-----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, H9jjjB71LZ2/lLju+WHho14vhLphrIssbXkvTgjUs8EbFAMNtqafLFAW6Bs27Add BJ0vmy3oRuWfPeB2CbntqQ== 0001047469-98-031273.txt : 19980817 0001047469-98-031273.hdr.sgml : 19980817 ACCESSION NUMBER: 0001047469-98-031273 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORE MARK INTERNATIONAL INC CENTRAL INDEX KEY: 0001024726 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 911295550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-14217 FILM NUMBER: 98687236 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 10-Q 1 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________to_____________________ Commission file number 333-14217 --------------- CORE-MARK INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 91-1295550 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 395 OYSTER POINT BOULEVARD, SUITE 415 SOUTH SAN FRANCISCO, CA 94080 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 589-9445 --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- At July 31, 1998, Registrant had outstanding 5,500,000 shares of Common Stock. ------------------------------------------------ CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES FORWARD-LOOKING STATEMENTS OR INFORMATION Certain statements contained in this quarterly report on Form 10-Q under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere herein and in the documents incorporated herein by reference are not statements of historical fact but are future-looking or forward-looking statements that may constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of such forward-looking terminology as the words "believes," "expects," "may," "will," "should," or "anticipates" (or the negative of such terms) or other variations thereon or comparable terminology, or because they involve discussions of Core-Mark International, Inc.'s (the "Company's") strategy. Such forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. The ability of the Company to achieve the results anticipated in such statements is subject to various risks and uncertainties and other factors which may cause the actual results, level of activity, performance or achievements of the Company or the industry in which it operates to be materially different from any future results, level of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the general state of the economy and business conditions in the United States and Canada; adverse changes in consumer spending; the ability of the Company to implement its business strategy, including the ability to integrate recently acquired businesses into the Company; the ability of the Company to obtain financing; competition; the level of retail sales of cigarettes and other tobacco products; possible effects of legal proceedings against manufacturers and sellers of tobacco products and the effect of government regulations affecting such products. As a result of the foregoing and other factors affecting the Company's business beyond the Company's control, no assurance can be given as to future results, levels of activity, performance or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these statements.
PAGE PART I - FINANCIAL INFORMATION ---- - ------------------------------ ITEM 1: FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998. . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income for the three and six months ended June 30, 1997 and 1998. . 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1998. . . . . 5 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 8 PART II - OTHER INFORMATION - --------------------------- Item 1: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 2: Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 3: Defaults upon Senior Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 4: Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . 14 Item 5: Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
DECEMBER 31, JUNE 30, 1997 1998 ------------ -------- ASSETS (UNAUDITED) Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,281 $ 12,971 Receivables: Trade accounts, less allowance for doubtful accounts of $2,950 and $2,728, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . 96,610 94,444 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,806 14,167 Inventories, net of LIFO allowance of $15,718 and $19,769, respectively. . . . 103,246 77,394 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,847 7,283 -------- -------- Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 233,790 206,259 Property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,633 59,069 Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (28,633) (31,241) -------- -------- Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 27,828 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,277 8,431 Goodwill, net of accumulated amortization of $17,293 and $18,334, respectively. . . 66,513 65,472 -------- -------- $336,580 $307,990 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,737 $55,453 Cigarette and tobacco taxes payable. . . . . . . . . . . . . . . . . . . . . . 43,506 44,472 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,085 1,069 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,599 7,508 Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,647 27,594 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 131,574 136,096 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,012 162,625 Other accrued liabilities and deferred income taxes . . . . . . . . . . . . . . . . 9,030 9,264 -------- -------- Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,616 307,985 Commitments and contingencies: Shareholders' equity: Common stock; $.01 par value; 10,000,000 shares authorized; 5,500,000 shares issued and outstanding . . . . . . . . . . . . . . . . . 55 55 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 26,121 26,121 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,286) (20,935) Accumulated other comprehensive income: Foreign currency translation adjustments. . . . . . . . . . . . . . . . . (2,879) (3,189) Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . (2,047) (2,047) -------- -------- Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . (1,036) 5 -------- -------- $336,580 $307,990 -------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements. 3 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS) (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------- -------------- 1997 1998 1997 1998 ---- ---- ---- ---- Net sales . . . . . . . . . . . . . . . . . . $614,994 $609,051 $1,142,860 $1,172,271 Cost of goods sold. . . . . . . . . . . . . . 568,428 564,627 1,056,184 1,087,160 -------- -------- ---------- ---------- Gross profit. . . . . . . . . . . . . . . 46,566 44,424 86,676 85,111 Operating and administrative expenses . . . . 37,708 37,013 72,931 73,050 -------- -------- ---------- ---------- Operating income. . . . . . . . . . . . . 8,858 7,411 13,745 12,061 Interest expense, net . . . . . . . . . . . . 4,653 3,692 9,044 7,988 Debt refinancing costs. . . . . . . . . . . . 391 1,199 783 1,573 -------- -------- ---------- ---------- Income before income taxes. . . . . . . . 3,814 2,520 3,918 2,500 Income tax expense. . . . . . . . . . . . . . 1,525 1,158 1,567 1,149 -------- -------- ---------- ---------- Net income . . . . . . . . . . . . . . . $2,289 $1,362 $2,351 $1,351 -------- -------- ---------- ---------- -------- -------- ---------- ----------
See Notes to Condensed Consolidated Financial Statements. 4 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------- 1997 1998 ---- ---- CASH PROVIDED BY OPERATING ACTIVITIES: Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,351 $ 1,351 Adjustments to reconcile net income to net cash provided by operating activities: LIFO expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,007 4,051 Amortization of goodwill. . . . . . . . . . . . . . . . . . . . . . . . 1,032 1,041 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 2,726 3,211 Amortization of debt refinancing fees . . . . . . . . . . . . . . . . . 783 1,573 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 121 64 Other adjustments for non-cash and non-operating activities . . . . . . 193 20 Changes in operating assets and liabilities, net of acquisitions. . . . 6,382 25,048 ------- ------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . 14,595 36,359 ------- ------- INVESTING ACTIVITIES: Net assets of acquired businesses . . . . . . . . . . . . . . . . . . . (21,361) -- Additions to property and equipment . . . . . . . . . . . . . . . . . . (6,196) (2,699) ------- ------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (27,557) (2,699) ------- ------- FINANCING ACTIVITIES: Net borrowings (payments) under revolving credit agreement . . . . . . 3,998 (104,387) Net proceeds from securitization of trade accounts receivable (see Note 6) -- 70,000 Debt refinancing fees . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,273) ------- ------- Net cash provided by (used in) financing activities . . . . . . . . . . . . 3,998 (35,660) ------- ------- Effects of changes in foreign exchange rates. . . . . . . . . . . . . . . . 24 (310) ------- ------- Decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,940) (2,310) Cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 25,769 15,281 ------- ------- CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,829 $12,971 ------- ------- ------- ------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash payments during the period for: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,778 $7,868 Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,248 1,110
See Notes to Condensed Consolidated Financial Statements. 5 SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) 1. BASIS OF PRESENTATION The condensed consolidated balance sheet as of June 30, 1998, the condensed consolidated statements of income for the three-month and six-month periods ended June 30, 1997 and 1998, and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 1997 and 1998, have been prepared by Core-Mark International, Inc. (the "Company"). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at June 30, 1998 (subject to year-end adjustments) with respect to the interim financial statements, and of the results of its operations and cash flows for the interim periods then ended, have been included. 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, 1997, 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 of the Company included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 ("1997 Form 10-K") include a description of the Company's significant accounting policies and additional information pertinent to an understanding of both the December 31, 1997 balance sheet and the interim financial statements included herein. 2. INVENTORIES The condensed consolidated financial statements have been prepared using the LIFO method of accounting for inventories. The use of the LIFO method resulted in an increase in cost of goods sold and a corresponding decrease in inventories of $0.6 million and $3.3 million for the three months ended June 30, 1997 and 1998, respectively, and $1.0 million and $4.1 million for the six months ended June 30, 1997 and 1998, respectively. Interim LIFO calculations are based on management's estimates of year-end inventory levels and inflation rates for the year. 3. EXCISE TAXES State and provincial excise taxes paid by the Company on cigarettes were $129.6 million and $116.4 million for the three months ended June 30, 1997 and 1998, respectively, and $243.4 million and $228.6 million for the six months ended June 30, 1997 and 1998, respectively. These amounts are included in net sales and cost of goods sold for the periods indicated. 4. ACQUISITION OF THE SOSNICK COMPANIES On February 3, 1997, the Company consummated a transaction, pursuant to a Purchase Agreement dated January 31, 1997, to acquire certain assets and the business of two related companies, Melvin Sosnick Company and Capital Cigar Company (collectively "Sosnick" or the "Sosnick Companies"), a wholesale distributor to the convenience retail market in northern California and northern Nevada. Sosnick operated in the same geographic marketplace as the Company and provided similar products and services. The Company's net sales for the six-month period ended June 30, 1997 would have been $1,157 million if the acquisition had occurred as of January 1, 1997. The Company's net sales for the three-month period ended June 30, 1997 includes Sosnick sales for the entire period. The impact of the acquisition on net income would not have been material for the six-month period ended June 30, 1997. 6 5. NEW ACCOUNTING PRONOUNCEMENT Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual financial statement that is displayed with the same prominence as other annual financial statements. This Statement also requires that an entity classify items of other comprehensive earnings by their nature in an annual financial statement. Other comprehensive loss represents foreign currency translation adjustments made during the respective quarters. Comprehensive income will be presented in the Company's annual financial statements and prior periods will be reclassified, as required. The Company's total comprehensive income was as follows (in thousands):
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1997 1998 1997 1998 ---- ---- ---- ---- Net income.................... $2,289 $1,362 $2,351 $1,351 Other comprehensive loss...... (282) (784) (330) (310) ------ ------ ------ ------ Total comprehensive income.. $2,007 $578 $2,021 $1,041 ------ ------ ------ ------ ------ ------ ------ ------
6. ASSET SECURITIZATION On April 1, 1998, the Company entered into a transaction to securitize its U.S. trade accounts receivable portfolio ("Accounts Receivable Facility"). In connection with this transaction, the Company formed a wholly-owned special purpose, bankruptcy-remote subsidiary (the "Special Purpose Company" or "SPC"), to which the U.S. trade accounts receivable originated by the Company are sold or contributed, without recourse, pursuant to a receivables sale agreement. The receivables have been assigned, with a call option by the SPC, to a trust formed pursuant to a pooling agreement. On April 1, 1998, the SPC issued two classes of term certificates with an aggregate principal value of $55 million, and variable certificates of up to $30 million representing fractional undivided interests in the receivables and the proceeds thereof. On a daily basis, collections related to sold receivables are administered by the Company acting as servicer, pursuant to a servicing agreement. Pursuant to supplements to the pooling agreement, certificate holders' accrued interest expense and other securitization expenses are reserved out of daily collections, before such remaining collections are returned to the Company by the SPC to pay for the SPC's purchase of newly originated receivables from the Company. The revolving period of the securitization expires in January 2003, or earlier if an early amortization event, as defined in the pooling agreement, occurs. The interest rate on the fixed term certificates is 0.28% (Class A) and 0.65% (Class B) above the Eurodollar Rate which was 5.66% as of June 30, 1998. The interest rate on the variable certificates is 0.50% above the commercial paper rate (as defined in the securitization agreement), which was 5.60% as of June 30, 1998. In connection with the securitization of accounts receivable, the Company amended its Revolving Credit Facility. The amendment reduced the available credit facility from $175 million to $120 million, reduced its interest rates from 1.5% to 1.0% above the Prime Rate, and from 2.5% to 2.0% above the Eurodollar Rate, as defined in the amendment, and extended the maturity through April, 2003. As a result of this modification, the Company wrote off $0.9 million of unamortized refinancing costs relating to the Revolving Credit Facility in the second quarter of 1998. The net result of the (i) securitization of the Company's U.S. trade accounts receivable portfolio and (ii) the modification of the Revolving Credit Facility was to lower the Company's cost of borrowings, and to increase its variable-rate borrowing capacity from $175 million to $205 million. The Company incurred approximately $1.7 million for legal, professional and other costs related to the transactions described above. These costs were capitalized and classified as other assets and are being amortized over the term of these transactions. 7 The following discussion should be read in conjunction with Management's Discussion and Analysis included in the Company's 1997 Form 10-K. GENERAL The Company is one of the largest broad-line, full-service wholesale distributors of packaged consumer products to the convenience retail industry in western 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 six-month period ended June 30, 1998, approximately 67%, 22% and 11% of the Company's net sales were derived from cigarettes, food products and non-food products, respectively. TOBACCO INDUSTRY BUSINESS ENVIRONMENT Manufacturers and distributors of cigarettes and other tobacco products in the United States are currently facing a number of significant issues that affect the business environment in which they operate including proposed additional governmental regulation (see Part II, Item 1. "Legal Proceedings - Regulatory Matters"); actual and proposed excise tax increases (see "Impact of Tobacco Taxes"); increased litigation involving health and other effects of cigarette smoking and other uses of tobacco (see Part II, Item 1. "Legal Proceedings - Legal Matters"); and proposed legislative action to resolve certain regulatory and litigation issues affecting the U.S. tobacco industry described below. In June 1997, a so called "national settlement" of many of these issues was proposed (referred to herein as the "Proposed Settlement") following negotiations among major U.S. tobacco manufacturers, state attorneys general, representatives of the public health community and attorneys representing plaintiffs in certain smoking and health litigation. The Proposed Settlement can be implemented only by federal legislation. In April 1998, the Senate Commerce Committee overwhelmingly approved a Bill sponsored by Senator McCain (the "McCain Bill"), which would have replaced the Proposed Settlement. The McCain Bill would have substantially changed the Proposed Settlement by, among other things, enacting substantial increases to federal excise taxes on tobacco products without affording the tobacco manufacturers and other industry participants protection from private litigation, which is a significant aspect of the Proposed Settlement. In June 1998, the bill sponsored by Senator McCain failed to pass the Senate. The major U.S. cigarette manufacturers disclosed in a report dated October 8, 1997 to a U.S. Senate task force that, if the Proposed Settlement were enacted in its then current form, among other things, prices of cigarettes would increase significantly and cigarette consumption would decline, although it is not possible to forecast, with any degree of confidence, the magnitude of the decline in consumption. Although the Company cannot predict whether federal legislation reflecting the Proposed Settlement will be enacted or if other legislation, similar to the McCain Bill, would be enacted, the Company believes that any form of federal legislation will cause significant increases in the prices of cigarettes. In addition, although no new federal legislation has been enacted or any type of national settlement agreed to, the U.S. cigarette manufacturers have continued to settle lawsuits individually, and have been raising the wholesale prices of cigarettes to fund the cost of such settlements. The Company believes that significant increases in the prices of cigarettes would negatively affect the Company's business of distributing tobacco products by decreasing the volume of sales of tobacco products and as a result of the impact of increases in cigarette prices on its working capital (see "Liquidity and Capital Resources"). The Company does not believe it is able to quantify the impact that the Proposed Settlement or other future legislation or governmental regulation affecting cigarettes and other tobacco products will have on future sales of cigarettes and other tobacco products. However, based upon various industry estimates of wholesale price increases which would result from different settlement scenarios, the Company's debt levels and interest expense would significantly increase. Depending upon the ultimate level of actual wholesale price increases, or if the terms of state and provincial excise taxes were adversely changed, or if the volume of cigarettes sold by the Company significantly declined as a result of higher prices, or taxes, or both, the Company may be required to seek additional financing in order to meet such higher working capital requirements. 8 The Company's business strategy has included and continues to include increasing sales of higher margin, non-tobacco products, a strategy which is intended to lessen the impact of potential future declines in unit sales and profitability of its tobacco distribution business. RESULTS OF OPERATIONS The following table sets forth certain operating results as a percentage of net sales for the periods indicated:
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------- --------------------- 1997 1998 1997 1998 ---- ---- ---- ---- Net sales..................................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold............................ 92.4 92.7 92.4 92.7 ----- ----- ----- ----- Gross profit.................................. 7.6 7.3 7.6 7.3 Operating and administrative expenses......... 6.1 6.1 6.4 6.2 ----- ----- ----- ----- Operating income............................ 1.4% 1.2% 1.2% 1.0% ----- ----- ----- ----- ----- ----- ----- -----
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997 NET SALES. Net sales for the three months ended June 30, 1998 were $609.1 million, a decrease of $5.9 million or 1.0% from the comparable period in 1997. Net sales of cigarettes for the three months ended June 30, 1998 were $408.1 million, a decrease of $0.3 million or 0.1% from the comparable period in 1997. The Company's total cigarette unit sales for the three months ended June 30, 1998 were 21.9 million cartons, a decrease of 1.8 million cartons or 7.6% from the comparable period in 1997. The decrease in volume sales was due primarily to increased price competition in California. The decrease in net sales due to volume declines was significantly offset by increases in manufacturers' list prices during the quarter that were passed along to the Company's customers. Net sales of food and non-food products for the three months ended June 30, 1998 were $200.9 million, a decrease of $5.6 million or 2.7% from the comparable period in 1997. The decrease was due primarily to increased competition in California. The decrease occurred primarily in candy sales, which decreased $6.1 million or 9.5%, cigar and tobacco sales, which decreased $2.2 million or 5.7%, and retail beverage sales, which decreased $1.1 million or 5.2%. The decreases were partially offset by increases in sales of fast food of $1.2 million or 5.1% and increases in snack sales of $0.9 million or 6.0%. GROSS PROFIT. Gross profit for the three months ended June 30, 1998 was $44.4 million, a decrease of $2.1 million or 4.6% from the comparable period in 1997. The decrease was primarily due to declines in sales volume in the cigarette category, and from sales declines in the food and non-food product categories. The gross profit margin for the three months ended June 30, 1998 decreased to 7.3% of net sales as compared to 7.6% of net sales for the comparable period in 1997. This was primarily due to the fact that while cigarette gross profit per unit remained unchanged, overall cigarette prices per unit have increased due to increases in manufacturers' list prices. For the three months ended June 30, 1998, the Company recognized LIFO expense of $3.3 million compared to $0.4 million for the comparable period in 1997. The increase in LIFO expense was due to manufacturers' price increases, and was significantly offset by gains resulting from increases in manufacturers' list prices during the quarter. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the three months ended June 30, 1998 were $37.0 million, a decrease of $0.7 million or 1.8% from the comparable period in 1997. Operating expenses were 6.1% of net sales for the three months ended June 30, 1998 and June 30, 1997. 9 OPERATING INCOME. As a result of the foregoing factors, operating income for the three months ended June 30, 1998 was $7.4 million, a decrease of $1.5 million or 16.6% compared to the comparable period in 1997. As a percentage of net sales, operating income for the three months ended June 30, 1998 was 1.2%, as compared to 1.4% for the comparable period in 1997. NET INTEREST EXPENSE. Net interest expense for the three months ended June 30, 1998 was $3.7 million, a decrease of $1.0 million or 20.7% compared to the 1997 period. The net decrease resulted from a decrease in the Company's borrowing rates as a result of the asset securitization and a decrease in average debt levels. DEBT REFINANCING COSTS. Debt refinancing costs for the three months ended June 30, 1998 were $1.2 million, an increase of $0.8 million or 206.6% over the comparable period in 1997. This increase resulted primarily from a one-time write off of unamortized costs relating to the modification of the Revolving Credit Facility (see Note 6 - Asset Securitization). SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997 NET SALES. Net sales for the six months ended June 30, 1998 were $1,172.3 million, an increase of $29.4 million or 2.6% over the comparable period in 1997. The increase in net sales was due to an increase in net sales of cigarettes and food and non-food products in 1998 compared to 1997. Net sales of cigarettes for the six months ended June 30, 1998 were $783.3 million, an increase of $19.1 million or 2.5% over the prior year. The increase in net sales of cigarettes was principally due to increases in manufacturers' list prices that were passed along to the Company's customers. The Company's total cigarette unit sales for the six months ended June 30, 1998 were 42.9 million cartons, a decrease of 1.8 million or 4.1% from the same period in 1997. Substantially all of this decline occurred in the second quarter. Net sales of food and non-food products for the six months ended June 30, 1998 were $389.0 million, an increase of $10.3 million or 2.7% over the comparable period in 1997. The increase resulted from the Company's continued focus on increasing food and non-food product sales and occurred primarily in fast food sales, which increased $5.8 million or 13.8%, snack sales, which increased $3.6 million or 13.9%, and general merchandise sales, which increased $2.3 million or 7.9%. The increases were partially offset by a decrease in candy sales of $3.5 million or 2.8% which resulted primarily from increased competition in California. GROSS PROFIT. Gross profit for the six months ended June 30, 1998 was $85.1 million, a decrease of $1.6 million or 1.8% from the comparable period in 1997. The decrease was primarily due to declines in sales volume in the cigarette category. The gross profit margin for the six months ended June 30, 1998 decreased to 7.3% of net sales as compared to 7.6% of net sales for the first six months of 1997. This decrease was primarily due to the fact that while cigarette gross profit per unit remained unchanged, overall cigarette prices per unit have increased due to increases in manufacturers' list prices, and lower margins earned on net sales from the food and non-food categories. For the six months ended June 30, 1998, the Company recognized LIFO expense of $4.1 million compared to $1.0 million for the comparable period in 1997. The increase in LIFO expense was due to inflation in the cigarette category, and was significantly offset by gains resulting from increases in manufacturers' list prices. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the six months ended June 30, 1998 were $73.1 million, an increase of $0.1 million or 0.2% over the comparable period in 1997. However, such expenses for the six months ended June 30, 1998 decreased to 6.2% of net sales as compared to 6.4% for the comparable period in 1997. The higher expenses as a percent of sales in the 1997 period reflect approximately $2.2 million (0.2% of 1997 net sales) of one-time duplicative facility costs as a result of the Sosnick acquisition. OPERATING INCOME. As a result of the foregoing factors, operating income for the six months ended June 30, 1998 was $12.0 million, a decrease of $1.7 million or 12.4% compared to the comparable period in 1997. As a percentage of net sales, operating income for the six months ended June 30, 1998 was 1.0%, as compared to 1.2% for the comparable period in 1997. NET INTEREST EXPENSE. Net interest expense for the six months ended June 30, 1998 was $8.0 million, a decrease of $1.0 million or 11.7% compared to 1997. The net decrease resulted primarily from a decrease in the Company's borrowing rates as a result of the asset securitization and a decrease in average debt levels. DEBT REFINANCING COSTS. Debt refinancing costs for the six months ended June 30, 1998 were $1.6 million, an increase of $0.8 million or 100.9% over the comparable period in 1997. This increase resulted primarily from a one-time write off of unamortized costs relating to the modification of the Revolving Credit Facility (see Note 6 - Asset Securitization). 10 LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise primarily from the funding of its working capital needs, capital expenditure programs and debt service requirements with respect to its credit facilities. The Company has no mandatory reductions of principal on its Revolving Credit Facility, its Accounts Receivable Facility, or its $75 million Senior Subordinated Notes scheduled prior to their final maturities in 2003. The Company has historically financed its operations through internally generated funds and borrowings under its credit facilities. Significant increases in the cost of cigarettes would occur if legislation were approved to enact the Proposed Settlement, or if future legislation similar to the McCain Bill were enacted. Based upon various industry estimates of wholesale price increases which would result from different settlement scenarios, the Company's required working capital would increase significantly. Depending upon the ultimate level of actual wholesale price increases, or if the terms of state and provincial excise taxes were adversely changed, or if the volume of cigarettes sold by the Company significantly declined as a result of higher prices, or taxes, or both, the Company could be required to seek additional financing in order to meet such higher working capital requirements. Any significant increase in debt would also increase the company's interest expense. The Company's debt obligations totaled $162.6 million at June 30, 1998, a decrease of $34.4 million from $197.0 million at December 31, 1997. The net decrease in outstanding debt is primarily due to decreased borrowings needed to finance working capital funding requirements. Debt requirements are generally the highest at December 31, when the Company historically carries higher inventory. The Company's principal sources of liquidity are net cash provided by operating activities and its credit facilities. At year end, the Company typically carries higher inventories which 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. The Company made capital expenditures of $2.7 million for the six months ended June 30, 1998. For the remainder of 1998, the Company estimates it will spend approximately $5 million for capital requirements, principally consisting of warehouse facilities and other equipment. These expenditures are expected to be funded out of net cash provided by operating activities and its credit facilities. On April 1, 1998, the Company entered into a transaction to securitize its U.S. trade accounts receivable portfolio ("Accounts Receivable Facility"). In connection with this transaction, the Company formed a wholly-owned special purpose, bankruptcy-remote subsidiary (the "Special Purpose Company" or "SPC"), to which the U.S. trade accounts receivable originated by the Company are sold or contributed, without recourse, pursuant to a receivables sale agreement. The receivables have been assigned, with a call option by the SPC, to a trust formed pursuant to a pooling agreement; the SPC issued two classes of term certificates with an aggregate principal value of $55 million, and variable certificates of up to $30 million representing fractional undivided interests in the receivables and the proceeds thereof. The revolving period of the securitization expires in January 2003, or earlier if an early amortization event, as defined in the pooling agreement, occurs. The interest rate on the fixed term certificates is 0.28% (Class A) and 0.65% (Class B) above the Eurodollar Rate, which was 5.66% as of June 30, 1998. The interest rate on the variable certificates is 0.50% above the commercial paper rate (as defined in the securitization agreement), which was 5.60% as of June 30, 1998. In connection with the securitization of accounts receivable, the Company amended its Revolving Credit Facility. The amendment reduced the available credit facility from $175 million to $120 million, reduced its interest rates from 1.5% to 1.0% above the Prime Rate, and from 2.5% to 2.0% above the Eurodollar Rate, as defined in the amendment, and extended the maturity through April, 2003. As a result of this modification, the Company wrote off $0.9 million of unamortized refinancing costs relating to the Revolving Credit Facility in the second quarter of 1998. The net result of the (i) securitization of the Company's U.S. trade accounts receivable portfolio and (ii) the modification of the Revolving Credit Facility was to lower the Company's cost of borrowings, and to increase its variable-rate borrowing capacity from $175 million to $205 million. YEAR 2000 The Company is currently in the process of modifying or replacing its computer systems in order to be year 2000 compliant. This activity is expected to continue through 1999, and is not expected to have a material impact on the financial position or results of operations of the Company in any given year. However, due to the interrelated nature of computer systems, the Company may be impacted in the year 2000 depending on whether entities not affiliated with the Company have addressed this issue successfully. Expenses related to this process are being expensed as incurred. 11 IMPACT OF TOBACCO TAXES State and Canadian 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. In general, such taxes have been increasing, and several states and Canadian provinces are currently weighing proposals for higher excise taxes on cigarettes and other tobacco products. 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 was incurred without the benefit of credit terms, the Company would incur a substantial permanent increase in its working capital requirements and might be required to seek additional financing in order to meet such higher 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). The U.S. federal excise tax on cigarettes is currently $2.40 per carton of cigarettes. In August 1997, legislation was enacted that will raise the federal excise tax by $1.00 per carton of cigarettes starting in the year 2000 and by an additional $.50 per carton of cigarettes in 2002. Unlike the state and provincial taxes described above, U.S. federal excise taxes on cigarettes are paid by the cigarette manufacturers and passed through to the Company as a component of the cost of cigarettes. Such increases in U.S. federal taxes increase the Company's working capital requirements by increasing the balances of its inventories and accounts receivable. The President as well as various members of Congress have suggested additional excise taxes on cigarette and tobacco products, either as part of the Proposed Settlement discussed above or to finance unrelated federal spending. Depending upon the ultimate level of any increase in federal excise taxes, the Company may be required to seek additional financing in order to meet its higher working capital requirements. NEW ACCOUNTING STANDARDS In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This Statement revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. This Statement standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures. Restatement of disclosures for earlier periods is required. This Statement is effective for the Company's financial statements for the year ended December 31, 1998. In March 1998, the American Institute of Certified Public Accountants issued Statement of Opinion ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for the costs of computer software developed or obtained for internal use. This SOP requires that entities capitalize certain internal-use software costs once certain criteria are met. Currently, the Company generally expenses the costs of developing or obtaining internal-use software as incurred. The Company is currently evaluating SOP 98-1, but does not expect it to have a material impact on its consolidated financial statements. This SOP is effective for the Company's financial statements for the year ended December 31, 1999. Earlier application is encouraged in fiscal years for which annual financial statements have not been issued. 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings REGULATORY MATTERS 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 the establishment of a federal minimum age of 18 for the sale of tobacco products with proof of age for anyone under the age of 27. The status of U.S. Food and Drug Administration (the "FDA") regulation is described in more detail in the Company's 1997 Annual Report on Form 10-K. While neither the FDA regulations nor the pending legislation would impose restrictions on the sale of cigarettes and smokeless tobacco products to adults, there can be no assurance such restrictions will not be proposed in the future or that any such proposed legislation or regulations would not result in a material reduction of the consumption of tobacco products in the United States or 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 or are considering future significant regulatory restrictions on tobacco products which are more fully described in the Company's 1997 Annual Report on Form 10-K. The Company is unable to assess the future effects that these various proposals may have on the sale of the Company's products. 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 as defendants. In October 1996, a subsidiary of the Company was named as a defendant in a class action lawsuit filed in state court in New Mexico. 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. In January 1998, the Company was served with a summons and First Amended Complaint in an action brought by Operating Engineers Local 12 Health and Welfare Trust (on behalf of itself and all others similarly situated), in the United States District Court for the Central District of California, against major tobacco manufacturers, the Company, and other distributors and retailers of tobacco products. The complaint seeks, inter alia, compensatory and punitive damages, restitution for monies expended by the Trust for health care of its members who have used tobacco products, and forms of injunctive relief. In March 1998, the Company was named as a defendant in a class action complaint filed in a state court in Salt Lake City, Utah. The other defendants include the principal U.S. tobacco manufacturers as well as several other distributors. The case is brought on behalf of a class of smokers who reside in Utah and who have purchased cigarette products distributed by the Company and alleges, among other things, the members of the class have suffered personal injuries and economic losses from the use of such cigarettes. The suit seeks, on behalf of the class, compensatory damages, punitive damages, equitable relief including the establishment of a medical monitoring fund and return of monies spent to purchase cigarette products. In June 1998 the Court granted a motion to dismiss the distributors from the litigation. 13 In April, May and June 1998, the Company was named as a defendant in 17 similar actions brought by various union health and welfare trusts, filed in state courts of several counties in Northern California against major tobacco manufacturers as well as other distributors. The complaints seek, inter alia, compensatory and punitive damages, restitution for monies expended by the trusts for health care of its members who have used tobacco products, and forms of injunctive relief. On May 19, 1998, a division of the Company was named a defendant and served in an individual tobacco litigation complaint filed in a state court in Broward County, Florida. The other defendants include the principal U.S. tobacco manufacturers as well as other distributors/retailers. The case is brought on behalf of two individuals, residents of Florida, who have purchased cigarette products distributed by the Company, and alleges, among other things, the plaintiffs have suffered personal injuries and economic losses from the use of such cigarettes. The suit seeks, on behalf of the plaintiffs, compensatory damages and punitive damages. The Company does not believe that these actions will have a material adverse effect on the Company's financial condition. The Company has been indemnified with respect to certain claims alleged in each of the above actions. 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. Item 2: Changes in Securities Not applicable Item 3: Defaults Upon Senior Securities Not applicable Item 4: Submission of Matters to a Vote of Security Holders Not applicable Item 5: Other Information Not applicable Item 6: Exhibits and Reports on Form 8-K (a) Exhibits 10.14 $120,000,000 Amended and Restated Credit Agreement dated as of April 1, 1998, among Core-Mark International, Inc., the Several Lenders from Time to Time Parties Thereto and The Chase Manhattan Bank, as Administrative Agent. 10.16 Amended and Restated Security Agreement dated as of April 1, 1998, 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. 10.17 Amendment to Borrower Stock Pledge Agreement dated as of April 1, 1998, between Core-Mark International, Inc., and The Chase Manhattan Bank, as Administrative Agent. 14 10.18 Pooling Agreement, dated as of April 1, 1998, among Core-Mark Capital Corporation, Core-Mark International, Inc., as Servicer, and The Chase Manhattan Bank, as Trustee. 10.19 Series 1998-1 Supplement to the Pooling Agreement, dated as of April 1, 1998, among the Core-Mark Capital Corporation, Core-Mark International, Inc., as Servicer, and The Chase Manhattan Bank. 10.20 Series 1998-2 Supplement to the Pooling Agreement, dated as of April 1, 1998, among Core-Mark Capital Corporation, Core-Mark International, Inc., as Servicer, and The Chase Manhattan Bank. 10.21 Servicing Agreement, dated as of April 1, 1998, among Core-Mark Capital Corporation, Core-Mark International, Inc., as Servicer, Subsidiaries of Core-Mark International, Inc., as Subservicers, and The Chase Manhattan Bank. 10.22 Receivables Sale and Contribution Agreement, dated as of April 1, 1998, among Core-Mark Capital Corporation, Core-Mark International, Inc., Core-Mark Midcontinent, Inc., and Core-Mark Interrelated Companies, Inc., as Sellers. 21 List of Subsidiaries of the Company 27 Financial Data Schedule (b) Reports on Form 8-K During the second quarter of 1998, the Company filed no reports on Form 8-K. 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of South San Francisco, California, on August 14, 1998. CORE-MARK INTERNATIONAL, INC. By: /s/ LEO F. KORMAN ----------------------------------------- Leo F. Korman, Senior Vice President and Chief Financial Officer 16 EX-10.14 2 EXHIBIT 10.14 EXECUTION COPY Exhibit 10.14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $120,000,000 AMENDED AND RESTATED 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 April 1, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS. . . . . . . . . . . . . . . . . . . . 24 2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . 24 2.2 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . 24 2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.4 Termination or Reduction of Commitments. . . . . . . . . . . . . . . . . 25 2.5 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . . . 25 2.6 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.7 Mandatory Prepayments and Other Reductions of Revolving Credit Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.8 Conversion and Continuation Options. . . . . . . . . . . . . . . . . . . 27 2.9 Maximum Number of Tranches . . . . . . . . . . . . . . . . . . . . . . . 27 2.10 Interest Rates and Payment Dates. . . . . . . . . . . . . . . . . . . . 27 2.11 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . . . 28 2.12 Inability to Determine Interest Rate. . . . . . . . . . . . . . . . . . 29 2.13 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . 29 2.14 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.15 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.17 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.18 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.2 Procedure for Issuance of Letters of Credit. . . . . . . . . . . . . . . 34 3.3 Fees, Commissions and Other Charges. . . . . . . . . . . . . . . . . . . 35 3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . . . 36 3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . 37 3.7 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . . . . . . 37 3.8 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 38 4.1 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.2 No Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . 38 4.4 Corporate Power; Authorization; Enforceable Obligations. . . . . . . . . 39 4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Page ---- 4.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . 39 4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.10 No Burdensome Restrictions. . . . . . . . . . . . . . . . . . . . . . . 40 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.14 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . 41 4.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.16 Purpose of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.18 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . 42 4.19 Security Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.20 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 5. CONDITIONS TO EFFECTIVENESS. . . . . . . . . . . . . . . . . . . . . . 43 5.1 Conditions to Restatement Effective Date . . . . . . . . . . . . . . . . 43 5.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . . . 46 SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 46 6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.2 Certificates; Other Information. . . . . . . . . . . . . . . . . . . . . 47 6.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . 49 6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . 49 6.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . 49 6.7 Annual Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 6.9 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.11 Cash Management System. . . . . . . . . . . . . . . . . . . . . . . . . 51 6.12 Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.13 Tax Stamp Bonding.. . . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.14 Compliance with Terms of Leaseholds.. . . . . . . . . . . . . . . . . . 52 SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.1 Financial Condition Covenants. . . . . . . . . . . . . . . . . . . . . . 53 7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 54 7.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 55 7.4 Limitation on Guarantee Obligations. . . . . . . . . . . . . . . . . . . 56 7.5 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . . . . 57 7.6 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . 57 7.7 Limitation on Speculative Transactions . . . . . . . . . . . . . . . . . 58 7.8 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 58 7.9 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . . . . 58 7.10 Limitation on Investments, Loans and Advances . . . . . . . . . . . . . 59
