens except Liens permitted under subsection 7.3 (a), (b) or (h), (e) which is stored in the Borrower's or any of its Subsidiaries' warehouses, which has been placed in the Borrower's or any of its Subsidiaries' storage area or allocated to the Borrower or any of its Subsidiaries in a third-party warehouse and identified separately from the inventory of others, or which is in transit between such third-party warehouses and Borrower's or any of its Subsidiaries' warehouses, (f) to which the Borrower or any of its Subsidiaries has good, valid and marketable title as sole owner and as to which no other Person has asserted in writing any claim to right of possession or dominion, (g) which is not raw materials, supplies, work-in- process or packaging, packing or shipping materials, and (h) which the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7 has not otherwise determined to be unacceptable, EXCLUDING the aggregate amount of the 10 Inventory Reserves, Tax Reserves and Landlord Lien Reserves allocable to such Inventory. "ELIGIBLE VENDOR RECEIVABLES": at a particular date, the total outstanding balance of Vendor Receivables of the Borrower and its Subsidiaries, determined in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower as of the date thereof (a) which are accounts within the meaning of Section 9-106 of the New York Uniform Commercial Code (or any successor provisions thereto), (b) which are bona fide, valid and legally enforceable obligations of the parties thereto or the account debtor in respect thereof and arise in the ordinary course of business to such account debtor or parties, (c) with respect to which all consents, licenses, approvals or authorizations of, or registrations or declarations with, any Governmental Authority required to be obtained, effected or given in connection with the execution, delivery and performance of such accounts receivable have been duly obtained, effected or given, are in full force and effect and do not subject the scope of such Accounts to any materially adverse limitation, either specific or general in nature, (d) which conform in all other respects to the representations and warranties contained herein and in the Security Agreement, (e) which are not owed by an obligor which is (i) a Governmental Authority, or (ii) an Affiliate or Subsidiary of the Borrower, (f) which are not owed by an obligor which has taken any of the actions or suffered any of the events of the kind described in subsection 8(f), (g) which are assignable and subject to a perfected, first-priority Lien in favor of the Administrative Agent pursuant to the Security Agreement and which are not subject to any other Liens except Liens permitted under subsection 7.3(a), (b) or (h), (h) which are not subject to any defense, setoff, recoupment or counterclaim, (i) to which the Borrower or any of its Subsidiaries has good, valid and marketable title as sole owner and as to which no other Person has asserted in writing any claim to right of possession or dominion, (j) the obligor in respect of which is located in the United States of America or in Canada, (k) which is denominated in Dollars or in Canadian dollars, and (l) which the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7 has not otherwise determined to be unacceptable, excluding (1) the aggregate amount owing to any obligor who is a supplier or creditor of the Borrower or any of its Subsidiaries to the extent that there is a receivable balance due from such obligor that would otherwise constitute an Eligible Vendor Receivable and (2) 50% of any Vendor Receivable due 180 days or more from the applicable date of determination. "ENVIRONMENTAL LAWS": any and all foreign, Federal, state, provincial, local or municipal laws, rules, guidelines, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of employee health and safety or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. 11 "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "EURODOLLAR BASE RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "EURODOLLAR LOANS": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "EURODOLLAR RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): EURODOLLAR BASE RATE 1.00 - Eurocurrency Reserve Requirements "EVENT OF DEFAULT": any of the events specified in Section 8, PROVIDED that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "EXCESS CASH FLOW": for any fiscal year of the Borrower, commencing with the fiscal year ending December 31, 1996, the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA of the Borrower for such fiscal year, (ii) the amount of any refund received by the Borrower and its Subsidiaries during such fiscal year on income taxes paid by the Borrower and its Subsidiaries to the extent not included in Consolidated EBITDA for such fiscal year, (iii) cash dividends, cash interest and other similar cash payments received by the Borrower during such fiscal year in respect of investments to the extent not included in Consolidated EBITDA for such fiscal year, (iv) extraordinary cash gains to the extent subtracted or otherwise not included in Consolidated EBITDA for such fiscal year, (v) decreases in Consolidated Working Capital (other than decreases in cash or US or Canadian Cash Equivalents) over (b) the sum, without duplication, of (i) the aggregate amount of capital expenditures on a consolidated basis made by the Borrower and its Subsidiaries during such fiscal year and not financed, (ii) the aggregate amount of all reductions of the Revolving Credit Commitments (to the extent such reductions are required by the terms of this Agreement to be accompanied by prepayment of Revolving Credit 12 Loans) or payments or prepayments of the Term Loans during such fiscal year other than pursuant to subsection 2.9(a), (b), (c) or (d), (iii) the aggregate amount of payments of principal of in respect of any Indebtedness (other than under this Agreement) permitted hereunder during such fiscal year (other than in respect of Existing Subordinated Debt), (iv) Consolidated Cash Interest Expense of the Borrower for such fiscal year, (v) the fees described in subsections 2.3 and 3.3 and the fees and expenses incurred in connection with the Recapitalization and the financing thereof and in connection with the offering of the High Yield Notes, (vi) taxes actually paid in such fiscal year or to be paid in the subsequent fiscal year on account of such fiscal year to the extent added to Consolidated Net Income to determine Consolidated EBITDA for such fiscal year, (vii) extraordinary cash payments or losses to the extent not subtracted in the determination of Consolidated EBITDA for such fiscal year, (viii) payments made by the Borrower or its Subsidiaries in respect of pension and other retirement benefits (to the extent not included in Consolidated EBITDA) and cash payments made to customers at the commencement of multi-year supply contracts (to the extent not included in Consolidated EBITDA), (ix) the aggregate amount of cash used for Permitted Acquisitions made by the Borrower during such fiscal year, and (x) increases in Consolidated Working Capital (other than increases in cash or US or Canadian Cash Equivalents). "EXISTING CREDIT FACILITY": the Credit Agreement, dated as of March 2, 1995 among the Borrower, the lenders named therein, Citibank, N.A., as U.S. and Canadian Issuing Bank, Citicorp USA, Inc., as Agent and Swing Line Bank and Citicorp Securities, Inc., as arranger, as heretofore amended, supplemented or otherwise modified. "EXISTING SUBORDINATED DEBT": Indebtedness of the Borrower evidenced by promissory notes issued to the Shareholders on the date hereof in an aggregate principal amount not to exceed $25 million, which Indebtedness shall be subordinated in all respects to all amounts due and owing to the Administrative Agent and the Lenders under this Agreement and the other Loan Documents in form and substance satisfactory to the Administrative Agent and the Lenders in all respects as contemplated pursuant to the Recapitalization Documents. "FINANCING LEASE": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "GAAP": generally accepted accounting principles in the United States of America in effect from time to time. "GOVERNMENTAL AUTHORITY": any nation or government, any state, province or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "GUARANTOR": any Person delivering the Subsidiaries Guarantee pursuant to this Agreement. "HEDGE AGREEMENTS": means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "HIGH YIELD NOTES": as defined in subsection 7.2(h). "INDEBTEDNESS": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of outstanding letters of credit, acceptances and similar obligations created for the account of such Person, (e) all obligations of such Person under Hedge Agreements and (f) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "INSOLVENCY": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. 14 "INSOLVENT": pertaining to a condition of Insolvency. "INSTALLMENT PAYMENT DATE": as defined in subsection 2.7(a). "INTELLECTUAL PROPERTY": the collective reference to Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses, in each case, as defined in the Security Agreement. "INTEREST EXPENSE": of any Person for any period the amount of interest expense, both expensed and capitalized, of such Person, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of its Indebtedness. "INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; PROVIDED that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Termination Date or, in the case of Interest Periods applicable to Term Loans, beyond the date final payment is due on the Term Loans shall end on the Termination Date or such date of final payment, as the case may be; 15 (3) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (4) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "INTERIM ADJUSTMENTS": means, that for the first three fiscal quarters following the Closing Date, the ratio to be calculated pursuant to subsection 7.1(e) which ratio shall be calculated using the adjustments and assumptions regarding Cash Interest Expense set forth below: (i) for the partial fiscal quarter ending September 30, 1996, Cash Interest Expense for the twelve month period for which the ration is being calculated shall be deemed to be the result obtained by adding (x) the actual Cash Interest Expense for the period from the Closing Date through the last day of such fiscal quarter and (y) $11,100,000, (ii) for the full fiscal quarter ending December 31, 1996, Cash Interest Expense for the twelve month period for which the ratio is being calculated shall be deemed to be the result obtained by adding (x) the actual Cash Interest Expense for the period from the Closing Date through the last day of such fiscal quarter and (y) $7,400,000 and (iii) for the full fiscal quarter ending March 31, 1997, Cash Interest Expense for the twelve month period for which the ratio is being calculated shall be deemed to be the result obtained by adding (x) the actual Cash Interest Expense for the period from the Closing Date through the last day of such fiscal quarter and (y) $3,700,000. "INVENTORY": as defined in Section 9-109(4) of the UCC. "INVENTORY RESERVE": with respect to any Inventory of the Borrower and its Subsidiaries, determined on a first in first out basis in accordance with GAAP and stated on a basis consistent with the historical practices of the Borrower on the date hereof, which intent is to record a deterioration in Inventory value for damaged, unsalable in the ordinary course or otherwise unmerchantable items or which have been held for more than six months in the case of Tobacco Products Inventory or more than twelve months in the case of other Inventory or is stale. "ISSUING BANK": Chase or an Affiliate of Chase designated by it, in its capacity as issuer of any Letter of Credit; initially, Chase Manhattan Bank Delaware. "LANDLORD LIEN RESERVES": at any time, the aggregate amount of any and all past due and current amounts then owing by the Borrower and its Subsidiaries to landlords in respect of their warehouse facilities. "L/C COMMITMENT": at any date of determination the lesser of $40,000,000 and Revolving Credit Commitments at such date. 16 "L/C FEE PAYMENT DATE": the last day of each March, June, September, and December, and the Termination Date. "L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5(a). "L/C PARTICIPANTS": the collective reference to all the Lenders with Revolving Credit Commitments other than the Issuing Bank. "LEASE EXPENSE": for any Person for any period, the aggregate amount of fixed and contingent rentals payable by such Person for such period with respect to leases of real and personal property. "LETTERS OF CREDIT": as defined in subsection 3.1(a). "LIEN": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "LOAN": any loan made by any Lender pursuant to this Agreement. "LOAN DOCUMENTS": this Agreement, any Notes, the Applications, any Letters of Credit, the Subsidiaries Guarantee and the Security Documents "LOAN PARTIES": the Borrower and each Subsidiary of the Borrower which is a party to a Loan Document. "MAJORITY LENDERS": at any time, Lenders the Voting Percentages of which aggregate more than 50%. "MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. 17 "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET INCOME": of any Person for any period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "NET PROCEEDS": (a) with respect to any sale, lease or other disposition of assets (other than Inventory sold, leased or otherwise disposed of in the ordinary course of business) aggregating $500,000 or more by the Borrower or any of its Subsidiaries, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such sale or other disposition MINUS the sum of (i) the reasonable and documented fees, commissions and other out-of-pocket expenses (including, without limitation, fees and expenses of attorneys, accountants, appraisers, title examiners, service companies and environmental consultants) incurred by the Borrower and its Subsidiaries and payable to Persons other than Affiliates in connection with such sale or other disposition (including, in connection with the repayment or amendment of any Indebtedness which is secured in whole or in part by such assets) and (ii) federal, state, local and foreign taxes incurred by the Borrower and its Affiliates in connection with such sale; (b) with respect to any issuance of any Indebtedness by the Borrower, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such issuance MINUS the reasonable and documented fees, commissions and other out-of-pocket expenses incurred by the Borrower in connection with such issuance; and (c) with respect to proceeds received by the Borrower or any of its Subsidiaries from any insurance policies as a result of a casualty, the amount of such proceeds MINUS the reasonable and documented out-of-pocket fees and expenses incurred by the Borrower and its Subsidiaries in connection with the collection of such proceeds. "NET WORTH": means, with respect to any Person as of any date of determination, the stockholder's equity of such Person as of such date, without giving effect to any cumulative gains or losses from foreign currency translations PLUS minority interests of such Person as of such date, in each case determined on a Consolidated basis and in accordance with GAAP using the first-in, first-out inventory valuation method (excluding any additional minimum pension liability). "NON-EXCLUDED TAXES": as defined in subsection 2.17. "NOTES": the collective reference to the Revolving Credit Notes and the Term Notes. 18 "OVERADVANCE AMOUNT": at any date of determination the excess, if any, of the Aggregate Covered Outstanding Revolving Extensions of Credit over the Borrowing Base at such date. "OVERADVANCE LIMIT": $10,000,000 as such amount may be reduced pursuant to subsection 2.9(f). "PARTICIPANT": as defined in subsection 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PERMITTED ACQUISITION": shall mean any acquisition of all or substantially all the assets of, or shares or other equity interests in, a Person or division or line of business of a Person or other significant assets of a Person (other than inventory, leases, materials and equipment in the ordinary course of business) if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) all transactions related thereto shall be consummated in all material respects in accordance with applicable laws, (c) 100% of the Capital Stock of any acquired or newly formed corporation, partnership, association or other business entity are owned directly by the Borrower or a Subsidiary and all actions required to be taken, if any, with respect to such acquired or newly formed subsidiary under subsections 6.10 and 6.12 shall have been taken, (d)(i) the Borrower shall be in compliance, on a PRO FORMA basis after giving effect to such acquisition or formation, with the covenants contained in subsection 7.1 recomputed as at the last day of the most recently ended fiscal quarter of the Borrower as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect, together with all relevant financial information for such subsidiary or assets (to the extent reasonably available), and (ii) after giving effect to such transaction, any acquired or newly formed subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by subsection 7.2) and (e) the Borrower shall have delivered to the Administrative Agent monthly projections on a PRO FORMA basis after giving effect to such acquisition or formation, for each of the twelve months following the proposed date of such acquisition or formation, which projections shall indicate that (i) the Borrower would be in compliance with the covenants contained in subsection 7.1 recomputed as of the last day of the most recently ended month as if such acquisition had occurred on the first day of each month for testing such compliance and (ii) the average amount of the lesser of (1) the available Borrowing Base and (2) the Available Revolving Credit Commitments shall be at least $15,000,000 during such 12 month period and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect, PROVIDED, that clauses (d)(i) and (e) above shall not apply to any acquisition the aggregate amount of which is less than $2,000,000 unless and until all such acquisitions which are less than $2,000,000 exceed $5 million in the aggregate during the term of this Agreement. 19 "PERSON": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PROPERTIES": as defined in subsection 4.17. "RECAPITALIZATION": The resulting ownership of the Borrower after the consummation of the transactions contemplated by Recapitalization Documents. "RECAPITALIZATION DOCUMENTS": the Stock Subscription Agreement by and between CM/J Acquisition, LLC and Core-Mark International, Inc., dated June 17, 1996, as amended by Amendment No. 1 thereto, dated as of August 7, 1996 (the "Stock Subscription Agreement") and the Company/LLC Purchase Agreement as defined in the Stock Subscription Agreement. "RECEIVABLE OFFSETS": the aggregate credit balances of the Borrower (determined on an account debtor by account debtor basis) more than 45 days past due. "REGISTER": as defined in subsection 10.6(d). "REGULATION U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "REIMBURSEMENT OBLIGATION": the obligation of the Borrower to reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts drawn under Letters of Credit. "REORGANIZATION": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "REPORTABLE EVENT": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. 2615 or other PBGC regulations or guidance. "REQUIREMENT OF LAW": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 20 "RESPONSIBLE OFFICER": the chief executive officer, the president, or the executive vice president of the Borrower or, with respect to financial matters, the chief financial officer, the treasurer or the Controller of the Borrower. "RESPONSIBLE OFFICER'S CERTIFICATE": as defined in subsection 6.2(b). "REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of such Lender to make Revolving Credit Loans to and/or issue or participate in Letters of Credit issued on behalf of the Borrower hereunder in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a) under the heading "Revolving Credit Commitment", as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted from time to time pursuant to subsection 10.6; collectively, as to all such Lenders, the "Revolving Credit Commitments". "REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage of the Revolving Credit Commitments then constituted by such Lender's Revolving Credit Commitment and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender's Revolving Credit Loans then outstanding plus (y) the product of such Lender's Revolving Credit Commitment Percentage immediately prior to the termination of the Revolving Credit Commitments (after giving effect to any permitted assignment pursuant to subsection 10.6) times the L/C Obligations then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Revolving Credit Loans of all the Lenders then outstanding plus (y) the aggregate L/C Obligations then outstanding. "REVOLVING CREDIT LOANS": as defined in subsection 2.1. "REVOLVING CREDIT NOTE": as defined in subsection 2.7(e). "SECURITY AGREEMENT": the Security Agreement to be executed and delivered by the Borrower and each of the Subsidiaries, substantially in the form of Exhibit C, as the same may be amended, supplemented or otherwise modified from time to time. "SECURITY DOCUMENTS": the collective reference to the Security Agreement, the Borrower Stock Pledge Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities. "SENIOR DEBT": at any date of determination, Total Debt of the Borrower and its Subsidiaries outstanding at such date of determination minus all Subordinated Debt (including, without limitation, the Existing Subordinated Debt) of the Borrower and its Subsidiaries outstanding at such date of determination, as determined on a consolidated basis in accordance with GAAP. 21 "SHAREHOLDERS": the Shareholders of the Borrower subsequent to the Recapitalization, including, Jupiter Partners, L.P., a Delaware limited partnership, Gary L. Walsh, Robert A. Allen, Leo F. Korman, J. Michael Walsh, Basil P. Prokop and Leo Granucci. "SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SOLVENT": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "SPOT RATE": the rate of exchange quoted by the Administrative Agent on such date of determination (at the hour on such date of determination at which it customarily makes such determination) to prime banks in the interbank market where its foreign currency exchange operations in respect of Canadian Dollars are then being conducted for the spot purchase of Canadian Dollars with Dollars. "STANDBY LETTER OF CREDIT": as defined in subsection 3.1(b)(1)(A). "SUBORDINATED DEBT": any unsecured Indebtedness of the Borrower no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to July 1, 2001; the payment of the principal of and interest on which and other obligations of the Borrower in respect thereof are subordinated to the prior payment in full of the principal of and interest (including post-petition interest) on the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent and the Lenders hereunder on terms and conditions approved in writing by the Administrative Agent; and all other terms and conditions of which are satisfactory in form and substance to the Administrative Agent. "SUBSIDIARIES GUARANTEE": the Guarantee to be executed and delivered by each Subsidiary, substantially in the form of Exhibit E, as the same may be amended, supplemented or otherwise modified from time to time. 22 "SUBSIDIARY": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to C/M Products, CMIC and/or CM Midcontinent, the only active Subsidiaries of the Borrower. "SUPPLEMENTAL REPORTING": the reports, accounting records and analyses delivered by the Borrower to the Administrative Agent pursuant to subsection 6.2(f) and certified by a Responsible Officer, as described in Exhibit I. "TAX RESERVES": at any time, all unpaid and unbonded state and local municipality tax stamp liabilities. "TERMINATION DATE": June 30, 2001. "TERM LOAN": as defined in subsection 2.5. "TERM LOAN COMMITMENT": as to any Lender, its obligation to make a Term Loan to the Borrower in an amount equal to the amount set forth opposite such Lender's name in Schedule 1.1(a) under the heading "Term Loan Commitment", as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted from time to time pursuant to subsection 10.6; collectively, as to all such Lenders, the "Term Loan Commitments". "TERM LOAN COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage of the Term Loan Commitments then constituted by such Lender's Term Loan Commitment (or, after the Term Loans are made, the percentage of the aggregate Term Loans then constituted by such Lender's Term Loan). "TERM NOTE": as defined in subsection 2.7(e). "TOBACCO AND CIGAR INVENTORY": the cigar, chewing tobacco and other tobacco products Inventory of the Borrower and its Subsidiaries in respect thereof (excluding items classified as Cigarette Inventory). "TOBACCO PRODUCTS INVENTORY": collectively, Cigarette Inventory and Tobacco and Cigar Inventory. "TOTAL DEBT": at any date of determination, all Indebtedness of the Borrower and its Subsidiaries outstanding at such date of determination (other than Indebtedness of the type set forth in clauses (d) (with respect to letters of credit only), (e) and (f) in the definition thereof in subsection 1.1) as determined on a consolidated basis in accordance with GAAP. 23 "TRANCHE": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "TRANSFEREE": as defined in subsection 10.6(f). "TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "UCC": the Uniform Commercial Code as in effect in the State of New York from time to time. "UNCLEARED US CHECKS": at a particular date, uncollected funds held to the account of the Borrower in the Depository Accounts in respect of checks deposited therein but only to the extent that such checks have been deducted from accounts receivable on the books of the Borrower. "UNCOVERED L/C AMOUNT": $20,000,000 as such amount may be reduced in accordance with subsection 2.9(f). "UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "US CASH COLLATERAL ACCOUNT": has the meaning specified in the Security Agreement. "US CASH EQUIVALENTS": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("MOODY'S"), (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest primarily in assets satisfying the requirements of clauses (a) through (f) of this definition. 24 "VENDOR RECEIVABLES": at a particular date, amounts not subject to offset or counter-claim, that are owing to the Borrower and its Subsidiaries from vendors whose creditworthiness is reasonably satisfactory to the Administrative Agent, that relate to marketing and promotional incentive programs and manufacturing rights agreements historically offered to the Borrower and its Subsidiaries from such vendors and are payable in cash. "VOTING PERCENTAGE": as to any Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender's Revolving Credit Commitment plus (y) the outstanding principal amount of such Lender's Term Loan then constitutes of (ii) the sum of (x) the Revolving Credit Commitments of all the Lenders plus (y) the aggregate principal amount of Term Loans of all the Lenders then outstanding, and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) the principal amount of such Lender's Loans then outstanding plus (y) the product of such Lender's Revolving Credit Commitment Percentage times the L/C Obligations then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Loans of all the Lenders then outstanding plus (y) the aggregate L/C Obligations of all the Lenders then outstanding. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (e) Notwithstanding anything to the contrary herein, for purposes of making all calculations in connection with the covenants contained in Section 7, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the date of this Agreement consistently applied. In the event of any material difference at any time between GAAP in effect on the date of this Agreement and GAAP from time to time in effect, the certificate of a Responsible Officer required pursuant to subsection 6.2(b) shall include a reconciliation of the calculations required thereby with the financial statements being delivered with such certificate. 25 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("REVOLVING CREDIT LOANS") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Credit Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving Credit Commitment, provided that no Lender shall be required to make a Revolving Credit Loan to the extent that, after giving effect thereto, the Aggregate Covered Outstanding Revolving Extensions of Credit at such time would exceed the sum of the Borrowing Base and the Overadvance Limit at such time. During the Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans, or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.11, PROVIDED that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow under the Revolving Credit Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice which notice must be received by the Administrative Agent prior to 1:00 P.M., New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans (provided that any borrowing to be made on the Closing Date may only be ABR Loans), or (b) on the requested Borrowing Date, otherwise (or, in the case of a requested borrowing on the Closing Date, on the Closing Date), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) whether such Loans will result in an Overadvance Amount and (v) if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of such Loan and the length of the initial Interest Period therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Revolving Credit Commitments are less than $500,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 2:30 P.M., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 26 2.3 FEES. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate of 1/2 of 1% per annum on the average daily amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date as the Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. (b) The Borrower agrees to pay to the Administrative Agent on the Closing Date and on each anniversary thereof, the administration fee as specified in the Fee Letter dated July 3, 1996. 2.4 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower shall have the right, upon not less than five Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the Aggregate Outstanding Revolving Extensions of Credit would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $100,000 or a whole multiple thereof and shall reduce permanently the Revolving Credit Commitments then in effect. 2.5 TERM LOANS. Subject to the terms and conditions hereof, each Lender severally agrees to make a term loan (a "TERM LOAN") to the Borrower on the Closing Date in an amount equal to the Term Loan Commitment of such Lender. The Term Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans, or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.6 and 2.11. 2.6 PROCEDURE FOR TERM LOAN BORROWING. The Borrower hereby requests a Term Loan borrowing on the Closing Date in an amount equal to the aggregate amount of the Term Loan Commitments of the Lenders. The Term Loans shall initially be ABR Loans. Each Lender will make the amount of its pro rata share of the Term Loans available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 10:00 A.M., New York City time, on the Closing Date in Dollars and in funds immediately available to the Administrative Agent. The Administrative Agent shall credit the account of the Borrower on the books of such office of the Administrative Agent by 12:00 noon, New York City time, on the Closing Date, with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 2.7 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the then unpaid principal amount of each Revolving Credit Loan of such Lender on the Termination Date (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 8), and (ii) the principal amount of the Term Loan of such Lender, in eighteen (18) consecutive quarterly installments (each, an "Installment Payment 27 Date"), payable on the last day of each March, June, September and December, commencing on March 31, 1997 in an amount equal to such Lender's Term Loan Commitment Percentage of the following amounts: Installment Payment Date Amount of Installment ------------------------ --------------------- 3/31/97 - 6/30/97 $1,600,000 9/30/97 - 6/30/98 $1,800,000 9/30/98 - 6/30/2000 $1,950,000 9/30/00 - 6/30/2001 $2,250,000 (or the then unpaid principal amount of such Term Loan, on the date that the Term Loans become due and payable pursuant to Section 8). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.13. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain the Register pursuant to subsection 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan and Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.7(b), absent manifest error, shall, to the extent permitted by applicable law, be PRIMA FACIE evidence of the existence and amounts of the obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to such Borrower by such Lender in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender (i) a promissory note of the Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a "REVOLVING CREDIT NOTE"), and/or (ii) a promissory note of the Borrower evidencing the Term Loan of such Lender, substantially in the form of Exhibit B with appropriate insertions as to date and principal amount (a "TERM NOTE"). 28 2.8 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time to time, prepay the Loans, in whole or in part, without premium or penalty, (i) with respect to Eurodollar Loans, upon at least three Business Days' irrevocable notice to the Administrative Agent, specifying the date and amount of prepayment and (ii) with respect to ABR Loans, upon same day irrevocable notice if such notice is received by the Administrative Agent by 1:00 P.M., New York City time, on such day, specifying the date and amount of prepayment; and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Prepayments of Eurodollar Loans shall be subject to the provisions of subsection 2.20. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.20 and, in the case of prepayments of the Term Loans only, accrued interest to such date on the amount prepaid. Partial prepayments of the Term Loans shall be applied to the installments of principal thereof pro rata. Amounts prepaid on account of the Term Loans may not be reborrowed. Partial prepayments of ABR Loans shall be in an aggregate principal amount of a minimum of $500,000 and partial prepayments of Eurodollar Loans shall be in an aggregate principal amount of a minimum of $1,000,000. 2.9 MANDATORY PREPAYMENTS AND OTHER REDUCTIONS OF TERM LOANS. (a) On the day upon which any Loan Party receives Net Proceeds from the issuance of any Indebtedness (other than Indebtedness expressly permitted pursuant to subsection 7.2(a), (b), (c), (d), (e), (f), (g), (i), (j), (k), (l), (m) and (n)), the Borrower shall prepay the Term Loans in an amount equal to the lesser of 100% of the Net Proceeds of such issuance and the outstanding amount of the Term Loans. (b) In the event that any Loan Party sells, assigns, transfers, leases or otherwise disposes of any of its assets (other than dispositions expressly permitted by subsection 7.6), including, without limitation, as a result of a condemnation, no later than three Business Days after receipt of the Net Proceeds therefrom, the Borrower shall prepay the Term Loans in an amount equal to the lesser of 100% of such Net Proceeds and the outstanding amount of the Term Loans. (c) So long as any portion of the Term Loans remains outstanding, in the event that any Loan Party receives any proceeds from any insurance policies as a result of a casualty, no later than five Business Days after receipt of the Net Proceeds therefrom, the Loan Party shall either (i) prepay the Term Loans in an amount equal to the lesser of 100% of such Net Proceeds and the outstanding amount of the Term Loans or (ii) opt to apply such Net Proceeds towards the restoration of the damaged property with any surplus used to prepay the Term Loans; provided that in the event such Net Proceeds (1) equals or exceeds $500,000 but is less than $1 million, the Loan Party shall provide the Administrative Agent, within 20 Business Days after receipt of such Net Proceeds, with a written estimate (as to both time and expense) from the contractor that the Loan Party has hired to perform the restoration, and shall subsequently provide the Administrative Agent within two Business Days of receipt thereof by such Loan Party, with a final invoice from such contractor which indicates that the Loan Party has paid for such restoration in full; or (2) equals or exceeds $1 million, the Loan Party shall deposit such Net Proceeds into a cash collateral account to be maintained by and 29 in the sole dominion and control of the Administrative Agent, which funds may be used by the Borrower and its Subsidiaries, for a period of 360 days from the date such Net Proceeds are deposited into such account, solely to restore such damaged property after which time such proceeds shall be used in the manner provided in clause (i) above; and so long as no Default or Event of Default has occurred or is continuing, all such cash collateral shall be invested by the Administrative Agent as instructed by the Borrower and agreed to by the Administrative Agent in its reasonable discretion and the Borrower shall be entitled to receive all interest on such cash collateral. (d) On the earlier of (i) the receipt by the Lenders of the financial statements required to be delivered by the Borrower pursuant to subsection 6.1(a) and (ii) the 90th day of each fiscal year of the Borrower, the Borrower shall repay the Term Loans in an amount equal to the lesser of 75% of Excess Cash Flow for the preceding fiscal year of the Borrower (commencing with the fiscal year in which the Closing Date occurs) and the outstanding amount of the Term Loans. (e) Each prepayment of the Term Loans pursuant to this subsection 2.9 shall be accompanied by payment in full of all accrued fees and interest thereon to and including the date of such prepayment, together with any additional amounts owing pursuant to subsection 2.20. Each prepayment of the Term Loans required pursuant to this subsection 2.9 may not be reborrowed and shall be applied to the installments of principal thereof pro rata; provided, that prepayment of the Term Loans required pursuant to subsection 2.9(d) in connection with each fiscal year of the Borrower shall be applied first, to the installments of principal with scheduled maturities falling within the twelve months following the end of the fiscal year in respect of which such Excess Cash Flow has been derived in the direct order of maturity, and second, to any remaining amounts, pro rata. (f) To the extent that the Net Proceeds of any of the transactions referred to in subsection 2.9(a) (with respect to Indebtedness constituting High Yield Notes only) exceeds the sum of the outstanding amount of the Term Loans required to be prepaid pursuant to such subsection and the aggregate amount of Existing Subordinated Debt to be repaid with the proceeds thereof, an amount equal to such excess shall be applied to permanently reduce the Overadvance Limit. To the extent that (i) the Net Proceeds of any of the transactions referred to in subsections 2.9(a) (excluding Indebtedness constituting High Yield Notes), (b) or (c) or (ii) with respect to subsection 2.9(d), 75% of Excess Cash Flow for the preceding year, exceeds the outstanding amount of the Term Loans required to be prepaid pursuant to such subsections, an amount equal to such excess shall be applied first to permanently reduce the Uncovered L/C Amount to zero and any remaining excess to permanently reduce the Overadvance Limit. 2.10 Mandatory Prepayments and Other Reductions of Revolving Credit Loans. (a) The Borrower will repay the Revolving Credit Loans in an amount necessary to cause the Overadvance Amount to equal zero (1) during each calendar year, so that the Overadvance Amount is not above zero for an aggregate period of more than 45 days during such calendar year, (2) during the period of December 1 through January 31 of each two consecutive calendar years, so that the Overadvance Amount is not above zero for a period of 30 more than 20 consecutive days during such period and (3) during any time period in each calendar year except for the period described in (2) above, so that the Overadvance Amount is not above zero for a period of more than 10 consecutive days. (b) If, at any time, the Aggregate Covered Outstanding Revolving Extensions of Credit at such time exceed the sum of the Borrowing Base and the Overadvance Limit at such time, the Borrower shall, without notice or demand, immediately repay the Revolving Credit Loans in an aggregate principal amount equal to the lesser of (i) the amount of such excess and (ii) the aggregate principal amount of Revolving Credit Loans then outstanding, together with interest accrued to the date of such payment or prepayment on the principal so prepaid and any amounts payable under subsection 2.20 in connection therewith. To the extent that after giving effect to any prepayment of the Revolving Credit Loans required by the preceding sentence, the Aggregate Covered Outstanding Revolving Extensions of Credit at such time exceed the sum of the Borrowing Base and the Overadvance Limit at such time, the Borrower shall, without notice or demand, immediately deposit in a Cash Collateral Account upon terms reasonably satisfactory to the Administrative Agent an amount equal to the lesser of (i) the aggregate then outstanding L/C Obligations and (ii) the amount of such remaining excess. The Administrative Agent shall apply any cash deposited in the Cash Collateral Account (to the extent thereof) to pay any Reimbursement Obligations which become due thereafter, PROVIDED that the Administrative Agent shall release to the Borrower from time to time such portion of the amount on deposit in the Cash Collateral Account which is equal to the amount by which the Borrowing Base at such time plus the amount on deposit in the Cash Collateral Account exceeds the Aggregate Outstanding Revolving Extensions of Credit at such time. "Cash Collateral Account" means an account established by the Borrower with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this subsection 2.10(b). 2.11 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, PROVIDED that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, PROVIDED that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Lenders have determined that such a conversion is not appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date (in the case of conversions of Revolving Credit Loans) or the date of the final installment of principal of the Term Loans. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest 31 Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, PROVIDED that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Lenders have determined that such a continuation is not appropriate or (ii) after the date that is one month prior to the Termination Date (in the case of continuations of Revolving Credit Loans) or the date of the final installment of principal of the Term Loans and PROVIDED, FURTHER, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 2.12 MAXIMUM NUMBER OF TRANCHES. In no event shall there be more than ten (10) Eurodollar Tranches outstanding at any time. 2.13 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus 2.50%. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus 1.50%. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, PROVIDED that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.14 COMPUTATION OF INTEREST AND FEES. (a) Amounts payable under this Agreement including interest, shall be calculated on the basis of a 360-day year for the actual days elapsed, except that with respect to (i) interest calculated on the basis of the Prime Rate and (ii) commitment fees, such amounts shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable, notify the Borrower and the affected Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirement shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall, as soon as practicable, notify the Borrower and the affected Lenders of the effective date and the amount of each such change in interest rate. 32 (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.13(a), (b) or (c). (c) For purposes of the Interest Act (Canada), whenever any interest under the Loan Documents is calculated using a rate based on a year of 360 days, such rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (i) the applicable rate based on a year of 360 days, (ii) multiplied by the actual number of days in the calendar year in which the period for which such interest is payable (or compounded) ends, and (iii) divided by 360. 2.15 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such interest Period, or (b) the Administrative Agent shall have received notice from the Majority Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period; the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans. 2.16 PRO RATA TREATMENT AND PAYMENTS. (a) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the appropriate Lenders, at the Administrative Agent's office specified in subsection 10.2 (except as otherwise provided herein) in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders entitled to receive the same promptly upon receipt in like funds as received. If any payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding 33 Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its portion of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's portion of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower. (c) Each borrowing by the Borrower of Term Loans and Revolving Credit Loans shall be made ratably from the Lenders in accordance with their respective Term Loan Commitment Percentages and Revolving Credit Commitment Percentages. Any reduction of the Revolving Credit Commitments shall be made ratably among the Lenders in accordance with their respective Revolving Credit Commitment Percentages. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Lenders. 2.17 ILLEGALITY. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.20. 34 2.18 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.19 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.19 TAXES. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or 35 on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, PROVIDED, HOWEVER, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not incorporated or organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated or organized under the laws of the United States of America or a state thereof shall: (i) deliver to the Borrower and the Administrative Agent, prior to the Closing Date in the case of the initial Lenders, (A) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; 36 unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred after the date of this Agreement and prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement or the Notes without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender or a Participant pursuant to subsection 10.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. (c) Neither the Administrative Agent nor any Lender shall be entitled to claim any indemnity payment or additional amount payable pursuant to this subsection 2.19 with respect to any tax unless the Administrative Agent or such Lender, as the case may be, shall have notified the Borrower that it will demand compensation for such payment or amount not more than 120 days after the date on which the Administrative Agent or such Lender, as the case may be, becomes aware of the costs or reductions giving rise to such claim. Failure on the part of the Administrative Agent or such Lender, as the case may be, to demand any indemnity payment of any such additional amount with respect to any period shall not constitute a waiver of the Administrative Agent's or such Lender's, right, as the case may be, to demand compensation with respect to any other period. 2.20 INDEMNITY. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the additional 2.50% for Eurodollar Loans and 1.50% for ABR Loans referred to in subsection 2.13, included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 37 2.21 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any demand for payment under subsection 2.18 or 2.19(a), or if any adoption or change of the type described in subsection 2.17 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under subsection 2.18 or 2.19(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.17. SECTION 3. LETTERS OF CREDIT 3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof, the Issuing Bank, in reliance on the agreements of the other Lenders set forth in subsection 3.4(a) agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Bank; PROVIDED that the Issuing Bank shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (1) the L/C Obligations would exceed the L/C Commitment, (2) the Available Revolving Credit Commitments would be less than zero or (3) the Aggregate Covered Outstanding Revolving Extensions of Credit at such time would exceed the Borrowing Base at such time. (b) Each Letter of Credit shall: (1) be denominated in Dollars and shall be either (A) a standby letter of credit issued to support obligations of the Borrower (a "STANDBY LETTER OF CREDIT"), or (B) a commercial letter of credit issued in respect of the purchase of goods or services by the Borrower and its Subsidiaries in the ordinary course of business (a "COMMERCIAL LETTER OF CREDIT") and (2) expire no later than the earlier of (i) one year after the date of issuance and (ii) five Business Days prior to the Termination Date; provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (ii) above). (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (d) The Issuing Bank shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. 38 The Borrower may from time to time request that the Issuing Bank issue a Letter of Credit by delivering to the Issuing Bank at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as the Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Bank be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. 3.3 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Bank, a fronting fee with respect to each Letter of Credit in an amount equal to 1/4 of 1% per annum of the face amount of such Letter of Credit. Such fronting fee shall be payable in arrears on each L/C Fee Payment Date and shall be nonrefundable. (b) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Bank and the L/C Participants, a letter of credit commission with respect to each Letter of Credit, computed for the period from the date of issuance thereof at a per annum rate equal to 2.50% (less any fronting fee paid pursuant to subsection 3.3(a)), calculated on the basis of a 360 day year, of the aggregate average daily amount available to be drawn under such Letter of Credit during the period for which payment is being made. Such fee shall be payable to the Issuing Bank and the L/C Participants to be shared ratably among them in accordance with their respective Revolving Credit Commitment Percentages. Such commissions shall be payable in arrears on each L/C Fee Payment Date. (c) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Bank for such normal and customary fees as are incurred or charged by the Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (d) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Bank and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in the Issuing Bank's obligations and rights under 39 each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit for which the Issuing Bank is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's address for notices specified herein an amount equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to the Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any Letter of Credit is paid to the Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted by the Issuing Bank, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, the Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will distribute to such L/C Participant its pro rata share thereof; PROVIDED, HOWEVER, that in the event that any such payment received by the Issuing Bank pursuant to subsection 3.5 shall be required to be returned by the Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it. 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower agrees to reimburse the Issuing Bank on each date on which the Issuing Bank notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Bank for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in connection with such payment. Each such payment shall be made to the Issuing Bank at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this subsection from the date such amounts become payable (whether at 40 stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding ABR Loans which were then overdue. 3.6 OBLIGATIONS ABSOLUTE. (a) The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Bank or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Bank that the Issuing Bank shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, provided that the Issuing Bank shall have exercised the standard of care specified in the Uniform Customs, or (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) The Issuing Bank shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Bank's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence of willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Bank to the Borrower. 3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for payment under any Letter of Credit, the Issuing Bank shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Bank to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 3.8 APPLICATION. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. 41 SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 4.1 FINANCIAL CONDITION. (a) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1995 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by KPMG Peat Marwick LLP copies of which have heretofore been furnished to the Administrative Agent with copies for each Lender, present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at June 30, 1996 and the related unaudited consolidated statements of income and of cash flows for the three and six-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to the Administrative Agent with copies for each Lender, present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three and six-month period then ended (subject to normal year-end audit adjustments), except that they have been prepared on a first-in-first-out inventory valuation method and except for the absence of notes and related schedules. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. During the period from December 31, 1995 to and including the date hereof there has been no sale, transfer or other disposition by the Borrower or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at December 31, 1995. (b) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at June 30, 1996 (including the notes thereto) prepared on a first-in first-out inventory valuation method (the "PRO FORMA BALANCE SHEET"), copies of which have heretofore been furnished to the Administrative Agent with copies for each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the Recapitalization contemplated to occur on the Closing Date and (ii) the borrowings under this Agreement contemplated to be made on the Closing Date. The Pro Forma Balance Sheet is based on the best information available to the Borrower as of the date of delivery thereof, and presents fairly in all material respects on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries as at June 30, 1996, assuming that the events specified in the preceding sentence had actually occurred at June 30, 1996. 42 4.2 NO CHANGE. (a) Except as set forth on Schedule 4.2, since December 31, 1995, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect, and (b) during the period from December 31, 1995, to and including the date hereof no dividends or other distributions have been declared, paid or made upon the Capital Stock of the Borrower nor has any of the Capital Stock of the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries, in each case, other than as contemplated pursuant to the Recapitalization Documents. 4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except where the failure to obtain such qualification would not have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of the Loan Documents to which it is a party and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. Except as set forth on Schedule 4.4, no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Borrower is a party other than actions and filings relating to the release of existing Liens and the perfection of the Liens created by the Security Documents. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 NO LEGAL BAR. The execution, delivery and performance of the Loan Documents to which the Borrower is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 43 4.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 4.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 4.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 OWNERSHIP OF PROPERTY; LIENS. Except as set forth on Schedule 4.8, each of the Borrower and its Subsidiaries has a valid leasehold interest in, all its real property, or a valid leasehold interest in, all its other property, and none of such owned property and no such leasehold interest is subject to any Lien except as permitted by subsection 7.3. 4.9 INTELLECTUAL PROPERTY. Except as set forth on Schedule 4.9, the Borrower and each of its Subsidiaries owns, is licensed to use, or otherwise has the right to use all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim, which could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower and its Subsidiaries the use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, do not have and could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, all registrations and filings which, in the reasonable judgment of the Borrower, are necessary to preserve the rights of the Borrower and each of the Subsidiaries in their material Intellectual Property have been made and are in good standing. 4.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries has or could reasonably be expected to have a Material Adverse Effect. 4.11 TAXES. Except as set forth on Schedule 4.11, each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority that are now due and payable (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 44 4.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation G or Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent with copies for each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case may be. 4.13 ERISA. Neither a Reportable Event which could result in a material liability to the Borrower or any of its Subsidiaries nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred that is reasonably likely to cause the Borrower to incur liability, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. Except as set forth on Schedule 4.13, the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits. Except as set forth on Schedule 4.13, neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan in the past five years, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 4.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 4.15 SUBSIDIARIES. Schedule 4.15 sets forth a list of all Subsidiaries of the Borrower at the date hereof. Each subsidiary of the Borrower that is not a Subsidiary, is a corporation that conducts no business, owns no assets (other than certain intercompany receivables), has no liabilities having an aggregate value in excess of $75,000 other than certain intercompany payables, and other than corporate franchise taxes. 4.16 PURPOSE OF LOANS. (a) The proceeds of the Term Loans shall be used by the Borrower to finance a portion of the Recapitalization and to pay related fees and expenses. (b) The proceeds of the Revolving Credit Loans shall be used by the Borrower to pay fees and expenses related to the Recapitalization, for working capital purposes of the 44 Borrower and its Subsidiaries in the ordinary course of business and for general corporate purposes. 4.17 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.17: (a) The facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "PROPERTIES") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law, which, in either case, could reasonably be expected to have a Material Adverse Effect. (b) The Properties and all operations at the Properties are in compliance, and to the knowledge of the Borrower have in the last five (5) years been in compliance, in all material respects with all applicable Environmental Laws, and to the knowledge of the Borrower there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Borrower or any of its Subsidiaries (the "BUSINESS") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (c) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice is being threatened, except, in either case, for such notice as could not reasonably be expected to have a Material Adverse Effect. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, except for such transportation or disposal as could not reasonably be expected to have a Material Adverse Effect, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law, except for such transportation or disposal as could not reasonably be expected to have a Material Adverse Effect. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (f) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the 46 operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under Environmental Laws except such releases or threats of releases which could not reasonably be expected to have a Material Adverse Effect. 4.18 ACCURACY OF INFORMATION. No factual statement or information contained in this Agreement, any other Loan Document, or any other document, certificate or written statement furnished to the Administrative Agent or the Lenders or any of them (including, without limitation, the Recapitalization Documents), by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents (including, without limitation, any financial information furnished pursuant to Section 4.1), taken as a whole contained as of the date such statement, information, document or certificate was so furnished any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein in light of the circumstances in which it was made not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, or in such other documents, certificates and statements furnished to the Administrative Agent for the benefit of the Lenders (including, without limitation, the Recapitalization Documents) for use in connection with the transactions contemplated hereby and by the other Loan Documents. 4.19 SECURITY DOCUMENTS. (a) The Borrower Stock Pledge Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Pledged Stock (as defined therein), and proceeds thereof and, when the stock certificates representing the Pledged Stock are delivered to the Administrative Agent, the Borrower Stock Pledge Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Borrower in such Pledged Stock and the proceeds thereof, in each case (except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally) prior and superior in right to any other Person. (b) The Security Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof; when financing statements in appropriate form are filed in the offices specified on Schedule 4.19(b), except as set forth in the Security Agreement, the Security Agreement constitutes a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and, to the extent provided therein, the proceeds thereof, in each case (except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the 47 enforcement of creditors' rights generally) prior and superior in right to any other Person, other than with respect to Liens expressly permitted by subsection 7.3. 4.20 SOLVENCY. Each Loan Party is, and after giving effect to the incurrence or assumption of all Indebtedness and obligations being incurred or assumed in connection herewith and the Recapitalization will be and will continue to be, Solvent. SECTION 5. CONDITIONS PRECEDENT 5.1 CONDITIONS TO INITIAL EXTENSION OF CREDIT. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent: (a) LOAN DOCUMENTS; GUARANTEES. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, with a counterpart for each Lender, (ii) the Borrower Stock Pledge Agreement, executed and delivered by a duly authorized officer of the Borrower, with a conformed copy for each Lender, (iii) the Security Agreement, executed and delivered by a duly authorized officer of each of the parties thereto, with a conformed copy for each Lender, (iv) the Subsidiaries Guarantee, executed and delivered by a duly authorized officer of each of the parties thereto, with a conformed copy for each Lender, (v) the Depository Letters, each executed and delivered by duly authorized officers of the parties thereto with a counterpart or conformed copy for each Lender and (vi) the Collection Account Letters, executed and delivered by duly authorized officers of the parties thereto with a conformed copy for each Lender. (b) RELATED AGREEMENTS. The Administrative Agent shall have received, with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of the Recapitalization Documents and such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Borrower or any of its Subsidiaries may be a party. (c) BORROWING CERTIFICATE. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit G, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent, executed by a Responsible Officer. (d) CORPORATE PROCEEDINGS OF THE BORROWER. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) the borrowings contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Borrower Security Documents, certified by the Secretary or an Assistant Secretary of 48 the Borrower as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) BORROWER INCUMBENCY CERTIFICATE. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (f) CORPORATE PROCEEDINGS OF SUBSIDIARIES. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Subsidiary of the Borrower which is a party to a Loan Document authorizing (i) the execution, delivery and performance of the Loan Documents to which it is a party and (ii) the granting by it of the Liens created pursuant to the Security Documents to which it is a party, certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (g) SUBSIDIARY INCUMBENCY CERTIFICATES. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Subsidiary of the Borrower which is a Loan Party, dated the Closing Date, as to the incumbency and signature of the officers of such Subsidiaries executing any Loan Document, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Subsidiary. (h) CORPORATE DOCUMENTS. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Loan Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party. (i) CONSENTS, LICENSES AND APPROVALS. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of a Responsible Officer of the Borrower (i) attaching copies of all consents, authorizations and filings referred to in subsection 4.4, and (ii) stating that such consents, licenses and filings are in full force and effect, and each such consent, authorization and filing shall be in form and substance satisfactory to the Administrative Agent. (j) FEES AND EXPENSES. The Lenders, the Administrative Agent and its Affiliates shall have received all fees required to be paid, and all expenses required to be paid for which invoices have been presented, on or before the Closing Date. 49 (k) LEGAL OPINIONS. The Administrative Agent shall have received, with a counterpart for each Lender, the following executed legal opinions: (1) the executed legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Borrower and the other Loan Parties, substantially in the form of Exhibit J-1; (2) the executed legal opinion of Sheppard, Mullin, Richter & Hampton, LLP, special counsel to the Administrative Agent and the Lenders in the State of California, substantially in the form of Exhibit J-2; (3) the executed legal opinion of Stoel, Rives, Boley, Fraser & Wyse, special counsel to the Administrative Agent and the Lenders in the State of Oregon, substantially in the form of Exhibit J-3; (4) the executed legal opinions of (i) Stikeman, Elliott; and (ii) Thompson Dorfman, Sweatman, counsel to the Administrative Agent and the Lenders in Canada, substantially in the form of Exhibit J-4. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require; (l) PLEDGED STOCK; STOCK POWERS. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to the Borrower Stock Pledge Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the Borrower. (m) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have received evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC-3 and form UCC-1, or their foreign equivalents, necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents shall have been completed or will be completed immediately after the Closing Date. (n) RECAPITALIZATION; CAPITAL STRUCTURE. (i) The Borrower shall have issued at least $55,000,000 of its common stock and at least $25,000,000 of its Existing Subordinated Debt, in each case, pursuant to the terms of the Recapitalization Documents and of which at least $60,000,000, in aggregate, shall have been received by the Borrower in cash on the Closing Date, all on terms and conditions satisfactory in all material respects to the Administrative Agent and the Lenders, and (ii) the capital structure of each Loan Party after giving effect to the Recapitalization shall be reasonably satisfactory in all material respects to the Administrative Agent and the Lenders. (o) FINANCIAL STATEMENTS. The Lenders shall have received unaudited interim consolidated financial statements of the Borrower and its consolidated Subsidiaries for each fiscal month and quarterly period ended subsequent to the date of the latest 50 financial statements previously delivered as to which such financial statements are available, in form and substance reasonably satisfactory to the Administrative Agent and the Lenders. (p) PRO FORMA FINANCIAL STATEMENTS. The Lenders shall have received a pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the date of the most recent consolidated balance sheet delivered pursuant to paragraph (o) above, adjusted to give effect to the consummation of the Recapitalization and the borrowings contemplated hereunder as if such transactions had occurred on such date, in form and substance reasonably satisfactory to the Administrative Agent and the Lenders. (q) LIEN SEARCHES. The Lenders shall have received the results of a recent lien search in each relevant jurisdiction with respect to the Borrower and its Subsidiaries, and such search shall reveal no Liens on any of the assets of the Borrower or its Subsidiaries except for Liens permitted by subsection 7.3 or Liens to be discharged on or prior to the Closing Date pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent. (r) TRANSACTION FEES. The fees and expenses to be incurred by the Borrower in connection with the Recapitalization and the financing thereof (other than the High Yield Notes contemplated thereby) shall not exceed $10,700,000 in the aggregate. (s) ENVIRONMENTAL REPORT. The Lenders shall have received written confirmation of the environmental report prepared by the Borrower and previously reported to the Administrative Agent with respect to the real property leased by the Borrower and its Subsidiaries. (t) EXISTING CREDIT AGREEMENT. The Administrative Agent shall have received evidence satisfactory to it that the Existing Credit Agreement shall have been terminated and all amounts owing thereunder shall have been paid in full. (u) BORROWING BASE. (i) The Lenders shall be satisfied as to form and substance with the calculation of the Borrowing Base and the forms of the Borrowing Base Certificate and Supplemental Reporting on or before the Closing Date and (ii) on the Closing Date and after giving effect to the extensions of credit hereunder on the Closing Date, the Borrowing Base shall exceed the Aggregate Covered Outstanding Revolving Extensions of Credit by at least $8,000,000. (v) INSURANCE. The Administrative Agent shall have received evidence in form and substance satisfactory to it that all of the requirements of subsection 6.5 and Section 4.2 of the Security Agreement shall have been satisfied. 