-ii-
Page ---- 7.11 Limitation on Optional Payments and Modifications of Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 7.12 Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . 59 7.13 Limitation on Sales and Leasebacks. . . . . . . . . . . . . . . . . . . 60 7.14 Limitation on Changes in Fiscal Year. . . . . . . . . . . . . . . . . . 60 7.15 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . 60 7.16 Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . 60 SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 9. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . 63 9.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . 64 9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.6 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . 65 9.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.8 Administrative Agent in Its Individual Capacity. . . . . . . . . . . . . 66 9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . 66 SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 10.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 66 10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 10.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . 68 10.4 Survival of Representations and Warranties. . . . . . . . . . . . . . . 68 10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . 68 10.6 Successors and Assigns; Participations and Assignments. . . . . . . . . 69 10.7 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.10 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.12 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . . . . . 72 10.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.14 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . 73 10.15 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.16 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.17 Special Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 74
-iii- ANNEXES Annex A Fee and Applicable Margin Table 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 Borrowing Base Certificate Exhibit C Form of Borrowing Certificate Exhibit D Form of Responsible Officer's Certificate Exhibit E Form of Supplemental Reporting Exhibit F-1 Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison Exhibit F-2 Form of Opinion of Sheppard, Mullin, Richter & Hampton, LLP Exhibit F-3 Form of Opinion of Stoel Rives LLP Exhibit F-4 Form of Opinions of Stikeman, Elliott; and Thompson Dorfman Sweatman Exhibit G Form of Assignment and Acceptance -iv- AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 1, 1998, 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. W I T N E S S E T H : WHEREAS, the Borrower, certain of the Lenders and the Administrative Agent are parties to that certain Credit Agreement, dated as of August 7, 1996 (as heretofore amended, the "EXISTING CREDIT AGREEMENT"); WHEREAS, subject to the terms and conditions of this Agreement, the Borrower, the Lenders and the Administrative Agent wish to amend and restate the Existing Credit Agreement in its entirety as provided herein; NOW, THEREFORE, subject to the satisfaction of the conditions set forth in subsection 5.1, the Borrower, the Lenders and the Administrative Agent hereby agree to amend and restate the Existing Credit Agreement in its entirety to read 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 and (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 2 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 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. "ADJUSTMENT DATE": the second Business Day following receipt by the Administrative Agent of both (a) the financial statements required to be delivered pursuant to subsection 6.1(a) or 6.1(b), as the case may be, for the most recently completed fiscal period and (b) the certificate required to be delivered pursuant to subsection 6.2(b) with respect to such fiscal period. "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. 3 "AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "APPLICABLE COMMITMENT FEE RATE": 0.375%, PROVIDED that, the Applicable Commitment Fee Rate will be adjusted, on each Adjustment Date occurring after the Restatement Effective Date, to the Commitment Fee Rate set forth on ANNEX A opposite the Category of the Borrower in effect on such Adjustment Date, PROVIDED, HOWEVER that the Applicable Commitment Fee Rate shall not be adjusted below Category 2 for a period of six months following the Restatement Effective Date, at which time the Applicable Commitment Fee Rate will be adjusted if necessary based on the Borrower's most recent financial statements. In the event that the financial statements required to be delivered pursuant to subsection 6.1(a) or 6.1(b), as applicable, and the related certificate required pursuant to subsection 6.2(b), are not delivered when due, the Administrative Agent or the Majority Lenders may, at their option, during the period from the date upon which such financial statements were required to be delivered until two Business Days following the date upon which they actually are delivered, increase the Applicable Commitment Fee Rate to 0.50%. "APPLICABLE MARGIN": for each Type of Revolving Loan, the rate per annum set forth under the relevant column heading below:
ABR LOANS EURODOLLAR LOANS --------- ---------------- 1.00% 2.00%
PROVIDED that, the Applicable Margin for each Type of Revolving Loan will be adjusted, on each Adjustment Date occurring after the Restatement Effective Date, to the Applicable Margin set forth on ANNEX A opposite the Category of the Borrower in effect on such Adjustment Date, PROVIDED, HOWEVER, that the Applicable Margin shall not be adjusted below Category 2 for a period of six months following the Restatement Effective Date, at which time the Applicable Margin will be adjusted if necessary based on the Borrower's most recent financial statements. In the event that the financial statements required to be delivered pursuant to subsection 6.1(a) or 6.1(b), as applicable, and the related certificate required pursuant to subsection 6.2(b), are not delivered when due, the Administrative Agent or the Majority Lenders may, at their option, during the period from the date upon which such financial statements were required to be delivered until two Business Days following the date upon which they actually are delivered, increase the Applicable Margin for ABR Loans to 1.50% and the Applicable Margin for Eurodollar Loans to 2.50%. "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. 4 "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, dated as of August 7, 1996, executed and delivered by the Borrower in connection with the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "BORROWING BASE": on any date of determination thereof, the sum (without duplication) of: a. 85% of the aggregate Eligible Canadian Accounts Receivable; b. 85% of the excess of the aggregate Eligible Canadian Cash Equivalents over the Canadian Cash Adjustment; c. 75% of the aggregate Eligible Vendor Receivables; d. 85% of the aggregate Eligible Cigarette Inventory purchased by the Borrower on zero day EFT terms; e. 65% of the aggregate Eligible Cigarette Inventory purchased by the Borrower on terms other than zero day EFT terms; f. 80% of the aggregate Eligible Tobacco and Cigar Inventory; g. 65% of the aggregate Eligible Other Inventory; and h. 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 B. "BORROWING DATE": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. 5 "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. "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. "CANADIAN RECEIVABLE OFFSETS": the aggregate Canadian credit balances of the Borrower (determined on an account debtor by account debtor basis) more than 45 days past due. "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 6 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 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. "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. "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. 7 "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 Uncovered L/C Amount shall have been permanently reduced to zero and (3) 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": $30,000 for rebates to customers subject to change by the Administrative Agent in its reasonable discretion based on the findings of the on-site periodic field exams conducted pursuant to subsection 6.7. 8 "DEFAULT": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DEPOSIT ACCOUNT LETTERS": has the meaning specified in the Security Agreement. "DEPOSIT ACCOUNTS": has the meaning specified in the Security Agreement. "DEPOSITORY LETTERS": has the meaning specified in the Security Agreement. "DOLLARS" and "$": 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 CANADIAN 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 9 owed by an obligor 25% or more of the outstanding balance of accounts receivable (that otherwise meet the requirements of clauses (n) and (o) of this definition) of which do not constitute Eligible Canadian 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 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 Canadian 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 Canadian 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 10 aggregate amount of the Inventory Reserves, Tax Reserves and Landlord Lien Reserves allocable to such Inventory. "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 11 (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 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. 12 "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "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. "EXISTING CREDIT AGREEMENT": as defined in the recitals hereto. "EXISTING CREDIT FACILITY": the Existing Credit Agreement. "EXISTING HIGH YIELD SUBORDINATED DEBT": Indebtedness of the Borrower evidenced by the High Yield Notes. "EXITING LENDER": a lender under the Existing Credit Facility who is not a Lender under this Agreement. "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. 13 "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 who delivered the Subsidiaries Guarantee. "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": $75,000,000 11-3/8% senior subordinated notes due 2003 of the Borrower issued pursuant to the indenture dated as of September 27, 1996. "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 14 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. Indebtedness of the Borrower and its Subsidiaries shall include, without limitation, the liabilities of the Receivables Sub under the Receivables Transaction whether or not such liabilities would be classified as indebtedness on a Consolidated balance sheet of the Borrower under GAAP. The principal amount of such liabilities at any time shall be deemed to be the Invested Amount at such time. "INSOLVENCY": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "INSOLVENT": pertaining to a condition of Insolvency. "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; 15 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 shall end on the Termination Date; (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. "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. "INVESTED AMOUNT": shall mean, with respect to any date of determination, an amount equal to the outstanding principal amount of the investment under the Receivables Transaction on such date. "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. "L/C FEE PAYMENT DATE": the last day of each March, June, September, and December, and the Termination Date. 16 "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. "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. 17 "NET INCOME": of any Person for any period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "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); plus any reduction in Net Worth attributable to the write-off on the Restatement Effective Date of up to $700,000 of fees paid by the Borrower in connection with the Existing Credit Facility. "NON-EXCLUDED TAXES": as defined in subsection 2.16. "NOTES": the Revolving Credit Notes. "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": 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 18 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 $5 million unless and until all such acquisitions which are less than $5 million exceed $10 million in the aggregate during the term of this Agreement. "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. "RECEIVABLES SALES DOCUMENTS": shall mean the following documents, each dated as of the Restatement Effective Date: the Receivables Sale and Contribution Agreement, among the Borrower, CMIC, CM Midcontinent and the Receivables Sub; the Pooling Agreement (the "POOLING AGREEMENT"), among the Receivables Sub, the Borrower and Chase; the Servicing Agreement, among the Receivables Sub, the Borrower and the other subsidiaries named therein; the 1998-1 Supplement, among the Receivables Sub, the Borrower and Chase; the 1998-2 Supplement, among the Receivables Sub, the Borrower, Chase and Park Avenue Receivables Corporation and any other supplements to the Pooling Agreement which may be entered into from time to time. "RECEIVABLES SUB": the wholly-owned Subsidiary, formed for the purpose of selling participations pursuant to the Receivables Transaction. "RECEIVABLES TRANSACTION": the transaction contemplated by the Receivables Sales Documents. "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. 19 "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. Section 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. "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). "RESTATEMENT EFFECTIVE DATE": the date on which the conditions to effectiveness set forth in subsection 5.1 shall be satisfied. "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 2.5(e). "SECURITY AGREEMENT": the Amended and Restated Security Agreement, dated as of the date hereof, executed and delivered by the Borrower and each of the 20 Subsidiaries (other than the Receivables Sub), as the same may be further 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 of the Borrower and its Subsidiaries outstanding at such date of determination, as determined on a consolidated basis in accordance with GAAP. "SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SOSNICK ACQUISITION": the acquisition, consummated on January 28, 1997, of substantially all of the assets of the Melvin Sosnick Company and Capital Cigar Company and the payment of related costs and expenses. "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). 21 "SUBORDINATED DEBT": the Existing High Yield Subordinated Debt and 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) on or before the Termination Date; 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, dated as of August 7, 1996, executed and delivered by each Subsidiary (other than the Receivables Sub) in connection with the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "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, CM Midcontinent and/or the Receivables Sub, 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 E. "TAX RESERVES": at any time, all unpaid and unbonded state and local municipality tax stamp liabilities. "TERMINATION DATE": the fifth anniversary of the Restatement Effective Date. "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 22 the definition thereof in subsection 1.1) as determined on a consolidated basis in accordance with GAAP. "TOTAL DEBT LEVERAGE RATIO": as of the last day of each fiscal quarter of the Borrower, the ratio of (i) Consolidated Total Debt of the Borrower at the last day of such fiscal quarter to (ii) Consolidated EBITDA of the Borrower for the period of four consecutive fiscal quarters of the Borrower ending on such last day. For purposes of computing Consolidated Total Debt of the Borrower, the amount of Revolving Credit Loans and Invested Amount 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. "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. "UNCOVERED L/C AMOUNT": $20,000,000. "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 23 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. "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 such Lender's Revolving Credit Commitment then constitutes of the Revolving Credit Commitments 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 (as in effect immediately prior to the termination of the Revolving Credit Commitments) 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. The phrase "date hereof" when used in this Agreement shall refer to the Restatement Effective Date. (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 24 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. 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 Borrowing Base. 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 2.8, 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, or (b) on the requested Borrowing Date, otherwise, 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 and (iv) 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 25 the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 2.3 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 but not including the Termination Date, computed at a rate per annum equal to the Applicable Commitment Fee Rate then in effect 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 Revolving Credit 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 Restatement Effective Date and on each anniversary thereof, the administration fee as specified in the Fee Letter dated January 23, 1998. 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 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender 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). 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 2.11. (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 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. 26 (d) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.5(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 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"). 2.6 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 2.17. 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 2.17. 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. 2.7 MANDATORY PREPAYMENTS AND OTHER REDUCTIONS OF REVOLVING CREDIT LOANS. If, at any time, the Aggregate Covered Outstanding Revolving Extensions of Credit at such time exceed the Borrowing Base 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 2.17 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 Borrowing Base 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 27 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 2.7. 2.8 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. (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 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 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. 2.9 MAXIMUM NUMBER OF TRANCHES. In no event shall there be more than ten (10) Eurodollar Tranches outstanding at any time. 2.10 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 the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. (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 28 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. (e) Prior to the Restatement Effective Date, all principal amounts outstanding under the Existing Credit Facilities shall continue to be subject to the interest rates provided in the Existing Credit Agreement. From and after the Restatement Effective Date, the interest rates provided in subsections 2.10(a) and (b) hereof shall apply to all principal amounts then outstanding hereunder. 2.11 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. (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 2.10(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. 29 2.12 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. 2.13 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 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 30 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 Revolving Credit Loans shall be made ratably from the Lenders in accordance with their respective 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 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. 2.14 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 2.17. 2.15 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 2.16 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 31 (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. 2.16 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 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 32 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 Restatement Effective Date in the case of any Lenders not a party to the Existing Credit Facility, (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; 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. 33 (c) Neither the Administrative Agent nor any Lender shall be entitled to claim any indemnity payment or additional amount payable pursuant to this subsection 2.16 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. 2.17 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 Applicable Margin referred to in subsection 2.10, 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. 2.18 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any demand for payment under subsection 2.15 or 2.16(a), or if any adoption or change of the type described in subsection 2.14 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 2.15 or 2.16(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.14. 34 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. 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) 35 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) Subject to subsection 3.3(e), 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 the Applicable Margin (less any fronting fee paid pursuant to subsection 3.3(a)) then in effect for Eurodollar Loans, 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. (e) Prior to the Restatement Effective Date, the Borrower shall pay a letter of credit commission with respect to each Letter of Credit issued under the Existing Credit Facility at a per annum rate as provided under the Existing Credit Agreement. From and after the Restatement Effective Date, the letter of credit commission provided in subsection 3.3(b) hereof shall apply to all outstanding Letters of Credit issued prior to the Restatement Effective Date. 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 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 36 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 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. 37 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. 38 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. The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1996 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 September 30, 1997 and the related unaudited consolidated statements of income and of cash flows for the three and nine-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 nine-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, 1996 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, 1996, except for the Sosnick Acquisition. 4.2 NO CHANGE. (a) Except as set forth on Schedule 4.2, since December 31, 1996, 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, 1996, 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. 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 39 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 this Agreement 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 this Agreement. 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 this Agreement. This Agreement and each other Loan Document to which it is a party has been duly executed and delivered on behalf of the Borrower. This Agreement and each other Loan Document to which it is a party constitutes 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. 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 40 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. 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 41 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. The proceeds of the Revolving Credit Loans shall be used by the Borrower for general corporate purposes, to fund ongoing working capital and to finance future acquisitions of the Borrower and its Subsidiaries in the ordinary course of business. 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 42 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 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 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 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 43 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 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 constitutes 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; financing statements in appropriate form have been filed in the offices specified on Schedule 4.19(b) and, 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 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 Receivables Transaction, will continue to be, Solvent. SECTION 5. CONDITIONS TO EFFECTIVENESS 5.1 CONDITIONS TO RESTATEMENT EFFECTIVE DATE. This amendment and restatement of the Existing Credit Agreement shall become effective upon, and the agreement of each Lender to make the initial extension of credit requested to be made by it under the Existing Credit Agreement as so amended and restated is subject to the satisfaction of, immediately prior to or concurrently with the making of such extension of credit on the Restatement Effective Date, the following conditions: (a) LOAN DOCUMENTS. 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 and (ii) the Security Agreement, executed by a duly authorized officer of the Borrower and each Grantor named therein. 44 (b) RECEIVABLES TRANSACTION. The Receivables Transaction shall have been consummated and the Borrower shall have the ability to sell participations thereunder and/or to issue term and variable funding certificates thereunder in an aggregate face amount of not less than $70 million. (c) BORROWING CERTIFICATE. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Restatement Effective Date, substantially in the form of Exhibit C, 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 the execution, delivery and performance of this Agreement and the borrowings contemplated hereunder and shall state that such resolutions 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 Restatement Effective Date, as to the incumbency and signature of the officer of the Borrower executing this Agreement 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 any Loan Document authorizing the execution, delivery and performance of such Loan Document(s), certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Restatement Effective 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 Restatement Effective 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) 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 45 force and effect, and each such consent, authorization and filing shall be in form and substance satisfactory to the Administrative Agent. (i) 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 Restatement Effective Date. (j) 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 F-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 F-2; (3) the executed legal opinion of Stoel Rives LLP, special counsel to the Administrative Agent and the Lenders in the State of Oregon, substantially in the form of Exhibit F-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 F-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; (k) REPAYMENT OF EXITING LENDERS; REPAYMENTS AND REBORROWINGS. The Administrative Agent shall have received evidence satisfactory to it that the commitments of Exiting Lenders under the Existing Credit Facility have been cancelled and such Exiting Lenders have received payment in full of their outstanding loans under the Existing Credit Facility and accrued interest and fees thereunder and have been released from their obligations in respect of outstanding letters of credit thereunder. In addition, the Borrower shall have effected such repayments and reborrowings hereunder from the Lenders such that, after giving effect thereto, the outstanding principal amount of the Revolving Credit Loans of each Lender shall be in proportion to the Revolving Commitment Percentages of the Lenders (after giving effect to the amendment and restatement hereof). (l) BORROWING BASE CERTIFICATE. The Administrative Agent shall have received 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, pursuant to subsection 6.2(f), which gives pro forma effect to the Receivables Transaction. 46 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: (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 47 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 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 (other than March, June, September and December) 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 48 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 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 D (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 49 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 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 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 50 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 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 once 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. 51 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. 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 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 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. 52 6.12 ADDITIONAL COLLATERAL. (a) With respect to any assets acquired on or after the Restatement Effective 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 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, on or subsequent to the Restatement Effective 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 Borrower Stock 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 other than the Receivables Sub (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 53 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. 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 to be less than 1.40 to 1.00. (b) MAINTENANCE OF NET WORTH. Permit Consolidated Net Worth of the Borrower at any time to be less than an amount equal to $6,500,000 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 ----------- ----- 12/31/97 - 9/30/98 4.00 to 1.00 12/31/98 - 9/30/01 and each four-quarter period thereafter 3.75 to 1.00
For purposes of computing Consolidated Senior Debt of the Borrower, the amount of Revolving Credit Loans and Invested Amount 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 Restatement Effective Date and ending on such date). 54 (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 ----------- ------ 9/30/97 - 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 and each four-quarter period thereafter $38,000,000
(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:
TEST PERIOD RATIO ----------- ----- 12/31/97 - 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 - 9/30/01 and each four quarter period thereafter 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) 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; (d) Indebtedness outstanding on August 7, 1996 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; (e) 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 55 amount not to exceed $75,000,000, in the case of the interest rate Hedge Agreements, and $40,000,000, in the case of foreign exchange rate Hedge Agreements, at any time outstanding; (f) 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; (g) Indebtedness constituting Existing High Yield Subordinated Debt; (h) Subordinated Debt of the Borrower (other than the High Yield Notes) in an aggregate principal amount not to exceed $2,000,000 at any one time outstanding; (i) 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; (j) 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; (k) 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; (l) Indebtedness of the type described in clause (f) of the definition of "Indebtedness" which is secured by Liens permitted under subsection 7.3; (m) 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; and (n) Indebtedness under the Receivables Transaction. 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; 56 (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 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 August 7, 1996 listed on Schedule 7.3, securing Indebtedness permitted by subsection 7.2(d) and new Liens created thereafter in connection with refinancings, refundings, renewals, and extensions described in subsection 7.2(d), PROVIDED that no such Lien is spread to cover any additional property after the Restatement Effective 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(c) 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; (j) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 7.2(b); and (k) Liens on the assets of the Receivables Sub pursuant to the Receivables Transaction. 7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or suffer to exist any Guarantee Obligation except: 57 (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(c), (d) and (e) or any leases for real property by any Subsidiary; and (c) the Subsidiaries Guarantee. 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; (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; and (d) as contemplated pursuant to the Receivables Transaction. 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 58 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; (f) as permitted by subsection 7.5; and (g) as contemplated pursuant to the Receivables Transaction. 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(e). 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 August 7, 1996 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, $11,500,000, for the 1997 fiscal year and $9,500,000, for each fiscal year thereafter, 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; PROVIDED, FURTHER, that any expenditures constituting a portion of the acquisition price of a business or a line of business acquired as a going concern and also classified as an acquisition covered by subsection 7.10 shall not be taken into account for purposes of determining compliance with the provisions of this subsection 7.9. 59 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, the lesser of (1) the Borrowing Base minus the Aggregate Outstanding Revolving Extensions of Credit 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) 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; (e) 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; (f) investments by the Borrower in its Subsidiaries and investments by such Subsidiaries in the Borrower and in other Subsidiaries; and (g) subject to the limitations set forth in subsection 7.2(e), investments constituting Hedge Agreements. 7.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT INSTRUMENTS. (a) Make any optional payment or prepayment on or optional redemption or optional purchase of any Indebtedness or receivables sold pursuant to the Receivables Transaction (other than (1) the Loans and (2) a refinancing of Indebtedness permitted by subsection 7.2(d)), 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). 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 60 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. 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(c) (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (c) any refinancing, refunding, renewal or extension permitted by subsection 7.2(d) (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) and (d) the Receivables Transaction, 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 61 Loan Party), and 6.12, Section 7, Section 5 of the Borrower Stock Pledge Agreement or Section 4 of the Security Agreement; or (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) an Early Termination (as defined in the Receivables Sales Documents) occurs; or (g) (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 62 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 (h) (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 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 (i) 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 (j) (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 (k) The Subsidiaries Guarantee shall cease, for any reason, to be in full force and effect or any Guarantor shall so assert; or (l) (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; 63 then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (g) 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 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 64 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 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 65 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 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 66 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 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 67 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 2.13, or reduce the percentage specified in the definition of 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 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: 650-589-4010 The Administrative Agent: Chase Securities Inc. 101 California Street, 27th Floor San Francisco, CA 94111 Attention: Wendy E. Gittings Fax: 415-954-9583 68 with a copy to: Chase Agent Bank Services 1 Chase Manhattan Plaza, 8th Floor New York, New York 10081 Attention: Janet Belden Fax: 212-552-5658 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, 2.7 or 2.12 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 transactions contemplated by, or any amendment, supplement or modification of, or 69 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 shall, to the maximum extent permitted by applicable law, be deemed to have 70 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 2.15, 2.16 and 2.17 (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 2.16 (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) Upon prior written notice to the Borrower, 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 G, 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 2.16 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. 71 (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 72 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 the State of New York sitting in the Borough of 73 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 74 normal banking 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. 10.17 SPECIAL PROVISIONS. (a) From and after the Restatement Effective Date, (i) each Exiting Lender shall cease to be a party to this Agreement, (ii) no Exiting Lender shall have any obligations or liabilities under this Agreement with respect to the period from and after the Restatement Effective Date and, without limiting the foregoing, no Exiting Lender shall have any Revolving Credit Commitment under this Agreement or any participation in any Letter of Credit outstanding hereunder and (iii) no Exiting Lender shall have any rights under the Existing Credit Agreement, this Agreement or any other Loan Document (other than rights under the Existing Credit Agreement expressly stated to survive the termination of the Existing Credit Agreement and the repayment of amounts outstanding thereunder). (b) The Lenders hereby waive any requirements for notice of prepayment, commitment terminations, minimum amounts of prepayments of Revolving Credit Loans (as defined in the Existing Credit Agreement), ratable reductions of Revolving Credit 75 Commitments (as defined in the Existing Credit Agreement) and ratable payments on account of the principal or interest of any Revolving Credit Loan (as defined in the Existing Credit Agreement) under the Existing Credit Agreement to the extent such prepayment, reductions or payments are required pursuant to subsection 5.1(k). (c) Each of the Exiting Lenders shall deliver to the Administrative Agent prior to the Restatement Effective Date written consent waiving its rights to pro-rata payment and pro-rata termination under the Existing Credit Agreement. (d) The Lenders hereby confirm that, from and after the Restatement Effective Date, all participations of the Lenders in respect of Letters of Credit outstanding hereunder pursuant to subsection 3.4(a) shall be based upon the Revolving Credit Commitment Percentages of the Lenders (after giving effect to this Agreement). (e) The Borrower hereby releases, effective as of the Restatement Effective Date, in full the Exiting Banks from their obligations in respect of the Revolving Credit Commitments (as defined in the Existing Credit Agreement) and, effective as of the Restatement Effective Date, the Lenders hereby assume such obligations, it being understood that such assumption is reflected in the Commitments of the Lenders hereunder. (f) The Borrower shall pay directly to each Exiting Lender, upon receiving an invoice from such Exiting Lender, any payments due under Section 2.20 of the Existing Credit Agreement. [Signature Pages Follow] 76 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: Sr. VP and CFO THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By: /s/ MARIAN N. SCHULMAN ------------------------------------- Name: Marian N. Schulman Title: Vice President BANKBOSTON, N.A., as a Lender By: /s/ R. BRANDON ------------------------------------- Name: R. Brandon Title: Director Address for Notices: BANKBOSTON, N.A. 100 Federal Street Boston, MA 02110 Attention: Kali Ramachandran Telecopy: 617-434-6241 UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ DAVID W. KINKELA ------------------------------------- Name: David W. Kinkela Title: Assistant Vice President Address for Notices: UNION BANK OF CALIFORNIA, N.A. 350 California Street 6th Floor San Francisco, CA 94104 Attention: David Kinkela Telecopy: (415) 705-5093 BANK OF MONTREAL, as a Lender By: /s/ LEON H. SINCLAIR ---------------------------- Name: Leon H. Sinclair Title: Director Address for Notices: BANK OF MONTREAL 601 South Figueroa Street Los Angeles, CA 90017 Attention: Maria Chachere Telecopy: 213-239-0617 LASALLE BUSINESS CREDIT, INC., as a Lender By: /s/ ROBERT C. ALEXANDER ------------------------------ Name: Robert C. Alexander Title: V.P. Address for Notices: LASALLE BUSINESS CREDIT, INC. One Centerpointe Drive, Suite 100 Lake Oswego, OR 97035 Attention: John Mundstock Telecopy: 503-684-4665 SANWA BUSINESS CREDIT CORPORATION, as a Lender By: /s/ RAFFI SHIRINYAN ---------------------------- Name: Raffi Shirinyan Title: Vice President Address for Notices: SANWA BUSINESS CREDIT CORPORATION 550 North Brand Blvd. Glendale, CA 91203 Attention: Sandra Sha Telecopy: 818-545-0095 U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ GREG WILSON ---------------------------- Name: Greg Wilson Title: Commercial Banking Officer Address for Notices: U.S. BANK NATIONAL ASSOCIATION 601 Second Avenue South, MPFP0702 Minneapolis, MN 55402-4302 Attention: Elliot Jaffee Telecopy: (612) 973-0825 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: /s/ PERRY VAVOULES ---------------------------- Name: Perry Vavoules Title: Senior Vice President Address for Notices: TRANSAMERICA BUSINESS CREDIT CORPORATION 555 Theodore Fremd Avenue, Suite C-301 Rye, NY 10580 Attention: Ron Walker Telecopy: (914) 921-0110 ERSTE BANK DER OSTERREICHISCHEN SPARKASSEN AG, as a Lender By: /s/ RIMA TERRADISTA ---------------------------- Name: Rima Terradista Title: Vice President By: /s/ JOHN S. RUNNION ----------------------------- Name: John S. Runnion Title: First Vice President Address for Notices: ERSTE BANK DER OSTERREICHISCHEN SPARKASSEN AG 280 Park Avenue West Building New York, NY 10017 Attention: Rima Terradista Telecopy: (212) 984-5627 BANQUE NATIONALE DE PARIS, as a Lender By: /s/ DAVID W. LOW --------------------------------- Name: David W. Low Title: Vice President and Manager By: /s/ JEFFREY S. KAJISA --------------------------------- Name: Jeffrey S. Kajisa Title: Assistant Vice President Address for Notices: BANQUE NATIONALE DE PARIS 180 Montgomery Street San Francisco, CA 94104 Attention: David Low Telecopy: (650) 296-8954 CREDITANSTALT CORPORATE FINANCE, INC., as a Lender By: /s/ JACK R. BERTGES ---------------------------- Name: Jack R. Bertges Title: Senior Vice President By: /s/ JAMES F. MCCANN --------------------------------- Name: James F. McCann Title: Vice President Address for Notices: CREDITANSTALT CORPORATE FINANCE, INC. 4 Embarcadero Center, Suite 1630 San Francisco, CA 94111 Attention: Jack R. Bertgus/James F. McCann Telecopy: (415) 481-0622 SCHEDULE 1.1 (a) CORE-MARK INTERNATIONAL, INC. REVOLVING CREDIT COMMITMENT ALLOCATIONS $120,000,000
BANKS TOTAL ALLOCATION THE CHASE MANHATTAN BANK $12,000,000.00 U.S. BANK NATIONAL ASSOCIATION 12,000,000.00 BANK OF MONTREAL 11,500,000.00 BANKBOSTON, N.A. 11,500,000.00 LASALLE BUSINESS CREDIT, INC. 11,500,000.00 UNION BANK OF CALIFORNIA, N.A. 11,500,000.00 SANWA BUSINESS CREDIT 10,000,000.00 CORPORATION TRANSAMERICA BUSINESS CREDIT 10,000,000.00 CORPORATION CREDITANSTALT CORPORATE FINANCE, INC. 10,000,000.00 BANQUE NATIONALE DE PARIS 10,000,000.00 ERSTE BANK DER OSTERREICHISCHEN 10,000,000.00 SPARKASSEN AG (FORMERLY GIROCREDIT) TOTALS 120,000,000.00
EXHIBIT A TO CREDIT AGREEMENT [FORM OF] REVOLVING CREDIT NOTE New York, New York $ , 1998 ---------- --------- -- 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) ____________ ($___________), 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 2.5 and 2.10 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 Amended and Restated Credit Agreement dated as of ___________ __, 1998 (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. 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: 2 Schedule A TO REVOLVING CREDIT NOTE LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- ------------------------------------------------------------------------------------------------------------------------------------ Amount Amount of Amount of ABR Loans Unpaid Principal Amount of Converted to Principal of Converted to Balance of Notation Date ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans ABR Loans Made By - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
Schedule B TO REVOLVING CREDIT NOTE
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS Interest Period Amount of Amount of Amount of Amount and Eurodollar Principal of Eurodollar Loans Unpaid Principal Eurodollar Converted to Rate with Eurodollar Loans Converted to Balance of Notation Date Loans Eurodollar Loans Respect Thereto Repaid ABR Loans Eurodollar Loans Made By - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EX-10.16 3 EXHIBIT 10.16 EXECUTION COPY Exhibit 10.16 ------------------------------- AMENDED AND RESTATED 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 April 1, 1998 ------------------------------- TABLE OF CONTENTS 1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 5 2. Grant of Security Interest; Release of Eligible Receivables. . . . . . . . . . 5 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1 Delivery of Instruments and Chattel Paper. . . . . . . . . . . . . . . . 8 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. . . . . . . . . . . . . . . . . . . . . . . . 10 5.1 Grantors Remain Liable under Accounts. . . . . . . . . . . . . . . . . . 10 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.5 Maintaining the Depository Accounts, the Deposit Accounts and the Canadian Cash Collateral Account . . . . . . . . . . . . . . . . . . . 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.. . . . . . . . . . . . . . . . . . . . 13 5.8 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13 5.9 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 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 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 . . . . . . . . . . . . . . 21 10. Duty of Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . 21 11. Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . 21 12. Authority of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 21 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 20 Termination and Release of Collateral. . . . . . . . . . . . . . . . . . . . . 23 21. WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ii AMENDED AND RESTATED SECURITY AGREEMENT AMENDED AND RESTATED SECURITY AGREEMENT, dated as of April 1, 1998, 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 April 1, 1998 (as amended, supplemented or otherwise modified from time to time, the "AMENDED AND RESTATED 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, in connection with the Credit Agreement, dated as of August 7, 1996 (as heretofore amended, the "EXISTING CREDIT AGREEMENT"), the Grantors entered into a Security Agreement, dated as of August 7, 1996 (the "EXISTING SECURITY AGREEMENT"); and WHEREAS, in connection with the amendment and restatement of the Existing Credit Agreement, the parties to the Existing Security Agreement wish to amend and restate the Existing Security Agreement in its entirety as provided herein. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Amended and Restated 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, that the Existing Security Agreement is hereby amended and restated to read in its entirety as follows: 1. DEFINED TERMS. 1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in the Amended and Restated Credit Agreement and used herein shall have the meanings given to them in the Amended and Restated 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 Depository Accounts, (4) the Deposit Accounts, (5) all other deposit accounts of each Grantor and (6) all Collateral Investments and (b)(1) 2 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. "BORROWING CERTIFICATE": a certificate substantially in the form of Exhibit C to the Amended and Restated Credit Agreement. "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. "CODE": the Uniform Commercial Code as from time to time in effect in the State of New York. "COLLATERAL": as defined in subsection 2(a). "COLLATERAL INVESTMENTS": as defined in subsection 5.6. "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 3 infringements and misappropriations thereof, (c) all income, royalties, damages and other payments due and/or payable as of August 7, 1996 or any time thereafter 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. "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": each non-interest bearing cash collection account with a bank that is reasonably satisfactory to the Administrative Agent and that has entered into a Depository Letter, initially, account number 4311-848436, with Wells Fargo Bank at its office at 420 Montgomery Street, San Francisco, CA 94194. "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 Amended and Restated Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Amended and Restated Credit Agreement after the filing of any petition in bankruptcy, or 4 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 existing as of August 7, 1996 or thereafter incurred, which may arise under, out of, or in connection with, the Amended and Restated 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 Amended and Restated 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: (a) 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; or (b) so long as Bank of Montreal is a Lender under the Amended and Restated Credit Agreement and is the Borrower's primary operating bank in Canada, the lesser of (i) the amount by which the aggregate amount debited from any deposit, concentration, operating or disbursement account maintained by any Grantor with Bank of Montreal or any Affiliate of Bank of Montreal, as the result of processing of payment orders issued by such Grantor or otherwise, exceeds the aggregate funds on deposit in such account and (ii) Canadian $1,000,000. "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. "RECEIVABLES SALE AND CONTRIBUTION AGREEMENT": as defined in subsection 2(b). "TRADEMARKS": (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other 5 source or business identifiers, and the goodwill associated therewith, existing as of August 7, 1996 or thereafter 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 Amended and Restated 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. 2. GRANT OF SECURITY INTEREST; RELEASE OF ELIGIBLE RECEIVABLES. (a) 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 owned as of August 7, 1996 or at any time thereafter acquired by such Grantor or in which such Grantor had as of August 7, 1996 or at any time thereafter acquired or may acquire any right, title or interest (collectively, the "COLLATERAL"): (1) all Account Collateral; (2) all Accounts; (3) all Chattel Paper; (4) all Contracts; 6 (5) all Copyrights; (6) all Copyright Licenses; (7) all Documents; (8) all Equipment; (9) all General Intangibles; (10) all Instruments; (11) all Inventory; (12) all Patents; (13) all Patent Licenses; (14) all Trademarks; (15) all Trademark Licenses; (16) all Unaffixed Tax Stamps; (17) all Vehicles; (18) all books and records pertaining to the Collateral; and (19) 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. (b) Upon the transfer or purported transfer of any assets by the Grantors pursuant to the Receivables Sale and Contribution Agreement, dated as of April 1, 1998 (the "RECEIVABLES SALE AND CONTRIBUTION AGREEMENT") among Core-Mark Capital Corporation, Core-Mark International, Inc., Core-Mark Midcontinent, Inc., Core-Mark Interrelated Companies, Inc. and the Sellers named therein, the security interest in such assets created pursuant hereto (but not the proceeds thereof) shall be automatically released. 7 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 Amended and Restated 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 Amended and Restated 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. 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 have been duly taken, and the security interests granted pursuant to this Agreement (a) 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 4.3(b)) in favor of the Administrative Agent, for the ratable benefit of the Lenders, as collateral security for the Obligations and (b) are prior to all other Liens on the Collateral in existence on August 7, 1996 except for Liens permitted pursuant to the Amended and Restated 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, from and after August 7, 1996 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 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 8 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 3.2 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. 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 3.2; 9 (b)change the location of its chief executive office from that specified in subsection 3.4, 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 Amended and Restated Credit Agreement of: (a)any Lien (other than security interests created hereby or Liens permitted under the Amended and Restated 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. 5.1 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 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 10 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 year or at the request of the Administrative Agent, 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: (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. 11 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 AND THE CANADIAN 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: (a) The Grantors shall maintain (1) 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) 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 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. (c) The Grantors shall instruct each Depository 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 Depository Accounts. (d) The Borrower shall instruct the Collateral Agent (as defined in the Receivables Sale and Contribution Agreement) to transfer all amounts owing to the Borrower under the Receivables Sale and Contribution Agreement to the US Cash Collateral Account. (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. (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, 12 Depository Letters, Deposit Accounts and Deposit Account Letters 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 (1) 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, 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 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 Amended and Restated 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 13 release, the conditions set forth in subsection 5.2 of the Amended and Restated 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) the Depository Bank to forward all amounts on deposit therein to the US Cash Collateral Account and (ii) 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 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. 14 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 15 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. (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 (1) seeking to limit, cancel or question the validity of any material Copyright, Patent or Trademark, or (2) 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. 16 (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 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. 17 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). 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 18 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 9-504(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 19 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 (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 Amended and Restated Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by each Grantor, shall be 20 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 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. EXECUTION 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 Amended and Restated 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 21 of the Amended and Restated Credit Agreement. 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 Amended and Restated 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. 19. GOVERNING LAW. This Agreement shall be governed by, and construed and 22 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. 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. /s/ LEO F. KORMAN By: ---------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO C/M PRODUCTS, INC. /s/ LEO F. KORMAN By: ---------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO CORE-MARK INTERRELATED COMPANIES, INC. /s/ LEO F. KORMAN By: ---------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO CORE-MARK MIDCONTINENT, INC. /s/ LEO F. KORMAN By: ---------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO EX-10.17 4 EXHIBIT 10.17 Exhibit 10.17 EXECUTION COPY AMENDMENT TO BORROWER STOCK PLEDGE AGREEMENT FIRST AMENDMENT, dated as of April 1, 1998 (this "AMENDMENT"), to the Borrower Stock Pledge Agreement, dated as of August 7, 1996, (the "PLEDGE AGREEMENT"), 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 Amended and Restated Credit Agreement, dated as of April 1, 1998 (as defined below), among the Borrower, the Administrative Agent and such Lenders (as defined in the Credit Agreement referred to below). W I T N E S S E T H: WHEREAS, the Borrower, certain of the Lenders and the Administrative Agent entered into that certain Credit Agreement, dated as of August 7, 1996; WHEREAS, pursuant to the provisions of such Credit Agreement, the Borrower entered into the Pledge Agreement; WHEREAS, the parties thereto have agreed to amend and restate the Credit Agreement in its entirety pursuant to the Amended and Restated Loan Agreement, dated as of April 1, 1998, among Core-Mark International, Inc., the Lenders (as defined therein), and the Administrative Agent (herein, as amended, supplemented or otherwise modified from time to time, called the "CREDIT AGREEMENT"); and WHEREAS, it is a condition to the Credit Agreement's becoming effective that the Pledge Agreement shall be amended as provided below; NOW, THEREFORE, in consideration of the premises and mutual covenants provided for herein and for other good and valuable consideration receipt of which is hereby acknowledged, the Borrower agrees with the Administrative Agent on behalf of and for the ratable benefit of the Lenders that the Pledge Agreement shall be amended as follows: 1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings assigned thereto in the Pledge Agreement or, if not therein defined, the Credit Agreement. 2 2. AMENDMENT TO SCHEDULE 1 OF THE PLEDGE AGREEMENT. Schedule 1 of the Pledge Agreement is hereby amended by deleting said Schedule in its entirety and substituting in lieu thereof a new Schedule 1 in the form of Schedule 1 to this Amendment. 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms that the representations and warranties contained in the Pledge Agreement are true and correct as of the date hereof, except in the case of representations and warranties that relate specifically to an earlier date, which representations and warranties were true and correct as of such earlier date. 4. CONTINUING EFFECT OF THE PLEDGE AGREEMENT. This Amendment shall not constitute an amendment of any provision not expressly referred to herein and shall not be construed as a waiver or consent to any action on the part of the Borrower that would require a waiver or consent of the Lenders or of the Administrative Agent except as expressly stated herein. Except as expressly amended or modified hereby, the provisions of the Pledge Agreement are and shall remain in full force and effect. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. CORE-MARK INTERNATIONAL, INC. ----------------------------- /s/ LEO F. KORMAN ----------------------------- By: Leo F. Korman Title: Sr. VP & CFO ACKNOWLEDGEMENT AND CONSENT Each of the Issuers referred to in the foregoing Amendment to Borrower Stock Pledge Agreement hereby acknowledges receipt of a copy of the Amendment to Borrower Stock Pledge Agreement, dated as of April 1, 1998, (the "PLEDGE AGREEMENT") made by Core-Mark International, Inc. for the benefit of The Chase Manhattan Bank, as Administrative Agent for the Lenders parties to the Amended and Restated Credit Agreement, dated as of April ___, 1998. 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 ERROR! REFERENCE SOURCE NOT FOUND. of the Pledge Agreement. 3. The terms of subsection ERROR! REFERENCE SOURCE NOT FOUND. 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 ERROR! REFERENCE SOURCE NOT FOUND. of the Pledge Agreement. C/M PRODUCTS, INC. By: /s/ LEO F. KORMAN --------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO Address for Notices: 395 Oyster Point Blvd., Suite 415, South San Francisco, CA 94080 Fax: (415) 952-4284 CORE-MARK INTERRELATED COMPANIES, INC. By: /s/ LEO F. KORMAN --------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO Address for Notices: 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Error!Fax: (415) 952-4284 CORE-MARK MIDCONTINENT, INC. By: /s/ LEO F. KORMAN --------------------------------- Name: Leo F. Korman Title: Sr. VP & CFO Address for Notices: 395 Oyster Point Blvd., Suite 415 South San Francisco, CA 94080 Fax: (415) 952-4284 EX-10.18 5 EXHIBIT 10.18 EXECUTION COPY Exhibit 10.18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CM CAPITAL CORPORATION, as Company, CORE-MARK INTERNATIONAL, INC., as Servicer, and THE CHASE MANHATTAN BANK, as Trustee on behalf of the Holders CORE-MARK RECEIVABLES MASTER TRUST POOLING AGREEMENT Dated as of April 1, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Other Definitional and Calculation Provisions . . . . . . . . . . . . 24 ARTICLE II CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES. . . . . . . . . . . . . . 25 2.1. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . . . . 25 2.2. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 28 2.3. Representations and Warranties of the Company Relating to the Company . . . . . . . . . . . . . . . . . . . . . . 28 2.4. Representations and Warranties of the Company Relating to the Receivables . . . . . . . . . . . . . . . . . . . . 32 2.5. Repurchase of Ineligible Receivables. . . . . . . . . . . . . . . . . 33 2.6. Purchase of Investor Certificateholders' Interest in Trust Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . 34 2.7. Affirmative Covenants of the Company. . . . . . . . . . . . . . . . . 35 2.8. Negative Covenants of the Company . . . . . . . . . . . . . . . . . . 38 ARTICLE III RIGHTS OF HOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS. . . . . . . . . . 42 3.1. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE IV ARTICLE IV IS RESERVED AND MAY BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO THE SERIES RELATING THERETO . . . . . . . . . 47 ARTICLE V THE CERTIFICATES AND INTERESTS . . . . . . . . . . . . 47 5.1. The Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.2. Authentication of Certificates. . . . . . . . . . . . . . . . . . . . 48 5.3. Registration of Transfer and Exchange of Certificates . . . . . . . . 48 5.4. Mutilated, Destroyed, Lost or Stolen
PAGE ---- Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.5. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 51 5.6. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . 52 5.7. Access to List of Investor Certificateholders' Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . 52 5.8. Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . . 53 5.9. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.10. Company Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.11. Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . 57 5.12. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . . . . . 57 5.13. Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE VI OTHER MATTERS RELATING TO THE COMPANY . . . . . . . . . . . . . . . . 58 6.1. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . 58 6.2. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE VII EARLY AMORTIZATION EVENTS. . . . . . . . . . . . . . 59 7.1. Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . 59 7.2. Additional Rights Upon the Occurrence of Certain Events . . . . . . . 60 ARTICLE VIII THE TRUSTEE . . . . . . . . . . . . . . . . . 61 8.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.2. Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . 63 8.3. Trustee Not Liable for Recitals in Certificates . . . . . . . . . . . 65 8.4. Trustee May Own Certificates. . . . . . . . . . . . . . . . . . . . . 66 8.5. Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 66 8.6. Eligibility Requirements for Trustee. . . . . . . . . . . . . . . . . 67 8.7. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . 67 8.8. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 68 8.9. Merger or Consolidation of Trustee. . . . . . . . . . . . . . . . . . 68 8.10. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . 69 8.11. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 8.12. Trustee May Enforce Claims Without Possession of Certificates . . . . 70 8.13. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 70 8.14. Rights of Investor Certificateholders to Direct Trustee . . . . . . . 71 8.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . 71
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PAGE ---- 8.16. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 71 8.17. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 72 ARTICLE IX TERMINATION . . . . . . . . . . . . . . . . . 72 9.1. Termination of Trust; Liquidation of Receivables. . . . . . . . . . . 72 9.2. Clean-Up Call and Final Termination Date of Investor Certificates of any Series . . . . . . . . . . . . . . . . 72 9.3. Final Payment with Respect to Any Series. . . . . . . . . . . . . . . 74 9.4. Company's Termination Rights. . . . . . . . . . . . . . . . . . . . . 75 ARTICLE X MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . 75 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.2. Protection of Right, Title and Interest to Trust. . . . . . . . . . . 77 10.3. Limitation on Rights of Holders . . . . . . . . . . . . . . . . . . . 77 10.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 10.6. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . 79 10.7. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 10.8. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . 79 10.9. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . 79 10.10. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . 79 10.11. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 10.12. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 80 10.13. Actions by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.14. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . . 80 10.15. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.16. Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . 80 10.17. No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.18. No Bankruptcy Petition. . . . . . . . . . . . . . . . . . . . . . . . 80 10.19. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 81 10.20. Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . 81
-iii- EXHIBITS Exhibit A Form of Lockbox Agreement Exhibit B Form of Eligible Segregated Account Bank Agreement Exhibit C Form of Annual Opinion of Counsel Exhibit D Internal Operating Procedures Memorandum SCHEDULES Schedule 1 Receivables Schedule 2 Identification of the Trust Accounts Schedule 3 Actions with respect to Chattel Paper Schedule 4 Location of Chief Executive Office Schedule 5 Contractual Obligations Schedule 6 Form of Legend for Receivables Computer Files Schedule 7 Conditions Precedent to becoming Eligible Receivable -iv- 1 POOLING AGREEMENT, dated as of April 1, 1998, among CM Capital Corporation, a Delaware corporation (the "COMPANY"); Core-Mark International, Inc., a Delaware corporation ("CORE-MARK"), in its capacity as servicer (the "SERVICER"); and The Chase Manhattan Bank, a New York banking corporation, not in its individual capacity, but solely as trustee (in such capacity, the "TRUSTEE"). W I T N E S S E T H : WHEREAS, as of the date hereof, (i) the Company, the Servicer and the Sellers (as hereinafter defined) are entering into a Receivables Sale Agreement (as amended, supplemented or otherwise modified from time to time, the "RECEIVABLES SALE AGREEMENT") and (ii) the Company, the Servicer, the Sellers, in their capacities as servicers of the Receivables (in such capacities, the "SUB-SERVICERS"), and the Trustee are entering into a Servicing Agreement (as amended, supplemented or otherwise modified from time to time, the "SERVICING AGREEMENT"); and WHEREAS, the parties hereto wish to enter into this Agreement in order to create a master trust to which the Company will transfer all of its right, title and interest in, to and under the Receivables and other Trust Assets now or hereafter owned by the Company, or in which the Company has an interest, and such master trust shall, from time to time at the direction of the Company, issue one or more Series of Investor Certificates which shall represent interests in the Receivables and such other Trust Assets as specified herein and in the Supplement related to such Series. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section I.1. DEFINITIONS. Whenever used in this Agreement, the following words and phrases shall have the following meanings: "ACCOUNTS" shall have the meaning specified in subsection 2.1(a)(v) of this Agreement. "ADJUSTED INVESTED AMOUNT" shall have, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. 2 "AFFILIATE" shall mean, with respect to any specified Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person; PROVIDED that a Person shall not be deemed an Affiliate of another Person solely by reason of an individual serving as an officer or director of such other Person. For purposes of this definition, "control" of a Person means 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 or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGED RECEIVABLE" shall mean, as of any date of determination, any Receivable (a) which is unpaid in whole or in part for more than 61 days after its original due date or (b) which is, as of such date of determination, a Charged-Off Receivable. "AGENT" shall mean, with respect to any Series, the Person or Persons, if any, so designated in the related Supplement. "AGGREGATE ADJUSTED INVESTED AMOUNT" shall mean, with respect to any date of determination, the sum of the Adjusted Invested Amounts with respect to all Outstanding Series on such date of determination. "AGGREGATE ALLOCATED RECEIVABLES AMOUNT" shall mean, with respect to any date of determination, the sum of the Allocated Receivables Amounts with respect to all Outstanding Series on such date of determination. "AGGREGATE DAILY COLLECTIONS" shall mean, with respect to any Business Day, the aggregate amount of all Collections deposited into the Collection Account which first became Available Funds after 1:00 p.m., New York City time, on the prior Business Day and prior to 1:00 p.m., New York City time, on such Business Day; PROVIDED, that during the first three Business Days following the Issuance Date for Series 1998-1 Certificates, Aggregate Daily Collections will not include Collections which have become Available Funds from deposits made prior to such Issuance Date. "AGGREGATE INVESTED AMOUNT" shall mean, at any date of determination, the sum of the Invested Amounts with respect to all Outstanding Series on such date of determination. "AGGREGATE OVERCONCENTRATION AMOUNT" shall mean, with respect to any date of determination, the sum of the Overconcentration Amounts of all Eligible Obligors at the end of the preceding Business Day. "AGGREGATE RECEIVABLES AMOUNT" shall mean, with respect to any date of determination, (i) the aggregate Principal Amount of all Eligible Receivables in the Trust at the end of the Business Day immediately preceding such date MINUS (ii) the Aggregate Overconcentration Amount for such date MINUS (iii) to the extent included 3 in clause (i), the aggregate amount of general price increases by the Tobacco Companies for which the Tobacco Companies have agreed to reimburse the Sellers and for which the Sellers give rebates to their customers relating thereto and which will give rise to Dilution Adjustments, PLUS (iv) the Aggregate Uncleared Funds Amount. "AGGREGATE TARGET RECEIVABLES AMOUNT" shall mean, with respect to any date of determination, the sum of the Target Receivables Amounts with respect to all Outstanding Series on such date of determination. "AGGREGATE UNCLEARED FUNDS AMOUNT" shall mean on any date, any amounts on deposit in any Eligible Segregated Account or Lockbox Account which were not Available Funds as of the last time that funds were transferred from such accounts to the Collection Account. "AGREEMENT" shall mean this Pooling Agreement and all amendments and modifications hereof and supplements hereto, and including, unless expressly stated otherwise, each Supplement. "ALLOCABLE CHARGED-OFF AMOUNT" shall have, with respect to any Series, the meaning specified in subsection 3.1(e). "ALLOCABLE RECOVERIES AMOUNT" shall have, with respect to any Series, the meaning specified in subsection 3.1(e). "ALLOCATED RECEIVABLES AMOUNT" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "AMORTIZATION PERIOD" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "AVAILABLE FUNDS" shall mean any funds which are immediately available funds on the applicable date of determination. "BOOK-ENTRY CERTIFICATES" shall mean the Certificates issued to a Clearing Agency to facilitate the use of book entries by such Clearing Agency to evidence ownership of beneficial interests in the Certificates, transfers of which beneficial interests shall be made through book entries by such Clearing Agency, all as described in Section 5.11; PROVIDED, HOWEVER, that after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Certificates are issued to the Certificate Book-Entry Holders, such Certificates shall no longer be "Book-Entry Certificates". "BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday or (ii) another day on which commercial banking institutions or trust companies in the 4 State of New York or in the city where the Corporate Trust Office is located, are authorized or obligated by law, executive order or governmental decree to be closed; PROVIDED that, when used in connection with the calculation of Certificate Rates which are determined by reference to the Eurodollar Rate, "Business Day" shall mean any Business Day on which dealings in Dollars between banks may be carried on in both London, England and New York, New York. "BUSINESS DAY RECEIVED" shall have the meaning specified in subsection 2.3(e) of the Servicing Agreement. "CASH DILUTION PAYMENT" shall have the meaning specified in subsection 4.6(a) of the Servicing Agreement. "CERTIFICATE" shall mean any Series of Investor Certificates. "CERTIFICATE BOOK-ENTRY HOLDER" shall mean, with respect to a Book- Entry Certificate, the Person who is listed on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency, as the beneficial owner of such Book-Entry Certificate (directly or as an indirect participant, in accordance with the rules of such Clearing Agency). "CERTIFICATE RATE" shall mean, with respect to any Series and Class of Certificates, the percentage interest rate (or formula on the basis of which such interest rate shall be determined) stated in the applicable Supplement. "CERTIFICATE REGISTER" shall mean the register maintained pursuant to Section 5.3, providing for the registration of the Certificates and transfers and exchanges thereof. "CERTIFICATEHOLDERS' INTEREST" shall have the meaning specified in subsection 3.1(b). "CHARGED-OFF RECEIVABLES" shall mean all Receivables (or portions thereof) which, in accordance with the Policies of the applicable Seller, have or should have been written off as uncollectible, including without limitation the Receivables of any Obligor which becomes the subject of any voluntary or involuntary bankruptcy proceeding. "CLASS" shall mean, with respect to any Series, any one of the classes of Certificates of that Series as specified in the related Supplement. "CLEAN-UP CALL PERCENTAGE" shall have, with respect to any Series, the meaning specified in the related Supplement for such Series. 5 "CLEAN-UP CALL REPURCHASE PRICE" shall have the meaning specified in Section 9.2. "CLEARING AGENCY" shall mean each organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with such Clearing Agency. "COLLECTION ACCOUNT" shall have the meaning specified in subsection 3.1(b)(i), and shall include, without limitation, all subaccounts thereof. "COLLECTION P.O. BOX" shall mean each post office box (other than Lockboxes) of the Company to which Obligors on the Receivables are instructed to remit payments on the Receivables. "COLLECTIONS" shall mean all collections, including the Aggregate Uncleared Funds Amount, and all amounts received in respect of the Receivables, including Recoveries, Seller Repurchase Payments, Seller Adjustment Payments, Servicer Indemnification Amounts paid by the Servicer and any other payments received in respect of Dilution Adjustments, together with all collections received in respect of the Related Property in the form of cash, checks, wire transfers or any other form of cash payment, and all proceeds of Receivables and collections thereof (including, without limitation, collections constituting an account or general intangible or evidenced by a note, instrument, letter of credit, security, contract, security agreement, chattel paper or other evidence of indebtedness or security, whatever is received upon the sale, exchange, collection or other disposition of, or any indemnity, warranty or guaranty payable in respect of, the foregoing and all "proceeds", as defined in Section 9-306 of the UCC as in effect in the State of New York, of the foregoing). "COLLECTOR" shall mean any delivery person or salesperson employed by the Servicer or any Sub-Servicer who is authorized to collect payments in respect of Receivables in accordance with the Policies of the Seller which generated such Receivables. "COMPANY" shall mean CM Capital Corporation, a Delaware corporation. "COMPANY COLLECTION SUBACCOUNT" shall have the meaning specified in subsection 3.1(a). "COMPANY EXCHANGE" shall have the meaning specified in subsection 5.10(a). "COMPANY INTEREST" shall have the meaning specified in subsection 3.1(b). 6 "CONTRACTUAL OBLIGATION" shall mean, as to any Person, any provision of any security issued by such Person or 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. "CORE-MARK" shall mean Core-Mark International, Inc., a Delaware corporation. "CORPORATE TRUST OFFICE" shall mean 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 Agreement is located at 450 West 33rd St., New York, New York 10001 (Attention: Structured Finance Services). "CREDIT ENHANCER" shall mean, with respect to any Outstanding Series, that Person, if any, designated as such in the applicable Supplement. "CUT-OFF DATE" shall mean the close of business on March 27, 1998. "DAILY REPORT" shall have the meaning specified in subsection 4.1 of the Servicing Agreement. "DCR" shall mean Duff & Phelps Credit Rating Co. or any successor thereto. "DEFINITIVE CERTIFICATES" shall have the meaning specified in Section 5.11. "DEPOSIT DATE" shall have the meaning specified in subsection 3.1(d). "DEPOSITORY" shall mean, with respect to any Series, the Clearing Agency designated as the "Depository" in the related Supplement. "DEPOSITORY AGREEMENT" shall mean, with respect to any Series, an agreement among the Company, the Trustee and a Clearing Agency, or a letter of undertaking to a Clearing Agency by the Company and the Trustee, in each case in a form reasonably satisfactory to the Trustee and the Company. "DILUTION ADJUSTMENTS" shall mean any rebates, administrative fees, discounts, credit memos, refunds, non-cash payments or other adjustments (including, without limitation, as a result of the application of any special or other discounts or any reconciliations) in respect of any Receivable, the amount owing for any returns (including, without limitation, as a result of the return of any defective goods) or cancellations and the amount of any other reduction in the amount owing under any Receivable (including, without limitation, any elimination of service charges), in each case granted, permitted or made by the applicable Seller or the Servicer to the related Obligor, PROVIDED that a "Dilution Adjustment" does not include any Charged-Off Receivable. 