5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent: 51 (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date. (b) NO DEFAULT. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. (c) ADDITIONAL MATTERS. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Administrative Agent in all material respects, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by and Letter of Credit issued on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 FINANCIAL STATEMENTS. Furnish to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, in each case, using the last-in, first-out inventory valuation method, and setting forth in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG Peat Marwick LLP or other independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, in each case, using the first-in, first-out inventory valuation method, and 52 setting forth in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event not later than 30 days after the end of each month of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such month and the portion of the fiscal year through the end of such month, in each case, using the first-in, first-out inventory valuation method, and setting forth in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative Agent with copies for each Lender except as otherwise provided in clause (g) below: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) subject to the proviso below, concurrently with the delivery of the financial statements referred to in subsections 6.1(a), (b) and (c), a certificate of a Responsible Officer (1) stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.12 with respect thereto), (ii) neither the Borrower nor any of its Subsidiaries has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of this Agreement and the Security Documents with respect thereto and (iii) the Borrower has observed or performed in all material respects all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; provided that with respect to the financial statements delivered pursuant to subsection 6.1(c), such certificate need only cover the items set forth in clause (i) above, and (2) in the case of the financial statements delivered pursuant to subsections 6.1(a) and (b) setting forth, in reasonable detail, a calculation of the financial covenants set forth in subsection 7.1 for the period corresponding to such financial statements; and, with respect to the annual financial statements required to be furnished pursuant to subsection 6.1(a), a reconciliation of 53 such financial statements from the last-in first-out inventory valuation method to the first-in, first-out inventory valuation method in order to calculate the financial covenants set forth in subsection 7.1, all in substantially the form set forth on Exhibit H (THE "RESPONSIBLE OFFICER'S CERTIFICATE"). (c) not later than 10 days prior to the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year using the first-in, first-out inventory valuation method, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Responsible Officer has no reason to believe they are incorrect or misleading in any material respect; (d) promptly upon receipt thereof, copies of all reports submitted to the Borrower or any of its Subsidiaries by KPMG Peat Marwick or any other independent accountants of the Borrower or any such Subsidiary in connection with each annual, interim or special audit of its financial statements made by such accountants (including, without limitation, any comment letter submitted by such accountants to management of the Borrower or any such Subsidiary in connection with their annual audit and any reports addressing internal accounting controls of the Borrower or such Subsidiary submitted by such accountants), and, promptly upon completion thereof, copies of any response report from the Borrower or such Subsidiary to such accountants; (e) within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority, and at such time, if any, that the Borrower becomes subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders; (f) promptly, but in no event later than 1:00 P.M., New York City time, on the third Business Day following the end of each calendar week, UNLESS such third Business Day falls in the last week of a calendar month, in which case, in no event later than 1:00 P.M., New York City time, on the third Business Day of the next calendar month, a Borrowing Base Certificate, certifying in reasonable detail the Borrowing Base as of the close of business on the last calendar day of the immediately preceding calendar week or calendar month, as the case may be, and in each case, a copy to the Administrative Agent of a Supplemental Reporting presenting the Borrower's computation thereof. Each Borrowing Base Certificate shall remain in effect from and including the date on which such Borrowing Base Certificate is delivered, to, but excluding, the date on which the next Borrowing Base Certificate is delivered; and (g) promptly, furnish to the Administrative Agent or any Lender such additional financial and other information with respect to the business or operations of 54 the Borrower and its Subsidiaries as the Administrative Agent or such Lender may from time to time reasonably request. 6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage in business of the same general type as now conducted by it or businesses reasonably related thereto; preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 7.5 and except to the extent that failure to comply with the foregoing would not, in the aggregate, be reasonably expected to have a Material Adverse Effect; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all tangible property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its tangible property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent with copies for each Lender, upon written request, full information as to the insurance carried. 6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time during normal business hours and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that such inspection shall be conducted in a manner that does not unreasonably interfere with the business or operations of the Borrower or its Subsidiaries. 6.7 SEMI-ANNUAL REVIEWS. At any time upon the request of the Administrative Agent, permit the Administrative Agent or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Administrative Agent to conduct evaluations and appraisals (at a reasonable time during normal business hours provided that the following is conducted in a manner that does not unreasonably interfere with the business or operations of the Borrower or its Subsidiaries) of (i) the Borrower's practices in the computation of the Borrowing Base, (ii) the assets included in the Borrowing Base, (iii) systems and procedures related to Borrowing Base items, (iv) other related procedures deemed necessary by the Administrative Agent, and pay the reasonable 55 fees and expenses in connection therewith (including, without limitation, the reasonable fees and expenses associated with services performed by the Administrative Agent's Collateral Monitoring Department); provided, however, that such persons shall not be entitled to conduct such evaluations and appraisals of assets more frequently than twice per year unless (x) a Default or Event of Default has occurred and is continuing or (y) the Administrative Agent or the Majority Lenders determine that any material event or material change has occurred with respect to the Loan Parties, their inventory or receivables practices or the performance of the Collateral and that as a result of such event or change more frequent evaluations or appraisals are required to effectively monitor the Borrowing Base, in which case the Borrower will permit such Persons to conduct such evaluations and appraisals at such reasonable times during normal business hours and as often as may be reasonably requested; provided that such inspection shall be conducted in a manner that does not unreasonably interfere with the business or operations of the Borrower or its Subsidiaries. 6.8 NOTICES. Promptly give notice to the Administrative Agent with copies for each Lender of (to the extent it has knowledge of same): (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $2,000,000 or more and not covered by insurance or with respect to which the Borrower or its Subsidiaries is not fully indemnified by a third party or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (e) any development or event which has had or which the Borrower believes could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 56 6.9 ENVIRONMENTAL LAWS. (a) Comply with, and use diligent efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and use diligent efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except, in either case to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.10 FURTHER ASSURANCES. Upon the request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.11 CASH MANAGEMENT SYSTEM. Maintain (i) the US Cash Collateral Account into which all proceeds of Collateral payable in the United States are deposited (including any amounts paid to the Borrower or any of its Subsidiaries and required pursuant to the Security Agreement, to be deposited by the Borrower and its Subsidiaries into the Collection Accounts or the Depository Accounts) with the Administrative Agent and (ii) the Canadian Cash Collateral Account and the Deposit Accounts into which all proceeds of Collateral payable in Canada are paid (including any amounts paid to the Borrower or any of its Subsidiaries and required pursuant to the Security Agreement to be deposited by the Borrower and its Subsidiaries into the Canadian Cash Collateral Account or the Deposit Accounts) with Bank of Montreal, or, in each case, one or more banks reasonably acceptable to the Administrative Agent that have acknowledged the assignment of such accounts to the Administrative Agent pursuant to the Depository Letters, the Collection Accounts Letters or the Deposit Account Letters and the Security Agreement, as the case may be, and maintain cash management systems reasonably acceptable to the Majority Lenders. At the beginning of each Business Day, transfer to the US Cash Collateral Account such amounts of Canadian dollars as shall be necessary to cause the aggregate amount of available funds on deposit in the Canadian Cash Collateral Account and the Deposit Accounts not to exceed $30,000,000 Canadian dollars. 6.12 ADDITIONAL COLLATERAL. (a) With respect to any assets acquired after the Closing Date by the Borrower or any of its Subsidiaries that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than any assets described in paragraph (b) or (c) of this subsection and assets that, in the judgment of the Administrative Agent are immaterial or a Lien on which cannot be perfected by filing 57 UCC-1 financing statements or their foreign equivalents), promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Security Documents or such other documents as the Administrative Agent shall reasonably deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (b) With respect to any Person that, subsequent to the Closing Date, becomes an active Subsidiary, promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent, for the benefit of the Lenders, a new pledge agreement or such amendments to the relevant Pledge Agreement as the Administrative Agent shall reasonably deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary (unless such Subsidiary is a foreign Subsidiary in which case, 66% of the Capital Stock of such foreign subsidiary) which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Subsidiary Guarantee and the Security Agreement, in each case pursuant to documentation which is in form and substance satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable to cause the Lien created by the Security Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 6.13 TAX STAMP BONDING. Maintain surety bonds if and to the extent required by law (including, with respect to amounts) with respect to all tobacco tax stamps not paid for on a cash basis. 6.14 COMPLIANCE WITH TERMS OF LEASEHOLDS. Make all payments and otherwise perform all material obligations in respect of all leases of real property to which the Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled if the failure to make such payments or perform such obligations, to keep such lease in full force and effect, or the lapse, termination or failure to renew would reasonably be likely to result in a Material Adverse Effect, notify the Administrative Agent of any default by any party of which the Borrower has actual knowledge with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so. 58 SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 FINANCIAL CONDITION COVENANTS. (a) MAINTENANCE OF CURRENT RATIO. Permit the ratio of Consolidated Current Assets of the Borrower to Consolidated Current Liabilities of the Borrower at any time during any period set forth below to be less than the ratio set forth opposite such period below: PERIOD RATIO 9/30/96 - 6/30/01 1.40 to 1.00 (b) MAINTENANCE OF NET WORTH. (i) Permit Consolidated Net Worth of the Borrower at any time during the period from August 7, 1996 to March 30, 1997 to be less than ($3,000,000) or, with respect to any time during the period from December 31, 1996 to March 30, 1997 to be less than ($5,000,000) if such lower Consolidated Net Worth amount is due solely to accounting adjustments and/or costs and expenses related to the Recapitalization or the issuance of the High Yield Notes and (ii) permit Consolidated Net Worth of the Borrower at any time during the period from March 31, 1997 to June 30, 2001 to be less than an amount equal to Consolidated Net Worth of the Borrower as at December 31, 1996 PLUS the aggregate of 50% of Consolidated Net Income of the Borrower, if positive, for each quarter during the period commencing on January 1, 1997 and ending at the close of the fiscal quarter then last ended. (c) MAINTENANCE OF SENIOR DEBT LEVERAGE RATIO. Permit the ratio of (i) Consolidated Senior Debt of the Borrower at the last day of any fiscal quarter ending during any "Test Period" set forth below to (ii) Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such date to be greater than the amount set forth opposite such period below: TEST PERIOD RATIO 9/30/96 - 9/30/97 5.25 to 1.00 12/31/97 - 9/30/98 4.75 to 1.00 12/31/98 - 9/30/99 4.25 to 1.00 12/31/99 - 9/30/00 3.75 to 1.00 12/31/00 - 6/30/01 3.25 to 1.00 59 ; provided, however, that from and after the date of the issuance by the Borrower of the High Yield Notes in an aggregate principal amount of at least $75 million, notwithstanding the ratios set forth above, the following ratios shall apply: TEST PERIOD RATIO 9/30/96 - 9/30/97 4.25 to 1.00 12/31/97 - 9/30/98 4.00 to 1.00 12/31/98 - 6/30/01 3.75 to 1.00 For purposes of computing Consolidated Senior Debt of the Borrower, the amount of Revolving Credit Loans included therein as of the last day of a fiscal quarter shall be the average daily outstanding principal amount thereof for the period of two consecutive fiscal quarters ending on such date (or, if shorter, the period commencing on the Closing Date and ending on such date). (d) MAINTENANCE OF MINIMUM EBITDA. Permit Consolidated EBITDA of the Borrower for the four quarters ending at the last day of any period set forth below to be less than the amount set forth opposite such period below: Test Period Amount 9/30/96 - 12/31/96 $30,000,000 3/31/97 - 6/30/97 $31,000,000 9/30/97 - 12/31/97 $32,000,000 3/31/98 - 6/30/98 $33,500,000 9/30/98 - 12/31/98 $35,000,000 3/31/99 - 6/30/99 $36,500,000 9/30/99 - 12/31/99 $38,000,000 3/31/00 - 6/30/00 $40,000,000 9/30/00 - 12/31/00 $42,000,000 3/31/01 - 6/30/01 $43,500,000 (e) Maintenance of Interest Coverage. Permit for any period of four consecutive fiscal quarters ending during any "Test Period" set forth below the ratio of (i) Consolidated EBITDA of the Borrower to (ii) Consolidated Cash Interest Expense of the Borrower for such period to be less than the ratio set forth opposite such period below after giving effect to the Interim Adjustments for the calculations occurring on September 30, 1996, December 31, 1996 and March 31, 1997: Test Period Ratio 9/30/96 - 9/30/98 2.00 to 1.00 12/31/98 - 9/30/99 2.25 to 1.00 12/31/99 - 9/30/00 2.50 to 1.00 12/31/00 - 6/30/01 3.00 to 1.00 60 ; provided, however, that from and after the date of the issuance by the Borrower of the High Yield Notes in an aggregate principal amount of at least $75 million, notwithstanding the ratios set forth above, the following ratios shall apply: Test Period Ratio 9/30/96 - 9/30/98 1.65 to 1.00 12/31/98 - 9/30/99 1.75 to 1.00 12/31/99 - 9/30/00 2.00 to 1.00 12/31/00 - 6/30/01 2.25 to 1.00 7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement; (b) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; (c) Existing Subordinated Debt; (d) Indebtedness of the Borrower and any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding as to the Borrower and its Subsidiaries $5 million at any time outstanding; (e) Indebtedness outstanding on the date hereof and listed on Schedule 7.2 and any refinancings, refundings, renewals or extensions thereof; provided that the aggregate principal amount set forth on Schedule 7.2 does not increase in connection with any such refinancing, refunding, renewal or extension; (f) Indebtedness in respect of Hedge Agreements designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice in an aggregate notional amount not to exceed $75,000,000, in the case of the interest rate Hedge Agreements, and $30,000,000, in the case of foreign exchange rate Hedge Agreements, at any time outstanding; (g) additional Indebtedness of the Borrower and its Subsidiaries (not otherwise described in this Section 7.2) not exceeding $3 million in aggregate principal amount at any one time outstanding; (h) Indebtedness constituting Subordinated Debt in an aggregate principal amount not to exceed $100 million (the "High Yield Notes") provided that the proceeds (or part thereof) of any such Indebtedness are used to repay the Term Loans in accordance with subsection 2.9; 61 (i) Subordinated Debt of the Borrower (other than the Existing Shareholders Debt and the High Yield Notes) in an aggregate principal amount not to exceed $2,000,000 at any one time outstanding; (j) Indebtedness in respect of the conditional sale of coffee machines and similar fast food equipment where the Borrower or its Subsidiaries guarantee the purchase price of such equipment in the event the purchaser of such equipment does not purchase such equipment through coffee and food purchases; (k) Indebtedness in respect of state cigarette stamp tax and other bonds incurred in the ordinary course of business on a basis consistent with past practice; (l) Indebtedness in respect of letters of credit which are denominated in Canadian dollars and issued for the account of the Borrower, in an aggregate face amount not to exceed $5 million Canadian dollars; provided, that any such letter of credit is supported by a Letter of Credit; (m) Indebtedness of the type described in clause (f) of the definition of "Indebtedness" which is secured by Liens permitted under subsection 7.3; and (n) Indebtedness assumed in connection with Permitted Acquisitions, provided that such Indebtedness was not incurred in anticipation of the Permitted Acquisition and, in any case, not to exceed $500,000 in the aggregate. 7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, PROVIDED that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like Liens arising in the ordinary course of business for amounts which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions, restrictive covenants, encroachments and other similar encumbrances incurred in the ordinary 62 course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3, securing Indebtedness permitted by subsection 7.2(e) and new Liens created after the Closing Date in connection with refinancings, refundings, renewals, and extensions described in subsection 7.2(e), PROVIDED that no such Lien is spread to cover any additional property after the Closing Date and that the principal amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 7.2(d) incurred to finance the acquisition of fixed or capital assets, PROVIDED that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the principal amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed the original purchase price of such property at the time it was acquired; (h) Liens created pursuant to the Security Documents; (i) Liens arising under licensing agreements entered into by the Borrower or any Subsidiaries in the ordinary course of business for the use of Intellectual Property or other intangible assets of the Borrower or any Subsidiary, and any consents to use, and other similar agreements concerning Intellectual Property or other intangible assets or judgments adjudicating rights in any intangible rights in Intellectual Property or other intangible assets; and (j) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 7.2(b). 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and refinancings, renewals or extensions thereof, provided that the aggregate principal amount set forth on Schedule 7.4 does not increase in connection with any such refinancing, renewal or extension; (b) guarantees made in the ordinary course of its business by the Borrower of obligations of any Subsidiary of Indebtedness permitted by subsections 7.2(d), (e) and (f) or any leases for real property by any Subsidiary; and (c) the Subsidiaries Guarantee. 63 7.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into, or be liquidated, wound up or dissolved into, the Borrower (PROVIDED that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (PROVIDED that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation); (b) subject to subsections 7.10(c) and (d), the Borrower or any Subsidiary may be merged or consolidated with any other Person organized under a jurisdiction of the United States with assets held primarily in the United States; PROVIDED, that the Borrower or such Subsidiary shall be the continuing or surviving corporation; the Administrative Agent is provided with written notice, and after giving effect thereto no Default or Event of Default would exist or reasonably be expected to be caused thereby; and (c) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower. 7.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale or other disposition of any property in the ordinary course of business, provided that (other than inventory) the aggregate book value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed $500,000; (c) the sale of inventory in the ordinary course of business; (d) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; and (e) the sale, abandonment or other disposition in the ordinary course of business of Intellectual Property that is no longer necessary for the conduct of the business of the Borrower or any Subsidiary; and (f) as permitted by subsection 7.5. 64 7.7 LIMITATION ON SPECULATIVE TRANSACTIONS. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions (including, without limitation, take-or-pay contracts) except for Hedge Agreements permitted under subsection 7.2(f). 7.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "RESTRICTED PAYMENTS"), except that if no Default or Event of Default exists or would reasonably be expected to be caused thereby, the Borrower may repurchase shares of its common stock from its employees and former employees so long as the aggregate amount of all such repurchases since the date of this Agreement does not exceed $1 million. 7.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower and its Subsidiaries, $8,500,000, for each fiscal year, PROVIDED, that up to $1,500,000 of any such amount if not so expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the next following fiscal year. 7.10 LIMITATION ON INVESTMENTS, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except : (a) extensions of trade credit in the ordinary course of business; (b) investments in US Cash Equivalents and Canadian Cash Equivalents; (c) investments constituting Permitted Acquisitions; provided, that at the date of signing of definitive documentation with respect to such proposed Permitted Acquisition, (i) the Term Loans shall have been repaid in full, (ii) the Uncovered L/C Amount shall have been permanently reduced to zero, (iii) the Overadvance Limit shall have been permanently reduced to zero and (iv) the lesser of (1) the available Borrowing Base and (2) the Available Revolving Credit Commitments shall be at least $15,000,000 determined on the basis of the average amount of the Borrowing Base and the Aggregate Outstanding Revolving Extensions of Credit, respectively, during the calendar month preceding the date such definitive documentation is signed; (d) investments constituting Permitted Acquisitions in an aggregate amount not to exceed $25,000,000; provided, that at the date of signing of 65 definitive documentation with respect to such proposed Permitted Acquisition, (i) the Term Loans shall have been repaid in full, (ii) the Overadvance Limit shall have been permanently reduced to zero and (iii) the lesser of (1) the available Borrowing Base and (2) the Available Revolving Credit Commitments shall be at least $15,000,000 determined on the basis of the average amount of the Borrowing Base and the Aggregate Outstanding Revolving Extensions of Credit, respectively, during the calendar month preceding the date such definitive documentation is signed; (e) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $500,000 at any one time outstanding; (f) investments by the Borrower and its Subsidiaries in securities and notes to the extent received in settlement of delinquent obligations of any supplier or customer that is in bankruptcy or reorganization proceedings or received in settlement of accounts receivables that are more than 60 days past due; (g) the acquisition by the Borrower described in a letter dated August 1, 1996, from Robert Allen to Richard Thayer, and previously distributed to the Lenders; provided that the aggregate purchase price of such acquisition does not exceed $2 million; (h) investments by the Borrower in its Subsidiaries and investments by such Subsidiaries in the Borrower and in other Subsidiaries; and (i) subject to the limitations set forth in subsection 7.2(f), investments constituting Hedge Agreements. 7.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT INSTRUMENTS. (a) Make any optional payment or prepayment on or redemption or purchase of any Indebtedness (other than (1) the Loans and (2) a refinancing of Indebtedness permitted by subsection 7.2(e)), or (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any such Indebtedness (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon); provided that the proceeds of the High Yield Notes in excess of the amount required to prepay the Term Loans in accordance with subsection 2.9(a) may be used to redeem the Existing Subordinated Debt. 7.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise not prohibited under this Agreement, and (b) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 66 7.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 7.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person any agreement, other than (a) this Agreement, (b) any Indebtedness permitted by subsection 7.2(d) (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), and (c) any refinancing, refunding, renewal or extension permitted by subsection 7.2(e) (in which case any prohibition or limitation shall not be more restrictive than the prohibition or limitation contained in the Indebtedness that was so refinanced, refunded, renewed or extended), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.16 LIMITATION ON LINES OF BUSINESS. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or businesses reasonably related thereto. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Borrower herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in subsections 6.4, 6.8, 6.11 (other than as a result of wire transfer difficulties or system malfunctions beyond the control of any Loan Party), and 6.12, Section 7, Section 5 of the Borrower Stock Pledge Agreement or Section 4 of the Security Agreement; or 67 (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; or (e) The Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, in each case, that is outstanding in a principal amount of at least $1 million either individually or in the aggregate, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or (f) (i) The Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as 68 defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions in clauses (i) through (vi), if any, could reasonably be expected to have a Material Adverse Effect and is reasonably expected to result in liability exceeding $1 million; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof or, in the event of such a stay, such judgment shall not be discharged within 60 days after such stay expires; or (i) (i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) The Subsidiaries Guarantee shall cease, for any reason, to be in full force and effect or any Guarantor shall so assert; or (k) (i) Jupiter Partners, LP ("Jupiter") shall at any time for any reason cease to control, directly or indirectly, at least the Control Percentage of the voting rights of the Borrower having ordinary voting power in the election of directors of the Borrower or (ii), any other Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (other than Jupiter and its Affiliates) shall have acquired control of 35% or more of the voting rights of the Borrower having ordinary voting power in the election of directors of the Borrower unless the acquisition by any such Person or "group" shall have been recommended by the board of directors of the Borrower; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of 69 Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the Notes. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the Administrative Agent shall return the balance, if any, in such cash collateral account to the Borrower and shall execute documents to terminate its security interest in such cash collateral. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Bank and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the security interest in such cash collateral account. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 9. THE ADMINISTRATIVE AGENT 9.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and 70 no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 9.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any administrative agents or attorneys in-fact selected by it with reasonable care. 9.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, administrative agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 9.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or 71 the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; PROVIDED that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, administrative agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Voting Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; PROVIDED that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the 72 Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans made by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 9.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. SECTION 10. MISCELLANEOUS 10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the consent of each Lender affected thereby, or (ii) amend, modify or waive any provision of this subsection or subsection 2.16, or reduce the percentage specified in the definition of 73 Majority Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or, subject to the proviso below, release the Subsidiaries Guarantee or all or any substantial part of the Collateral, in each case without the written consent of all the Lenders; provided, that with respect to a release of the Subsidiaries Guarantee or all or any substantial part of the Collateral relating solely to the obligations of the Borrower or any of its Subsidiaries in connection with a Hedge Agreement entered into with any Lender, the written consent of the Lender affected thereby, or (iii) increase any of the percentages specified in the Borrowing Base, or increase the Overadvance Limit, or increase the Uncovered L/C Amount, in each case, without the written consent of all the Lenders, or (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent and the Issuing Banks, and as set forth on its signature page hereto in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: The Borrower: Core-Mark International, Inc. 395 Oyster Point Boulevard, Suite 415 South San Francisco, CA 94080 Attention: Leo F. Korman Fax: 415-952-4284 The Administrative Agent: The Chase Manhattan Bank 1 Chase Manhattan Plaza, 4th Floor New York, New York 10081 Attention: Mary Cameron Fax: 212-552-4266 74 with a copy to: Chase Agent Bank Services 140 East 45th Street, 29th Floor New York, New York 10017 Attention: Janet Belden Fax: 212-622-0002 The Issuing Bank: Chase Manhattan Bank Delaware 1201 Market Street Wilmington, Delaware 19801 Attention: Michael Handago Fax: 302-428-3390 PROVIDED that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.8, 2.10 or 2.15 shall not be effective until received. 10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse the Administrative Agent and its Affiliates for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution, delivery and administration of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby including, without limitation, the fees specified in subsection 6.7 and monthly collateral monitoring fees, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse the Administrative Agent and the Lenders for all their out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and the Lenders, (c) to pay, indemnify, and hold the Administrative Agent and its Affiliates and the Lenders (and their respective officers, directors, employees, advisors and agents) harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other like taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the 75 transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold the Administrative Agent and its Affiliates and the Lenders (and their respective officers, directors, employees, advisors and agents) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Loan Documents or of the financing contemplated thereby or the use or the proposed use of the proceeds thereof (other than matters the subject matter of which is covered by clauses (a), (b) or (c) above), including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), PROVIDED that the Borrower shall have no obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or any such Lender or arising from events or actions occurring after any Lender has taken possession of the property at issue by foreclosure or otherwise. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent and their respective successors and permitted assigns. The Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents, provided that each such sale shall be of Loans and Commitments in an aggregate amount of at least $5,000,000 and provided further, that no Lender may so sell its Commitments so that less than $5,000,000 of such Commitments are held by such Lender without participating interests therein, unless such Lender so sells 100% of its Commitments, in each case, unless otherwise agreed by the Borrower and the Administrative Agent. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i) and (ii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant 76 shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, PROVIDED that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.18, 2.19 and 2.20 (Requirements of Law, Taxes and Indemnity) with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; PROVIDED that, in the case of subsection 2.19 (Taxes), such Participant shall have complied with the requirements of said subsection and PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Lender or any Affiliate thereof or, with the consent of the Borrower, the Administrative Agent and the Issuing Bank (which in each case shall not be unreasonably withheld), to an additional bank or financial institution (an "ASSIGNEE") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit K, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent and the Issuing Bank) and delivered to the Administrative Agent for its acceptance and recording in the Register, PROVIDED that, each such sale be of Loans and Commitments of an aggregate amount of at least $5,000,000 and provided further, that no Lender party to this Agreement on the date hereof may so sell any of its initial Commitments hereunder such that such Lender holds directly less than $5,000,000 of such Commitments unless such Lender so sells 100% of its Commitments. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent PROVIDED in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein PROVIDED that, no Assignee shall be entitled to receive any greater amount pursuant to subsection 2.19 than the assignor Lender would have been entitled to receive in respect of the amount assigned by such assignor Lender to such Assignee had no such assignment occurred, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 8(f) shall have occurred and be continuing. 77 (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. (f) Subject to subsection 10.16, the Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 10.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans or the Reimbursements Obligations owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans, or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such 78 collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. 10.8 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 INTEGRATION. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the Courts of 79 the State of New York sitting in the Borough of Manhattan, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 10.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 JUDGMENT CURRENCY. (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due under any of the Loan Documents to the Administrative Agent or any Lender in any currency (the "Original Currency") into another currency (the "Other Currency"), the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking 80 procedures the Administrative Agent or such Lender, as the case may be, could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is paid or satisfied. (b) The obligations of the Borrower in respect of any sum due in the Original Currency from it to the Administrative Agent or any Lender under any of the Loan Documents shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender of any sum adjudged to be so due in such Other Currency, the Administrative Lender or such Lender, as the case may be, may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the Administrative Agent or the Lender, as the case may be, in the Original Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender, as the case may be, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due to the Administrative Agent or such Lender, as the case may be, in the Original Currency, the Administrative Agent and such Lender, as the case may be, agree to remit such excess to the Borrower. 10.16 CONFIDENTIALITY. The Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by or on behalf of the Borrower or any Subsidiary that is designated by the Borrower or any Subsidiary as confidential; PROVIDED that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent or any other Lender, (b) to any Transferee or prospective Transferee which agrees to comply with the provisions of this subsection 10.16, (c) to the employees, directors, agents, attorneys, accountants and other professional advisors of such Lender for purposes related to the transactions contemplated by the Loan Documents, (d) upon the request or demand of any Governmental Authority having jurisdiction over the Administrative Agent or such Lender, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to applicable law or regulation, (f) which has been publicly disclosed other than in breach of this subsection 10.16, or (g) in connection with the exercise of any remedy hereunder or under any other Loan Document. 81 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CORE-MARK INTERNATIONAL, INC. By: /s/ Leo F. Korman ------------------------------------ Name: Leo F. Korman Title: Senior Vice President, Chief Financial Officer and Secretary THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By: /s/ Marian N. Schulman ------------------------------------ Name: Marian N. Schulman Title: Attorney-In-Fact 82 THE FIRST NATIONAL BANK OF BOSTON, as a Lender By: /s/ Abraham Weekes ------------------------------------ Name: Abraham Weekes Title: Vice President Address for Notices: BANK OF BOSTON 100 Federal Street Boston, MA 02110 Attention: Abraham Weekes Telecopy: 617-434-6241 83 UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Alison Amonette ------------------------------------ Name: Alison Amonette Title: Vice President Address for Notices: UNION BANK OF CALIFORNIA, N.A. 400 California Street 17th Floor San Francisco, CA 94104 Attention: Alison Amonette Telecopy: (415) 765-2634 84 BANK OF MONTREAL, as a Lender By: /s/ M.P. Joyce ------------------------------------ Name: M.P. Joyce Title: Managing Director Address for Notices: BANK OF MONTREAL 601 South Figueroa Street Los Angeles, CA 90017 Attention: Brenda Buttner Telecopy: 213-239-0680 85 FIRST SOURCE FINANCIAL LLP, as a Lender by First Source Financial, Inc., its Agent/Manager By: /s/ Gary L. Francis ------------------------------------ Name: Gary L. Francis Title: Senior Vice President Address for Notices: FIRST SOURCE FINANCIAL, INC. 2850 West Golf Road, 5th Floor Rolling Meadows, IL 60008 Attention: Kelli Campbell Telecopy: 847-734-7910 86 LASALLE BUSINESS CREDIT, INC., as a Lender By: /s/ John W. Mundstock ------------------------------------ Name: John W. Mundstock Title: Vice President Address for Notices: LASALLE BUSINESS CREDIT, INC. One Centerpointe Drive, Suite 100 Lake Oswego, OR 97035 Attention: John Mundstock Telecopy: 503-684-4665 87 SANWA BUSINESS CREDIT CORPORATION, as a Lender By: /s/ Robert J. Price ------------------------------------ Name: Robert J. Price Title: First Vice President Address for Notices: SANWA BUSINESS CREDIT Corporation 550 North Brand Blvd. Glendale, CA 91203 Attention: Sandra Sha Telecopy: 818-545-0095 88 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Lender By: /s/ Brian W. Good ----------------------------------- Name: BRIAN W. GOOD Title: VICE PRESIDENT Address for Notices: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST One Parkview Plaza Oakbrook Terrace, IL 60181 Attention: Jeffrey W. Maillet Telecopy: 708-684-6740 SCHEDULE 1.1(a) CORE-MARK INTERNATIONAL, INC. COMMITMENT ALLOCATIONS $210,000,000
==================================================================================================================== BANKS REVOLVING CREDIT TERM LOAN TOTAL ALLOCATION - -------------------------------------------------------------------------------------------------------------------- The Chase Manhattan Bank $86,666,666.67 $17,333,333.33 $104,000,000.00 - -------------------------------------------------------------------------------------------------------------------- Van Kampen 17,500,000.00 3,500,000.00 21,000,000.00 - -------------------------------------------------------------------------------------------------------------------- Union Bank of California 12,500,000.00 2,500,000.00 15,000,000.00 - -------------------------------------------------------------------------------------------------------------------- Bank of Montreal 12,500,000.00 2,500,000.00 15,000,000.00 - -------------------------------------------------------------------------------------------------------------------- First Source 12,500,000.00 2,500,000.00 15,000,000.00 - -------------------------------------------------------------------------------------------------------------------- LaSalle Bus. Credit 12,500,000.00 2,500,000.00 15,000,000.00 - -------------------------------------------------------------------------------------------------------------------- Sanwa Bus. Credit 12,500,000.00 2,500,000.00 15,000,000.00 - -------------------------------------------------------------------------------------------------------------------- Bank of Boston 8,333,333.33 1,666,666.67 10,000,000.00 - -------------------------------------------------------------------------------------------------------------------- TOTALS 175,000,000.00 35,000,000.00 $210,000,000.00 ====================================================================================================================
SCHEDULE 4.2 CHANGES -none- SCHEDULE 4.4 CONSENTS -none- SCHEDULE 4.6 LITIGATION Carol A. Connor v. The American Tobacco Company, et al., CV-96-05497, Second Judicial District Court, County of Bernalillo, New Mexico. The complaint, brought against the major tobacco companies and certain distributors, lists a subsidiary of the Company as a defendant. The Company was never served. The plaintiff has voluntarily dismissed the case without prejudice "to allow the Plaintiffs additional time in which to realign the parties, amend the Complaint, and possibly add additional representative plaintiffs." Both Philip Morris and R.J. Reynolds have fully indemnified the Company and its subsidiary against all liability and fees in connection with this litigation. Philip Morris and R.J. Reynolds will, if the case is brought, defend the Company's subsidiary. SCHEDULE 4.8 OWNERSHIP OF PROPERTY; LIENS -none- SCHEDULE 4.9 INTELLECTUAL PROPERTY -none- SCHEDULE 4.11 TAXES (page 1) Tax Filings All Federal and State income tax extensions for fiscal year ended 12/31/95 have been filed as customary and in the ordinar course of business. Tax Liens See attached schedule SCHEDULE 4.11 TAXES (page 2) TAX LIENS ONLY UCC-1 AND UCC-2/UCC-3 FINANCING STATEMENTS AGAINST THE DEBTORS NAMED BELOW
- ------------------------------------------------------------------------------------------------------------------------------------ [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] CAPTION] CAPTION] CAPTION] [ILLEGIBLE CAPTION] - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Distributors Inc. CA Alameda 7/2/90 Secured State Tax Lien for 3130 Leanis Bl. County 90-180344 Property fiscal year 1986/87 Los Angeles, CA 90058 Taxes for $411.30 - ------------------------------------------------------------------------------------------------------------------------------------
Page 1 of 1 SCHEDULE 4.13 ERISA Present Value of Accrued Benefits The Core-mark International, Inc. Non-Bargaining Employees Pension Plan as per the 1/1/95 actuarial valuation had a market value of assets of $10,892,840 and a total current liability of $14,150,842. Withdrawals Core-Mark International, Inc. withdrew from the following plans: Plan Name: Western Conference of Teamsters Pension Plan #204130 Effective: June 30, 1986 Division: Hayward Reason: Bargaining unit of sales representatives represented by Teamsters Union Local 588 voted to decertify the union on May 17, 1996. Those election results were subsequently certified by the National Labor Relations Board on May 29, 1996. Plan Name: Western Conference of Teamsters Pention Plan #310641 Effective: July 1, 1996 Division: Las Vegas Reason: Contract Negotiations; employees now covered by a new collective bargaining agreement effective March 31, 1996 through March 31, 1999. Plan Name: Western Conference of Teamsters Pension Plan #204128 Effective: December 31, 1992 Division: Carpenteria Reason: Cessation of operations effective December 31, 1992 Withdrawal Liability Per a letter dated July 1, 1996 from the Western Conference of Teamsters Pension Trust: the employer has no withdrawal liability for a complete or partial withdrawal from the Western Conference of Teamsters Pension Plan ("the Plan") occurring in plan year 1995; the Plan has no unfunded, vested benefit liability for plan years December 31, 1988 - 1994; and this trend is expected to continue, but the Trustees for the Plan reserve the right to determine future withdrawal liability based upon actual plan experience. Two of the above plans (#204130 and #310641) are subject to audits which could result in assessments on past contributions. Per a letter dated February 29, 1996, the Western Conference of Teamsters Pension Trust concluded their audit of the third plan, #204128, and the assessment has been paid. SCHEDULE 4.15 SUBSIDIARIES
Name of State of Date of Shares Shares Percentage Subsidiary Incorporation Incorporation Authorized Outstanding Outstanding - ---------- ------------- ------------- ---------- ----------- ----------- C/M Products, Inc. California 7/19/89 1,000 100 10% Sole Shareholder: Core-Mark International, Inc. Core-Mark Interrelated Companies, Inc. California 4/14/75 1,000,000 1,000,000 100% Core-Mark Midcontinent, Inc. Arkansas 7/2/81 2,000 2,000 100%
SCHEDULE 4.17 ENVIRONMENTAL MATTERS The company has five underground storage tanks (UST) located at the following properties Location Number of USTs -------- -------------- 1. 353 Meyer Street 2 Corona, CA 91720 2. 3970 Pell Circle 1 Sacramento, CA 95838 3. 2311 E. 48th Street 1 Vernon, CA 90058 4. 13951 Bridgeport Road 1 Richmond, BC, V6V 1J6, Canada SCHEDULE 4.19(b) SECURITY DOCUMENTS; OFFICES Financing Statements Debtor Filing Jurisdiction Core-Mark International, Inc. Arizona - Secretary of State Core-Mark Midcontinent, Inc. California - Secretary of State Core-Mark Interrelated Companies, Inc. Colorado - Secretary of State Core-Mark Distributors, Inc. Nevada - Secretary of State C/M Products, Inc. New Mexico - Secretary of State Oregon - Secretary of State Utah - Secretary of State Washington - Secretary of State Canada - Alberta Provincial Registrar General Canada - British Columbia Provincial Registrar General Canada - Manitoba Personal Property Registry SCHEDULE 7.2 INDEBTEDNESS Letters of Credit ISSUER BENEFICIARY AMOUNT ------ ----------- ------ BANK OF ITWAL C$400,000 MONTREAL 2725321 CANADA, INC. C$100,000 --------- C$500,000 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Xerox Corporation CA Secretary 7/18/91 Xerox Duplicating System 31300 Medallion Drive of 91155677 Hayward, CA 94544 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International Xerox Corporation CA Secretary 3/10/92 Xerox Duplicating System 31300 Medallion Drive of 92044057 Hayward, CA 94544 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Yale Industrial Trucks, Inc. CA Secretary 8/06/92 Yale Motorized Hand Truck 3130 South 1030 West Assigned to: of 92172268 Salt Lake City, UT 84119 Yale Financial Services, Inc. State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Crown Credit Company CA Secretary 11/3/92 Crown Lift Truck & Batteries 2311 E. 48th Street of 92237404 Los Angeles, CA 90058 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Bell Atlantic TriCon Leasing CA Secretary 4/15/93 Sharp Equipment 353 Meyers Circle of 93075712 Corona, CA 91720 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Security Leasing Services, Inc. CA Secretary 8/2/93 Alarm System 2311 E. 48th Street Assigned to: of 93155811 Los Angeles, CA 90058 AVCO Leasing Services, Inc. State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Tennant Company CA Secretary 9/20/93 Power Scrubber 353 Meyers Circle of 93191058 Corona, CA 91720 State - ------------------------------------------------------------------------------------------------------------------------------------
Page 1 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Xerox Corporation CA Secretary 10/8/93 Xerox Copier 2311 E. 48th Street of 93205557 Los Angeles, CA 90058 State - ------------------------------------------------------------------------------------------------------------------------------------ Core Mark International Pitney Bowes Credit Corp. CA Secretary 4/25/96 All Equipment from Pitney 31300 Medallion Drive of 9611760204 Bowes subject to Hayward, CA 94544 State lease dated 3/29/96. - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International Norwest Financial Leasing. CA Secretary 5/9/96 Radionic Control 2311 E. 48th Street Inc. of 9613160876 Equipment Los Angeles, CA 90058 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Yale Industrial Trucks, Inc. UT Secretary 8/5/92 Yale Motorized Hand Truck 3130 South 1030 West of 331764 Salt Lake City, UT 84119 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Orix Credit Alliance, Inc. UT Secretary 3/2/93 Voice Mail Unit 3130 S. 1030 W of 352276 Salt Lake City, UT 84119 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Tennant Company UT Secretary ? Power Scrubber 3130 S. 130 W of 96-519049 Salt Lake City, UT 84119 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Interrelated General Electric Company CA Secretary 5/17/91 Inventory-Lamps and Companies, Inc. of 91109021 Light Bulbs 2840 South Reservoir Street State Pomona, CA 91766 - ------------------------------------------------------------------------------------------------------------------------------------
Page 2 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark Midcontinent, Inc. NCR Credit Corp CA Secretary 8/3/95 AT&T Equipment & All 395 Oyster Point Blvd., Suite 415 of 9521960399 Attachments South San Francisco, CA 94080 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Midcontinent, Inc. First Security Leasing Company NM Secretary 4/24/95 Stationary Compactor 395 Oyster Point Blvd., Suite 415 of 950424067 South San Francisco, CA 94080 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Distributors, Inc. Yale Financial Services Trust CA Secretary 2/18/87 Fork Lift Trucks & 1800 N. Vine St. Assigned to: of 87041979 All Accessories Los Angeles, CA 90028 Heller Financial, Inc. State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Distributors, Inc. PacifiCorp Capital, Inc. CA Secretary 11/5/91 AT&T Equipment 395 Oyster Point Blvd., Suite 415 of 91237851 South San Francisco, CA 94080 State - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Distributors, Inc. Norlift of Oregon, Inc. OR Secretary 1/6/93 Forklift PO Box 99 of R38518 (old) Clackamas, OR 97015 State 162206 (new) - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark Distributors, Inc. Wheeler Machinery Company UT Secretary 12/17/91 Equipment 643 West 3560 South Assigned to: of 307812 Salt Lake City, UT 84119 Raymond Leasing Corp. State - ------------------------------------------------------------------------------------------------------------------------------------
Page 3 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Xerox Canada, Ltd. Alberta Personal 4/1/93 Xerox Copier Property 93040108453 Registry - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Telecom Leasing Canada Alberta Personal 09/29/93 Telephone Equipment (TLC) Limited Property 93092907018 Registry - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Xerox Canada, Ltd. Alberta Personal 12/20/94 Xerox Equipment Property 94122006342 Registry - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Transport International Pool Alberta Personal 08/22/95 3 Trailers Property 95082213869 Registry - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. AT&T Capital Canada Alberta Personal 06/24/96 Riso Model 6300 & Property 96062420730 accessories Registry - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. G.N. Johnston Equipment Co. BC Ministry of 02/28/92 Battery & Charger 2924 Jacklin Rd. LTD Finance & 3874008 Victoria, BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Telecom Leasing Canada BC Ministry of 06/25/92 Telephone Equipment 13211 Delf Place, Ste 601 (TLC) Limited Finance & 4071096 Richmond BC Corporate 05/17/95 Relations 5788967 05/17/95 5789636 - ------------------------------------------------------------------------------------------------------------------------------------
Page 4 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Telecom Leasing Canada BC Ministry of 06/25/92 Telephone Equipment 2924 Jacklin Rd. (TLC) Limited Finance & 4071146 Victoria, BC Corporate 05/17/95 Relations 5788968 05/17/95 5789655 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. IBM Canada Ltd. BC Ministry of 12/23/92 Office Equipment / 13160 Vanier Place, Ste 140 Finance & 4374735 Computers supplied by Richmond BC Corporate 01/14/93 Secured Party Relations 4403182 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Comdisco Canada Ltd. BC Ministry of 02/15/93 IBM equipment under 13211 Delf Place, Ste 601 Finance & 4457490 master lease Richmond BC Corporate 03/03/95 dated 1/13/93 Relations 5669001 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 03/09/93 Equipment per terms 13211 Delf Place, Ste 601 Finance & 4492529 517 dated 3/3/93 Richmond BC Corporate 08/20/93 Relations name change 03/04/96 address change - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 08/12/93 Computer Equipment 13211 Delf Place, Ste 601 Finance & 4761308 Richmond BC Corporate 08/20/93 Relations name change 03/04/96 address change - ------------------------------------------------------------------------------------------------------------------------------------
Page 5 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Rentway Inc. BC Ministry of 09/27/93 1994 Ford 13160 Vanier Place, Ste 140 Finance & 4839192 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Barclays Bank of Canada BC Ministry of 12/03/93 Computer Equipment 13211 Delf Place, Ste 601 Finance & 4956110 Richmond BC Corporate 03/09/95 Relations 5678507 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services, Ltd. BC Ministry of 01/05/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5001568 Richmond BC Corporate 03/04/96 Relations address change - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 03/07/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5096864 Richmond BC Corporate 03/04/96 Relations address change - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Rentway Inc. BC Ministry of 04/13/94 1994 Freightliner 13160 Vanier Place, Ste 140 Finance & 5158292 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Canadian Western Bank BC Ministry of 04/14/94 Coldstream Coolers & 2924 Jacklin Rd. Leasing Inc. Finance & 5160635 Accessories Victoria, BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------
Page 6 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Barclays Bank of Canada BC Ministry of 08/16/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5364783 Richmond BC Corporate 03/04/96 Relations address change 03/09/95 5678508 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Barclays Bank of Canada BC Ministry of 10/26/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5479148 Richmond BC Corporate 03/04/96 Relations address change 03/09/95 5678509 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services, Ltd. BC Ministry of 12/21/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5568305 Richmond BC Corporate 03/04/96 Relations address change - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 12/21/94 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5568304 Richmond BC Corporate 03/04/96 Relations address change - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 02/06/95 Computer Equipment 13211 Delf Place, Ste 601 Finance & 5629923 Richmond BC Corporate 03/04/96 Relations address change - ------------------------------------------------------------------------------------------------------------------------------------
Page 7 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Inland Kenworth BC Ministry of 04/28/95 Kenworth T300 13160 Vanier Place, Ste 140 Finance & 5753001 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Paccar of Canada, Ltd. BC Ministry of 07/05/95 2 - 1994 Kenworth T400 13160 Vanier Place, Ste 140 Finance & 5866771 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Ensign Pacific Lease Ltd. BC Ministry of 07/07/95 1995 Ford Taurus 13160 Vanier Place, Ste 140 Finance & 5871444 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Inland Kenworth BC Ministry of 07/13/95 2 Kenworth T400 13160 Vanier Place, Ste 140 Finance & 5881647 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Inland Kenworth BC Ministry of 08/04/95 Kenworth T800B 13160 Vanier Place, Ste 140 Finance & 5916963 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Inland Kenworth BC Ministry of 08/16/95 Kenworth T300 13160 Vanier Place, Ste 140 Finance & 5932783 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------
Page 8 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Paccar of Canada, Ltd. BC Ministry of 10/23/95 1996 Kenworth 7800 13160 Vanier Place, Ste 140 Finance & 6046467 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Paccar of Canada, Ltd. BC Ministry of 10/23/95 1995 Kenworth T300 13160 Vanier Place, Ste 140 Finance & 6046469 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Paccar of Canada, Ltd. BC Ministry of 07/11/95 1995 Kenworth 13160 Vanier Place, Ste 140 Finance & 5876306 Richmond BC Corporate 11/21/95 Relations 6100865 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. MFP Technology Services Ltd. BC Ministry of 12/20/95 Computer Equipment 13211 Delf Place, Ste 601 Finance & 614778 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Per. M. Enterprises Ltd DBA BC Ministry of 04/02/96 1989 Trailmobile 13160 Vanier Place, Ste 140 Annacis Truck & Trailer Service Finance & 6307632 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Per. M. Enterprises Ltd DBA BC Ministry of 04/02/96 1989 Van 13160 Vanier Place, Ste 140 Annacis Truck & Trailer Service Finance & 6307650 Richmond BC Corporate Relations - ------------------------------------------------------------------------------------------------------------------------------------
Page 9 of 10 SCHEDULE 7.3 LIENS
==================================================================================================================================== [ILLEGIBLE CAPTION] [ILLEGIBLE CAPTION] [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE [ILLEGIBLE CAPTION] CAPTION] CAPTION] CAPTION] ==================================================================================================================================== Core-Mark International, Inc. Paccar of Canada, Ltd. Winnipeg 950106- Motor Vehicles Manitoba 104393 - ------------------------------------------------------------------------------------------------------------------------------------ Core-Mark International, Inc. Paccar of Canada, Ltd. Winnipeg 951100- 1996 Kenworth Manitoba 101972 - ------------------------------------------------------------------------------------------------------------------------------------ Core-mark Distributors, Inc. CCL Leasing - Calgary Alberta Personal 07/27/93 Canon Copier Copier Ltd. Property 93072722346 Manager - ------------------------------------------------------------------------------------------------------------------------------------
Page 10 of 10 SCHEDULE 7.4 GUARANTEE OBLIGATIONS -none- EXHIBIT A TO CREDIT AGREEMENT ---------------- [FORM OF] REVOLVING CREDIT NOTE $ _______ New York, New York August 7, 1996 FOR VALUE RECEIVED, the undersigned, CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "BORROWER"), hereby unconditionally promises to pay to the order of _______ (the "LENDER") at the office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, on the Termination Date the principal amount of (a)_______ DOLLARS ($_______), or, if less, (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower pursuant to subsection 2.1 of the Credit Agreement, as hereinafter defined. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsections 2.11 and 2.13 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Revolving Credit Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement, absent manifest error, shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in such endorsement shall not affect the obligations of the Borrower in respect of such Revolving Credit Loan. This Note (a) is one of the Revolving Credit Notes referred to in the Credit Agreement dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, the Lender, the other banks and financial institutions from time to time parties thereto and The Chase Manhattan Bank, as administrative agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof. 2 Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether as maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind in connection with this Note. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. CORE-MARK INTERNATIONAL, INC. By: ----------------------------------- Name: Title:
Schedule A to Revolving Credit Note ------------------------ LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS - ----------------------------------------------------------------------------------------------------------------------------------- Amount Amount of ABR Loans Amount of Converted to Amount of Principal of Converted to Unpaid Principal Balance Date ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
Schedule B to Revolving Credit Note ------------------------- LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS - ----------------------------------------------------------------------------------------------------------------------------------- Amount of Amount Interest Period Amount of Principal Amount of Eurodollar Unpaid Principal Eurodollar Converted to and Eurodollar Rate of Eurodollar Loans Converted to Balance of Notation Date Loans Eurodollar Loans with Respect Thereto Loans Repaid ABR Loans Eurodollar Loans Made By - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B TO CREDIT AGREEMENT ---------------- [FORM OF] TERM NOTE $________ New York, New York August 7, 1996 FOR VALUE RECEIVED, the undersigned, CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "BORROWER"), hereby unconditionally promises to pay to the order of ___________________ (the "LENDER") at the office of The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of ________________________ DOLLARS ($_________), or, if less, the unpaid principal amount of the Term Loan made by the Lender pursuant to subsection 2.5 of the Credit Agreement, as hereinafter defined. The principal amount shall be paid in the amounts and on the dates specified in subsection 2.7. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsections 2.11 and 2.13 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of the Term Loan and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement, absent manifest error, shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in such endorsement shall not affect the obligations of the Borrower in respect of such Term Loan. This Note (a) is one of the Term Notes referred to in the Credit Agreement dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, the Lender, the other banks and financial institutions from time to time parties thereto and The Chase Manhattan Bank, as administrative agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof. 2 Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether as maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind in connection with this Note. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. CORE-MARK INTERNATIONAL, INC. By:__________________________ Name: Title: Schedule A to Term Loan Note ----------------- LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
AMOUNT AMOUNT OF ABR LOANS CONVERTED TO AMOUNT OF PRINCIPAL OF CONVERTED TO UNPAID PRINCIPAL BALANCE DATE AMOUNT OF ABR LOANS ABR LOANS ABR LOANS REPAID EURODOLLAR LOANS OF ABR LOANS NOTATIONS MADE BY - ---------- ------------------- -------------- ---------------------- ------------------- ------------------------ -----------------
Schedule B to Term Loan Note -----------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS - --------------------------------------------------------------------------------------------------------------------------------- AMOUNT INTEREST PERIOD AND AMOUNT OF PRINCIPAL AMOUNT OF EURODOLLAR UNPAID PRINCIPAL AMOUNT OF CONVERTED TO EURODOLLAR RATE WITH OF EURODOLLAR LOANS CONVERTED BALANCE OF NOTATION DATE EURODOLLAR LOANS EURODOLLAR LOANS RESPECT THERETO LOANS REPAID TO ABR LOANS EURODOLLAR LOANS MADE BY - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C TO CREDIT AGREEMENT SECURITY AGREEMENT among CORE-MARK INTERNATIONAL, INC., C/M PRODUCTS, INC., CORE-MARK INTERRELATED COMPANIES, INC. and CORE-MARK MIDCONTINENT, INC. in favor of THE CHASE MANHATTAN BANK, as Administrative Agent August 7, 1996 TABLE OF CONTENTS 1. Defined Terms.............................................................1 1.1 Definitions..........................................................1 1.2 Other Definitional Provisions........................................5 2. Grant of Security Interest................................................6 3. Representations and Warranties............................................7 3.1 Title; No Other Liens................................................7 3.2 Perfected First Priority Liens.......................................7 3.3 Inventory and Equipment..............................................7 3.4 Chief Executive Office...............................................7 3.5 Farm Products........................................................7 4. Covenants.................................................................7 4.1 Delivery of Instruments and Chattel Paper............................7 4.2 Maintenance of Insurance.............................................8 4.3 Maintenance of Perfected Security Interest; Further Documentation....8 4.5 Further Identification of Collateral.................................9 4.6 Notices..............................................................9 5. Provisions Relating to Accounts...........................................9 5.1 Grantors Remain Liable under Accounts................................9 5.2 Analysis of Accounts................................................10 5.3 Collections on Accounts.............................................10 5.4 Maintaining the US Cash Collateral Account and the L/C Cash Collateral Account..................................................10 5.5 Maintaining the Depository Accounts, the Deposit Accounts, the Canadian Cash Collateral Account and the Collection Accounts....11 5.6 Investing of Amounts in the US Cash Collateral Account and the L/C Cash Collateral Account.....................................12 5.7 Application and Release of Funds....................................12 5.8 Representations and Warranties......................................13 5.9 Covenants...........................................................13 6. Provisions Relating to Contracts.........................................14 6.1 Borrower Remains Liable under Contracts.............................14 6.2 Communication With Contracting Parties..............................14 6.3 Representations and Warranties......................................14 6.4 Covenants...........................................................15 7. Provisions Relating to Copyrights, Patents and Trademarks................15 7.1 Representations and Warranties......................................15 7.2 Covenants...........................................................16 8. Remedies.................................................................17 i 8.1 Notice to Obligors and Contract Parties............................17 8.2 Proceeds to be Turned Over To Administrative Agent.................18 8.3 Code Remedies......................................................18 9. Administrative Agent's Appointment as Attorney-in-Fact; Administrative Agent's Performance of Borrower's Obligations............19 9.1 Powers.............................................................19 9.2 Performance by Administrative Agent of Borrower's Obligations......20 9.3 Borrower's Reimbursement Obligation................................20 9.4 Ratification; Power Coupled With An Interest.......................20 10. Duty of Administrative Agent............................................21 11. Execution of Financing Statements.......................................21 12. Authority of Administrative Agent.......................................21 13. Notices.................................................................21 14. Severability............................................................22 15. Amendments in Writing; No Waiver; Cumulative Remedies...................22 15.1 Amendments in Writing.............................................22 15.2 No Waiver by Course of Conduct....................................22 15.3 Remedies Cumulative...............................................22 16. Section Headings........................................................22 17. Successors and Assigns..................................................22 18. Attachment..............................................................22 19. Governing Law...........................................................23 20 Termination and Release of Collateral....................................23 21. WAIVERS OF JURY TRIAL...................................................23 ii [FORM OF] SECURITY AGREEMENT SECURITY AGREEMENT, dated as of August 7, 1996, made by each of the signatories hereto (the "Grantors"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders parties to the Credit Agreement, dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Core-Mark International, Inc., a Delaware corporation (the "Borrower"), the Administrative Agent and such Lenders. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans to and issue or participate in Letters of Credit for the account of, the Borrower upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans and other extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Security Agreement to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Loans and other extensions of credit to the Borrower, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 1. DEFINED TERMS. 1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General Intangibles, Instruments, Inventory and Proceeds. (b) The following terms shall have the following meanings: "ACCOUNT COLLATERAL": (a) all funds held in and all certificates and instruments, if any, from time to time representing or evidencing (1) the Cash Collateral Accounts, (2) the L/C Cash Collateral Account, (3) the Collection Accounts, (4) the Depository Accounts, (5) the Deposit Accounts, (6) all other deposit accounts of each Grantor and 2 (7) all Collateral Investments and (b)(1) all notes, certificates of deposit, deposit accounts, checks and other instruments from time to time hereinafter delivered to or otherwise possessed by the Administrative Agent for or on behalf of each Grantor in substitution for or in addition to any or all of the then existing Account Collateral and (2) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral. "AGREEMENT": this Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ALLOCATION PERCENTAGE": (a) with respect to the Term Loans, a fraction the numerator of which is the outstanding Term Loans, and the denominator of which is the sum of the outstanding Term Loans, the outstanding Revolving Credit Loans and the outstanding L/C Obligations and (b) with respect to the Aggregate Outstanding Revolving Extensions of Credit, 1 minus the allocation percentage applicable to the Term Loans as set forth above. "BORROWING CERTIFICATE": a certificate substantially in the form of Exhibit G to the Credit Agreement. "CODE": the Uniform Commercial Code as from time to time in effect in the State of New York. "CANADIAN CASH COLLATERAL ACCOUNT": a cash collateral account with Bank of Montreal or such other bank as may be reasonably acceptable to the Administrative Agent, in the name of the Borrower that has entered into a letter agreement substantially in the form of Exhibit A-2-A. "CASH COLLATERAL ACCOUNTS": the Canadian Cash Collateral Account and the US Cash Collateral Account. "COLLATERAL": as defined in Section 2. "COLLATERAL INVESTMENTS": as defined in subsection 5.6. "COLLECTION ACCOUNT BANK": as defined in subsection 5.5(b). "COLLECTION ACCOUNTS": each non-interest bearing cash collection account with a bank that is reasonably satisfactory to the Administrative Agent and that has entered into a Collection Account Letter, initially, account number 149-643-709, with Wells Fargo Bank (formerly First Interstate Bank) at its office at 707 Wilshire Blvd., Los Angeles, CA 90019, account number 4518-099999, with Wells Fargo Bank at its office at 420 Montgomery Street, San Francisco, CA 94194 and account number 3 0109656314, with Sunwest Bank at its office at 303 Roma N.W., Albuquerque, New Mexico 87103. "COLLECTION ACCOUNT LETTER": as defined in subsection 5.5(b). "CONTRACTS": with respect to any Accounts, Instruments, Chattel Paper or General Intangibles, any contract or agreement in respect thereof or pursuant to which any of the foregoing was created, as the same may be amended, supplemented or otherwise modified from time to time, including, without limitation, (a) all rights of each Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of each Grantor to damages arising out of or for breach or default in respect thereof and (c) all rights of each Grantor to exercise all remedies thereunder. "COPYRIGHTS": all copyrights, whether registered or unregistered, and whether or not the underlying works of authorship have been published, and all works of authorship and other rights therein or derived therefrom, all copyrights of works based on, incorporated in, derived from or relating to works covered by such copyrights, all right, title and interest to make and exploit all derivative works based upon or adopted from works covered by such copyright and all copyright registrations and copyright applications, and any renewals or extensions thereof, including without limitation, each copyright registration and copyright application, if any, identified in SCHEDULE 1 hereto, and including, without limitation, (a) the right to print, publish and distribute any of the foregoing, (b) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (c) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof) and (d) all rights of each Grantor corresponding thereto throughout the United States and all other rights of any kind whatsoever of each Grantor accruing thereunder or pertaining thereto; provided that, for purposes hereof, the term "Copyrights" shall not include those rights which are not created by, or do not arise or exist under, the laws of the United States or any State or political subdivision thereof. "COPYRIGHT LICENSES": all license agreements with any other Person in connection with any of the Copyrights of each Grantor, or such other Person's copyrights, whether each Grantor is a licensor or licensee under any such license agreement, including, without limitation, the license agreements listed on SCHEDULE 1 hereto, subject in each case to the terms of such license agreements, including, without limitation, terms requiring consent to a grant of a security interest; PROVIDED that, for purposes hereof, the term "Copyright Licenses" shall not include those rights which are not created by, or do not arise or exist under, the laws of the United States or any State or political subdivision thereof. 4 "DEPOSIT ACCOUNTS": as defined in subsection 5.5(a). "DEPOSIT BANKS": as defined in subsection 5.5(a). "DEPOSIT ACCOUNT LETTERS": as defined in subsection 5.5(a). "DEPOSITORY ACCOUNTS": as defined in subsection 5.5(a). "DEPOSITORY BANKS": as defined in subsection 5.5(a). "DEPOSITORY LETTERS": as defined in subsection 5.5(a). "L/C CASH COLLATERAL ACCOUNT": a non-interest bearing cash collateral account with The Chase Manhattan Bank at its office at 270 Park Avenue, New York, New York, 10017, account number 910-2-775732, in the name of the Administrative Agent and under its sole dominion and control and subject to the terms of this Agreement. "OBLIGATIONS": the collective reference to the unpaid principal of and interest on the Loans and all other obligations and liabilities of each Grantor to the Administrative Agent and the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to each Grantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan Documents, any Hedge Agreement entered into by any Grantor with any Lender, any Overdraft or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by each Grantor pursuant to the terms of the Credit Agreement, this Agreement, any other Loan Document, any Hedge Agreement entered into by any Grantor with any Lender or any Overdraft), PROVIDED that in no event shall the obligations of any Grantor other than the Borrower exceed the maximum amount specified in the Subsidiaries Guarantee. "OVERDRAFT": means, at any time, the amount by which the aggregate amount debited from any deposit, concentration, operating or disbursement account maintained by any Grantor with the Administrative Agent or any Affiliate of the Administrative Agent, as the result of processing of payment orders issued by such Grantor or otherwise, exceeds the aggregate funds on deposit in such account. 5 "PATENTS": (a) all letters patent of the United States or any other country and all reissues and extensions thereof, including, without limitation, any thereof referred to in SCHEDULE 2, and (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any thereof referred to in SCHEDULE 2. "PATENT LICENSE": all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in SCHEDULE 2. "TRADEMARKS": (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any thereof referred to in SCHEDULE 3, and (b) all renewals thereof. "TRADEMARK LICENSE" means any written agreement, providing for the grant by or to any Grantor of any right to use any Trademark, including, without limitation, any thereof referred to in SCHEDULE 3. "US CASH COLLATERAL ACCOUNT": a non-interest bearing cash deposit account with The Chase Manhattan Bank at its office at 270 Park Avenue, New York, New York, 10017, account number 910-2-775740, in the name of the Administrative Agent and under its sole dominion and control and subject to the terms of this Agreement. "UNAFFIXED TAX STAMPS": tax stamps in respect of local and state cigarette taxes that are not physically attached to the Cigarette Inventory as defined in the Credit Agreement; "VEHICLES" means all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 6 2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, each Grantor hereby grants to the Administrative Agent for the ratable benefit of the Lenders a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "COLLATERAL"): (a) all Account Collateral; (b) all Accounts; (c) all Chattel Paper; (d) all Contracts; (e) all Copyrights; (f) all Copyright Licenses; (g) all Documents; (h) all Equipment; (i) all General Intangibles; (j) all Instruments; (k) all Inventory; (l) all Patents; (m) all Patent Licenses; (n) all Trademarks; (o) all Trademark Licenses; (p) all Unaffixed Tax Stamps; (q) all Vehicles; (r) all books and records pertaining to the Collateral; and 7 (s) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. 3. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, as to itself that: 3.1 TITLE; NO OTHER LIENS. Except for the security interest granted to the Administrative Agent for the ratable benefit of the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Collateral pursuant to the Credit Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Lenders, pursuant to this Agreement or as are permitted pursuant to the Credit Agreement and except for financing statements relating to property in which such Grantor has no interest other than an interest arising under an operating lease. 3.2 PERFECTED FIRST PRIORITY LIENS. Effective upon the filing of appropriate financing statements, the filing with and recording by the United States Patent and Trademark Office and the United States Copyright Office of this Security Agreement, and all other appropriate action having been duly taken, the security interests granted pursuant to this Agreement constitute perfected security interests in the Collateral (other than the Vehicles, except to the extent that the appropriate steps for perfection have been taken pursuant to subsection ) in favor of the Administrative Agent, for the ratable benefit of the Lenders, as collateral security for the Obligations and are prior to all other Liens on the Collateral in existence on the date hereof except for Liens permitted pursuant to the Credit Agreement. 3.3 INVENTORY AND EQUIPMENT. The Inventory and the Equipment are kept at the locations listed on SCHEDULE 5. 3.4 CHIEF EXECUTIVE OFFICE. The location of such Grantor's chief executive office or sole place of business is specified on SCHEDULE 6. 3.5 FARM PRODUCTS. No material portion of the Collateral constitutes, or is the Proceeds of, Farm Products. 4. COVENANTS. Each Grantor covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full, the Commitments shall have expired or otherwise been terminated and no Letters of Credit are outstanding, as follows: 4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument 8 or Chattel Paper and such amount exceeds $100,000, such Instrument or Chattel Paper shall be added to SCHEDULE 8. If requested by the Administrative Agent each such Instrument or Chattel Paper shall be promptly delivered to the Administrative Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement. 4.2 MAINTENANCE OF INSURANCE. (a) Such Grantor (or the Borrower, on behalf of such Grantor) will maintain, with financially sound and reputable companies, insurance policies (1) insuring the Inventory, Equipment and Vehicles against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Administrative Agent and (2) insuring such Grantor, the Administrative Agent and the Lenders against liability for personal injury and property damage relating to such Inventory, Equipment and Vehicles, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Administrative Agent and the Lenders, with losses payable to such Grantor (or the Borrower, on behalf of such Grantor), the Administrative Agent and the Lenders as their respective interests may appear. (b) All such insurance shall (1) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Administrative Agent of written notice thereof, (2) name the Administrative Agent and the Lenders as insured parties, (3) include a breach of warranty clause and (4) be reasonably satisfactory in all other respects to the Administrative Agent. (c) Such Grantor shall deliver to the Administrative Agent and the Lenders a certificate of a reputable insurance broker with respect to such insurance during the month of August in each calendar year and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request. 4.3 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in subsection and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the Uniform Commercial Code or their foreign equivalent in effect in any jurisdiction with respect to the security interests created hereby and (ii) after an Event of Default and at the request of the Administrative Agent, the delivery of certificates of title with respect to Vehicles to the Administrative Agent, properly endorsed in accordance with applicable law, and the filing of any appropriate lien documents with the relevant state authorities. 9 4.4 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not: (a) permit any of the Inventory or Equipment to be kept at a location other than those listed on SCHEDULE 5 unless it gives the Administrative Agent notice and takes all steps reasonably necessary or advisable, in the judgment of the Administrative Agent, to maintain the perfection and priority in such Inventory and Equipment as set forth in subsection ; (b) change the location of its chief executive office from that specified in subsection , unless it shall have given the Administrative Agent and the Lenders at least 30 days' prior written notice of such change and takes all steps reasonably necessary or advisable, in the judgment of the Administrative Agent, to maintain the perfection and priority of the security interests granted pursuant to this Agreement; or (c) change its name, identity or corporate structure to such an extent that any financing statement filed by the Administrative Agent in connection with this Agreement would become seriously misleading, unless it shall have given the Administrative Agent and the Lenders at least 30 days' prior written notice of such change and takes all steps reasonably necessary or advisable, in the judgment of the Administrative Agent, to maintain the perfection and priority of the security interests granted pursuant to this Agreement. 4.5 FURTHER IDENTIFICATION OF COLLATERAL. Such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail. 4.6 NOTICES. Such Grantor will advise the Administrative Agent and the Lenders promptly after becoming aware thereof, in reasonable detail, at their respective addresses for notices provided for in the Credit Agreement of: (a) any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral; and (b) the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5. PROVISIONS RELATING TO ACCOUNTS. 5. Grantors Remain Liable under Accounts. Anything herein to the contrary notwithstanding, as between any Grantor and the Administrative Agent, each Grantor shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of 10 any agreement giving rise to each such Account. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Lender of any payment relating to such Account pursuant hereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 5.2 ANALYSIS OF ACCOUNTS. The Administrative Agent shall have the right to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent reasonably may require in connection with such test verifications. The Administrative Agent in its own name or in the name of others may communicate with the obligors on the Accounts to verify with them to the Administrative Agent's satisfaction the existence, amount and terms of any Accounts. 5.3 COLLECTIONS ON ACCOUNTS. (a) To the extent that any obligor makes payments in respect of Accounts, the Administrative Agent hereby authorizes each Grantor to collect such Accounts, subject to the Administrative Agent's direction and control as set forth in this Section, and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. Each Grantor shall, upon receipt of any payments made directly to such Grantor in respect of Accounts (1) forthwith (and, in any event, within two Business Days) deposit such amounts duly indorsed by such Grantor if required, in a Deposit Account or Depository Account, as the case may be, and (2) until so turned over, shall be held by such Grantor in trust for the Administrative Agent for the benefit of the Lenders. (b) No less frequently than once a month, the Borrower shall deliver to the Administrative Agent a revised SCHEDULE 8, reflecting all collections in respect of the preceding month in respect of Instruments or Chattel Paper listed on such schedule. (c) At the Administrative Agent's request, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to any Accounts exceeding $100,000, including, without limitation, all original orders, invoices and shipping receipts. 5.4 MAINTAINING THE US CASH COLLATERAL ACCOUNT AND THE L/C CASH COLLATERAL ACCOUNT. Until the Obligations shall have been paid in full, the Commitments shall have expired or otherwise been terminated and no Letters of Credit are outstanding: 11 (a) The Borrower shall maintain the US Cash Collateral Account and the L/C Cash Collateral Account with The Chase Manhattan Bank. (b) It shall be a term and condition of each of the US Cash Collateral Account and the L/C Cash Collateral Account, notwithstanding any term or condition to the contrary in any other agreement relating to the US Cash Collateral Account or the L/C Cash Collateral Account, as the case may be, and except as otherwise provided by the provisions of Section 5.7 and Section 8, that no amount (including interest on Collateral Investments) shall be paid or released to or for the account of, or withdrawn by or for the account of, any Grantor or any other Person from the US Cash Collateral Account or the L/C Cash Collateral Account, as the case may be. The US Cash Collateral Account and the L/C Cash Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 5.5 MAINTAINING THE DEPOSITORY ACCOUNTS, THE DEPOSIT ACCOUNTS, THE CANADIAN CASH COLLATERAL ACCOUNT AND THE COLLECTION ACCOUNTS. Until the Obligations shall have been paid in full, the Commitments shall have expired or otherwise been terminated and no Letters of Credit are outstanding: (a) The Grantors shall maintain (1) lockboxes and blocked deposit accounts in the United States ("DEPOSITORY ACCOUNTS") only with banks ("DEPOSITORY BANKS") that have entered into letter agreements in substantially the form of Exhibit A-1 with the Grantors and the Administrative Agent ("DEPOSITORY LETTERS") or in form and substance reasonably acceptable to the Borrower and the Administrative Agent, (2) deposit accounts in Canada ("DEPOSIT ACCOUNTS") only with banks ("DEPOSIT BANKS") that (i) are listed on SCHEDULE 7 (as such schedule may be amended or supplemented from time to time) and (ii) within 60 days of the Closing Date shall have entered into letter agreements in substantially the form of Exhibit A-2-B with the Grantors and the Administrative Agent ("Deposit Account Letters") or in form and substance reasonably acceptable to the Borrower and the Administrative Agent and (3) the Canadian Cash Collateral Account. (b) The Grantors shall maintain the Collection Accounts in the United States only with the banks listed as Collection Account banks on SCHEDULE 7 hereto, reasonably acceptable to the Administrative Agent (the "COLLECTION ACCOUNT BANKS") and have entered into a letter agreement in substantially the form of Exhibit A-3 with such Grantor and the Administrative Agent (the "COLLECTION ACCOUNT LETTER") or in form and substance reasonably acceptable to such Grantor and the Administrative Agent. 12 (c) The Grantors shall instruct each Depository Bank to forward an amount equal to the available balance of the Depository Account at such Depository Bank to a Collection Account, at the beginning of each Business Day, in same day funds and shall cause each Deposit Bank to forward an amount equal to the available balance of the Deposit Account at such Deposit Bank to the Canadian Cash Collateral Account, at least once a week, in same day funds. (d) The Grantors shall instruct each Collection Account Bank to transfer to the US Cash Collateral Account, at the beginning of each Business Day, in same day funds, an amount equal to the available balance of such Collection Accounts. (e) Upon any termination of any Depository Letter or other agreement with respect to the maintenance of a Depository Account, the Borrower shall immediately notify all Obligors that were making payments to such Depository Account to make all future payments to another Depository Account or to the Collection Accounts. (f) Upon any termination of any Deposit Account Letter or other agreement with respect to the maintenance of a Deposit Account the Borrower shall immediately notify all Obligors that were making payments to such Deposit Account to make all future payments to another Deposit Account or to the Canadian Cash Collateral Account. (g) The Grantors agree to terminate any or all Depository Accounts, Depository Letters, Deposit Accounts, Deposit Account Letters, the Collection Accounts and the Collection Account Letter upon request by the Administrative Agent made after the occurrence and during the continuance of an Event of Default. 5.6 INVESTING OF AMOUNTS IN THE US CASH COLLATERAL ACCOUNT AND THE L/C CASH COLLATERAL ACCOUNT. If requested by the Borrower, the Administrative Agent will, subject to the provisions of Section 5.7 and Section 8, from time to time (a) invest amounts on deposit in the US Cash Collateral Account and the L/C Cash Collateral Account in such US Cash Equivalents in the name of the Administrative Agent and (b) invest interest paid on the US Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of any such US Cash Equivalents that may mature or be sold, in each case in such US Cash Equivalents in the name of the Administrative Agent (the US Cash Equivalents referred to in clauses (a) and (b) above being collectively "COLLATERAL INVESTMENTS"). Interest and proceeds that are not invested or reinvested in Collateral Investments as provided above shall be deposited and held in the US Cash Collateral Account or the L/C Cash Collateral Account, as the case may be. 5.7 APPLICATION AND RELEASE OF FUNDS. (a) So long as the notice contemplated by the next succeeding paragraph has not been given or, if given, is not still in effect, on each Business Day the Administrative Agent shall apply the available funds then on deposit in the US Cash Collateral Account in the following order of priority: FIRST, to pay interest, fees, 13 expenses and other amounts (other than principal) then due and payable under the Loan Documents, SECOND, to pay the principal amount of any Revolving Credit Loan that is an ABR Loan, if any such principal amount is then outstanding, THIRD, if such Business Day is the last day of an Interest Period for any Eurodollar Loan that is a Revolving Credit Loan, to pay all such Eurodollar Loans to the extent thereof. Any amounts remaining in the US Cash Collateral Account after application as set forth in the preceding sentence shall be held in the US Cash Collateral Account as Collateral for the Obligations. If an Event of Default has occurred and is continuing and the Administrative Agent has given notice to the Borrower of its intent to do so, the Administrative Agent shall remit any funds on deposit in the US Cash Collateral Account as follows: FIRST, to pay interest, fees, expenses and other amounts (other than principal) then due and payable under the Loan Documents, SECOND, to pay the Term Loans, the Aggregate Outstanding Revolving Extensions of Credit and any amounts then due and payable under any Hedge Agreement between the Borrower and any Lender and any Overdraft pro rata based upon the respective amounts owing in respect thereof. Amounts allocable to the Aggregate Outstanding Revolving Extensions of Credit shall be further allocated as follows: FIRST to any amounts outstanding under the Reimbursement Obligations, SECOND upon the payment in full of the Reimbursement Obligations, to the outstanding Revolving Credit Loans and THIRD to cash collateralize the aggregate then undrawn and unexpired amount of all Letters of Credit by releasing any funds from the US Cash Collateral Account to make the deposit to the L/C Cash Collateral Account in accordance with Section 8 of the Credit Agreement). (b) So long as no Event of Default has occurred and is continuing, the Borrower may from time to time request that available funds on deposit in the US Cash Collateral Account be released to the Borrower PROVIDED that on the date of such requested release, the conditions set forth in subsection 5.2 of the Credit Agreement shall have been satisfied. 5.8 REPRESENTATIONS AND WARRANTIES. (a) The amounts represented by the Borrower to the Lenders from time to time as owing to the Grantors in respect of the Accounts will at such times be accurate in material respects. (b) No Grantor has any Depository Accounts or other deposit accounts other than the Depository Accounts listed on SCHEDULE 7, the permitted unblocked accounts listed on SCHEDULE 9, the Deposit Accounts listed on SCHEDULE 7 and the Canadian Cash Collateral Account. The Grantors have instructed (i) all Depository Banks to forward all amounts on deposit in the Depository Accounts to the Collection Accounts, (ii) the Collection Account Bank to forward all amounts on deposit in the Collection Account to the US Cash Collateral Account and (iii) all Deposit Banks to forward all amounts on deposit in the Deposit Accounts to the Canadian Cash Collateral Account. 5.9 COVENANTS. (a) The Grantors will not (i) grant any extension of the time of payment of any Account, (ii) compromise or settle any Account for less than the full 14 amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Account, (iv) allow any credit or discount whatsoever on any Account, (v) amend, supplement or modify any Account in any manner that could adversely affect the value thereof or (vi) fail to exercise promptly and diligently each and every material right which it may have under each agreement giving rise to a Account (other than any right of termination), except that so long as no Event of Default has occurred and is continuing and the notice contemplated by the second paragraph of subsection 5.7(a) has not been given, the Grantors may do any of the foregoing in the ordinary course of business consistent with their past practice. (b) The Borrower will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Accounts. 6. PROVISIONS RELATING TO CONTRACTS. 6.1 BORROWER REMAINS LIABLE UNDER CONTRACTS. Anything herein to the contrary notwithstanding, as between each Grantor and the Administrative Agent, each Grantor shall remain liable under each of the Contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions of such Contract. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any such Lender of any payment relating to such Contract pursuant hereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of each Grantor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.2 COMMUNICATION WITH CONTRACTING PARTIES. After prior notice to the Borrower of its intention to do so, the Administrative Agent in its own name or in the name of others may communicate with parties to the Contracts to verify with them to the Administrative Agent's reasonable satisfaction the existence, amount and terms of any Contracts. 6.3 REPRESENTATIONS AND WARRANTIES. (a) No consent of any party (other than each Grantor) to any Contract is required, or purports to be required, in connection with the execution, delivery and performance of this Agreement. (b) Each Contract is in full force and effect and constitutes a valid and legally enforceable obligation of each Grantor and to each Grantor's knowledge, the other parties thereto, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (c) No consent or authorization of, filing with or other act by or in respect of any Governmental Authority is required in connection with the execution, delivery, performance, validity or enforceability of any of the Contracts by any party thereto other than those which have been duly obtained, made or performed, are in full force and effect and do not subject the scope of any such Contract to any material adverse limitation, either specific or general in nature. (d) Neither each Grantor nor (to the best of each Grantor's knowledge) any of the other parties to the Contracts is in default in the performance or observance of any of the terms thereof in any manner that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. (e) The right, title and interest of each Grantor in, to and under the Contracts are not subject to any defenses, offsets, counterclaims or claims that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 6.4 COVENANTS. (a) Each Grantor will perform and comply in all material respects with all its obligations under the Contracts which the failure to so do could reasonably be expected to materially adversely affect the value of such Contract as Collateral. (b) Each Grantor will not amend, modify, terminate or waive any provision of any Contract in any manner which could reasonably be expected to materially adversely affect the value of such Contract as Collateral. (c) Each Grantor will exercise promptly and diligently each and every material right which it may have under each Contract (other than any right of termination) which the failure to so do could reasonably be expected to materially adversely affect the value of such Contract as Collateral. (d) Each Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it relating in any way to any Contract that questions the validity or enforceability of such Contract. 7. PROVISIONS RELATING TO COPYRIGHTS, PATENTS AND TRADEMARKS. 7.1 REPRESENTATIONS AND WARRANTIES. (a) SCHEDULE 1 includes all material Copyright and Copyright Licenses owned by each Grantor in its own name on the date hereof. (b) SCHEDULE 2 includes all Patents and Patent Licenses owned by each Grantor in its own name on the date hereof. 16 (c) SCHEDULE 3 includes all registered Trademarks, applications therefor and Trademark Licenses owned by each Grantor in its own name on the date hereof. (d) To the best of each Grantor's knowledge, each material Copyright, Patent and Trademark is on the date hereof valid, subsisting, unexpired, enforceable and has not been abandoned. (e) Except as set forth in either SCHEDULE 1, SCHEDULE 2 or SCHEDULE 3, none of such Copyrights, Patents and Trademarks is on the date hereof the subject of any licensing or franchise agreement. (f) No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of any Copyright, Patent or Trademark in any respect that could reasonably be expected to have a Material Adverse Effect. (g) No action or proceeding is pending on the date hereof seeking to limit, cancel or question the validity of any material Copyright, Patent or Trademark, or which, if adversely determined, would have a material adverse effect on the value of any material Copyright, Patent or Trademark. 7.2 COVENANTS. (a) Each Grantor (either itself or through licensees) will (1) continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (2) maintain as in the past the quality of products and services offered under such Trademark, (3) employ such Trademark with the appropriate notice of registration, (4) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (5) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated. (b) Each Grantor will not do any act, or omit to do any act, whereby any material Patent may become abandoned or dedicated. (c) Each Grantor will notify the Administrative Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Patent or Trademark may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any similar office or agency in any other county or political subdivision thereof or 17 any court or tribunal in any country) regarding each Grantor's ownership of any material Patent or Trademark or its right to register the same or to keep and maintain the same. (d) Whenever each Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, each Grantor shall report such filing to the Administrative Agent and the Lenders within five Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request of the Administrative Agent, each Grantor shall execute and deliver any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Administrative Agent's and the Lenders' security interest in any Patent or Trademark and the goodwill and general intangibles of each Grantor relating thereto or represented thereby. (e) Each Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) for and to maintain each registration of the material Patents and Trademarks, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (f) In the event that any Patent or Trademark is infringed, misappropriated or diluted by a third party, each Grantor shall (i) take such actions as each Grantor shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark and (ii) if such Patent or Trademark is of material economic value, promptly notify the Administrative Agent and the Lenders after it learns thereof and sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution. 8. REMEDIES. 8.1 NOTICE TO OBLIGORS AND CONTRACT PARTIES. Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Accounts and parties to the Contracts that the Accounts and the Contracts have been assigned to the Administrative Agent for the ratable benefit of the Lenders and that payments in respect thereof shall be made directly to the Administrative Agent. At any time and from time to time after the occurrence and during the continuance of an Event of Default, the Administrative Agent may in its own name or in the name of others communicate with the parties to the Contracts (or the parties to any other contract (as defined in the Code) to which each Grantor is a party) to verify with them to its satisfaction the existence, amount and terms of any such Contracts (or such other contracts). 18 8.2 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In addition to the rights of the Administrative Agent specified in subsection 5 and with respect to payments of Accounts, if an Event of Default shall occur and be continuing and the notice contemplated by the second paragraph of subsection 5.7(a) has been given, all Proceeds of any Collateral received by each Grantor consisting of cash, checks and other near-cash items shall be held by each Grantor in trust for the Administrative Agent for the benefit of the Lenders, segregated from other funds of each Grantor, and shall, forthwith upon receipt by each Grantor, be turned over to the Administrative Agent (duly indorsed by each Grantor to the Administrative Agent, if required) and held by the Administrative Agent in the US Cash Collateral Account. All Proceeds while held by the Administrative Agent in the US Cash Collateral Account (or by each Grantor in trust for the Administrative Agent for the benefit of the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in subsection 5.7. 8.3 CODE REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code or any applicable law. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon each Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give an option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Administrative Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in each Grantor, which right or equity is hereby waived or released. Each Grantor further agrees, at the Administrative Agent's request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at each Grantor's premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this subsection, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as provided in subsection 5.7 and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9- 19 504(1)(c) of the Code, need the Administrative Agent account for the surplus, if any, to each Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by it of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 9. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT; ADMINISTRATIVE AGENT'S PERFORMANCE OF BORROWER'S OBLIGATIONS. 9.1 POWERS. Upon the occurrence and during the continuance of an Event of Default, each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of each Grantor and in the name of each Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of each Grantor, without notice to or assent by each Grantor, to do any or all of the following: (a) in the name of each Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account or Contract or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Account or Contract or with respect to any other Collateral whenever payable; (b) in the case of any Copyright, Patent or Trademark, execute and deliver any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent's security interest in such Copyright, Patent or Trademark and the goodwill and general intangibles of each Grantor relating thereto or represented thereby; (c) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (d) execute, in connection with any sale provided for in subsection 8.3 , any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and 20 (e)(1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against each Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent's option and each Grantor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interests therein and to effect the intent of this Agreement, all as fully and effectively as each Grantor might do. Anything in this subsection to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this subsection unless an Event of Default shall have occurred and be continuing. 9.2 PERFORMANCE BY ADMINISTRATIVE AGENT OF BORROWER'S OBLIGATIONS. If each Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. 9.3 BORROWER'S REIMBURSEMENT OBLIGATION. The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due ABR Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by each Grantor, shall be payable by each Grantor to the Administrative Agent on demand. 9.4 RATIFICATION; POWER COUPLED WITH AN INTEREST. Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof and in 21 accordance with the terms hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 10. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of each Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Administrative Agent hereunder are solely to protect the Administrative Agent's interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Lender to exercise any such powers. The Administrative Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to each Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 11. EXECUTIION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the Code or any applicable law, each Grantor authorizes the Administrative Agent to file financing statements with respect to the Collateral without the signature of each Grantor in such form and in such filing offices as the Administrative Agent reasonably determines appropriate to perfect the security interests of the Administrative Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction (except in Canada). 12. AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and each Grantor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and each Grantor shall be under no obligation, or entitlement, to make any inquiry respecting such authority. 13. NOTICES. All notices, requests and demands to or upon the Administrative Agent or each Grantor hereunder shall be effected in the manner provided for in subsection 10.2 of the Credit Agreement. 22 14. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. 15.1 AMENDMENTS IN WRITING. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Grantor and the Administrative Agent, PROVIDED that any provision of this Agreement imposing obligations on any Grantor may be waived by the Administrative Agent in a written instrument executed by the Administrative Agent. 15.2 NO WAIVER BY COURSE OF CONDUCT. Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to subsection 15.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Lender would otherwise have on any future occasion. 15.3 REMEDIES CUMULATIVE. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 16. SECTION HEADINGS. The Section and subsection headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and permitted assigns under the Credit Agreement. 18. ATTACHMENT. The parties hereby acknowledge that (i) value has been given; (ii) each Grantor has rights in the Collateral; (iii) they have not agreed to postpone the time of attachment of the security interest; and (iv) each Grantor has received a duplicate original copy of this Agreement. 23 19. GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York except with respect to the security interests granted hereby in deposit accounts which shall be governed by the law of the State of California. 20. TERMINATION AND RELEASE OF COLLATERAL. At such time as the Obligations then due and payable have been fully satisfied and the Commitments terminated, the Collateral shall be released from the lien created by this Agreement, and the security interest created by this Agreement and all obligations of the Grantors with respect thereto shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. Upon request of any Grantor following any such termination, the Administrative Agent will deliver (at the sole cost and expense of such Grantor) to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver (at the sole cost and expense of such Grantor) to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. 21. WAIVERS OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 24 IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written. CORE-MARK INTERNATIONAL, INC. By: ___________________________________ Name: Title: C/M PRODUCTS, INC. By: ___________________________________ Name: Title: CORE-MARK INTERRELATED COMPANIES, INC. By: ___________________________________ Name: Title: CORE-MARK MIDCONTINENT, INC. By: ___________________________________ Name: Title: STATE OF NEW YORK ) : ss: COUNTY OF NEW YORK ) On August __, 1996, before me personally came ___________________, to me known, who, by me duly sworn, did depose and say that deponent resides at __________________________________, deponent is _____________________ of _________________________________________________, the corporation described in and which executed the foregoing instrument; that the seal affixed to said instrument is the corporate seal of such corporation and that it was so affixed by order of the Board of Directors of such corporation; and that deponent signed deponent's name thereto by like order. ________________________________________ Notary Public SCHEDULE 1 COPYRIGHTS AND COPYRIGHT LICENSES The Company is a party to general software license agreements for programs used in day to day operations (e.g., Lotus, Excel, Microsoft Word, etc.) SCHEDULE 2 PATENTS AND PATENT LICENSES -none- SCHEDULE 3 TRADEMARKS AND TRADEMARK LICENSES CORE-MARK INTERNATIONAL, INC. Registration Registration Renewal Jurisdiction Mark Number Date Date - ------------ ---- ----- ---- ---- United States Cable Car 929,258 2/15/72 2/15/02 United States Cable Car & 1,810,976 12/14/93 12/14/03 Design United States Capt'n Slush 1,240,974 6/7/83 6/7/03 United States Convenience 2000 1,826,573 3/15/94 3/15/04 United States Convenience 2000 1,827,690 3/22/94 3/22/04 & Design United States Core-Mark 1,283,707 6/26/84 6/26/04 United States Core-Mark & 1,834,121 5/3/94 5/3/04 Design United States Core-Mark & 1,834,123 5/3/94 5/3/04 Design United States Spacevues 1,742,013 12/22/92 12/22/02 United States Starmark 1,605,239 7/10/90 7/10/00 Canada Core-Mark TMA 272,823 10/15/82 10/15/97 Canada Core-Mark & TMA 279,410 5/13/83 5/13/98 Design Canada Core-Mark & TMA 433,460 9/16/94 9/16/10 Design Canada Core-Mark & TMA 432,801 9/02/94 9/02/10 Design Canada Fast 'N Fresh TMA 349,558 12/23/88 12/23/03 Canada Fast 'N Tasty & TMA 456,145 3/22/96 3/22/11 Design Trademark and Service Mark Applications --------------------------------------- Application Application Jurisdiction Mark Number Date - ------------ ---- ------ ---- United States Starmark & 75/106,574 5/20/96 Design United States Tully's To Go 75/023,295 11/22/95 United States Tully's To Go 75/072,803 3/14/96 & Design SCHEDULE 3 TRADEMARKS AND TRADEMARK LICENSES (PAGE 2) CORE-MARK INTERRELATED COMPANIES, INC Registration Registration Renewal Jurisdiction Mark Number Date Date - ------------ --- ------ ---- ----- United States Best Buy 1,225,254 1/25/83 1/25/03 United States Best Buy 1,801,011 10/26/93 10/26/03 United States Best Buy 1,801,668 10/26/93 10/26/03 United States Best Buy 1,225,253 1/25/83 1/25/03 & Design United States Best Buy 1,809,484 12/7/93 12/7/03 & Design United States Best Buy 1,833,456 4/26/94 4/26/04 & Design United States Best Buy 1,813,973 12/8/93 12/28/03 & Design United States Major Brand 1,404,520 8/5/86 8/5/06 Canada Best Buy TMA335,175 12/11/877 12/11/02 & Design Trademark and Service Mark Applications --------------------------------------- Registration Registration Renewal Jurisdiction Mark Number Date Date - ------------ --- ------ ---- ----- None SCHEDULE 3 TRADEMARKS AND TRADEMARK LICENSES (PAGE 3) TRADEMARK LICENSES 1. Trademark License Agreement, dated as of July 1, 1993, by and between Famous Value Brands, a division of Philip Morris Incorporated (the "Licensee") and CORE-MARK INTERRELATED COMPANIES, INC. (the "Licensor"). 2. Agreement, dated as of September 17, 1992, by and between Helme Tobacco Company (the "Licensee") and C/M Products, Inc. (the "Licensor"), with respect to trademarks owned by CORE-MARK INTERRELATED COMPANIES, INC. 3. Non-Exclusive Dealer Agreements, dated a of November 1, 1993, by and between Applied Business Corporation (the "Licensor") and CORE-MARK INTERNATIONAL, INC. (the "Licensee"). SCHEDULE 4 INTENTIONALLY LEFT BLANK SCHEDULE 5 LOCATIONS OF EQUIPMENT AND INVENTORY LOCATIONS OF EQUIPMENT: U.S. 8333 Washington Place, N.E. ALBUQUERQUE, Bernalillo County, NM 87113 200 Core-Mark Court BAKERSFIELD, Kern County, CA 93307 311 Reed Circle (note: AMI) CORONA, Riverside County, CA 91720 353 Meyer Circle CORONA, Riverside County, CA 91720 31300 Medallion Dr. HAYWARD, Alameda County, CA 94544 2311 East 48th St. VERNON, Los Angeles County, CA 90058 3970 Pell Circle SACRAMENTO, Sacramento County, CA 95838 3650 Fraser St. AURORA, Adams County, CO 60011 3950 West Harmon LAS VEGAS, Clark County, NV 89103 245 Telegraph St. RENO, Washoe County, NV 89502 13551 S.E. Johnson (note: Portland Division) MILWAUKEE, Clackamas County, OR 97223 303 N.E. F St. GRANTS PASS, Josephine County, OR 97526 3130 South 1030 West SOUTH SALT LAKE CITY, Salt Lake County, UT 84119 North 1015 Dyer Rd. SPOKANE, Spokane County, WA 99212 152 Lombard Street #608 SAN FRANCISCO, San Francisco, CA 94123 8225 Washington Place, N.E. ALBUQUERQUE, Bernalillo County, NM 87113 8350 Fruitridge Road, #247 SACRAMENTO, Sacramento County, CA 95826 5545 West Latham St., Suite 3 PHOENIX, Maricopa County, AZ 85043 3164 East La Palma Ave. Unit #1 ANAHEIM, Orange County, CA 92806 184 West Club Center Dr., Unit F SAN BERNARDINO, San Bernardino County, CA 92408 9235 Trade Place, Suite G SAN DIEGO, San Diego County, CA 92126 1419 N. San Fernando Blvd., Suite 210 BURBANK, Los Angeles County, CA 91504 10 West 7th St. EUREKA, Humboldt County, CA 95501 395 Oyster Point Blvd., Suite 415 SOUTH SAN FRANCISCO, San Mateo County, CA 94080 2409 East Butler Market Rd. BEND, Deschutes County, OR 97701 1022 South 30th St. TACOMA, Pierce County, WA 98424 431 W. Lambert Road, #300 BREA, Orange County, Ca 92621 4630 Pacific Hwy. East #B10 TACOMA, Pierce County, WA 98424 2468 Whipple Road HAYWARD, Alameda County, CA 94544 1 SCHEDULE 5 PAGE 2 LOCATIONS OF EQUIPMENT: (CONT'D) CANADA 8225 30th Street, Suite 140 CALGARY, AB, T2C 1H7, Canada 13951 Bridgeport Road RICHMOND, BC, V6V 1J6, Canada 2924 Jacklin Road VICTORIA, BC, V9B 3Y5, Canada 99 Banister Road WINNIPEG, MB, R2R 0S2, Canada 4611 Viking Way RICHMOND, BC V6V 2K9, Canada 4619 Marine Avenue POWELL RIVER, BC, V8A 2K8, Canada 13160 Vanier Place, Suite 140 RICHMOND, BC, V6V 2J2, Canada 13211 Delf Place RICHMOND, BC, V6V 2A2, Canada 9603 45th Avenue EDMONTON, AB, T6E 5V8, Canada 550 McDonald Street REGINA, SK, S4P, Canada 2 SCHEDULE 5 PAGE 3 LOCATIONS OF INVENTORY: U.S. 8333 Washington Place, N.E. ALBUQUERQUE, Bernalillo County, NM 87113 200 Core-Mark Court BAKERSFIELD, Kern County, CA 93307 311 Reed Circle (note: AMI) CORONA, Riverside County, CA 91720 353 Meyer Circle CORONA, Riverside County, CA 91720 31300 Medallion Dr. HAYWARD, Alameda County, CA 94544 2311 East 48th St. VERNON, Los Angeles County, CA 990058 3970 Pell Circle SACRAMENTO, Sacramento County, CA 95838 3650 Fraser St. AURORA, Adams County, CO 60011 3950 West Harmon LAS VEGAS, Clark County, NV 89103 245 Telegraph St. RENO, Washoe County, NV 89502 13551 S.E. Johnson (note: Portland Division) MILWAUKEE, Clackamas County, OR 97223 303 N.E. F St. GRANTS PASS, Josephine County, OR 97526 3130 South 1030 West SOUTH SALT LAKE CITY, Salt Lake County, UT 84119 North 1015 Dyer Rd. SPOKANE, Spokane County, WA 99212 8225 Washington Place, NE ALBUQUERQUE, Benalillo County, NM 87113 8350 Fruitridge Rd. # 247 SACRAMENTO, Sacramento County, CA 95826 CANADA 8225 30th Street, Suite 140 CALGARY, AB, T2C 1H7, Canada 13160 Vanier Place, Suite 140 RICHMOND, BC, V6V 2J2, Canada 2924 Jacklin Road VICTORIA, BC, V9B 3Y5, Canada 99 Banister Road WINNIPEG, MB, R2R 0S2, Canada PUBLIC WAREHOUSES OCCASIONALLY USED: U.S.: Desert Empire Transfer & Storage 258 E. Commercial Rd. San Bernardino, CA 92408 California Distribution Centers, Inc. 2080 Enterprise Blvd. West Sacramento, CA 95691 United States Cold Storage of California 3100 52nd Avenue Sacramento, CA 95823 3 SCHEDULE 6 LOCATION OF CHIEF EXECUTIVE OFFICE GRANTOR LOCATION ------- -------- Core-Mark International, Inc. 395 Oyster Point Boulevard #415 South San Francisco, CA 94080 C/M Products, Inc. 395 Oyster Point Boulevard #415 South San Francisco, CA 94080 Core-Mark Interrelated 395 Oyster Point Boulevard #415 Companies, Inc. South San Francisco, CA 94080 Core-Mark Midcontinent, Inc. 395 Oyster Point Boulevard #415 South San Francisco, CA 94080 SCHEDULE 7 DEPOSIT BANKS/CANADA NAME AND ADDRESS OF BANK ACCOUNT NUMBER - ---------------------------- ---------------------------------- BANK OF MONTREAL CANADIAN CASH FIRST BANK TOWER, 6TH FL COLLATERAL ACCOUNT 595 BURRARD STREET 07600-0000-313 VANCOUVER, B.C. V7X 1L5 C$ Concentration Acct ATTN: ERIC LINDSTROM THE BANK OF NOVA SCOTIA DEPOSIT ACCOUNT 650 WEST GEORGIA ST. 34TH FL 11239-002-0010-15 VANCOUVER, B.C., V6B 4N7 Visa Deposit/Calgary ATTN: MARK CLAYARDS Transfer to Bk Montreal weekly DEPOSIT ACCOUNT 71480-002-00009-14 Visa Deposit Richmond Transfer to Bk Montreal weekly CANADIAN IMPERIAL BANK DEPOSIT ACCOUNT OF COMMERCE 00307-2604310 1727 ELLICE AVE. Visa & Master Card Deposit WINNIPEG, M.B. R3H 0B4 Calgary Transfer to Bk Montreal weekly SCHEDULE 7 COLLECTION ACCOUNT AND DEPOSITORY BANKS (CONTINUED) NAME AND ADDRESS OF BANK ACCOUNT NUMBER - ------------------------- -------------------------------- CHASE MANHATTAN BANK-NEW YORK US CASH COLLATERAL 1 CHASE PLAZA 910-2-775740 NEW YORK, NY 10081 Chase Controls ATTN: LEONARD PENN (SAN FRANCISCO) L/C COLLATERAL 910-2-775732 Chase Controls WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF ARIZONA 1620-12120 114 WEST ADAMS STREET Depository/Corona MAIL SORT 967 PHOENIX, ARIZONA 85003 DEPOSITORY ACCOUNT ATTN: ED BAROSKY (WELLS SAN FRANCISCO) 1829-12192 Depository/Las Vegas WELLS FARGO/FIRST INTERSTATE COLLECTION ACCOUNT BANK OF CALIFORNIA 149-643-709 707 WILSHIRE BOULEVARD Sweep account for non-Calif LOS ANGELES, CALIFORNIA 90017 ACH activity ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF DENVER 4785940 633 SEVENTEENTH STREET Depository/Denver (CMI) 3N-056 Lockbox DENVER, COLORADO 80270 ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF NEVADA 147-316-3763 3800 HOWARD HUGHES PARKWAY Depository/Las Vegas NUMBER 811LV LAS VEGAS, NEVADA 89109 DEPOSITORY ACCOUNT ATTN: ED BAROSKY (WELLS SAN FRANCISCO) 002-2572-642 Depository/Reno SCHEDULE 7 COLLECTION ACCOUNT AND DEPOSITORY BANKS (CONTINUED) NAME AND ADDRESS OF BANK ACCOUNT NUMBER - ------------------------------- -------------------------------- WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF OREGON 189-002378-7 1300 S.W. FIFTH AVENE Depository/Portland T-19 Lockbox PORTLAND, OREGON 97201 ATTN: ED BAROSKY (WELLS SAN FRANCISCO) DEPOSITORY ACCOUNT 427-011809-5 Depository/Grants Pass WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF UTAH 02-07137-1 180 SOUTH MAIN Depository/Salt Lake City SALT LAKE CITY, UTAH 84101 ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO/FIRST INTERSTATE DEPOSITORY ACCOUNT BANK OF WASHINGTON 300-080-065 999 THIRD AVENUE, MAIL STATION 886 Depository/Spokane SEATTLE, WASHINGTON 98104 ATTN: ED BAROSKY (WELLS SAN FRANCISCO) DEPOSITORY ACCOUNT 303-651-950 Depository/Spokane SUNWEST BANK COLLECTION ACCOUNT P.O. BOX 25500 0109656314 ALBUQUERQUE, NEW MEXICO 87125 Depository/Albuquerque HAZEL HILL WELLS FARGO BANK COLLECTION ACCOUNT 420 MONTGOMERY STREET 4518-099999 SAN FRANCISCO, CA 94194 California Depository/Lockbox ATTN: ED BAROSKY Lockbox address Sacramento dept 44110 Hayward dept 44238 Los Angeles dept 66514 Corona dept 66579 Bakersfield dept 66543 SCHEDULE 8 INSTRUMENTS AND CHATTEL PAPER 1. Series B Bonds issued by Apex Oil Company, Inc. due November 2000 with an aggregate principal balance of $183,305. No fair market value is available. 2. Promissory Note of Antranik A. Hindoyan, an individual and Elizabeth Hindoyan, an individual, doing business as Sunset Shell and Sunset Shell Food Mart and with an additional debtor of Hindoyan Enterprises, Inc., with an outstanding balance of $1,118,150 and maturity date of February 1, 1997. A balloon payment of $1,065,642 is due on February 1, 1997. Substantially all of the principal is expected to be renegotiated and the maturity date extended under a new promissory note agreement to be entered into at maturity. 3. Promissory Note of Dennis Sheldon, an individual doing business as Dennis Discount Depot with an outstanding balance of $151,703 and maturity date of June 20, 1996. SCHEDULE 9 PERMITTED UNBLOCKED ACCOUNTS (PAGE 1) NAME AND ADDRESS OF BANK ACCOUNT NUMBER - --------------------------- --------------- BANK OF MONTREAL 07600-0000-426 FIRST BANK TOWER, 6TH FL. CS Disbursement/ZBA 595 BURRARD STREET VANCOUVER, B.C. V7X 1L5 07800-1168-054 C$ Cigarette EFT/ZBA 07600-1102-397 C$ Payroll/ZBA 07600-1154-963 C$ Manual Payroll/ZBA 0782-1056-724 Returned Items/Richmond 2788-1019-392 Returned Items/Calgary 07600-4601-086 US $ Account 0004-7034-355 CAN $ Loan Balance Acct. CHASE MANHATTAN BANK-NEW YORK 910-2-775419 1 CHASE PLAZA Concentration (disbursement) NEW YORK, NY 10081 ATTN: LEONARD PENN (SAN FRANCISCO) 910-2-775427 Cigarette EFT/ZBA 910-2-775435 Non Cigarette EFT/ZBA 910-2-775443 CMI Originated EFT/ZBA CHASE MANHATTAN BANK-SYRACUSE 601-8-09668 6040 TARBELL RD. Accounts payable/checking SYRACUSE, NEW YORK 13206 ZBA ATTN: LEONARD PENN (SAN FRANCISCO) CITIBANK-NEW YORK 4064-2251 399 PARK AVE Master Disbursement NEW YORK, NY 10043 SCHEDULE 9 PERMITTED UNBLOCKED ACCOUNTS (PAGE 2) NAME AND ADDRESS OF BANK ACCOUNT NUMBER - ------------------------- -------------- CITIBANK-DELAWARE 4002-3661 ONE PENN'S WAY Disbursement Funding NEW CASTLE, DE 19720 4002-2768 Accounts payable 4002-3733 EDI/EFT 4002-3741 non cig EFT/EDI 3911-1795 CMI initiated EFT/EDI WELLS FARGO/FIRST INTERSTATE 149-543-203 BANK OF CALIFORNIA Payroll 707 WILSHIRE BOULEVARD MAIL SORT W12-17 LOS ANGELES, CALIFORNIA 90017 ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO/FIRST INTERSTATE 7633249 BANK OF DENVER Tradeshow Petty Cash 633 SEVENTEENTH STREET 3N-056 5035851 DENVER, COLORADO 80270 Petty Cash/Denver ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO/FIRST INTERSTATE 147-018-6965 BANK OF NEVADA Petty Cash/Las Vegas 3800 HOWARD HUGHES PARKWAY NUMBER 881LV 002-0176-982 LAS VEGAS, NEVADA 89100 Petty Cash/Reno ATTN: ED BAROSKY (WELLS SAN FRANCISCO) WELLS FARGO BANK 4518-110584 420 MONTGOMERY STREET Payroll/to replace FIB SAN FRANCISCO, CA. 94194 ATTN: ED BAROSKY 4518-100110 Petty Cash/Corona 4518-100292 Petty Cash/Sacramento 4518-100235 Petty Cash/Los Angeles 4518-100177 Petty Cash/Bakersfield EXHIBIT A-1 TO SECURITY AGREEMENT [FORM OF] DEPOSITORY LETTER [Addressee] Re: Account Nos. PER THE ATTACHED SCHEDULE Core-Mark International, Inc. (the "ASSIGNOR") currently maintains with you (the "DEPOSITORY"), the bank accounts identified in the attached schedules (the "DEPOSITORY ACCOUNT"). The Assignor hereby irrevocably notifies and instructs the Depository with respect to the Depository Account as set forth below, and hereby requests the Depository to indicate its acceptance of and agreement to be bound by the terms hereof by signing in the space provided for below. (1) In order to provide security for certain obligations of the Assignor under the Credit Agreement dated as of August 7, 1996 (as amended and in effect from time to time, the "CREDIT AGREEMENT") among the Assignor, each of the banks and financial institutions parties thereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), the Assignor has granted to the Administrative Agent for the benefit of the Lenders a security interest (the "SECURITY INTEREST") in the Collateral (as defined in the Security Agreement dated as of August 7, 1996 between the Assignor and the Administrative Agent (as amended and in effect from time to time, the "SECURITY AGREEMENT")), which includes, without limitation, all of the Assignor's accounts (as such term is defined in the Uniform Commercial Code (the "UCC")), now owned or hereafter acquired, all amounts due and to become due under any of the foregoing and all products and proceeds of any and all of the foregoing. (2) In connection with the granting of the Security Interest in the Collateral by the Assignor to the Administrative Agent for the benefit of the Lenders, the Assignor has granted and transferred to the Administrative Agent for the benefit of the Lenders a Security Interest in (a) the Depository Account, (b) all of the items from time to time in the Depository Account (it being acknowledged that such items constitute proceeds, within the meaning of the UCC, of the Collateral) and (c) all of the proceeds of such items. (3) Subject to the further instructions of the Administrative Agent, the Depository is hereby directed to transfer, at the start of each business day, in same day funds, all available funds on deposit in the Depository Account (less any minimum required balances) to Account No.______________ (the "COLLECTION ACCOUNT") maintained at First Interstate Bank (California), which account has been assigned by Assignor to the Administrative Agent. (4) The Depository is hereby notified that (i) the Administrative Agent is authorized and empowered to direct the Depository administering the Depository Account and any related lockboxes to remit all future payments directly to other designated accounts maintained by the Administrative Agent and (ii) the Assignor has agreed that it will not withdraw any funds in the Depository Account without the prior written consent of the Administrative Agent. Such direction may be given by the Administrative Agent either in its own name or as a secured party, or in the name of the Assignor pursuant to an irrevocable power of attorney (which power is coupled with an interest) heretofore granted by the Assignor in favor of the Administrative Agent. The Depository is 2 hereby irrevocably authorized and directed to abide by any such written direct payment instructions it may receive from the Administrative Agent in its own name or in the name of the Assignor. Such payment instructions shall only apply to good, collected funds held in the Depository Account. (5) By its acceptance hereof and agreement hereto, the Depository hereby (a) waives, with respect to all its existing and future claims against the Assignor, or any affiliate thereof, all existing and future rights for set-off and banker's liens against the Depository Account and all items and proceeds thereof that come into the possession of the Depository in connection with the Depository Account; PROVIDED, however, that the Depository retains the right to charge the Depository Account for all items deposited in the Depository Account and subsequently returned unpaid to the Depository and for any unpaid fees and expenses pertaining to the Depository Account or any related lockboxes; (b) represents and warrants to the best of its knowledge that except for the Depository Account and any other accounts disclosed to the Administrative Agent, there are no bank accounts that are maintained by the Depository with respect to the receivables of the Assignor; (c) agrees to provide to the Administrative Agent written notice of any fees and expenses pertaining to the Depository Account or any related lockboxes that have not been paid by the Assignor and agrees not to discontinue any services pertaining to the Depository Account or such lockboxes until 30 days have elapsed from such notice being given by the Depository to the Administrative Agent and such fees and expenses shall not have been paid; (d) agrees to provide the Administrative Agent written notice (at The Chase Manhattan Bank, 270 Park Avenue, New York, NY 10017, Attention: ______________) simultaneously with the notice being given to the Assignor as required by an agreement, if any, governing the Depository Account, should it alter, change or discontinue any services pertaining to the Depository Account or such lockboxes, such alteration, change or discontinuance to be effective 30 days from such notice being given by the Depository to the Administrative Agent, or sooner should the Administrative Agent have consented in writing; (e) agrees that in the event any services pertaining to the Depository Account or such lockboxes are discontinued after notice by the Depository as aforesaid, the Depository will (subject to being furnished with reasonable assurances regarding payment of its related fees and expenses) comply with the Administrative Agent's reasonable instructions regarding the forwarding of any payments of items then contained or subsequently deposited in the Depository Account or delivered to any related lockboxes; (f) agrees that it shall not, without the prior written consent of the Administrative Agent, transfer any funds in the Depository Account; and (g) agrees to provide the Administrative Agent with access to daily balance reporting in respect of the Depository Account, including any necessary code or password. (6) The Depository confirms to the best of its knowledge and the Assignor confirms that true and correct copies of all existing agreements between the Assignor and the Depository with respect to the Depository Account or any related lockboxes or otherwise relating to the collection of receivables of the Assignor are attached. (7) This Letter Agreement (a) shall be effective as of the date first above written; (b) shall supersede any other agreement relating to the assignment of the Depository Account, including any bank account agreement between the Assignor and the Depository relating to collection of receivables of the Assignor but only to the extent that such other agreement is inconsistent with this Letter Agreement; (c) is binding upon the parties and their respective successors and assigns and shall inure to their benefit; (d) shall not in any way or to any extent be changed, amended, modified or waived without the Administrative Agent's and the Depository's prior written consent; (e) shall be governed by, and interpreted in accordance with, the laws of the State of New York; and (f) may be executed in any number of counterparts which together shall constitute one and the same instrument. Any provision hereof that may prove unenforceable under any law or regulation shall not affect the validity of any other provision hereof. The execution, delivery and performance of this Letter 3 Agreement is within the corporate power of each of the Assignor, the Administrative Agent and the Depository, and has been duly authorized by all necessary corporate action. (8) All notices or instructions herein provided for shall be in writing and shall be deemed to have been given when delivered at or mailed, postage prepaid, or telecopied, to the intended recipient at the address specified below its name on the signature pages hereof, except that notices and communication to the Depository shall not be effective until received by the Depository. (9) The undersigned, First Interstate Bank Ltd. ("FIB"), has represented and warranted to the Administrative Agent that it is authorized to sign on behalf of the Depository. By signing in the space provided for below, FIB shall effectively bind the Depository to the instructions provided for herein. Very truly yours, CORE-MARK INTERNATIONAL, INC. By: ________________________________ Name: Title: Address: ACCEPTED AND AGREED AS AFORESAID: [Name of Depository] By:___________________________ Name: Title: Address: THE CHASE MANHATTAN BANK As Administrative Agent By: Name: Title: Address: EXHIBIT A-2-A TO SECURITY AGREEMENT [FORM OF] DEPOSIT ACCOUNT LETTER FOR CANADIAN CASH COLLATERAL ACCOUNT [Addressee] Re: Account No.