7 "DISTRIBUTION DATE" shall mean, except as otherwise set forth in the applicable Supplement, the 20th day of each calendar month, beginning on May 20, 1998, or if such 20th day is not a Business Day, the next succeeding Business Day. "DOLLARS," "U.S. DOLLARS", "U.S. $" and "$" shall mean dollars in lawful currency of the United States of America. "EARLY AMORTIZATION EVENT" shall have, with respect to any Series, the meaning specified in Section 7.1 of this Agreement (without taking into account any Supplements) and in any Supplement for such Series. "EARLY AMORTIZATION PERIOD" shall have, with respect to any Series, the definition assigned to such term in Section 7.1 of this Agreement (without taking into account any Supplements) and in any Supplement for such Series. "EARLY TERMINATION" shall have the meaning assigned to such term in the Receivables Sale Agreement. "ELIGIBLE INSTITUTION" shall mean a depositary institution or trust company (which may include the Trustee and its affiliates) organized under the laws of the United States of America or any one of the states thereof or the District of Columbia; PROVIDED, HOWEVER, that at all times (i) such depositary institution or trust company is a member of the Federal Deposit Insurance Corporation, the certificates of deposit or unsecured and uncollateralized debt obligations of such depositary institution or trust company are rated in one of the two highest long-term or highest short-term rating category by each Rating Agency and (ii) such depositary institution or trust company has a combined capital and surplus of at least $50,000,000. "ELIGIBLE INVESTMENTS" shall mean any deposit accounts, book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; (b) federal funds, demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any state thereof (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or State banking or depository institution authorities; PROVIDED, HOWEVER, that at the time of the investment or contractual commitment to invest therein the commercial paper, certificates of deposit or other short-term unsecured and uncollateralized debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from each of 8 the Rating Agencies rating such investment in one of the two highest investment category granted thereby; (c) commercial paper rated, at the time of the investment or contractual commitment to invest therein, in one of the two highest rating category by each Rating Agency rating such commercial paper; (d) investments in money market funds (including funds for which the Trustee or any of its Affiliates is investment manager or adviser) rated in one of the two highest rating category by each Rating Agency rating such money market fund (PROVIDED, that if such Rating Agency is S&P, such rating shall be AAAm-G); (e) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause (b) above; or (g) any other investment upon satisfaction of the Rating Agency Condition with respect thereto. "ELIGIBLE OBLIGOR" shall mean, as of any date of determination, each Obligor in respect of a Receivable that satisfies the following eligibility criteria: (a) it is a resident of the United States, its territories or possessions; (b) it is not the United States federal government, or any subdivision thereof, or any agency, department or instrumentality thereof (a "FEDERAL GOVERNMENT OBLIGOR"), or any state or local government, or any subdivision thereof, or any agency, department, or instrumentality thereof (a "STATE/LOCAL GOVERNMENT OBLIGOR"; each Federal Government Obligor and each State/Local Government Obligor being a "GOVERNMENT OBLIGOR"),; (c) it is not a Seller or an Affiliate of a Seller; and (d) it is not the subject of any voluntary or involuntary bankruptcy proceeding; PROVIDED, HOWEVER, that if 40% or more of the Principal Amount of Receivables of an Obligor (measured by the Principal Amount of Receivables of such Obligor in the Trust) is reported as being aged 91 days or more after the respective original due dates of such Receivables as at the end of the Settlement Period immediately preceding the most recent Settlement Report Date (commencing with the Settlement Report Date 9 occurring on May 15, 1998), such Obligor shall not be deemed an Eligible Obligor until such time as the Servicer furnishes the Trustee with a report (which may be part of a Daily Report or a Monthly Settlement Statement) demonstrating that less than 40% of the Principal Amount of Receivables of such Obligor then in the Trust are aged 91 days or more after the respective original due dates of such Receivables. "ELIGIBLE RECEIVABLE" shall mean, as of any date of determination, each Receivable owing by an Eligible Obligor that as of such date satisfies the following eligibility criteria: (a) it constitutes either (i) an account within the meaning of Section 9-106 of the UCC of the State the law of which governs the perfection of the interest granted in it, (ii) chattel paper within the meaning of Section 9-105 of such UCC, subject, in the case of chattel paper, to compliance with the procedures set forth in Schedule 3 hereto; or (iii) a general intangible (to the extent that such Receivable includes interest, finance charges, returned check or late charges or sales or similar taxes) within the meaning of Section 9-106 of such UCC; (b) it is not an Aged Receivable; (c) the goods related to it shall have been shipped or the services related to it shall have been performed and such Receivable shall have been billed to the related Obligor; (d) it is denominated and payable only in U.S. Dollars in the United States; (e) it arose in the ordinary course of business from the sale of goods, products or services of the relevant Seller and in accordance with the Policies of such Seller and, at such date of determination, no Early Termination has occurred with respect to such Seller; (f) (i) it does not contravene any applicable law, rule or regulation and the applicable Seller is not in violation of any law, rule or regulation in connection with it, in each case which in any way renders such Receivable unenforceable or would otherwise impair in any material respect the collectibility of such Receivable and (ii) it is not subject to any investigation or proceeding known by such Seller that would reasonably be expected to adversely affect the payment or enforceability thereof; (g) it is an account receivable representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the 1940 Act; (h) (i) it is not a Receivable of a Seller Division which has not become a New Division or (ii) it is not a Receivable purchased by a Seller from any Person other than a Receivable purchased in connection with the acquisition by a Seller of the 10 business unit or operating assets of another Person, so long as the Seller Division consisting of such business unit or operating assets has become a New Division and the conditions set forth on Schedule 7 hereto have been satisfied; (i) it is not a Receivable for which the applicable Seller has established an offsetting specific reserve; PROVIDED that a Receivable subject only in part to the foregoing shall be an Eligible Receivable to the extent not so subject; (j) it is not a Receivable with original payment terms in excess of 60 days from its original invoice date, or in respect of which the applicable Seller has (i) altered the basis of the aging from the initial due date for payment such that the final due date extends to a date more than 60 days from its original invoice date or (ii) otherwise made any modification except in the ordinary course of business and consistent with the Policies of such Seller; (k) all required consents, approvals or authorizations necessary for the creation and enforceability of such Receivable and the effective assignment and sale thereof by the applicable Seller to the Company and by the Company to the Trust shall have been obtained with respect to such Receivable; (l) the applicable Seller is not in default in any material respect under the terms of the contract, if any, from which such Receivable arose; provided that if a series of Receivables arise under a single contract Receivables not subject to such default shall be an Eligible Receivable to the extent not so subject; (m) all right, title and interest in it has been validly sold to the Company by the applicable Seller pursuant to the Receivables Sales Agreement; (n) the Company or the Trust will have legal and beneficial ownership therein free and clear of all Liens other than such Liens described in clauses (i) and (iv) of the definition of Permitted Liens and such Receivable has been the subject of either a valid transfer from the Company to the Trust or, alternatively, the grant of a first priority perfected security interest therein to the Trust free and clear of all Liens other than such Liens described in clauses (i) and (iv) of the definition of Permitted Liens; (o) it is not subject to any dispute in whole or in part or to any offset, counterclaim, defense, rescission, recoupment or subordination; PROVIDED that a Receivable subject only in part to any of the foregoing shall be an Eligible Receivable to the extent not so subject; (p) it is at all times the legal, valid and binding obligation of the Obligor thereon, enforceable against such Obligor to pay the full Principal Amount thereof in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting 11 the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or law); (q) each of the representations and warranties with respect thereto made in the Receivables Sale Agreement by the applicable Seller with respect to such Receivable is true and correct in all material respects; and (r) at the time such Receivable was sold by the applicable Seller to the Company under the Receivables Sale Agreement, no event described in subsection 6.01(g) (other than clause (v) thereof) of the Receivables Sale Agreement (without giving effect to any requirement as to the passage of time) had occurred with respect to such Seller. "ELIGIBLE SEGREGATED ACCOUNT" shall mean (a) a segregated account or accounts maintained with a depositary institution or trust company whose long-term unsecured debt obligations are rated in one of the three highest long-term or short-term rating categories by each Rating Agency rating such depository institution or trust company at the time of any deposit therein, PROVIDED, that if such obligations are only rated by one of S&P or Moody's, such rating shall suffice, or (b) a segregated account or accounts maintained with a federal of state chartered depository institution subject to regulations regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section 9.10(b). "ELIGIBLE SEGREGATED ACCOUNT BANK" shall mean any bank or depositary institution with which an Eligible Segregated Account has been established. "ELIGIBLE SEGREGATED ACCOUNT BANK AGREEMENT" shall have the meaning specified in subsection 2.3(b)(ii) of the Servicing Agreement. "ELIGIBLE SUCCESSOR SERVICER" shall mean a Person which, at the time of its appointment as Servicer, (i) is legally qualified and has the corporate power and authority to service the Receivables transferred to the Trust, (ii) has demonstrated the ability to service a portfolio of similar receivables in accordance with the standards set forth in subsection 6.2(c) of the Servicing Agreement and (iii) has a combined capital and surplus of at least $5,000,000. "ENHANCEMENT" shall mean, with respect to any Series, (i) the funds on deposit in or credited to any bank account (or subaccount thereof) of the Trust for the benefit of any Holders of such Series, (ii) any surety arrangement, any letter of credit, guaranteed rate agreement, maturity guaranty facility, tax protection agreement, interest rate swap, currency swap or other contract, agreement or arrangement, in each case for the benefit of any Holders of such Series, as designated in the applicable Supplement and (iii) the subordination of one Class of Certificates in a Series to another class in such Series or the subordination of any Certificate held or interest owned by the Company to the Investor Certificates of such Series. 12 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "EXCHANGEABLE COMPANY INTEREST" shall have the meaning specified in subsection 3.1(a) and shall be exchangeable as provided in Section 5.10. "EXCHANGE DATE" shall have the meaning, with respect to any Series issued pursuant to a Company Exchange, specified in Section 5.10. "EXCHANGE NOTICE" shall have the meaning, with respect to any Series issued pursuant to a Company Exchange, specified in Section 5.10. "FORCE MAJEURE DELAY" shall mean, with respect to any Servicing Party, any cause or event which is beyond the control and not due to the negligence of such Servicing Party which delays, prevents or prohibits the Servicer's delivery of Daily Reports and/or Monthly Settlement Statements, including, without limitation, acts of God or the elements and fire, but excluding strikes by any Servicing Party's employees; PROVIDED that no such cause or event shall be deemed to be a Force Majeure Delay unless the Servicer shall have given the Company and the Trustee written notice promptly after the beginning of such delay. "FRACTIONAL UNDIVIDED INTEREST" shall mean the fractional undivided interest in the Certificateholders' Interest evidenced by an Investor Certificate. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "GENERAL OPINION" shall mean, with respect to any action, an Opinion of Counsel to the effect that (A) such action has been duly authorized by all necessary corporate action on the part of the Servicer, the applicable Seller or Sellers or the Company, as the case may be, (B) any agreement executed in connection with such action constitutes a legal, valid and binding obligation of the Servicer, the applicable Seller or Sellers or the Company, as the case may be, enforceable in accordance with the terms thereof, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect, affecting the enforcement of creditors' rights and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity), (C) such action does not violate any Requirement of Law or require any consent or filing thereunder, (D) such action does not result in a breach of, or default under any contractual obligation, or creation of any Lien, pursuant thereto and (E) any condition precedent to any such action specified in the applicable agreement, if any, has been complied with, which opinion in the case of clauses (D) or (E) may, to the extent that such opinion concerns questions of fact, rely on an Officer's Certificate with respect to such questions of fact. 13 "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HOLDERS" shall mean the collective reference to (i) the Investor Certificateholders, (ii) the owner of the Exchangeable Company Interest and (iii) if applicable, the owner of each Series Subordinated Interest. "INDEBTEDNESS" shall mean, with respect to any Person at any date, (a) all indebtedness of such Person for borrowed money, (b) any obligation owed for the deferred purchase price of property or services which purchase price is evidenced by a note or similar written instrument, (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (d) that portion of obligations of such Person under capital leases which is properly classified as a liability on a balance sheet in conformity with GAAP and (e) all Indebtedness referred to in clauses (a) through (d) above of another Person 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. "INDEPENDENT PUBLIC ACCOUNTANTS" means any independent certified public accountants of nationally recognized standing which constitute one of the accounting firms commonly referred to as the "big six" accounting firms (or any successor thereto); PROVIDED that such firm is independent with respect to the Servicer within the meaning of Rule 2-01(b) of Regulation S-X under the Securities Act. "INELIGIBLE RECEIVABLE" shall have the meaning specified in Section 2.5. "INITIAL CLOSING DATE" shall mean April 1, 1998. "INITIAL INVESTED AMOUNT" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "INSOLVENCY EVENT" shall mean the occurrence of any one or more of the Early Amortization Events specified in paragraph (a) of Section 7.1. "INTERNAL OPERATING PROCEDURES MEMORANDUM" shall mean the internal operating procedures memorandum prepared by the Trustee as set forth in Exhibit D hereto. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "INVESTED AMOUNT" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. 14 "INVESTED PERCENTAGE" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "INVESTMENT EARNINGS" shall have the meaning specified in subsection 3.1(c). "INVESTOR CERTIFICATEHOLDER" shall mean the registered holder of, or the bearer of, an Investor Certificate. "INVESTOR CERTIFICATES" shall mean the Certificates executed by the Company and authenticated by or on behalf of the Trustee, substantially in the form attached to the applicable Supplement, but shall not include any Certificate held by the Company. "ISSUANCE DATE" shall mean, with respect to any Series, the date of issuance of such Series, or the date of any issuance of additional certificates representing any increase to the Invested Amount of such Series, as specified in the related Supplement. "LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or other similar right of a third party with respect to such securities; PROVIDED, HOWEVER, that if a lien is imposed under Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA applies, then such lien shall not be treated as a "Lien" from and after the time any Person who is obligated to make such payment pays to such plan the amount of such lien determined under Section 412(n)(3) of the Internal Revenue Code or Section 302(f)(3) of ERISA, as the case may be, and provides to the Trustee, any Agent and each Rating Agency written evidence reasonably satisfactory to the Rating Agencies of the release of such lien, or such lien expires pursuant to Section 412(n)(4)(B) of the Internal Revenue Code or Section 302(f)(4)(B) of ERISA. "LOCKBOX" shall mean the post office boxes listed on Schedule 3 to the Receivables Sale Agreement to which the Obligors are instructed to remit payments on the Receivables and/or such other post office boxes as may be established pursuant to Section 2.3 of the Servicing Agreement. "LOCKBOX ACCOUNT" shall mean each intervening bank account of the Company used by a Lockbox Processor for deposit of funds received in a Lockbox prior to their transfer to the Collection Account, which account may also be used by Collectors and other employees of the Servicing Parties for deposit of Collections received by such persons or direct payment by Obligors. 15 "LOCKBOX AGREEMENT" shall mean, with respect to each Lockbox Processor, a lockbox agreement in substantially the form set forth as Exhibit A hereto, or such other form of lockbox agreement with a Lockbox Processor acceptable to each Agent, or if there are no Agents, which upon execution thereof the Rating Agency Condition is satisfied. "LOCKBOX BANK" shall mean the depositary institution that holds a Lockbox Account. "LOCKBOX PROCESSOR" shall mean the depositary institution or processing company (which may be the Trustee) which processes payments on the Receivables sent by the Obligors thereon forwarded to a Lockbox. "MATERIAL ADVERSE EFFECT" shall mean (a) a material impairment of the ability of a Seller, a Servicing Party or the Company, as the case may be, to perform its obligations under the Transaction Documents, (b) a materially adverse effect on the business, operations, property or condition (financial or otherwise) of the Company, (c) a material impairment of the validity or enforceability of any of the Transaction Documents against a Seller, a Servicing Party or the Company, (d) a material impairment of the collectibility of the Receivables taken as a whole or (e) a material impairment of the interests, rights or remedies of the Trustee or the Investor Certificateholders under or with respect to the Transaction Documents or the Receivables taken as a whole. "MONTHLY SERVICING FEE" shall have the meaning specified in subsection 2.5(a) of the Servicing Agreement. "MONTHLY SETTLEMENT STATEMENT" shall have the meaning specified in Section 4.2 of the Servicing Agreement. "NEW DIVISION" shall mean any Seller Division which has satisfied the criteria for the addition of a Seller Division specified in any Pooling and Servicing Agreement. "1940 ACT" shall mean the Investment Company Act of 1940, as amended. "OBLIGOR" shall mean, with respect to any Receivable, the party obligated to make payments with respect to such Receivable, including any guarantor thereof. "OFFICER'S CERTIFICATE" shall mean, unless otherwise specified in this Agreement, a certificate signed by the President, Chief Financial Officer, Treasurer, Controller, or any Vice President of the Servicer or the Company, as the case may be, or, in the case of a Successor Servicer, a certificate signed by a Vice President and the financial controller (or an officer holding an office with equivalent or more senior responsibilities) of such Successor Servicer. 16 "OPINION OF COUNSEL" shall mean a written opinion or opinions of one or more counsel (who, unless otherwise specified in this Agreement, may be internal counsel) to the Company or the Servicer, designated by the Company or the Servicer, as the case may be, which is reasonably acceptable to the Trustee. "OPTIONAL TERMINATION NOTICE" shall have, with respect to any Series, the meaning specified in the related Supplement for such Series. "OUTSTANDING SERIES" shall mean, at any time, a Series issued pursuant to an effective Supplement for which the Series Termination Date for such Series has not occurred. "OVERCONCENTRATION AMOUNT" shall mean, at any date with respect to an Eligible Obligor, the Principal Amount of Eligible Receivables due from such Obligor at such date which, expressed as a percentage of the Principal Amount of all Eligible Receivables in the Trust at such date, exceeds the percentage set forth below for the applicable category of that Obligor at such date (or such higher percentage after giving effect to which the Rating Agency Condition is satisfied): MINIMUM RATING
S&P DCR MOODY'S PERCENTAGE --- --- ------- ---------- A-1+ or AA- D-1+ or AA- P-1 or Aa3 15% A-1 or A+ D-1 or A+ P-1 or A1 11.25% A-2 or BBB+ D-2 or BBB+ P-2 or Baa1 5.625% A-3 or BBB- D-3 or BBB- P-3 or Baa3 3.75% Not rated/other Less than D-3 or BBB- Not rated/other 2.25% /Not rated
; PROVIDED, HOWEVER, (i) that all Eligible Obligors that are Affiliates of each other shall be deemed to be a single Eligible Obligor to the extent the Servicer knows or has reason to know of the affiliation and in that case, the applicable debt rating for such group of Obligors shall be the debt rating of the ultimate parent of the group. The percentage applicable to any Obligor (or the ultimate parent of the affiliated group of which such Obligor is a member, as the case may be) will be the percentage associated with the lowest of such Obligor's (or such ultimate parent's, as the case may be) short-term and long-term senior debt rating issued by S&P, Moody's and DCR; PROVIDED THAT: (i) if such debt is not rated by DCR, the applicable percentage will be the percentage associated with the rating issued by S&P 17 or Moody's and (ii) if S&P or Moody's issues no rating with respect to the debt of such Obligor (or such ultimate parent, as the case may be), then the percentage applicable to such Obligor (or such ultimate parent, as the case may be) shall be the percentage associated with the categories "Not rated/other" and "Less than D-3 or BBB-/Not rated and NOT rated/other." The ratings specified in the table are minimums for each percentage category, so that a rating not shown in the table falls in the category associated with the highest rating shown in the table that is lower than that rating. "PAYING AGENT" shall mean any paying agent and co-paying agent appointed pursuant to Section 5.6 and, unless otherwise specified in the related Supplement of any Outstanding Series and with respect to such Series, shall initially be the Trustee. "PERMITTED LIENS" shall mean, at any time, for any Person: (i) Liens created pursuant to this Agreement or the Receivables Sale Agreement; (ii) Liens for taxes, assessments or other governmental charges or levies not yet due and payable or if such Person shall currently be contesting the validity thereof in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Person; (iii) Liens on a Receivable arising as a result of offsetting specific reserves and rights of set-off, counterclaim or other defenses with respect to such Receivable; and (iv) Liens for federal taxes, state tobacco excise taxes or ERISA obligations in an aggregate at any one time outstanding not in excess of $250,000 and any other Liens securing obligations not in excess of $100,000 in the aggregate at any one time outstanding. "PERSON" shall mean any individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "POLICIES" shall mean, with respect to each Seller, the credit and collection policies and the returned goods policies of such Seller, copies of which have been delivered to the Trustee, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Transaction Documents. "POOLING AND SERVICING AGREEMENTS" shall mean, collectively, this Agreement, the Servicing Agreement and each Supplement for an Outstanding Series. 18 "POTENTIAL EARLY AMORTIZATION EVENT" shall mean an event which, with the giving of notice and/or the lapse of time, would constitute an Early Amortization Event hereunder or under any Supplement for an Outstanding Series. "POTENTIAL SERVICER DEFAULT" shall mean an event which, with the giving of notice and/or the lapse of time, would constitute a Servicer Default. "PREPAYMENT REQUEST" shall have, with respect to any Series, the meaning specified in the related Supplement. "PRINCIPAL AMOUNT" shall mean, with respect to any Receivable, the amount due thereunder. "PRINCIPAL TERMS" shall have, with respect to any Series issued pursuant to a Company Exchange, the meaning specified in subsection 5.10(c). "RATING AGENCY" shall mean, with respect to each Outstanding Series, any rating agency or agencies designated as such in the related Supplement; PROVIDED that in the event that no Outstanding Series has been rated, then for purposes of the definitions of "Eligible Institution", "Eligible Investments" and Section 2.3(b) of the Servicing Agreement, "RATING AGENCY" shall mean S&P and references to "each Rating Agency" shall refer solely to S&P. "RATING AGENCY CONDITION" shall mean, subject to the applicable Supplement, with respect to any action, that each Rating Agency shall have notified the Company, the Servicer, any Agent and the Trustee in writing that such action will not result in a reduction or withdrawal of the rating of any Outstanding Series or any Class of any such Outstanding Series with respect to which it is a Rating Agency. "RECEIVABLE" shall mean the indebtedness and payment obligations of any Person to a Seller or acquired by a Seller (including, without limitation, obligations constituting an account or general intangible or evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security) arising from a sale of merchandise or the provision of services by such Seller or the Person from whom such indebtedness and payment obligation was acquired by a Seller, including, without limitation, any right to payment for goods sold or for services rendered, and including the right to payment of any interest, sales taxes, finance charges, returned check or late charges and other obligations of such Person with respect thereto. "RECEIVABLES PURCHASE DATE" shall mean, with respect to any Receivable, the Business Day on which the Company purchases such Receivable from the applicable Seller and transfers such Receivable to the Trust. 19 "RECEIVABLES SALE AGREEMENT" shall have the meaning specified in the recitals hereto. "RECORD DATE" shall mean, with respect to any Series, the dates specified as such in the applicable Supplement. "RECOVERIES" shall mean all amounts collected (net of out-of-pocket costs of collection) in respect of Charged-Off Receivables. "RELATED PROPERTY" shall mean, with respect to each Receivable: (a) all of the applicable Seller's interest in the goods (other than returned goods), if any, sold and delivered to an Obligor relating to the sale which gave rise to such Receivable; (b) all other security interests or Liens, and the applicable Seller's interest in the property subject thereto, from time to time purporting to secure payment of such Receivable, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; and (c) all guarantees, insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable; in the case of clauses (b) and (c), without limitation, whether pursuant to the contract related to such Receivable or otherwise or pursuant to any obligations evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security and the proceeds thereof. "REPORTED DAY" shall have the meaning specified in Section 4.1 of the Servicing Agreement. "REPURCHASE OBLIGATION DATE" shall have the meaning specified in subsection 2.5(a). "REQUIREMENT OF LAW" for any Person shall mean the certificate or articles 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. "RESPONSIBLE OFFICER" shall mean (i) when used with respect to the Trustee, any officer within the Corporate Trust Office of the Trustee including any Vice President, any Assistant Vice President, Trust Officer or Assistant Trust Officer or any other 20 officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and (ii) when used with respect to any other Person, the Chairman or Vice Chairman of the Board, President, Chief Financial Officer, any Vice President, Treasurer, Controller, Assistant Treasurer or Secretary of such Person. "REVOLVING PERIOD" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "S&P" shall mean Standard & Poor's Ratings Services, or any successor thereto. "SECURITIES ACT" shall mean the United States Securities Act of 1933, as amended. "SELLER ADJUSTMENT PAYMENTS" shall have the meaning specified in Section 2.05 of the Receivables Sale Agreement. "SELLER DIVISION" shall mean any business unit or operating assets acquired by a Seller which is made part of an existing division of a Seller or made a new division (but not a subsidiary) of a Seller. "SELLER REPURCHASE PAYMENTS" shall have the meaning specified in Section 2.06 of the Receivables Sale Agreement. "SELLERS" shall mean the collective reference to Core-Mark, in its capacity as a Seller under the Receivables Sale Agreement, the wholly-owned Subsidiaries of Core-Mark listed as Sellers on the signature pages thereof and any wholly-owned Subsidiaries of Core-Mark which have been added as Sellers in accordance with the provisions of the Receivables Sale Agreement and the other Transaction Documents (but, in each case, excluding any such Subsidiaries which have been terminated as Sellers in accordance with the provisions thereof and of the other Transaction Documents), all of the foregoing in their capacities as Sellers under the Receivables Sale Agreement; each, individually, a "SELLER". "SERIES" shall mean any series of Investor Certificates, the terms of which are set forth in a Supplement. "SERIES ACCOUNT" shall mean any deposit, trust, escrow, reserve or similar account maintained by the Trustee for the benefit of the Investor Certificateholders of any Series or Class, as specified in any Supplement. "SERIES COLLECTION SUBACCOUNT" shall have the meaning specified in subsection 3.1(a). 21 "SERIES COLLECTION SUB-SUBACCOUNT" shall have the meaning specified in subsection 3.1(a). "SERIES NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning specified in subsection 3.1(a). "SERIES PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning specified in subsection 3.1(a). "SERIES SUBORDINATED INTEREST" shall mean, with respect to any Series, the interest of the Company in the Trust Assets, if any, which is subordinated to the Certificateholders' Interest of such Series, as set forth in the Supplement for such Series. "SERIES TERMINATION DATE" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. "SERVICE TRANSFER" shall have the meaning specified in Section 6.1 of the Servicing Agreement. "SERVICER" shall initially mean Core-Mark in its capacity as Servicer under the Transaction Documents and, after any Service Transfer, the Successor Servicer. "SERVICER DEFAULT" shall have, with respect to any Series, the meaning specified in Section 6.1 of the Servicing Agreement and, if applicable, as supplemented by the related Supplement for such Series. "SERVICER INDEMNIFICATION AMOUNTS" shall have the meaning specified in Section 5.2(c) of the Servicing Agreement. "SERVICER SITE REVIEW" shall mean a review performed by the Trustee of the servicing operations of the Servicer at its offices. "SERVICING AGREEMENT" shall have the meaning specified in the recitals hereto. "SERVICING FEE" shall have the meaning specified in subsection 2.5(a) of the Servicing Agreement. "SERVICING FEE PERCENTAGE" shall mean 1% per annum. "SERVICING PARTY" shall mean the collective reference to the Servicer and each Sub-Servicer. 22 "SETTLEMENT PERIOD" shall mean (i) initially, the period commencing April 1, 1998 and ending on the last day of the April 1998 fiscal month of the Servicer, and (ii) thereafter, each fiscal month of the Servicer. "SETTLEMENT REPORT DATE" shall mean, except as otherwise set forth in the applicable Supplement, the 15th day of each calendar month (or if such 15th day is not a Business Day, the next succeeding Business Day). "SPECIAL ALLOCATION SETTLEMENT REPORT DATE" shall have the meaning specified in subsection 3.1(e). "SPECIFIED BANKRUPTCY OPINION PROVISIONS" shall mean the factual assumptions and the actions to be taken by any Seller or the Company, in each case as specified in the legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison relating to certain bankruptcy matters and delivered on the Initial Closing Date. "STANDBY LIQUIDATION SYSTEM" shall mean a system satisfactory to the Trustee by which the Trustee will receive and store electronic information regarding Receivables from the Servicer and each Sub-Servicer which may be utilized in the event of a liquidation of the Receivables to be carried out by the Trustee. "SUBORDINATED NOTE" shall have the meaning specified in Section 8.01 of the Receivables Sale Agreement. "SUB-SERVICER" shall have the meaning specified in the recitals hereto. "SUBSIDIARY" shall mean, 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. "SUCCESSOR SERVICER" shall have the meaning specified in Section 6.2 of the Servicing Agreement. "SUPPLEMENT" shall mean, with respect to any Series, a supplement to this Agreement complying with the terms of Section 5.10(c), executed in conjunction with the issuance of any Series. "TARGET RECEIVABLES AMOUNT" shall mean, with respect to any Outstanding Series, the meaning assigned to such term in the related Supplement for such Series. 23 "TAX OPINION" shall mean, with respect to any action, an Opinion of Counsel of one or more outside law firms (a) to the effect that, for federal income tax purposes, (i) such action will not adversely affect the characterization as debt or as an interest in a partnership (other than a partnership taxable as a corporation), as the case may be, of any Investor Certificates of any Outstanding Series or Class not retained by the Company, (ii) following such action, the Trust will not be classified as an association or a publicly traded partnership taxable as a corporation, (iii) such action will not cause or constitute a taxable event in which gain or loss would be recognized by any Investor Certificateholder or the Trust and (iv) in the case of Section 5.9, the Investor Certificates of the new Series which are not retained by the Company will be characterized as debt or as an interest in a partnership (other than a partnership taxable as a corporation) and (b) with respect to state taxation issues, in substantially the form delivered on the Initial Closing Date. "TERMINATION NOTICE" shall have the meaning specified in Section 6.1 of the Servicing Agreement. "TOBACCO COMPANIES" shall mean the collective reference to any company engaged in the manufacture and sale of cigarettes. "TRANSACTION DOCUMENTS" shall mean the collective reference to this Agreement, the Servicing Agreement, each Supplement with respect to any Outstanding Series, the Receivables Sale Agreement, the Lockbox Agreements, the Eligible Segregated Account Bank Acknowledgements, the Certificates and any other documents delivered pursuant to or in connection therewith. "TRANSFER AGENT AND REGISTRAR" shall have the meaning specified in Section 5.3 and shall initially be the Trustee. "TRANSFER DEPOSIT AMOUNT" shall have the meaning specified in subsection 2.5(b). "TRANSFERRED AGREEMENTS" shall have the meaning specified in subsection 2.1(b). "TRUST" shall mean the Core-Mark Receivables Master Trust created by this Agreement. "TRUST ACCOUNT" shall have the meaning, with respect to any Series, specified in the applicable Supplement for such Series. "TRUST ASSETS" shall have the meaning specified in Section 2.1. "TRUST TERMINATION DATE" shall have the meaning specified in subsection 9.1(a). 24 "TRUSTEE" shall mean the institution executing this Agreement as trustee, or its successor in interest, or any successor trustee appointed as herein provided. "UCC" shall mean the Uniform Commercial Code, as amended from time to time, as in effect in any specified jurisdiction or if no jurisdiction is specified, as in effect in the State of New York. Section I.2. OTHER DEFINITIONAL AND CALCULATION PROVISIONS. (a) All terms defined in this Agreement, the Servicing Agreement or in any Supplement shall have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under GAAP, the definitions contained herein shall control. (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 contained in this Agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (d) All references herein to any agreement or instrument shall be deemed references to such agreement or instrument as amended, supplemented or otherwise modified from time to time in which case such reference shall be to the agreement or instrument. (e) The definitions contained in Section 1.1 are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. (f) Where a definition contained in Section 1.1 specifies that such term shall have the meaning set forth in the related Supplement, the definition of such term set forth in the related Supplement may be preceded by a prefix indicating (or include in its definition) the specific Series or Class to which such definition shall apply. (g) Where reference is made in this Agreement or any related Supplement to the amount of Receivables, such reference shall, unless explicitly stated otherwise, be deemed a reference to the Principal Amount (as such term is defined in Section 1.1) of such Receivables. 25 (h) Any reference herein or in any other Transaction Document to a provision of the Internal Revenue Code or ERISA shall be deemed a reference to any successor provision thereto. (i) To the extent that any provision of this Agreement or any other Transaction Document requires that a calculation be performed with respect to a date occurring prior to the effective date of such Transaction Document, such calculation shall be performed as provided therein as though such Transaction Document had been effective on and as of such prior date. (j) In calculating the Principal Amount of Receivables on any day, the Principal Amount of Receivables shall be reduced by the amount of collections received on such day (whether or not such Collections have resulted in Available Funds); PROVIDED, that to the extent that a Collection is subsequently dishonored by the bank on which such Collection is drawn, the Principal Amount of Receivables shall be reinstated by the amount of such dishonored Collection. In addition, for purposes of making the allocations required by Article III of this Agreement, as supplemented by the Supplements, on any day, the Servicer shall only direct, and the Trustee shall only be required to transfer, Available Funds. ARTICLE II CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES Section 2.1. CONVEYANCE OF RECEIVABLES. (a) By execution and delivery of this Agreement, the Company does hereby transfer, assign, set over and otherwise convey to the Trust for the benefit of the Holders, without recourse (except as specifically provided herein), all of its present and future right, title and interest in, to and under: (i) all Receivables, including those existing at the close of business on the Initial Closing Date and all Receivables thereafter arising from time to time until but not including the Trust Termination Date; (ii) the Related Property; (iii) all Collections; (iv) all payment, enforcement and other rights (including rescission, replevin or reclamation), but none of the obligations, relating to any Receivable or arising therefrom; (v) the Collection Account, each Eligible Segregated Account, each Lockbox and each Lockbox Account (collectively, the "ACCOUNTS"), including (A) all 26 funds and other evidences of payment held therein and all certificates and instruments, if any, from time to time representing or evidencing any of such Accounts or any funds and other evidences of payment held therein, (B) all investments of such funds held in such Accounts and all certificates and instruments from time to time representing or evidencing such investments, (C) all notes, certificates of deposit and other instruments from time to time hereafter delivered or transferred to, or otherwise possessed by, the Trustee for and on behalf of the Company in substitution for any of the then existing Accounts and (D) 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 and all of the then existing Accounts; (vi) all monies due or to become due and all amounts received with respect to the items listed in clauses (i) through (v) and all proceeds (including, without limitation, whatever is received upon the sale, exchange, collection or other disposition of the foregoing and all "proceeds" as defined in Section 9-306 of the UCC as in effect in the State of New York) thereof, including all Recoveries relating thereto; (b) The Company, to secure its obligations hereunder, hereby transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Holders, and grants to the Trustee, for the benefit of the Holders, a first priority perfected security interest in, all its right, title and interest in, to and under the following: each of the Receivables Sale Agreement and the Servicing Agreement, including in respect of each agreement, (A) all property assigned thereunder and all rights of the Company to receive monies due and to become due under or pursuant to such agreement, whether payable as fees, expenses, costs or otherwise, (B) all rights of the Company to receive proceeds of any credit or similar types of insurance, indemnity, warranty or guaranty with respect to such agreement, (C) claims of the Company for damages arising out of or for breach of or default under such agreement, (D) the right of the Company to amend, waive or terminate such agreement, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder, (E) all other rights, remedies, powers, privileges and claims of the Company under or in connection with such agreement (whether arising pursuant to such agreement or otherwise available to the Company at law or in equity), including the rights of the Company to enforce such agreement and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or in connection therewith and (F) all monies due or to become due and all amounts received with respect to the items listed in clauses (A) through (F) and all proceeds (including, without limitation, whatever is received upon the sale, exchange, collection or other disposition of the foregoing and all "proceeds" as defined in Section 9-306 of the UCC as in effect in the State of New York) thereof, including all Recoveries relating thereto (all of the foregoing set forth in subclauses (A)-(F), inclusive, the "TRANSFERRED AGREEMENTS"); Such property described in the foregoing paragraphs (a) and (b), together with all investments and all monies on deposit in any other bank account or accounts maintained for the benefit of any Holders and all monies available under any Enhancement to be provided by any 27 Enhancement Provider for any Series for payment to Holders shall constitute the assets of the Trust (the "TRUST ASSETS"). Subject to Section 5.9, although it is the intent of the parties to this Agreement that the conveyance of the Company's right, title and interest in, to and under the Receivables and the other Trust Assets described in paragraph (a) pursuant to this Agreement shall constitute a purchase and sale and not a loan, in the event that such conveyance is deemed to create a loan, the Company hereby grants to the Trustee, for the benefit of the Investor Certificateholders, a perfected first priority security interest in all of the Company's present and future right, title and interest in, to and under the Receivables and such other Trust Assets to secure the payment of the applicable Invested Amounts, interest thereon and the other fees and expenses payable to the Investor Certificateholders, and that this Agreement shall constitute a security agreement under applicable law in favor of the Trustee, for the benefit of the Investor Certificateholders. (c) The assignment, set over and conveyance to the Trust pursuant to Section 2.1(a) shall be made to the Trustee, on behalf of the Trust, and each reference in this Agreement to such assignment, set over and conveyance shall be construed accordingly. In connection with the foregoing assignment, except as expressly provided otherwise in the Transaction Documents, the Company, the Servicer and each Sub-Servicer agree to deliver to the Trustee each Trust Asset (including any original documents or instruments included in the Trust Assets as are necessary to effect such assignment) in which the transfer of an interest is perfected under the UCC or otherwise solely by possession and not by filing a financing statement or similar document. Notwithstanding the assignment of the Transferred Agreements set forth in Section 2.1(b), the Company does not hereby assign or delegate any of its duties or obligations under the Transferred Agreements to the Trust or the Trustee and neither the Trust nor the Trustee accepts such duties or obligations, and the Company shall continue to have the right and the obligation to purchase Receivables from the Sellers thereunder from time to time. The foregoing assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trust, the Trustee, any Investor Certificateholder or the Company, in its capacity as a Holder, of any obligation of the Servicer, the Company, any Seller or any other Person in connection with the Receivables or under any agreement or instrument relating thereto, including, without limitation, any obligation to any Obligor. In connection with such assignment, the Company agrees to record and file, at its own expense, any financing statements (and continuation statements with respect to such financing statements when applicable) or, where applicable, registrations in the appropriate records, (i) with respect to the Receivables now existing and hereafter created and (ii) with respect to any other Trust Assets a security interest in which may be perfected under the relevant UCC, legislation or similar statute by such filing or registration, as the case may be, in each case meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary to perfect and maintain perfection of the assignment of the 28 Receivables and such other Trust Assets to the Trust, and to deliver a file-stamped copy or certified statement of such financing statement or registration or other evidence of such filing or registration to the Trustee on or prior to the date of issuance of any Certificates. The Trustee shall be under no obligation whatsoever to file such financing statement, or a continuation statement to such financing statement, or to make any other filing or other registration under the UCC, other relevant legislation or similar statute in connection with such transfer. The Trustee shall be entitled to conclusively rely on the filings or registrations made by or on behalf of the Company without any independent investigation and the Company's obligation to make such filings as evidence that such filings have been made. In connection with such assignment, the Company further agrees, at its own expense, on or prior to the Initial Closing Date (a) to indicate, or to cause to be indicated, in its computer files (but not on individual invoices or individual collection files) relating to such Receivables (by means of a general legend, substantially in the form described on Schedule 6 hereto, that will automatically appear each time a Person enters the Sellers' Receivables program that unless otherwise specifically identified as a receivable not so sold, transferred, assigned and conveyed, all Receivables (and any such other receivables) included therein and all other Receivables Property (and any other similar related property) have been sold, transferred, assigned and conveyed pursuant to the Receivables Sale Agreement or this Agreement, respectively, to the Company or the Trust for the benefit of the Holders, as the case may be, and (b) to deliver, or cause to be delivered, to the Trustee computer files, microfiche lists or typed or printed lists (the "RECEIVABLES LISTS") containing true and complete lists of all such Receivables transferred to the Trust, identified by Obligor and setting forth the Receivables balance for each such Receivable, as of the Cut-Off Date. Such tapes or disks shall be marked as Schedule 1 to this Agreement and are hereby incorporated into and made a part of this Agreement. Section 2.2. ACCEPTANCE BY TRUSTEE. (a) The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest to the property, now existing and hereafter created, assigned to the Trust pursuant to Section 2.1 and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Holders. The Trustee further acknowledges that prior to, or simultaneously with, the execution and delivery of this Agreement, the Company delivered or caused to be delivered to the Trustee the computer file printout or microfiche list described in the last paragraph of Section 2.1. (b) The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement. Section 2.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RELATING TO THE COMPANY. The Company hereby represents and warrants to the Trustee and the Trust, for the benefit of the holders of Certificates of each Outstanding Series, as of the Issuance Date of such Series, that: 29 (a) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Company (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite corporate power and authority and all legal right to own and operate its properties, to lease the properties it operates as lessee and to conduct its business as now conducted, (iii) is duly qualified as a foreign corporation to do business and is in good standing under the laws of each jurisdiction where such qualification is necessary and (iv) is in compliance with its certificate or articles of incorporation and by-laws or other organizational or governing documents and, in all material respects, any other Requirements of Law. The Company does not engage in activities prohibited by the Transaction Documents or its certificate of incorporation. (b) CORPORATE POWER; AUTHORIZATION; CONSENTS. The Company has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction 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 or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which it is a party by or against the Company other than (i) those which have duly been obtained or made and are in full force and effect on the Initial Closing Date, (ii) any filings of UCC-1 financing statements or similar documents necessary to perfect the Company's or the Trust's interest in the Trust Assets and (iii) those that may be required under the state securities or "blue sky" laws in connection with the offering or sale of certificates. This Agreement and each other Transaction Document to which the Company is a party have been duly executed and delivered on behalf of the Company. (c) ENFORCEABILITY. This Agreement and each of the other Transaction Documents to which the Company is a party (i) constitute the legal, valid and binding obligations of the Company enforceable against it in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity) and (ii) are effective to, and all action has been taken to, cause compliance with paragraph (n) of the definition of Eligible Receivables. (d) NO LEGAL BAR. The execution, delivery and performance of this Agreement and the other Transaction Documents to which the Company is a party will not violate its certificate or articles of incorporation and by-laws or other organizational or governing documents and, any other Requirement of Law in any material respect, and will not result in, or require, the creation or imposition of any Lien (other than Liens 30 contemplated or permitted hereby) on any of its properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. (e) NO CONFLICT. The execution and delivery of this Agreement and the other Transaction Documents to which the Company is a party, the performance of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof will not, in any material respect, conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Company is a party or by which it or any of its property is bound. (f) NO MATERIAL LITIGATION. There are no actions, suits, investigations or proceedings at law or in equity (including, without limitation, injunctions, writs or restraining orders) by or before any arbitrator, court or Governmental Authority now pending or, to the knowledge of the Company, threatened against or affecting the Company or any properties, revenues or rights of the Company which (i) involve this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby, (ii) which could reasonably be expected to affect adversely the income tax or franchise tax attributes of the Trust under the United States federal or any state or franchise tax systems or (iii) would be reasonably likely to have a Material Adverse Effect. The transactions contemplated hereunder and the use of the proceeds thereof will not violate any Requirement of Law. (g) NO DEFAULT. The Company is not in default, in any material respect, under or with respect to any of its Contractual Obligations. No Early Amortization Event or Potential Early Amortization Event has occurred and is continuing. (h) COMPLIANCE WITH LAW. The Company has complied with all applicable provisions of its certificate or articles of incorporation and by-laws or other organizational or governing documents and, in all material respects, any other Requirements of Law with respect to the Company, its business and properties and the Trust Assets. (i) TAX RETURNS. The Company has filed or caused to be filed all tax returns which are required to have been filed by it and has paid or caused to be paid all taxes shown thereon to be due and payable, and any assessments made against it or any of its property. No tax Lien has been filed, and, to the best knowledge of the Company, no claim is being asserted, with respect to any taxes other than Liens permitted pursuant to clause (iv) of the definition of Permitted Liens. For purposes of this paragraph, "taxes" shall mean any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any Governmental Authority. 31 (j) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. The offices at which the Company keeps its records concerning the Receivables either (x) are located at the addresses set forth for the Sellers on Schedule 2 of the Receivables Sale Agreement or (y) have been reported to the Trustee in accordance with the provisions of subsection 2.8(l) of this Agreement. The chief executive office of the Company is located at the address set forth on Schedule 4 (as such location may be changed from time to time in accordance with Section 2.8(1) of the Agreement) and is the place where the Company is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York. The state and county where the chief executive office of the Company is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York has not changed in the past four months. (k) SOLVENCY. Both prior to and after giving effect to the transactions occurring on each Issuance Date, (i) the fair value of the assets of the Company at a fair valuation will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Company; (ii) the present fair salable value of the property of the Company will be greater than the amount that will be required to pay the probable liability of the Company on its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; (iii) the Company will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Company will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. For all purposes of clauses (i) through (iv) above, the amount of contingent liabilities at any time shall be computed as the amount that, in the 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. The Company does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it and the timing of and amounts of cash to be payable in respect of its debt. (l) INVESTMENT COMPANY. Neither the Company nor the Trust (before and after giving effect to the issuance of Certificates on such Issuance Date) is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such act. (m) OWNERSHIP; SUBSIDIARIES. All of the issued and outstanding capital stock of the Company is owned, legally and beneficially, by Core-Mark. The Company has no Subsidiaries. (n) NAMES. The legal name of the Company is as set forth in this Agreement. The Company has not had, nor has, any trade names, fictitious names, assumed names or "doing business as" names. 32 (o) LIABILITIES. Other than, (i) the liabilities, commitments or obligations (whether absolute, accrued, contingent or otherwise) arising under or in respect of the Transaction Documents and (ii) immaterial amounts due and payable in the ordinary course of business of a special- purpose company, the Company does not have any liabilities, commitments or obligations (whether absolute, accrued, contingent or otherwise), whether due or to become due. (p) USE OF PROCEEDS; FEDERAL RESERVE BOARD REGULATION. No proceeds of the issuance of any Investor Certificates will be used by the Company to purchase or carry any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time). The Company is in compliance with all applicable regulations of the Board of Governors of the Federal Reserve System (including, without limitation, Regulations U and G with respect to "margin stock"). (q) COLLECTION PROCEDURES. The Company and each Seller have in place procedures pursuant to the Policies which are either necessary or advisable to ensure the timely collection of Receivables in accordance with the Transaction Documents. (r) LOCKBOX ACCOUNTS; ELIGIBLE SEGREGATED ACCOUNTS. The Lockbox Banks and Eligible Segregated Account Banks are the only institutions holding any Lockbox Accounts or Eligible Segregated Accounts for the receipt of payments from Obligors in respect of Receivables and no Persons other than Obligors have been instructed to make payments to Lockbox Accounts or Eligible Segregated Accounts. (i) Each Lockbox Agreement to which the Company is party is in full force and effect, (ii) each Lockbox Account is free and clear of any Lien (other than any right of set-off expressly provided for in the applicable Lockbox Agreement), (iii) each Eligible Segregated Account Agreement to which the Company is party is in full force and effect and (iv) each Eligible Segregated Account established pursuant to subsection 2.3(b) of the Servicing Agreement is free and clear of any Lien. (s) BULK SALES. The execution, delivery and performance of this Agreement do not require compliance with any "bulk sales" law by the Company. The representations and warranties set forth in this Section 2.3 shall survive after the date made and the transfer and assignment of the Trust Assets to the Trust. Upon discovery by a Responsible Officer of the Company or the Servicer or by a Responsible Officer of the Trustee of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other parties and to each Agent with respect to all Outstanding Series. The Trustee's obligations in respect of any breach are limited as provided in subsection 8.2(g). 33 Section 2.4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RELATING TO THE RECEIVABLES. The Company hereby represents and warrants to the Trustee and the Trust, for the benefit of the holders of Certificates of each Outstanding Series, (x) as of the Issuance Date of such Series, and (y) with respect to each Receivable transferred to the Trust after such Issuance Date, as of the related Receivables Purchase Date, unless, in either case, otherwise stated in the applicable Supplement or unless such representation or warranty expressly relates only to a prior date, that: (a) Schedule 1 to this Agreement sets forth an accurate and complete listing as of the Cut-Off Date of all Receivables to be transferred to the Trust as of the Initial Closing Date and the information contained therein with respect to the identity of the Obligor of, and Principal Amount of, each such Receivable is true and correct in all material respects as of the Cut-Off Date. As of the Cut-Off Date, the aggregate amount of Receivables owned by the Company is accurately set forth in all material respects in Schedule 1 hereto. (b) Each Receivable existing on the Initial Closing Date or, in the case of Receivables transferred to the Trust after the Initial Closing Date, on the date that each such Receivable shall have been transferred to the Trust, has been conveyed to the Trust free and clear of any Lien, except for Permitted Liens specified in clauses (i) and (iv) of the definition thereof. (c) On the Initial Closing Date, each Receivable transferred to the Trust that is included in the calculation of the initial Aggregate Receivables Amount is an Eligible Receivable and, in the case of Receivables transferred to the Trust after the Initial Closing Date, on the date such Receivable shall have been transferred to the Trust, each such Receivable that is included in the calculation of the Aggregate Receivables Amount on such date is an Eligible Receivable. Each Receivable classified as an "Eligible Receivable" by the Company in any document or report delivered hereunder satisfies the requirements of eligibility contained in the definition of Eligible Receivable. The representations and warranties set forth in this Section 2.4 shall survive after the date made and the transfer and assignment of the Trust Assets to the Trust. Upon discovery by a Responsible Officer of the Company or the Servicer or a Responsible Officer of the Trustee of a breach of any of the representations and warranties, the party discovering such breach shall give prompt written notice to the other parties and to each Agent with respect to all Outstanding Series. The Trustee's obligations in respect of any breach are limited as provided in Section 8.2(g). Section 2.5. REPURCHASE OF INELIGIBLE RECEIVABLES. (a) REPURCHASE OBLIGATION. If (i) any representation or warranty under subsections 2.4(a), (b) or (c) is not true and correct in any material respect as of the date specified therein with respect to any Receivable transferred to the Trust, (ii) there is a breach of any covenant under subsection 2.8(c) with respect to any Receivable and such breach has a material adverse effect on the 34 Certificateholders' Interest in such Receivable or (iii) the Trust's interest in any Receivable is not a first priority perfected ownership or security interest at any time as a result of any action taken by, or any failure to take action by, the Company (any Receivable as to which the conditions specified in any of clauses (i), (ii) or (iii) of this subsection 2.5(a) exists is referred to herein as an "INELIGIBLE RECEIVABLE") then, upon the earlier (the date on which such earlier event occurs, the "REPURCHASE OBLIGATION DATE") of the discovery by the Company of any such event which continues unremedied or receipt by the Company of written notice given by the Trustee or the Servicer of any such event which continues unremedied, the Company shall become obligated to repurchase or cause to be repurchased such Ineligible Receivable on the terms and conditions set forth in subsection 2.5(b). (b) REPURCHASE OF RECEIVABLES. Subject to the last sentence of this subsection 2.5(b), the Company shall repurchase, or cause to be repurchased, each Ineligible Receivable required to be repurchased pursuant to subsection 2.5(a) by depositing in the Collection Account in immediately available funds on the Business Day following the related Repurchase Obligation Date an amount equal to the lesser of (x) the amount by which the Aggregate Target Receivables Amount exceeds the Aggregate Receivables Amount (after giving effect to the reduction thereof by the Principal Amount of such Ineligible Receivable) and (y) the aggregate outstanding Principal Amount of each such Ineligible Receivable (the "TRANSFER DEPOSIT AMOUNT"). Upon transfer or deposit of the Transfer Deposit Amount, the Trust shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Company, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Ineligible Receivable, all monies due or to become due with respect thereto and all proceeds thereof; and such repurchased Ineligible Receivable shall be treated by the Trust as collected in full as of the date on which it was transferred. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Company to effect the conveyance of such Receivables pursuant to this subsection. Except as otherwise specified in any Supplement, the obligation of the Company to repurchase any Ineligible Receivable shall constitute the sole remedy respecting the event giving rise to such obligation available to Investor Certificateholders (or the Trustee on behalf of Investor Certificateholders) unless such obligation is not satisfied in full in accordance with the terms of this Agreement. Section 2.6. PURCHASE OF INVESTOR CERTIFICATEHOLDERS' INTEREST IN TRUST PORTFOLIO. (a) In the event of any breach of any of the representations and warranties set forth in Section 2.3, which breach has a material adverse effect on the interests of the holders of an Outstanding Series (without giving effect to any Enhancement) under or with respect to the Transaction Documents, then the Trustee, at the written direction of holders of Certificates evidencing more than 50% of the Invested Amount of such Outstanding Series shall notify the Company to purchase such Outstanding Series and the Company shall be obligated to make such purchase on the next Distribution Date occurring at least five Business Days after receipt of such notice on the terms and conditions set forth in subsection 2.6(b) below; PROVIDED, HOWEVER, that no such purchase shall be required to be made if, by such Distribution Date, the representations and warranties contained in Section 2.3 shall be satisfied in all material 35 respects and any material adverse effect on the holders of such Outstanding Series caused thereby shall have been cured. (b) As required under subsection 2.6(a) above, the Company shall deposit into the Collection Account for credit to the applicable subaccount of the Collection Account on the Business Day preceding such Distribution Date an amount equal to the purchase price (as described in the next succeeding sentence) for the Certificateholders' Interest for such Outstanding Series on such day. The purchase price for any such purchase will be equal to (i) the Adjusted Invested Amount of such Outstanding Series on the date on which the purchase is made plus (ii) an amount equal to all interest accrued but unpaid on such Series up to the Distribution Date on which the distribution of such deposit is scheduled to be made pursuant to Section 9.2 plus (iii) any other amount required to be paid in connection therewith pursuant to any Supplement. Notwithstanding anything to the contrary in this Agreement, the entire amount of the purchase price deposited in the Collection Account (together with amounts on deposit in the applicable Series Principal Collection Sub-subaccount) shall be distributed to the related Investor Certificateholders on such Distribution Date pursuant to Section 9.2. If the Trustee gives notice directing the Company to purchase the Certificates of an Outstanding Series as provided above, except as otherwise specified in any Supplement, the obligation of the Company to purchase such Certificates pursuant to this Section 2.6 shall constitute the sole remedy respecting an event of the type specified in the first sentence of this Section 2.6 available to the applicable Investor Certificateholders (or the Trustee on behalf of such Investor Certificateholders) unless such obligation is not satisfied in full in accordance with the terms of this Agreement. Section II.7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants that, until the Trust Termination Date occurs, the Company shall: (a) FINANCIAL STATEMENTS. (i) Furnish to the Trustee, each Agent and the Rating Agencies, within 120 days after the end of each fiscal year, the balance sheet and related statements of income, stockholders' equity and cash flows showing the financial condition of the Company as of the close of such fiscal year and the results of its operations during such year, certified by an appropriate Responsible Officer of the Company to the effect that such financial statements fairly present the financial condition and results of operations of the Company in accordance with GAAP consistently applied; (ii) Furnish to the Trustee, each Agent and the Rating Agencies, within 60 days after the end of each of the first three fiscal quarters of each fiscal year, the Company's balance sheet and related income statement showing the financial condition of the Company as of the close of such fiscal quarter and the results of its operations during such fiscal year (and, beginning with the second fiscal year, showing, on a comparative basis, such information as of and for the corresponding dates and periods of the preceding fiscal year), all certified by a Responsible Officer of such Person as fairly presenting the financial condition and results of operations of the Company in accordance 36 with GAAP consistently applied, subject to normal year-end audit adjustments; and (iii) Furnish to the Trustee and each Agent, promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Company, or compliance with the terms of any Transaction Document, in each case as any Agent or the Trustee may reasonably request. (b) ANNUAL OPINION. Deliver to the Trustee an Opinion of Counsel, substantially in the form of Exhibit C, by March 31st of each year, the first such delivery hereunder to occur in March 1999. (c) PAYMENT OF OBLIGATIONS; COMPLIANCE WITH 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 (including, without limitation, all taxes, assessments, levies and other governmental charges imposed on it), 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 Company. The Company shall defend the right, title and interest of the Trustee and the Holders in, to and under the Receivables and the other Trust Assets, whether now existing or hereafter created, against all claims of third parties claiming through or under the Company, any Seller, any Sub-Servicer or the Servicer. (d) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper books of records and accounts in which full, true and correct entries in conformity in all material respects 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 the Trustee or any Agent for any Outstanding Series upon reasonable advance notice to visit and inspect any of its properties and examine and make abstracts from any of its books and records during normal business hours on any Business Day and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Company with officers and employees of the Company and with its Independent Public Accountants; PROVIDED, that the Trustee shall notify the Company prior to any contact with such accountants and, prior to the occurrence of an Early Amortization Event, shall permit representatives of the Company to be present during such discussions. (e) COMPLIANCE WITH LAW AND POLICIES. (i) Comply in all material respects with all Requirements of Law applicable to the Company. (ii) Cause each Seller to perform its obligations in accordance with, and comply in all material respects with, the Policies, as amended from time to 37 time in accordance with the Transaction Documents, in regard to the Receivables and the Related Property. (f) PURCHASE OF RECEIVABLES. Purchase Receivables solely pursuant to (i) the Receivables Sale Agreement or (ii) this Agreement. (g) DELIVERY OF COLLECTIONS. In the event that the Company receives Collections directly from Obligors, deposit such Collections into the applicable Lockbox Account, Eligible Segregated Account or the Collection Account within one Business Day after receipt thereof by the Company. (h) NOTICES. Promptly (and, in any event, within five Business Days after a Responsible Officer of the Company becomes aware of such event) give written notice to the Trustee, each Rating Agency and each Agent for any Outstanding Series of: (i) the occurrence of any Early Amortization Event or Potential Early Amortization Event; and (ii) any Lien not permitted by subsection 2.8(c) on any Receivable or any other Trust Assets. (i) LOCKBOXES; ELIGIBLE SEGREGATED ACCOUNTS. (i) Maintain, and keep in full force and effect, each Lockbox Agreement and Eligible Segregated Account Agreement to which the Company is a party, and not amend or otherwise modify each such agreement, except in each case to the extent otherwise permitted under the terms of this Agreement and the other Transaction Documents; PROVIDED, HOWEVER, that the Company may enter into any amendments or modifications of a Lockbox Agreement or Eligible Segregated Account Agreement that the Company reasonably deems necessary to conform such Lockbox Agreement or Eligible Segregated Account Agreement to the cash management system of the Servicer and that are reasonably acceptable to the Trustee and each Agent, (ii) ensure that each related Lockbox Account shall be free and clear of, and defend each such Lockbox Account against and (iii) ensure that each related Eligible Segregated Account shall be free and clear of, and defend such Eligible Segregated Account against, any writ, order, stay, judgment, warrant of attachment or execution or similar process. (j) SEPARATE CORPORATE EXISTENCE. (i) Maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and ensure that the funds of the Company will not be diverted to any other Person or for other than corporate uses of the Company, nor will any material amount of such funds be commingled with the funds of any Seller or any other Subsidiary or Affiliate of any Seller; 38 (ii) To the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees; (iii) To the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Company contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs. All material transactions between the Company and any of its Affiliates, whether currently existing or hereafter entered into, shall be only on an arm's-length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iii); (iv) Maintain a principal executive office at a separate address from the address of Core-Mark and its Affiliates; PROVIDED that a separate space within, but segregated from, that of Core-Mark and its Affiliates shall constitute separate addresses for purposes of this clause (iv). To the extent that the Company and any of its stockholders or Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses; (v) Issue separate financial statements prepared not less frequently than quarterly and prepared in accordance with GAAP; (vi) Conduct its affairs in its own name and strictly in accordance with its articles of incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts; (vii) Not assume or guarantee any of the liabilities of any Seller, any Servicing Party or any Affiliate of any thereof; and 39 (viii) Take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to (x) ensure that the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions remain true and correct in all material respects with respect to the Company and (y) comply in all material respects with those procedures described in such provisions which are applicable to the Company. (k) PRESERVATION OF CORPORATE EXISTENCE. (i) Preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation and (ii) qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would, if not remedied within 30 days, be reasonably likely to have a Material Adverse Effect. (l) NET WORTH. Maintain at all times a consolidated net worth, as determined in accordance with GAAP, of at least $9,500,000. (m) MAINTENANCE OF PROPERTY. Keep all property and assets useful and necessary to permit the monitoring and collection of Receivables. (n) FURTHER ASSURANCES. File, or cause to be filed, at the applicable Seller's expense and in accordance with the provisions of the UCC of the applicable jurisdiction, duly completed and executed continuation statements with respect to all financing statements filed in connection with the transactions contemplated by the Receivables Sale Agreement. Section 2.8. NEGATIVE COVENANTS OF THE COMPANY. The Company hereby covenants that, until the Trust Termination Date occurs, it shall not directly or indirectly: (a) ACCOUNTING OF TRANSFERS. Prepare any financial statements which shall account for the transactions contemplated by the Receivables Sale Agreement in any manner other than as a sale of (or capital contribution of) Receivables and the other Trust Assets by the Sellers to the Company or in any other respect account for or treat the transactions under the Receivables Sale Agreement (including for financial accounting purposes, except as required by law) in any manner other than as transfers of Receivables and the other Trust Assets by the Sellers to the Company; PROVIDED, HOWEVER, that this subsection shall not apply for any tax or tax accounting purposes. (b) LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness evidenced by the Subordinated Note; (ii) Indebtedness representing fees, expenses and indemnities payable pursuant to and in accordance with the Transaction Documents; and (iii) Indebtedness for services supplied or furnished to the Company in an amount not to exceed $25,000 at any one time outstanding; PROVIDED that any Indebtedness permitted hereunder and described in clauses (i) and (iii) shall be payable by the Company solely from funds available to 40 the Company which are not otherwise required to be applied to the payment of any amounts by the Company pursuant to any Pooling and Servicing Agreements. (c) LIMITATION ON LIENS AND SALES. Except for the conveyance hereunder, the Company will not sell, pledge, assign or transfer to any Person, or create, incur, assume or suffer to exist any Lien upon any Receivables or any of its property, assets or revenues, whether now owned or hereafter acquired, except for Permitted Liens, it being understood that no Permitted Lien under clause (ii) of the definition thereof shall cover any of the Trust Assets (except to the limited extent permitted by clause (iv) of such definition). (d) LIMITATION ON GUARANTEE OBLIGATIONS. Become or remain liable, directly or contingently, in connection with any Indebtedness or other liability of any other Person, whether by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), agreement to purchase or repurchase, agreement to supply or advance funds, or otherwise, except in connection with indemnification obligations of the Company to the limited extent provided in the Company's articles of incorporation and by-laws; PROVIDED that any such indemnification shall be paid solely from funds available to the Company which are not otherwise needed to be applied to the payment of any amounts pursuant to any Pooling and Servicing Agreements, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. (e) 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 make any material change in its present method of conducting business (other than as contemplated by the Transaction Documents), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets other than the assignments and transfers contemplated hereby . (f) LIMITATION ON DIVIDENDS AND OTHER PAYMENTS. Declare or pay any dividend 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 Company, 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 Company (any of the foregoing, a "restricted payment"), or make, directly or indirectly, payments in any form in respect of the Subordinated Note unless (i) at the date such restricted payment or payment in respect of the Subordinated Note is made, the Company shall have made all payments in respect of its repurchase obligations pursuant to this Agreement outstanding at such date, (ii) at the date such restricted payment is made, outstanding principal amount of the Subordinated Note shall be zero, and (iii) any such restricted payment is made no more frequently than on a monthly basis and is effected in accordance with all corporate and legal formalities applicable to the Company; PROVIDED, HOWEVER, that (A) no restricted payment or payment in 41 respect of the Subordinated Note, shall be made on any date if (x) a Potential Early Amortization Event of a type referred to in clause (a)(ii) or (iii) of Section 7.1 or (y) an Early Amortization Event has occurred and is continuing (or would occur as a result of such payment) on such date and (B) all restricted payments, and payments in respect of the Subordinated Note, made on any date shall be payable by the Company solely from funds available to the Company which are not otherwise needed on such date to be applied to the payment of any amounts by the Company pursuant to any Pooling and Servicing Agreement. (g) BUSINESS OF THE COMPANY. Engage at any time in any business or business activity other than the acquisition of Receivables pursuant to the Receivables Sale Agreement, the assignments and transfers hereunder and the other transactions contemplated by the Transaction Documents, and any activity incidental to the foregoing and necessary or convenient to accomplish the foregoing, or enter into or be a party to any agreement or instrument other than in connection with the foregoing, except those agreements or instruments permitted under subsection 2.8(i). (h) 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 for any Exchangeable Company Interest, any Series Subordinated Interest, the Receivables and the other Trust Assets. (i) AGREEMENTS. (A) Become a party to, or permit any of its properties to be bound by, any indenture, mortgage, instrument, contract, agreement, lease or other undertaking, except the Transaction Documents, leases of office space, equipment or other facilities for use by the Company in its ordinary course of business, employment agreements, service agreements, agreements relating to shared employees and the other Transaction Documents and agreements necessary to perform its obligations under the Transaction Documents, (B) issue any power of attorney (except to the Trustee or the Servicer or except for the purpose of permitting any Person to perform any ministerial functions on behalf of the Company that are not prohibited by or inconsistent with the terms of the Transaction Documents), or (C) amend, supplement, modify or waive any of the provisions of the Receivables Sale Agreement or any Lockbox Agreement or Eligible Segregated Account Agreement or request, consent or agree to or suffer to exist or permit any such amendment, supplement, modification or waiver or exercise any consent rights granted to it thereunder unless such amendment, supplement, modification or waiver or such exercise of consent rights would not be reasonably likely to have a Material Adverse Effect and, in the case of the Receivables Sale Agreement, the Rating Agency Condition shall have been satisfied with respect to any such amendments, supplements, modifications or waivers. (j) POLICIES; AMENDMENTS TO RECEIVABLES. (i) Make any change or modification (or permit any change or modification to be made) in any material respect to the Policies, except (x) if such changes or modifications are necessary under 42 any Requirement of Law, (y) if such changes or modifications would not reasonably be likely to have a Material Adverse Effect or (z) if the Rating Agency Condition is satisfied with respect thereto; PROVIDED, HOWEVER, that if any change or modification, other than a change or modification permitted pursuant to clause (x) or (y) above, would be reasonably likely to have a material adverse effect on the interests of the Investor Certificateholders of a Series which is not rated by a Rating Agency, the consent of the applicable Agent (or as specified in the related Supplement) shall be required to effect such change or modification. (ii) Take any action with respect to the Receivables of the type which if taken by the Servicer would violate the provisions of Section 4.6 of the Servicing Agreement. (k) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Subject to the delivery requirement set forth in subsection 2.1(c), take any action to cause any Receivable to be evidenced by any "instrument" other than, provided that the procedures set forth in Schedule 3 are fully implemented with respect thereto, an instrument which alone or together with a security agreement constitutes "chattel paper" (each as defined in the UCC as in effect in any state in which the Company's or the applicable Seller's chief executive office or books and records relating to such Receivable are located), except in connection with its enforcement or collection of an Aged Receivable. (l) OPTIONAL TERMINATION. Fail to deliver an Optional Termination Notice to the Trustee with respect to any Outstanding Series, unless it shall deliver an Optional Termination Notice to the Trustee with respect to all Outstanding Series. (m) OFFICES. Move outside or within the state where such office is now located the location of its chief executive office or of any of the offices where it keeps its records with respect to the Receivables without (i) in the case of moves outside such state, giving 30 days' prior written notice to the Trustee and each Rating Agency, (ii) in the case of moves within such state, giving the Trustee prompt notice of a change within the state where such office is now located of the location of its chief executive office or any office where it keeps its records with respect to the Receivables and (iii) taking all actions reasonably requested by the Trustee (including but not limited to all filings and other acts necessary or advisable under the UCC or similar statute of each relevant jurisdiction) in order to continue the Trust's first priority perfected ownership or security interest in all Receivables now owned or hereafter created; PROVIDED, HOWEVER, that the Company shall not change the location of its chief executive office to outside of the United States, or to a state which is within the Tenth Circuit unless it delivers an Opinion of Counsel reasonably acceptable to the Rating Agencies to the effect that OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993), is no longer controlling precedent in the Tenth Circuit. 43 (n) CHANGE IN NAME. Change its name, identity or corporate structure in any manner which would or might make any financing statement or continuation statement (or other similar instrument) filed in accordance herewith seriously misleading within the meaning of Section 9-402(7) of the UCC as in effect in any applicable jurisdiction in which UCC filings have been made in respect of the Trust Assets without 30 days' prior written notice to the Trustee and each Rating Agency. (o) CHARTER. Amend or make any change or modification to its certificate of incorporation or by-laws without first satisfying the Rating Agency Condition (other than an amendment, change or modification made pursuant to changes in law of the state of its incorporation or amendments to change the Company's name (subject to compliance with clause (m) above), resident agent or address of resident agent). (p) ADDITION OF SELLERS. Agree to the addition of any Subsidiary of Core-Mark as an additional Seller pursuant to Section 9.12 of the Receivables Sale Agreement without (i) such Subsidiary complying with all conditions precedent set forth in Section 3.02 of the Receivables Sale Agreement, or such Subsidiary's being simultaneously added as a Sub- Servicer (or without another Subsidiary's simultaneously agreeing to act as a Sub-Servicer in respect of such additional Seller) under the Transaction Documents pursuant to Section 2.6 of the Servicing Agreement. ARTICLE III RIGHTS OF HOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS THE FOLLOWING PORTION OF THIS ARTICLE III IS APPLICABLE TO ALL SERIES. Section III.1. RIGHTS OF HOLDERS. (a) Each Series of Investor Certificates shall represent Fractional Undivided Interests in the Trust (including any Enhancement applicable to such Series as specified in the related Supplement) relating to such Series and the right to receive Collections and other amounts at the times and in the amounts specified in this Article III (as supplemented by the Supplement related to such Series) to be deposited in the Collection Account and any other accounts maintained for the benefit of the Investor Certificateholders or paid to the Investor Certificateholders (with respect to each outstanding Series, the "CERTIFICATEHOLDERS' INTEREST"). The "EXCHANGEABLE COMPANY INTEREST" shall be the interest in the Trust not represented by any Series of Investor Certificates then outstanding or Series Subordinated Interests then in existence, including the right to receive Collections and other amounts at the times and in the amounts specified in this Article III to be paid to the Company (the "COMPANY INTEREST"), and each Series Subordinated Interest, if any, shall be the interest specified as such pursuant to the related Supplement; PROVIDED, HOWEVER, that no such Exchangeable Company Interest or Series Subordinated Interest shall include any interest in any Trust Account or any other accounts maintained for the benefit of the Investor 44 Certificateholders or the benefit of any Enhancement Provider, except as specifically provided in this Article III. (b) ESTABLISHMENT OF COLLECTION ACCOUNT; AUTHORITY OF THE TRUSTEE IN RESPECT OF THE COLLECTION ACCOUNT AND HOLDERS' INTERESTS THEREIN. (i) The Trustee, for the benefit of the Investor Certificateholders, shall cause to be established and maintained in the name of the Trust with an Eligible Institution or with the corporate trust department of the Trustee or an affiliate of the Trustee, a segregated trust account (the "COLLECTION ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Investor Certificateholders. Schedule 2, which is hereby incorporated into and made a part of this Agreement, identifies the Collection Account by setting forth the account number of such account, the account designation of such account and the name of the institution with which such account has been established. The Collection Account shall be divided into individual subaccounts for each Outstanding Series (each, respectively, a "SERIES COLLECTION SUBACCOUNT" and, collectively, the "SERIES COLLECTION SUBACCOUNTS") and for the Company (the "COMPANY COLLECTION SUBACCOUNT"). For administrative purposes only, the Trustee shall establish or cause to be established for each Series, so long as such Series is an Outstanding Series, sub-subaccounts of the Series Collection Subaccounts with respect to such Series (respectively, the "SERIES PRINCIPAL COLLECTION SUB-SUBACCOUNT" and "SERIES NON- PRINCIPAL COLLECTION SUB-SUBACCOUNT" and, collectively, the "SERIES COLLECTION SUB-SUBACCOUNTS"). (ii) The Trustee, on behalf of the Investor Certificateholders, shall possess all right, title and interest in all funds on deposit from time to time in the Collection Account and in all proceeds thereof. The Collection Account shall be under the sole dominion and control of the Trustee for the benefit of the Investor Certificateholders and, to the extent set forth in any Supplement, any Enhancement Provider set forth therein. If, at any time, the Servicer has actual notice or knowledge that any institution holding the Collection Account is other than the corporate trust department of the Trustee or an affiliate of the Trustee, or that any other institution holding the Collection Account has ceased to be an Eligible Institution, the Servicer shall direct the Trustee in writing to establish within 30 days a substitute account therefor with an Eligible Institution, transfer any cash and/or any Eligible Investments to such new account and from the date any such substitute accounts are established, such account shall be the Collection Account. Neither the Company nor the Servicer, nor any person or entity claiming by, through or under the Company or Servicer, shall have any right, title or interest in, except to the extent expressly provided under the Transaction Documents, or any right to withdraw any amount from, the Collection Account. Pursuant to the authority granted to the Servicer in subsection 2.2(a) of the Servicing Agreement, the Servicer shall have the power, revocable by the Trustee, to instruct the Trustee in writing to make withdrawals from and payments to the Collection Account for the purposes of carrying out the Servicer's or the Trustee's duties hereunder. (c) ADMINISTRATION OF THE COLLECTION ACCOUNT. At the written direction of the Servicer, funds on deposit in the Collection Account available for investment shall be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Investor Certificateholders. 