______________ Core-Mark International, Inc. (the "ASSIGNOR") currently maintains with you (the "DEPOSITORY"), the bank account identified by the above-referenced account number (the "DEPOSIT ACCOUNT"). The Assignor hereby irrevocably notifies and instructs the Depository with respect to the Deposit Account as set forth below, and hereby requests the Depository to indicate its acceptance of and agreement to be bound by the terms hereof by signing in the space provided for below. (1) In order to provide security for certain obligations of the Assignor under the Credit Agreement dated as of August 7, 1996 (as amended and in effect from time to time, the "CREDIT AGREEMENT") among the Assignor, each of the banks and financial institutions parties thereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), the Assignor has granted to the Administrative Agent for the benefit of the Lenders a security interest (the "SECURITY INTEREST") in the Collateral (as defined in the Security Agreement dated as of August 7, 1996 between the Assignor and the Administrative Agent (as amended and in effect from time to time, the "SECURITY AGREEMENT")), which includes, without limitation, all of the Assignor's accounts (as such term is defined in the Uniform Commercial Code (the "UCC")), now owned or hereafter acquired, all amounts due and to become due under any of the foregoing and all products and proceeds of any and all of the foregoing. (2) In connection with the granting of the Security Interest in the Collateral by the Assignor to the Administrative Agent for the benefit of the Lenders, the Assignor has granted and transferred to the Administrative Agent for the benefit of the Lenders a Security Interest in (a) the Deposit Account, (b) all of the items from time to time in the Deposit Account, (c) all investments made from amounts on deposit in the Deposit Account in term deposits and interest paid on such investments in term deposits and (d) all of the proceeds of such items. (3) The Depository is hereby notified that (i) the Administrative Agent is authorized and empowered to direct the Depository administering the Deposit Account to remit all future payments directly to the Administrative Agent. Such direction may be given by the Administrative Agent either in its own name or as a secured party, or in the name of the Assignor pursuant to an irrevocable power of attorney (which power is coupled with an interest) heretofore granted by the Assignor in favor of the Administrative Agent. The Depository is hereby irrevocably authorized and directed to abide by any such written direct payment instructions it may receive from the Administrative Agent in its own name or in the name of the Assignor. Such payment instructions shall only apply to good, collected funds held in the Deposit Account. (4) By its acceptance hereof and agreement hereto, the Depository hereby (a) waives, with respect to all its existing and future claims against the Assignor, or any affiliate thereof, 2 all existing and future rights for set-off and banker's liens against the Deposit Account and all items and proceeds thereof that come into the possession of the Depository in connection with the Deposit Account; PROVIDED, however, that the Depository retains the right to charge the Deposit Account for all items deposited in the Deposit Account and subsequently returned unpaid to the Depository and for any unpaid fees and expenses pertaining to the Deposit Account; (b) represents and warrants to the best of its knowledge that except for the Deposit Account and any other accounts disclosed to the Administrative Agent, there are no bank accounts that are maintained by the Depository with respect to the receivables of the Assignor; (c) agrees to provide to the Administrative Agent written notice of any fees and expenses pertaining to the Deposit Account that have not been paid by the Assignor and agrees not to discontinue any services pertaining to the Deposit Account until 30 days have elapsed from such notice being given by the Depository to the Administrative Agent and such fees and expenses shall not have been paid; (d) agrees to provide the Administrative Agent written notice (at The Chase Manhattan Bank, 270 Park Avenue, New York, NY 10017, Attention: ______________) simultaneously with the notice being given to the Assignor as required by an agreement, if any, governing the Deposit Account, should it alter, change or discontinue any services pertaining to the Deposit Account, such alteration, change or discontinuance to be effective 30 days from such notice being given by the Depository to the Administrative Agent, or sooner should the Administrative Agent have consented in writing; (e) agrees that in the event any services pertaining to the Deposit Account are discontinued after notice by the Depository as aforesaid, the Depository will (subject to being furnished with reasonable assurances regarding payment of its related fees and expenses) comply with the Administrative Agent's reasonable instructions regarding the forwarding of any payments of items then contained or subsequently deposited in the Deposit Account; and (f) agrees to provide the Administrative Agent with access to daily balance reporting in respect of the Deposit Account, including any necessary code or password. (5) The Depository confirms to the best of its knowledge and the Assignor confirms that true and correct copies of all existing agreements between the Assignor and the Depository with respect to the Deposit Account or otherwise relating to the collection of receivables of the Assignor are attached. (6) This Letter Agreement (a) shall be effective as of the date first above written; (b) shall supersede any other agreement relating to the assignment of the Deposit Account, including any bank account agreement between the Assignor and the Depository relating to collection of receivables of the Assignor but only to the extent that such other agreement is inconsistent with this Letter Agreement; (c) is binding upon the parties and their respective successors and assigns and shall inure to their benefit; (d) shall not in any way or to any extent be changed, amended, modified or waived without the Administrative Agent's and the Depository's prior written consent; (e) shall be governed by, and interpreted in accordance with, the laws of the State of New York; and (f) may be executed in any number of counterparts which together shall constitute one and the same instrument. Any provision hereof that may prove unenforceable under any law or regulation shall not affect the validity of any other provision hereof. The execution, delivery and performance of this Letter Agreement is within the corporate power of each of the Assignor, the Administrative Agent and the Depository, and has been duly authorized by all necessary corporate action. 3 (7) All notices or instructions herein provided for shall be in writing and shall be deemed to have been given when delivered at or mailed, postage prepaid, or telecopied, to the intended recipient at the address specified below its name on the signature pages hereof, except that notices and communication to the Depository shall not be effective until received by the Depository. Very truly yours, CORE-MARK INTERNATIONAL, INC. By: ____________________________________ Name: Title: Address: ACCEPTED AND AGREED AS AFORESAID: [Name of Depository] By: ___________________________ Name: Title: Address: THE CHASE MANHATTAN BANK As Administrative Agent By: ___________________________ Name: Title: Address: EXHIBIT A-2-B TO SECURITY AGREEMENT [FORM OF] DEPOSIT ACCOUNT LETTER [Addressee] Re: Account No.______________ Core-Mark International, Inc. (the "ASSIGNOR") currently maintains with you (the "DEPOSITORY"), the bank account identified by the above-referenced account number (the "DEPOSIT ACCOUNT"). The Assignor hereby irrevocably notifies and instructs the Depository with respect to the Deposit Account as set forth below, and hereby requests the Depository to indicate its acceptance of and agreement to be bound by the terms hereof by signing in the space provided for below. (1) In order to provide security for certain obligations of the Assignor under the Credit Agreement dated as of August 7, 1996 (as amended and in effect from time to time, the "CREDIT AGREEMENT") among the Assignor, each of the banks and financial institutions parties thereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), the Assignor has granted to the Administrative Agent for the benefit of the Lenders a security interest (the "SECURITY INTEREST") in the Collateral (as defined in the Security Agreement dated as of August 7, 1996 between the Assignor and the Administrative Agent (as amended and in effect from time to time, the "SECURITY AGREEMENT")), which includes, without limitation, all of the Assignor's accounts (as such term is defined in the Uniform Commercial Code (the "UCC")), now owned or hereafter acquired, all amounts due and to become due under any of the foregoing and all products and proceeds of any and all of the foregoing. (2) In connection with the granting of the Security Interest in the Collateral by the Assignor to the Administrative Agent for the benefit of the Lenders, the Assignor has granted and transferred to the Administrative Agent for the benefit of the Lenders a Security Interest in (a) the Deposit Account, (b) all of the items from time to time in the Deposit Account and (c) all of the proceeds of such items. (3) Subject to the further instructions of the Administrative Agent, the Depository is hereby authorized, upon the request of Bank of Montreal to transfer, at least once a week, in same day funds, all available funds on deposit in the Deposit Account (less any minimum required balances) to Account No.______________ (the "CANADIAN CASH COLLATERAL ACCOUNT") maintained at Bank of Montreal. (4) The Depository is hereby notified that the Administrative Agent is authorized and empowered to direct the Depository administering the Deposit Account and any related lockboxes to remit all future payments directly to other designated accounts maintained by the Administrative Agent. Such direction may be given by the Administrative Agent either in its own name or as a secured party, or in the name of the Assignor pursuant to an irrevocable power of attorney (which power is coupled with an interest) heretofore granted by the Assignor in favor of the Administrative Agent. The Depository is hereby irrevocably authorized and directed to abide by any such written direct payment instructions it may receive from the Administrative Agent in its own name or in the 2 name of the Assignor. Such payment instructions shall only apply to good, collected funds held in the Deposit Account. (5) By its acceptance hereof and agreement hereto, the Depository hereby (a) waives, with respect to all its existing and future claims against the Assignor, or any affiliate thereof, all existing and future rights for set-off and banker's liens against the Deposit Account and all items and proceeds thereof that come into the possession of the Depository in connection with the Deposit Account; PROVIDED, however, that the Depository retains the right to charge the Deposit Account for all items deposited in the Deposit Account and subsequently returned unpaid to the Depository and for any unpaid fees and expenses pertaining to the Deposit Account; (b) represents and warrants to the best of its knowledge that except for the Deposit Account and any other accounts disclosed to the Administrative Agent, there are no bank accounts that are maintained by the Depository with respect to the receivables of the Assignor; (c) agrees to provide to the Administrative Agent written notice of any fees and expenses pertaining to the Deposit Account that have not been paid by the Assignor and agrees not to discontinue any services pertaining to the Deposit Account until 30 days have elapsed from such notice being given by the Depository to the Administrative Agent and such fees and expenses shall not have been paid; (d) agrees to provide the Administrative Agent written notice (at The Chase Manhattan Bank, 270 Park Avenue, New York, NY 10017, Attention: ______________) simultaneously with the notice being given to the Assignor as required by an agreement, if any, governing the Deposit Account, should it alter, change or discontinue any services pertaining to the Deposit Account such alteration, change or discontinuance to be effective 30 days from such notice being given by the Depository to the Administrative Agent, or sooner should the Administrative Agent have consented in writing; (e) agrees that in the event any services pertaining to the Deposit Account are discontinued after notice by the Depository as aforesaid, the Depository will (subject to being furnished with reasonable assurances regarding payment of its related fees and expenses) comply with the Administrative Agent's reasonable instructions regarding the forwarding of any payments of items then contained or subsequently deposited in the Deposit Account; (f) agrees that it shall not, without the prior written consent of the Administrative Agent, transfer any funds in the Deposit Account, except as provided in paragraph (3) above; and (g) agrees to provide the Administrative Agent with access to daily balance reporting in respect of the Deposit Account, including any necessary code or password. (6) The Depository confirms to the best of its knowledge and the Assignor confirms that true and correct copies of all existing agreements between the Assignor and the Depository with respect to the Deposit Account or otherwise relating to the collection of receivables of the Assignor are attached. (7) This Letter Agreement (a) shall be effective as of the date first above written; (b) shall supersede any other agreement relating to the assignment of the Deposit Account, including any bank account agreement between the Assignor and the Depository relating to collection of receivables of the Assignor but only to the extent that such other agreement is inconsistent with this Letter Agreement; (c) is binding upon the parties and their respective successors and assigns and shall inure to their benefit; (d) shall not in any way or to any extent be changed, amended, modified or waived without the Administrative Agent's and the Depository's prior written consent; (e) shall be governed by, and interpreted in accordance with, the laws of the State of New York; and (f) may be executed in any number of counterparts which together shall constitute one and the same instrument. Any provision hereof that may prove unenforceable under any law or regulation shall not affect the validity of any other provision hereof. The execution, delivery and performance of this Letter Agreement is within the corporate power of each of the Assignor, the Administrative Agent and the Depository, and has been duly authorized by all necessary corporate action. 3 (8) All notices or instructions herein provided for shall be in writing and shall be deemed to have been given when delivered at or mailed, postage prepaid, or telecopied, to the intended recipient at the address specified below its name on the signature pages hereof, except that notices and communication to the Depository shall not be effective until received by the Depository. Very truly yours, CORE-MARK INTERNATIONAL, INC. By: ___________________________________ Name: Title: Address: ACCEPTED AND AGREED AS AFORESAID: [Name of Depository] By: __________________________ Name: Title: Address: THE CHASE MANHATTAN BANK As Administrative Agent By: __________________________ Name: Title: Address: EXHIBIT A-3 TO SECURITY AGREEMENT [FORM OF] COLLECTION ACCOUNT LETTER [Addressee] Re: Account No.______________ Core-Mark International, Inc. (the "ASSIGNOR") currently maintains with you (the "DEPOSITORY"), the bank account identified by the above-referenced account number (the "COLLECTION ACCOUNT"). The Assignor hereby irrevocably notifies and instructs the Depository with respect to the Collection Account as set forth below, and hereby requests the Depository to indicate its acceptance of and agreement to be bound by the terms hereof by signing in the space provided for below. (1) In order to provide security for certain obligations of the Assignor under the Credit Agreement dated as of August 7, 1996 (as amended and in effect from time to time, the "CREDIT AGREEMENT") among the Assignor, each of the banks and financial institutions parties thereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"), the Assignor has granted to the Administrative Agent for the benefit of the Lenders a security interest (the "SECURITY INTEREST") in the Collateral (as defined in the Security Agreement dated as of August 7, 1996 between the Assignor and the Administrative Agent (as amended and in effect from time to time, the "SECURITY AGREEMENT")), which includes, without limitation, all of the Assignor's accounts (as such term is defined in the Uniform Commercial Code (the "UCC")), now owned or hereafter acquired, all amounts due and to become due under any of the foregoing and all products and proceeds of any and all of the foregoing. (2) In connection with the granting of the Security Interest in the Collateral by the Assignor to the Administrative Agent for the benefit of the Lenders, the Assignor has granted and transferred to the Administrative Agent for the benefit of the Lenders a Security Interest in (a) the Collection Account, (b) all of the items from time to time in the Collection Account (it being acknowledged that such items constitute proceeds, within the meaning of the UCC, of the Collateral) and (c) all of the proceeds of such items. (3) Subject to the further instructions of the Administrative Agent, the Assignor is hereby directed to transfer, at the start of each business day, in same day funds, all available funds on deposit in the Collection Account (less any minimum required balances) to Account No.______________ (the "US COLLATERAL ACCOUNT") maintained by the Administrative Agent, but in no event shall such funds be transferred to an account other than an account maintained by the Administrative Agent. (4) The Depository is hereby notified that (i) the Administrative Agent is authorized and empowered to direct the Depository administering the Collection Account and any related lockboxes to remit all future payments directly to other designated accounts maintained by the Administrative Agent and (ii) the Assignor has agreed that it will not withdraw any funds in the Collection Account without the prior written consent of the Administrative Agent. Such direction may be given by the Administrative Agent either in its own name or as a secured party, or in the name of the Assignor pursuant to an irrevocable power of attorney (which power is coupled with an interest) heretofore granted by the Assignor in favor of the Administrative Agent. The Depository is hereby irrevocably authorized and directed to abide by any such written direct payment instructions it may 2 receive from the Administrative Agent in its own name or in the name of the Assignor. Such payment instructions shall only apply to good, collected funds held in the Collection Account. (5) By its acceptance hereof and agreement hereto, the Depository hereby (a) waives, with respect to all its existing and future claims against the Assignor, or any affiliate thereof, all existing and future rights for set-off and banker's liens against the Collection Account and all items and proceeds thereof that come into the possession of the Depository in connection with the Collection Account; PROVIDED, however, that the Depository retains the right to charge the Collection Account for all items deposited in the Collection Account and subsequently returned unpaid to the Depository and for any unpaid fees and expenses pertaining to the Collection Account or any related lockboxes; (b) represents and warrants to the best of its knowledge that except for the Collection Account and any other accounts disclosed to the Administrative Agent, there are no bank accounts that are maintained by the Depository with respect to the receivables of the Assignor; (c) agrees to provide to the Administrative Agent written notice of any fees and expenses pertaining to the Collection Account or any related lockboxes that have not been paid by the Assignor and agrees not to discontinue any services pertaining to the Collection Account or such lockboxes until 30 days have elapsed from such notice being given by the Depository to the Administrative Agent and such fees and expenses shall not have been paid; (d) agrees to provide the Administrative Agent written notice (at The Chase Manhattan Bank, 270 Park Avenue, New York, NY 10017, Attention: ______________) simultaneously with the notice being given to Assignor as required by an agreement, if any, governing the Collection Account, should it alter, change or discontinue any services pertaining to the Collection Account or such lockboxes, such alteration, change or discontinuance to be effective 30 days from such notice being given by the Depository to the Administrative Agent, or sooner should the Administrative Agent have consented in writing; (e) agrees that in the event any services pertaining to the Collection Account or such lockboxes are discontinued after notice by the Depository as aforesaid, the Depository will (subject to being furnished with reasonable assurances regarding payment of its related fees and expenses) comply with the Administrative Agent's reasonable instructions regarding the forwarding of any payments of items then contained or subsequently deposited in the Collection Account or delivered to any related lockboxes; (f) agrees that it shall not, without the prior written consent of the Administrative Agent, transfer any funds in the Collection Account; and (g) agrees to provide the Administrative Agent with access to daily balance reporting in respect of the Collection Account, including any necessary code or password. (6) The Depository confirms to the best of its knowledge and the Assignor confirms that true and correct copies of all existing agreements between the Assignor and the Depository with respect to the Collection Account or any related lockboxes or otherwise relating to the collection of receivables of the Assignor are attached. (7) This Letter Agreement (a) shall be effective as of the date first above written; (b) shall supersede any other agreement relating to the assignment of the Collection Account, including any bank account agreement between the Assignor and the Depository relating to collection of receivables of the Assignor but only to the extent that such other agreement is inconsistent with this Letter Agreement; (c) is binding upon the parties and their respective successors and assigns and shall inure to their benefit; (d) shall not in any way or to any extent be changed, amended, modified or waived without the Administrative Agent's and the Depository's prior written consent; (e) shall be governed by, and interpreted in accordance with, the laws of the State of New York; and (f) may be executed in any number of counterparts which together shall constitute one and the same instrument. Any provision hereof that may prove unenforceable under any law or regulation shall not affect the validity of any other provision hereof. The execution, delivery and performance of this Letter 3 Agreement is within the corporate power of each of the Assignor, the Administrative Agent and the Depository, and has been duly authorized by all necessary corporate action. (8) All notices or instructions herein provided for shall be in writing and shall be deemed to have been given when delivered at or mailed, postage prepaid, or telecopied, to the intended recipient at the address specified below its name on the signature pages hereof, except that notices and communication to the Depository shall not be effective until received by the Depository. Very truly yours, CORE-MARK INTERNATIONAL, INC. By: _________________________________ Name: Title: Address: ACCEPTED AND AGREED AS AFORESAID: [Name of Depository] By: _________________________ Name: Title: Address: THE CHASE MANHATTAN BANK As Administrative Agent By: _________________________ Name: Title: Address: EXHIBIT D TO CREDIT AGREEMENT [FORM OF] BORROWER STOCK PLEDGE AGREEMENT BORROWER STOCK PLEDGE AGREEMENT, dated as of August 7, 1996, made by CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "BORROWER"), in favor of THE CHASE MANHATTAN BANK, as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders parties to the Credit Agreement, dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, the Administrative Agent and such Lenders. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans to and issue or participate in Letters of Credit for the account of, the Borrower upon the terms and subject to the conditions set forth therein; WHEREAS, the Borrower is the legal and beneficial owner of the shares of Pledged Stock (as hereinafter defined) issued by the Issuers (as hereinafter defined); and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans and other extensions of credit to the Borrower under the Credit Agreement that the Borrower shall have executed and delivered this Borrower Stock Pledge Agreement to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Loans and other extensions of credit under the Credit Agreement, the Borrower hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) The following terms shall have the following meanings: "AGREEMENT": this Borrower Stock Pledge Agreement, as the same may be amended, modified or otherwise supplemented from time to time. 2 "CODE": the Uniform Commercial Code from time to time in effect in the State of New York. "COLLATERAL": the Pledged Stock and all Proceeds. "COLLATERAL ACCOUNT": any account established to hold money Proceeds, maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders only as provided in subsection . "ISSUERS": the collective reference to the companies identified on SCHEDULE 1 attached hereto as the issuers of the Pledged Stock; individually, each an "ISSUER." "OBLIGATIONS": the collective reference to the unpaid principal of and interest on the Notes and all other obligations and liabilities of the Borrower to the Administrative Agent and the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Notes, this Agreement, the other Loan Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of the Credit Agreement or this Agreement or any other Loan Document). "PLEDGED STOCK": the shares of capital stock listed on SCHEDULE 1 hereto, together with all stock certificates, options or rights of any nature whatsoever that may be issued or granted by any Issuer to the Borrower in respect of the Pledged Stock while this Agreement is in effect. "PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Stock, collections thereon or distributions with respect thereto. "SECURITIES ACT": the Securities Act of 1933, as amended. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. 3 (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. PLEDGE; GRANT OF SECURITY INTEREST. The Borrower hereby delivers to the Administrative Agent, for the ratable benefit of the Lenders, all the Pledged Stock and hereby grants to the Administrative Agent, for the ratable benefit of the Lenders, a first priority security interest in the Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. 3. STOCK POWERS. Concurrently with the delivery to the Administrative Agent of each certificate representing one or more shares of Pledged Stock to the Administrative Agent, the Borrower shall deliver an undated stock power covering such certificate, duly executed in blank by the Borrower. 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants that: (a) The shares of Pledged Stock constitute all the issued and outstanding shares of all classes of the capital stock of each Issuer. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) The Borrower is the record and beneficial owner of, and has good and marketable title to, the Pledged Stock, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement. (d) Upon delivery to the Administrative Agent of the stock certificates evidencing the Pledged Stock (and assuming the Administrative Agent maintains possession of the same), the security interest created by this Agreement will constitute a valid, perfected first priority security interest in the Collateral, enforceable in accordance with its terms as such against all creditors of the Borrower and any Persons purporting to purchase any Collateral from the Borrower, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 5. COVENANTS. The Borrower covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until this Agreement is terminated and the security interests created hereby are released: (a) If the Borrower shall, as a result of its ownership of the Pledged Stock, become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any 4 reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Pledged Stock, or otherwise in respect thereof, the Borrower shall accept the same as the agent of the Administrative Agent and the Lenders, hold the same in trust for the benefit of the Administrative Agent and the Lenders and deliver the same forthwith to the Administrative Agent in the exact form received, duly endorsed by the Borrower to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by the Borrower and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by the Borrower and required to be paid to the Administrative Agent, the Borrower shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the benefit of the Lenders, segregated from other funds of the Borrower, as additional collateral security for the Obligations. (b) Unless otherwise permitted under the Credit Agreement, without the prior written consent of the Administrative Agent, the Borrower will not (1) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, (2) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, (3) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the security interests created by this Agreement or (4) enter into any agreement or undertaking restricting the right or ability of the Borrower or the Administrative Agent to sell, assign or transfer any of the Collateral. (c) The Borrower shall maintain the security interest created by this Agreement as a first priority, perfected security interest and shall defend such security interest against claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the 5 Administrative Agent, duly endorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement. (d) The Borrower shall pay, and save the Administrative Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other like taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the Borrower of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section below, the Borrower shall be permitted to receive all cash dividends paid in the normal course of business of the Issuers and consistent with past practice, to the extent permitted in the Credit Agreement, in respect of the Pledged Stock and to exercise all voting and corporate rights with respect to the Pledged Stock; PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral in a manner inconsistent with the Credit Agreement or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, the Notes, this Agreement or any other Loan Document. 7. RIGHTS OF THE LENDERS AND THE ADMINISTRATIVE AGENT. (a) All money Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent for the benefit of the Lenders in a Collateral Account. All Proceeds while held by the Administrative Agent in a Collateral Account (or by the Borrower in trust for the benefit of the Administrative Agent and the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in subsection 8(a). (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise its rights, as specified below, to the Borrower, (1) the Administrative Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as the Administrative Agent may determine, and (2) all shares of the Pledged Stock shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of any Issuer or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by the Borrower or the Administrative Agent of any right, privilege or option pertaining to such shares of the Pledged Stock, and in connection therewith, the right to 6 deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to the Borrower to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. 8. REMEDIES. (a) If an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations in such order as the Administrative Agent may elect. (b) If an Event of Default shall have occurred and be continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Borrower or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give an option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Administrative Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred in respect thereof or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements of counsel to the Administrative Agent, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Administrative Agent or any Lender arising out of the exercise by them of any rights hereunder, except, in 7 the case of the Administrative Agent or any Lender, to the extent of any gross negligence or willful misconduct on the part of the Administrative Agent or such Lender, as the case may be. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of Collateral are insufficient to pay the Obligations and the reasonable fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the Borrower will cause the Issuer thereof to (1) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (2) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (3) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Borrower agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. (b) The Borrower recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Borrower acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. 8 (c) The Borrower further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section valid and binding and in compliance with any and all other applicable Requirements of Law. The Borrower further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Borrower, and the Borrower hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement. 10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The Borrower hereby authorizes and instructs each Issuer to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Borrower, and the Borrower agrees that each Issuer shall be fully protected in so complying. 11. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Borrower hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent of the Administrative Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in the Administrative Agent's own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including, without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in subsection 11(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 12. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar securities and property for its own account, except that the Administrative Agent shall have no obligation to invest funds held in any Collateral Account and may hold the same as demand deposits. Neither the Administrative Agent, any Lender nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or 9 shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the Code, the Borrower authorizes the Administrative Agent to file financing statements with respect to the Collateral without the signature of the Borrower in such form and in such filing offices as the Administrative Agent reasonably determines appropriate to perfect the security interests of the Administrative Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 14. AUTHORITY OF ADMINISTRATIVE AGENT. The Borrower acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Borrower, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Borrower nor any Issuer shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 15. NOTICES. All notices, requests and demands to or upon the Administrative Agent or the Borrower to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (1) when delivered by hand or (2) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (3) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed to the Administrative Agent or the Borrower at its address or transmission number for notices provided in subsection 10.2 of the Credit Agreement. The Administrative Agent and the Borrower may change their addresses and transmission numbers for notices by notice in the manner provided in this Section. 16. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 17. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Borrower and the Administrative Agent, PROVIDED that any provision of this Agreement may be waived by the Administrative 10 Agent and the Lenders in a letter or agreement executed by the Administrative Agent or by telex or facsimile transmission from the Administrative Agent. (b) Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to subsection 17(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Lender would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 18. SECTION HEADINGS. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and permitted assigns. 20. GOVERNING LAW. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 21. TERMINATION AND RELEASE OF COLLATERAL. At such time as the Obligations then due and payable have been fully satisfied and the Commitments terminated, the Collateral shall be released from the lien created by this Agreement, and the security interest created by this Agreement and all obligations of the Issuers and the Borrower with respect thereto shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Borrower. Upon request of the Borrower following any such termination, the Administrative Agent will deliver (at the sole cost and expense of the Borrower) to the Borrower any Collateral held by the Administrative Agent hereunder, and execute and deliver (at the sole cost and expense of the Borrower) to the Borrower such documents as the Borrower shall reasonably request to evidence such termination. 11 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. CORE-MARK INTERNATIONAL, INC. By:-------------------------- Name: Title: ACKNOWLEDGEMENT AND CONSENT Each of the Issuers referred to in the foregoing Borrower Stock Pledge Agreement hereby acknowledges receipt of a copy of the Borrower Stock Pledge Agreement dated as of August 7, 1996, made by Core-Mark International, Inc. for the benefit of The Chase Manhattan Bank, as Administrative Agent (the "PLEDGE AGREEMENT"). The undersigned agrees for the benefit of the Administrative Agent and the Lenders as follows: 1. The undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. The undersigned will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in subsection 5(a) of the Pledge Agreement. 3. The terms of subsection 9(c) of the Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required of it under or pursuant to or arising out of Section 9 of the Pledge Agreement. C/M PRODUCTS, INC. By: __________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415, South San Francisco, CA 94080 Fax: (415) 952-4284 CORE-MARK INTERRELATED COMPANIES, INC. By:___________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415, South San Francisco, CA 94080 Fax: (415) 952-4284 CORE-MARK MIDCONTINENT, INC. By:___________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415, South San Francisco, CA 94080 Fax: (415) 952-4284 SCHEDULE 1 TO PLEDGE AGREEMENT DESCRIPTION OF PLEDGED STOCK Class of Stock Certificate Issuer Stock Number No. of Shares - ----------------------------- -------- ----------------- -------------- C/M Products, Inc. Common 2 100 Core-Mark Interrelated Common 3 1,000,000 Companies, Inc. Core-Mark Midcontinent, Inc. Common 3 2,000 EXHIBIT E TO CREDIT AGREEMENT [FORM OF] SUBSIDIARIES GUARANTEE SUBSIDIARIES GUARANTEE, dated as of August 7, 1996, made by each of the corporations that are signatories hereto (the "GUARANTORS"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for the lenders (the "LENDERS") parties to the Credit Agreement, dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Core-Mark International, Inc. (the "BORROWER"), the Lenders and the Administrative Agent. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans to and issue or participate in Letters of Credit for the account of, the Borrower upon the terms and subject to the conditions set forth therein; WHEREAS, the Borrower owns directly or indirectly all of the issued and outstanding stock of each Guarantor; WHEREAS, the proceeds of the Loans and other extensions of credit will be used in part to enable the Borrower to make valuable transfers to each Guarantor in connection with the operation of their respective businesses; WHEREAS, the Borrower and the Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefit from the making of the Loans and other extensions of credit; and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans and other extensions of credit to the Borrower under the Credit Agreement that the Guarantors shall have executed and delivered this Guarantee to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Loans and other extensions of credit to the Borrower under the Credit Agreement, the Guarantors hereby agree with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 2 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement and the following terms shall have the following meanings: "OBLIGATIONS": the collective reference to the unpaid principal of and interest on the Notes and all other obligations and liabilities of the Borrower to the Administrative Agent or the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Notes, the other Loan Documents or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower or the Guarantor pursuant to the terms of the Credit Agreement or this Agreement or any other Loan Document). (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and subsection references are to this Guarantee unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. GUARANTEE (a) Subject to the provisions of subsection , each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors. (c) Each Guarantor further agrees to pay any and all expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or 3 enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full, the Commitments are terminated and no Letters of Credit are outstanding, notwithstanding that from time to time prior thereto the Borrower may be free from any Obligations. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender hereunder. (e) No payment or payments made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment or payments other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations, remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full, the Commitments are terminated and no Letters of Credit are outstanding. (f) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability hereunder, it will notify the Administrative Agent in writing that such payment is made under this Guarantee for such purpose. 3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 4. RIGHT OF SET-OFF. Upon the occurrence and continuance of any Event of Default, each Guarantor hereby irrevocably authorizes each Lender at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender to or for the 4 credit or the account of such Guarantor, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of such Guarantor to such Lender hereunder and claims of every nature and description of such Lender against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any Note, any other Loan Document or otherwise, as such Lender may elect, whether or not the Administrative Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent and each Lender shall notify such Guarantor promptly of any such set-off and the application made by the Administrative Agent or such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or such Lender may have. 5. NO SUBROGATION. Notwithstanding any payment or payments made by any of the Guarantors hereunder or any set-off or application of funds of any of the Guarantors by any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 6. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and the Credit Agreement, the Notes and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Majority Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of 5 offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against any of the Guarantors, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from the Borrower or any such other Guarantor or guarantor or any release of the Borrower or such other Guarantor or guarantor shall not relieve any of the Guarantors in respect of which a demand or collection is not made or any of the Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee, the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Credit Agreement, any Note or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or any such collateral security, 6 guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent and the Lenders against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective permitted successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full, the Commitments shall be terminated and no Letters of Credit are outstanding, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Obligations. 8. REINSTATEMENT. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 9. PAYMENTS. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars at the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017. 10. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents and warrants that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority and the legal right to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged; (b) it has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally, general equitable principles and an implied covenant of good faith and fair dealing; (d) the execution, delivery and performance of this Guarantee will not violate any provision of any Requirement of Law or Contractual Obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties or 7 revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of the Guarantor; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of such Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; Each Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each borrowing by the Borrower under the Credit Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 11. AUTHORITY OF ADMINISTRATIVE AGENT. Each Guarantor acknowledges that the rights and responsibilities of the Administrative Agent under this Guarantee with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and such Guarantor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. NOTICES. All notices, requests and demands to or upon the Administrative Agent, any Lender or any Guarantor to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (1) when delivered by hand or (2) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (3) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows: (a) if to the Administrative Agent or any Lender, at its address or transmission number for notices provided in subsection 10.2 of the Credit Agreement; and (b) if to any Guarantor, at its address or transmission number for notices set forth under its signature below. The Administrative Agent, each Lender and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 13. COUNTERPARTS. This Guarantee may be executed by one or more of the Guarantors on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Guarantee signed by all the Guarantors shall be lodged with the Administrative Agent. 8 14. SEVERABILITY. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15. INTEGRATION. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent or any Lender relative to the subject matter hereof not reflected herein. 16. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Guarantee with respect to any Guarantor may be waived, amended, supplemented or otherwise modified except by a written instrument executed by such Guarantor and the Administrative Agent, PROVIDED that any provision of this Guarantee may be waived by the Administrative Agent and the Lenders in a letter or agreement executed by the Administrative Agent or by telex or facsimile transmission from the Administrative Agent. (b) Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to subsection hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Lender would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 17. SECTION HEADINGS. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and permitted assigns. 19. GOVERNING LAW. This Guarantee shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 9 IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. C/M PRODUCTS, INC. By: ___________________________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Fax: (415) 952-4284 CORE-MARK INTERRELATED COMPANIES, INC. By:____________________________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Fax: (415) 952-4284 CORE-MARK MIDCONTINENT, INC. By:____________________________________________ Name: Title: Address for Notices: 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Fax: (415) 952-4284 EXHIBIT F TO CREDIT AGREEMENT ---------------- [FORM OF] CORE-MARK INTERNATIONAL, INC. BORROWING BASE CERTIFICATE Pursuant to subsection 6.2(f) of the Credit Agreement, dated as of August 7, 1996 (the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined), among Core-Mark International, Inc., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as administrative agent for the Lenders, the undersigned hereby certifies that the following statements and figures are true on the date hereof: CORE-MARK INTERNATIONAL, INC. BORROWING BASE CERTIFICATE FOR THE PERIOD ENDING DATE ------------------ ADVANCE U.S. CANADA CANADA TOTAL TOTAL RATE (US$) (CDN$) (US$) (US$) AVAILABLE --------- ---------- ---------- ---------- ---------- ---------- Uncleared US Checks Available Uncleared US Checks: 90% Canadian Cash Equivalents Less Ineligibles and Canadian Cash Adjustment Available Canadian Cash Equiv: 85% Cash Held by Agent Available Cash Held by Agent: 100% Gross Accounts Receivable Per Aging Less Intercompany Receivables Gross A/R Net of Intercompany Less Other Ineligibles: Past Dues Greater than 45 Days Contras Employee Accounts Manufacturer Representatives Government Receivables Bankruptcy Loss/accounts in collection Special Terms 25% Cross-age Credits Greater Than 45 Days --------- ---------- ---------- ---------- ---------- ---------- Total Ineligibles Less Reserve-Customer Rebates (100,000) Total Eligible Receivable Available Accounts Receivables 85% Vendor Receivables Less Ineligibles: Contras 50% due 180 days or more Total Ineligibles: Total Eligible Vendor Receivables Available Amt. of Vendor Receivables 75% Cigarette Inventory on 0 Day EFT (Including Affixed & Unaffixed Tax Stamps) DATE ------------------ ADVANCE U.S. CANADA CANADA TOTAL TOTAL RATE (US$) (CDN$) (US$) (US$) AVAILABLE --------- ---------- ---------- ---------- ---------- ---------- Less Ineligibles Stamps in Excess of Bond Consignment Inventory Landlord Lien Reserve Inventory Reserve Total Ineligibles Eligible Cigarette Inventory Available Cigarette Inventory 85% Tobacco & Cigar Inventory Less Ineligibles Consignment Inventory Landlord Lien Reserve Inventory Reserve Total Ineligibles Eligible Tobacco & Cigar Inventory Available Tobacco & Cigar Inventory 80% Other Inventory Less Ineligibles Consignment Inventory Landlord Lien Reserve Inventory Reserve Total Ineligibles Eligible Other Inventory Available Other Inventory 65% Total Available
The following is a summary of Core-Mark International, Inc.'s availability as of (ENTER DATE): Available Uncleared US Checks . . . . . . . . . $ ______ Available Canadian Cash Equivalents . . . . . . $ ______ Available Cash Held by Agent . . . . . . . . . $ ______ Available Accounts Receivable . . . . . . . . . $ ______ Available Vendor Receivables . . . . . . . . . $ ______ Available Cigarette and tax Stamp Inventory . . $ ______ Available Cigar and Tobacco Inventory . . . . . $ ______ Available Other Inventory . . . . . . . . . . . $ ______ Total Available Collateral . . . . . . . . . $ ______ CORE-MARK INTERNATIONAL, INC. By:_________________________ Name: Title: Dated: ________ __, 199_ EXHIBIT G TO CREDIT AGREEMENT [FORM OF] CORE-MARK INTERNATIONAL, INC. BORROWING CERTIFICATE Pursuant to subsection 2.2 of the Credit Agreement, dated as of August 7, 1996 (the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined), among Core-Mark International, Inc., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as administrative agent for the Lenders, the undersigned hereby requests [a withdrawal from the US Cash Collateral Account and] [a Revolving Credit Loan] under the Credit Agreement, and in that connection sets forth below the information relating to such proposed borrowing (the "PROPOSED BORROWING"): (i) The aggregate amount of the Proposed Borrowing is $ ________ [of which $ ________ shall constitute a withdrawal from the US Cash Collateral Account and $ ________ shall constitute a Revolving Credit Loan]. (ii) The requested Borrowing Date of the Proposed Borrowing is ________ __, 199_. (iii) The Type of Revolving Credit Loan(s) comprising the Proposed Borrowing is/are [Eurodollar Loans] [ABR Loans] [a combination thereof]. (iv) The Proposed Borrowing will [not] result in an Overadvance Amount. [(v) The initial Interest Period for each Eurodollar Loan made as part of the Proposed Borrowing is [one] [two] [three] [six] month[s].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) The representations and warranties of the Borrower set forth in the Credit Agreement and each of the other Loan Documents to which the Borrower is a party or which are contained in any certificate furnished by or on behalf of the Borrower pursuant to or in connection with the Credit Agreement or any of the other Loan Documents are true and correct on and as of the date hereof with the same effect as if made on the date hereof except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct as of such earlier date; and (B) No Default or Event of Default has occurred and is continuing as of the date hereof or after giving effect to the Revolving Credit Loans to be made on the 2 date hereof and/or the issuance of any Letters of Credit to be issued on the date hereof. (C) After giving effect to the Proposed Borrowing, the Aggregate Covered Outstanding Revolving Extensions of Credit will not exceed the sum of the Borrowing Base (as determined by reference to the Borrowing Base Certificate and Supplemental Reporting most recently required to be delivered in accordance with subsection 6.2(f) of the Credit Agreement) and the Overadvance Limit. IN WITNESS WHEREOF, the undersigned have hereunto set our names as of the date set forth below. CORE-MARK INTERNATIONAL, INC. By:-------------------------- Name: Title: Date: ________ __, 199_ 1 EXHIBIT H TO CREDIT AGREEMENT --------------- [FORM OF] CORE-MARK INTERNATIONAL, INC. RESPONSIBLE OFFICER'S CERTIFICATE Pursuant to subsection 6.2(b) of the Credit Agreement, dated as of August 7, 1996 (the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined), among Core-Mark International, Inc., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as administrative agent for the Lenders, the undersigned hereby certifies the following: 1. to the best of the undersigned's knowledge, during the period of the financial statements delivered pursuant to subsection 6.1 (a) (b) and (c) of the Credit Agreement (the Financial Statements"), (a) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.12 of the Credit Agreement with respect thereto); (b) neither the Borrower nor any of its Subsidiaries has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of the Credit Agreement and the Security Documents with respect thereto; and (c) the Borrower has observed or performed in all material respects all of its covenants and other agreements, and satisfied every condition, contained in the Credit Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that undersigned has obtained no knowledge of any Default or Event of Default except as specified in such certificate; provided that with respect to the financial statements delivered pursuant to subsection 6.1(c) of the Credit Agreement, such certificate need only cover the items set forth in clause (a) above; and 2. in the case of the financial statements delivered pursuant to subsection 6.1(a) and (b) of the Credit Agreement, the following statements and figures are true on the date hereof: [Insert, in reasonable detail, a calculation of the financial covenants set forth in subsection 7.1 of the Credit Agreement for the period corresponding to the "Financial Statements" and, with respect to the annual financial statements required to be furnished pursuant to subsection 6.1(a) of the Credit Agreement, a reconciliation of such financial statements from the last-in first-out inventory valuation method to the first-in, first-out inventory valuation method in order to calculate the financial covenants set forth in subsection 7.1 of the Credit Agreement.] IN WITNESS WHEREOF, the undersigned has hereunto set my name as of the date set forth below. CORE-MARK INTERNATIONAL, INC. By: --------------------------- Name: Title: Date: ________ __, 199_ EXHIBIT I TO CREDIT AGREEMENT [FORM OF] CORE-MARK INTERNATIONAL, INC. SUPPLEMENTAL REPORTING AS OF: Pursuant to subsection 6.2(f) of the Credit Agreement, dated as of August 7, 1996 (the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined), among Core-Mark International, Inc., a Delaware corporation (the "BORROWER"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as administrative agent for the Lenders, the undersigned hereby certifies that the following statements and figures are true on the date hereof: REPORTING FOR PERIOD ENDED:___________ WEEKLY ACCOUNTS RECEIVABLE REPORTING*
Canada Canada U.S. CDN$ US$ Total (prior ----- ------ ------ ----- week end) Beginning Accounts Receivable _____ _____ _____ _____ Gross Billings _____ _____ _____ _____ Other Debits _____ _____ _____ _____ Collection Receipts Applied _____ _____ _____ _____ Discounts Taken** _____ _____ _____ _____ Credits Issued** _____ _____ _____ _____ Returns** _____ _____ _____ _____ Write Offs** _____ _____ _____ _____ Other Credit Adjustments** _____ _____ _____ _____ Intercompany Receivables _____ _____ _____ _____ Ending Accounts Receivable, net of Intercompany _____ _____ _____ _____ (current week end)
______________________ **Items notes are to be detailed on a monthly basis, and presented in total on a weekly basis. 2 WEEKLY INVENTORY REPORTING* - -------------------------------
Cigarette Inventory (zero day EFT terms) Including Tobacco and Other stamps Cigar Inventory Inventory Total --------- --------------- --------- ----- Beginning Inventory Balance (prior week end) _____ _____ _____ _____ Plus: Purchases _____ _____ _____ _____ Less: Cost of Goods Sold _____ _____ _____ _____ Other _____ _____ _____ _____ Ending Inventory Balance (current week end) _____ _____ _____ _____ Monthly Inventory Reporting* - ---------------------------- Inventory by Location: List Locations Here _____ _____ _____ _____ List Locations Here _____ _____ _____ _____ List Locations Here _____ _____ _____ _____ List Locations Here _____ _____ _____ _____ Total: _____ _____ _____ _____
___________________ * Documents to be submitted per Schedule I to this certificate are integral part of the above reporting. ** Items noted are to be detailed on a monthly basis, and presented in total on a weekly basis. IN WITNESS WHEREOF, the undersigned has hereunto set my name as of the date set forth below. CORE-MARK INTERNATIONAL, INC. By:_______________________________ Name: Title: Date: ________ __, 199_ SCHEDULE I I. WEEKLY REPORTS On the third Business Day following the end of each calendar week and on the third Business Day of the next calendar month, the Borrower will deliver to the Administrative Agent by facsimile transmission the Supplemental Reporting with respect to the close of business on the last calendar day of the immediately preceding calendar week or calendar month, as the case may be, duly completed and certified by a Responsible Officer of the Borrower. On the third Business Day following the end of each calendar week and on the third Business Day of the next calendar month, the Borrower will deliver to the Administrative Agent by overnight courier the following reports with respect to the close of business on the last calendar day of the immediately preceding calendar week or calendar month, as the case may be: 1. An accounts receivable activity report (i.e., rollforward) for the US and Canada operations, with supporting documentation including system generated reports detailing gross sales, collections, and adjustments. 2. An accounts receivable consolidating aging for both the US and Canada operations. The total on the consolidating aging must agree to the ending balance on the activity report referred to in item 1. 3. Supporting documentation for all ineligible accounts receivable items 4. A perpetual inventory activity report (i.e., rollforward) by category with supporting documentation including system generated reports detailing receipts, sales, and adjustments. 5. A perpetual inventory report, i.e., a one page corporate rollup and summary sheet. The total of which agrees to the ending balance on the activity report referred to in item 4. 6. Calculation/worksheet of tax stamps eligible and not eligible. 7. A copy of weekly bank statements (or balances as reported from a bank reporting system) of gross collected and available funds for account numbers (TO BE PROVIDED) reconciled to the amount of uncleared US checks as presented on the Borrowing Base Certificate. 8. Schedule of Canadian Cash Equivalents reconciled to amounts as presented on the Borrowing Base Certificate. 9. Details of accrual calculation used to determine the vendor receivable, by category, i.e., quarterly program, semi-annual program and annual program. 2 II. MONTHLY REPORTS On the tenth Business Day of each fiscal month, the Borrower will deliver to the Agent by overnight courier the following reports with respect to the previous fiscal month: 1. An accounts receivable activity report (i.e., rollforward) for the US and Canada operations, with supporting documentation including system generated reports detailing gross sales, collection, and adjustments. Adjustments are to be detailed for all dilutive items such as discounts taken, credits issued, returns, write-offs, and other credit adjustments. Although a month end Borrowing Base Certificate is not required, a reconciliation must be performed from the weekly to the monthly rollforward. 2. A consolidating aged accounts receivable aging by division for both the US and Canada operations. The total on the consolidating aging must agree to the ending balance on the monthly activity report referred to in item 1. 3. A corporate chain report for accounts receivable, summarizing the top ten accounts on the report. The top ten (excluding Southland and any other customers which are on the "Franchise-No" report but should be on the "Franchise-Yes" report) should be accumulated from the "Franchise-No" portion of the corporate chain report. The "Franchise-Yes" report should also be provided. 4. A perpetual Inventory report by category and by division. 5. Supporting documentation for all ineligible inventory items, including inventory reserves, landlord lien reserves and consigned inventory. 6. Summary of amounts payable to the top ten tax vendors. 7. A schedule on a state by state basis of accrued or payable excise taxes and bonding with respect thereto. 8. "Cigarette inventory" and "other inventory" turnover by division. [LETTERHEAD OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON] August 7, 1996 Exhibit J-1 To the Lenders Party to the Credit Agreement Referred to Below and The Chase Manhattan Bank as Administrative Agent Ladies and Gentlemen: We have acted as special counsel to Core-Mark International, Inc., a Delaware corporation (the "Borrower"), C/M Products, Inc., a California corporation and a wholly-owned subsidiary of the Borrower ("C/M Products"), Core-Mark Interrelated Companies, Inc., a California corporation and a wholly-owned subsidiary of the Borrower ("CMIC"), and Core-Mark Midcontinent, Inc., an Arkansas corporation and a wholly-owned subsidiary of the Borrower ("CM Midcontinent" and, together with the Borrower, C/M Products and CMIC, collectively the "Loan Parties" and each a "Loan Party"), in connection with the Credit Agreement, dated as of PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 2 Referred to Below and The Chase Manhattan Bank as Administrative Agent August 7, 1996 (the "Credit Agreement"), among the Borrower, the several banks and other financial institutions parties thereto as lenders (the "Lenders"), and The Chase Manhattan Bank, a New York banking corporation, as Administrative Agent. Capitalized terms not otherwise defined herein shall have the respective meanings given them in the Credit Agreement. This opinion is being furnished to you at the request of the Borrower pursuant to Section 5. l(1()(l) of the Credit Agreement. In connection with this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents, each dated as of the date hereof (collectively, the "Documents"): 1. The Credit Agreement; 2. The Revolving Credit Notes; 3. The Term Notes; 4. The Security Agreement; 5. The Borrower Stock Pledge Agreement; and 6. The Subsidiaries Guarantee. In addition, we have examined such corporate records of the Loan Parties as we have considered appropriate, including copies of the charter and by-laws of the Borrower as in effect on the date hereof and certified copies of resolutions of the board of directors of the Borrower, and such other certificates, agreements and PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 3 Referred to Below and The Chase Manhattan Bank as Administrative Agent documents as we deemed relevant and necessary as a basis for the opinions hereafter expressed. In our examination of the aforesaid documents, we have assumed, without independent investigation, the genuineness of all signatures, the due authorization, execution and delivery of the Documents by each Person other than the Borrower that are parties to the Documents, the enforceability of the Documents against each party thereto other than the Loan Parties that are parties thereto, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies of validly existing agreements or other documents, the authenticity of all such latter documents and the legal capacity of all individuals who have executed any of the documents. In expressing the opinions set forth herein we have relied upon the factual matters contained in the representations and warranties of the Loan Parties and upon certificates of public officials and officers of the Loan Parties. Whenever an opinion is indicated to be based on our knowledge, it is intended to signify that in the course of our representation of the Loan Parties in connection with the transactions contemplated by the Documents, no information came to the attention of the attorneys at our firm who are actually engaged in such transactions that would give such attorneys actual knowledge of the existence or absence of such facts. We have not PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 4 Referred to Below and The Chase Manhattan Bank as Administrative Agent. undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Loan Parties. Based upon the foregoing, and subject to the assumptions, exceptions and qualifications set forth herein, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged. 2. The Borrower has the corporate power and authority to make, deliver and perform the Loan Documents to which it is a party and to borrow under the Credit Agreement and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of the Loan Documents to which it is a party and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority of the State of New York, the United States of America or under the General Corporation law of the State of Delaware (the "GLC") is required in connection with the borrowings under the Credit Agreement or the execution, delivery, performance, validity or enforceability of the PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 5 Referred to Below and The Chase Manhattan Bank as Administrative Agent Loan Documents to which the Borrower is a party, except for such filings as are necessary to perfect security interests. 3. Each of the Loan Documents to which the Borrower is a party has been duly executed and delivered on behalf of the Borrower. Each of the Loan Documents constitutes a legal, valid and binding obligation of each Loan Party which is a party thereto, enforceable against such Loan Party in accordance with its terms. 4. The execution, delivery and performance of each of the Loan Documents to which each Loan Party is a party, the borrowings under the Credit Agreement by the Borrower and the use of proceeds thereof as set forth in Section 4.16 of the Credit Agreement will not violate any Requirement of Law of the State of New York, the United States of America or under the GCL or any Contractual Obligation known to us of such Loan Party, and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any such Requirement of Law or Contractual Obligation known to us (except for Liens in favor of the Administrative Agent for the benefit of the Lenders as contemplated by the Documents). 5. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 6. The Borrower Stock Pledge Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a valid and PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 6 Referred to Below and The Chase Manhattan Bank as Administrative Agent enforceable security interest in the Pledged Stock described therein and, assuming that (i) the Administrative Agent has, at the date hereof, possession in the State of New York of the Pledged Stock and maintains continuous possession thereof and (ii) the Lenders and the Administrative Agent have entered into the Credit Agreement in good faith without notice of any adverse claim to such Pledged Stock, and after giving effect to the making of Loans on the date hereof, the Administrative Agent has a valid and perfected security interest, for the benefit of the Lenders and the Administrative Agent, to the extent provided in the Borrower Stock Pledge Agreement, in all right, title and interest of the Borrower in such Pledged Stock, which security interest has priority over any other security interest in the Pledged Stock which can be perfected under the UCC. 7. After giving effect to the making of the Loans on the date hereof, each Security Agreement is effective to create in favor of the Administrative Agreement, for the benefit of the Lenders and the Administrative Agent, a valid and enforceable security interest in such of the Collateral purported to be covered thereby and in which a security interest may be created under Article 9 of the UCC, except that the Security Agreements to which a Loan Party is a party will create such interests in property in which such Loan Party has no currently existing rights only when such Loan Party acquires right therein. PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 7 Referred to Below and The Chase Manhattan Bank as Administrative Agent 8. Except as set forth in Schedule 4.6 to the Credit Agreement, we have no knowledge of any litigation, investigation or proceeding of or before any arbitrator or Governmental Authority, pending or threatened against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. * * * The foregoing opinion is subject to the following additional assumptions, exceptions and qualifications: (a) The enforceability of the Documents may be: (i) subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally; (ii) subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); (iii) subject to the qualification that certain remedial provisions of the Security Documents are or may be unenforceable in whole or in part under the laws of the State of New York, but the inclusion of such provisions does not make the remedies afforded by such Security Documents inadequate for the practical realization of the rights and benefits purported to be provided thereby, PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 8 Referred to Below and The Chase Manhattan Bank as Administrative Agent except for the economic consequences resulting from any delay imposed by, or any procedure required by, applicable New York laws, rules, regulations and court decisions and by constitutional requirements in and of the State of New York; and (iv) subject to the qualification that, insofar as provisions contained in the Documents provide for indemnification, the enforcement thereof may be limited by public policy considerations. (b) We express no opinion as to: (i) the enforceability of any provisions in the Guarantees purporting to preserve and maintain the liability of any party thereto despite the fact that the guaranteed debt is unenforceable due to illegality or the fact that the obligee has voluntarily released the primary obligor's liability on the guaranteed debt; (ii) the enforceability of any provisions contained in the Documents that purport to establish (or may be construed to establish) evidentiary standards; (iii) the enforceability of any provisions contained in the Documents that constitute waivers not permitted under applicable law; and (iv) the enforceability of forum selection clauses in the federal courts. (c) We express no opinion as to: (i) any Loan Party's right, title or interest in or to any Collateral or the description of any property (real, personal or mixed) in the Security Documents, the UCC financing statements or any other Documents; (ii) the laws of any state other than the State of New York or the perfection and effect of perfection or non-perfection of a security interest in the PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 9 Referred to Below and The Chase Manhattan Bank as Administrative Agent Collateral subject to the laws of any state other than New York; (iji) the perfection of security interests in equipment used in farming operations, farm products, consumer goods, timber or minerals or the like, or accounts resulting from the sale thereof; (iv) except as expressly stated herein, the creation, validity, perfection, priority or enforceability of any security interest sought to be created in any patents, trademarks, tradenames, service marks, copyrights, aircraft, deposit accounts, insurance policies, real property or any other items of property to the extent that a security interest therein is excluded from the coverage of Article 9 of the UCC; (v) except as specifically set forth in paragraph 6 above, any opinion as to the perfection or priority of any security interest; or (vi) the creation, validity, perfection, priority or enforceability of any security interest with respect to any item of Collateral subject to Section 552 of Title 11 of the United States Code, 11 U.S.C. ss.ss. 101, et seq. (the "Bankruptcy Code") which limits the extent to which property acquired by a debtor after the commencement of a case under the Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. We have also assumed that no item of Collateral (or any agreement relating thereto) contains or will contain any provision purportedly prohibiting or otherwise restricting the assignability thereof or the granting of a security interest with respect thereto. PAUL, WEISS, RIFKIND, WHARTON & GARRISON To the Lenders Party to the Credit Agreement 10 Referred to Below and The Chase Manhattan Bank as Administrative Agent (d) With regard to the choice of law provisions contained in the Documents and any reference to certain provisions of the UCC contained therein, we wish to point out that, whether through the operation of applicable choice of law rules or otherwise, the laws of the jurisdiction in which an item of collateral is located or in which the debtor is located may govern the perfection of the security interests created by the Documents and the enforceability of the rights or remedies provided in the Documents upon the occurrence of a Default or Event of Default and, to the extent that the Documents provide otherwise, such provisions may be unenforceable. We express no opinion herein as to the law of any jurisdiction other than the federal laws of the United States of America and the laws of the State of New York and the GCL. Our opinion is rendered only with respect to the laws, and the rules, regulations and orders thereunder, which are currently in effect. Please be advised that no member of this firm is admitted to practice in the State of Delaware. This letter is furnished by us solely for your benefit in connection with the transactions referred to in the Credit Agreement and the other Documents and may not be circulated to, or relied upon by, any other Person or used in any other context. Very truly yours, /s/ Paul, Weiss, Rifkind, Wharton & Garrison PAUL, WEISS, RIFKIND, WHARTON & GARRISON Exhibit J-2 [LETTERHEAD OF SHEPPARD, MULLIN, RICHTER & HAMPTON LLP] August 7, 1996 The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Each of the Lenders party to the Credit Agreement referred to below Re: Credit Agreement among Core-Mark International, Inc. the Lenders from time to time parties thereto and The Chase Manhattan Bank, as Administrative Agent, dated as of August 7, 1996 Dear Sirs: We have acted as special local counsel in the State of California to The Chase Manhattan Bank, as administrative agent for the Lenders referred to below, in connection with (a) the Credit Agreement dated as of August 7, 1996 (the "Credit Agreement"), among Core-Mark International, Inc., a Delaware corporation (the "Borrower"), the lenders party thereto (collectively, the "Lenders"), and The Chase Manhattan Bank, as administrative agent for the Lenders (in such capacity, the "Agent"), and (b) the Security Documents listed on Schedule 1 attached hereto delivered pursuant to the Credit Agreement (the "State Security Documents"). The opinions expressed below are furnished to you pursuant to Section 5.1(k) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement, and terms defined in the Uniform Commercial Code of the State of California (the "UCC"), are used herein as therein defined. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP The Chase Manhattan Bank, as Administrative Agent, and each of the Lenders August 7, 1996 Page 2 In connection with the opinions expressed below, (a) we have examined and relied on copies, certified or otherwise identified to our satisfaction, of each of (1) the Credit Agreement and (2) the State Security Documents. (b) we have examined unfiled copies of the financing statements listed on Schedule 2 (collectively, the "Financing Statements") naming the Borrower, C/M Products, Inc., a California corporation ("C/M Products"), or Core-Mark Interrelated Companies, Inc., a California corporation ("CMIC"), as Debtor and the Agent as Secured Party, which we understand will be filed in the filing offices listed on Schedule 2 (the "Filing Offices"); (c) we have examined and relied on (i) copies of the articles of incorporation of C/M Products and CMIC, each certified by the California Secretary of State on August 5, 1996, (ii) certificates of status for C/M Products and CMIC, each dated August 5, 1996, issued by the California Secretary of State, and (iii) franchise tax board letters for C/M Products and CMIC, each dated August 5, 1996, issued by the California Franchise Tax Board; and (d) we have also examined such other documents as we have deemed necessary or appropriate for the purpose of giving this opinion. In rendering the opinions expressed below, we have assumed, with your permission, without independent investigation or inquiry, (a) the genuineness of all signatures, (b) the authenticity of all documents submitted to us as originals and (c) the conformity to original documents of documents submitted to us as certified, conformed or photostatic copies. You have advised us that in rendering this opinion, we may assume that (i) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) Core-Mark Midcontinent, Inc. ("CM Midcontinent") is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas; (iii) the Borrower is duly qualified as a foreign corporation and is in good standing under the laws of the State of California; (iv) the actions of each of the Borrower, C/M SHEPPARD, MULLIN, RICHTER & HAMPTON LLP The Chase Manhattan Bank, as Administrative Agent, and each of the Lenders August 7, 1996 Page 3 Products, CMIC and CM Midcontinent are permitted under their respective certificates of incorporation, bylaws and other organizational or governing documents; (v) each of the Credit Agreement and the State Security Documents has been duly authorized, executed and delivered by the respective parties thereto in the form of the copies reviewed by us; (vi) except for C/M Products and CMIC, none of the Subsidiaries either has its place of business or chief executive office in the State, or owns any personal property that is located in the State; (vii) with respect to patents, copyrights and trademarks covered by the Security Agreement described in Item 2 on Schedule 1 attached hereto, the Agent has made all filings in federal offices, and has taken all actions in jurisdictions other than the State of California, necessary to effect any transfer of, or create or perfect any interest in, any of the property described therein. Based on the foregoing, we are of the opinion that: 1. C/M Products and CMIC (a) are each corporations duly organized, validly existing and in good standing under the laws of the State of California, and (b) each has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged. 2. The execution, delivery and performance by C/M Products and CMIC of the State Security Documents, and the creation and perfection of any security interest upon or with respect to any of C/M Products' or CMIC's properties provided for therein do not violate (a) the articles or incorporation of C/M Products or CMIC or (b) any applicable law, statute, rule or regulation of the State of California. 3. Except for the filings described on Schedule 2 to perfect the security interests created by the Security Agreement, no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority of the State of California is required in connection with the execution, delivery or performance by the Borrower, C/M Products, CMIC or CM Midcontinent of the State Security Documents, or the creation and perfection of any security interest upon or with respect to any of the Borrower's, C/M Products' or CMIC's properties provided for therein. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP The Chase Manhattan Bank, as Administrative Agent, and each of the Lenders August 7, 1996 Page 4 4. (a) Insofar as the laws of the State of California apply, the provisions of each State Security Agreement are effective to create in favor of the Agent a legal, valid and enforceable security interest in the Collateral described therein. (b) Upon the filing of the Financing Statements in the Filing Offices, the Agent will have a perfected security interest in the Filing Collateral. As used in this paragraph, "Filing Collateral" means (x) all equipment and inventory located in the State of California other than (i) motor vehicles or boats subject to the registration provisions of the California Vehicle Code, (ii) mobile homes or commercial coaches subject to the registration provisions of the California Health and Safety Code, (iii) any vehicle or other item of tangible personal property subject to a registration or certificate of title statute of a jurisdiction other than California, and (iv) goods which are mobile and which are of a type normally used in more than one jurisdiction; (y) all accounts (other than accounts resulting from the sale of minerals or the like (including oil and gas) at the wellhead or minehead), chattel paper (other than chattel paper in which the Lenders' interest is perfected by possession under Section 9305 of the UCC) and general intangibles (other than (i) uncertificated securities or (ii) any property subject to a statute or treaty of the United States which provides for a national or international registration or which specifies a place of filing different from that specified in the UCC) of C/M Products and CMIC; and (z) all other Collateral as to which filing UCC-l financing statements in the Filing Offices is an appropriate method of perfection. Our opinions set forth in paragraphs 1 and 2(a), above, are based solely upon our review of (i) copies of the articles of incorporation of C/M Products and CMIC, each certified by the California Secretary of State on August 5, 1996, (ii) certificates of status for C/M Products and CMIC, each dated August 5, 1996, issued by the California Secretary of State, and (iii) franchise tax board letters for C/M Products and CMIC, each dated August 5, 1996, issued by the California Franchise Tax Board. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP The Chase Manhattan Bank, as Administrative Agent, and each of the Lenders August 7, 1996 Page 5 Our opinions set forth in paragraph 4, above, are subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and the implied covenant of good faith and fair dealing. In giving the opinions set forth in paragraph 4, above, we advise you that a California court may not strictly enforce certain covenants contained in the State Security Documents or allow acceleration of the maturity of the indebtedness secured by the State Security Documents if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances. We do believe, however, that subject to the limitations expressed elsewhere in this opinion, enforcement or acceleration would be available if an Event of Default occurs as a result of a material breach of a material covenant contained in the Credit Agreement or the State Security Documents. We have not made or undertaken to make any investigation of the state of title to the personal property described in the State Security Documents, and we express no opinion with respect to the title thereto. We understand that you are relying on your own examinations of title to personal property. We express no opinion concerning the priority of any liens or security interests in connection with the transaction. Our opinions are based solely upon the existing laws of the State of California , and we express no opinion as to the laws or regulations of any jurisdiction other than the State of California which may be applicable to the transaction or documents referred to herein. We are not admitted to practice law in any states or jurisdictions other than the State of California. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP The Chase Manhattan Bank, as Administrative Agent, and each of the Lenders August 7, 1996 Page 6 This opinion is rendered in connection with the transaction contemplated by the Credit Agreement and the State Security Documents, and is intended solely for your guidance in connection therewith. Our opinion speaks only as of the date hereof. This opinion is not to be relied upon in any other context, nor is it to be relied upon by any other person or entity for any reason whatsoever. Very truly yours, /s/ Sheppard, Mullin, Richter & Hampton LLP SHEPPARD, MULLIN, RICHTER & HAMPTON LLP SCHEDULE 1 STATE SECURITY DOCUMENTS 1. SUBSIDIARIES GUARANTEE dated as of August 7, 1996, executed by C/M Products, CMIC and CM Midcontinent in favor of the Agent, as administrative agent for itself and the other Lenders. 2. SECURITY AGREEMENT dated as of August 7, 1996, executed by the Borrower, C/M Products, CMIC and CM Midcontinent in favor of the Agent, as administrative agent for itself and the other Lenders. Page 1 of 2 SCHEDULE 2 UCC-1 FINANCING STATEMENTS TO BE FILED WITH THE CALIFORNIA SECRETARY OF STATE 1. UCC-1 financing statement executed by the Borrower, as debtor, for the benefit of the Agent, as administrative agent for itself and the other Lenders, as secured party. 2. UCC-1 financing statement executed by C/M Products, as debtor, for the benefit of the Agent, as administrative agent for itself and the other Lendors, as secured party. 3. UCC-1 financing statement executed by CMIC. as debtor, for the benefit of the Agent, as adminstrative agent for itself and the other Lenders, as secured party. 4. UCC-1 financing statement executed by CM Midcontinent, as debtor, for the benefit of the Agent, as administrative agent for itself and the other Lenders, as secured party. 5. UCC-1 financing statement executed by the Borrower under the name of Core-Mark Distributors, Inc., the Borrower's former name, as debtor, for the benefit of the Agent, as administrative agent for itself and the other Lenders, as secured party. Page 2 of 2 Exhibit J-3 [LETTERHEAD OF STOEL RIVES LLP] August 7, 1996 To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent Re: $210,000,000 Loan to Core-Mark International, Inc. By The Chase Manhattan Bank, as Administrative Agent to the Lenders Under the Credit Agreement Described Below Dear The Chase Manhattan Bank and Lenders: We have acted as special counsel to you (collectively "the Lenders") in the state of Oregon (the "State") in connection with the transactions contemplated by a Credit Agreement between The Chase Manhattan Bank, as Administrative Agent for the Lenders and Core-Mark International, Inc. ("Borrower"), for certain loans in the aggregate principal amount of $210,000,000 (the "Loans") to be made by the Lenders to the Borrower. This opinion is furnished to you pursuant to Section 5.1(k) of the Credit Agreement. DOCUMENTS AND DEFINITIONS We have examined draft, unsigned execution copies of the Credit Agreement, the Security Agreement and a Uniform Commercial Code UCC-1 financing statement from Borrower (the "Financing Statement") (collectively, the "Loan Documents"). We also have examined a certificate from the Oregon Secretary of State relating to the registration of Borrower as a foreign corporation, and we have relied on that certificate as we have deemed appropriate. We have relied solely on the foregoing documents and such other documents as referred to in this letter as to all matters and facts covered therein. We have not undertaken any independent verification or investigation of these factual matters, nor have we conducted or reviewed searches of files of UCC financing statements or judgments. Capitalized terms not defined in this Opinion shall have the respective meaning ascribed to them in the Credit Agreement. "UCC" shall mean the Uniform Commercial Code as currently in effect in the state of Oregon. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 2 ASSUMPTIONS For purposes of this letter, we have assumed: 1. Conformity. The executed original Loan Documents will conform to the draft execution copies submitted to us, and the signatures thereon will be genuine. 2. Document Authenticity. The Loan Documents will be duly authorized, executed and delivered by all the parties thereto other than the Borrower and will constitute the legal, valid and binding and enforceable obligations of all parties other than Borrower. 3. Lenders. The Lenders are duly organized and validly existing under the laws of the states of their respective incorporation and are qualified to do business in all states where the activities contemplated by the Loan Documents require such qualification. 4, Borrower. The Borrower is a corporation duly incorporated and validly existing under the laws of the state of Delaware. The Borrower has all requisite corporate power and authority under the laws of the state of Delaware (i) to execute and deliver, and to perform its obligations under and carry out the transactions contemplated by, the Loan Documents to which it is party, (ii) to own its properties, including, without limitation, the Collateral, and (iii) to conduct its business as contemplated by the Loan Documents. 5. Authorization. Each of the Loan Documents to which the Borrower is a party will be duly authorized by all necessary corporate action on the part of the Borrower to the extent authorization is required as a condition to the legality, validity, binding effect or enforceability of such Loan Document and has been duly and properly executed and delivered by Borrower. 6. Performance. All conditions to the Borrower's and the Lenders' performance set forth in the Loan Documents, whether performance or satisfaction thereof is due before, on or after the date hereof, have been or will be fully performed and satisfied at the respective times required by such documents or have been or will be validly waived. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 3 7. Future Conduct. The Borrower will obtain all permits and governmental approvals required in the future and take all actions similarly required for its performance of the Loan Documents. 8. Title to Collateral. The Borrower holds the requisite title to the Collateral. 9. Property Title and Description. The descriptions of personal property in the pertinent Loan Documents are sufficient to create a lien or security interest under the pertinent security documents and to enable identification by a subsequent purchaser, secured party or creditor. 10. Indexing. The Financing Statement will be filed with and properly indexed by the Oregon Secretary of State. 11. Use of Loan Proceeds. No portion of the loans will be used for the "purpose of purchasing or carrying" any "margin stock" or "margin security" as such terms are used in Regulations G, U and X of the Board of Governors of the Federal Reserve System or otherwise in violation of such regulations. 12. Attachment. The Borrower has "rights" in all of the Collateral capable of being pledged and has received "value" within the meaning of ORS 79.2030. 13. Good Faith. The transaction has been entered into by all of the parties in good faith within the meaning of ORS 71.2030, and the conduct of all parties has conformed and will conform with all applicable express and implied covenants of good faith and fair dealing and the requirements of conscionability. 14. Enforceability Under Other Laws. Each of the Loan Documents, to the extent governed by the laws of any state other than the state of Oregon, is legal, valid, binding and enforceable in accordance with the laws of such other state. 15. No Notice of Defenses. The Lenders and any agents acting for them in connection with the Loans have acted in good faith and without notice of any defense against the enforcement of any rights created by the Loan Documents. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 4 16. Laws of Other States. The performance by the parties of their respective obligations under the Loan Documents do not and will not contravene or conflict with any law, rule or regulation of any jurisdiction other than the State, or any judgment, order or decree of any court or regulatory body applicable to the parties or by which the parties may be bound, and do not conflict with or constitute on the part of the Borrower a violation of, breach of or default under any agreement or other instrument to which the Borrower is a party or by which it is bound. 17. Location. The Loans are being made, funded and closed in New York, the Loan Documents have been primarily negotiated in New York and have been executed and delivered by the parties in New York, amounts due under the Loans are intended to be paid in New York, and the chief executive office and principal place of business of Borrower is in California. The interest and other charges payable by the Borrower under the Loan Documents are lawful in the state of New York. 18. Collateral. The Collateral does not include timber to be cut, minerals or the like (including oil and gas), accounts subject to ORS 79.1030(5) or minerals, and goods that are or are to become fixtures. The inventory is not held in Oregon by a third party bailee or warehouseman under a negotiable document of title. We have not conducted an independent investigation with respect to these assumptions although we have no knowledge that these assumptions are incorrect. We have not conducted any investigation as to any transaction, including those contemplated by the Loan Documents. For the purpose of this opinion, our "knowledge" is limited to the current actual knowledge (and not constructive, implied or imputed knowledge) of the attorneys in our firm acquired who participated in the preparation of this opinion without independent inquiry, investigation or review of the Collateral or any files or public or private records. We understand that you will rely solely on separate opinions furnished to you by other counsel should you desire assurances regarding these matters. OPINIONS Based upon the foregoing review and assumptions, and subject to the qualifications, exclusions and limitations below, we are of the opinion that under the applicable state law in effect in Oregon on the date of this opinion: STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 5 1. The Borrower is authorized to transact business as a foreign corporation in Oregon. 2. The execution and delivery by the Borrower of the Loan Documents to which the Borrower is a party, and the consummation by the Borrower and the Lenders of the transactions contemplated thereby, will not violate any law, rule or regulation of Oregon. 3. Subject to the assumptions and qualifications to the opinions expressed herein, no authorization or approval or other action by, and no notice to any governmental or quasi-governmental authority or regulatory body of the State is required for (a) the due execution, delivery, recordation, filing or performance by the Borrower of the Loan Agreements, (b) the grant by the Borrower of the liens or security interests granted by it pursuant to the Security Agreement, (c) the perfection or maintenance of the security interests created by the Security Agreement in that collateral that can be perfected by a UCC financing statement, or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Agreement, except (i) that the exercise of certain remedies may require prior court approvals, filings or notice, and (ii) in the case of clause (c) above, the matters referred to in paragraphs 5 and 6 below. 4. The Security Agreement creates in favor of the Administrative Agent as secured party, for the benefit of the Administrative Agent and the Lenders, valid security interests in all Collateral located in Oregon as collateral security for the payment of the obligations under the Loan Documents. 5. The Financing Statement is in proper form so as to comply with the filing requirements of Oregon. Assuming the proper execution and delivery of the Security Agreement, upon filing of the Financing Statement in the office of the Oregon Secretary of State with the applicable filing fee, the Administrative Agent will have a valid and perfected security interest in the Inventory of the Borrower located in the State subject to the provisions of ORS 79.1030, and in any other Collateral referred to therein located in the State to which Article 9 of the Uniform Commercial Code, as in effect in the State (the "UCC"), is applicable and to the extent a security interest can be perfected by filing in the office of the Secretary of State a financing statement under the UCC. We advise you that: (a) UCC continuation statements must be filed with respect to the Financing Statement in the same office in which the Financing Statement was STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 6 originally filed within six months before the expiration of each consecutive five-year period (with the first such period commencing on the date such Financing Statement was originally filed and recorded); (b) Section 552 of the Bankruptcy Code limits the extent to which certain property acquired by a debtor after the commencement of a bankruptcy case under the Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of that case; (c) The perfection of the security interests perfected by the filing of a fmancing statement in the state of Oregon will be terminated as to any Collateral acquired by the Borrower more than four months after the Borrower so changes its name, identity or corporate structure as to make the respective Financing Statement seriously misleading, unless new appropriate UCC financing statements indicating the new name, identity or corporate structure of the Borrower are properly filed before the expiration of such four months; (d) Actions other than the filing of a UCC financing statement are necessary to perfect a security interest in certain types of personal property (including deposit accounts; instruments; permits; licenses; property subject to state, federal or international registration; intellectual property; insurance; motor vehicles; watercraft; and manufactured housing); (e) ORS 79.3060 limits the right of a secured party to perfect a security interest in the proceeds of the collections from any of the Collateral that is the type of collateral subject to a security interest under Article 9 of the UCC. In the case of noncash proceeds that do not constitute part of the Collateral subject to the Loan Documents and in the case of nonidentifiable cash proceeds, continuation of the perfection of the security interest is also limited to the extent set forth in ORS 79.3060; and (f) Under ORS 79.3070, .3080 and.3090, certain purchasers of the Collateral may take the same free and clear of the Security Documents and the security interests granted therein. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 7 (g) We express no opinion regarding any requirements to file in any other state, nor as to perfection with respect to intellectual property, including without limitation any requirement to file under any nation-wide system for the perfection of security interests in intellectual property. To the extent that a security interest in intellectual property can be perfected by filing a UCC financing statement in Oregon, the Office of the Secretary of State is the appropriate office. (h) In the case of inventory or other goods held for the benefit of the Borrower by a third-party bailee or warehouseman, perfection of the security interest in the goods may be had by filing only if the interest in the applicable document of title, if negotiable, is perfected by an applicable UCC filing adequately describing the document of title or possession of the document of title, and if the document of title is not negotiable, by (i) filing an applicable UCC financing statement as to the goods, or (ii) receipt by the bailee or warehouseman of notice of the secured party's interest, or (iii) possessing the document of title issued in the name of the secured party. 6. Each of the Loan Documents is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. QUALIFICATIONS The opinions expressed above are subject to the following qualifications: 1. The enforcement of the Loan Documents will be subject to certain limitations imposed by general principles of equity and by statutes and judicial decisions that limit or prohibit enforcement which would violate the implied covenant of good faith and fair dealing or would be commercially unreasonable. 2. Certain procedural requirements, such as the required format and timing of service of process, court filings, recordation and notices, must meet the minimum statutory requirements. Other rights and obligations are subject to limitations or restrictions imposed by statute. By way of example only, you are advised that any provision in the Loan Documents requiring a party to pay the attorneys' fees and costs of another party in actions to enforce the provisions thereof will be construed to entitle the prevailing party in any action to be awarded its costs and reasonable attorneys' fees. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 8 3. With respect to our opinions in paragraphs 4 and 6, (a) the enforceability of the Loan Documents may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws, or by equitable principles (regardless of whether such enforcement is considered in a proceeding in equity or at law) relating to or limiting the rights of creditors generally, and (b) the use of the term "enforceable" shall not imply any opinion as to the availability of equitable remedies other than the foreclosure of the liens created by the Loan Documents in accordance with Oregon law. Further, a court of the State may not strictly enforce certain provisions contained in the Loan Documents or allow acceleration of the maturity of the indebtedness if it concludes that such enforcement or acceleration would be unreasonable under circumstances then existing. We do believe, however, that subject to limitations expressed elsewhere in this opinion, enforcement or acceleration against the Borrower would be available if an event of default occurs as a result of a material breach of a material provision contained in the Loan Documents. The following list is not a complete recitation of matters as to which no opinion is expressed, but we wish to emphasize specifically that we express no opinion as to the enforceability of (i) self-help, rights of set off or the right to possession of the personal property or collection of rental or other income without appointment of a receiver or the rights, procedural requirements for or powers of a receiver; (ii) provisions purporting to establish evidentiary standards; (iii) provisions related to the waiver of rights, remedies and defenses; (iv) provisions that permit the Lenders to collect a late charge, increased interest rate after default or maturity or a prepayment premium to the extent such amount exceeds actual damages; (v) any reservation of the right to pursue inconsistent or cumulative remedies; (vi) any "due on encumbrance" clause in any circumstance where the security for the loan would not be impaired; (vii) provisions for payment or reimbursement of costs and expenses or indemnification for claims, losses or liabilities (including, without limitation, attorneys' fees) in excess of statutory limits or an amount determined to be reasonable by any court or other tribunal and any provision for attorneys' fees other than to the prevailing party; (viii) provisions pertaining to jurisdiction or venue; (ix) provisions purporting to appoint the Administrative Agent or a Lender as attorney-in-fact for the Borrower; (x) limitations on the liability of the Administrative Agent or a Lender, or for indemnification of same, for its own negligence or misconduct; (xi) provisions that purport to establish or maintain priority of the lien or security interest; (xii) provisions purporting to allow the Administrative Agent to determine the method or order of sale of property in a foreclosure action; and (xiii) any disclaimer of liability under environmental laws. STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 9 4. Our opinions set forth in paragraphs 4 and 5 above are subject to the further qualifications that we express no opinion as to the validity or perfection of the security interests referred to in paragraphs 4 and 5 above as they relate to any interest in or claim under any policy of insurance, except a claim to the proceeds payable by reason of loss or damage under insurance policies maintained by the Borrower with respect to Collateral as required by and in compliance with the Security Agreement. 5. Our opinion with respect to the perfection and maintenance of perfection of security interests under the UCC is not to be construed as applying (i) to the creation or perfection of any security interest in any "security," as defined in the UCC, or (ii) to the laws of any jurisdiction other than the State that may govern the creation or perfection of any security interest in any of the Collateral. A perfected security interest in certain tangible Collateral may become unperfected if it is removed from the State. 6. Under Oregon law, the interpretation of any contract is based on the intent of the parties and evidence extrinsic to a contract may be introduced to ascertain the intent of the parties regardless of the presence or absence of ambiguity and regardless of a statement by the parties that the written agreement constitutes an integrated expression of their agreement. We expressly disclaim any knowledge of the intent of the parties not expressed in the words used in the Loan Documents. This opinion is expressly qualified to the extent that determination of the intent of the parties based on evidence other than the words used in the Loan Documents would lead to a result differing from our opinion. EXCLUSIONS 1. We express no opinion regarding the priority of any lien or security interest. LIMITATIONS The opinions expressed in this Opinion are limited to matters governed by the substantive laws of the State (excluding the laws of any other jurisdiction that may be applicable under choice or conflicts of laws, rules or principles of the State), in each case as in effect on the date of this letter, and we express no opinion as to the law of any other state or jurisdiction. We undertake no obligation to update or supplement this Opinion in response to subsequent changes in the law or facts or future events. This Opinion is limited to the specific STOEL RIVES LLP To The Chase Manhattan Bank and the Lenders Who Are a Party to the Credit Agreement Referred to Below, Acting by and Through The Chase Manhattan Bank, As Administrative Agent August 7, 1996 Page 10 transactions, documents and matters described above, and no opinions may be implied or inferred beyond those that are expressly stated in this letter. This Opinion may not be relied upon by any person other than the addressees named in this letter and any permitted participant under the Credit Agreement, and no person may be subrogated to the rights of the addressees. This Opinion is provided to you solely for the purpose of complying with the requirements of Section 5.1(k) of the Credit Agreement and, without our prior written consent, may not be quoted in whole or in part or otherwise referred to in (or be the basis for) any report or document furnished to any person or entity, except in connection with the inspection of your files by internal or governmental examiners or auditors. Very truly yours, /S/ Stoel Rives LLP Stoel Rives LLP Exhibit J-4 (1) [LETTERHEAD OF STIKEMAN, ELLIOTT] August 7, 1996 TO THE PERSONS IDENTIFIED IN SCHEDULE A TO THIS LETTER Dear Sirs: Re: Security Interest granted in favour of The Chase Manhattan Bank by Core-Mark International, Inc., CIM Products, Inc., Core-Mark Interrelated Companies, Inc. and Core-Mark Midcontinent. Inc. ---------------------------------------------------------------- We have acted as local agent for Core-Mark International, Inc., CIM Products, Inc., Core-Mark Interrelated Companies, Inc. and Core-Mark Midcontinent, Inc. (collectively, the "Debtors" and each individually being a "Debtor") in connection with the registration under the Personal Property Security Act (Alberta), as amended (the "PPSA"), of a financing statement in respect of a security interest created under a security agreement (the "Security Agreement") dated August 7, 1996 granted in favour of The Chase Manhattan Bank, as Administrative Agent (the "Lender") by each of the Debtors. Scope of Examination We have examined a copy identified to our satisfaction of the Security Agreement. We have also examined originals or copies of such records, certificates or other documents and have considered such questions of law as we have considered relevant and necessary as a basis for the opinions hereinafter expressed. Assumptions In rendering the opinions expressed below we have, without independent inquiry, assumed: STIKEMAN, ELLIOTT 2 1. and relied upon the genuineness of all signatures (whether on originals or copies of documents), the authenticity of all documents submitted to us as originals the conformity to the original documents of all documents submitted to us as notarial, certified, conformed, photostatic or telecopied copies thereof and the authenticity of the originals of such documents; 2. the name and address of each of the Debtors is at all relevant times as set forth in Schedule C hereto; 3. that the name and address of the lender is at all relevant times as set forth in Schedule C hereto; 4. that each of the parties to the Security Agreement has all requisite power and authority to execute and deliver the Security Agreement and to perform its obligations thereunder; 5. that the Security Agreement has been duly authorized, executed and unconditionally delivered by each of the parties thereto and constitutes a legal, valid and binding obligation enforceable against the parties in accordance with its terms; 6. that the personal property subject to the security interest expressed to be created under the Security Agreement (the "Collateral") is accurately described in the Security Agreement; 7. that value has been given and each of the Debtors has rights in the Collateral such that attachment (as that term is used in the PPSA) of the security interest in the Collateral expressed to be created under the Security Agreement has occurred; 8. that the parties to the Security Agreement have not specifically agreed in writing to postpone the time for attachment of the security interest in the Collateral expressed to be created under the Security Agreement; 9. that the Collateral does not include "serial number goods" as defined in Alberta Regulation 234/90 made pursuant to the PPSA, being a motor vehicle, a trailer, a mobile home, an aircraft, a boat or an outboard motor for a boat; and 10. that the Collateral does not include property in which a security interest may not be perfected by the filing of a financing statement under the PPSA, such as, but without limitation, contracts of annuity or policies of insurance (except money or other value payable under a policy of insurance as indemnity or compensation for loss of or damage to the Collateral), interests in land (including a lease), interests STIKEMAN, ELLIOTT 3 in rights to payment in connection with an interest in lands (including rental payments), and rights to damages in tort. In addition we have assumed and relied upon the accuracy of the search results and verification statements issued by the Personal Property Registry (Alberta). In providing the opinion set forth in paragraph 1 under the heading "Opinions" we have relied solely on a Certificate of Status respecting Core-Mark International, Inc. issued by the Registrar of Corporations (Alberta) and dated August 6, 1996, a copy of which is attached hereto as Schedule B. Subject Laws Our opinions expressed herein are limited to the laws of the Province of Alberta and federal laws of Canada applicable therein and we express no opinion with respect to the laws of any other jurisdiction. For the purposes of the PPSA the validity, perfection and effect of perfection or non-perfection of a security interest in intangibles (which includes accounts receivable) is governed by the law of the jurisdiction where the debtor is located at the time the security interest attaches. Under the PPSA, a debtor is deemed to be located at the debtor's place of business if there is one, at the debtor's chief executive office if there is more than one place of business, and otherwise at the debtor's principal place of residence. Searches At your request, we have conducted or arranged to be conducted searches in certain public registry or filing offices in the Province of Alberta which may disclose any other interests in the Collateral. The results of those searches have been provided under separate cover. Registrations On August 6, 1996 we attended to registration of a financing statement (the "Financing Statement") in respect of the security interest expressed to be granted to and created in favour of the lender under the Security Agreement, which registration is described in Schedule C hereto. In accordance with your instructions that registration has been made for a term of ten (10) years and unless the obligations secured by the security interest expressed to be created by the Security Agreement have been fulfilled within that period of time, renewal of that Financing Statement prior to its expiry on August 6, 2006 will be required. STIKEMAN, ELLIOTT 4 Renewals Our firm maintains no record of the dates of registration of financing statements and we have no reminder system for that purpose; accordingly, we take no responsibility for the registration of renewals or amendments . Opinions Subject to the assumptions set forth above and the qualifications hereinafter expressed, we are of the opinion that: 1. Core-Mark International, Inc. is a valid and subsisting extra-provincial corporation under the Business Corporations Act (Alberta) . 2. The Security Agreement creates a valid security interest in that Collateral the validity of a security interest in which is governed by the PPSA. 3. The security interest created under the Security Agreement in that Collateral, the perfection of a security interest in which is governed by the PPSA, has been duly perfected by registration under the PPSA. 4. No other notice, registration or act is necessary in the Province of Alberta to perfect under the PPSA the security interests created under the Security Agreement . Qualifications The opinions expressed herein are based on and subject to the following qualifications: 1. we express no opinion as to title of the Collateral; 2. we express no opinion as to the rank or priority of any charge on or security interest in the Collateral, including that expressed to be created under the Security Agreement; 3. to the extent that the PPSA is applicable, the obligations of an account debtor in respect of an intangible or chattel paper assigned under the Security Agreement to make payment to the secured party are subject to Section 41 of the PPSA which requires, inter alia, that the account debtor receive notice regarding the assignment as stipulated in Section 41(5) of the PPSA; STIKEMAN, ELLIOTT 5 4. we express no opinion as to any recordings, filings, indexing, entering or registrations which may be necessary in respect of: (i) any interest in real or immovable property; (ii) any debt owing by the Crown in right of Canada or Alberta or any agency thereof; (iii) any permit, license or authorization, the transfer or assignment of which is specifically regulated by any statute or regulation of Alberta; (iv) debts, claims, demands and other rights the assignment of which is subject to certain conditions or is specifically regulated by any statute or regulation of Alberta; (v) ships (which are registered under the Canada Shipping Act), rolling stock, trademarks, patents, copyrights or industrial designs; or (vi) property to which the PPSA does not apply; 5. under the PPSA, the failure to register by serial number in respect of certain kinds of collateral (itinerant collateral such as motor vehicles, trailers, mobile homes, aircraft and boats) not held by the debtor as inventory may result in the secured party not having priority over certain third parties in relation to such collateral. As no registration by serial number has been effected in respect of such kinds of assets which now or may hereafter form part of the Collateral, this opinion is qualified to the extent that such serial number registration may be necessary or desirable. This opinion has been delivered to you in connection with the registration of the security interest created under the Security Agreement in the Province of Alberta. Without our prior consent, this opinion may not be relied upon by you for any other purposes or in connection with any other transaction, be relied upon by any other party other than the addressees nor quoted in whole or in part. Yours very truly, /s/ Stikeman, Elliott EXHIBIT K TO CREDIT AGREEMENT [FORM OF] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Core-Mark International, Inc. (the "BORROWER"), the Lenders named therein and The Chase Manhattan Bank, as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 hereto (individually, an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal amount for each Assigned Facility as set forth on Schedule 1 hereto. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (c) attaches any Notes held by it evidencing the Assigned Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Notes for a new Note or Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Assigned Facility, requests that the Administrative Agent exchange the attached Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date); and (d) represents and warrants that it has complied with all of the provisions of Section 10.6(c) of the Credit Agreement which are applicable to it in connection with this Assignment. 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the 2 Credit Agreement, together with copies of the financial statements delivered pursuant to subsection 4.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to subsection 2.19(b) of the Credit Agreement; and (f) represents and warrants that it has complied with all of the provisions of Section 10.6 (c) of the Credit Agreement which are applicable to it in connection with this Assignment. 4. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 5. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 6. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 7. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. Schedule 1 to Assignment and Acceptance Name of Assignor: ---------------------------------- Name of Assignee: ---------------------------------- Effective Date of Assignment: ---------------------- Credit Principal Facility Assigned Amount Assigned Commitment Percentage Assigned (1) - ----------------- --------------- ---------------------------------- $ % --------- --------- [Name of Assignee] [Name of Assignor] By: By: ------------------------ ------------------------ Name: Name: Title: Title: - ------------------- (1) Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. 2 Accepted: Consented To: THE CHASE MANHATTAN BANK, as CORE-MARK INTERNATIONAL, INC.(2) Administrative Agent By: By: -------------------------- ----------------------------- Name: Name: Title: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By: --------------------------------- Name: Title: CHASE MANHATTAN BANK DELAWARE, as Issuing Bank By: --------------------------------- Name: Title: - ------------------- (2) The consents of the Borrower, the Administrative Agent and the Issuing Bank are not required unless the assignee is not an existing Lender under the Credit Agreement. STIKEMAN, ELLIOTT SCHEDULE A ADDRESSEES Core-Mark International, Inc. C/M Products, Inc. Core-Mark Interrelated Companies, Inc. Core-Mark Midcontinent, Inc. Simpson Thacher & Bartlett The Chase Manhattan Bank The other Lenders party to the Credit Agreement dated August 7, 1996 among Core-Mark International, Inc., The Chase Manhattan Bank and those Lenders STIKEMAN, ELLIOTT SCHEDULE B CERTIFICATE OF STATUS ================================================================================ Alberta Corporate Access Number GOVERNMENT OF ALBERTA 21670091 CERTIFICATE OF STATUS Form 32 I CERTIFY THAT ACCORDING TO OUR RECORDS CORE-MARK INTERNATIONAL, INC. JURISDICTION: DELAWARE REGISTERED IN ALBERTA ON 95/09/28 IS AS OF THIS DATE A VALID AND SUBSISTING EXTRA-PROVINCIAL CORPORATION GIVEN UNDER MY HAND AND SEAL OF OFFICE IN THE PROVINCE OF ALBERTA. DATED: 96 AUG 06 [Seal] /s/ [Illegible] Registrar of Corporations ================================================================================ STIKEMAN, ELLIOTT SCHEDULE C REGISTRATION PARTICULARS A Financing Statement was registered at Personal Property Registry (Alberta) in respect of the Security Agreement on August 6, 1996. Particulars of the Registration are as follows: (a) Registration #: 96080616228 (b) Expiry Date: August 6, 2006 (c) Name and Address of each Debtor: Core-Mark International, Inc. 395 Oyster Point Boulevard, South San Francisco, California 94080 C/M Products, Inc. 395 Oyster Point Boulevard, South San Francisco, California 94080 Core-Mark Interrelated Companies, Inc. 395 Oyster Point Boulevard, South San Francisco, California 94080 Core-Mark Midcontinent, Inc. 395 Oyster Point Boulevard, South San Francisco, California 94080 (d) Secured Party's Name: The Chase Manhattan Bank (e) Secured Party's Address: 200 Jericho Quadrangle Jericho, New York 11753 (f) Collateral Description: All of the Debtor's present and after acquired personal property Exhibit J-4(2) [LETTERHEAD OF STIKEMAN, ELLIOTT] FILE NO. 00010-046 August 7, 1996 The Chase Manhattan Bank and the Lenders (as hereinafter defined) 200 Jericho Quadrangle Jericho, New York 11753 and Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Dear Sirs: Re: Security granted by Core-Mark International, Inc. ------------------------------------------------------ We have acted on your behalf as special British Columbia counsel in connection with a security agreement granted pursuant to a credit agreement made as of August 7, 1996 (the "Credit Agreement") between The Chase Manhattan Bank (the "Agent") as agent bank and the lenders (collectively, the "Lenders") party thereto as lenders and Core-Mark International, Inc. ("Core-Mark"), C/M Products, Inc., Core-Mark Interrelated Companies, Inc. and Core-Mark Midcontinent, Inc. (which, together with Core-Mark are collectively referred to as the "Borrowers"). In connection with this transaction, we have reviewed a security agreement dated as of August 7, 1996 (the "Security Agreement") granted by the Borrowers in favour of the Agent. We have examined originals, or copies certified or otherwise identified to our satisfaction, of certificates of governmental officials, documents and such other material as we have considered necessary or appropriate for the purposes of this opinion. In such STIKEMAN, ELLIOTT -2- examination we have assumed that all signatures are genuine, all documents submitted to us as originals are authentic and all photostatic, certified, notarial or other copies conform to the originals. For the purposes of this opinion, we have assumed that: (i) the Borrowers have been duly incorporated and are validly existing corporations in good standing under the laws of their respective jurisdictions of incorporation and that the Borrowers have all corporate power and authority to own property and carry on business; (ii) the Borrowers have the corporate power and capacity to execute and deliver the Security Agreement; and (iii) the Security Agreement has been duly and validly authorized, executed and delivered to the Agent by the Borrowers. We have conducted or arranged for certain searches and registrations against the name of the Borrower in certain offices of public record in the Province of British Columbia. The results of the searches and registrations are set out in Schedule A to this opinion. The opinions expressed herein relate only to the laws of the Province of British Columbia and the laws of Canada applicable therein. No opinions are expressed herein with respect to the laws of any other jurisdiction. For the purposes of the Personal Property Security Act (British Columbia) (the "PPSA"), the validity, perfection and effect of perfection or non-perfection of a security interest in intangibles (which includes accounts receivable) is governed by the law of the jurisdiction where the debtor is located at the time the security interest attaches. Under the PPSA, a debtor is deemed to be located at the debtor's place of business if there is one, at the debtor's chief executive office if there is more than one place of business, and otherwise at the debtor's principal place of residence. It is our understanding that you have made appropriate personal property security registrations in the jurisdiction where the Borrower maintains their chief executive offices. Based upon and subject to the foregoing and the qualifications below, we are of the opinion that, on the date hereof: 1. Core-Mark is duly registered as an extra-provincial corporation with the Registrar of Companies for the Province of British Columbia and is duly qualified to carry on business under the Company Act British Columbia). STIKEMAN, ELLIOTT -3- 2. The Security Agreement creates a valid security interest in the Collateral (as defined in the Security Agreement) to which the Personal Property Security Act (British Columbia) applies. No other notice, filing, registration or act is necessary in the Province of British Columbia to perfect the security interest created by the Security Agreement. The foregoing opinions are subject to the following qualifications: (a) we express no opinion as to the rank or priority of any security interest in personal property; (b) we express no opinion as to the accuracy of the description of any of the property charged by the Security Agreement or as to the ownership of or title to any of the property charged by the Security Agreement; (c) we express no opinion as to the creation or perfection of the security interest, nor have we effected registrations, filings or searches in any office of public record, with respect to: (i) any Collateral which is now or hereafter becomes a fixture or crop; (ii) any Collateral that is serial numbered goods, as defined in the PPSA; (iii) any Collateral of a nature described in subsections (c), (d), (e), (f), (g), (1) or (1) of Section 4 of the PPSA, a copy of which Section is attached hereto; (iv) any Collateral to the extent that security agreements with respect to such Collateral are governed by the provisions of an Act of the Parliament of Canada including, without limitation, any vessel registered under the Canada Shipping Act and any patents, trademarks and other intellectual property rights; (v) any Collateral for which, pursuant to applicable conflicts rules (including without limitation the conflicts rules of the PPSA), the validity, perfection and the effect of perfection are governed by the laws of a jurisdiction other than British Columbia; (vi) any Collateral being proceeds which are not identifiable or traceable; and (vii) permits, quotas or other property which is not personal property; STIKEMAN, ELLIOTT -4- (d) to the extent that the PPSA is applicable, the obligation of an account debtor under an intangible or chattel paper assigned to make payments to the assignee thereunder is subject to section 41(7) of the PPSA which requires, inter alia, that the account debtor receive the notice regarding the assignment stipulated in section 41(7); (e) to the extent that the Financial Administration Act (Canada) (the "FAA") is applicable, the obligation of the Crown to make payment of a Crown debt (as defined in Part VII of the FAA) requires, inter alia, that the assignment is absolute and that the Crown receive notice of the assignment in the form and manner stipulated in section 69 of the FAA; (f) the requirement to re-register or amend the existing registration in certain instances pursuant to the provisions of the PPSA in order to maintain the perfection of the security interest; and (g) we express no opinion as to the creation of the security interest with respect to: (i) any contractual rights which by their terms; or (ii) any Collateral which by its nature, cannot be the subject of a security interest without consent, authorization or approval of third parties. This opinion is solely for the benefit of the addressees in connection with the Credit Agreement and is not for the benefit of any other person or entity. This opinion letter may not be relied upon by, quoted, in whole or in part, or otherwise referred to, used or disclosed to, anyone else or used for any other purpose, without our prior written consent. Yours truly, /s/ Stikeman, Elliott 1989 PERSONAL PROPERTY SECURITY SBC CHAP. 36 INDEX CHAP. 321.5 Exclusions from scope of Act 4. Except as otherwise provided in this Act, this Act does not apply to the following: (a) a lien, charge or other interest given by a rule of law or by an enactment unless the enactment contains an express provision that this Act applies; (b) a security agreement governed by an Act of the Parliament of Canada that deals with rights of parties to the agreement or the rights of third parties affected by a security interest created by the agreement, including but without limiting the generality of the foregoing (i) a mortgage under the Canada Shipping Act, and (ii) any agreement governed by Part V, Division B of the Bank Act (Canada); (c) the creation or transfer of an interest or claim in or under a contract of annuity or policy of insurance except the transfer of a right to money or other value payable under a policy of insurance as indemnity or compensation for loss of or damage to collateral; (d) the creation or transfer of an interest in present or future wages, salary, pay, commission or any other compensation for labour or personal services other than fees for professional services; (e) the transfer of an interest in an unearned right to payment under a contract to a transferee who is to perform the transferor's obligations under the contract; (f) the creation or transfer of an interest in land, other than an interest arising under a licence, including (i) a lease, (ii) [Repealed 1990-11-3 (b).] (iii) a petroleum and natural gas lease under the Petroleum and Natural Gas Act, (iv) a lease, issued under the Coal Act, that confers the right to produce coal, or (v) any similar interest that is prescribed for the purposes of this section; (g) the creation or transfer of an interest in a right to payment that arises in connection with an interest in land, including an interest in rental payments payable under a lease of land; (h) a sale of accounts or chattel paper as part of a sale of a business out of which they arose unless the vendor remains in apparent control of the business after the sale; (i) a transfer of accounts made solely to facilitate the collection of the accounts for the assignor; (j) the creation or transfer of an interest in a right to damages in tort; (k) an assignment for the general benefit of creditors made in accordance with an Act of the Parliament of Canada relating to insolvency; (l) a mineral claim or a placer claim as those terms are defined in the Mineral Tenure Act. 1989-36-4; 1990-11-3. SCHEDULE A [Letterhead of Province of British Columbia] - ------------------------------------------------------------------------------ BC Online: PPRS SEARCH RESULT - ------------------------------------------------------------------------------ Date: AUG 06, 1996 Currency Date: JUL 31 1996 Page: 1 Time: 11:44:07 Clerk: PE12804 Searching Party: STIKEMAN, ELLIOTT BARRISTER & SOLIC Mailing Address: STIKEMAN, ELLIOTT BARRISTER & SOLICITOR SUITE 1700, PARK PLACE 666 BURRARD STREET VANCOUVER BC V6C 2X8 Inquiry Origin: BC ONLINE Billing #: Control #: Index: BUSINESS DEBTOR Search Criteria: CORE-MARK INTERNATIONAL ______________________________________________________________________ ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: FEB 28, 1992 Reg. Length: 5 YEARS Reg. Time: 10:20:00 Expiry Date: FEB 28, 1997 Base Reg. #: 3874008 Control #: F0588052 Block# 50001 Secured Party: G.N. JOHNSTON EQUIPMENT CO. LTD. 1400 COURTNEY PARK DRIVE MISSISSAUGA ON L5T 1Hl *D0001 Base Debtor: CORE-MARK INTERNATIONAL INC. (Business) 2924 JACKLIN ROAD VICTORIA BC V9B 3Y5 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.* V000l MV 031G-91-16997 91 RAYMOND 311R3OTT General Collateral: GNB BATTERY MODEL 18-120C-13 S/N V12630 IEL CHARGER MODEL 185A720 S/N 7210 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUN 25, 1992 Reg. Length: 3 YEARS Reg. Time: 10:43:12 Expiry Date: JUN 25, 1998 Base Reg. 1: 4071096 Control #: B0521053 *** Expiry date includes subsequent registered renewal(s). Block# Continued on Page 2 - ------------------------------------------------------------------------------ BC Online: PPRS SEARCH RESULT - ------------------------------------------------------------------------------ Search Criteria: CORE-MARK INTERNATIONAL Page: 2 S000l Secured Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 *D0001 Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 13211 DELF PLACE STE 601 RICHMOND BC V6V 2A2 General Collateral: TELEPHONE EQUIPMENT ---------- R E N E W A L ---------- Reg. Date: MAY 17, 1995 Reg. Life: 3 YEARS Reg. Time: 10:45:00 Reg. #: 5788967 Control #: C1658589 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4071096 Base Reg. Date: JUN 25, 1992 Registering Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 ---------- A M E N D M E N T / O T H E R C H A N G E ---------- Reg. Date: MAY 17, 1995 Reg. Time: 10:45:00 Base Reg. #: 5789656 Control #: C1658588 Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4071096 Base Reg. Date: JUN 25, 1992 Details Description: AMENDING GENERAL COLLATERAL General Collateral: ** DELETED ** TELEPHONE EQUIPMENT *** ADDED *** TELEPHONE EQUIPMENT LEASE #405258 Registering Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 Continued on Page 3 - ------------------------------------------------------------------------------ BC Online: PPRS SEARCH RESULT - ------------------------------------------------------------------------------ Search Criteria: CORE-MARK INTERNATIONAL Page: 3 ********** P P 5 A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUN 25, 1992 Reg. Length: 3 YEARS Reg. Time: 10:51:26 Expiry Date: JUN 25, 1998 Base Reg. #: 4071146 Control #: B0521090 *** Expiry date includes subsequent registered renewal(s). Block# S0001 Secured Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 D0001 Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 2924 JACKLIN ROAD VICTORIA BC V9B 3Y5 General Collateral: TELEPHONE EQUIPMENT ---------- R E N E W A L ---------- Reg. Date: MAY 17, 1995 Reg. Life: 3 YEARS Reg. Time: 10:45:00 Reg. #: 5788968 Control #: C1658586 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4071146 Base Reg. Date: JUN 25, 1992 Registering Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 ---------- A M E N D M E N T / O T H E R C H A N G E ------------ Reg. Date: MAY 17, 1995 Reg. Time: 10:45:00 Reg. #: 5789655 Control #: C1658587 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4071146 Base Reg. Date: JUN 25, 1992 Details Description: AMENDING GENERAL COLLATERAL General Collateral: ** DELETED ** TELEPHONE EQUIPMENT Continued on Page 4 - ------------------------------------------------------------------------------ BC Online: PPRS SEARCH RESULT - ------------------------------------------------------------------------------ Search Criteria: CORE-MARK INTERNATIONAL Page: 4 *** ADDED *** TELEPHONE EQUIPMENT LEASE 1405259 Registering Party: TELECOM LEASING CANADA (TLC) LIMITED 700 5945 KATHLEEN AVENUE BURNABY BC V5H 4L5 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: DEC 23, 1992 Reg. Length: 6 YEARS Reg. Time: 16:06:29 Expiry Date: DEC 23, 1998 Base Reg. #: 4374735 Control #: B0689691 Block# S0001 Secured Party: IBM CANADA LTD. 3500 STEELES AVENUE EAST., MARKHAM ONT L3R 2Z1 D0001 Base Debtor: COMDISCO CANADA LTD (Business) 1055 DUNSMUIR STREET, STE 2794 VANCOUVER BC V7X 1L4 =D0002 Bus. Debtor: CORE-MARK INTERNATIONAL, INC 13160 VANIER PLACE, STE 140 RICHMOND BC V6V 2J2 General Collateral: ALL PRESENT AND AFTER-ACQUIRED GOODS SUPPLIED BY THE SECURED PARTY, INCLUDING WITHOUT LIMITATION, ALL OFFICE MACHINES, OFFICE EQUIPMENT, COMPUTER HARDWARE, SOFTWARE AND ANCILLARY PRODUCTS SUPPLIED BY THE SECURED PARTY, AND ALL PROCEEDS THEREFROM REGARDLESS OF THE FORM OF THE PROCEEDS. Registering Party: RUSSELL & DUMOULIN 1075 W GEORGIA ST, STE 1500 VANCOUVER BC V6E 3G2 *** Name/Address Changed on October 25, 1994 to: Registering Party: RUSSELL & DUMOULIN 1075 W GEORGIA ST, STE 2100 VANCOUVER BC V6E 3G2 Continued on Page 5 - ------------------------------------------------------------------------------ BC Online: PPRS SEARCH RESULT - ------------------------------------------------------------------------------ Search Criteria: CORE-MARK INTERNATIONAL Page: 5 ---------- A M E N D M E N T / 0 T H E R C H A N G E ----------- Reg. Date: JAN 14, 1993 Reg. Time: 10:15:00 Reg. #: 4403182 Control #: C0899147 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4374735 Base Reg. Date: DEC 23, 1992 Details Description: ADD TWO DEBTORS Block# *** ADDED *** D0003 Bus. Debtor: COMDISCO DU CANADA LTEE 1055 DUNSMUIR STREET, STE 2794 VANCOUVER BC V7X 1L4 *** ADDED *** D0004 Bus. Debtor: COMDISCO CANADA LTD/COMDISCO DU CANADA LTEE 1055 DUNSMUIR STREET, STE 2794 VANCOUVER BC V7X 1L4 Registering Party: RUSSELL & DUMOULIN 1075 W GEORGIA ST, STE 1500 VANCOUVER BC V6E 3G2 *** Name/Address Changed on October 25, 1994 to: Registering Party: RUSSELL & DUMOULIN 1075 W GEORGIA ST, STE 2100 VANCOUVER BC V6E 3G2 ********** P P 5 A S E C U R I T Y A G R E E M E N T ********** Reg. Date: FEB 15, 1993 Reg. Length: S YEARS Reg. Time: 09:00:00 Expiry Date: FEB 15, 1998 Base Reg. #: 4457490 Control #: F1219612 Block# S0001 Secured Party: COMDISCO CANADA LTD. ROYAL BANK PLAZA, NORTH TOWER, TORONTO ONT M5J 2J3 Continued on Page 6 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 6 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND BC V6V 2A2 General Collateral: EQUIPMENT LEASED PURSUANT TO MASTER LEASE AGREEMENT DATED JANUARY 13, AND PROCEEDS. - --------A D D I T I O N O F C O L L A T E R A L / P R 0 C E E D S------- Reg. Date: MAR 03, 1995 Reg. Time: 10:50:00 Reg. #: 5669001 Control #: C1606120 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4457490 Base Reg. Date: FEB 15, 1993 General Collateral: *** ADDED *** ALL PROPERTY LEASED UNDER A MASTER LEASE DATED JANUARY 13, 1993 AND CORRESPONDING LEASE SCHEDULES INCLUDING BUT NOT LIMITED TO THE FOLLOWING: ONE IBM 9406 E45 S/N 10A9488, ONE IBM 2623 SIX LINE COMM CONTROLLER S/N 10A9489, ONE IBM 2626, ONE IBM 2644,ONE IBM 2658, TWO IBM 3101, TWO IBM 6112, ONE IBM 6140, TWO IBM 6173, ONE IBM 6175. THREE IBM 5494-001 REMOTE CONTROLLERS S/N 8201420, 8201421, 8201422. ONE CROSS COMM XLT-20 WITH THE FOLLOWING FEATURES: XLM-EEWW/XL-WS-V35IBM/XL-WS-SCM/XL-PS/FPX-20-R/IMS-1/XLM-MODEM/CS- V35/CS-V35-PT. ONE BM 9406 E60 S/N A3534, ONE IBM 2623 SIX LINE COMM CONTROLLER, ONE IBM 2619 OR 2626, ONE IBM 2644, ONE IBM 2658, TWO IBM 3104, ONE IBM 5042, ONE IBM 5512, ONE IBM 5520, ONE IBM 5540, ONE IBM 6050 OR 6140, ONE IBM 6173, ONE IBM 6175, ONE IBM 6501, ONE IBM 9080, ONE IBM 9865, ONE IBM 9980 ONE IBM MULIC E60/1/2 INCH 3480 CART. 18 TRACK TOGETHER WITH ALL PARTS AND ACCESSORIES INSTALLED IN OR AFFIXED OR ATTACHED TO ANY OF THE FOREGOING AND ALL MANUALS AND USER DOCUMENTATION RELATING THERETO AND ALL PROCEEDS IN ANY FORM DERIVED DIRECTLY OR INDIRECTLY FROM ANY DEALING WITH THE COLLATERAL. Registering Party: CANADIAN SECURITIES REGISTRATION SYSTEMS 130 3751 SHELL ROAD, RICHMOND BC V6X 2W2 ********** P P 5 A S E C U R I T Y A G R E E M E N T ********** Reg. Date: MAR 09, 1993 Reg. Length: 5 YEARS Reg. Time: 15:00:00 Expiry Date: MAR 09, 1998 Base Reg. #: 4492529 Control #: F1889100 Block# Continued on Page 7 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 7 +++ Secured Party: MANUFACTURER FINANCE PROGRAMS LTD 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on August 20, 1993 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND BC V6V 2A2 General Collateral: ALL EQUIPMENT PURSUANT TO SCHEDULE OF TERMS 517 DATED MAR 3/93 AND ALL EQUIPMENT LEASED AND AMOUNTS OWING THEREUNDER. ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: AUG 12, 1993 Reg. Length: 5 YEARS Reg. Time: 13:44:09 Expiry Date: AUG 12, 1998 Base Reg. #: 4761308 Control #: B0923784 Block# +++ Secured Party: MANUFACTURER FINANCE PROGRAMS LTD 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT LSK 2P8 *** Name/Address Changed on August 20, 1993 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT LSK 2P8 *** Name/Address Changed en March 4, 1996 to: S000l Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 253 Continued on Page 8 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 8 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-2 DATED AUGUST 13, 1993 UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MANUFACTURER FINANCE PROGRAMS LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on August 20, 1993 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: SEP 27, 1993 Reg. Length: 6 YEARS Reg. Time: 08:38:25 Expiry Date: SEP 27, 1999 Base Reg. #: 4839192 Control #: B0971051 Block# S0001 Secured Party: RENTWAY INC. 1910 800 5TH AVE. S W CALGARY AB T2P 3T6 =D0001 Base Debtor: CORE MARK INTERNATIONAL INC (Business) 1140 19160 VANIER PLACE RICHMOND B.C. V6V 2JZ Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V000l MV 1FTYS9SL4RVA11913 94 FORD HDCC 2138 513 Continued on Page 9 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 9 Registering Party: RENTWAY INC. 1910 800 5TH AVE.S W CALGARY AB T2P 3T6 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: DEC 03, 1993 Reg. Length: 5 YEARS Reg. Time: 13:56:11 Expiry Date: DEC 03, 1998 Base Reg. #: 4956110 Control #: B1040696 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT LSK 2S3 =DOOO1 Base Debtor: CORE-MARK INTERNATIONAL INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-3 DATED NOVEMBER 29, 1993, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed en March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 Continued on Page 10 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 10 ---------- A M E N D M E N T / 0 T H E R C H A N G E ---------- Reg. Date: MAR 09, 1995 Reg. Time: 11:10:00 Reg. #: 5678507 Control #: C1614515 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 4956110 Base Reg. Date: DEC 03, 1993 Details Description: TO DELETE SECURED PARTY AND ADD NEW SECURED PARTY. Block# ** DELETED ** +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 *** ADDED *** S0002 Secured Party: BARCLAYS BANK OF CANADA 304 BAY STREET TORONTO ON MSH 2P2 Registering Party: CANADIAN SECURITIES REGISTRATION SYSTEMS 130 3751 SHELL ROAD, RICHMOND BC V6X 2W2 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JAN 05, 1994 Reg. Length: 5 YEARS Reg. Time: 14:03:17 Expiry Date: JAN 05, 1999 Base Reg. #: 5001568 Control #: B1067403 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT LSK 2P8 Continued on Page 11 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 11 *** Name/Address Changed on March 4, 1996 to: S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D000l Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-4 DATED JANUARY 5, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: MAR 07, 1994 Reg. Length: 5 YEARS Reg. Time: 13:09:10 Expiry Date: MAR 07, 1999 Base Reg. #: 5096864 Control #: B1124219 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 Continued on Page 12 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 12 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-5 DATED MARCH 7, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: APR 13, 1994 Reg. Length: 4 YEARS Reg. Time: 09:42:06 Expiry Date: APR 13, 1998 Base Reg. #: 5158292 Control #: B1161242 Block# S0001 Secured Party: RENTWAY INC. 1910 800 5TH AVE.S W CALGARY AB T2P 3T6 =D0001 Base Debtor: CORE-MARK INTERNATIONAL INC. (Business) 140-13160 VANIER PLACE RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV 1FUYDSEBORP75527Z 94 FREIGHTLINER FLDl20 Registering Party: RENTWAY INC. 1910 800 5TH AVE.S W CALGARY AB T2P 3T6 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: APR 14, 1994 Reg. Length: 4 YEARS Reg. Time: 08:40:12 Expiry Date: APR 14, 1998 Base Reg. #: 5160635 Control #: B1159309 Block# 2138 51? Continued on Page 13 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 13 S000l Secured Party: CANADIAN WESTERN BANK LEASING INC. 900 - 555 BURRARD STREET VANCOUVER BC V7X 1M8 =D000l Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 2924 JACKLIN ROAD VICTORIA BC V9B 3Y5 General Collateral: 104 COLDSTREAM RSCP 48G5 COOLERS S/N'S 94B0327 TO 94B0430 C/W GRAPHICS 2 EXTRA SHELVES PER UNIT TAG MOLDING ALL PARTS, ACCESSORIES) GOODS AND EQUIPMENT NOW OR HEREAFTER ATTACHED TO OR FORMING A PART OF THE GOODS DESCRIBED IN THIS FINANCING STATEMENT PROCEEDS: GOODS (INCLUDING TRADE-INS), CHATTEL PAPER, SECURITIES, DOCUMENTS OF TITLE, INSTRUMENTS, MONEY AND INTANGIBLES. ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: AUG 16, 1994 Reg. Length: 5 YEARS Reg. Time: 13:29:32 Expiry Date: AUG 16, 1999 Base Reg. #: 5364783 Control #: B1286869 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT LSK 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-6 DATED AUGUST 16, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 8280 MISSISSAUGA ONT L5K 2P8 Continued on Page 14 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 14 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ---------- A M E N D M E N T / O T H E R C H A N G E ---------- Reg. Date: MAR 09, 1995 Reg. Time: 11:10:00 Reg. #: 5678508 Control #: C1614514 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 5364783 Base Reg. Date: AUG 16, 1994 Details Description: TO DELETE SECURED PARTY AND ADD NEW SECURED PARTY. Block# ** DELETED ** +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 *** ADDED *** S0002 Secured Party: BARCLAYS BANK OF CANADA 304 BAY STREET TORONTO ON MSH 2P2 Registering Party: CANADIAN SECURITIES REGISTRATION SYSTEMS 130 3751 SHELL ROAD, RICHMOND BC V6X 2W2 Continued on Page 15 - ----------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - ----------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 15 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: OCT 26, 1994 Reg. Length: 5 YEARS Reg. Time: 13:16:42 Expiry Date: OCT 26, 1999 Base Reg. #: 5479148 Control #: B1354819 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-7 DATED OCTOBER 21, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT LSK 2S3 ---------- A M E N D M E N T / O T H E R C H A N G E ---------- Reg. Date: MAR 09) 1995 Reg. Time: 1#:10:00 Reg. #: 5678509 Control #: C1614513 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 5479148 Base Reg. Date: OCT 26, 1994 Details Description: TO DELETE SECURED PARTY AND ADD NEW SECURED PARTY. Continued on Page 16 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 16 Block# ** DELETED ** +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 *** ADDED *** S0002 Secured Party: BARCLAYS BANK OF CANADA 304 BAY STREET TORONTO ON M5H 2P2 Registering Party: CANADIAN SECURITIES REGISTRATION SYSTEMS 130 3751 SHELL ROAD, RICHMOND BC V6X 2W2 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: DEC 21, 1994 Reg. Length: 5 YEARS Reg. Time: 12:5#:14 Expiry Date: DEC 21, 1999 Base Reg. #: 5568305 Control #: B1410449 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 1280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed en March 4, 1996 to: S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D000l Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V ZA2 Continued on Page 17 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 17 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-8 DATED DECEMBER 20, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4) 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: DEC 21, 1994 Reg. Length: 5 YEARS Reg. Time: 12:5#:16 Expiry Date: DEC 21, 1999 Base Reg. #: 5568306 Control #: B1410450 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-9 DATED DECEMBER 20, 1994, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY 8280 MISSISSAUGA ONT L5K 2P8 Continued on Page 18 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 18 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: FEB 06, 1995 Reg. Length: 5 YEARS Reg. Time: 12:18:21 Expiry Date: FEB 06, 2000 Base Reg. #: 5629923 Control #: B1449421 Block# +++ Secured Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: S000l Secured Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 601-13211 DELF PLACE RICHMOND B.C. V6V 2A2 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-10 DATED FEBRUARY 1, 1995, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS NO. 517 DATED MARCH 3, 1993 AND ALL AMOUNTS OWING THEREUNDER. Registering Party: MFP TECHNOLOGY SERVICES LTD. 2655 NORTH SHERIDAN WAY #280 MISSISSAUGA ONT L5K 2P8 *** Name/Address Changed on March 4, 1996 to: Registering Party: MFP TECHNOLOGY SERVICES LTD. 2381 NORTH SHERIDAN WAY MISSISSAUGA ONT L5K 2S3 Continued on Page 19 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 19 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: FEB 10, 1995 Reg. Length: 6 YEARS Reg. Time: 09:50:32 Expiry Date: FEB 10, 2001 Base Reg. #: 5637599 Control #: B1454670 Block# S0001 Secured Party: RENTWAY INC. 1910 800 5TH AVE.S W CALGARY AB T2P 3T6 =D000l Base Debtor: CORE MARK INTERNATIONAL INC DIV CORE (Business) MARK DISTRIBUTORS DIV 140 19160 VANIER PLACE RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV 1FTY595L75VA31028 95 FORD LA9OOO Registering Party: RENTWAY INC. 1910 800 5TH AVE.S W CALGARY AB T2P 3T6 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: FEB 23, 1995 Reg. Length: 10 YEARS Reg. Time: 14:53:01 Expiry Date: FEB 23, 2005 Base Reg. #: 5657110 Control #: B1466697 Block# S0001 Secured Party: CITICORP USA, INC. 399 PARK AVENUE NEW YORK NY 10043 =D000l Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 Continued on Page 20 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 20 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: APR 28, 1995 Reg. Length: 6 YEARS Reg. Time: 09:23:40 Expiry Date: APR 28, 2001 Base Reg. #: 5753001 Control #: B15280250 Block# S0001 Secured Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 =D0001 Base Debtor: CORE-MARK INTERNATIONAL) INC. (Business) 140 13160 VANIER PLACE RICHMOND BC V6V2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.* V0001 MV 2NKMH78X05M937360 KENWORTH T300 Registering Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC VSB 3A4 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUL 05, 1995 Reg. Length: 6 YEARS Reg. Time: 11:31:52 Expiry Date: JUL 05, 2001 Base Reg. #: 5866771 Control #: B1599863 Block# S000l Secured Party: PACCAR OF CANADA,LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 D0001 Base Debtor: INLAND KENWORTH LTD (Business) 5550 GORING AVENUE BURNABY B.C. V5B 3A4 =D0002 Bus. Debtor: CORE-MARK INTERNATIONAL INC 140-13160 VANIER PLACE RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV ZXKBAS8XlTM941276 96 KENWORTH T400 V0002 MV 2XKBA58X3TM941277 96 KENWORTH T400 Continued on Page 21 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 21 Registering Party: PACCAR OF CANADA,LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUL 07, 1995 Reg. Length: 6 YEARS Reg. Time: 09:07:04 Expiry Date: JUL 07, 2001 Base Reg. #: 5871444 Control #: B1559553 Block# S000l Secured Party: ENSIGN PACIFIC LEASE LTD. 1130 WEST GEORGIA STREET VANCOUVER BC V6E 3H7 +D0001 Base Debtor: CORE-MARK INTERNATIONAL (Business) #140 - 13160 VANIER PLACE RICHMOND BC V4M 2K6 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V000l MV 1FALP52465G260151 95 FORD TAURUS GL 4DR. SEDAN ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUL 13, 1995 Reg. Length: 8 YEARS Reg. Time: 14:45:01 Expiry Date: JUL 13, 2003 Base Reg. #: 5881647 Control #: B1609446 Block# S0001 Secured Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 140 - 13160 VANIER RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.1 V0001 MV 2XKBA58X1TM941276 T400 KENWORTH V0002 MV 2XKBA58X3TM941277 T400 KENWORTH Continued on Page 22 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 22 Registering Party: INLAND INDUSTRIES LTD. 2482 DOUGLAS ROAD BURNABY BC V5C 6C9 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: AUG 04, 1995 Reg. Length: 7 YEARS Reg. Time: 08:50:25 Expiry Date: AUG 04, 2002 Base Reg. #: 5916963 Control #: B1632815 Block# S0001 Secured Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 140 13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV lXKDDR9XOTS94139l KENWORTH T8OOB Registering Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: AUG 16, 1995 Reg. Length: 8 YEARS Reg. Time: 09:48:37 Expiry Date: AUG 16, 2003 Base Reg. #: 5932783 Control #: B1642787 Block# S000l Secured Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 =D000l Base Debtor: CORE-MARK INTERNATIONAL, INC. (Business) 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V000l MV 2NKMH78X05M936645 KENWORTH T300 Continued on Page 23 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 23 Registering Party: INLAND KENWORTH 5550 GORING STREET BURNABY BC V5B 3A4 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: OCT 23, 1995 Reg. Length: 6 YEARS Reg. Time: 12:29:48 Expiry Date: OCT 23, 2001 Base Reg. #: 6046467 Control #: B1712420 Block* S000l Secured Party: PACCAR OF CANADA,LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 =D000l Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 140 - 13160 VANIER PLACE RICHMOND B.C. V6V 2J2 D0002 Bus. Debtor: INLAND KENWORTH LTD 5550 GORING AVENUE BURNABY B.C. V5B 3A4 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV 1XKDDR9XOTS94139l 96 KENWORTH T800 Registering Party: PACCAR OF CANADA,LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Rag. Date: OCT 23, 1995 Reg. Length: 8 YEARS Reg. Time: 12:30:09 Expiry Date: OCT 23, 2003 Base Rag. #: 6046469 Control #: B1712422 Block# S0001 Secured Party: PACCAR OF CANADA,LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 D0001 Base Debtor: INLAND KENWORTH LTD (Business) 5550 GORING AVENUE BURNABY B.C. V5B 3A4 Continued on Page 24 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 24 =D0002 Bus. Debtor: CORE-MARK INTERNATIONAL INC 140-13160 VANIER PLACE RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V000l MV 2NKMH78X05M936645 95 KENWORTH T300 Registering Party: PACCAR OF CANADA, LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: JUL 11, 1995 R3g. Length: 8 YEARS Reg. Time: 12:33:21 Expiry Date: JUL 11, 2003 Base Reg. #: 5876306 Control #: B1606301 Block# S0001 Secured Party: PACCAR OF CANADA, LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 D0001 Base Debtor: INLAND KENWORTH LTD (Business) 5550 GORING AVENUE BURNABY B.C. V5B 3A4 Bus. Debtor: CORE-MARK 140-13160 VANIER PLACE RICHMOND B.C. V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV 2NKMH78X05M937360 95 KENWORTH Registering Party: PACCAR OF CANADA, LTD. 6711 MISSISSAUGA ROAD, NORTH MISSISSAUGA ON L5N 4J8 Continued on Page 25 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 25 ---------- A M E N D M E N T / O T H E R C H A N G ----------E Reg. Date: NOV 21, 1995 Reg. Time: 09:55:00 Reg. #: 6100865 Control #: C1816443 Base Reg. Type: PPSA SECURITY AGREEMENT Base Reg. #: 5876306 Base Reg. Date: JUL 11, 1995 Details Description: CORRECT NAME ADDED TO REGISTRATION Block# ** DELETED ** Bus. Debtor: CORE-MARK 140-13160 VANIER PLACE RICHMOND B.C. V6V 2J2 *** ADDED *** =D0003 Bus. Debtor: CORE-MARK INTERNATIONAL INC 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Registering Party: CANADIAN SECURITIES REGISTRATION SYSTEMS 130 3751 SHELL ROAD, RICHMOND BC V6X 2W2 ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: DEC 20, 1995 Reg. Length: 5 YEARS Reg. Time: 08:42:49 Expiry Date: DEC 20, 2000 Base Rag. #: 6141778 Control #: B1773562 Block# S0001 Secured Party: MFP TECHNOLOGY SERVICES LTD 2281 NORTH SHERIDAN WAY MISSISSAUGA ON L5K 2S3 =D0001 Base Debtor: CORE-MARK INTERNATIONAL INC. (Business) 601-13211 DELF PLACE RICHMOND BC V6V 2A2 Continued on Page 26 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 26 General Collateral: COMPUTER EQUIPMENT PURSUANT TO LEASE AGREEMENT NO. 517-li DATED DECEMBER 18) 1995, AND ALL AMENDMENTS THERETO, UNDER SCHEDULE OF TERMS FOR EQUIPMENT LEASE AGREEMENT NO. 517 DATED MARCH 3, 1993, AND ALL AMOUNTS OWING THEREUNDER. DEBTORS FULL NAME IS- CORE-MARK INTERNATIONAL, INC. Registering Party: MFP TECHNOLOGY SERVICES LTD 2281 NORTH SHERIDAN WAY MISSISSAUGA ON L5K 2S3 ********** R E P A I R E R S L I E N A C T ********** Reg. Date: APR 02, 1996 Reg. Length: 180 DAYS Reg. Time: 10:05:32 Expiry Date: SEP 30, 1996 Base Reg. #: 6307632 Control #: B1877762 Amount of Lien: $2617.52 Surrender Date: MAR 18, 1996 Block# S0001 Secured Party: PER.M. ENTETPRISES LTD. DBA ANNACIS TRUCK & TRAILER SERVICE 918 CLIVEDEN AVENUE NEW WESTMINSTER B.C. V3M 5R5 =D0001 Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV 1PT071NE9K9006089 89 TRAILMBILE SEMI ********** R E P A I R E R S L I E N A C T ********** Reg. Date: APR 02, 1996 Reg. Length: 180 DAYS Reg. Time: 10:10:36 Expiry Date: SEP 30, 1996 Base Reg. #: 6307650 Control #: B1877789 Amount of Lien: $2791.76 Surrender Date: MAR 22, 1996 Block# S0001 Secured Party: PER.M. ENTERPRISES LTD. DBA ANNACIS TRUCK & TRAILER SERVICE 918 CLIVEDEN AVENUE NEW WESTMINSTER B.C. V3M 5R5 Continued on Page 27 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 27 =D000l Base Debtor: CORE-MARK INTERNATIONAL INC (Business) 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV JHBSGZ354K1S1O17S 89 HINO VAN ********** R E P A I R E R S L I E N A C T ********** Reg. Date: JUL 16, 1996 Reg. Length: 180 DAYS Reg. Time: 16:25:30 Expiry Date: JAN 13, 1997 Base Reg. #: 6491191 Control #: B1999499 Amount of Lien: $1945.79 Surrender Date: JUN 25, 1996 Block* S000l Secured Party: PER.M. ENTERPRISES LTD. DBA ANNACIS TRUCK & TRAILER SERVICE 918 CLIVEDEN AVENUE NEW WESTMINSTER B.C. V3M 5R5 =D0001 Base Debtor: COREMARK INTERNATIONAL INC. (Business) 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V0001 MV JHBSG235XL1TlO198 90 HINO VAN ********** R E P A I R E R S L I E N A C T ********** Reg. Date: JUL 31, 1996 Reg. Length: 180 DAYS Reg. Time: 08:58:04 Expiry Date: JAN 27, 1997 Base Reg. #: 6521207 Control #: B2016283 Amount of Lien: $1782.86 Surrender Date: JUL 13, 1996 Block# S000l Secured Party: PER.M. ENTERPRISES LTD. DBA ANNACIS TRUCK & TRAILER SERVICE 918 CLIVEDEN AVENUE NEW WESTMINSTER B.C. V3M 5R5 D0001 Base Debtor: CORE-MARK INT'L INC. #50 (Business) 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Continued on Page 28 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 28 =D0002 Bus. Debtor: CORE MARK INTERNATIONAL INC. 140-13160 VANIER PLACE RICHMOND BC V6V 2J2 Vehicle Collateral: Type Serial # Year Make/Model MH Reg.# V000l MV JHB5G2354K1510175 89 HINO VAN ********** P P S A S E C U R I T Y A G R E E M E N T ********** Reg. Date: AUG 06, 1996 Reg. Length: 10 YEARS Reg. Time: 1#:38:28 Expiry Date: AUG 06, 2006 Base Reg. #: 6529487 Control #: B2021119 Block# S000l Secured Party: THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT - LIEN PERF. DEPT . 200 JERICHO QUADRANGLE JERICHO NY 11753 =D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0002 Bus. Debtor: C/M PRODUCTS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0003 Bus. Debtor: CORE-MARK INTERRELATED COMPANIES, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0004 Bus. Debtor: CORE-MARK MIDCONTINENT, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0005 Bus. Debtor: CORE-MARK DISTRIBUTORS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Continued on Page 29 - -------------------------------------------------------------------------------- BC Online: PPRS SEARCH RESULT - -------------------------------------------------------------------------------- Search Criteria: CORE-MARK INTERNATIONAL Page: 29 Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 **************************************************************************** Some, but not all, tax liens and other Crown claims are registered at the Personal Property Registry (PPR) and if registered, will be displayed on this search result. HOWEVER, it is possible that a particular chattel is subject to a Crown claim that is not registered at the PPR. Please consult the Miscellaneous Registrations Act, 1992 for more details. If you are concerned that a particular chattel may be subject to a Crown claim not registered at the PPR, please consult the agency administering the type of Crown claim. **************************************************************************** **************************************************************************** WARNING: The currency date noted at the top of this search indicates the date to which registrations have been completely recorded on the system. While some registrations processed after this date may be included, others may still be in process and not included. *********************************** END OF SEARCH *************************** Page: 1 As of: JUL 31 1996 BC OnLine: PPRS SEARCH RESULT 96/08/06 Lterm: V1381414 For: PE12804 STIKEMAN, ELLIOTT BAPRISTER & SOL 11:43:02 Search Criteria: C/M PRODUCT Index: BUSINESS DEBTOR **************** P P S A S E C U R I T Y A G R E E M E N T **************** Reg. Date: AUG 06, 1996 Reg. Length: 10 YEARS Reg. Time: 11:38:28 Expiry Date: AUG 06, 2006 Base Reg. #: 6529487 Control #: B2021119 Block# S0001 Secured Party: THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT - LIEN PERF. DEPT. 200 JERICHO QUADRANGLE JERICHO NY 11753 D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 =D0002 Bus. Debtor: C/M PRODUCTS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0003 Bus. Debtor: CORE-MARK INTERRELATED COMPANIES, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0004 Bus. Debtor: CORE-MARK MIDCONTINENT, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0005 Bus. Debtor: CORE-MARK DISTRIBUTORS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 ****************************************************************************** Some, but not all, tax liens and other Crown claims are registered at the Personal Property Registry (PPR) and if registered, will be displayed on this search result. HOWEVER, it is possible that a particular chattel is subject to a Crown claim that is not registered at the PPR. Please consult the Miscellaneous Reqistrations Act, 1992 for more details. If you are concerned that a particular chattel may be subject to a Crown claim not registered at the PPR, please consult the agency administering the type of Crown claim. Continued on Page 2 Search Criteria: C/M PRODUCT Page: 2 ******************************************************************************* WARNING: The currency date noted at the top of this search indicates the date to which registrations have been completely recorded on the system. While some registrations processed after this date may be included, others may still be in process and not included. *********************************** END OF SEARCH *************************** As of: JUL 31 1996 BC OnLine: PPRS SEARCH RESULT 96/08/06 Lterm: V1381414 For: PE12804 STIKEMAN, ELLIOTT BAPRISTER & SOL 11:43:02 Search Criteria: CORE-MARK INTERRELATED Index: BUSINESS DEBTOR **************** P P S A S E C U R I T Y A G R E E M E N T **************** Reg. Date: AUG 06, 1996 Reg. Length: 10 YEARS Reg. Time: 11:38:28 Expiry Date: AUG 06, 2006 Base Reg. #: 6529487 Control #: B2021119 Block# S0001 Secured Party: THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT - LIEN PERF. DEPT. 200 JERICHO QUADRANGLE JERICHO NY 11753 D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0002 Bus. Debtor: C/M PRODUCTS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 =D0003 Bus. Debtor: CORE-MARK INTERRELATED COMPANIES, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0004 Bus. Debtor: CORE-MARK MIDCONTINENT, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0005 Bus. Debtor: CORE-MARK DISTRIBUTORS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 ***************************************************************************** Some, but not all, tax liens and other Crown claims are registered at the Personal Property Registry (PPR) and if registered, will be displayed on this search result. HOWEVER, it is possible that a particular chattel is subject to a Crown claim that is not registered at the PPR. Please consult the Miscellaneous Registrations Act, 1992 for more details. If you are concerned that a particular chattel may be subject to a Crown claim not registered at the PPR, please consult the agency administering the type of Crown claim. Continued on Page 2 Search Criteria: CORE-MARK INTERRELATED Page: 2 ***************************************************************************** WARNING: The currency date noted at the top of this search indicates the date to which registrations have been completely recorded on the system. While some registrations processed after this date may be included, others may still be in process and not included. ************************************ END OF SEARCH *************************** As of: JUL 31 1996 BC OnLine: PPRS SEARCH RESULT 96/08/06 Lterm: V1381414 For: PE12804 STIKEMAN, ELLIOTT BAPRISTER & SOL 11:43:02 Search Criteria: CORE-MARK MIDCONTINENT Index: BUSINESS DEBTOR **************** P P S A S E C U R I T Y A G R E E M E N T **************** Reg. Date: AUG 06, 1996 Reg. Length: 10 YEARS Reg. Time: 11:38:28 Expiry Date: AUG 06, 2006 Base Reg. #: 6529487 Control #: B2021119 Block# S0001 Secured Party: THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT - LIEN PERF. DEPT. 200 JERICHO QUADRANGLE JERICHO NY 11753 D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0002 Bus. Debtor: C/M PRODUCTS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0003 Bus. Debtor: CORE-MARK INTERRELATED COMPANIES, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 =D0004 Bus. Debtor: CORE-MARK MIDCONTINENT, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0005 Bus. Debtor: CORE-MARK DISTRIBUTORS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 ***************************************************************************** Some, but not all, tax liens and other Crown claims are registered at the Personal Property Registry (PPR) and if registered, will be displayed on this search result. HOWEVER, it is possible that a particular chattel is subject to a Crown claim that is not registered at the PPR. Please consult the Miscellaneous Registrations Act, 1992 for more details. If you are concerned that a particular chattel may be subject to a Crown claim not registered at the PPR, please consult the agency administering the type of Crown claim. Continued on Page 2 Search Criteria: CORE-MARK MIDCONTINENT Page: 2 ***************************************************************************** WARNING: The currency date noted at the top of this search indicates the date to which registrations have been completely recorded on the system. While some registrations processed after this date may be included, others may still be in process and not included. ****************************** END OF SEARCH ******************************** As of: JUL 31 1996 BC OnLine: PPRS SEARCH RESULT 96/08/06 Lterm: V1381414 For: PE12804 STIKEMAN, ELLIOTT BAPRISTER & SOL 11:43:02 Search Criteria: CORE-MARK DISTRIBUTOR Index: BUSINESS DEBTOR **************** P P S A S E C U R I T Y A G R E E M E N T **************** Reg. Date: AUG 06, 1996 Reg. Length: 10 YEARS Reg. Time: 11:38:28 Expiry Date: AUG 06, 2006 Base Reg. #: 6529487 Control #: B2021119 Block# S0001 Secured Party: THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT - LIEN PERF. DEPT. 200 JERICHO QUADRANGLE JERICHO NY 11753 D0001 Base Debtor: CORE-MARK INTERNATIONAL, INC (Business) 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0002 Bus. Debtor: C/M PRODUCTS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0003 Bus. Debtor: CORE-MARK INTERRELATED COMPANIES, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 D0004 Bus. Debtor: CORE-MARK MIDCONTINENT, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 =D0005 Bus. Debtor: CORE-MARK DISTRIBUTORS, INC 395 OYSTER POINT BLVD, STE 415 SOUTH SAN FRANCISCO CA 94080 General Collateral: ALL PRESENT AND AFTER-ACQUIRED PERSONAL PROPERTY OF THE DEBTOR. Registering Party: STIKEMAN ELLIOTT 1700-666 BURRARD STREET VANCOUVER BC V6C 2X8 **************************************************************************** Some, but not all, tax liens and other Crown claims are registered at the Personal Property Registry (PPR) and if registered, will be displayed on this search result. HOWEVER, it is possible that a particular chattel is subject to a Crown claim that is not registered at the PPR. Please consult the Miscellaneous Reqistrations Act, 1992 for more details. If you are concerned that a particular chattel may be subject to a Crown claim not registered at the PPR, please consult the agency administering the type of Crown claim. Continued on Page 2 Search Criteria: CORE-MARK DISTRIBUTOR Page: 2 **************************************************************************** WARNING: The currency date noted at the top of this search indicates the date to which registrations have been completely recorded on the system. While some registrations processed after this date may be included, others may still be in process and not included. ********************************* END OF SEARCH **************************** [Letterhead of Thompson Dorfman Sweatman] Exhibit J-5 August 7, 1996 STIKEMAN, ELLIOTT Barristers and Solicitors P.O. Box 85 5300 Commerce Court West Toronto, ON M5L 1B9 THE CHASE MANHATTAN BANK (and the other Lenders) 200 Jericho Quardrangle Jericho, NEW YORK 11753 SIMPSON THACHER & BARTLETT Barristers and Solicitors 425 Lexington Avenue New York, NEW YORK 10017-3954 Re: CORE-MARK INTERNATIONAL, INC. (the "Corporation") We have acted as agents for Stikeman, Elliott in the Province of Manitoba (the "Province") in Connection with a security agreement dated as of August 7, 1996 (the "Security Agreement") made between the Corporation, CIM Products, Inc., Core-Mark Interrelated Companies, Inc. and Core-Mark Midcontinent, Inc. (collectively the "Business Debtors") and The Chase Manhattan Bank (the "Bank") as Administrative Agent for the Lenders parties to a Credit Agreement dated as of August 7, 1996 among the Corporation, the Bank and such Lenders (the "Credit Agreement"). A Financing Statement giving notice of the Security Agreement was registered in the Manitoba Personal Property Registry (the "PPR") on August 7, 1996 (the "Financing Statement"). Upon verification of the registration of the THOMPSON DORFMAN SWEATMAN Barristers and Solicitors -2- Statement a registration number will be assigned, and upon our receipt of the Verification Statement we will provide the registration number to you. A Certificate of the Registrar of the PPR dated as at July 9, 1996 at 4:30 p.m. (as updated and confirmed by a search conducted August 7, 1996 for the period ended at the close of business on July 30, 1996) disclosed the following registrations against the Corporation which, as regards the Corporation, continue to remain in priority to the Financing Statement: 1. Registration No.950106-104393 in favour of PACCAR OF CANADA LTD. in respect of certain motor vehicles; 2. Registration No.951120-101972 in favour of PACCAR OF CANADA LTD. in respect of a 1996 Kenworth motor vehicle, Serial No. 1XKDD99XXT5942970; 3. Registration No. 950228-102057 in favour of CITICORP USA INC. in respect of assets described by schedule including inventory, equipment, debts, accounts and intangibles. In the Province there may also exist encumbrances ranking in priority to the Financing Statement of the following nature which would not be disclosed by our searches: 1. conditional sales contracts made prior to September 1, 1978, being the date The Personal Property Security Act (Manitoba) (the "PPSA") came into force; 2. wage claims of employees of the Corporation and the other Business Debtors under the provisions of The Payment of Wages Act (Manitoba) and under the provisions of legislation relative to insolvency and bankruptcy; 3. liens created by statute in favour of Her Majesty in Right of Manitoba, municipalities, Crown corporations and government agencies on (personal) property of the Corporation and the other Business Debtors for the amount of any debt due from the Corporation and the other Business Debtors which came into existence prior to the registration of the Financing Statement. THOMPSON DORFMAN SWEATMAN Barristers and Solicitors -3- In giving the opinion which follows, we have assumed: (a) the genuineness of all documents submitted to us as originals and the authenticity and conformity to the originals of all certified and notarial copies of original documents; (b) that the Security Agreement has been duly and validly authorized, executed and delivered to the Bank by the Business Debtors; (c) the Business Debtors each have the corporate power and capacity to execute and deliver the Security Agreement; (d) value has been given by the Bank to the Business Debtors; (e) the Business Debtors have rights in the Collateral, as that term is defined in the Security Agreement; (f) that the Collateral does not include real or immovable property or property that has been affixed to real or immovable property. For the purposes of the PPSA, the validity, perfection and possibility and effect of proper registration with respect to intangibles (which includes accounts receivable) is governed by the law of the jurisdiction in which the chief place of business of the debtor is located. Based and relying upon the foregoing and subject to the qualifications hereinafter set out, we are of the opinion that: 1. The Corporation has been duly registered as an extra-provincial corporation under the laws of the Province and is in good standing under the laws of the Province with respect to the filing of Annual Returns. 2. With the exception of the Corporation none of the Business Debtors has been duly registered as an extra-provincial corporation under the laws of the Province. 3. The Security Agreement creates in favour of the Bank a valid security interest in Collateral (as that term is defined in the Security Agreement) to which the PPSA applies. THOMPSON DORFMAN SWEATMAN Barristers and Solicitors -4- 4. Notice of the Security Agreement has been properly registered according to the laws of the Province in all places in which registration is necessary or advisable. No other notice, filing, registration or act is necessary in the Province to perfect the security interests created by the Security Agreement. 5. At the time of registration of the Financing Statement, except for the registrations described above, there were no mortgages, hypothecs, charges, pledges, encumbrances or security interests registered in the PPR against or affecting the Corporation which rank or purport to rank in priority to or pari passu with the security interest created or granted by the Security Agreement. The foregoing opinions are: (a) Subject to the qualification that in order to continue the effectiveness of the registration of the Financing Statement, it is necessary to register: (i) a renewal financing statement respecting the Financing Statement before the expiration of the three year period from the date of the initial registration thereof and before the expiration of the third anniversary of each successive renewal; and (ii) a transfer financing statement within fifteen (15) days after the Bank learns that the Corporation has transferred its interest in the collateral described in the Financing Statement. (b) subject to the qualification that a security interest in instruments, securities, letters of credit and advices of credit, or negotiable documents of title (as such terms are defined in the PPSA can only be perfected by the Bank (or its agents) possessing such items of Collateral; (c) limited to matters governed by the laws of the Province only; (d) limited to the matters expressly stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein; THOMPSON DORFMAN SWEATMAN Barristers and Solicitors -5- (e) subject to the qualification that no opinion is expressed as to the enforceability of a security interest in Collateral to the extent that such Collateral is not identifiable and traceable; (f) subject to the qualification that perfection of a security interest in the Collateral may be defeated or impaired with respect to such portion of the Collateral that is removed from the Province to another jurisdiction; (g) subject to the qualification that motor vehicles or aircraft (as defined by the PPSA) comprised in the Collateral and used by the Business Debtors as equipment must be described in the Financing Statement according to the serial number and other identifying information required by the PPSA in order for the security interest therein to be perfected; (h) subject to the qualification that a license, quota or similar governmental authorization may not be personal property subject to the granting of a security interest pursuant to the PPSA; and (i) subject to the qualification that limitations may exist in law upon the right of the holder of a judgment to seize patent rights under a writ of execution and subject to such priorities as may be created pursuant to the Copyright Act (Canada), the Trade Marks Act (Canada) and the Patent Act (Canada). The opinion expressed herein is effective as of the date hereof and is based upon the laws in effect as of the date hereof. We expressly disclaim any undertaking or obligation to modify this opinion to reflect changes in facts or developments in law which may occur after the date hereof. This opinion is rendered solely for the use of the addressees hereof in connection with the transaction referred to herein and may not be relied upon by any other parties or for any other purpose without our prior express written consent. Yours truly, /s/Thompson Dorfman Sweatman EXHIBIT K TO CREDIT AGREEMENT [FORM OF] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of August 7, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Core-Mark International, Inc. (the "BORROWER"), the Lenders named therein and The Chase Manhattan Bank, as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 hereto (individually, an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal amount for each Assigned Facility as set forth on Schedule 1 hereto. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (c) attaches any Notes held by it evidencing the Assigned Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Notes for a new Note or Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Assigned Facility, requests that the Administrative Agent exchange the attached Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date); and (d) represents and warrants that it has complied with all of the provisions of Section 10.6(c) of the Credit Agreement which are applicable to it in connection with this Assignment. 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the 2 Credit Agreement, together with copies of the financial statements delivered pursuant to subsection 4.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to subsection 2.19(b) of the Credit Agreement; and (f) represents and warrants that it has complied with all of the provisions of Section 10.6 (c) of the Credit Agreement which are applicable to it in connection with this Assignment. 4. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 5. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 6. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 7. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. Schedule 1 to Assignment and Acceptance Name of Assignor: ---------------------------------- Name of Assignee: ---------------------------------- Effective Date of Assignment: ---------------------- Credit Principal Facility Assigned Amount Assigned Commitment Percentage Assigned (1) - ----------------- --------------- ---------------------------------- $ % --------- --------- [Name of Assignee] [Name of Assignor] By: By: ------------------------ ------------------------ Name: Name: Title: Title: - ------------------- (1) Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. 2 Accepted: Consented To: THE CHASE MANHATTAN BANK, as CORE-MARK INTERNATIONAL, INC.(2) Administrative Agent By: By: -------------------------- ----------------------------- Name: Name: Title: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By: --------------------------------- Name: Title: CHASE MANHATTAN BANK DELAWARE, as Issuing Bank By: --------------------------------- Name: Title: - ------------------- (2) The consents of the Borrower, the Administrative Agent and the Issuing Bank are not required unless the assignee is not an existing Lender under the Credit Agreement. EX-10.5 15 EXHIBIT 10.5 STOCKHOLDERS AGREEMENT by and among CORE-MARK INTERNATIONAL, INC. and ALL OF THE HOLDERS OF ITS COMMON STOCK Dated as of August 7, 1996 TABLE OF CONTENTS Page ---- Section 1. Certain Definitions. . . . . . . . . . . . . . . . . . . . .. . .2 Section 2. Restrictions on Transfer . . . . . . . . . . . . . . . . . .. . 12 2.1 Common Stock Subject To This Agreement. . . . . . . . . . . . . . . 12 2.2 General Restriction . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3 Transfers of Restricted B Stock and Option Shares . . . . . . . . . 14 2.4 Tag-Along Right . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.5 Drag-Along Right. . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.6 Transfers Following Initial Public Offering . . . . . . . . . . . . 19 Section 3. Call Options . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.1 Call Options of the Company and the Principal Stockholder . . . . . 21 3.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.3 Termination of Call Options . . . . . . . . . . . . . . . . . . . . 26 Section 4. Registration Rights. . . . . . . . . . . . . . . . . . . . . . 26 Section 5. Changes in Common Stock; Option Plan . . . . . . . . . . . . . 26 5.1 Changes in Common Stock . . . . . . . . . . . . . . . . . . . . . . 26 5.2 Approval of Option Plan . . . . . . . . . . . . . . . . . . . . . . 27 Section 6. Transferees Subject to Agreement . . . . . . . . . . . . . . . 27 Section 7. Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 8. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 29 8.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.3 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 29 8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.5 Entire Agreement; Headings; Gender. . . . . . . . . . . . . . . . . 30 8.6 Copy of Agreement with Company. . . . . . . . . . . . . . . . . . . 30 8.7 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 30 8.8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.9 Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . 31 8.10 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 32 Exhibit A Parties Exhibit B Repurchase Percentages Exhibit C Form of Registration Rights Agreement i STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT (the "AGREEMENT"), dated as of August 7, 1996, by and among CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"), JUPITER PARTNERS L.P., a Delaware limited partnership ("JUPITER"), and the other parties listed on Exhibit A hereto under the caption "Management Stockholders" (Jupiter and the Management Stockholders are collectively referred to herein as the "STOCKHOLDERS," which term shall also include any Person who hereafter becomes a party to this Agreement in accordance with the terms hereof). Capitalized terms used herein and not otherwise defined shall have the meanings specified in Section 1. W I T N E S S E T H : WHEREAS, the Stockholders are the holders of all of the issued and outstanding shares of Common Stock of the Company; WHEREAS, the Management Stockholders own both Restricted A Stock and Restricted B Stock; WHEREAS, concurrently with the execution of this Agreement, the Company is entering into severance and non-competition agreements with each of the Management Stockholders (each, a "SEVERANCE AGREEMENT"); WHEREAS, concurrently with the execution of this Agreement, pursuant to that certain Stock Option Plan of the Company (the "OPTION PLAN"), the Company is granting to certain of its employees options to purchase shares of Common Stock at a 2 per share exercise price of $10 per share, subject to the terms and conditions set forth in the Option Plan; WHEREAS, as a result of a 155,000 for 1 stock split occurring on the date hereof, the Company has 5,500,000 shares of Common Stock outstanding as of the date hereof; and WHEREAS, the parties hereto wish to provide for certain rights and obligations of the Stockholders with respect to the transfer, purchase and other rights affecting the Common Stock. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: Section CERTAIN DEFINITIONS. For the purposes of this Agreement, the following terms and phrases have the following meanings: "AFFILIATE" means, (i) with respect to any natural Person, the spouse of such Person, either parent of such Person or of such Person's spouse, any descendant of any such parent, or any relative of such Person who has the same home as such Person, and (ii) with respect to any other Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. For purposes of this definition, the term "CONTROL" (including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. 3 "AFFILIATED TRANSFEREE," with respect to the Principal Stockholder, means (i) any Affiliate of the Principal Stockholder, (ii) any employee or partner of the Principal Stockholder or (iii) any employee or partner of any Affiliate of the Principal Stockholder. "BOARD" means the Board of Directors of the Company. "BUSINESS DAY" shall mean any day except a Saturday, Sunday or other day on which commercial banks in New York, New York, are authorized by law to close. "CALL FOR BREACH" shall have the meaning specified in Section 3.1.4. "CALL FOR CAUSE" shall have the meaning specified in Section 3.1.1. "CALL FOR RESIGNATION" shall have the meaning specified in Section 3.1.2. "CALL OPTION" shall mean any right of the Company or the Principal Stockholder to purchase Restricted B Stock from a Management Stockholder under Section 3. "CALL SHARES" shall mean any shares of Restricted B Stock with respect to which the Company or the Principal Stockholder would have a purchase right if a Management Stockholder ceased to be employed by the Company or any of its subsidiaries for any of the reasons specified in Section 3.1. "CALL WITHOUT CAUSE" shall have the meaning specified in Section 3.1.3. "CAUSE," with respect to any Management Stockholder, shall mean (i) a reasonable, good faith determination by the Board that the Management Stockholder has, in any material respect, willfully failed to follow any of the Company's written policies or any written directives of the Board (other than by reason of a resignation for 4 Good Reason) and, if such failure is susceptible of being cured as reasonably determined by the Board in good faith, the failure of the Management Stockholder to cure such failure within 10 days after receiving written notice (stating with specificity the nature of such failure) from the Board; or (ii) any act of gross negligence, willful misconduct, fraud or personal dishonesty by the Management Stockholder involving the assets of the Company or any of its Affiliates resulting in economic or reputational harm to the Company; or (iii) the conviction of, or a plea of guilty or NOLO CONTENDERE by the Management Stockholder to, a charge of any crime involving moral turpitude or a felony; or (iv) the breach by the Management Stockholder in any material respect of any contract or other agreement between the Company or any of its Affiliates and the Management Stockholder and, if such breach is susceptible of being cured as reasonably determined by the Board in good faith, the failure of the Management Stockholder to cure such breach within 10 days after receiving written notice (stating with specificity the nature of such failure) from the Board. "CHANGE IN CONTROL" shall mean (i) such time as the Principal Stockholder no longer is the beneficial owner of shares of any Common Stock or (ii) the consummation of a sale of all or substantially all of the assets of the Company and its subsidiaries (other than to the Principal Stockholder or any Affiliate of the Company); PROVIDED, that a Change in Control shall only be deemed to have occurred if immediately after the occurrence of the event specified in clause (i) or clause (ii) the Company does not have any publicly- traded securities. 5 "COMMON STOCK" means the common stock, par value $.01 per share, of the Company and any other shares of capital stock of the Company classified as common stock hereafter authorized. "COMPANY" means Core-Mark International, Inc., a Delaware corporation. "CONTINGENT OBLIGATION" shall mean any direct or indirect liability, contingent or otherwise, (i) with respect to any indebtedness, letter of credit or other monetary obligation of another if the primary purpose or intent thereof by the Person incurring such liability is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holder of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) under any letter of credit issued for the account of that Person or for which that Person is otherwise liable for reimbursement thereof. "DISABILITY," with respect to a Management Stockholder, shall mean incapacity of such Management Stockholder due to physical or mental illness, as a result of which such Management Stockholder shall have been unable to perform his duties for an aggregate period of six months during any 12-month period. "DRAG-ALONG RIGHT" shall have the meaning specified in Section 2.5. "EBIT" shall mean, as of the date of determination, the Company's consolidated earnings before interest and taxes for the twelve full months immediately preceding such date, determined in accordance with generally accepted accounting 6 principles as defined by the Company's accountants as in effect as of the date hereof, except that inventory shall be determined on a "first-in, first-out" basis. "ENCUMBRANCE" means any mortgage, lien, security interest, pledge, claim, option, right of first refusal or other like encumbrance with respect to any share of Common Stock, and "ENCUMBER" shall have a correlative meaning. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" shall mean (A) after the Initial Public Offering, (i) the average of the last reported bid price of the Common Stock for the 30 consecutive trading days immediately preceding the date on which any such determination is to be made, as reported by NASDAQ or, if the Common Stock is not listed on NASDAQ, by another reliable source or (ii) if the Common Stock is listed on a securities exchange, the average of the last reported sales price of the Common Stock for the 30 consecutive trading days immediately preceding the date on which any such determination is to be made and (B) prior to the Initial Public Offering, the fair market value per share of Common Stock as determined in good faith by the Board. "FULLY DILUTED SHARES" shall mean the total number of the Company's outstanding shares of Common Stock on a fully diluted, fully converted basis (assuming the exercise of all options and other securities convertible or exchangeable into or exercisable for Common Stock). "GOOD REASON," with respect to a Management Stockholder, means (i) a reduction of such Management Stockholder's base salary payable during any fiscal year by the Company and its Subsidiaries, (ii) the failure of the Company to pay such 7 Management Stockholder his base salary or any of his benefits to which he is entitled to be paid during any fiscal year, if such failure is not cured within ten days thereof or (iii) a relocation of such Management Stockholder's principal base of operation to any location other than a location within 50 miles of San Francisco during the term of such Management Stockholder's employment with the Company. "INITIAL PUBLIC OFFERING" means the first public offering of Common Stock pursuant to an effective registration statement under the Securities Act which results in the listing of such Common Stock on a national securities exchange or the quotation of such Common Stock on NASDAQ. "IN-THE-MONEY," with respect to options or other securities convertible into Common Stock, shall mean any options or other such securities the Fair Market Value of whose underlying shares of Common Stock exceeds the then applicable exercise price. "INVOLUNTARY TRANSFER," with respect to any shares of Common Stock, means any Transfer, proceeding or action (other than a Transfer on the death of a Management Stockholder) by or in which a Management Stockholder (or his Permitted Transferee) shall be deprived or divested of any right, title or interest in or to any of its shares of Common Stock, including, without limitation, any seizure under levy of attachment or execution, any Transfer in connection with bankruptcy (whether pursuant to the filing of a voluntary or an involuntary petition under any applicable bankruptcy law) or other court proceeding to a debtor-in-possession, trustee in bankruptcy or receiver or other officer or agency, any Transfer to a state or to a public officer or agency pursuant to any statute pertaining to escheat or abandoned property, any 8 Transfer pursuant to a divorce action or any Transfer upon or occasioned by the legal incompetence of any Management Stockholder (or his Permitted Transferee) or any Transfer to a legal representative of any Management Stockholder (or his Permitted Transferee). "MANAGEMENT STOCKHOLDERS" means the individuals listed on Exhibit A under the caption "MANAGEMENT STOCKHOLDERS," any Stockholder who acquires Common Stock from a Management Stockholder and who becomes a party to this Agreement, and any other Stockholder (including any Person who acquires Option Shares) who hereafter becomes a party to this Agreement and is denominated as a "Management Stockholder." "NET DEBT" shall mean (A) the sum of (a) all obligations of the Company (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred and unpaid purchase price of any property, service or business (other than trade accounts payable and accrued liabilities incurred in the ordinary course of business and constituting current liabilities in accordance with generally accepted accounting principles), (b) any liability of the Company secured by any lien on property owned or acquired by the Company, whether or not such liability shall have been assumed (but if such liability has not been assumed by the Company, only to the extent that the value of the asset(s) is subject to such lien), (c) all Contingent Obligations of the Company, (d) all letters of credit and all obligations of the Company relating thereto, and (e) all net obligations of the Company in respect of interest rate swap agreements, currency swap agreements and other similar agreements designed to hedge against fluctuations in interest rates or foreign exchange rates 9 (collectively, "HEDGES"), minus (B) the sum of (a) all cash and cash equivalents of the Company, (b) all net receivables of the Company in respect of Hedges and (c) the aggregate exercise or conversion prices that would be payable to the Company in connection with the exercise of any "in-the-money" options or "in- the-money" convertible securities or other securities to acquire Common Stock, regardless of whether such options or convertible or other securities are then actually exercised or converted. In determining Net Debt as of any date, the obligations described in clauses (A)(a)(i), (A)(a)(ii) and (A)(d) shall be the ending balance or, to the extent such obligations arise under revolving credit facilities, be the average of the ending balances of such obligations for the 12 months immediately preceding such date. "NOTICE" shall have the meaning specified in Section 2.4. "OPTION PLAN" shall have the meaning specified in the recitals to this Agreement. "OPTION SHARES" shall mean any shares of Common Stock issued or issuable pursuant to the Option Plan. "OPTION SHARE RESTRICTION PERIOD" shall mean any time prior to February 7 , 2004. "PERMITTED TRANSFEREE" means, with respect to a Stockholder who is a natural person, (a) the spouse, parents, parents-in-law, siblings (by blood or adoption) of such Stockholder or the lineal descendants (by blood or adoption) of such Stockholder or such Stockholder's spouse, parents or siblings, (b) a trust, the beneficiaries of which include only such Stockholder or spouse, parents, or siblings (by blood or adoption) of such Stockholder or the lineal descendants (by blood or adoption) 10 of such Stockholder, spouse, parents or siblings, or a charitable trust that is an Affiliate of such Stockholder, or (c) upon such Stockholder's death, executors, administrators, testamentary trustees, legatees or beneficiaries of such Stockholder. "PERSON" shall mean an individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "POTENTIAL PARTICIPANT" shall have the meaning specified in Section 2.4. "PRINCIPAL STOCKHOLDER" shall mean Jupiter and, where the context refers to the ownership by the Principal Stockholder of Common Stock, shall also mean its Affiliated Transferees who own Common Stock. "PROSPECTIVE SELLER" shall have the meaning specified in Section 2.4. "PROSPECTIVE TRANSFEREE" shall have the meaning specified in Section 6. "PUBLIC OFFERING" means a public offering of Common Stock pursuant to an effective registration statement under the Securities Act. "PUBLIC SALE" means a Transfer of Common Stock pursuant to a Public Offering or under Rule 144 (or any successor rule) under the Securities Act. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date hereof, in the form of Exhibit C. "REPURCHASE PRICE" shall mean, with respect to a share of Common Stock, (A) prior to the Initial Public Offering, an amount in cash equal to the quotient obtained by dividing (i) Enterprise Value (defined below) minus Net Debt by (ii) the number of Fully Diluted Shares and (B) after the Initial Public Offering, an amount in 11 cash equal to the Fair Market Value of such share. "ENTERPRISE VALUE" shall mean EBIT times 6.1. "RESTRICTED A STOCK," with respect to any Management Stockholder, means those shares of Common Stock representing 40% of the aggregate shares of Common Stock held by such Management Stockholder as of the date hereof and bearing the legend specified in Section 7.2. "RESTRICTED B STOCK," with respect to any Management Stockholder, means all Common Stock (including, without limitation, any Option Shares) held by such Management Stockholder from time to time, other than Restricted A Stock. "RESTRICTED SHARES" means all shares of Common Stock other than (i) shares that have been registered under a registration statement pursuant to the Securities Act, (ii) shares with respect to which a sale has been made pursuant to Rule 144 promulgated under the Securities Act (or any successor rule) or (iii) shares with respect to which the holder thereof shall have delivered to the Company an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that the Transfer of such shares may be effected without registration under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SEVERANCE AGREEMENT" shall have the meaning specified in the recitals to this Agreement. "STOCKHOLDERS" shall have the meaning specified in the introductory paragraph of this Agreement. 12 "SUBSIDIARY," with respect to any Person, means any other Person of which such Person owns or controls, directly or indirectly, more than 50% of the outstanding voting shares or other voting interests or equity interests. "SUBSTITUTE PURCHASE OFFER" shall have the meaning specified in Section 2.4. "TAG-ALONG COMMON STOCK" shall have the meaning specified in Section 2.4. "TAG-ALONG NOTICE" shall have the meaning specified in Section 2.4. "TAG-ALONG RIGHT" shall have the meaning specified in Section 2.4. "THRESHOLD AMOUNT" shall mean 825,000 shares of Common Stock, which is 20% of the shares of Common Stock held by the Principal Stockholder on the date hereof. "TRANSFER," with respect to any shares of Common Stock, means any transfer, assignment, sale, gift, pledge, hypothecation or other disposition of Common Stock or of all or part of the voting power (other than the granting of a revocable proxy) associated with the Common Stock whatsoever, or any other transfer of beneficial ownership of Common Stock, including, without limitation, any Involuntary Transfer; and "TRANSFEREE" shall have a correlative meaning. Section 2. RESTRICTIONS ON TRANSFER 2.1 COMMON STOCK SUBJECT TO THIS AGREEMENT. Unless otherwise provided herein, all shares of Common Stock of the Company (including, without limitation, any Option Shares) now owned or hereafter acquired by any of the Stockholders or any Transferee thereof (including any Person who acquires Common 13 Stock by means of an Involuntary Transfer, but not including any Person who acquires Common Stock pursuant to a Public Sale) shall be subject to the terms of this Agreement. 2.2 GENERAL RESTRICTION. 2.2.1 GENERAL. Each Stockholder agrees that it will not, directly or indirectly, make any Transfer of any Common Stock, except in compliance with the Securities Act. Each Management Stockholder agrees that he will not, directly or indirectly, make any Transfer of any Restricted B Stock except in compliance with this Agreement. Each Management Stockholder further agrees (i) that any direct or indirect Transfer of Restricted A Stock will be made only in compliance with Section 6 (Transferees Subject to Agreement), to the extent applicable, (ii) to be bound by the provisions of Section 2.5 (Drag- Along Right) with respect to its Restricted A Stock, and (iii) that he shall not Encumber his Restricted A Stock without the consent of the Board. The Principal Stockholder agrees (i) that any direct or indirect Transfer of Common Stock held by it will be made only in compliance with Section 6 (Transferees Subject to Agreement), to the extent applicable, and (ii) to be bound by the provisions of Section 2.4 (Tag-Along Right) with respect to its Common Stock. Any Transfer effected, or purported or attempted to be effected, not in accordance with the terms and conditions of this Agreement shall be void and of no effect. In connection with any voided Transfer, the Company may hold and refuse to transfer any Common Stock or certificate therefor tendered for transfer, in addition and without prejudice to any and all other rights and remedies which may be available. 14 2.2.2 INVOLUNTARY TRANSFER. Any Person who acquires Common Stock from a Management Stockholder by means of an Involuntary Transfer shall be deemed to have become a party to this Agreement as a "Management Stockholder" and shall be bound by the terms hereof; PROVIDED, that prior to the Company transferring such Common Stock on its books and records to such Person and prior to the exercise by such Person of any rights hereunder, such Person shall have delivered an appropriate document, in form and substance reasonably satisfactory to the Company, confirming that such Person takes such shares subject to the terms and conditions of this Agreement, and such Person thereupon shall be deemed to be a Permitted Transferee of such Management Stockholder. 2.3 TRANSFERS OF RESTRICTED B STOCK AND OPTION SHARES 2.3.1 Each Management Stockholder agrees that he will not, directly or indirectly, Transfer any shares of Restricted B Stock except, subject to compliance with Section 6 (Transferees Subject to Agreement), (i) Transfers of Restricted B Stock pursuant to the procedures, and subject to the limitations, set forth in Section 2.4 (Tag-Along Right), Section 2.5 (Drag- Along Right), Section 2.6 (Transfers Following Initial Public Offering), or (ii) Transfers of Restricted B Stock to the Company or the Principal Stockholder pursuant to the provisions of Section 3 (Call Options) or otherwise, or (iii) Transfers of Restricted B Stock to any Permitted Transferee of such Management Stockholder, or (iv) Transfers consisting of pledges of Restricted B Stock to the Company, or (v) Transfers of Restricted B Stock to any Person pursuant to an Involuntary Transfer; PROVIDED that, in the case of this clause (v), such Person shall have delivered an appropriate document, in form and 15 substance reasonably satisfactory to the Company, confirming that such Person takes such shares subject to the terms and conditions of this Agreement, and such Person thereupon shall be deemed to be a Permitted Transferee of such Management Stockholder. Each Management Stockholder further agrees that, notwithstanding the foregoing, he will not, directly or indirectly, Transfer any Option Shares during the Option Share Restriction Period other than pursuant to Section 2.4 (Tag-Along Right), Section 2.5 (Drag-Along Right) or Section 2.6 (Transfers Following Initial Public Offering). 2.4 TAG-ALONG RIGHT. Other than in connection with the exercise of the Drag-Along Right or a Call Option or pursuant to a Public Sale permitted hereunder, in the event that any Stockholder (as used in this Section, a "PROSPECTIVE SELLER") shall receive a bona fide offer to purchase shares of Common Stock (a "PURCHASE OFFER") from any Person (including, without limitation, any offer by a Management Stockholder, but not including (a) an offer by a Permitted Transferee of such Prospective Seller or (b) an offer by the Principal Stockholder), the Prospective Seller shall either decline such Purchase Offer or, if the Prospective Seller determines to accept such Purchase Offer, then, prior to accepting any Purchase Offer, arrange for the proposed purchaser to make, in lieu of the Purchase Offer, a substitute bona fide offer to purchase the same number of shares of Common Stock that were the subject of the Purchase Offer, and upon the same terms as the Purchase Offer, from the Stockholders owning Common Stock as a group in the relative proportions and otherwise as described in the third succeeding sentence (the "SUBSTITUTE PURCHASE OFFER"). Notwithstanding the foregoing, a Management Stockholder may sell his 16 Restricted A Stock at any time without complying with the provisions of this Section 2.4. In the event a Substitute Purchase Offer is made, the Prospective Seller shall give the other Stockholders written notice thereof (the "NOTICE") specifying (i) the number of shares of Common Stock that is the subject of such Substitute Purchase Offer, (ii) the terms (including the proposed date of consummation thereof, which shall be not less than 30 days following the date of the Notice) of such Substitute Purchase Offer, and (iii) the identity of the proposed purchaser. Upon receipt of the Notice, each Stockholder (a "POTENTIAL PARTICIPANT") shall have the right (the "TAG-ALONG RIGHT") to sell that number of shares of Common Stock equal to (A) the product of (a) the total number of shares of Common Stock proposed to be purchased and (b) a fraction, the numerator of which shall be the number of shares of Tag-Along Common Stock (as defined below) owned by such Potential Participant and the denominator of which shall be the number of shares of Tag-Along Common Stock owned by all Potential Participants (including the Prospective Seller) electing to participate in such sale, minus (B) the total number of shares of Restricted A Stock held by such Potential Participant as of the date hereof. For purposes of the foregoing, "TAG-ALONG COMMON STOCK" shall mean all shares of Common Stock, including shares issuable pursuant to Options which, at the time of the Notice, are capable of being exercised in accordance with the terms of the Option Plan and are "in-the- money." The Tag-Along Right may be exercised by a Potential Participant by delivery, not later than 15 days after receipt of the Notice, of a written notice (the "TAG-ALONG NOTICE") to the Prospective Seller, which shall state the number of shares of Common Stock that such Potential Participant wishes to include in such sale to the purchaser. Any Potential Participant who elects 17 not to participate in such sale may assign his rights with respect to such participation to any other Potential Participant in any manner as such assigning Potential Participant so elects, provided that the Tag-Along Notice is received by the Prospective Seller on a timely basis and provides sufficient information with respect to such assignment to enable the Prospective Seller to determine the aggregate number of shares of Common Stock that all Potential Participants wish to include in such sale. The Prospective Seller, together with any electing Potential Participants, shall participate in any purchase made by the purchaser specified in the Notice on the terms set forth therein (or on terms no less favorable) and as provided in the Tag-Along Notice during the 90-day period following the date of the Notice. Any purchases by such purchaser following such 90-day period shall require a new Notice. To the extent a Potential Participant does not participate in such sale and does not assign his rights with respect thereto as provided above, the Prospective Seller may sell that number of its shares of Common Stock (in addition to the shares of Common Stock otherwise permitted to be sold by it hereunder) equal to the number of shares with respect to which such Potential Participant had the opportunity to sell hereunder and did not so assign his rights with respect thereto. All Transfers made pursuant to this Section 2.4 shall be subject to the provisions of Section 6 (Transferees Subject to Agreement). The provisions of this Section 2.4 shall terminate after the Initial Public Offering at such time as the Principal Stockholder no longer owns Common Stock in excess of the Threshold Amount. 2.5 DRAG-ALONG RIGHT. If the Principal Stockholder proposes to make a bona fide sale of its shares of Common Stock to a third party un-Affiliated with the 18 Principal Stockholder (which may include another Stockholder) in an amount equal to at least 1% of the Fully Diluted Shares (which amount shall be calculated based on the transaction in question or series of transactions related thereto), the Principal Stockholder shall have the right (the "DRAG-ALONG RIGHT"), exercisable upon 15 days' prior written notice, to require the other Stockholders to sell a corresponding percentage (as the percentage being sold by the Principal Stockholder) of the number of shares of Common Stock held by such other Stockholder to such third party upon terms no less favorable than those that apply to the Principal Stockholder with respect to such third party sale. For purposes of calculating such corresponding percentage, there shall be included in such calculation (i) Option Shares that are exercisable in accordance with the Option Plan and are in-the-money, even if such sale is during the Option Share Restriction Period, and (ii) Call Shares. Any shares of Restricted A Stock held by a Management Stockholder shall be subject to the Drag-Along Right prior to the inclusion of any Restricted B Stock held by such Management Stockholder in such third party sale. Each Stockholder hereby agrees to cooperate with the Principal Stockholder and to take any and all action reasonably required in connection with the consummation of such third party sale. Without limiting the foregoing, at the closing of any sale under this Section 2.5, each Stockholder shall deliver certificates representing the shares of Common Stock to be sold, duly endorsed for transfer and accompanied by all requisite stock transfer taxes, and each Stockholder shall represent and warrant that it is the beneficial owner of such shares free and clear of any Encumbrances, with full authority and power to transfer such shares. All Transfers made pursuant to this Section 2.5 shall be subject to the provisions of Section 6 (Transferees Subject to 19 Agreement). The provisions of this Section 2.5 shall terminate after the Initial Public Offering at such time as the Principal Stockholder no longer owns Common Stock in excess of the Threshold Amount. 2.6 TRANSFERS FOLLOWING INITIAL PUBLIC OFFERING. 2.6.1 From and after the date of the Initial Public Offering, and provided that at the time of the Transfer by a Management Stockholder referred to below the Principal Stockholder owns Common Stock in excess of the Threshold Amount, a Management Stockholder and his Permitted Transferees may Transfer shares of Restricted B Stock held by them (other than, until the fifth anniversary of the date hereof, any Call Shares) (x) pursuant to the exercise of their rights under the Registration Rights Agreement, (y) pursuant to a sale under Rule 144 of the Securities Act which is subject to the volume limitations set forth in subparagraph (e)(1) of such Rule; PROVIDED, that a Management Stockholder and his Permitted Transferees as a group may only Transfer their Restricted B Stock under this clause (y) in an aggregate amount equal to (A) the product of (i) the total number of shares of Public Sale Stock (as defined below) held by such Management Stockholder as of the date hereof (or, if such Management Stockholder and his Permitted Transferees as a group have acquired additional Restricted B Stock after the date hereof in a manner that was not in violation of this Agreement, such greater number) multiplied by (ii) a fraction, the numerator of which shall be the aggregate number of shares of Common Stock that have been Transferred by the Principal Stockholder prior to the date of the proposed Transfer by such Management Stockholder, and the denominator of which shall be the total number of shares of Common Stock held by the Principal Stockholder as of the date hereof (or, 20 if the Principal Stockholder has acquired additional Common Stock after the date hereof in a manner that was not in violation of this Agreement, such greater number), minus (B) the total number of shares of Restricted A Stock held by such Management Stockholder as of the date hereof, or (z) pursuant to an exemption from the registration requirements of the Securities Act, but only (in the case of this clause (z)) if at the time of such Transfer by such Management Stockholder the Principal Stockholder is also Transferring Common Stock; PROVIDED that a Management Stockholder and his Permitted Transferees as a group may only Transfer their Restricted B Stock under this clause (z) in an aggregate amount equal to (A) the product of (i) the total number of shares of Public Sale Stock held by such Management Stockholder as of the date hereof (or, if such Management Stockholder and his Permitted Transferees as a group have acquired additional Restricted B Stock after the date hereof in a manner that was not in violation of this Agreement, such greater number) multiplied by (ii) a fraction, the numerator of which shall be the aggregate number of shares of Common Stock then being Transferred by the Principal Stockholder, and the denominator of which shall be the total number of shares of Common Stock held by the Principal Stockholder as of the date hereof (or, if the Principal Stockholder has acquired additional Common Stock after the date hereof in a manner that was not in violation of this Agreement, such greater number), minus (B) the total number of shares of Restricted A Stock held by such Management Stockholder as of the date hereof. For purposes of the foregoing, "PUBLIC SALE STOCK" shall mean all shares of Common Stock, including shares issuable 21 pursuant to Options which, at the time of such proposed Transfer, are capable of being exercised in accordance with the terms of the Option Plan and are "in-the- money," but until the fifth anniversary of the date hereof, shall not include any Call Shares. 