45 Amounts on deposit in each Series Non-Principal Collection Sub-subaccount shall, if applicable, be invested in Eligible Investments that will mature, or that are payable or redeemable upon demand of the holder thereof, so that such funds will be available on or before the Business Day immediately preceding the next Distribution Date. None of such Eligible Investments shall be disposed of prior to the maturity date with respect thereto unless such disposition is reasonably necessary to prevent a loss. All interest and investment earnings (net of losses and investment expenses) (the "INVESTMENT EARNINGS") on funds deposited in a Series Non-Principal Collection Sub-subaccount shall be deposited in such sub-subaccount. Amounts on deposit in the Series Principal Collection Sub-subaccounts and any other sub-subaccounts as specified in the related Supplement shall be invested in Eligible Investments that mature, or that are payable or redeemable upon demand of the holder thereof, so that such funds will be available not later than the date which is specified in any Supplement. The Trustee, or its nominee or custodian, shall maintain possession of the instruments or securities, if any, evidencing any Eligible Investments from the time of purchase thereof until the time of sale or maturity. Any Investment Earnings on such invested funds in a Series Principal Collection Sub-subaccount and any other sub-subaccounts as specified in the related Supplement will be deposited in the related Series Non-Principal Collection Sub-subaccount. If the Servicer fails to give such written instruction, the amounts in the Collection Account available for investment shall remain uninvested. (d) DAILY COLLECTIONS. (i) Promptly following its receipt of Collections in the form of available funds in the Lockbox Accounts or Eligible Segregated Accounts, but in no event later than the Business Day following such receipt, the Servicer shall transfer, or cause to be transferred, all Collections on deposit (less the aggregate amount of set-offs permitted to be retained pursuant to any applicable Lockbox Agreement or Eligible Segregated Accounts Agreement) in the form of available funds in the Lockbox Accounts, or Eligible Segregated Accounts directly to the Collection Account. (ii) On the date funds become available in the Collection Account (unless received after 1:00 p.m., New York City time, on such date, then on the next Business Day) (the "DEPOSIT DATE"), the Trustee shall (in accordance with the written directions received from the Servicer pursuant to subsection (h) below, upon which the Trustee may conclusively rely) transfer from Aggregate Daily Collections for such Deposit Date, to the respective Series Collection Subaccount for each Outstanding Series, an amount equal to the product of (x) the applicable Invested Percentage for such Outstanding Series and (y) such Aggregate Daily Collections. (iii) On each Deposit Date, the Trustee shall (in accordance with the written directions received from the Servicer pursuant to subsection (h) below, upon which the Trustee may conclusively rely) allocate funds transferred to the Series Collection Subaccount for each Outstanding Series pursuant to subsection (d)(ii) above to the Series Non-Principal Collection Sub-subaccount, the Series Principal Collection Sub-subaccount and such other Sub-subaccounts of each such Series in accordance with the related Supplement for such Series. 46 (iv) On each Deposit Date, except as otherwise provided in a Supplement, the Trustee shall (in accordance with the written directions received from the Servicer pursuant to subsection (h) below, upon which the Trustee may conclusively rely) transfer to the Company Collection Subaccount from Aggregate Daily Collections deposited into the Collection Account pursuant to subsection (d)(i) above on such Deposit Date, the remaining funds (less an amount equal to the costs and expenses, if any, incurred by the Trustee with respect to the sale of the Receivables pursuant to subsection 7.2(a) or 9.1(b) and reimbursable to the Trustee as provided in Section 8.5), if any, on deposit in the Collection Account on such date after giving effect to transfers to be made pursuant to subsection (d)(ii) above. (e) CERTAIN ALLOCATIONS FOLLOWING AN AMORTIZATION PERIOD. (i) If, on any Settlement Report Date, an Amortization Period has occurred and is continuing with respect to any Outstanding Series and at such Settlement Report Date, a Revolving Period is still in effect with respect to any other Outstanding Series (a "SPECIAL ALLOCATION SETTLEMENT REPORT DATE"), then the Servicer shall make the following calculations: (A) the amount (the "ALLOCABLE CHARGED-OFF AMOUNT") equal to the excess, if any, of (I) the aggregate Principal Amount of Charged-Off Receivables for the related Settlement Period over (II) the aggregate amount of Recoveries received during the related Settlement Period; (B) the amount (the "ALLOCABLE RECOVERIES AMOUNT") equal to the excess, if any, of (I) the aggregate amount of Recoveries received during the related Settlement Period over (II) the aggregate Principal Amount of Charged-Off Receivables for the related Settlement Period; and (ii) If, on any Special Allocation Settlement Report Date, any of the Allocable Charged-Off Amount or the Allocable Recoveries Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions received pursuant to subsection (h) above, upon which the Trustee may conclusively rely) make (A) a pro rata allocation to each Outstanding Series (based on the Invested Percentage for such Series) of a portion of each such positive amount and (B) an allocation to the Exchangeable Company Interest of the remaining portion of each such positive amount; PROVIDED, that the aggregate Allocable Recoveries Amount allocated pursuant to this subsection 3.1(e)(ii) shall never exceed the Allocable Charged-Off Amount previously allocated pursuant to this subsection 3.1(e)(ii). (iii) With respect to each portion of the Allocable Charged-Off Amount and the Allocable Recoveries Amount which is allocated to an Outstanding Series pursuant to subsection 3.1(e)(ii), the Trustee shall apply each such amount to such Series in accordance with the related Supplement for such Series. (f) ALLOCATIONS FOR THE EXCHANGEABLE COMPANY INTEREST. Until the occurrence and continuance of a Potential Early Amortization Event or an Early Amortization Event, in each case set forth in Section 7.1 of the Agreement, or an Early Amortization 47 Period, on each Business Day and, after the occurrence and continuance of a Potential Early Amortization Event or an Early Amortization Event, in each case set forth in Section 7.1 of the Agreement, or an Early Amortization Period, and until the Trust Termination Date, on each Distribution Date, after making all allocations required pursuant to subsection 3.1(d), the Trustee shall (in accordance with the written direction of the Servicer, upon which the Trustee may conclusively rely) transfer to the owner of the Exchangeable Company Interest the remaining amount on deposit in the Company Collection Subaccount. (g) SET-OFF. (i) In addition to the provisions of Section 8.5, if the Company shall fail to make a payment as provided in this Agreement or any Supplement, the Servicer or the Trustee may set off and apply any amounts otherwise payable to the Company under any Pooling and Servicing Agreement, including without limitation any amounts allocable to the Exchangeable Company Interest or any Series Subordinated Interest. The Company hereby waives demand, notice or declaration of such set-off and application; PROVIDED that notice will promptly be given to the Company of such set-off; PROVIDED FURTHER that failure to give such notice shall not affect the validity of such set-off. (ii) In addition to the provisions of Section 8.5, in the event the Servicer shall fail to make a payment as provided in any Pooling and Servicing Agreement, the Trustee may set off and apply any amounts otherwise payable to the Servicer in its capacity as Servicer under the Transaction Documents on account of such obligation. The Servicer hereby waives demand, notice or declaration of such set-off and application; PROVIDED that notice will promptly be given to the Servicer of such set-off; PROVIDED FURTHER that failure to give such notice shall not affect the validity of such set-off. (h) ALLOCATION AND APPLICATION OF FUNDS. The Servicer shall direct the Trustee in writing (which may be given in the form of the Daily Report and Monthly Settlement Statement) in a timely manner to apply all Collections with respect to the Receivables in accordance with this Article III and in the Supplement with respect to each Outstanding Series. The Servicer shall direct the Trustee in writing to pay Collections to the owner of the Exchangeable Company Interest to the extent such Collections are allocated to the Exchangeable Company Interest under subsection 3.1(f) and as otherwise provided in Article III. Notwithstanding anything in this Agreement, any Supplement or any other Transaction Document to the contrary, to the extent that the Trustee receives any Daily Report prior to 2:00 p.m., New York City time, on any Business Day, the Trustee shall make any applications of funds required thereby on the same Business Day and otherwise on the next succeeding Business Day. THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES. SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE SERIES RELATING TO THE SUPPLEMENT IN WHICH SUCH REMAINDER APPEARS. 48 ARTICLE IV ARTICLE IV IS RESERVED AND MAY BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO THE SERIES RELATING THERETO ARTICLE V THE CERTIFICATES AND INTERESTS Section V.1. THE CERTIFICATES. The Investor Certificates of each Series and any Class thereof shall be in fully registered form and shall be substantially in the form of the exhibits with respect thereto attached to the applicable Supplement. The Certificates shall, upon issue, be executed and delivered by the Company to the Trustee for authentication and redelivery as provided in Section 5.2. The Investor Certificates shall be issued in minimum denominations of $1,000,000 and in integral multiples of $100,000 in excess thereof unless otherwise specified in any Supplement for any Series and Class. Unless otherwise specified in any Supplement for any Series, the Investor Certificates of any Series or Class shall be issued upon initial issuance as one or more global certificates in an aggregate original principal amount equal to the Initial Invested Amount with respect to such Series or Class. The Company is hereby authorized to execute and deliver each Certificate on behalf of the Trust. Each Certificate shall be executed by manual or facsimile signature on behalf of the Company by a Responsible Officer. Certificates bearing the manual or facsimile signature of the individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Company or the Trustee shall not be rendered invalid, notwithstanding that such individual has ceased to be so authorized prior to or on the date of the authentication and delivery of such Certificates or does not hold such office at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate of authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication but failure to do so shall not render them invalid. Section V.2. AUTHENTICATION OF CERTIFICATES. Contemporaneously with the execution and delivery of this Agreement, the Trustee shall authenticate and deliver the initial Series of the Investor Certificates that is issued upon original issuance, upon the written order of the Company in a form reasonably satisfactory to the Trustee, to the holders of the initial Series of Investor Certificates, against payment to the Company of the Initial Invested Amount. The Investor Certificates shall be duly authenticated by or on behalf of the Trustee in authorized denominations equal to (in the aggregate) the Initial Invested Amount and the interests evidenced thereby, and together with any Series Subordinated Interest and the Exchangeable Company Interest, shall constitute the entire ownership of the Trust. Upon a 49 Company Exchange as provided in Section 5.10 and the satisfaction of certain other conditions specified therein, the Trustee shall authenticate and deliver the Certificates of additional Series (with the designation provided in the applicable Supplement) (or, if provided in any Supplement, the additional Investor Certificates of an existing Series), upon the written order of the Company, to the Persons designated in such Supplement or order (if no additional Supplement is required). Upon the order of the Company, the Investor Certificates of any Series shall be duly authenticated by or on behalf of the Trustee, in authorized denominations equal to (in the aggregate) the Initial Invested Amount of such Series (or, if provided in any Supplement, the additional Investor Certificates of an existing Series), of Investor Certificates. Section V.3. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Trustee shall cause to be kept at the office or agency to be maintained by a transfer agent and registrar (which may be the Trustee) (the "TRANSFER AGENT AND REGISTRAR") in accordance with the provisions of Section 8.16 a register (the "CERTIFICATE REGISTER") in which, subject to such reasonable regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall provide for the registration of the Investor Certificates and of transfers and exchanges of the Investor Certificates as herein provided. The Company hereby appoints the Trustee as Transfer Agent and Registrar for the purpose of registering the Investor Certificates and transfers and exchanges of the Investor Certificates as herein provided. The Trustee shall be permitted to resign as Transfer Agent and Registrar upon 30 days' written notice to the Company and the Servicer; PROVIDED, HOWEVER, that such resignation shall not be effective and the Trustee shall continue to perform its duties as Transfer Agent and Registrar until the Trustee has appointed a successor Transfer Agent and Registrar reasonably acceptable to the Company and such successor Transfer Agent and Registrar has accepted such appointment. The provisions of Sections 8.1, 8.2, 8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as Transfer Agent or Registrar, as the case may be, for so long as the Trustee shall act as Transfer Agent or Registrar, as the case may be. The Company hereby agrees to provide the Trustee from time to time sufficient funds, on a timely basis and in accordance with and subject to Section 8.5, for the payment of any reasonable compensation payable to the Transfer Agent and Registrar for their services under this Section 5.3. The Trustee hereby agrees that, upon the receipt of such funds from the Company, it shall pay the Transfer Agent and Registrar such amounts. Upon surrender for registration of transfer of any Investor Certificate at any office or agency of the Transfer Agent and Registrar maintained for such purpose, the Company shall execute, and, upon the written request of the Company, the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Investor Certificates in authorized denominations of the same Series (and Class) representing like aggregate Fractional Undivided Interests and which bear numbers that are not contemporaneously outstanding. At the option of an Investor Certificateholder, Investor Certificates may be exchanged for other Investor Certificates of the same Series (and Class) in authorized 50 denominations of like aggregate Fractional Undivided Interests, bearing numbers that are not contemporaneously outstanding, upon surrender of the Investor Certificates to be exchanged at any such office or agency of the Transfer Agent and Registrar maintained for such purpose. Whenever any Investor Certificates of any Series are so surrendered for exchange, the Company shall execute, and, upon the written request of the Company, the Trustee shall authenticate and (unless the Transfer Agent and Registrar is different from the Trustee, in which case the Transfer Agent and Registrar shall) deliver, the Investor Certificates of such Series which the Investor Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer substantially in the form attached to the form of such Investor Certificate and duly executed by the holder thereof or his attorney-in-fact duly authorized in writing delivered to the Trustee (unless the Transfer Agent and Registrar is different from the Trustee, in which case to the Transfer Agent and Registrar) and complying with any requirements set forth in the applicable Supplement. No service charge shall be made for any registration of transfer or exchange of Investor Certificates, but the Transfer Agent and Registrar may require any Investor Certificateholder that is transferring or exchanging one or more Certificates to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Investor Certificates. All Investor Certificates surrendered for registration of transfer and exchange shall be cancelled and disposed of in a customary manner satisfactory to the Trustee. The Company shall execute and deliver Certificates to the Trustee or the Transfer Agent and Registrar in such amounts and at such times as are necessary to enable the Trustee and the Transfer Agent and Registrar to fulfill their respective responsibilities under this Agreement and the Certificates. (b) The Transfer Agent and Registrar will maintain at its expense in the Borough of Manhattan, The City of New York and, subject to subsection 5.3(a), if specified in the related Supplement for any Series, any other city designated in such Supplement, an office or offices or agency or agencies where Investor Certificates may be surrendered for registration or transfer or exchange. (c) Unless otherwise stated in any related Supplements, registration of transfer of Certificates containing a legend relating to restrictions on transfer of such Certificates (which legend shall be set forth in the Supplement relating to such Investor Certificates) shall be effected only if the conditions set forth in the related Supplement are complied with. Certificates issued upon registration or transfer of, or in exchange for, Certificates bearing the legend referred to above shall also bear such legend unless the 51 Company, the Servicer, the Trustee and the Transfer Agent and Registrar receive an Opinion of Counsel satisfactory to each of them, to the effect that such legend may be removed. (d) (i) The Company may not transfer, assign, exchange or otherwise pledge or convey the Series Subordinated Interest of any Series or the Exchangeable Company Interest except, with respect to the Exchangeable Company Interest, pursuant to Section 5.10. (ii) Neither the Company nor the Servicer shall at any time participate in the listing of any Targeted Investor Certificate (as defined below) on an "established securities market" within the meaning of Section 7704(b)(1) of the Internal Revenue Code and any proposed, temporary or final treasury regulation thereunder as of the date hereof, including, without limitation, an over-the-counter or interdealer quotation system that regularly disseminates firm buy or sell quotations. "TARGETED INVESTOR CERTIFICATE" shall mean any Certificate representing a right to receive interest or principal with respect to any Class or Series of Investor Certificates with respect to which an Opinion of Counsel has not been rendered that such Certificates will be treated as debt for federal income tax purposes (it being understood that any Certificate with respect to which an Opinion of Counsel has been rendered that such Certificate will be treated EITHER as debt or as an interest in a partnership for federal income tax purposes shall be a Targeted Investor Certificate). (e)(i) No transfer of a Targeted Investor Certificate or grant of a participation therein shall be permitted if (A) such transfer or grant would cause the number of Targeted Holders (as defined below) to exceed 75 or (B) the transferee or grantee, as the case may be, is a trust, partnership or "S corporation" (within the meaning of Section 1361(a) of the Code) (a "FLOW-THROUGH ENTITY"), unless such flow-through entity represents that less than 50% of the aggregate value of such flow-through entity's assets consist of Targeted Investor Certificates. "TARGETED HOLDER" shall mean each holder of a Targeted Investor Certificate; PROVIDED, HOWEVER, that any Person holding more than one interest with respect to the Investor Certificates or the Trust, each of which separately would cause such Person to be a Targeted Holder, shall be treated as a single Targeted Holder. (ii) The Company and the Servicer hereby jointly and severally agree not to permit the sum of (x) the number of Persons holding a right to receive any amount in respect of the Exchangeable Company Interest or any Series Subordinated Interest and (y) the number of Servicing Parties that receive any portion of the Servicing Fee to exceed 25. (iii) Any determination by the Transfer Agent and Registrar (in accordance with the information contained in the Certificate Register and the certifications made by each transferee and participant pursuant to the applicable Supplement, upon which information the Transfer Agent and Registrar may conclusively rely) that the event described in either clause (i)(A) or (i)(B) of this subsection 5.3(e) would occur as the result of a transfer of a Targeted Investor Certificate or the grant of a participation therein shall be (X) communicated in writing to the transferring or granting Investor Certificateholder prior to the effective date set 52 out in the notice of transfer or participation required by, or otherwise provided for under, the related Supplement and (Y) binding upon the parties absent manifest error. (iv) Except as specified in any Supplement for a related Series, all Investor Certificates of any Series shall be equally and ratably entitled as provided herein to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Agreement and the applicable Supplement. Section V.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any mutilated Certificate is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence in the form of a certification by the holder thereof of the destruction, loss or theft of any Certificate and (b) there is delivered to the Transfer Agent and Registrar and the Trustee such security or indemnity as may be required by them to save the Trust and each of them harmless, then, in the absence of actual notice to the Trustee or Transfer Agent and Registrar that such Certificate has been acquired by a bona fide purchaser, the Company shall execute and, upon the written request of the Company, the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and aggregate Fractional Undivided Interest and bearing a number that is not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 5.4, the Trustee or the Transfer Agent and Registrar may require the payment by the Holder of a sum sufficient to cover any tax or other governmental expenses (including the fees and expenses of the Trustee and Transfer Agent and Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 5.4 shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section V.5. PERSONS DEEMED OWNERS. At all times prior to due presentation of a Certificate for registration of transfer, the Company, the Trustee, the Paying Agent, the Transfer Agent and Registrar, any Agent and any agent of any of them may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Article IV of the related Supplement and for all other purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and Registrar, any Agent nor any agent of any of them shall be affected by any notice to the contrary. Notwithstanding the foregoing provisions of this Section 5.5, in determining whether the holders of the requisite Fractional Undivided Interests have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Certificates (or interests therein) owned by the Company, the Servicer or any Affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Certificates (or interests therein) so owned by the Company, the Servicer or any Affiliate thereof which have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the 53 satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates (or interests therein) and that the pledgee is not the Company, the Servicer or an Affiliate thereof. Section V.6. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Investor Certificateholders from the Collection Account (and/or any other account or accounts maintained for the benefit of the Investor Certificateholders as specified in the related Supplement for any Series) pursuant to Articles III and IV. The Trustee may revoke such power and remove the Paying Agent if the Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. Unless otherwise specified in the related Supplement for any Series and with respect to such Series, the Paying Agent shall initially be the Trustee and, if the Trustee so chooses, any co-paying agent chosen by the Trustee. Each Paying Agent shall have a combined capital and surplus of at least $50,000,000. The Paying Agent shall be permitted to resign upon 30 days' written notice to the Trustee. In the event that the Paying Agent shall so resign, the Trustee shall appoint a successor to act as Paying Agent (which shall be a depositary institution or trust company) reasonably acceptable to the Company which appointment shall be effective on the date on which the Person so appointed gives the Trustee written notice that it accepts the appointment. Any resignation or removal of the Paying Agent and appointment of successor Paying Agent pursuant to this Section 5.6 shall not become effective until acceptance of appointment by the successor Paying Agent, as provided in this Section 5.6. The Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Trustee to execute and deliver to the Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Investor Certificateholders in trust for the benefit of the Investor Certificateholders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Trustee. The provisions of Sections 8.1, 8.2, 8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as Paying Agent, for so long as the Trustee shall act as Paying Agent. Any reference in this Agreement to the Paying Agent shall include any co-paying agent, if any, unless the context requires otherwise. The Company hereby agrees to provide the Trustee from time to time sufficient funds, on a timely basis and in accordance with and subject to Section 8.5, for the payment of any reasonable compensation payable to the Paying Agent for its services under this Section 5.6. The Trustee hereby agrees that, upon the receipt of such funds from the Company, it shall pay the Paying Agent such amounts. Section V.7. ACCESS TO LIST OF INVESTOR CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Company, the Servicer or the Paying Agent, within ten Business Days after receipt by the Trustee of a request therefor from the Company, the Servicer or the Paying Agent, respectively, in writing, a list of the names and addresses of the Investor Certificateholders as then recorded by or on behalf of the Trustee. If three or more Investor 54 Certificateholders of record or any Investor Certificateholder of any Series or a group of Investor Certificateholders of record representing Fractional Undivided Interests aggregating not less than 10% of the Invested Amount of the related Outstanding Series (the "APPLICANTS") apply in writing to the Trustee, and such application states that the Applicants desire to communicate with other Investor Certificateholders of any Series with respect to their rights under this Agreement or under the Investor Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee, after having been adequately indemnified by such Applicants for its costs and expenses, shall transmit or shall cause the Transfer Agent and Registrar to transmit, such communication to the Investor Certificateholders reasonably promptly after the receipt of such application. Every Investor Certificateholder, by receiving and holding an Investor Certificate, agrees with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of their respective agents, officers, directors or employees shall be held accountable by reason of the disclosure or mailing of any such information as to the names and addresses of the Investor Certificateholders hereunder, regardless of the sources from which such information was derived. As soon as practicable following each Record Date, the Trustee shall provide to the Paying Agent or its designee, a list of Investor Certificateholders in such form as the Paying Agent may reasonably request. Section V.8. AUTHENTICATING AGENT. (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Company. (b) Any institution succeeding to the corporate trust business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any paper or any further act on the part of the Trustee or such authenticating agent. (c) An authenticating agent may at any time resign by giving written notice of resignation to the Trustee. Upon the receipt by the Trustee of any such notice of resignation and upon the giving of any such notice of termination by the Trustee, the Trustee shall immediately give notice of such resignation or termination to the Company. Any resignation of an authenticating agent shall not become effective until acceptance of appointment by the successor authenticating agent as provided in this Section 5.8. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee, the 55 Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent (other than an Affiliate of the Trustee) shall be appointed unless reasonably acceptable to the Trustee and the Company. (d) The Company hereby agrees to provide the Trustee from time to time sufficient funds, on a timely basis and in accordance with and subject to Section 8.5, for the payment of any reasonable compensation payable to each authenticating agent for its services under this Section 5.8. The Trustee hereby agrees that, upon the receipt of such funds from the Company it shall pay each authenticating agent such amounts. (e) The provisions of Sections 8.1, 8.2, 8.3 and 8.5 shall be applicable to any authenticating agent. (f) Pursuant to an appointment made under this Section 5.8, the Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: "This is one of the Certificates described in the Pooling Agreement dated as of April 1, 1998, among CM Capital Corporation, Core-Mark International, Inc., as Servicer, and The Chase Manhattan Bank, as Trustee. --------------------------- as Authenticating Agent for the Trustee By ------------------------ Authorized Signatory" Section V.9. TAX TREATMENT. It is the intent of the Servicer, the Company, the Investor Certificateholders and the Trustee that, for federal, state and local income and franchise tax purposes, the Investor Certificates be treated as evidence of indebtedness secured by the Trust Assets and the Trust not be characterized as an association taxable as a corporation. The Company, the Servicer and the Trustee, by entering into this Agreement, and each Investor Certificateholder, by its acceptance of its Investor Certificate, agree to treat the Investor Certificates for federal, state and local income and franchise tax purposes as indebtedness. The provisions of this Agreement and all related Transaction Documents shall be construed to further these intentions of the parties. This Section 5.9 shall survive the termination of this Agreement and shall be binding on all transferees of any of the foregoing persons. 56 Section V.10. COMPANY EXCHANGES. (a) The Company may, in accordance with the procedures set forth below, call for an adjustment of the Exchangeable Company Interest in exchange for (i) an increase in the Invested Amount of Investor Certificates of an Outstanding Series (or a Class thereof) and an increase in the related Series Subordinated Interest or (ii) one or more newly issued Series of Investor Certificates and the related newly created Series Subordinated Interest (a "NEW SERIES") (any such exchange, a "COMPANY EXCHANGE"). The Company may perform a Company Exchange by notifying the Trustee, in writing at least five days in advance (an "EXCHANGE NOTICE") of the date upon which the Company Exchange is to occur (an "EXCHANGE DATE"). Any Exchange Notice shall state the designation of any Series (and/or Class, if applicable) to be issued (or increased) on the Exchange Date and, with respect to each such Series (and/or Class, if applicable): (a) its additional or Initial Invested Amount, as the case may be, if any, which in the aggregate at any time may not be greater than the current value of the Exchangeable Company Interest, if any, at such time, (b) its Certificate Rate (or the method for allocating interest payments or other cash flow to such Series), if any, and (c) whether such New Series will be a companion series to an Outstanding Series as described in paragraph (d) below (an "EXISTING COMPANION SERIES"; and together with the New Series, a "COMPANION SERIES"). On the Exchange Date, the Trustee shall, upon the written order of the Company, authenticate and deliver any Certificates evidencing an increase in the Invested Amount of Investor Certificates of an Outstanding Series (or a Class thereof) or a newly issued Series only upon delivery by the Company to the Trustee of the following (together with the delivery by the Company to the Trustee of any additional agreements, instruments or other documents as are specified in the related Supplement): (a) a Supplement executed by the Company and specifying the Principal Terms of such Series (provided that no such Supplement shall be required for any increase in the Invested Amount of an Outstanding Series (or Class thereof) of Investor Certificates unless it is so required by the related Supplement; PROVIDED that if the Certificate Rate for the new Certificates is different from the Certificate Rate applicable to the outstanding Certificates of such Series (or Class thereof) the new Certificate Rate shall be set forth in an Officer's Certificate of the Company delivered to the Trustee), (b) a Tax Opinion addressed to the Trustee and the Trust, (c) a General Opinion addressed to the Trustee and the Trust, (d) an agreement pursuant to which the Enhancement Provider, if any, agrees to provide Enhancement, (e) an Officer's Certificate that the Exchange will not result in the occurrence of a Potential Early Amortization Event or Early Amortization Event with respect to any Outstanding Series and that all conditions precedent to the Exchange contained in the Pooling and Servicing Agreements have been complied with, and (f) written confirmation from each Rating Agency that the Company Exchange will not result in the Rating Agency's reducing or withdrawing its rating on any then Outstanding Series rated by it. Upon the delivery of the items listed in clauses (a) through (f) above, the existing Exchangeable Company Interest and the applicable Series Subordinated Interests, as the case may be, shall be deemed adjusted as of the Exchange Date, and the new Series Subordinated Interests, if any, shall be deemed duly created as of the Exchange Date, in each case as provided above. There is no limit to the number of Company Exchanges that the Company may perform under this Agreement. If the Company shall, on any Exchange Date, retain any Investor Certificates issued on such Exchange Date, it shall, prior to transferring any such Certificates to another Person, obtain a 57 Tax Opinion. Additional restrictions relating to a Company Exchange may be set forth in any Supplement. (b) Upon any Company Exchange, the Trustee, in accordance with the written directions of the Company, shall issue to the Company under Section 5.1, for execution and redelivery to the Trustee for authentication under Section 5.2, (i) one or more Certificates representing an increase in the Invested Amount of an Outstanding Series (or Class thereof) or (ii) one or more new Series of Investor Certificates. Any such Certificates shall be substantially in the form specified in the applicable Supplement and each shall bear, upon its face, the designation for such Series (and Class thereof) to which each such certificate belongs so selected by the Company. (c) In conjunction with a Company Exchange, the parties hereto shall, except as otherwise provided in subsection (a) above, execute a Supplement to this Agreement, which shall define, with respect to any additional Investor Certificates or newly issued Series, as the case may be: (i) its name or designation, (ii) its additional or initial principal amount, as the case may be (or method for calculating such amount), (iii) its coupon rate (or formula for the determination thereof), (iv) the interest payment date or dates and the date or dates from which interest shall accrue, (v) the method for allocating Collections to Holders, including the applicable Investor Percentage, (vi) the names of any accounts to be used by such Series and the terms governing the operation of any such accounts, (vii) the issue and terms of a letter of credit or other form of Enhancement, if any, with respect thereto, (viii) the terms, if any, on which the Certificates of such Series may be repurchased by the Company or may be remarketed to other investors, (ix) the Series Termination Date, (x) any deposit account maintained for the benefit of Holders, (xi) the number of Classes of such Series, and if more than one Class, the rights and priorities of each such Class, (xii) the rights of the owner of the Exchangeable Company Interest that have been transferred to the holders of such Series, (xiii) the designation of any Series Accounts and the terms governing the operation of any such Series Accounts, (xiv) provisions reasonably acceptable to the Trustee concerning the payment of the Trustee's fees and expenses and (xv) other relevant terms (all such terms, the "PRINCIPAL TERMS" of such Series). The Supplement executed in connection with the Company Exchange shall contain administrative provisions which are reasonably acceptable to the Trustee. (d) In order for a New Series to be part of a Companion Series, the Supplement for the related Existing Companion Series must provide for or permit the Amortization Period to commence on the Issuance Date for such New Series, and on or prior to the Issuance Date for the New Series the Servicer and the Company shall take all actions, if any, necessary to cause the Amortization Period for such Existing Companion Series to commence on such Issuance Date. The proceeds from the issuance of the New Series shall be deposited in the applicable Series Principal Collection Sub-subaccount and the Company shall, on the Issuance Date for such New Series, deposit into the applicable Series Non-Principal Sub-subaccount the amount of interest that will accrue on the New Series over a period specified in the related Supplement for such New Series. On each day on which principal is paid to the holders of the Existing Companion Series, the Trustee shall distribute 58 to the Company from the applicable Series Principal Collection Sub-subaccount of the New Series an amount (up to the amount of available funds in such account) equal to the amount distributed on such day to the Investor Certificateholders of any Existing Companion Series; PROVIDED that, after giving effect to such distributions, the Aggregate Receivables Amount shall equal or exceed the sum of (i) the Target Receivables Amount with respect to such Existing Companion Series on such day, PLUS (ii) the Target Receivables Amount with respect to the New Series on such day, PLUS (iii) the Target Receivables Amount with respect to any other Outstanding Series on such day; PROVIDED FURTHER that the Trustee may conclusively rely on the calculations of the Servicer of such amounts. Section V.11. BOOK-ENTRY CERTIFICATES. If specified in any related Supplement, the Investor Certificates, or any portion thereof, upon original issuance, shall be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates, to be delivered to the depository specified in such Supplement (the "DEPOSITORY") which shall be the Clearing Agency, specified by, or on behalf of, the Company for such Series. The Investor Certificates shall initially be registered on the Certificate Register in the name of the nominee of such Clearing Agency, and no Certificate Book-Entry Holder will receive a definitive certificate representing such Certificate Book-Entry Holder's interest in the Investor Certificates, except as provided in Section 5.13. Unless and until definitive, fully registered Investor Certificates ("DEFINITIVE CERTIFICATES") have been issued to Holders pursuant to Section 5.13 or the related Supplement: (a) the provisions of this Section 5.11 shall be in full force and effect; (b) the Company, the Servicer and the Trustee may deal with each Clearing Agency for all purposes (including the making of distributions on the Investor Certificates) as the Holder without respect to whether there has been any actual authorization of such actions by the Certificate Book-Entry Holders with respect to such actions; (c) to the extent that the provisions of this Section 5.11 conflict with any other provisions of this Agreement, the provisions of this Section 5.11 shall control; and (d) the rights of Certificate Book-Entry Holders shall be exercised only through the Clearing Agency and the related Clearing Agency Participants and shall be limited to those established by law and agreements between such related Certificate Book-Entry Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Depository Agreement, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Investor Certificates to such Clearing Agency Participants. Notwithstanding the foregoing, no Class or Series of Investor Certificates may be issued as Book Entry Certificates (but, instead, shall be issued as Definitive Certificates) unless at the time of issuance of such Class or Series the Company and the Trustee receive an opinion of 59 independent counsel that the Certificates of such Class or Series will be treated as indebtedness for federal income tax purposes. Section V.12. NOTICES TO CLEARING AGENCY. Whenever notice or other communication to the Holders is required under this Agreement, unless and until Definitive Certificates shall have been issued to Certificate Book-Entry Holders pursuant to Section 5.13, the Trustee shall, give all such notices and communications specified herein to be given to the Investor Certificateholders to the Clearing Agencies. Section V.13. DEFINITIVE CERTIFICATES. If (a)(i) the Company advises the Trustee in writing that any Clearing Agency is no longer willing or able to properly discharge its responsibilities under the applicable Depository Agreement, and (ii) the Company is unable to locate a qualified successor, (b) the Company, at its option, advises the Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of a Servicer Default or an Early Amortization Event, Certificate Book-Entry Holders representing Fractional Undivided Interests aggregating more than 50% of the Invested Amount held by such Certificate Book-Entry Holders of each affected Series then issued and outstanding advise the Clearing Agency through the Clearing Agency Participants in writing, and the Clearing Agency shall so notify the Trustee, that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Book-Entry Holders, the Trustee shall notify the Clearing Agency, which shall be responsible to notify the Certificate Book-Entry Holders, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Book-Entry Holders requesting the same. Upon surrender to the Trustee of the Book-Entry Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Company shall execute and the Trustee shall authenticate the Definitive Certificates. Neither the Company nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. ARTICLE VI OTHER MATTERS RELATING TO THE COMPANY Section VI.1. LIMITATION ON LIABILITY. None of the Company's directors or officers or employees or agents, shall be under any liability to the Trust, the Trustee, the Holders or any other Person for any action taken or for refraining from the taking of any action pursuant to this Agreement, whether or not such action or inaction arises from express or implied duties under this Agreement; PROVIDED, that this provision shall not protect any such director, officer, employee or agent against any liability which would otherwise be imposed on such Person by reason of wilful misconduct, bad faith or gross negligence in the performance of such Person's duties or by reason of reckless disregard of such Person's obligations and duties hereunder. 60 Section VI.2. LIABILITIES. By entering into this Agreement, the Company agrees to be liable, directly to the injured party, for the entire amount of any losses, claims, damages or liabilities, arising out of or based on the arrangement created by any Pooling and Servicing Agreement or the actions of the Servicer taken pursuant hereto or thereto (except those losses, claims, damages or liabilities incurred by an Investor Certificateholder in the capacity of an investor in the Investor Certificates as a result of the performance of the Receivables, market fluctuations or other similar market or investment risks) as though the Pooling and Servicing Agreements created a partnership under the New York Uniform Limited Partnership Act with the Company as a general partner thereof. The Company agrees to pay, indemnify and hold harmless each Investor Certificateholder against and from any and all such losses, claims, damages and liabilities, except to the extent they arise from any action or omission by such Investor Certificateholder; PROVIDED that any payments made by the Company in respect of any of the foregoing items shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts pursuant to any Pooling and Servicing Agreements (other than to the Company), shall be non-recourse other than with respect to such funds and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. In the event of a Service Transfer, the Successor Servicer (except for the Trustee in its capacity as Successor Servicer) will indemnify and hold harmless the Company for any losses, claims, damages and liabilities of the Company arising under this Section 6.2 from the actions or omissions of such Successor Servicer. ARTICLE VII EARLY AMORTIZATION EVENTS Section VII.1. EARLY AMORTIZATION EVENTS. Unless modified with respect to any Series of Investor Certificates by any related Supplement, if any one of the following events (each, an "EARLY AMORTIZATION EVENT") shall occur: (a)(i) the Company 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 or other similar official for it or for all or any substantial part of its assets, or the Company shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company 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 Company any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process 61 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 such days from the entry thereof; or (iv) the Company shall take any action in furtherance of any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (b) the Trust or the Company shall become an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (c) the Trust is characterized for federal income tax purposes as a "publicly traded partnership" or as an association taxable as a corporation; or (d) the Trustee shall be appointed as Successor Servicer pursuant to subsection 6.2(b) of the Servicing Agreement; then, an "EARLY AMORTIZATION PERIOD" with respect to all Outstanding Series shall commence without any notice or other action on the part of the Trustee or any Investor Certificateholder immediately upon the occurrence of such event. The Servicer shall notify each Rating Agency, each Agent and the Trustee in writing of the occurrence of any Early Amortization Period, specifying the cause thereof. Further, upon the commencement against the Company of a case, proceeding or other action described in clause (a)(ii) or (iii) above, the Company shall not purchase Receivables from any Seller, or transfer Receivables to the Trust, until such time, if any, as such case, proceeding or other action is vacated, discharged, or stayed or bonded pending appeal. Additional Early Amortization Events and the consequences thereof may be set forth in each Supplement with respect to the Series relating thereto. Section VII.2. ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN EVENTS. (a) If an Insolvency Event with respect to the Company occurs, the Company shall immediately cease to transfer Receivables to the Trust and shall promptly give notice to the Trustee of such occurrence. Notwithstanding any cessation of the transfer to the Trust of additional Receivables, Receivables transferred to the Trust prior to the occurrence of such Insolvency Event and Collections in respect of such Receivables and interest, whenever created, accrued in respect of such Receivables, shall continue to be a part of the Trust. Within 15 days of the Trustee's receipt of notice of the occurrence of an Insolvency Event in accordance with Section 7.1, if the Aggregate Invested Amount and all accrued and unpaid interest thereon have not been paid to the Investor Certificateholders, then the Trustee shall (i) publish a notice in a newspaper with a national circulation (an "AUTHORIZED NEWSPAPER") that an Insolvency Event has occurred and that the Trustee intends to sell, dispose of or otherwise liquidate the Receivables and the other Trust Assets in a commercially reasonable manner and (ii) send written notice to the Investor Certificateholders and request instructions from such holders, which notice shall request each Investor Certificateholder to advise the Trustee in writing that it elects one of the following options: (A) the Investor Certificateholder wishes 62 the Trustee to instruct the Servicer not to sell, dispose of or otherwise liquidate the Receivables and the other Trust Assets, or (B) the Investor Certificateholder wishes the Trustee to instruct the Servicer to sell, dispose of or otherwise liquidate the Receivables and the other Trust Assets and to instruct the Servicer to reconstitute the Trust upon the same terms and conditions set forth herein, or (C) the Investor Certificateholder refuses to advise the Trustee as to the specific action the Trustee shall instruct the Servicer to take. If after 60 days from the day notice pursuant to clause (i) above is first published (the "PUBLICATION DATE"), the Trustee shall not have received written instructions of (x) holders of Certificates representing undivided interests in the Trust aggregating in excess of 50% of the related Invested Amount of each Series (or in the case of a series having more than one Class of Investor Certificates, each Class of such series) selecting option (A) above and (y) if the owners of the Exchangeable Company Interest do not include the Company (and following the delivery of written notice in the form referred to above by the Company to such owners), the owners thereof representing undivided interests in the Trust aggregating in excess of 50% of the Company Interest, the Trustee shall instruct the Servicer to proceed to sell, dispose of, or otherwise liquidate the Receivables and the other Trust Assets in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids, and the Servicer shall proceed to consummate the sale, liquidation or disposition of the Receivables and the other Trust Assets as provided above with the highest bidder therefor; PROVIDED, HOWEVER, that if the allocable sale price, less all reasonable fees, expenses and other amounts due hereunder to the Trustee, its agents and counsel to the Trustee, to be realized from such sale, liquidation or disposition would be less than the Aggregate Invested Amount plus accrued and unpaid interest thereon through the Distribution Date next succeeding the date of such sale, the Trustee must receive the prior unanimous consent of all the Investor Certificateholders to such sale, liquidation or disposition. The Company or any of its Affiliates shall be permitted to bid for the Receivables and the other Trust Assets. In addition, the Company or any of its Affiliates shall have the right to match any bid by a third person and be granted the right to purchase the Receivables and the other Trust Assets at such matched bid price. The Trustee may obtain a prior determination from any such conservator, receiver or liquidator that the terms and manner of any proposed sale, disposition or liquidation are commercially reasonable. The provisions of Sections 7.1 and 7.2 shall be cumulative and not mutually exclusive. The costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in Section 8.5. (b) The proceeds from the sale, liquidation or disposition of the Receivables and the other Trust Assets pursuant to subsection (a) above shall be treated as Collections on the Receivables and such proceeds will be distributed to any Servicers who are not Affiliates of the Company for the payment of servicing fees and to the Trustee in an amount equal to the amount of any expenses incurred by the Trustee acting in its capacity either as Trustee or as liquidating agent pursuant to subsection 7.2(a) above which have not otherwise been reimbursed prior thereto. Thereafter, the remaining funds, if any, shall be distributed (i) to holders of each Series after immediately being deposited in the Collection Account, in accordance with the provisions of subsection 3.1(d) and the related Supplement for such Series and (ii) after giving effect to the transfer to be made pursuant to the preceding clause 63 (i), the remainder, if any, shall be allocated to the Company Interest and shall be released to the owner of the Exchangeable Company Interest upon cancellation thereof. ARTICLE VIII THE TRUSTEE Section VIII.1. DUTIES OF TRUSTEE. (a) The Trustee, prior to the occurrence of a Servicer Default or an Early Amortization Event of which a Responsible Officer of the Trustee has actual knowledge and after the curing of all Servicer Defaults and Early Amortization Events which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Pooling and Servicing Agreements and no implied covenants or obligations shall be read into such Pooling and Servicing Agreements against the Trustee. If a Servicer Default or Early Amortization Event to the actual knowledge of a Responsible Officer of the Trustee has occurred (which has not been cured or waived), the Trustee shall exercise the rights and powers vested in it in its capacity as Trustee by any Pooling and Servicing Agreement and shall 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. The provisions of this Section shall be applicable to the Trustee in its capacity as Trustee hereunder. If the Trustee shall have succeeded to the obligations of the Servicer, the provisions of the Servicing Agreement shall govern the actions of the Trustee as Successor Servicer. (b) The Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein upon resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee and believed by it to be genuine and to have been signed or presented to it pursuant to any Pooling and Servicing Agreement by the proper party or parties; but in the case of any of the above which are specifically required to be furnished to the Trustee pursuant to any provision of the Pooling and Servicing Agreements, the Trustee shall, subject to Section 8.2, examine them to determine whether they substantially conform to the requirements of this Agreement; PROVIDED, that the Trustee shall not be responsible for the accuracy or content of any document furnished pursuant to any Pooling and Servicing Agreement. (c) Subject to subsection 8.1(a), no provision of any Pooling and Servicing Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct; PROVIDED, HOWEVER, that: (i) The Trustee shall not be liable in its individual capacity for an error of judgment unless it shall be proved that the Trustee was negligent, or acted in bad faith, in ascertaining the pertinent facts; (ii) The Trustee shall not be liable in its individual capacity with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with 64 the Pooling and Servicing Agreement or at the direction of the Servicer or the holders of Investor Certificates evidencing in excess of 50% (or such lesser percentage as set forth in any applicable provision) of the Aggregate Invested Amount; (iii) The Trustee shall not be charged with knowledge of any failure by the Servicer to comply with any of its obligations, unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Servicer, any Agent or any Investor Certificateholder. In the absence of written notice, the Trustee may conclusively rely that there is no Servicer Default or Early Amortization Event; (iv) The Trustee shall not be charged with knowledge of a Servicer Default or Early Amortization Event unless a Responsible Officer of the Trustee obtains actual knowledge of such event or the Trustee receives written notice of such default or event from the Servicer, any Agent or any Investor Certificateholder. In the absence of written notice received by a Responsible Officer of the Trustee, the Trustee may conclusively rely that there is no Servicer Default or Early Amortization Event; (v) The Trustee shall not be liable for any investment losses resulting from any investments of funds on deposit in the Accounts or any subaccounts thereof; and (vi) The Trustee shall have no duty to monitor the performance of the Servicer, nor shall it have any liability in connection with malfeasance or nonfeasance by the Servicer. The Trustee shall have no liability in connection with compliance of the Servicer or the Company with statutory or regulatory requirements related to the Receivables. (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under any Pooling and Servicing Agreement or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in any Pooling and Servicing Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any obligations of the Servicer under such Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of such Agreement. (e) Except as expressly provided in any Pooling and Servicing Agreement, the Trustee shall have no power to vary the corpus of the Trust. (f) Provided that the Servicer and the Company shall have provided to the Trustee promptly upon request all books, records and other information reasonably requested by the Trustee and shall have provided the Trustee with all necessary access to the properties, books and records of the Servicer and the Company which the Trustee may reasonably 65 require, then within 90 days following the Initial Closing Date, the Trustee shall have (i) completed the Servicer Site Review and (ii) established the Standby Liquidation System, and shall have notified and delivered descriptions to the Servicer, each Rating Agency and each Agent of such events. (g) The Trustee shall deliver the Internal Operating Procedures Memorandum to the Company and the Servicer on the Initial Closing Date. From and after such date, the Trustee shall take such actions as are set forth in the Internal Operating Procedures Memorandum unless prevented from doing so through no fault of the Trustee. Section VIII.2. RIGHTS OF THE TRUSTEE. Except as otherwise provided in Section 8.1: (a) The Trustee may conclusively rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, note or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to any Pooling and Servicing Agreement by the proper party or parties; (b) The Trustee may consult with counsel (at the Company's expense) and any Opinion of Counsel or any advice of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel; (c) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by any Pooling and Servicing Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Holders, pursuant to the provisions of any Pooling and Servicing Agreement, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of a Servicer Default or Early Amortization Event (which the Trustee has written notice thereof and which has not been cured), to exercise such of the rights and powers vested in it by any Pooling and Servicing Agreement, and to use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The right of the Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or wilful misconduct in the performance of any such act; (d) The Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion 66 or rights or powers conferred upon it by any Pooling and Servicing Agreement; PROVIDED that the Trustee shall be liable for its negligence or willful misconduct; (e) The Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, direction, order, approval, bond, note or other paper or document, or to recompute the amount of any allocations or distributions contained in any direction from the Servicer provided for under the Agreement, unless requested in writing so to do by the holders of Investor Certificates evidencing Fractional Undivided Interests aggregating more than 10% of the Invested Amount of any Series which could be adversely affected if the Trustee does not perform such acts; PROVIDED, HOWEVER, that such holders of Investor Certificates shall reimburse the Trustee for any expense resulting from any such investigation requested by them to the extent the Trustee is not otherwise reimbursed hereunder; PROVIDED, FURTHER, that the Trustee shall be entitled to make such further inquiry or investigation into such facts or matters as it may reasonably see fit, and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books and records of the Company, personally or by agent or attorney, at the sole cost and expense of the Company; (f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through affiliates, agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such affiliate, agent, attorney, custodian or nominee appointed with due care by it hereunder; (g) The Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Receivables for the purpose of establishing the presence or absence of defects, the compliance by the Company with its representations and warranties or for any other purpose; (h) In the event that the Trustee is also acting as Paying Agent or Transfer Agent and Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VIII shall also be afforded to such Paying Agent or Transfer Agent and Registrar; (i) The Trustee shall not be required to give any bond or surety in respect of the execution of the Trust created hereby or the powers granted hereunder; (j) The Trustee shall not in any way be liable by reason of any insufficiency in any Account held by Trustee unless it is determined by a court of competent jurisdiction that the Trustee's negligence or willful misconduct was the primary cause of such insufficiency; 67 (k) The Trustee shall not in any way be liable by reason of any insufficiency in the Collateral Account resulting from any investment loss on any Eligible Investment invested pursuant to Section 3.1(c) of this Agreement; and (l) Anything in this Agreement to the contrary notwithstanding, in no event shall the Trustee be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. Section VIII.3. TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES. The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates (other than the certificate of authentication on the Certificates). Except as set forth in Section 8.15, the Trustee makes no representations as to the validity or sufficiency of any Pooling and Servicing Agreement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Receivable or related document. The Trustee shall not be accountable for the use or application by the Company of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Company in respect of the Receivables or from the Accounts or other accounts hereafter established to effectuate the transactions contemplated herein and in accordance with the terms of any Pooling and Servicing Agreement. The Trustee shall not be accountable for the use or application by the Servicer of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Servicer or any Sub-Servicer in respect of the Receivables or deposited in or withdrawn from the Accounts or any Lockbox by or at the direction of the Servicer, any Sub-Servicer or the Lockbox Processor, in each case unless the Trustee, acting in its capacity as Successor Servicer, itself makes such use or application. The Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable. Section VIII.4. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual or any other capacity (a) may become the owner or pledgee of Investor Certificates with the same rights as it would have if it were not the Trustee and (b) may transact any banking and trust business with the Company, the Servicer, any Sub-Servicer or any Seller as it would were it not the Trustee. Section VIII.5. TRUSTEE'S FEES AND EXPENSES. The Trustee shall be entitled to a fee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by the Trustee in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee. The Servicer covenants and agrees to pay, but only from funds available to it as the Servicing Fee paid under the Servicing Agreement, to the Trustee an annual fee agreed upon in writing between the Servicer and the Trustee, payable in advance on the Initial Closing Date and on each one-year anniversary thereof. The Trustee also shall be entitled to reimbursement from the Servicer or the Company upon the Trustee's request for 68 all reasonable expenses (including, without limitation, expenses incurred in connection with notices, requests for documentation or other communications to or directions from Holders), disbursements, losses, liabilities, damages and advances incurred or made by the Trustee in accordance with any of the provisions of any Pooling and Servicing Agreement or by reason of its status as Trustee under any Pooling and Servicing Agreement (including the reasonable fees and expenses of its agents, any co-trustee and counsel) except any such expense, disbursement, loss, liability, damage or advance as may arise from its negligence or bad faith or willful misconduct; PROVIDED that any payments made by the Company in respect of any of the foregoing items shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts pursuant to any Pooling and Servicing Agreements (other than to the Company), shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. To the extent that the Trustee has not been paid for any of the foregoing items (including pursuant to the first sentence of this Section 8.5), the Trustee shall be entitled to be paid for such items from amounts which otherwise would be distributable to the Company under Article III of this Agreement. The Trustee shall be entitled to reimbursement for any reasonable out-of-pocket costs or expenses incurred in connection with the review, negotiation, preparation, execution and delivery of any of the Transaction Documents or in connection with the issuance of any Certificates on the Initial Closing Date. If the Trustee is appointed Successor Servicer in accordance with the Servicing Agreement, the Trustee, in its capacity as Successor Servicer, shall also be entitled to be paid the Servicing Fee and any other compensation to which the Servicer is expressly entitled under any Pooling and Servicing Agreement. The provisions of this Section 8.5 shall apply to the reasonable expenses, disbursements and advances made or incurred by the Trustee, or any other Person, in its capacity as liquidating agent, to the extent not otherwise paid. The covenants and agreements contained in this Section 8.5 (including, without limitation, the covenants to pay the expenses, disbursements, losses, liabilities, damages and advances provided for in this Section 8.5) shall survive the termination of any Pooling and Servicing Agreement and shall be binding, as applicable, on (i) the Servicer and any Successor Servicer and (ii) the Company. Section VIII.6. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state thereof and authorized under such laws to exercise corporate trust powers, having (or having a holding company parent with) a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purpose of this Section 8.6, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 8.6, the Trustee shall resign immediately in the manner and with the effect specified in Section 8.7. 69 Section VIII.7. RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to paragraph (c) below, the Trustee may at any time resign and be discharged from the trust hereby created by giving written notice thereof to the Company, the Servicer, each Agent and the Rating Agencies. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 8.6 hereof and shall fail to resign after written request therefor by the Servicer, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Company may remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (c) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 8.7 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 8.8. (d) The obligations of the Company described in Sections 6.3 and 8.5 hereof and the obligations of the Servicer described in Section 8.5 hereof and Section 5.1 of the Servicing Agreement shall survive the removal or resignation of the Trustee as provided in this Agreement. (e) No Trustee under this Agreement shall be personally liable for any action or omission of any successor trustee. Section VIII.8. SUCCESSOR TRUSTEE. (a) Any successor trustee appointed as provided in Section 8.7 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents or copies thereof, at the expense of the Servicer, and statements held by it hereunder; and the Company and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, power, duties and obligations. The Servicer shall immediately and, in any event, no less than ten days prior to any such 70 resignation or removal, give notice to each Rating Agency upon the appointment of a successor trustee. (b) No successor trustee shall accept appointment as provided in this Section 8.8 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 8.6. (c) Upon acceptance of appointment by a successor trustee as provided in this Section 8.8, such successor trustee shall mail notice of such succession hereunder to all Holders at their addresses as shown in the Certificate Register. Section VIII.9. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 8.6, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Trustee (unless the Trustee is The Chase Manhattan Bank) shall promptly give notice (except to the extent prohibited under any Requirement of Law or Contractual Obligation), but in no event less than ten days prior to any such merger or consolidation, to the Company, the Servicer and the Rating Agencies upon any such merger or consolidation of the Trustee. Section VIII.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of any Pooling and Servicing Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Holders, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.6 and no notice to Holders of the appointment of any co-trustee or separate trustee shall be required under Section 8.8. The Trustee shall promptly notify each Rating Agency of the appointment of any co-trustee. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any statute of any jurisdiction in which any 71 particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of any Pooling and Servicing Agreement, specifically including every provision of any Pooling and Servicing Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Servicer and the Company. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to any Pooling and Servicing Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Section VIII.11. TAX RETURNS. In the event the Trust shall be required to file tax returns, the Company shall prepare and file or shall cause to be prepared and filed (including, without limitation, by the Servicer) any tax returns required to be filed by the Trust and shall remit such returns to the Trustee for signature at least five Business Days before such returns are due to be filed. The Trustee is hereby authorized to sign any such return on behalf of the Trust. The Company shall also prepare or shall cause to be prepared (including, without limitation, by the Servicer) all tax information required by law to be distributed to Holders and shall deliver such information to the Trustee at least five Business Days prior to the date it is required by law to be distributed to the Holders. The Trustee, upon written request, will furnish the Company, or the Company's designee, with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust, and shall, upon request, execute such returns. In no event shall the Trustee in its 72 individual capacity be liable for any liabilities, costs or expenses of the Trust, the Holders, the Company or the Servicer arising under any tax law or regulation, including, without limitation, federal, state or local income or excise taxes or any other tax imposed on or measured by income (or any interest or penalty with respect thereto or arising from any failure to comply therewith). Section VIII.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES. All rights of action and claims under any Pooling and Servicing Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been obtained. Section VIII.13. SUITS FOR ENFORCEMENT. If a Servicer Default shall occur and be continuing, the Trustee may, as provided in Section 6.1 of the Servicing Agreement, proceed to protect and enforce its rights and the rights of the Holders under this Agreement or any other Transaction Document by suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or any other Transaction Document or in aid of the execution of any power granted in this Agreement or any other Transaction Document or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Holders. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Investor Certificateholder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any holder thereof, or authorize the Trustee to vote in respect of the claim of any Investor Certificateholder in any such proceeding. Section VIII.14. RIGHTS OF INVESTOR CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Investor Certificateholders evidencing more than 50% of the Invested Amount of any Series affected by the conduct of any proceeding or the exercise of any right conferred on the Trustee shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; PROVIDED, HOWEVER, that, subject to Section 8.1, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or expose it to personal liability or be unduly prejudicial to the rights of Investor Certificateholders not party to such direction; and PROVIDED, FURTHER, that nothing in any Pooling and Servicing Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction of the Investor Certificateholders. 73 Section VIII.15. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee represents and warrants that: (a) the Trustee is a banking corporation organized, existing and in good standing under the laws of the United States or any of its fifty states and is duly authorized and empowered to exercise trust powers under applicable law; (b) the Trustee has the power and authority to enter into this Agreement and any Supplement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and any Supplement; and (c) each Pooling and Servicing Agreement and each of the Transaction Documents executed by it have been duly executed and delivered by the Trustee and, in the case of all such Transaction Documents, are legal, valid and binding obligations of the Trustee, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). Section VIII.16. MAINTENANCE OF OFFICE OR AGENCY. The Trustee will maintain at its expense in the Borough of Manhattan, The City of New York, an office or offices or agency or agencies where notices and demands to or upon the Trustee in respect of the Certificates and the Pooling and Servicing Agreements may be served. The Trustee will give prompt written notice to the Company, the Servicer and the Holders of any change in the location of the Certificate Register or any such office or agency. Section VIII.17. LIMITATION OF LIABILITY. The Certificates are executed by the Trustee, not in its individual capacity but solely as Trustee of the Trust, in the exercise of the powers and authority conferred and vested in it by this Agreement. Each of the undertaking and agreements made on the part of the Trustee in the Certificates is made and intended not as a personal undertaking or agreement by the Trustee but is made and intended for the purpose of binding only the Trust. ARTICLE IX TERMINATION Section IX.1. TERMINATION OF TRUST; LIQUIDATION OF RECEIVABLES. (a) The Trust and the respective obligations and responsibilities of the Company, the Servicer, the Sub-Servicers and the Trustee created hereby (other than the obligation of the Trustee to make payments to Holders as hereafter set forth and any indemnification obligations hereunder) shall terminate, except with respect to any such obligations or responsibilities expressly stated to survive such termination, on the earliest of (i) April 1, 2014, (ii) at the option of 74 the Company, at any time where the Aggregate Invested Amount is zero (unless an Early Amortization Event as specified in Section 7.1 of this Agreement shall have occurred and be continuing, in which case the Company shall be deemed to elect to terminate the Trust pursuant to this clause (ii)) and (iii) upon completion of distribution of the amounts referred to in subsection 7.2(b) (the "TRUST TERMINATION DATE"). (b) If on the Distribution Date in the month immediately preceding the month in which the Trust Termination Date occurs (after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal on any Series of Certificates to be made on the related Distribution Date pursuant to Article III) the Invested Amount of any Series would be greater than zero, the Trustee, at the written direction of the Servicer, shall sell within 30 days of such Distribution Date all of the Receivables and other Trust Assets. The proceeds of such sale shall be treated as Collections on the Receivables and shall be allocated in accordance with Article III. During such 30-day period, the Servicer shall continue to collect Collections on the Receivables and allocate Collections in accordance with the provisions of Article III. The costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in Section 8.5. Section IX.2. CLEAN-UP CALL AND FINAL TERMINATION DATE OF INVESTOR CERTIFICATES OF ANY SERIES. (a) On the Distribution Date during the Amortization Period with respect to any Series on which the Invested Amount (or such other amount as may be set forth in the related Supplement) of such Series is reduced to an amount equal to or less than the Clean-Up Call Percentage of the Invested Amount for such Series as of the day preceding the beginning of such Amortization Period (or such other amount as may be set forth in the related Supplement), the Company shall have the option to repurchase, and to the extent set forth in the related Supplement, shall repurchase, the entire Certificateholders' Interest of such Series, at a purchase price equal to (i) the outstanding Invested Amount of the Investor Certificates of such Series PLUS (ii) accrued and unpaid interest through the date of such purchase (after giving effect to any payment of principal and monthly interest on such date of purchase) PLUS (iii) all other amounts payable to all Investor Certificateholders of such Series under the related Supplement (such purchase price, the "CLEAN-UP CALL REPURCHASE PRICE"). The amount of the Clean-Up Call Repurchase Price will be deposited into the Collection Account for credit to the Series Collection Subaccount for such Series on the Business Day prior to such Distribution Date in immediately available funds and will be passed through in full to the applicable Investor Certificateholders. Following any such repurchase, such Certificateholders' Interest in the Trust Assets shall terminate and such interest therein will be allocated to the Company Interest and such Holders will have no further rights with respect thereto. In the event that the Company fails for any reason to deposit the Clean-Up Call Repurchase Price for such Receivables, the Certificateholders' Interest in the Receivables and the other Trust Assets will continue and monthly payments will continue to be made to the Holders. (b) The amount deposited pursuant to subsection 9.2(a) shall be paid to the Investor Certificateholders of the related Series pursuant to Article III on the Distribution Date following the date of such deposit. All Certificates of a Series which are purchased by 75 the Company pursuant to subsection 9.2(a) shall be delivered by the Company upon such purchase to, and be canceled by (in accordance with the written directions of the Company), the Transfer Agent and Registrar and be disposed of in a manner satisfactory to the Trustee and the Company. (c) All principal or interest with respect to any Series of Investor Certificates shall be due and payable no later than the Series Termination Date with respect to such Series. Unless otherwise provided in a Supplement, in the event that the Invested Amount of any Series of Certificates is greater than zero on its Series Termination Date (after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal to be made on such Series on such date), the Trustee will sell or cause to be sold, in accordance with the directions of Investor Certificateholders representing more than 50% of the Invested Amount of such Series, and pay the proceeds to all Holders of such Series PRO RATA (except that unless expressly provided to the contrary in the related Supplement, no payment shall be made to Holders of any Class of any Series that is by its terms subordinated to any other Class until such senior Class of Certificates has been paid in full) in final payment of all principal of and accrued interest on such Series of Certificates, an amount of Receivables or interests in Receivables up to the Invested Amount of such Series at the close of business on such date. Absent such direction from Investor Certificateholders representing more than 50% of the Invested Amount of such Series, the Trustee shall continue to hold the Trust Assets in respect of such Series in accordance with the terms of the Pooling and Servicing Agreements until the Trust Termination Date (or until Investor Certificateholders representing more than 50% of the Invested Amount of such Series shall otherwise direct the Trustee); PROVIDED that the terms of this Agreement, the related Supplement and the Servicing Agreement shall be deemed to remain in full force and effect, except that no additional Receivables shall be allocated with respect to such Series. The reasonable costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in Section 8.5. Any proceeds of such sale in excess of such principal and interest paid shall be paid to the owner of the Exchangeable Company Interest, unless and to the extent otherwise specified in any applicable Supplement. Upon such Series Termination Date with respect to the applicable Series of Certificates, final payment of all amounts allocable to any Investor Certificates of such Series shall be made in the manner provided in this Section 9.2. Section IX.3. FINAL PAYMENT WITH RESPECT TO ANY SERIES. (a) Written notice of any termination, specifying the Distribution Date upon which the Investor Certificateholders of any Series may surrender their Investor Certificates for payment of the final distribution with respect to such Series and cancellation, shall be given (subject to at least 30 days' (or such shorter period as is acceptable to the Trustee) prior written notice from the Servicer to the Trustee containing all information required for the Trustee's notice) by the Trustee to Investor Certificateholders of such Series, mailed not later than the fifth day of the month of such final distribution and specifying (i) the Distribution Date upon which final payment of the Investor Certificates will be made upon presentation and surrender of Investor Certificates at the office or offices therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, 76 payments being made only upon presentation and surrender of the Investor Certificates at the office or offices therein specified. The Servicer's notice to the Trustee in accordance with the preceding sentence shall be accompanied by an Officer's Certificate setting forth the information specified in Section 4.3 of the Servicing Agreement covering the period during the then current calendar year through the date of such notice. The Trustee shall give such notice to the Transfer Agent and Registrar and the Paying Agent at the time such notice is given to such Investor Certificateholders. (b) Notwithstanding the termination of the Trust pursuant to subsection 9.1(a) or the occurrence of the Series Termination Date with respect to any Series pursuant to Section 9.2, all funds then on deposit in the Collection Account (but only to the extent necessary to pay all outstanding and unpaid amounts to Holders) shall continue to be held in trust for the benefit of the Holders, and the Paying Agent or the Trustee shall pay such funds to the Holders upon surrender of their Certificates in accordance with the terms hereof. Any Certificate not surrendered on the date specified in subsection 9.3(a)(i) shall cease to accrue any interest provided for such Certificate from and after such date. In the event that all of the Investor Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Investor Certificateholders of such Series to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Investor Certificates of such Series shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Investor Certificateholders of such Series concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds in the Collection Account held for the benefit of such Investor Certificateholders. The Trustee and the Paying Agent shall pay to the Company upon request any monies held by them for the payment of principal or interest that remains unclaimed for two years. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. (c) All Certificates surrendered for payment of the final distribution with respect to such Certificates and cancellation shall be canceled by the Transfer Agent and Registrar and be disposed of in a customary manner satisfactory to the Trustee. Section IX.4. COMPANY'S TERMINATION RIGHTS. Upon the termination of the Trust pursuant to Section 9.1 and the cancellation of the Exchangeable Company Interest and payment to the Trustee (in its capacity as such and/or in its capacity as Successor Servicer) of all amounts owed to it under any Pooling and Servicing Agreement, the Trustee shall assign and convey to the Company (without recourse, representation or warranty) in exchange for the Exchangeable Company Interest all right, title and interest of the Trust in the Trust Assets, whether then existing or thereafter created, and all proceeds thereof except for amounts held by the Trustee pursuant to subsection 9.3(b). The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, representation or 77 warranty, as shall be reasonably requested by the Company to vest in the Company all right, title and interest which the Trust had in the Trust Assets. ARTICLE X MISCELLANEOUS PROVISIONS Section X.1. AMENDMENT. (a) Any Pooling and Servicing Agreement, including any schedule or exhibit thereto, may be amended in writing from time to time by the Servicer, the Company and the Trustee, without the consent of any holder of any outstanding Certificate, to cure any ambiguity, to correct or supplement any provisions herein or therein which may be inconsistent with any other provisions herein or therein or to add any other provisions hereto to change in any manner or eliminate any of the provisions with respect to matters or questions raised under any Pooling and Servicing Agreement which shall not be inconsistent with the provisions of any Pooling and Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Officer's Certificate from the Company and, to the extent, in the reasonable view of the Company, a question of law exists, supported by an Opinion of Counsel delivered to the Trustee, adversely affect in any material respect the interests of the Investor Certificateholders. The Trustee may, but shall not be obligated to, enter into any such amendment pursuant to this paragraph or paragraph (b) below which affects the Trustee's rights, duties or immunities under any Pooling and Servicing Agreement or otherwise. (b) Any Pooling and Servicing Agreement and any schedule or exhibit thereto may also be amended in writing from time to time by the Servicer, the Company and the Trustee with the consent of Investor Certificateholders evidencing more than 50% of the Invested Amount of any Series adversely affected by the amendment (or, if any such Series shall have more than one Class of Investor Certificates adversely affected by the amendment, 50% or more of the Invested Amount of each such Class) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Pooling and Servicing Agreement or of modifying in any manner the rights of holders of any Series then issued and outstanding; PROVIDED, HOWEVER, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, distributions which are required to be made on any Investor Certificate of such Series without the consent of such Investor Certificateholder of such Series; (ii) change the definition of or the manner of calculating the interest of any Investor Certificateholder of such Series without the consent of such Investor Certificateholder; or (iii) reduce the aforesaid percentage of Fractional Undivided Interests the holders of which are required to consent to any such amendment, in each case without the consent of all Holders of each Series adversely affected in any material respect. (c) Notwithstanding anything in this Section 10.1 to the contrary, the Supplement with respect to any Series may be amended on the terms and with the procedures provided in such Supplement. 