2.6.3 From and after the date of the Initial Public Offering, and provided that at the time of the Transfer referred to below the Principal Stockholder does not own Common Stock in excess of the Threshold Amount, a Management Stockholder and his Permitted Transferees may Transfer shares of Common Stock held by them (other than, until the fifth anniversary of the date hereof, any Call Shares) pursuant to the exercise of their rights under the Registration Rights Agreement or pursuant to an applicable exemption from the registration requirements of the Securities Act. 2.6.3 Any shares of Common Stock Transferred pursuant to a Public Sale shall no longer be subject to the provisions of this Agreement. Section 3. CALL OPTIONS. 3.1 CALL OPTIONS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDER. 3.1.1 TERMINATION FOR CAUSE. Subject to Section 3.3 (Termination of Call Options), if the employment by the Company of any Management Stockholder shall be terminated by the Company or any of its subsidiaries for Cause, then the Company and the Principal Stockholder shall have the right, but not the obligation, to purchase (the "CALL FOR CAUSE") from the applicable Management Stockholder and his Permitted Transferees, and if the Company and/or the Principal Stockholder exercises such right, such Management Stockholder and his Permitted Transferees shall have the obligation to sell to the Company and/or the Principal 22 Stockholder, all (but not less than all) of the shares of Restricted B Stock held by such Management Stockholder and his Permitted Transferees (it being agreed that the number of shares subject to the Call for Cause shall be the maximum number of shares of Restricted B Stock that may be held by such Management Stockholder and his Permitted Transferees during the 180-day period during which such Call for Cause may be exercised), at a price per share equal to the lower of (i) $10 per share and (ii) the Repurchase Price (PROVIDED, that if the termination for Cause occurs on or after the fifth anniversary of the date hereof, the Call for Cause shall only apply to the Option Shares then held by the applicable Management Stockholder and his Permitted Transferees). For purposes of this Section 3.1.1, a termination for Cause shall be deemed to have occurred with respect to a Management Stockholder if such Management Stockholder resigns from his employment with the Company after committing any act which, with notice or lapse of time or both, would constitute an event of Cause under the definition of "Cause." 3.1.2 TERMINATION BY RESIGNATION. Subject to Section 3.3 (Termination of Call Options), if prior to the fifth anniversary of the date hereof any Management Stockholder shall cease to be employed by the Company or any of its subsidiaries as a result of his resignation (other than for Good Reason and other than a resignation which occurs after committing any act which, with notice or lapse of time or both, would constitute an event of Cause under the definition of such term), then the Company and the Principal Stockholder shall have the right, but not the obligation, to purchase (the "CALL FOR RESIGNATION") from the applicable Management Stockholder and his Permitted Transferees, and if the Company and/or the Principal Stockholder exer- 23 cises such right, such Management Stockholder and his Permitted Transferees shall have the obligation to sell to the Company and/or the Principal Stockholder, all (but not less than all) of that number of shares of Restricted B Stock held by such Management Stockholder and his Permitted Transferees (it being agreed that the number of shares referred to above shall be the maximum number of shares of Restricted B Stock that may be held by such Management Stockholder and his Permitted Transferees during the 180-day period during which such Call for Resignation may be exercised) multiplied by the percentage specified on Exhibit B opposite the relevant period in which such resignation occurs, at a price per share equal to the lower of (i) $10 per share and (ii) the Repurchase Price. 3.1.3 TERMINATION WITHOUT CAUSE. Subject to Section 3.3 (Termination of Call Options), if prior to the fifth anniversary of the date hereof any Management Stockholder shall cease to be employed by the Company or any of its subsidiaries for any reason whatsoever, except due to death, Disability, termination for Cause (including resignation deemed to be a termination for Cause under Section 3.1.1) or resignation (other than resignation for Good Reason), the Company and the Principal Shareholder shall have the right, but not the obligation, to purchase (the "CALL WITHOUT CAUSE") from the applicable Management Stockholder and his Permitted Transferees, and if the Company and/or the Principal Stockholder exercises such right, such Management Stockholder and his Permitted Transferees shall have the obligation to sell to the Company and/or the Principal Stockholder, all (but not less than all) of that number of shares of Restricted B Stock held by such Management Stockholder and his Permitted Transferees (it being agreed that the number of shares referred to above shall 24 be the maximum number of shares of Restricted B Stock that may be held by such Management Stockholder and his Permitted Transferees during the 180-day period during which such Call Without Cause may be exercised) multiplied by the percentage specified on Exhibit B opposite the relevant period in which such cessation occurs, at a price per share equal to the Repurchase Price. 3.1.4 MANAGEMENT STOCKHOLDER BREACH OF SEVERANCE AGREEMENT. Subject to Section 3.3 (Termination of Call Options), if any Management Stockholder materially breaches any of Sections 3 (Non-Competition), 4 (Confidential Information), 5 (Employees of the Company) or 6 (Consultants of the Company, Etc.) of his Severance Agreement and, if such breach is susceptible of being cured as reasonably determined by the Board in good faith, such breach is not cured within ten days after receiving written notice (stating with specificity the nature of the breach of such failure) from the Board, then the Company, among the other rights and remedies set forth in the Severance Agreement, and the Principal Stockholder shall have the right, but not the obligation, to purchase (the "CALL FOR BREACH") from the applicable Management Stockholder and his Permitted Transferees, and if the Company and/or the Principal Stockholder exercises such right, the Management Stockholder and his Permitted Transferees shall have the obligation to sell to the Company and/or the Principal Stockholder, all (but not less than all) of the shares of Restricted B Common Stock held by such Management Stockholder and his Permitted Transferees (it being agreed that the number of shares of Restricted B Stock subject to the Call for Breach shall be the maximum number of shares of Restricted B Stock held by such Management Stockholder and his Permitted Transferees during the 180-day period 25 during which such Call for Breach may be exercised) at a price per share equal to the lower of (i) $10 per share and (ii) the Repurchase Price. 3.1.5 PROCEDURE. The Company may exercise its rights pursuant to this Section 3.1 by providing written notice to the relevant Management Stockholder and the Principal Stockholder not later than 90 days after the occurrence of the event which triggers the Company's rights under this Section 3.1 (the "EVENT DATE"), provided, that the Company may exercise its rights pursuant to this Section 3.1 for less than all of the shares subject to such rights only with the prior written consent of the Principal Stockholder. Any portion of such Call Option not exercised within such 90-day period shall expire with respect to the Company and be void and of no further force and effect. Provided that the Company (with the consent of the Principal Stockholder) has not exercised its rights in full with respect to such relevant Call Option under this Section 3.1, the Principal Stockholder shall exercise the rights of the Company (with respect to that portion of the Call Option not exercised by the Company) under this Section 3.1 on its own behalf by providing written notice to the relevant Management Stockholder not later than 180 days after the Event Date. 3.2 CLOSING. The closing of any purchase by the Company or the Principal Stockholder under this Section 3 shall be held at the principal office of the Company on the 30th day after the date on which a notice of exercise of a Call Option is given hereunder or at such other time and place as the parties to the transaction may agree upon. At the closing of any purchase under this Section 3, the applicable Stockholder and his Permitted Transferees shall deliver certificates representing the shares of Restricted B Stock to be sold, duly endorsed for transfer and accompanied by 26 all requisite stock transfer taxes, and the Stockholder and his Permitted Transferees shall represent and warrant that each is the beneficial owner of such shares free and clear of any Encumbrances, with full authority and power to transfer such shares. At such closing, the parties shall execute and/or deliver such additional documents as are otherwise reasonably necessary or appropriate to consummate the transfers. 3.3 TERMINATION OF CALL OPTIONS. Upon the occurrence of a Change in Control, any theretofore unexercised Call Options shall terminate and be of no further force or effect. Any shares of Common Stock Transferred in accordance with the provisions of Section 2.4 (Tag-Along Right), Section 2.5 (Drag-Along Right) or Section 2.6 (Transfers Following Initial Public Offering) (other than to a Person who is a Management Stockholder on the date hereof or to any Permitted Transferee of such Management Stockholder) shall no longer be subject to the Call Options. Section 4. REGISTRATION RIGHTS. The Company hereby grants to the Principal Stockholder, the Management Stockholders and each of their Permitted Transferees, registration rights with respect to the Common Stock on the terms and subject to the conditions set forth in the Registration Rights Agreement. Section 5. CHANGES IN COMMON STOCK; OPTION PLAN. 5.1 CHANGES IN COMMON STOCK. If there is any change in the Common Stock by way of stock split, reverse stock split, stock dividend, reclassification, merger, consolidation, reorganization, recapitalization or any other means, then all appropriate adjustments to the provisions hereof shall be made so that the rights and obligations of the parties hereto under this Agreement shall continue, without enlargement or dilution, with respect to the Common Stock as so changed. 27 5.2 APPROVAL OF OPTION PLAN. Each Stockholder (as of August 7, 1996) hereby acknowledges receipt of a copy of the Option Plan, and hereby approves the adoption of the Option Plan by the Company in all respects. Section 6. TRANSFEREES SUBJECT TO AGREEMENT. Each Stockholder agrees that it will not make any Transfer (including, without limitation, to a Permitted Transferee but excluding a Transfer in a Public Sale) unless, prior to the consummation of any such Transfer, the Person (other than any then current Stockholder) to whom such Transfer will be made (a "PROSPECTIVE TRANSFEREE") executes and delivers to the Company an agreement, in form and substance reasonably satisfactory to the Company, whereby such Prospective Transferee confirms that it shall be deemed to be a Stockholder for the purposes of, and shall be subject to, this Agreement. Section 7. LEGENDS. 7.1 Each certificate evidencing shares of Common Stock shall bear a legend in substantially the following form: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, ALL AS SET FORTH IN A 28 STOCKHOLDERS AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER." 7.2 Each certificate evidencing shares of Restricted A Stock shall bear an additional legend in substantially the following form: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL CONSTITUTE "RESTRICTED A STOCK," AS DEFINED IN AND GOVERNED BY THE STOCKHOLDERS AGREEMENT." 7.3 Each certificate evidencing shares of Restricted B Stock shall bear an additional legend in substantially the following form: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL CONSTITUTE "RESTRICTED B STOCK," AS DEFINED IN AND GOVERNED BY THE STOCKHOLDERS AGREEMENT, AND MAY BE SUBJECT TO CERTAIN REPURCHASE RIGHTS AS PROVIDED IN SUCH AGREEMENT." 7.4 In the event that any shares of Common Stock shall cease to be Restricted Shares, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such shares without the first two sentences of the legend required by Section 7.1 In the event any shares of Common Stock shall cease to be subject to the restrictions on transfer and repurchase set forth in this Agreement, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such shares without the third sentence of the legend required by Section 7.1 or the legends required by Sections 7.2 and 7.3. 29 Section 8. MISCELLANEOUS. 8.1 AMENDMENT. This Agreement cannot be amended orally, but only by an agreement in writing signed by the Company, the Principal Stockholder and the holders of at least 50% of the shares of Common Stock held by all of the Management Stockholders and their Permitted Transferees as a group, except that the Company may amend Exhibit A of this Agreement to reflect changes made in accordance with this Agreement. 8.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE. 8.3 EXECUTION IN COUNTERPARTS. This Agreement may be signed in one or more counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.4 NOTICES. All communications provided for herein shall be in writing and, (i) if addressed to a Stockholder, shall be delivered or mailed or telecopied to such Stockholder at its address specified on Exhibit A (or an annex thereto, if such Stockholder shall have become a party hereto pursuant to Section 6), or to such other address as such Stockholder shall have notified the Company in writing, or (ii) if addressed to the Company, shall be delivered or mailed or telecopied to it at Core-Mark International, Inc., 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94060, Attention: Gary L. Walsh, 30 Telecopy: 415-589-4010, with a copy to the Principal Stockholder, c/o Jupiter Partners, L.P., 30 Rockefeller Plaza, Suite 4525, New York, New York 10112, Attention: John A. Sprague, Telecopy: (212) 332-2829, or to such other address as the Company or the Principal Stockholder, as the case may be, shall have notified all Stockholders in writing. Except as otherwise expressly provided herein, any communication shall be deemed to have been given when delivered (if delivered by hand or by reputable overnight courier service), in the case of facsimile transmission, when telecopied with confirmation of transmission, or if mailed, shall be deemed to have been given three days after having been so mailed. 8.5 ENTIRE AGREEMENT; HEADINGS; GENDER. This Agreement (including the Exhibits hereto) and the Agreements referred to herein embody the entire agreement and understanding among the parties and supersede all prior agreements and understandings relating to the subject matter hereof. The headings in and date of this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. The term "ITS" is used in this Agreement for convenience only and shall be deemed to include, where applicable, "HER OR HIS," and vice versa. Similarly, the pronoun "IT" when referring to a Stockholder shall be deemed to include, where applicable, "HER OR SHE" or "HIM OR HE," and vice versa. 8.6 COPY OF AGREEMENT WITH COMPANY. A counterpart of this Agreement shall be filed with the Company at its principal office. 8.7 SPECIFIC PERFORMANCE. The parties recognize that the obligations imposed on them in this Agreement are special, unique and of extraordinary character, and that in the event of breach by any party, damages will be an insufficient remedy; 31 consequently, it is agreed that the parties hereto may have specific performance (in addition to damages) as a remedy for the enforcement hereof, without proving damages. No party shall raise any argument as to the sufficiency of money damages. 8.8 ASSIGNMENT. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns; PROVIDED, HOWEVER, that this Agreement may not be assigned by the Company or any of the Management Stockholders without the prior written consent of the Company, the Principal Stockholder and the holders of at least 50% of the shares of Common Stock held by all of the Management Stockholders and their Permitted Transferees as a group, except that (i) the Company may assign its rights herein to any successor to all or substantially all of its assets (by merger or otherwise); (ii) subject to Section 6 (Transferees Subject to Agreement), any Management Stockholder may assign its rights under this Agreement to any Permitted Transferee of its shares of Common Stock; and (iii) each Stockholder's rights under the Registration Rights Agreement shall inure to the benefit of any holder of Registrable Securities (as defined in the Registration Rights Agreement). Any purported assignment made in violation of this Agreement shall be void and of no force and effect. 8.9 THIRD PARTY BENEFICIARY. Nothing in this Agreement, express or implied, is intended or shall confer upon anyone other than the parties hereto (and their 32 respective permitted successors and assigns) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8.10 CERTAIN TAX MATTERS. The Company covenants and agrees that it shall not claim a deduction for federal, state or local income tax purposes in connection with the issuance of, the reduction of the Repurchase Percentage (as set forth in Exhibit B) with respect to, or the disposition of, the shares of Restricted A Stock and Restricted B Stock. IN WITNESS WHEREOF, the parties hereto have hereunder signed their names or have caused this Agreement to be duly executed by their officers thereunder duly authorized as of the date first above written. CORE-MARK INTERNATIONAL, INC. By:/s/Gary L. Walsh ----------------------------- Authorized Officer STOCKHOLDERS: /s/Robert A. Allen ----------------------------- Robert A. Allen /s/Leo Granucci ----------------------------- Leo Granucci /s/Leo F. Korman ----------------------------- Leo F. Korman /s/Basil P. Prokop ----------------------------- Basil P. Prokop /s/Gary L. Walsh ----------------------------- Gary L. Walsh /s/J. Michael Walsh ----------------------------- J. Michael Walsh JUPITER PARTNERS, L.P. By: Ganymede, L.P., its General Partner By: Europa, L.P., its General Partner By:/s/Illegible ----------------------------- General Partner EXHIBIT A PARTIES -------- NUMBER OF COMMON SHARES I.STOCKHOLDERS: OWNED AS OF DATE HEREOF: Name and Address - ---------------- Jupiter Partners, L.P. 4,125,000 II. MANAGEMENT STOCKHOLDERS: Restricted Restricted A Stock B Stock --------- ----------- NAME Gary L. Walsh 137,500 206,251 Robert A. Allen 112,750 169,125 Leo F. Korman 85,250 127,875 J. Michael Walsh 85,250 127,875 Basil P. Prokop 66,000 98,999 Leo Granucci 63,250 94,875 ------- ------- 550,000 825,000 --------------------------- 1,375,000 EXHIBIT B REPURCHASE PERCENTAGES Anniversary from Date of Agreement Repurchase Percentage ----------------- --------------------- On or before 1st Anniversary 100% Between 1st and on or before 100% 2nd Anniversary Between 2nd and on or before 100% 3rd Anniversary Between 3rd and on or before 66 2/3% 4th Anniversary Between 4th and on or before 33 1/3% 5th Anniversary On or After 5th Anniversary 0% EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT ============================================================================== REGISTRATION RIGHTS AGREEMENT by and among CORE-MARK INTERNATIONAL, INC. and ALL OF THE HOLDERS OF ITS COMMON STOCK Dated as of August 7, 1996 ============================================================================== TABLE OF CONTENTS PAGE ---- 1. Demand Registrations ............................................... 1 2. Piggy-back Registration ............................................ 6 3. Registration Procedures ............................................ 8 4. Preparation; Reasonable Investigation .............................. 14 5. Rule 144 ........................................................... 15 6. Hold-Back .......................................................... 16 7. Indemnification .................................................... 16 8. Participation in Underwritten Registration ......................... 18 9. Registration Rights to Others ...................................... 19 10. Definitions ........................................................ 19 REGISTRATION RIGHTS AGREEMENT, dated as of August 7 1996, by and among CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"), and each of the other parties signatory hereto who own Common Stock of the Company and are parties to that certain Stockholders Agreement, dated as of the date hereof, among the Company and all of the holders of the Common Stock of the Company (the "STOCKHOLDERS AGREEMENT"). Capitalized terms used herein and not otherwise defined shall have the meanings given them in Section 10. The parties hereto agree as follows: 1. DEMAND REGISTRATIONS. (a) REQUEST. Jupiter shall have the right from time to time to make up six written requests that the Company, subject to the provisions of Sections 1(e) and (f), effect the registration under the 1933 Act of all or any part of its Registrable Securities. Registrations requested pursuant to this Section 1(a) are referred to herein as "DEMAND REGISTRATIONS." Each request for a Demand Registration shall specify the number of Registrable Securities requested to be registered. Within 10 days after receipt of any such request, the Company shall give written notice of the Demand Registration to all other holders of Registrable Securities (such holders, together with Jupiter, are referred to in this Section 1 as the ""SELLING HOLDERS") and shall, subject to Section 1(e), include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the giving of the Company's notice; PROVIDED, that the Company shall not be required to include in such registration any Registrable Securities held by a Management Stockholder or any of his Permitted 2 Transferees in excess of the Proportional Amount (as defined below). The term "PROPORTIONAL AMOUNT," as of any date, shall mean an aggregate number of shares of Common Stock equal to (A) the product of (i) the total number of shares of Registrable Securities held by such Management Stockholder and his Permitted Transferees as of the date hereof (or, if such Management Stockholder and his Permitted Transferees as a group have acquired additional Registrable Securities after the date hereof in a manner that was not in violation of the Stockholders Agreement, such greater number) multiplied by (ii) a fraction, the numerator of which shall be the aggregate number of shares of Registrable Securities requested to be included in such registration by Jupiter and the denominator of which shall be the total number of shares of Registrable Securities held by Jupiter as of the date hereof (or, if Jupiter has acquired additional Registrable Securities after the date hereof in a manner that was not in violation of the Stockholders Agreement, such greater number), minus (B) the total number of shares of Restricted A Stock transferred by such Management Stockholder prior to the date of such registration. For purposes of the foregoing definition, there shall be included in the number of shares of Registrable Securities all shares of Common Stock, including shares that, as of the date of determination, are capable of being exercised in accordance with the terms of the Option Plan and are "in-the-money," but, until the fifth anniversary of the date hereof, shall not include any Call Shares. (b) REGISTRATION STATEMENT FORM. Registrations under this Section 1 shall be on such appropriate registration form of the Commission as shall be reasonably selected by the Company. 3 (c) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this Section 1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities covered by such registration statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the Selling Holders set forth in such registration statement (unless the failure to so dispose of such Registrable Securities shall be caused solely by reason of a failure on the part of the Selling Holders); PROVIDED that such period need not exceed 180 days, (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not primarily attributable to the Selling Holders and has not thereafter again become effective, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than primarily by reason of a failure on the part of the Selling Holders. (d) SELECTION OF UNDERWRITERS. If the Company or Jupiter desires to engage an underwriter or underwriters with respect to an offering of the Registrable Securities so to be registered, such underwriter shall be selected by Jupiter and shall be reasonably acceptable to the Company. (e) PRIORITY IN DEMAND REGISTRATION. If the managing underwriter of any underwritten offering shall advise the Company (and the Company 4 shall so advise each Selling Holder of such advice) that, in its opinion, the securities requested to be included in such registration exceeds the number which can successfully be sold in such offering within a price range acceptable to Jupiter, then the Company will include in such registration, to the extent of the Registrable Securities which the Company is so advised can be sold in such offering, FIRST, all securities proposed to be registered by Jupiter and, SECOND, to the extent additional shares of Common Stock may be included is such offering, all other shares proposed to be registered, pro rata among the other Selling Holders of Registrable Securities participating in such registration (relative to the number of Registrable Securities originally requested to be registered by such Selling Holders) and the Company (subject, in the case of any Management Stockholder or his Permitted Transferees, to the Proportional Amount limitation); PROVIDED that if the number of Registrable Securities that such managing underwriter advises can be sold in such offering is less than 75% of all the Registrable Securities the Jupiter had requested be included, Jupiter may withdraw its written request made pursuant to Section 1(a) (Demand Registration) and such written request will not be considered a request for registration for the purposes of Section 1(a). (f) LIMITATIONS ON DEMAND REGISTRATIONS. Notwithstanding anything in this Section I to the contrary, (i) in no event will the Company be required to effect more than six registrations pursuant to this Section I upon the request of Jupiter and (ii) the Company shall not be required to effect more than one Demand Registration in any six-month period or within 90 days after a previous offering of the Common Stock registered under the 1933 Act. 5 (g) COMPANY DELAY. Notwithstanding herein to the contrary, if after Jupiter has given a written request under Section 1(a) (Demand Registration), and prior to the effective date of the registration statement filed in connection with such registration, the Board of Directors of the Company shall determine in its good faith judgement that the filing of such registration statement would be undesirable and would interfere with any material financing, investment, acquisition or merger transaction then under consideration or would reasonably in the judgement of the Board of Directors of the Company adversely affect the interests of the Company and its Stockholders, the Company may decide to delay the registration of such Registrable Securities, and if the Board of Directors of the Company makes such determination, the Company shall give written notice of such determination to each Selling Holder. Such delay shall be for the period the Company determines on the basis provided above in good faith is necessary or desirable, but in no event greater than six months. The Company shall notify Jupiter of the expiration of the period of delay. Following such delay, the Company shall promptly cause the Registrable Securities to be registered unless, within 15 days of receipt of notice from the Company, Jupiter withdraws its written request made pursuant to Section 1 (Demand Registration), in which case, such written request will not be considered a request for registration for the purposes of Section 1 (Demand Registration) or 2 (Piggy-back Registration). (h) EXPENSES. The Company will pay all Registration Expenses (excluding any underwriting discounts or commissions with respect to the 6 Registrable Securities) in connection with any registration requested pursuant to this Section 1. 2. PIGGY-BACK REGISTRATION. (a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company proposes to register any of its Common Stock under the 1933 Act by registration on any form other than Forms S-4 or S-8 (or any successor rule) for sale for its own account, it will each such time give prompt written notice to all holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 2 prior to the proposed registration. Upon the written request of any such holder (a "REQUESTING HOLDER") made as promptly as practicable and in any event within 15 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Requesting Holder), the Company will file a registration statement with respect to, and use all reasonable efforts to make effective at the earliest possible date, the registration under the 1933 Act, subject to Section 2(b), of all Registrable Securities which the Company has been so requested to register (PROVIDED that the Company shall not be required to include in such registration any Registrable Securities held by any Management Stockholder or his Permitted Transferees in excess of the Proportional Amount) by the Requesting Holders thereof (each, a "PIGGY-BACK REGISTRATION"); PROVIDED, HOWEVER, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice 7 of such determination to each Requesting Holder of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to cause such registration to be effected as a registration under Section 1 (Demand Registration), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 2 shall receive the Company of its obligation to effect any Demand Registration under Section 1. (b) PRIORITY IN PIGGY-BACK REGISTRATION. If the managing underwriter of any underwritten offering shall inform the Company that the Registrable Securities requested to be included in such registration exceeds the number which can successfully be sold in such offering within a price range acceptable to the Company, and the Company has so advised the Requesting Holders in writing, then the Company will include in such registration, to the extent of the Registrable Securities and other shares of Common Stock which the Company is so advised can be sold in such offering, FIRST, all securities proposed to be registered by the Company for its own account, SECOND, to the extent additional shares of Common Stock may be registered in such offering, all of the Registrable Securities requested to be registered by Jupiter, and THIRD, to the extent additional shares of Common Stock may be registered in such offering, all other shares of Registrable Securities proposed 8 to be registered, pro rata (subject, in the case of any Management Stockholder or his Permitted Transferees, to the Proportional Amount limitation). In connection with any registration as to which this Section 2(b) applies, the Requesting Holders shall have the right, upon written notice to the Company within 10 days of receipt of notice from the Company, to withdraw from such registration the Registrable Securities requested to be registered by such Requesting Holders. (c) EXPENSES. The Company will pay all Registration Expenses (excluding any underwriting discounts or commissions with respect to the Registrable Securities) in connection with any registration effected pursuant to this Section 2. 3. REGISTRATION PROCEDURES. If and whenever the Company is required to use its reasonable efforts to make effective the registration of any Registrable Securities under the 1933 Act as provided in Sections 1 (Demand Registration) and 2 (Piggy-back Registration), the Company will, as expeditiously as possible. (a) prepare and (within 90 days after the date a request for registration is given to the Company but in any event as soon thereafter as practicable) file with the Commission the requisite registration statement to effect such registration and thereafter use all reasonable efforts to cause such registration statement to become effective; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to 9 comply with the provisions of the 1933 Act and the rules and regulations of the Commission thereunder with respect to the disposition of all Registrable Securities covered by such registration statement, and furnish to each seller of Registrable Securities, prior to the filing thereof draft copies of any amendment or supplement to such registration statement or prospectus; (c) furnish to each seller of Registrable Securities covered by such registration statement, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the 1933 Act, and in each case, each amendment or supplement thereto, in conformity with the requirements of the 1933 Act, such documents, if any, incorporated by reference in such registration statement or prospectus, and such other documents, as such seller may reasonably request; (d) use all reasonable efforts (i) to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such states of the United States of America where an exemption is not available and as the sellers of Registrable Securities covered by such registration statement shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall 10 not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 3(d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction or to subject itself to taxation in such jurisdiction; (e) use all reasonable efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company or counsel to the seller or sellers of Registrable Securities to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) furnish at the effective date of such registration statement to each seller of Registrable Securities and each such seller's underwriters, if any, a signed counterpart of an opinion of counsel for the Company, addressed to such seller and underwriters, if any, dated the effective date of such registration statement and, if applicable, the date of the closing under the underwriting agreement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) as are customarily covered in opinions of issuer's counsel delivered to the underwriters in underwritten public offerings of securities and such other legal matters as the underwriters may reasonably request; (g) promptly notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registra- 11 tion statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and promptly prepare and, at the request of any such seller, furnish to it a reasonable number of copies of drafts and final forms of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) otherwise use all reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 promulgated thereunder, and promptly furnish to each such seller of Registrable Securities a copy of any amendment or supplement to such registration statement or prospectus; (i) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration; 12 (j) use all reasonable efforts to list all Registrable Securities covered by such registration statement on any national securities exchange on which Registrable Securities of the same class covered by such registration statement are then listed (or, if other shares of Registrable Securities are so qualified, qualify them for inclusion in the National Association of Securities Dealers Automated Quotations National Market System, as the case may be); (k) enter into such customary agreements (including an underwriting agreement in customary form, including customary provisions concerning indemnification of the underwriters by the Company) and take such other actions as the sellers of Registrable Securities and the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (l) obtain a "cold comfort" letter or letters from the Company's independent public accountants in customary form and covering matters of the type customarily covered by "cold comfort" letters as the underwriters may reasonably request; (m) notify each seller of Registrable Securities and the managing underwriter or agent, immediately, and confirm the notice in writing (i) when the registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement to the prospectus or any amendment to the prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request of the Commission to amend the registration statement or amend or supplement the prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the 13 effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Registrable Securities for sale in any jurisdiction, or of the institution or threatening of any proceedings for any such purposes; (n) use all reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible time; (o) cooperate with the sellers of Registrable Securities and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be sold, and enable such Registrable Securities to be in such denominations and registered in such names as such sellers or the managing underwriter or agent, if any, may reasonably request; (p) cause its subsidiaries and affiliates to take all action necessary or advisable to effect the registration of the Registrable Securities contemplated hereby, including preparing and filing any required financial information; (q) make its officers and employees available to participate in presentations to potential purchasers of Registrable Securities; and (r) use all reasonable efforts to take all other steps necessary or advisable to effect the registration of the Registrable Securities contemplated hereby. 14 The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any written notice from the Company of the happening of any event of the kind described in Section 3(g) (Company Delay), such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 4. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the 1933 Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration statement, the underwriters, if any, and their respective counsel and accountants, the timely opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public 15 accountants who have certified its financial statements as shall be reasonably necessary or advisable, in the opinion of such holders and such underwriters' respective counsel, to conduct appropriate due diligence as contemplated by the 1933 Act. 5. RULE 144. So long as the Common Stock shall be registered pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Company will file the reports required to be filed by it under the Exchange Act and will take such further action as Jupiter or the Management Stockholders, as the case may be, may reasonably request, all to the extent required from time to time to enable Jupiter and the Management Stockholders to sell Registrable Securities (to the extent permitted by the Stockholders Agreement) without registration under the 1933 Act under the exemptions provided by Rule 144, as such rule may be amended from time to time ("RULE 144"), or any similar rule or regulation hereafter adopted by the Commission. Upon the request of Jupiter or such Management Stockholder, as the case may be, a written statement as to whether it has complied with such requirements and, if it has not so complied, stating that it will promptly do so. 6. HOLD-BACK. Each of the Company and each Stockholder holding Registrable Securities, whether or not included in a registration statement hereunder, agrees not to effect any public sale or distribution of shares of Common Stock during the period specified by the managing underwriter or underwriters if the underwritten offer being made pursuant to such registration statement (which period shall not 16 exceed seven days prior to and 180 days following the effective date of such registration statement), except as part of such registration, if and to the extent reasonably requested by such managing underwriter or underwriters. 7. INDEMNIFICATION. (a) The Company agrees to indemnify, to the fullest extent permitted by law, each holder of Registrable Securities, its partners, officers and directors, agents and each person who controls such holder (within the meaning of the 1933 Act) against all losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein by such holder's failure to deliver a copy of the prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the 1933 Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company may reasonably 17 requests for use in connection with any such registration statement or prospectus and, to the extent premitted by law, shall indemnify the Company, its directors, officers and agents and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof of or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; PROVIDED, that the obligation to indemnify shall be individual to each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but 18 such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (and such local counsel as may be necessary) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any partner, officer, director or controlling person of such indemnified party and shall not survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party on the event the Company's indemnification is unavailable for any reason. 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. Notwithstanding the provisions of Sections 1 (Demand Registration) and 2 (Piggy-Back Registration), no person may participate in any registration hereunder which is underwritten unless such person (i) agrees to sell such person's securities on the basis provided in any underwriting arrangements approved by the person or persons entitled to hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; PROVIDED that no holder of Registrable Securities included in any underwriting registration shall be required to make any 19 representations or warranties to the Company or the underwriters other than representations and warranties regarding such holder and such holder's intended method of distribution. 9. REGISTRATION RIGHTS TO OTHERS. If the Company shall at any time after the date hereof provide to any holder of any securities of the Company rights with respect to the registration of such securities under the 1933 Act, such rights shall not be in conflict with the rights provided to the holders of Registrable Securities in this Agreement. 10. DEFINITIONS. As used in this Agreement, unless the context otherwise requires, the following terms have the following respective meanings: "BOARD" shall mean the Board of Directors of the Company. "CALL SHARES" shall have the meaning specified in the Stockholders Agreement. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the 1933 Act. "COMMON STOCK" shall mean the authorized common stock of the Company, par value $.01 per share. "IN-THE-MONEY" shall have the meaning specified in the Stockholders Agreement. "JUPITER" shall mean the Principal Stockholder, as defined in the Stockholders Agreement. "MANAGEMENT STOCKHOLDERS" shall have the meaning specified in the Stockholders Agreement. 20 "1933 ACT" shall mean the Securities Act of 1933, as amended. "PROPORTIONAL AMOUNT" shall have the meaning specified in Section 1(a). "PERMITTED TRANSFEREES" shall have the meaning specified in the Stockholders Agreement. "PERSON" shall mean any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "REGISTRABLE SECURITIES" shall mean any shares of Common Stock issued or issuable to any of Jupiter, the Management Stockholders or any of their transferees (but only if such transfer was made in compliance with the terms of the Stockholders Agreement and such transferee became a party to the Stockholders Agreement), but with respect to any particular share of Common Stock, only until such time as such share (i) has been effectively registered under the 1933 Act and disposed of in accordance with the registration statement covering it, (ii) has been sold to the public pursuant to Rule 144 (or any similar provision then in effect) under the 1933 Act, or (iii) has ceased to be outstanding; PROVIDED that any shares of Common Stock issued or issuable to a Management Stockholder whose employment with the Company and/or any of its subsidiaries has terminated shall only be deemed to be Registrable Securities hereunder if such employment was terminated Without Cause. 21 "REGISTRATION EXPENSES" means all expenses incident to the Company's performance of or compliance with Sections 1 (Demand Registration), 2 (Piggy-back Registration) or 3 (Registration Procedures), including, without limitation, all registration and filing fees, all fees of the New York Stock Exchange, Inc., other national securities exchanges or the National Association of Securities Dealers, Inc., all fees and expenses of complying with federal securities or blue sky laws, all word processing, duplicating and printing expenses (including expenses of printing prospectuses and of certificates for the Registrable Securities), messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (excluding any underwriting discounts or commissions with respect to the Registrable Securities), any fees and expenses associated with any road show, and the fees and expenses of one counsel to the Selling Holders or the Requesting Holders, as applicable (selected by Selling Holders or the Requesting Holders, as applicable, representing at least 50% of the Registrable Securities covered by such registration). "STOCKHOLDERS AGREEMENT" shall have the meaning specified in the introductory paragraph hereto and shall mean the Stockholders Agreement as in effect on the date hereof. "WITHOUT CAUSE" with respect to a Management Stockholder, shall mean the termination of such Management Stockholder's employment with the Company or any of its subsidiaries for any reason (including due to death, Disability 22 or for Good Reason (as such terms are defined in the Stockholders Agreement)), other than a termination for Cause (as defined in the Stockholders Agreement). IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CORE-MARK INTERNATIONAL, INC. By: __________________________________ Name: Title: JUPITER PARTNERS L.P. By: GANYMEDE L.P., its General Partner By: EUROPA L.P., its General Partner By:_______________________________ Name: Title: General Partner MANAGEMENT STOCKHOLDERS: ______________________________________ Robert A. Allen ______________________________________ Leo Granucci ______________________________________ Leo F. Korman ______________________________________ Basil P. Prokop ______________________________________ Gary L. Walsh ______________________________________ J. Michael Walsh EX-10.6-1 16 EXHIBIT 10.6-1 - -------------------------------------------------------------------------------- SEVERANCE AND NON-COMPETITION AGREEMENT by and between CORE-MARK INTERNATIONAL, INC. and GARY L. WALSH Dated as of August 7, 1996 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE 1. Severance............................................................... 2 2. Acknowledgments......................................................... 2 3. Non-Competition......................................................... 3 4. Confidential Information................................................ 5 5. Employees of the Company................................................ 5 6. Consultants of the Company, Etc......................................... 6 7. Rights and Remedies Upon Breach......................................... 6 8. Severability of Covenants............................................... 7 9. Blue Pencilling......................................................... 8 10. Enforceability in Jurisdictions......................................... 8 11. Amendment and Modification.............................................. 8 12. Notices................................................................. 8 13. Assignment.............................................................. 9 14. Governing Law........................................................... 10 15. Counterparts............................................................ 10 16. Entire Agreement........................................................ 10 SEVERANCE AND NON-COMPETITION AGREEMENT SEVERANCE AND NON-COMPETITION AGREEMENT, dated as of August 7, 1996, by and between Gary L. Walsh (the "MANAGEMENT STOCKHOLDER") and CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"). WHEREAS, concurrently with the execution of this Agreement, Jupiter Partners L.P., a Delaware limited partnership ("JUPITER"), is acquiring from the Company a majority of the common stock, par value $.01 per share, of the Company (the "COMMON STOCK") in a transaction in which the Management Stockholder is reducing his indirect interest in the Company in exchange for significant proceeds; WHEREAS, concurrently with the execution of this Agreement, the Company and all of the holders of its Common Stock, including the Management Stockholder, are entering into a Stockholders Agreement (the "STOCKHOLDERS AGREEMENT"); WHEREAS, in order to induce the Management Stockholder to continue to serve as a key employee of the Company, the Company is willing to provide severance compensation to the Management Stockholder to the extent provided herein; and WHEREAS, as a condition to Jupiter's obligation to acquire a majority interest in the Company pursuant to the Stockholders Agreement, thus resulting in significant proceeds to the Management Stockholder, the Management Stockholder has agreed to certain non-competition arrangements as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 2 1. SEVERANCE. If the Management Stockholder's employment by the Company and its subsidiaries is terminated (a) by the Company, other than for Cause (as defined in Section 3) or (b) due to the resignation of the Management Stockholder for Good Reason (as defined below), the Company may, in its sole discretion, continue to pay to the Management Stockholder, for a period of up to one year following such termination, the Management Stockholder's base salary as in effect at the effective date of such termination, less such deductions or amounts to be withheld as required by applicable law and regulations (the "SEVERANCE"). As used in this Agreement, "GOOD REASON" means (i) a reduction of such Management Stockholder's base salary payable during any fiscal year by the Company and its Subsidiaries, (ii) the failure of the Company to pay such Management Stockholder his base salary or any of his benefits to which he is entitled to be paid during any fiscal year, if such failure is not cured within ten days thereof, or (iii) a relocation of such Management Stockholder's principal base of operation to any location other than a location within 50 miles of San Francisco during the term of such Management Stockholder's employment with the Company. 2. ACKNOWLEDGMENTS. The Management Stockholder hereby acknowledges that the agreements and covenants contained in Section 3 (Non-Competition), Section 4 (Confidential Information), Section 5 (Employees of the Company), Section 6 (Consultants of the Company), and Section 7 (Rights and Remedies Upon Breach) of this Agreement are essential to protect the business and goodwill of the Company. As used in Sections 2, 3, 4, 5 and 6 of this Agreement, the term "COMPANY" shall be deemed to include the Company and its subsidiaries. 3 3. NON-COMPETITION. During (A) the period the Management Stockholder is an employee of the Company (the "EMPLOYMENT PERIOD") and (B) provided that the Company has become bound to provide, and for so long as the Company shall pay, the Severance to such Management Stockholder, for a period of one year thereafter, if the Management Stockholder's employment with the Company is terminated by the Company for Cause (as defined below) or terminates as a result of his resignation other than a resignation for Good Reason, the Management Stockholder agrees that he shall not in the United States of America or Canada, or any other geographic region in which the Company is doing business at the time of such termination, directly or indirectly, (i) engage in any activities that compete, directly or indirectly, with the Company for the Management Stockholder's own account; (ii) enter the employ of, or render any services to, any person engaged, directly or indirectly, in such activities in any capacity that involves engaging, directly or indirectly, in activities that compete, directly or indirectly, with the Company; or (iii) acquire an active interest in any person engaged in such activities, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, employee, trustee, consultant or in any other relationship or capacity; PROVIDED, HOWEVER, that the Management Stockholder may own, directly or indirectly, solely as an investment, securities of any person which are traded on any national securities exchange or quoted on the NASDAQ National Market System or NASDAQ National List if the Management Stockholder is not a controlling person of, or a member of a group which controls, such person, and does not, directly or indirectly, own more than 1% of any class of securities of such person. 4 For purposes of this Agreement, "CAUSE" shall mean (a) a reasonable, good faith determination by the Board of Directors of the Company (the "BOARD") that the Management Stockholder has, in any material respect, willfully failed to follow any of the Company's written policies or any written directives of the Board (other than by reason of a resignation for Good Reason) and, if such failure is susceptible of being cured as reasonably determined by the Board in good faith, the failure of the Management Stockholder to cure such failure within 10 days of receiving written notice (stating with specificity the nature of such failure) from the Board; or (b) any act of gross negligence, willful misconduct, fraud or personal dishonesty by the Management Stockholder involving the assets of the Company or any of its affiliates resulting in economic or reputational harm to the Company, or (c) the conviction of, or a plea of guilty or NOLO CONTENDERE by the Management Stockholder to, a charge of any crime involving moral turpitude or a felony; or (d) the breach by the Management Stockholder in any material respect of any contract or other agreement between the Company or any of its affiliates and such Management Stockholder and, if such breach is susceptible of being cured as reasonably determined by the Board in good faith, the failure of the Management Stockholder to cure such breach within 10 days after receiving written notice (stating with specificity the nature of such failure) from the Board. A termination for Cause shall be deemed to have occurred if the Management Stockholder resigns from his employment with the Company after committing any act which, with notice or lapse of time or both, would constitute an event of Cause under the foregoing definition. 5 4. CONFIDENTIAL INFORMATION. During and following the Employment Period, the Management Stockholder agrees that (except as required by law or in any action or proceeding) he shall keep secret and retain in strictest confidence, and shall not disclose to others, all confidential information relating to the Company or learned by the Management Stockholder, directly or indirectly, from the Company or as a result of his duties with respect to the Company, and shall not disclose them to anyone, except with the Company's prior written consent except for information (i) which is or becomes generally available to the public other than as a result of a disclosure by any person in violation of any confidentiality agreement, (ii) available to the Management Stockholder on a non-confidential basis from a source outside of the Company, which source to the knowledge of the Management Stockholder is not and was not prohibited from disclosing such information to the Management Stockholder by a contractual, legal or fiduciary obligation, (iii) rightfully known to the Management Stockholder outside of the scope of his employment by the Company without any limitation on use or disclosure prior to receipt thereof from the Company or (iv) generally made available to third parties without restrictions on disclosure. 5. EMPLOYEES OF THE COMPANY. During the Employment Period and for one year thereafter, the Management Stockholder shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any director, officer or employee of the Company, or hire any such person who has left the employment of the Company within one year of the expiration of the Employment Period. 6 6. CONSULTANTS OF THE COMPANY, ETC. During the Employment Period and for one year thereafter, the Management Stockholder shall not, directly or indirectly, hire, solicit or encourage to cease to work with the Company any consultant then under contract with the Company or any then supplier or customer of the Company, except that such a consultant may be hired and supplier or customer dealt with in connection with a business which does not engage in any activities which are competitive with the Company. 7. RIGHTS AND REMEDIES UPON BREACH. If the Management Stockholder breaches, in any material respect, any of the provisions of Section 3 (Non- Competition), Section 4 (Confidential Information), Section 5 (Employees of the Company) or Section 6 (Consultants of the Company Etc.) of this Agreement (collectively, the "RESTRICTIVE COVENANTS") and, if such failure is susceptible of being cured as reasonably determined by the Board in good faith, the Management Stockholder fails to cure such breach within 10 days of receiving written notice (stating with specificity the nature of such breach) from the Company, then the Company shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity: (a) SPECIFIC PERFORMANCE. The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, it 7 being acknowledged and agreed that any such breach will cause irreparable injury to the Company and that money damages will not provide adequate remedy to the Company; (b) BENEFITS. The right and remedy to require the Management Stockholder to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively, "BENEFITS") derived or received by the Management Stockholder during the period of his breach of any of the Restrictive Covenants, as the result of any transactions constituting a breach of any of the Restrictive Covenants, and the Management Stockholder shall account for and pay over such Benefits to the Company; (c) CANCELLATION OF SEVERANCE. The right to terminate all or part of the Management Stockholder's rights to Severance under Section 1; (d) CANCELLATION OF OPTIONS. The right to terminate the Management Stockholder's rights (if any) under the Company's Stock Option Plan with respect to any options, whether or not then vested; and (e) CALL OPTION. The right to purchase Common Stock held by the Management Stockholder or his permitted transferees thereof as provided in Section 3.1.4 of the Stockholders Agreement. 8. SEVERABILITY OF COVENANTS. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or enforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. 8 9. BLUE PENCILLING. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable and shall be enforced. 10. ENFORCEABILITY IN JURISDICTIONS. The Company and the Management Stockholder intend to and hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and the Management Stockholder that such determination not bar or in any way affect the Company's right to the relief provided above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. 11. AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by a written agreement signed by the parties hereto. 12. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by courier or registered or certified mail (postage prepaid, return receipt requested) or by 9 facsimile to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to the Management Stockholder, to him at his address set forth on the stock records of the Company: with a copy to: Ronald F. Daitz, Esq. Weil, Gotshal & Manges LLP 757 Fifth Avenue New York, New York 10153 Telecopy: (212) 310-8007 (b) If to the Company, to it at: Core-Mark International, Inc. 395 Oyster Point Boulevard Suite 415 South San Francisco, CA 94080 Telecopy: (415) 589-4010 Attention: Gary L. Walsh with copies to: Jupiter Partners L.P. 30 Rockefeller Plaza Suite 4525 New York, New York 10019 Attention: John A. Sprague Telecopy: (212) 332-2828 and Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Richard S. Borisoff Telecopy: (212) 757-3990 13. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 10 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. 15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. ENTIRE AGREEMENT. This Agreement, including the documents referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings with respect thereto, other than those expressly set forth or referred to herein. IN WITNESS WHEREOF, the Company and the Management Stockholder have executed this Agreement as of the date first above written. CORE-MARK INTERNATIONAL, INC. By: /s/ Gary L. Walsh ----------------------------- Name: Title: /s/ Gary L. Walsh -------------------------------- Gary L. Walsh EX-10.6-2 17 EXHIBIT 10.6-2 EXHIBIT 10.6.2 1. Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Robert A. Allen 2. Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Leo Granucci 3. Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Leo F. Korman 4. Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and Basil P. Prokop 5. Severance and Noncompetition Agreement, dated August 7, 1996, between the Company and J. Michael Walsh EX-10.7 18 EXHIBIT 10.7 [LETTERHEAD] JUPITER PARTNERS LP August 7, 1996 Mr. Gary L. Walsh Chairman and Chief Executive Officer Core-Mark International, Inc. 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Dear Gary: In connection with the transaction contemplated between Core-Mark International, Inc. ("Core-Mark") and Jupiter Partners L.P. ("Jupiter"), Core-Mark, Jupiter and management stockholders have agreed to certain call rights with respect to your shares as provided in the Stockholders Agreement dated as of August 7, 1996 (the "Stockholders Agreement"). Notwithstanding the provisions described in the Stockholders Agreement with respect to call rights Jupiter and you agree that, in the event of your termination by Core-Mark without cause or your resignation without cause or for good reason after December 31, 1997, Jupiter will not exercise, and Jupiter will cause Core-Mark not to exercise, the call rights with respect to your shares. Very truly yours, /s/ Terry J. Blumer Terry J. Blumer Accepted and agreed as of this 7th day of August, 1996 --- /s/ Gary L. Walsh - --------------------------------- Gary L. Walsh JFK/cp EX-10.8 19 EXHIBIT 10.8 CORE-MARK INTERNATIONAL, INC. $75,000,000 11-3/8% Senior Subordinated Notes due 2003 PURCHASE AGREEMENT September 24, 1996 CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, NY 10072 Ladies and Gentlemen: Core-Mark International, Inc., a Delaware corporation (the "Company"), proposes to issue and sell $75,000,000 principal amount of its 11-3/8% Senior Subordinated Notes due 2003 (the "Securities"). The Securities are to be issued pursuant to an Indenture substantially in the form of Exhibit A hereto to be dated as of the Closing Date (as defined in Section 3 hereof) (the "Indenture"), between the Company and Bankers Trust Company, as trustee (the "Trustee"). The Company hereby confirms its agreement with Chase Securities Inc. ("CSI") and Donaldson, Lufkin & Jenrette Securities Corporation (together with CSI, the "Initial Purchasers") with respect to the sale by the Company of the Securities. The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on an exemption therefrom. The Company has prepared a preliminary offering memorandum dated September 5, 1996 (such preliminary offering memorandum being hereinafter referred to as the "preliminary offering memorandum"), and an offering memorandum dated September 24, 1996 (such offering memorandum, in the form first furnished to the Initial Purchasers for use in connection with the offering of the Securities, being hereinafter referred to as the "Offering Memorandum"), setting forth information regarding the Company and the 2 Securities. The Company hereby confirms that it has authorized the use of the preliminary offering memorandum and the Offering Memorandum in connection with the offering and sale of the Securities. Holders (including subsequent transferees) of the Securities will have the registration rights set forth in the Exchange and Registration Rights Agreement (the "Registration Rights Agreement") to be dated as of the Closing Date, in substantially the form of Exhibit B hereto, for so long as any such Securities constitute "Transfer Restricted Securities" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of a series of senior subordinated notes (the "Exchange Securities") identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) to be offered in exchange for the Securities (the "Exchange Offer") and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used herein without definition have the respective meanings specified therefor in the Offering Memorandum. 1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company represents and warrants to and agrees with the Initial Purchasers as of the date hereof and as of the Closing Date that: (a) Each of the preliminary offering memorandum and the Offering Memorandum, as of its respective date, contains all the information that, if requested by a prospective purchaser, would be required to be provided pursuant to Rule 144A(d)(4) under the Securities Act. Each of the preliminary offering memorandum and the Offering Memorandum, as of its respective date, did not, and at the Closing Date, the Offering Memorandum and any amendment or supplement thereto will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not 3 misleading. The preceding sentence does not apply to information contained in or omitted from the preliminary offering memorandum or the Offering Memorandum (or any supplement or amendment thereto) in reliance upon and in conformity with written information relating to either Initial Purchaser furnished to the Company by or on behalf of either Initial Purchaser specifically for use therein (the "Initial Purchasers' Information"). The parties acknowledge and agree that the Initial Purchasers' Information consists solely of the last paragraph of text on the cover page of the Offering Memorandum and the third, fourth and sixth paragraphs under the caption "Plan of Distribution" in the Offering Memorandum. The parties hereto acknowledge and agree that certain of the financial data set forth in Note 10 to the Consolidated Financial Statements in the preliminary offering memorandum are incorrect and will be corrected in the Offering Memorandum. (b) Each of the Company and the Subsidiaries (as defined below) has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its respective properties and to conduct the businesses in which it is engaged as described in the Offering Memorandum, except where the failure to so qualify or have such power or authority would not have, singly or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company and the Subsidiaries considered as a whole (a "Material Adverse Effect"). The term "Subsidiary" means each person of which a majority of the voting equity securities or other interests is owned, directly or indirectly, by the Company as of the Closing Date, such persons referred to collectively as the "Subsidiaries". (c) The Company has an authorized capitalization as set forth in the Offering Memorandum under the heading "Capitalization", and all the issued shares of capital stock of the Company have been duly and validly 4 authorized and issued and are fully paid and non-assessable. The capital stock of the Company conforms to the description thereof contained in the Offering Memorandum. The outstanding shares of capital stock of each Subsidiary are validly authorized and issued and fully paid and nonassessable and are owned, directly or indirectly, by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party (except as disclosed in the Offering Memorandum). (d) This Agreement has been duly authorized and validly executed and delivered by the Company and is the valid and legally binding agreement of the Company. At the Closing Date the Indenture will conform in all respects to the requirements of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; and the Indenture and the Registration Rights Agreement have been duly authorized by the Company and, when duly executed and delivered in accordance with their terms by each party thereto, will constitute valid and legally binding agreements of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) On the Closing Date, the Securities will have been duly authorized by the Company, and the Securities, the Indenture and the Registration Rights Agreement will have been duly executed by the Company and will conform in all material respects to the descriptions thereof contained in the Offering Memorandum. When the Securities are issued, authenticated and delivered in accordance with the Indenture and paid for in accordance with the terms of this Agreement, the Securities will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights 5 and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (f) The execution, delivery and performance of the Indenture, the Securities, the Registration Rights Agreement and this Agreement by the Company, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of the terms hereof or thereof, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of their respective properties or assets is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any Subsidiary or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets, except for such conflicts, breaches, violations, defaults, liens, charges or encumbrances that would not, singly or in the aggregate, have a Material Adverse Effect; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance of the Indenture, the Securities, the Registration Rights Agreement or this Agreement by the Company or any Subsidiary or the consummation of the transactions contemplated hereby and thereby which shall not have been obtained or made prior to the Closing Date (other than such consents, approvals, authorizations or orders of, or filings or registrations with, the Commission or any state securities regulatory authorities as may be required to be obtained or made pursuant to the Registration Rights Agreement). (g) KPMG Peat Marwick LLP ("Peat Marwick") are independent public accountants with respect to the 6 Company as required by the Securities Act and the rules and regulations thereunder for financial statements included in a definitive prospectus forming part of a registration statement on Form S-1 under the Securities Act. The historical financial statements (including the related notes, if any) included in the preliminary offering memorandum and the Offering Memorandum have been prepared, and fairly present in all material respects, the financial position of the Company and the Subsidiaries on a consolidated basis at the respective dates indicated and the results of their operations and cash flows for the respective periods indicated, in accordance with generally accepted accounting principles consistently applied throughout such periods; and the financial information and financial data set forth in the Offering Memorandum under the captions "Summary -- Summary Consolidated Financial and Other Data", "Capitalization", "Selected Historical and Pro Forma Consolidated Financial and Other Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of the Company, and fairly present in all material respects the data purported to be shown. The pro forma financial information contained in the preliminary offering memorandum and the Offering Memorandum give effect to assumptions made on a reasonable basis and present fairly in all material respects the historical and proposed transactions contemplated by the preliminary offering memorandum, the Offering Memorandum and this Agreement. The other historical financial and statistical information and data included in the preliminary offering memorandum and the Offering Memorandum are, in all material respects, accurately presented. The parties hereto acknowledge and agree that certain of the financial data set forth in Note 10 to the Consolidated Financial Statements in the preliminary offering memorandum are incorrect and will be corrected in the Offering Memorandum. (h) There are no pending actions or suits or judicial, arbitral, rule-making or other administrative or other proceedings to which the Company or any Subsidiary is a party or of which any property or assets of the Company or any Subsidiary is the subject which, singly or in the aggregate, are reasonably likely to have a Material Adverse Effect; and to the best of the Company's knowledge, except as described in 7 the Offering Memorandum, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (i) No action has been taken and no statute, rule or regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by a federal or state court of competent jurisdiction has been issued with respect to the Company or any Subsidiary which would prevent or suspend the issuance or sale of the Securities, or the use of the preliminary offering memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best of the Company's knowledge, threatened against or affecting the Company or any Subsidiary before any court or arbitrator or any governmental body, agency or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or in any manner draw into question the validity of the Indenture, the Securities, the Registration Rights Agreement or this Agreement or any action taken or to be taken pursuant hereto or thereto; and every request of any securities authority or agency of any jurisdiction for additional information (to be included in the preliminary offering memorandum or the Offering Memorandum or otherwise) has been complied with. (j) Neither the Company nor any Subsidiary is (i) in violation of its charter or by-laws, (ii) in default in any material respect, nor has any event occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any Subsidiary is a party or by which it is bound or to which any of their respective property or assets is subject or (iii) in violation in any respect of any law, ordinance, governmental rule, regulation or court decree to which the Company or any Subsidiary or their respective property or assets may be subject, except any violation 8 or default under clauses (ii) or (iii) that would not have a Material Adverse Effect. (k) The Company and the Subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate state, federal or foreign regulatory agencies or bodies which are necessary for the ownership of their respective properties or the conduct of their businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not have, singly or in the aggregate, a Material Adverse Effect, and neither the Company nor any Subsidiary has received notification of any revocation or modification of any such license, authorization or permit and none of them has any reason to believe that any such license, certificate, authorization or permit will not be renewed, except where such revocation, modification or non-renewal would not have a Material Adverse Effect. (l) All material Tax Returns (as defined below) required to be filed by the Company and the Subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith (other than federal and state income tax returns for the year ended December 31, 1995, for which extensions have been timely filed), and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due or claimed to be due from such entities have been paid, other than those being contested in good faith and for which adequate reserves under generally accepted accounting principles have been provided or those currently payable without penalty or interest. To the best of the Company's knowledge, all Tax Returns filed by the Company and the Subsidiaries prior to the date hereof were complete and accurate, except such as could not reasonably be expected to result, singly or in the aggregate, in a Material Adverse Effect. No material claim for assessment or collection of Taxes (as defined below) is presently being asserted or, to the knowledge of the tax director of the Company, threatened against the Company or any Subsidiary except such as could not reasonably be expected to result, singly or in the aggregate, in a Material Adverse Effect. Except for state tax liens in an aggregate amount not exceeding $100,000 no Liens are presently imposed upon or assert- 9 ed against any of the assets as a result of or in connection with any failure, or alleged failure, to pay any Tax. Except as set forth in Schedule II hereto, as of the Closing Date, neither the Company nor any Subsidiary will have any agreement, whether or not written, providing for the payment of material income Tax liabilities or entitlements to refunds with any other party. To the best of the Company's knowledge, the Company and the Subsidiaries have withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party with respect to the business of the Company. The unpaid Taxes of the Company and the Subsidiaries do not materially exceed the reserve for Tax liability set forth on the most recent consolidated balance sheet of the Company as of and through the date thereof. For purposes of this Agreement, the terms "Tax" and "Taxes" shall mean all federal, state, local or foreign income, payroll, employee withholding, unemployment insurance, social security, sales use, service use, leasing use, excise, franchise, gross receipts, value added, alternative or add-on minimum, estimated, occupation, real and personal property, stamp, transfer, workers' compensation, severance, windfall profits, environmental (including taxes under Section 59A of the Internal Revenue Code of 1986, as amended (the "Code")), or other tax of the same or of a similar nature, including any interest, penalty, or addition thereto. The term "Tax Return" means any return, declaration, report, form, claim for refund, or information return or statement relat- ing to Taxes or income subject to taxation, or any amendment thereto, and including any schedule or attachment thereto. (m) Neither the Company nor any Subsidiaries is (i) an "investment company" or a company "controlled" by an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder or (ii) a "holding company" or a "subsidiary company" of a holding company, or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. (n) The Company and the Subsidiaries maintain a system of internal accounting controls which the 10 Company believes is sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (o) The Company and the Subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks reasonably adequate to protect their respective businesses. (p) There are no securities of the Company or any Subsidiary registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation system. The Company has been advised that the Securities have been designated as PORTAL securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD"). (q) Neither the Company nor any Subsidiary owns any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board. (r) Other than this Agreement or as disclosed in the Offering Memorandum under "Certain Transactions", neither the Company nor any Subsidiary is a party to 11 any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or any Subsidiary or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering of the Securities. (s) The Company and the Subsidiaries own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their businesses, except for those the failure to own which could not reasonably be expected to have a Material Adverse Effect, and the Company has no reason to believe that the conduct of their businesses will conflict with any such rights of others which might reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of any claim of conflict with any such rights of others. (t) The Company and the Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property material to the business of the Company and the Subsidiaries, in each case free and clear of all liens, encumbrances, claims, defects and imperfections of title that may have a Material Adverse Effect, other than as permitted by the Senior Credit Facility. (u) No labor disturbance or dispute by the employees of the Company or any Subsidiary exists or, to the best of the Company's knowledge, is threatened, in either case which might reasonably be expected to have a Material Adverse Effect. (v) No non-exempt "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Code) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 12 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any "employee benefit plan" (as defined in ERISA Section 3(3)) other than a "multiemployer plan" (as defined in ERISA Section 3(37)) (an "Employee Benefit Plan") which might reasonably be expected to have a Material Adverse Effect; each Employee Benefit Plan is in compliance in all material respects with applicable laws, including ERISA and the Code; the Company and the Subsidiaries have not incurred and do not expect to incur any material liability under Title IV of ERISA with respect to the termina- tion of, or withdrawal from, any "pension plan" (as defined in ERISA Section 3(2)); and each "pension plan" for which the Company or any Subsidiary would have any liability and that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which might reasonably be expected to cause the loss of such qualification. (w) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any Subsidiary (or, to the best of the Company's knowledge, any other entity for whose acts or omissions the Company or any Subsidiary is or may reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any Subsidiary, or upon any other property, (i) in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or (ii) which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except in the case of both clauses (i) and (ii) for any violation or liability which could not reasonably be expected to have, singly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; there has been no disposal, discharge, 13 emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any Subsidiary has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (x) None of the Company, any affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Company or any person acting on its or their behalf has engaged or will engage in any directed selling efforts (as that term is defined in Regulation S under the Securities Act), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (y) Neither the Company nor any affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Company has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Securities Act. (z) None of the Company or any affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Company or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (aa) Assuming the accuracy of the Initial Purchasers representations in Section 2 hereof and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities and the offer, resale and delivery of the Securities in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act. (bb) The Company and the Subsidiaries on a consolidated basis immediately after the Closing Date (after giving effect to the issuance of the Securities and to the other transactions related thereto as described in the Offering Memorandum) will be Solvent. As used in this paragraph (bb), the term "SOLVENT" 14 means, with respect to an entity on a particular date, that on such date (A) the present fair salable value of the assets of such entity is not less than the total amount required to pay the probable liabilities of such entity on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (B) such entity is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (C) assuming the sale of the Securities as contemplated by this Agreement and as described in the Offering Memorandum, such entity is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (D) such entity is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such person is engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (cc) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (dd) The Company has not taken and will not take, directly or indirectly, any action prohibited by Rule 10b-6 under the Exchange Act in connection with the offering of the Securities. (ee) Except for the letter agreement dated as of January 1, 1990, between the Company and Corporate Decisions, Inc. and as described in the Offering Memorandum, there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings to which the Company is a party or to which the Company has knowledge with respect to the sale or issuance of, any shares of capital stock of or other equity interest in the Company. 15 (ff) Since the date as of which information is given in the Offering Memorandum, (A) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Company or any Subsidiary, other than those in the ordinary course of business, which are material with respect to the Company and the Subsidiaries taken as a whole, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. 2. Purchase by the Initial Purchasers. On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers severally and not jointly, and the Initial Purchasers, severally and not jointly, agree to purchase from the Company such respective principal amounts of Securities as are set forth opposite the name of such Initial Purchaser in Schedule I hereto at a purchase price equal to 97% of the principal amount thereof, plus accrued interest, if any, from September 27, 1996, to the Closing Date. If payment of the purchase price on the Closing Date is made in immediately available funds, the Initial Purchasers shall be entitled to deduct from such purchase price the costs, if any (calculated at the Federal Funds Effective Rate as in effect at 12:00 p.m. New York City Time, on the business day prior to the Closing Date), of obtaining such immediately available funds for delivery on the Closing Date. The Company shall not be obligated to deliver any of the Securities except upon payment for all the Securities to be purchased as provided herein. The Initial Purchasers have advised the Company that it is their intention, as promptly as they deem appropriate after the Company shall have furnished the Initial Purchasers with copies of the Offering Memorandum, to resell the Securities pursuant to the procedures and upon the terms set forth in the Offering Memorandum, including not to solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or 16 general advertising (within the meaning of Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. The Initial Purchasers represent, warrant and agree with the Company that they have solicited and will solicit offers for Securities only from, and will offer Securities only to, persons that they reasonably believe to be, in the case of offers inside the United States, (i) "Qualified Institutional Buyers" ("QIBs"), as defined in Rule 144A under the Securities Act, or (ii) other Institutional Accredited Investors, within the meaning of Rule 501(a) under the Securities Act. Each Initial Purchaser, severally and not jointly, represents and warrants that (i) it has either QIBs or Institutional Accredited Investors, in either case with such knowledge and experience in financial and business matters as are necessary to evaluate the merits and risks of an investment in the Securities, and are acquiring their interest in the Securities not with a view to the distribution or resale thereof, except resales in compliance with the registration requirements or exemption provisions of the Securities Act, (ii) neither they, nor anyone acting on their behalf, will offer the Securities so as to bring the issuance and sale of the Securities within the provisions of Section 5 of the Securities Act, (iii) they will be re-offering and reselling the Securities only to QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A and to a limited number of persons that they reason- ably believe to be Institutional Accredited Investors that execute and deliver a letter containing certain representations and agreements in the form attached as Annex A to the Offering Memorandum, and (iv) they have used no form of general solicitation or general advertising in connection with the offer and sale of the Securities. The Company acknowledges and agree that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to the Initial Purchasers. The Initial Purchasers agree that, prior to or simultaneously with the confirmation of sale by the Initial Purchasers to any purchaser of any of the Securities purchased by the Initial Purchasers from the Company pursuant hereto, the Initial Purchasers shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment thereof or supplement thereto that the Company shall have furnished to the Initial Purchasers prior to the date of such confirmation of sale). In addition to the foregoing, the Initial Purchasers agree and understand that the Company and, for purposes of 17 the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(c) and (d) hereof, counsel to the Company and to the Initial Purchasers, respectively, may rely upon the accuracy and truth of the foregoing represent- ations, warranties and covenants in this Section 2 and the Initial Purchasers hereby consent to such reliance. 3. Delivery of and Payment for the Securities. Delivery of and payment for the Securities shall be made at the office of Cravath, Swaine & Moore ("CS&M"), New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 9:00 a.m., New York City time, on September 27, 1996, or at such other date or time, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time being referred to herein as the "Closing Date"). On the Closing Date, the Company shall deliver or cause to be delivered to CSI for the account of each Initial Purchaser certificates for the Securities against payment to or upon the order of the Company of the purchase price by wire or book-entry transfer of immediately available funds. Upon delivery, the Securities shall be in definitive fully registered form, in such denominations and registered in such names, or otherwise, as CSI on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company shall make one or more certificates for the Securities available for inspection by CSI on behalf of the Initial Purchasers in New York, New York, not later than one full business day prior to the Closing Date. 4. Further Agreements of the Company. The Company agrees with the Initial Purchasers: (a) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements therein, in light of the circumstances under which they were made, not misleading and not to effect such amendment or supplementation without the consent of the Initial Purchasers, which consent shall not be unreasonably withheld; to advise the Initial Purchasers promptly of any order preventing or suspending the use of the preliminary offering memorandum or the Offering 18 Memorandum, of any suspension of the qualification of the Securities for offer- ing or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use best efforts to prevent the issuance of any such order preventing or suspending the use of the preliminary offering memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; (b) to furnish promptly to the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the preliminary offering memorandum and the Offering Memorandum (and of any amendments or supplements thereto) as may be reasonably requested; to furnish to the Initial Purchasers on the date hereof two copies of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; and the Company hereby consents to the use of the preliminary offering memorandum and the Offering Memorandum, and any amendments and supplements thereto, in connection with resales of the Securities; (c) if the delivery of the Offering Memorandum is required at any time in connection with the sale of the Securities and if at such time any events shall have occurred as a result of which the Offering Memorandum as then amended or supplemented would 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 when the Offering Memorandum is delivered, not misleading, or if for any other reason it shall be necessary at such time to amend or supplement the Offering Memorandum in order to comply with any law, to notify the Initial Purchasers immediately thereof, and to promptly prepare and furnish to the Initial Purchasers an amended Offering Memorandum or a supplement to the Offering Memorandum which will correct such statement or omission or effect such compliance. The Initial Purchasers' delivery of any such amendment or supplement shall not constitute a waiver of any of the conditions set forth in Section 5 hereof; 19 (d) during the five year period following the Closing Date, to furnish to the Initial Purchasers all public reports and all reports, documents, information and financial statements furnished by the Company to the Commission pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; (e) for so long as it is required to do so under the Indenture, upon request of any holder of the Securities, to furnish to such holder, and to any prospective purchaser or purchasers of the Securities designated by such holder, information satisfying the requirements of subsection (d)(4) of Rule 144A under the Securities Act. This covenant is intended to be for the benefit of the holders from time to time of the Securities, and prospective purchasers of the Securities designated by such holders; (f) to use the proceeds from the sale of the Securities in the manner described in the Offering Memorandum under the caption "Use of Proceeds"; (g) to assist the Initial Purchasers, at their reasonable request, in arranging to cause the Securities to be designated as PORTAL securities in accordance with the rules and regulations of the NASD; (h) in connection with the offering of the Securities, to make its officers, employees, independent accountants and legal counsel reasonably available upon request by the Initial Purchasers; (i) to do and perform all things required to be done and performed under this Agreement by it that are within its control prior to or after the Closing Date and to use its best efforts to satisfy all conditions precedent on its part to the delivery of the Securities; (j) except following the effectiveness of the Exchange Offer or Shelf Registration Statement, as the case may be, to not, to use its best efforts to ensure that no affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Company will, and to not authorize or knowingly permit any person acting on its or their behalf to, solicit any offer to buy or offer to sell the Securities by means 20 of any form of general solicitation or general advertising (as such terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; (k) to not, and to use its best efforts to ensure that no affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Company will, offer, sell or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Securities Act) which could be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Securities Act; (l) to not, so long as the Securities are outstanding, be or become, or be or become owned by, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, and to not be or become, or be or become owned by, a closed-end investment company required to be registered, but not registered thereunder; (m) to cause each Security to bear the legend set forth in the form of Security attached as Exhibit A to the Indenture until such legend shall no longer be necessary or advisable because the Securities are no longer subject to the restrictions on transfer described therein; (n) promptly to take from time to time such action as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the securities laws of such jurisdictions as the Initial Purchasers may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities; provided, however, that in connection therewith neither the Company nor any Subsidiary shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not so qualified or so subject. The Company will promptly advise the Initial Purchasers of the receipt by the Company of any notification with respect to the suspension of the 21 qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (o) to comply with the Registration Rights Agreement and all agreements set forth in the representation letters of the Company to The Depository Trust Company relating to the approval of the Securities for "book-entry" transfer; (p) other than borrowings under the Senior Credit Facility, for a period of 180 days from the date of the Offering Memorandum, to not offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company (other than the Securities or the Exchange Securities) without the prior written consent of the Initial Purchasers, which consent shall not be unreasonably withheld. The Company will not offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offer and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (q) in connection with the offering, until the completion of the resale of the Securities, neither the Company nor any of its affiliated purchasers (as defined in Rule 10b-6 under the Exchange Act), either alone or with one or more other persons, will bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Securities, or attempt to induce any person to purchase any Securities; and neither it nor any of its affiliated purchasers will make bids or purchases for the purpose of creating actual, or apparent, active trading in the Securities or of raising the price of the Securities; (r) during the period from the Closing Date until three years after the Closing Date, without the prior written consent of the Initial Purchasers, to not, and not permit any of its affiliates (as defined in 22 Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act; (s) prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchasers is notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; (t) to not take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; and (u) to not take any action prior to the Closing Date which in the Company's reasonable judgment would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(c) hereof. (v) Notwithstanding any provision of Sections 4(a) or (c) to the contrary, the Company's obligations under Sections 4(a) and (c) shall terminate on the earliest to occur of (i) 180 days after the Closing Date, (ii) the Exchange Date, (iii) the effective date of a Shelf Registration Statement pursuant to the Registration Rights Agreement and (iv) the date upon which the Initial Purchasers and their affiliates cease to hold Securities acquired as part of the initial distribution, the occurrence of which the Initial Purchaser shall promptly notify the Company. 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties of the Company contained herein, to the accuracy of the statements of officers of the Company made in any certificates pursuant 23 to the provisions hereof, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (b) All corporate proceedings and other legal matters incident to the authorization, form and validity of the Securities, the Indenture, the Registration Rights Agreement, this Agreement and the Offering Memorandum, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be satisfactory in all material respects to the Initial Purchasers, and the Company shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (c) Paul, Weiss, Rifkind Wharton & Garrison shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, to the effect that: (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has all corporate power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged; (ii) based solely on certificates of appropriate government officers of each jurisdiction listed in Schedule III, the Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction listed in Schedule III hereto. In 24 rendering the opinion set forth in this paragraph (ii), such counsel may rely on a certificate of an officer of the Company which is attached hereto as Appendix A, as to the jurisdictions in which the Company's ownership or lease of property or the conduct of business requires such qualification; (iii) the outstanding shares of common stock and preferred stock of the Company has been duly and validly authorized and issued and are fully paid and nonassessable; and the certificates for the Securities are in valid and sufficient form; (iv) the Company has the requisite corporate power and authority to execute and deliver the Indenture, the Securities, the Registration Rights Agreement and this Agreement and to perform its obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of the Indenture, the Securities, the Registration Rights Agreement and this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly taken; (v) each of this Agreement and the Registration Rights Agreement has been duly authorized, executed and delivered by the Company; (vi) the Indenture has been duly authorized, executed and delivered by the Company and the Securities have been duly authorized and executed by the Company; (vii) the Company's authorized capitalization is as set forth in the Offering Memorandum under the heading "Capitalization"; the capital stock of the Company conforms to the description thereof contained in the Offering Memorandum; (viii) the descriptions in the Offering Memorandum of statutes, legal and governmental proceedings and contracts and other documents are accurate in all material respects and fairly present the information that would be required to be shown if the Offering Memorandum were a prospectus included in a registration statement on 25 Form S-1 under the Securities Act; the statements in the Offering Memorandum under the caption "Business--Legal Proceedings" to the extent that they constitute matters of law or regulation or legal conclusions, have been reviewed by them and fairly summarize the matters described therein in all material respects; and such counsel does not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as required; (ix) as of its date and on the Closing Date, the Offering Memorandum (except for financial statements, the notes thereto and related schedules and other financial data included in the Offering Memorandum, as to which no opinion need be expressed) complies as to form in all material respects with that which would be required by the Securities Act and the rules and regulations of the Commission thereunder applicable to a definitive prospectus forming part of a registration statement on Form S-1 under the Securities Act; (x) the Indenture conforms as to form in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (xi) no authorization, approval, consent or order of, or filing or registration with, any Delaware (pursuant to the Delaware General Corporation Act), New York or Federal governmental body or agency or, to such counsel's best knowledge, any New York or Federal court that has jurisdiction over the Company or any of its assets or properties is required for the consummation by the Company of the transactions contemplated by this Agreement, except such as may be required under state securities or Blue Sky laws or regulations and except, with respect to the Exchange Offer and Exchange Securities, filings or registration under the Securities Act or the 26 Exchange Act or the rules and regulation promulgated thereunder or the by-laws of the NASD and except where the failure to obtain such authorization, approval, consent or order would not reasonably be expected to have a material adverse effect on the ability of the Company to consummate the offering of the Securities and the other transactions contemplated hereby; (xii) neither the Company nor any Subsidiary is (A) an "investment company" or a company "controlled" by an investment company within the meaning of the Investment Company Act and the rules and regulations of the Commission thereunder, without taking account of any exemption under the Investment Company Act arising out of the number of holders of the Company's securities, or (B) a "holding company" or a "subsidiary company" of a holding company, or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended; (xiii) each of this Agreement and the Registration Rights Agreement constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms (assuming the due execution and delivery thereof by the other parties thereto) subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that indemnification or contribution provisions may be unenforceable; (xiv) the Indenture constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms (assuming due execution and delivery by the Trustee), subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws (now or hereafter in effect relating to or affecting creditors' rights and remedies generally and to general principles 27 of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); the Securities are in the form contemplated by the Indenture and, upon the due authentication and delivery thereof by the Trustee pursuant to the Indenture, will be duly and validly issued and outstanding and will constitute valid and legally binding obliga- tions of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and the Indenture, the Securities and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Offering Memorandum; (xv) the execution, delivery and performance by the Company of the Indenture, the Securities, the Registration Rights Agreement and this Agreement, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of the terms hereof and thereof, do not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument identified to such counsel in a certificate of the Company or any of its Subsidiaries as being a material instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, except for any breach, violation, default, lien, charge or encumbrances which would not have a material adverse effect on the transactions contemplated hereby nor will such actions result in any violation of the provisions of the charter or by- 28 laws of the Company or any of its subsidiaries or any statute, or, to the best of our knowledge, any judgment, order, decree, rule or regulation of any federal or New York State court or governmental agency or body or arbitrator having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets except for any violation which would not have a material adverse effect on the transactions contemplated hereby; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body is required under any such statute, judgment, order, decree, rule or regulation for the execution, delivery and performance of the Indenture, the Securities or the Registration Rights Agreement by the Company or the consumma- tion of the transactions contemplated hereby and thereby except, with respect to the Exchange Offer and Exchange Securities, filings or registration under the Securities Act or the Exchange Act or the rules and regulations of the Commission promulgated thereunder or the by- laws of the NASD and except any filings, consents, approvals, authorizations, orders or registrations the failure to so obtain or make would not have a material adverse effect on the ability of the Company to consummate the offering of the Securities and the other transactions contemplated hereby; provided, however, that the fore- going may exclude state securities laws or Blue Sky laws and any such consents, approvals, authorizations, or order of, or filings or registrations with, the Commission and any state securities regulatory authorities as may be required to be obtained or made pursuant to the Registration Rights Agreement; (xvi) neither the consummation of the transactions contemplated by this Agreement nor the sale, issuance, execution or delivery of the Securities will violate Regulation G, T, U or X of the Federal Reserve Board; (xvii) except as disclosed in the Offering Memorandum, to the best knowledge of counsel, there is no pending or threatened action or suit or judicial, arbitral, rule-making or other 29 administrative or other proceeding to which the Company or any Subsidiary is a party or of which any of their respective property or assets is the subject that, singly or in the aggregate, (A) questions the validity of this Agreement, the Registration Rights Agreement or the Indenture or any action taken or to be taken pursuant hereto or thereto, or (B) if determined adversely to the Company or any Subsidiary is reasonably likely to have a Material Adverse Effect; and (xviii) assuming the accuracy of the representations, warranties and agreements of the Company and each of the Subsidiaries contained in paragraphs (x), (y) and (z) of Section 1 of this Agreement and of the Initial Purchasers in Section 2 of this Agreement, the issuance and sale of the Securities and the offer, resale and delivery of the Securities in the manner contemplated in the Offering Memorandum and this Agreement, are exempt from the registration requirements of the Securities Act and it is not necessary to qualify the Indenture under the Trust Indenture Act. Such counsel shall state that they have participated in conferences with representatives of the Company, representatives of the independent auditors of the Company and representatives of the Initial Purchasers at which conferences the contents of the Offering Memorandum any amendment thereof and supplement thereto and related matters were discussed, and, although such counsel assume no responsibility for the accuracy or completeness or fairness of the Offering Memorandum, any amendment thereof or supplement thereto (except as expressly provided above), nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Memorandum or any amendment thereof or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief) as of its date or such Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 30 In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates or written statements of responsible officers of the Company and public officials which are furnished to the Initial Purchasers. Such counsel need not, and may state in such opinion that it does not, express any opinion with regard to the laws of any jurisdiction other than the federal laws of the United States, the laws of the State of New York and the Delaware General Corporation Law. (d) The Initial Purchasers shall have received from Cravath, Swaine & Moore ("CS&M"), counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters. (e) The Company shall have furnished to the Initial Purchasers a letter of Peat Marwick, dated the date hereof, with respect to the Company's fiscal years ended December 31, 1993, 1994 and 1995, and the six month periods ended June 30, 1995 and 1996 in form and substance satisfactory to the Initial Purchasers, to the effect that: (i) they are independent certified public accountants with respect to the Company within the meaning of the applicable rules and regulations thereunder and Rule 101 of the American Institute of Certified Public Accountants' Code of Professional Conduct and its interpretations and rulings; (ii) based upon a reading of the latest unaudited financial statements made available by the Company, the procedures of the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, reading of minutes and inquiries of certain officials of the Company who have responsibility for financial and accounting matters and certain other limited procedures requested by the Initial Purchasers and described 31 in detail in such letter, nothing has come to their attention that causes them to believe that (A) any unaudited financial statements included or incorporated in the Offering Memorandum do not comply in form in all material respects with applicable accounting requirements or (B) any material modifications should be made to the unaudited financial statements included in the Offering Memorandum for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Offering Memorandum; (iii) based upon the procedures detailed in such letter with respect to the period subsequent to June 30, 1996, including reading of minutes and inquiries of certain officials of the Company who have responsibility for financial and accounting matters, nothing has come to their attention that causes them to believe that (1) at July 31, 1996, there was any change in capital stock, increase in accumulated deficit, increase in long-term debt or decrease in net current assets as compared with the amounts shown in the December 31, 1995 audited balance sheet included in the Offering Memorandum or for the month of July 1996, there were any decreases on a first-in-first-out basis, as compared with the corresponding period in the preceding year, in consolidated net sales, earnings before acquisition expenses, interest and taxes, and net income, (2) at a specified date not more than five business days prior to the date of the letter, there was any change in capital stock, increase in accumulated deficit or increase in long- term debt as compared with the amounts shown in the December 31, 1995 audited balance sheet included in the Offering Memorandum or (3) for the period from July 1, 1996 to a specified date not more than five business days prior to the date of the letter, there was any decrease, as compared with the corresponding period in the preceding year, in net sales, except in all instances for changes, increases or decreases that the Offering Memorandum discloses have occurred or which are set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said 32 explanation is not deemed necessary by the Initial Purchasers; and (iv) they have performed certain other specified procedures as a result of which they respectively determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company) set forth in the Offering Memorandum agrees with the accounting records of the Company, excluding any questions of legal interpretation. (f) The Company shall have furnished to the Initial Purchasers a letter (the "bring-down letter") of Peat Marwick, addressed to the Initial Purchasers and dated the Closing Date confirming, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than two days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by its letter delivered to the Initial Purchasers concurrently with the execution of this Agreement and described in paragraph (e). (g) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, signed by its Chairman and Chief Executive Officer and its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) to such person's knowledge, as of its date, the Offering Memorandum did not include any untrue statement of a material fact and did not, omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and since its date, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum as of the Closing Date would not include any untrue statement of a material fact or would not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they 33 were made, not misleading (C) to such person's knowledge as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct in all material respects, the Company has complied with all agreements and satisfied all conditions on its part to be perform- ed or satisfied hereunder at or prior to the Closing Date, and subsequent to the date of the most recent financial statements in the Offering Memorandum, there has been no event or development that can reasonably be expected to result in a Material Adverse Effect, except as set forth in the Offering Memorandum. (h) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any event or development that can reasonably be expected to result in a Material Adverse Effect or any change specified in the letters referred to in paragraphs (e) or (f) of this Section, the effect of which, in any such case described above, is, in the reasonable judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the offering or delivery of the Securities on the terms and in the manner contemplated in the Offering Memorandum (exclusive of any amendment or supplement). (i) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency which would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. (j) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other debt securities or preferred stock by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act, and (ii) no such organization shall have publicly 34 announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or any of the Company's other debt securities or preferred stock. (k) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on either of such exchanges or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in securities of the Company on any exchange or in the over-the-counter market shall have been suspended or (ii) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (iii) an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Initial Purchasers, impracticable or inadvisable to proceed with the offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Memorandum. (l) The Company and the Initial Purchasers shall have executed and delivered the Registration Rights Agreement. (m) The Securities shall have been approved by the NASD for trading in the PORTAL market. (n) The Indenture shall have been duly executed and delivered by the Company and the Trustee and the Securities shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (o) If any event shall have occurred that requires the Company under Section 4(c) hereof to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a 35 reasonable opportunity to comment thereon, and copies thereof delivered to the Initial Purchasers. (p) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities as contemplated hereby. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to CS&M. 6. TERMINATION. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(h), 5(i), 5(j) or 5(k) shall have occurred. 7. DEFAULTING INITIAL PURCHASERS. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchaser may make arrangements for the purchase of such Securities by other persons satisfactory to the Company but if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchaser or the Company except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchaser" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule I hereto who, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. 36 (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or the non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, either the non-defaulting Initial Purchaser or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly make any amendment or supplement to the Offering Memorandum that effects any such changes. 8. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If this Agreement is terminated pursuant to Section 6 or if for any reason permitted under this Agreement the purchase of the Securities by the Initial Purchasers is not consummated, the Company shall remain responsible (except to a defaulting Initial Purchaser) for the expenses to be paid or reimbursed by it pursuant to Section 12 and the respective obligations of the Company and the Initial Purchasers pursuant to Sections 9 and 10 shall remain in effect. In addition, if the purchase of the Securities by the Initial Purchasers is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 5 hereof is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by the Initial Purchasers, the Company will reimburse the Initial Purchasers upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with this Agreement and the proposed purchase and sale of the Securities. 9. INDEMNIFICATION. (a) The Company shall indemnify and hold harmless the Initial Purchasers, their affiliates, and their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for the purposes of this Section 9 and Section 10 as the Initial Purchasers), to the fullest extent lawful, against any loss, claim, damage, expense or liability, joint or several, or any action in respect 37 thereof, to which an Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the preliminary offering memorandum or the Offering Memorandum or in any amendment or supplement thereto or any information provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Initial Purchaser for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or preparing to defend or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability, expense or action promptly following receipt of detailed statements itemizing such expenses; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission from any of such documents in reliance upon and in conformity with the Initial Purchasers' Information; provided further that with respect to any such untrue statement or omission made in the preliminary offering memorandum, the indemnity agreement contained in this Section 9(a) shall not enure to the benefit of the Initial Purchaser from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned if, to the extent that such sale was an initial resale by the Initial Purchaser and any such loss, claim, damage or liability of the Initial Purchaser is a result of the fact that both (A) a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person, (B) the untrue statement or omission in the preliminary offering memorandum was corrected in the Offering Memorandum unless, in either case, such failure to deliver the Offering Memorandum was a result of noncompliance by the Company with Section 4(c). (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, its affiliates, and their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the 38 Securities Act or the Exchange Act (collectively referred to for the purposes of this Section 9 and Section 10 as the Company), to the same extent as the foregoing indemnity from the Company to each Initial Purchaser, against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, expense, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the preliminary offering memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, but in each case 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 Initial Purchasers' Information, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability, expense or action promptly following receipt of detailed statements itemizing such expenses. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense 39 thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. 40 The obligations of the Company and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 10. CONTRIBUTION. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or (b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company bear to the total discounts received by the Initial Purchasers with respect to the Securities purchased under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or to the Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the 41 equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased from the Company by it were offered to investors less the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers, the Company and their respective affiliates and successors and the controlling persons and officers and directors referred to in Sections 9 and 10 and their heirs and legal representatives and other than holders and prospective purchasers of the Securities as provided in Section 4(e), any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. EXPENSES. The Company agrees to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of any preliminary offering memorandum, the Offering Memorandum and any amendments and supplements thereto; (c) the costs of reproducing and distributing this Agreement, the Registration Rights Agreement and the Indenture; (d) the preparation, issuance and delivery of the certificates for the Securities to the Initial Purchasers; (e) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in 42 Section 4(n) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of CS&M); (f) any fees charged by securities rating services for rating the Securities; (g) all fees and expenses of the Trustee; (h) all costs incident to and fees and expenses of the inclusion of the Securities on the PORTAL system and the approval of the Securities for book-entry transfer by The Depository Trust Company; and (i) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided, however, that, except as otherwise provided in this Section 12 and in Section 8 the Initial Purchasers shall pay their own costs and expenses (including, without limitation, the costs of travel and lodging), including the costs and expenses of their counsel, 50% of the costs of charter- ing aircraft in connection with the roadshow, any transfer taxes on the Securities that they may sell and the expenses of advertising any offering of the Securities made by the Initial Purchasers. 13. SURVIVAL. The respective indemnities, rights of contribution, representations, warranties and agreements made by or on behalf of the Company and the Initial Purchasers and any of their respective affiliates, representatives, officers, directors or controlling persons contained in this Agreement or in any certificate delivered pursuant to this Agreement, shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any person controlling any of them. 14. NOTICES, ETC. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail, telex or facsimile transmission to Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Stephen J. Eichenberger; (b) if to the Company, shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Offering Memorandum, Attention: Leo F. Korman. 43 PROVIDED, HOWEVER, that any notice to the Initial Purchasers pursuant to Section 9(c) shall be delivered or sent by mail, telex or facsimile transmission to the Initial Purchasers at their addresses set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. 15. BUSINESS DAY. For purposes of this Agreement, "business day" means any day on which the New York Stock Exchange, Inc. is open for trading. 16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 18. HEADINGS. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 44 If the foregoing is in accordance with your understanding of the agreement between the Company and the Initial Purchasers, kindly indicate your acceptance in the space provided for that purpose below. Very truly yours, CORE-MARK INTERNATIONAL, INC., by ------------------------------------- Name: Title: Accepted: CHASE SECURITIES INC., By --------------------------------- Name: Title: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, By ---------------------------------- Name: Title: Address for Notices: CHASE SECURITIES INC. One Chase Plaza, 25th Floor New York, New York 10081 Attention: Legal Department DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, NY 10072 Schedule I Principal Amount of Senior Initial Purchaser Subordinated Notes - ----------------- ------------------ Chase Securities Inc. $45,000,000 Donaldson, Lufkin & $30,000,000 Jenrette Securities Corporation ------------ TOTAL $75,000,000 Schedule III Arizona Alaska Arkansas California Colorado Idaho Indiana Kansas Missouri Montana Nebraska Nevada New Mexico Oregon Texas Utah Washington Wisconsin Wyoming British Columbia Alberta Saskatchewan Manitoba Ontario Yukon Territory Northwest Territory Appendix A CORE-MARK INTERNATIONAL, INC. I, [ ], the [ ] of CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "Company"), do hereby certify in such capacity and on behalf of the Company that on and as of the date of this certificate the following is a true and complete list of jurisdictions in which the Company's ownership or lease of property or the conduct of business requires the Company to be duly qualified to do business and to be in good standing in such jurisdictions: Arizona Alaska Arkansas California Colorado Idaho Indiana Kansas Missouri Montana Nebraska Nevada New Mexico Oregon Texas Utah Washington Wisconsin Wyoming British Columbia Alberta Saskatchewan Manitoba Ontario Yukon Territory Northwest Terriroty EX-12 20 EXHIBIT 12 EXHIBIT 12 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT RATIOS)
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, 1991 1992 1993 1994 1995 1995 1996 ---------- --------- --------- --------- --------- --------- --------- Earnings: Income (loss) before income taxes (a)................. $ (7,222) $ 4,333 $ 41,652 $ 11,904 $ 12,286 $ 5,764 $ 10,845 Fixed charges............... 13,757 9,670 8,593 9,522 11,821 6,017 5,556 ---------- --------- --------- --------- --------- --------- --------- Earnings...................... $ 6,535 $ 14,003 $ 50,245 $ 21,426 $ 24,107 $ 11,781 $ 16,401 Fixed Charges: Interest expense (net)(b)... $ 10,358 $ 5,983 $ 4,887 $ 5,773 $ 8,052 $ 4,185 $ 3,606 One-third rental expense.... 3,399 3,687 3,706 3,749 3,769 1,832 1,950 ---------- --------- --------- --------- --------- --------- --------- Fixed charges................. $ 13,757 $ 9,670 $ 8,593 $ 9,522 $ 11,821 $ 6,017 $ 5,556 Earnings to fixed charges..... N/A 1.4x 5.8x 2.3x 2.0x 2.0x 3.0x Deficiency.................... $ (7,222) -- -- -- -- -- --
(a) Before cumulative effects of changes in accounting principles and extraordinary items. (b) Including amortization of SFAS No. 15 troubled debt restructuring deferred credit and debt financing costs. EX-21 21 EXHIBIT 21 SUBSIDIARIES
PERCENTAGE STATE OF DATE OF SHARES SHARES OF SHARES NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING - ------------------ ------------- ------------- ---------- ----------- ----------- ASI OFFICE AUTOMATION, INC. * California 5/26/78 C: 300,000 C: 75,000 25% P: 150,000 P: 0 0% Series A Sole Shareholder: Marquise Ventures Company, Inc. BINGO CASH & CARRY, INC.* California 2/26/81 C: 50,000 C: 25,000 50% P: 5,000 P: 1,000 20% Series A Sole Shareholder: Core-Mark Interrelated Companies, Inc. C/M PRODUCTS, INC. California 7/19/89 C: 1,000 C: 100 10% P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc. E.A. MORRIS DISTRIBUTORS, LIMITED Canada* 1/20/82 C: 10,000 C: 1 less than .01% P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc.
*Represents inactive corporations
PERCENTAGE STATE OF DATE OF SHARES SHARES OF SHARES NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING - ------------------ ------------- ------------- ------------ ----------- ----------- CORE-MARK INTERRELATED California 4/14/75 C: 1,000,000 C: 1,000,000 100% COMPANIES, INC. P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc. CORE-MARK MIDCONTINENT, INC. Arkansas 7/2/81 C: 2,000 C: 2,000 100% P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc. CORE-MARK VIDEO, INC.* California 11/5/80 C: 100,000 C: 100,000 100% P: N/A P: N/A Sole Shareholder: Core-Mark Interrelated Companies, Inc. CORE-MARK WOOD PRODUCTS, INC.* California 12/15/87 C: 100,000 C: 100 .10% P: N/A P: N/A N/A Sole Shareholder: Core-Mark Interrelated Companies, Inc. 2
*Represents inactive corporations
PERCENTAGE STATE OF DATE OF SHARES SHARES OF SHARES NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING - ------------------ ------------- ------------- ---------- ----------- ----------- FOAM MERCHANTS CORPORATION* California 6/1/88 C: 1,000 C: 100 10% P: N/A P: N/A N/A Sole Shareholder: Core-Mark Interrelated Companies, Inc. GENERAL ACCEPTANCE CORPORATION* California 6/10/83 C: 400,000 C: 200 .05% P: N/A P: N/A N/A Sole Shareholder: Core-Mark Interrelated Companies, Inc. LCLC ACQUISITION CORPORATION* Delaware 10/25/88 C: 5,000 C: 1,000 20% P: 5,000 P: 1,000 20% Series A Sole Shareholder: Core-Mark Interrelated Companies, Inc. MARQUISE VENTURES COMPANY, INC.* California 7/26/84 C: 75,000 C: 75,000 100% P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc.
*Represents inactive corporations
PERCENTAGE STATE OF DATE OF SHARES SHARES OF SHARES NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING - ------------------ ------------- ------------- ---------- ----------- ----------- RUSSELLVILLE TOBACCO COMPANY* Arkansas 11/26/76 C: 1,000 C: 150 15% P: N/A P: N/A N/A Sole Shareholder: Core-Mark International, Inc. SJL PRODUCTS, INC.* California 3/4/83 C: 7,500 C: 300 4% P: N/A P: N/A N/A Sole Shareholder: Core-Mark Interrelated Companies, Inc. - ------------------ C: - Common Stock P: - Preferred Stock
*Represents inactive corporations EX-23.1 22 EXHIBIT 23.1 EXHIBIT 23.1 The Board of Directors Core-Mark International, Inc.: The audits referred to in our report dated February 23, 1996, included the related financial statement schedule for each of the years in the three-year period ended December 31, 1995, included in the registration statement on Form S-4. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. KPMG Peat Marwick LLP October 8, 1996 EX-25 23 EXHIBIT 25 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________ ------------------------------ ------------------------------ BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) --------------------------------- --------------------------------- CORE-MARK INTERNATIONAL, INC. (Exact name of obligor as specified in its charter) DELAWARE 84-0978360 (State or other jurisdiction of (I.R.S. employer Incorporation or organization) Identification no.) 395 OYSTER POINT BOULEVARD, SUITE 415 SAN FRANCISCO, CA 94080 (Address of principal executive offices) (Zip Code) 11-3/8% SENIOR SUBORDINATED NOTES DUE 2003 (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS ---- ------- Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3. -15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated June 21, 1995 - Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration No. 33-65171, and Certificate of Admendment of the Organization Certificate of Bankers Trust Company dated March 21, 1996, copy attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, dated as amended on October 19, 1995. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 33-65171. -2- EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - A copy of the latest report of condition of Bankers Trust Company dated as of July 31, 1996. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 3rd day of October, 1996. BANKERS TRUST COMPANY By: /s/ Kevin Weeks --------------- Kevin Weeks Assistant Treasurer -4-
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1 City, State ZIP: New York, NY 10006 11 FDIC Certificate No.: 0 0 6 2 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
------------------------------ C400 ------------------------------------------ Dollar Amounts in Thousands RCFD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------- ASSETS / / / / / / / / / / / / / / / / / / 1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / / / / / / / / / / / / a. Noninterest-bearing balances and currency and coin(1) ................ 0081 1,631,000 1.a. b. Interest-bearing balances(2) ......................................... 0071 2,066,000 1.b. 2. Securities: / / / / / / / / / / / / / / / / / / a. Held-to-maturity securities (from Schedule RC-B, column A) ........... 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D).......... 1773 3,761,000 2.b. 3 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, / / / / / / / / / / / / / / / / / / and in IBFs: / / / / / / / / / / / / / / / / / / a. Federal funds sold ................................................... 0276 5,162,000 3.a. b. Securities purchased under agreements to resell ...................... 0277 4,192,000 3.b. 4. Loans and lease financing receivables: / / / / / / / / / / / / / / / / / / a. Loans and leases, net of unearned income (from Schedule RC-C)...........................RCFD 2122 24,849,000 / / / / / / / / / / / / / / / / / / 4.a. b. LESS: Allowance for loan and lease losses......RCFD 3123 923,000 / / / / / / / / / / / / / / / / / / 4.b. c. LESS: Allocated transfer risk reserve .........RCFD 3128 0 / / / / / / / / / / / / / / / / / / 4.c. d. Loans and leases, net of unearned income, / / / / / / / / / / / / / / / / / / allowance, and reserve (item 4.a minus 4.b and 4.c) .................. 2125 23,926,000 4.d. 5. Assets held in trading accounts ........................................... 3545 33,052,000 5. 6. Premises and fixed assets (including capitalized leases) .................. 2145 858,000 6. 7. Other real estate owned (from Schedule RC-M) .............................. 2150 216,000 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)....................................................... 2130 271,000 8. 9. Customers' liability to this bank on acceptances outstanding .............. 2155 572,000 9. 10. Intangible assets (from Schedule RC-M) .................................... 2143 18,000 10. 11. Other assets (from Schedule RC-F) ......................................... 2160 7,612,000 11. 12. Total assets (sum of items 1 through 11) .................................. 2170 83,337,000 12. ------------------------------------------
- ------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts.
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2 City, State Zip: New York, NY 10006 12 FDIC Certificate No.: 0 0 6 2 3 SCHEDULE RC--CONTINUED ---------------------------------------------- Dollar Amounts in Thousands / / / / / / / / Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES / / / / / / / / / / / / / / / / / / / / / / / / 13. Deposits: / / / / / / / / / / / / / / / / / / / / / / / a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)........................... RCON 2200 9,040,000 13.a. (1) Noninterest-bearing(1)...RCON 6631 3,569,000.... / / / / / / / / / / / / / / / / / / / / / / / 13.a.(1) (2) Interest-bearing.........RCON 6636 5,471,000.... / / / / / / / / / / / / / / / / / / / / / / / 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, / / / / / / / / / / / / / / / / / / / / / / / and IBFs (from Schedule RC-E part II)................. RCFN 2200 19,648,000 13.b. (1) Noninterest-bearing....RCFN 6631 494,000 / / / / / / / / / / / / / / / / / / / / / / / 13.b.(1) (2) Interest-bearing.......RCFN 6636 19,154,000 / / / / / / / / / / / / / / / / / / / / / / / 13.b.(2) 14. Federal funds purchased and securities sold under / / / / / / / / / / / / / / / / / / / / / / / agreements to repurchase in domestic offices of the bank / / / / / / / / / / / / / / / / / / / / / / / and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased .............................. RCFD 0278 2,564,000 14.a. b. Securities sold under agreements to repurchase ....... RCFD 0279 790,000 14.b. 15. a. Demand notes issued to the U.S. Treasury ............. RCON 2840 0 15.a. b. Trading liabilities .................................. RCFD 3548 18,177,000 15.b. 16. Other borrowed money: / / / / / / / / / / / / / / / / / / / / / / / a. With original maturity of one year or less ........... RCFD 2332 16,421,000 16.a. b. With original maturity of more than one year ......... RCFD 2333 3,388,000 16.b. 17. Mortgage indebtedness and obligations under capitalized leases .................................................... RCFD 2910 31,000 17. 18. Bank's liability on acceptances executed and outstanding... RCFD 2920 572,000 18. 19. Subordinated notes and debentures ......................... RCFD 3200 1,227,000 19. 20. Other liabilities (from Schedule RC-G) .................... RCFD 2930 6,911,000 20. 21. Total liabilities (sum of items 13 through 20) ............ RCFD 2948 78,769,000 21. / / / / / / / / / / / / / / / / / / / / / / / 22. Limited-life preferred stock and related surplus .......... RCFD 3282 0 22. EQUITY CAPITAL / / / / / / / / / / / / / / / / / / / / / / / 23. Perpetual preferred stock and related surplus ............. RCFD 3838 500,000 23. 24. Common stock .............................................. RCFD 3230 1,002,000 24. 25. Surplus (exclude all surplus related to preferred stock)... RCFD 3839 528,000 25. 26. a. Undivided profits and capital reserves ............... RCFD 3632 2,915,000 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ........................ RCFD 8434 ( 5,000) 26.b. 27. Cumulative foreign currency translation adjustments ....... RCFD 3284 ( 372,000) 27. 28. Total equity capital (sum of items 23 through 27) ......... RCFD 3210 4,568,000 28. 29. Total liabilities, limited-life preferred stock, and / / / / / / / / / / / / / / / / / / / / / / / equity capital (sum of items 21, 22, and 28) .............. RCFD 3300 83,337,000 29. --------------------------------------------- Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of Number auditing work performed for the bank by independent external ------------ auditors as of any date during 1995......................... RCFD 6724 2 M.1 ----------------------------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company auditors (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ------------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. STATE OF NEW YORK, BANKING DEPARTMENT I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated March 20, 1996, providing for an increase in authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, MY HAND AND OFFICIAL SEAL OF THE BANKING DEPARTMENT AT THE CITY OF NEW YORK, THIS 21ST DAY OF MARCH IN THE YEAR OF OUR LORD ONE THOUSAND NINE HUNDRED AND NINETY-SIX. Peter M. Philbin --------------------------------- DEPUTY SUPERINTENDENT OF BANKS CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of march, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Three Hundred Fifty One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670), divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Five Hundred One Million, Six Hundred Sixty- Six Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th day of March , 1996. James T. Byrne, Jr. ---------------------------------- James T. Byrne, Jr. Managing Director Lea Lahtinen ---------------------------------- Lea Lahtinen Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ------------------------ Lea Lahtinen Sworn to before me this 20th day of March, 1996. Sandra L. West - -------------------------- Notary Public SANDRA L. WEST Notary Public State of New York Counterpart filed in the No. 31-4942101 Office of the Superintendent of Qualified in New York County Banks, State of New York, Commission Expires September 19, 1996 This 21st day of March, 1996 EX-27 24 EXHIBIT 27
5 1,000 YEAR 6-MOS DEC-31-1995 JUN-30-1996 DEC-31-1995 JUN-30-1996 24,447 12,911 0 0 105,190 109,321 3,600 3,958 96,703 72,933 230,882 200,405 40,746 42,922 20,217 22,051 324,536 292,594 126,652 127,710 101,598 62,404 0 0 0 0 0 0 87,669 93,951 324,536 292,594 2,047,187 1,068,575 2,047,187 1,068,575 1,901,604 989,608 125,245 64,516 1,065 635 0 0 6,987 2,971 12,286 10,845 5,563 4,629 6,723 6,216 0 0 0 0 0 0 6,723 6,216 0 0 0 0
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