78 (d) The Company or the Servicer shall deliver any proposed amendment to each Agent at least five days prior to the execution and delivery thereof. The Servicer shall furnish written notification of the substance of such amendment to each Rating Agency. No such amendment (including, without limitation, the amendment of any Supplement, notwithstanding anything to the contrary contained in any Supplement) shall be effective until the Rating Agency Condition has been satisfied with respect thereto. (e) Promptly after the execution of any such amendment or consent the Trustee shall furnish written notification of the substance of such amendment to each Holder of each Outstanding Series (or with respect to an amendment of a Supplement, of the applicable Series). (f) It shall not be necessary for the consent of Investor Certificateholders under this Section 10.1 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. (g) In executing or accepting any amendment pursuant to this Section 10.1, the Trustee shall, upon request, be entitled to receive and rely upon (i) an Opinion of Counsel (A) stating that such amendment is authorized pursuant to a specific provision of a Pooling and Servicing Agreement and complies with such provision, (B) stating that all conditions precedent to the execution and delivery of such amendment shall have been satisfied in full, which opinion in the case of this clause (B) may, to the extent that such opinion concerns questions of fact, rely on an Officer's Certificate with respect to such questions of fact and (C) to the extent such amendment modifies Article I, II, III or IV hereof, substantially in the form of Exhibit C, (ii) a certificate from a Responsible Officer of the Company stating that such amendment shall not adversely affect the interests of the holders of any outstanding Certificates in any material respect except for holders of the Series whose consent to such amendment has been obtained in accordance with clause (b) of this Section 10.1 and (iii) a Tax Opinion. Section X.2. PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST. (a) The Servicer shall cause this Agreement, any Supplement, all amendments hereto and/or all financing statements and continuation statements and any other necessary documents covering the Certificateholders' and the Trustee's right, title and interest to the Trust and the Trust Assets to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Trustee hereunder to all property comprising the Trust. The Servicer shall deliver to the Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Company shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this subsection 10.2(a). 79 (b) With respect to any prospective change in its name, identity or corporate structure, the Company shall comply fully with subsection 2.8(m) hereof and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. If the Company determines that no refiling is required, it shall provide to the Trustee an Opinion of Counsel so stating. Section X.3. LIMITATION ON RIGHTS OF HOLDERS. (a) The death or incapacity of any Holder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Holder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) Except with respect to the Investor Certificateholders as expressly provided in any Pooling and Servicing Agreement, no Holder shall have any right to vote or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto. Nor shall any Investor Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Investor Certificateholder shall have any right by virtue of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Investor Certificateholder previously shall have given to the Trustee written request to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Investor Certificateholder with every other Investor Certificateholder and the Trustee, that no one or more Holders shall have any right in any manner whatever by virtue of or by availing itself or themselves of any provisions of the Pooling and Servicing Agreements to affect, disturb or prejudice the rights of any other of the Investor Certificateholders, or to obtain or seek to obtain priority over or preference to any other such Investor Certificateholder, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Investor Certificateholders. For the protection and enforcement of the provisions of this Section 10.3, each and every Investor Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. (d) By their acceptance of Certificates pursuant to this Agreement and the applicable Supplement, the Holders agree to the provisions of this Section 10.3. Section X.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF 80 THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section X.5. NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of facsimile notice, when received, (i) addressed as follows in the case of the Company, the Servicer and the Trustee and (ii) in the case of the Sub-Servicers, as set forth under their signatures in the Receivables Sale Agreement, or, in either case, to such other address as may be hereafter notified by the respective parties hereto: The Company: CM CAPITAL CORPORATION 395 Oyster Point Blvd. Suite 415, Room A South San Francisco, CA 94080 Attention: Leo F. Korman Facsimile: (650) 589-4010 with a copy to the Servicer: The Servicer: Core-Mark International, Inc. 395 Oyster Point Blvd. Suite 415 South San Francisco, CA 94080 Attention: Leo F. Korman Facsimile: (650) 589-4010 The Trustee: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Structured Finance Services Facsimile: 212-946-8191 Any notice required or permitted to be mailed to an Investor Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Investor Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in any Pooling and Servicing Agreement shall be conclusively presumed to have been duly given, whether or not the Investor Certificateholder receives such notice. Section X.6. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of any Pooling and Servicing Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of such 81 Pooling and Servicing Agreement and shall in no way affect the validity or enforceability of the other provisions of any Pooling and Servicing Agreement or of the Certificates or rights of the Holders. Section X.7. ASSIGNMENT. Notwithstanding anything to the contrary contained herein, except as provided in Section 5.3 of the Servicing Agreement, no Pooling and Servicing Agreement, nor any rights or interests thereunder, may be assigned by the Company or the Servicer without the prior written consent of the Trustee acting at the direction of the holders of 66 2/3% of the Invested Amount of each Outstanding Series and without the Rating Agency Condition's having been satisfied with respect to such assignment. Section X.8. CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the intention of the parties to each Pooling and Servicing Agreement that the Investor Certificateholders shall not be personally liable for obligations of the Trust, that the interests in the Trust represented by the Investor Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever and that Investor Certificates upon authentication thereof by the Trustee pursuant to Section 5.2 are and shall be deemed fully paid. Section X.9. FURTHER ASSURANCES. The Company and the Servicer agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the Trustee more fully to effect the purposes of each Pooling and Servicing Agreement, including, without limitation, the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC of any applicable jurisdiction. Section X.10. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee or the Investor Certificateholders, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section X.11. COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Section X.12. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Holders and their respective successors and permitted assigns. Except as otherwise provided in Section 6.3 and this Article X and in any Supplement, no other Person will have any right or obligation hereunder. Section X.13. ACTIONS BY HOLDERS. (a) Wherever in any Pooling and Servicing Agreement a provision is made that an action may be taken or a notice, demand or instruction given by Investor Certificateholders, such action, notice or instruction may be 82 taken or given by any Investor Certificateholders of any Series, unless such provision requires a specific percentage of Investor Certificateholders of a certain Series or all Series. (b) Any request, demand, authorization, direction, notice, consent, waiver or other act by a Investor Certificateholder shall bind such Investor Certificateholder and every subsequent holder of such Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee, the Company or the Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. Section X.14. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement and the Servicing Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the Servicing Agreement. This Agreement and the Servicing Agreement may not be modified, amended, waived, or supplemented except as provided herein. Section X.15. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section X.16. CONSTRUCTION OF AGREEMENT. (a) The Company hereby grants to the Trustee, for the benefit of the Holders, a perfected first priority security interest in all of the Company's right, title and interest in, to and under the Receivables and the other Trust Assets now existing and hereafter created, all monies due or to become due and all amounts received with respect thereto and all "proceeds" thereof (including Recoveries), to secure all of the Company's and the Servicer's obligations hereunder, including, without limitation, the Company's obligation to sell or transfer Receivables hereafter created to the Trust. (b) This Agreement shall constitute a security agreement under applicable law. Section X.17. NO SET-OFF. Except as expressly provided in this Agreement, the Trustee agrees that it shall have no right of set-off or banker's lien against, and no right to otherwise deduct from, any funds held in the Collection Account for any amount owed to it by the Company, the Servicer or any Investor Certificateholder. Section X.18. NO BANKRUPTCY PETITION. Each of the Trustee and the Servicer hereby covenants and agrees that, prior to the date which is one year and one day after the date of the end of the Amortization Period with respect to all Outstanding Series, it will not institute against, or join any other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law. Section X.19. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) each Pooling and Servicing Agreement is executed and delivered by the Trustee, not individually or personally but solely as Trustee of the Trust, in the 83 exercise of the powers and authority conferred and vested in it, (b) except with respect to Section 8.15 hereof the representations, undertakings and agreements herein made on the part of the Trust are made and intended not as personal representations, undertakings and agreements by the Trustee, but are made and intended for the purpose of binding only the Trust, (c) nothing herein contained shall be construed as creating any liability of the Trustee, individually or personally, to perform any covenant of the Trust either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties who are signatories to this Agreement and by any Person claiming by, through or under such parties; PROVIDED, HOWEVER, the Trustee shall be liable in its individual capacity for its own willful misconduct or negligence and (d) under no circumstances shall the Trustee be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under any Pooling and Servicing Agreement; PROVIDED FURTHER, that the foregoing clauses (a) through (d) shall survive the resignation or removal of the Trustee. The Company hereby agrees to indemnify and hold harmless the Trustee and the Trust for the benefit of the Holders (each, an "INDEMNIFIED PERSON") from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Company pursuant to any Pooling and Servicing Agreement to which it is a party, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury resulted from the negligence, bad faith or wilful misconduct of an indemnified person; PROVIDED that any payments made by the Company pursuant to this subsection shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts pursuant to any Pooling and Servicing Agreements (other than to the Company), shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. Section X.20. CERTAIN INFORMATION. The Servicer and the Company shall promptly provide to the Trustee such information in computer tape, hard copy or other form regarding the Receivables as the Trustee may reasonably request to perform its obligations hereunder. IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. CM CAPITAL CORPORATION, as Company By: /s/ ROBERT A. ALLEN --------------------------- Name: Robert A. Allen Title: President & CEO CORE-MARK INTERNATIONAL, INC., as Servicer By: /s/ LEO F. KORMAN --------------------------- Name: Leo F. Korman Title: Sr. VP & CFO THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Trustee By: /s/ KIMBERLY K. COSTA --------------------------- Name: Kimberly K. Costa Title: Second Vice President EX-10.19 6 EXHIBIT 10.19 Exhibit 10.19 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CM CAPITAL CORPORATION, as Company, CORE-MARK INTERNATIONAL, INC., as Servicer and THE CHASE MANHATTAN BANK, as Trustee -------------------- SERIES 1998-1 SUPPLEMENT Dated as of April 1, 1998 to POOLING AGREEMENT Dated as of April 1, 1998 -------------------- CORE-MARK RECEIVABLES MASTER TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II DESIGNATION OF CERTIFICATES AND INTERESTS; PURCHASE AND SALE OF THE TERM CERTIFICATES. . . . . . . . . . . . . . 16 SECTION 2.1. Designation . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.2. The Term Certificates . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.3. Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.4. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . 17 SECTION 2.5. Application of Proceeds . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.6. Procedure for Decreasing the Series 1998-1 Invested Amount; Optional Termination. . . . . . . . . . . . . . . . . . 21 SECTION 2.7. Sale of Additional Term Certificates. . . . . . . . . . . . . . 22 SECTION 2.8. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE III ARTICLE III OF THE AGREEMENT. . . . . . . . . . . . . 25 SECTION 3A.2. Establishment of Trust Accounts. . . . . . . . . . . . . . . . 25 SECTION 3A.3. Daily Allocations. . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 3A.4. Determination of Interest. . . . . . . . . . . . . . . . . . . 28 SECTION 3A.5. Determination of Series 1998-1 Monthly Principal . . . . . . . 29 SECTION 3A.6. Applications . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE IV DISTRIBUTIONS AND REPORTS SECTION 4A.1. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 4A.2. Statements and Notices . . . . . . . . . . . . . . . . . . . . 33 SECTION 4A.3. Notice Procedures. . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS SECTION 5.1. Additional Early Amortization Events. . . . . . . . . . . . . . 34 ARTICLE VI SERVICING FEE SECTION 6.1. Servicing Compensation. . . . . . . . . . . . . . . . . . . . . 37 ARTICLE VII REPRESENTATIONS AND WARRANTIES, COVENANTS SECTION 7.1. Representations and Warranties of the Company and the Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 7.2. Covenants of the Company and the Servicer . . . . . . . . . . . 37 ARTICLE VIII MISCELLANEOUS SECTION 8.1. Ratification of Agreement . . . . . . . . . . . . . . . . . . . 38 SECTION 8.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 8.3. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 8.4. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . 38 SECTION 8.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 8.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8.9. Limitation on Addition and Termination of Sellers.. . . . . . . 39 ARTICLE IX FINAL DISTRIBUTIONS SECTION 9.1. Certain Distributions . . . . . . . . . . . . . . . . . . . . . 41 EXHIBITS Exhibit A Form of Class A Certificate, Series 1998-1 Exhibit B Form of Class B Certificate, Series 1998-1 Exhibit C Form of Daily Report Exhibit D Form of Monthly Settlement Statement Exhibit E Form of Purchaser Letter Exhibit F Form of Definitive Certificate Conversion Letter SCHEDULES Schedule 1 Trust Accounts
SERIES 1998-1 SUPPLEMENT, dated as of April 1, 1998 (as amended, supplemented or otherwise modified from time to time, this "SUPPLEMENT"), among CM Capital Corporation, a Delaware corporation (the "COMPANY"), Core-Mark International, Inc., a Delaware corporation ("CORE-MARK"), as servicer (except where otherwise noted) (in such capacity, the "SERVICER"), and The Chase Manhattan Bank, a New York banking corporation, in its capacity as Trustee (the "TRUSTEE") under the Agreement (as defined below). W I T N E S S E T H : WHEREAS, the Company, the Servicer and the Trustee have entered into a Pooling Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "AGREEMENT"); WHEREAS, the Agreement provides, among other things, that the Company, the Servicer and the Trustee may at any time and from time to time enter into supplements to the Agreement for the purpose of authorizing the issuance on behalf of the Trust by the Company for execution and redelivery to the Trustee for authentication of one or more Series of Investor Certificates; and WHEREAS, the Company, the Servicer and the Trustee wish to supplement the Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION I.1. DEFINITIONS. (a) The following words and phrases shall have the following meanings with respect to Series 1998-1 and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: "ACCRUAL PERIOD" shall mean the period from and including a Distribution Date, or, in the case of the initial Accrual Period, the Issuance Date, to but excluding the immediately succeeding Distribution Date. "ACCRUED EXPENSE AMOUNT" shall mean, for each Business Day during an Accrual Period, the sum of (i) the Series 1998-1 Daily Interest Expense for such Business Day, (ii) for each of the first ten of such Business Days, one-tenth of the Series 1998-1 Monthly Servicing Fee due and payable on the immediately succeeding Distribution Date and zero on each Business Day thereafter (until such immediately 2 succeeding Distribution Date) and (iii) all Program Costs which have accrued since the preceding Business Day; PROVIDED, HOWEVER, that if by the tenth Business Day of an Accrual Period, the entire amount of (A) the Series 1998-1 Monthly Interest, (B) the Series 1998-1 Monthly Servicing Fee and (C) all accrued Program Costs, in each case for such Accrual Period, shall not have been transferred to the applicable Series Collection Subaccount (or subaccount thereof), the Accrued Expense Amount for such tenth Business Day (and each Business Day thereafter until paid) shall also include the amount of such shortfall. "AGED RECEIVABLES RATIO" shall mean, as of the last day of each Settlement Period, the percentage equivalent of a fraction, (i) the numerator of which shall be the sum of (A) the aggregate unpaid balance of Receivables that were 91-120 days past their respective original due dates as of such last day and (B) the aggregate amount of Receivables of the Sellers which were charged off as uncollectible prior to the day which is 91 days after their respective original due dates during such Settlement Period, and (ii) the denominator of which shall be the aggregate Principal Amount of Receivables originated by the Sellers during the fourth prior Settlement Period (including the Settlement Period ended on such day). "CARRYING COST RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) equal to the product of (a) 2.00 TIMES Days Sales Outstanding as of such day and (b) (i) 1.50 TIMES a rate per annum equal to the weighted average Class A Certificate Rate and Class B Certificate Rate in effect with respect to the outstanding Class A Certificates and Class B Certificates, respectively, as of the end of the Settlement Period immediately preceding such earlier Settlement Report Date, DIVIDED BY (ii) 360. "CHANGE IN CONTROL" shall mean the occurrence of any event the result of which causes the Company not to be a direct, wholly-owned Subsidiary of Core-Mark. "CLASS A ADDITIONAL INTEREST" shall have the meaning specified in subsection 3A.4(b)(i). "CLASS A ADJUSTED INVESTED AMOUNT" shall mean, as of any date of determination, (i) the Class A Invested Amount on such date, MINUS (ii) the amount on deposit in the Series 1998-1 Principal Collection Sub-subaccount on such date (up to a maximum of the Class A Invested Amount). "CLASS A CERTIFICATE" shall mean a Class A Certificate, Series 1998-1, executed by the Company and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A. "CLASS A CERTIFICATEHOLDER" shall mean each holder of a Class A Certificate. 3 "CLASS A CERTIFICATE RATE" shall mean, (a) in the case of the initial Class A Certificates, with respect to (i) the initial Accrual Period, 5.97% per annum, and (ii) any Accrual Period thereafter, One-Month LIBOR for such Accrual Period PLUS 0.28% per annum, and (b) in the case of any additional Class A Certificates issued pursuant to Section 2.7, the rate per annum set forth in the written direction delivered by the Company to the Trustee pursuant to subsection 2.7(c). "CLASS A INITIAL INVESTED AMOUNT" shall mean $50,000,000. "CLASS A INTEREST SHORTFALL" shall have the meaning specified in subsection 3A.4(b)(i). "CLASS A INVESTED AMOUNT" shall mean, with respect to any date of determination, an amount equal to (i) the Class A Initial Invested Amount (plus the Initial Invested Amount of any Class A Certificate issued subsequent to the Issuance Date) MINUS (ii) the aggregate amount of distributions to the Class A Certificateholders (including the holders of any such subsequently issued Class A Certificates) made in respect of principal on or prior to such date MINUS (iii) the aggregate Series 1998-1 Allocable Charged-Off Amount applied to the Class A Certificates on or prior to such date pursuant to subsection 3A.5(b)(ii) PLUS (iv) (but only to the extent of any unreimbursed reductions made pursuant to clause (iii) above) the aggregate Series 1998-1 Allocable Recoveries Amount applied to the Class A Certificates on or prior to such date pursuant to subsection 3A.5(c)(i). "CLASS A MONTHLY INTEREST" shall have the meaning specified in subsection 3A.4(a)(i). "CLASS A RATIO" shall mean, on any date of determination with respect to the Class A Certificates, the greatest of (a) the sum of the Loss Reserve Ratio I and the Dilution Reserve Ratio I, (b) the sum of the Loss Reserve Ratio II and the Dilution Reserve Ratio II and (c) the Minimum Ratio, in each case applicable to the Class A Certificates. "CLASS A REDEMPTION PREMIUM" shall have the meaning specified in subsection 2.4(a)(i). "CLASS A REDEMPTION PRICE" shall have the meaning specified in subsection 2.4(a)(i). "CLASS B ADDITIONAL INTEREST" shall have the meaning specified in subsection 3A.4(b)(ii). "CLASS B ADJUSTED INVESTED AMOUNT" shall mean, as of any date of determination, (i) the Class B Invested Amount on such date, MINUS (ii) the excess, if any, on deposit on such date in the Series 1998-1 Principal Collection Sub-subaccount 4 over the Class A Invested Amount on such date (up to a maximum of the Class B Invested Amount). "CLASS B CERTIFICATE" shall mean a Class B Certificate, Series 1998-1, executed by the Company and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit B. "CLASS B CERTIFICATEHOLDER" shall mean each holder of a Class B Certificate. "CLASS B CERTIFICATE RATE" shall mean, (a) in the case of the initial Class B Certificates, with respect to (i) the initial Accrual Period, 6.34% per annum, and (ii) any Accrual Period thereafter, One-Month LIBOR for such Accrual Period PLUS 0.65% per annum, and (b) in the case of any additional Class B Certificates issued pursuant to Section 2.7, the rate per annum set forth in the written direction delivered by the Company to the Trustee pursuant to subsection 2.7(c). "CLASS B INITIAL INVESTED AMOUNT" shall mean $5,000,000. "CLASS B INTEREST SHORTFALL" shall have the meaning specified in subsection 3A.4(b)(ii). "CLASS B INVESTED AMOUNT" shall mean, with respect to any date of determination, an amount equal to (i) the Class B Initial Invested Amount (plus the Initial Invested Amount of any Class B Certificate issued subsequent to the Issuance Date) MINUS (ii) the aggregate amount of distributions to the Class B Certificateholders (including the holders of any such subsequently issued Class B Certificates) made in respect of principal on or prior to such date MINUS (iii) the aggregate Series 1998-1 Allocable Charged-Off Amount applied to the Class B Certificates on or prior to such date pursuant to subsection 3A.5(b)(ii) PLUS (iv) (but only to the extent of any unreimbursed reductions made pursuant to clause (iii) above) the aggregate Series 1998-1 Allocable Recoveries Amount applied to the Class B Certificates on or prior to such date pursuant to subsection 3A.5(c)(ii). "CLASS B MONTHLY INTEREST" shall have the meaning specified in subsection 3A.4(a)(ii). 5 "CLASS B RATIO" shall mean, on any date of determination with respect to the Class B Certificates, the greatest of (a) the sum of the Loss Reserve Ratio I and the Dilution Reserve Ratio I, (b) the sum of the Loss Reserve Ratio II and the Dilution Reserve Ratio II and (c) the Minimum Ratio, in each case applicable to the Class B Certificates. "CLASS B REDEMPTION PREMIUM" shall have the meaning specified in subsection 2.4(a)(ii). "CLASS B REDEMPTION PRICE" shall have the meaning specified in subsection 2.4(a)(ii). "CLEAN-UP CALL AMOUNT" shall mean the product of (i) the Clean-Up Call Percentage and (ii) the Series 1998-1 Initial Invested Amount. "CLEAN-UP CALL PERCENTAGE" shall mean 10%. "CORE-MARK" shall have the meaning specified in the preamble hereto. "DAILY REPORT" shall mean a report prepared by the Servicer on each Business Day for the period specified therein, in substantially the form of Exhibit C. "DAYS SALES OUTSTANDING" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, the number of days equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the aggregate Principal Amount of Eligible Receivables as of the last day of the immediately preceding Settlement Period by (ii) the aggregate Principal Amount of Receivables generated by the Sellers for the three Settlement Periods immediately preceding such earlier Settlement Report Date. "DCR" shall mean Duff & Phelps Credit Rating Co. or any successor thereto. "DEFINITIVE CERTIFICATE CONVERSION LETTER" shall mean a Definitive Certificate Conversion Letter in substantially the form attached hereto as Exhibit F. "DEPOSITORY" shall mean The Depository Trust Company, the nominee of which is Cede & Co., or any successor thereto. "DEPOSITORY PARTICIPANT" shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depository effects book-entry transfers and pledges of securities deposited with the Depository. "DILUTION HORIZON" shall mean, (i) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 5.3 days as representing the time period it takes the Sellers to recognize a Dilution Adjustment, and (ii) for each 6 six-month period (beginning and ending on the previous Settlement Report Date) to occur after such initial period, the number of days (expressed as a dollar weighted average based upon the Dilution Adjustments for such period), as determined by the Servicer in accordance with the procedures utilized to calculate the dilution horizon in clause (i) above; PROVIDED that in no event shall the Dilution Horizon be less than 2 days. "DILUTION HORIZON FACTOR" shall mean (a) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 0.18 months and (b) for each six-month period (beginning and ending on a Settlement Report Date) to occur after such initial period, a fraction, (i) the numerator of which is the Dilution Horizon for such period and (ii) the denominator of which is 30; PROVIDED, HOWEVER, that if the Dilution Horizon Factor for any period would be less than the Dilution Horizon Factor for the immediately preceding period, then the actual Dilution Horizon Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Dilution Horizon Factor for such immediately preceding period and such current period and the denominator of which is 30. "DILUTION PERIOD" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, the quotient of (i) the product of (A) the aggregate Principal Amount of Receivables which were originated by the Sellers during the Settlement Period immediately preceding such earlier Settlement Report Date and (B) the Dilution Horizon Factor then in effect and (ii) the Aggregate Receivables Amount as of the last day of the Settlement Period preceding such earlier Settlement Report Date. "DILUTION RATIO" shall mean, for each Settlement Period, an amount (expressed as a percentage) equal to the aggregate amount of Dilution Adjustments (other than Dilution Adjustments related to rebates given by a Seller to its customers relating to general price increases by the Tobacco Companies for which the Tobacco Companies have granted rebates to the Sellers, so long as the Seller has granted the rebate to its customer prior to the time that the merchandise giving rise to the Receivable to which such rebate is applied is shipped by the Seller) made during such Settlement Period DIVIDED BY the aggregate Principal Amount of Receivables which were originated by the Sellers during such Settlement Period. "DILUTION RESERVE RATIO I" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated for either the Class A Certificates or the Class B Certificates, as the case may be, as follows: 7 DRR = [(c * d) + [(e-d) * (e/d)]] * f Where: DRR = Dilution Reserve Ratio I; c = with respect to the Class A Certificates, 2.5, and with respect to the Class B Certificates, 2.0; d = the average of the Dilution Ratio during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; e = the highest Dilution Ratio for any Settlement Period during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; and f = the Dilution Period. "DILUTION RESERVE RATIO II" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated for either the Class A Certificates or the Class B Certificates, as the case may be, as follows: DRR = [(c * d) + e] * f Where: DRR = Dilution Reserve Ratio II c = with respect to the Class A Certificates, 2.5, and with respect to the Class B Certificates, 2.0; d = the average of the Dilution Ratio during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; e = the product of (i) the twelve-month sample standard deviation of the Dilution Ratio as of the end of each of the twelve consecutive Settlement Periods immediately preceding such earlier Settlement Report Date and (ii) (A) for calculations with respect to Class A Certificates, 2.58, and (B) for calculations with respect to Class B Certificates, 1.96; and f = the Dilution Period. 8 "EARLY AMORTIZATION EVENT" shall have the meanings assigned in Section 5.1 of this Supplement and Section 7.1 of the Agreement. "EARLY AMORTIZATION PERIOD" shall have the meaning assigned in Section 5.1 of this Supplement and Section 7.1 of the Agreement. "ERISA ENTITY" shall mean (i) an "employee benefit plan" within the meaning of Section 3(3) of ERISA or other retirement arrangement, individual retirement account or Keogh plan, whether or not it is subject to the provisions of Title I of ERISA, (ii) any plan described in Section 4975(e)(1) of the Internal Revenue Code or (iii) any other entity that would be deemed to be a "benefit plan investor" within the meaning of Department of Labor regulation Section 2510.3-101(f)(2). "INITIAL PURCHASER" shall mean Chase Securities Inc., who is purchasing the Term Certificates on the Issuance Date pursuant to the Purchase Agreement. "INSTITUTIONAL ACCREDITED INVESTOR" shall mean an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3) or (7) of Regulation D under the Securities Act. "INVESTED PERCENTAGE" shall mean, with respect to any Business Day (i) during the Series 1998-1 Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Series 1998-1 Allocated Receivables Amount as of the end of the immediately preceding Business Day and the denominator of which is the Aggregate Receivables Amount as of the end of the immediately preceding Business Day and (ii) during the Series 1998-1 Amortization Period, the percentage equivalent of a fraction, the numerator of which is the Series 1998-1 Allocated Receivables Amount as of the end of the last Business Day of the Series 1998-1 Revolving Period (PROVIDED THAT if during the Series 1998-1 Amortization Period, the amortization periods of all other Outstanding Series which were outstanding prior to the commencement of the Series 1998-1 Amortization Period commence, then, from and after the date the last of such Series commences its Amortization Period, the numerator shall be the Series 1998-1 Allocated Receivables Amount as of the end of the Business Day preceding such date) and the denominator of which is the greater of (A) the Aggregate Receivables Amount as of the end of the immediately preceding Business Day and (B) the sum of the numerators used to calculate the Invested Percentage for all Outstanding Series on the Business Day for which such percentage is determined. "ISSUANCE DATE" shall mean April 1, 1998. "LOSS RESERVE RATIO I" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated for either the Class A Certificates or the Class B Certificates, as the case may be, as follows: 9 LRR = [(a * b)/c] * d * e Where: LRR = Loss Reserve Ratio I; a = the aggregate Principal Amount of Receivables originated by the Sellers during the three Settlement Periods immediately preceding such earlier Settlement Report Date; b = the highest three-month rolling average of the Aged Receivables Ratio that occurred during the period of twelve consecutive Settlement Periods preceding such earlier Settlement Report Date; c = the Aggregate Receivables Amount as of the last day of the Settlement Period preceding such earlier Settlement Report Date; d = with respect to the Class A Certificates, 2.5, and with respect to the Class B Certificates, 2.0; and e = Payment Terms Factor. "LOSS RESERVE RATIO II" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated for either the Class A Certificates or the Class B Certificates, as the case may be, as follows: LRR = [[(a * b)/c] * d] * e + f Where: LRR = Loss Reserve Ratio II; a = the aggregate Principal Amount of Receivables originated by the Sellers during the three Settlement Periods immediately preceding such earlier Settlement Report Date; b = the highest three-month rolling average of the Aged Receivables Ratio that occurred during the period of twelve consecutive Settlement Periods preceding such earlier Settlement Report Date; c = for the period prior to the first Settlement Report Date, the difference between (i) the aggregate outstanding Principal Amount of all Receivables and (ii) the aggregate outstanding Principal Amount of all Aged Receivables, in each case, originated by the Sellers as of the last 10 day of the Settlement Period preceding such earlier Settlement Report Date; and thereafter, the Aggregate Receivables Amount as of the last day of the Settlement Period preceding such earlier Settlement Report Date; d = with respect to the Class A Certificates, 2.5, and with respect to the Class B Certificates, 2.0; e = Payment Terms Factor; and f = the product of (i) the twelve-month sample standard deviation of the Aged Receivables Ratio as of the end of each of the twelve consecutive Settlement Periods preceding such earlier Settlement Report Date and (ii) (A) for calculations with respect to Class A Certificates, 2.58, and (B) for calculations with respect to Class B Certificates, 1.96. "MAJORITY TERM CERTIFICATEHOLDERS" shall mean, on any day, Term Certificateholders representing, in the aggregate, more than 50% of the Series 1998-1 Invested Amount. "MINIMUM RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated for either the Class A Certificates or the Class B Certificates, as the case may be, as follows: MR = (a * b) + c Where: MR = Minimum Ratio; a = the average of the Dilution Ratio during the period of the twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; b = the Dilution Period; and c = with respect to the Class A Certificates, 11.25%, and with respect to the Class B Certificates, 9.0%. "ONE-MONTH LIBOR" shall mean, for any Accrual Period after the initial Accrual Period, the rate per annum, as recorded by the Trustee, which is the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for Dollar deposits having a maturity of one month commencing on the first day of such Accrual Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as 11 defined below) at approximately 11:00 a.m., London time, on the second full Business Day prior to such date; PROVIDED, HOWEVER, that if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "One-Month LIBOR" shall mean with respect to each day during each Accrual Period, the rate per annum equal to the rate at which The Chase Manhattan Bank is offered Dollar deposits at or about 10:00 a.m., New York City time, two Business Days prior to the beginning of such Accrual Period in the London interbank eurodollar market for delivery on the first day of such Accrual Period for one month and in a principal amount equal to an amount of not less than $1,000,000. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which Dollar deposits are offered by leading banks in the London interbank deposit market). "OPTIONAL TERMINATION DATE" shall have the meaning assigned in subsection 2.6(b). "OPTIONAL TERMINATION NOTICE" shall have the meaning assigned in subsection 2.6(b). "PAYMENT TERMS FACTOR" shall mean, (a) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 0.82 months and (b) for each six-month period to occur after such initial period, a fraction, the numerator of which is the sum of (i) the weighted average payment terms (based upon the principal amount of the Receivables and expressed as a number of days) for the Receivables originated during such period and (ii) 60 and the denominator which is 90; PROVIDED, HOWEVER, that if the Payment Terms Factor for any period is less than the Payment Terms Factor for the immediately preceding period, then the actual Payment Terms Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Payment Terms Factor for such current period and the three immediately preceding periods (without giving effect to this proviso) and the denominator of which is 90. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PREPAYMENT PREMIUM" shall have the meaning assigned in subsection 2.6(b). "PROGRAM COSTS" shall mean, for any Business Day, the sum of (a) the product of (i) all unpaid fees and expenses due and payable to counsel to, and independent auditors of, the Company (other than fees and expenses payable on or in connection with the closing of any issuance of the Term Certificates) on such Business Day and (ii) a fraction, the numerator of which is the Series 1998-1 Invested Amount on such Business Day and the denominator of which is the Aggregate Invested Amount on such Business Day and (b) all unpaid fees and expenses due and payable to Rating 12 Agencies rating the Term Certificates; PROVIDED, HOWEVER, that Program Costs shall not exceed $100,000 in the aggregate in any fiscal year of the Company. "PURCHASE AGREEMENT" shall mean the agreement to be entered into on the Issuance Date among the Company, Core-Mark and the Initial Purchaser pursuant to which the Company agrees to sell, and the Initial Purchaser agrees to purchase, the principal amounts and Classes of Term Certificates set forth therein. "PURCHASER LETTER" shall mean a Purchaser Letter in substantially the form attached hereto as Exhibit E. "QUALIFIED INSTITUTIONAL BUYER" has the meaning ascribed to such term in Rule 144A(a) under the Securities Act. "RATING AGENCY" shall mean the collective reference to S&P and DCR. "RECORD DATE" shall mean, with respect to any Distribution Date, the last Business Day of the immediately preceding Settlement Period. "REDUCTION" shall have the meaning specified in subsection 2.6(a). "REDUCTION AMOUNT" shall have the meaning specified in subsection 2.6(a). "REDUCTION THRESHOLD" shall mean, at any date of determination, $10,000,000. "SCHEDULED REVOLVING TERMINATION DATE" shall mean the last day of the Settlement Period ending in January, 2003. "SERIES 1998-1" shall mean Series 1998-1, the Principal Terms of which are set forth in this Supplement. "SERIES 1998-1 ACCRUED INTEREST SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-1 ADJUSTED INVESTED AMOUNT" shall mean, as of any date of determination, (i) the Series 1998-1 Invested Amount on such date, MINUS (ii) the amount on deposit in the Series 1998-1 Principal Collection Sub- subaccount on such date. "SERIES 1998-1 ALLOCABLE CHARGED-OFF AMOUNT" shall mean, with respect to any Special Allocation Settlement Report Date, the "Allocable Charged- Off Amount", if any, which has been allocated to Series 1998-1. 13 "SERIES 1998-1 ALLOCABLE RECOVERIES AMOUNT" shall mean, with respect to any Special Allocation Settlement Report Date, the "Allocable Recoveries Amount", if any, which has been allocated to Series 1998-1. "SERIES 1998-1 ALLOCATED RECEIVABLES AMOUNT" shall mean, on any date of determination, the lower of (i) the Series 1998-1 Target Receivables Amount on such day and (ii) the product of (x) the Aggregate Receivables Amount on such day and (y) the percentage equivalent of a fraction the numerator of which is the Series 1998-1 Target Receivables Amount on such day and the denominator of which is the Aggregate Target Receivables Amount on such day. "SERIES 1998-1 AMORTIZATION PERIOD" shall mean the period commencing on the Business Day following the earliest to occur of (i) the date on which an Early Amortization Period is declared to commence or automatically commences, (ii) the Optional Termination Date and (iii) the Scheduled Revolving Termination Date and ending on the earlier of (x) the date when the Series 1998-1 Invested Amount shall have been reduced to zero and all accrued interest on the Term Certificates shall have been paid in full and (y) the Series 1998-1 Termination Date. "SERIES 1998-1 CERTIFICATEHOLDERS' INTEREST" shall have the meaning assigned in subsection 2.2(a). "SERIES 1998-1 COLLECTION SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-1 DAILY INTEREST EXPENSE" shall mean, for each Business Day during an Accrual Period, the sum (without duplication) of (a) for each of the first ten of such Business Days, one-tenth of the Series 1998-1 Monthly Interest due and payable on the immediately succeeding Distribution Date and zero on each Business Day thereafter (until such immediately succeeding Distribution Date), (b) the aggregate amount of all previously accrued and unpaid Series 1998-1 Daily Interest Expense (up to but not exceeding the full amount thereof) and (c) the aggregate amount of all accrued and unpaid Class A Additional Interest and Class B Additional Interest for each day since the preceding Business Day (up to but not exceeding the full amount thereof). "SERIES 1998-1 INITIAL INVESTED AMOUNT" shall mean, collectively, the Class A Initial Invested Amount and the Class B Initial Invested Amount. "SERIES 1998-1 INTERESTS" shall mean, collectively, the Class A Certificates, the Class B Certificates and the Series 1998-1 Subordinated Interest. "SERIES 1998-1 INVESTED AMOUNT" shall mean, collectively, the Class A Invested Amount and the Class B Invested Amount. 14 "SERIES 1998-1 MONTHLY INTEREST" shall mean, collectively, the Class A Monthly Interest and the Class B Monthly Interest. "SERIES 1998-1 MONTHLY PRINCIPAL PAYMENT" shall have the meaning assigned in Section 3A.5. "SERIES 1998-1 MONTHLY SERVICING FEE" shall have the meaning assigned in Section 6.1. "SERIES 1998-1 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-1 PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-1 REQUIRED RESERVES" shall mean, subject to Section 8.9, (x) on any date of determination during the Series 1998-1 Revolving Period, an amount equal to the sum of: (a) an amount equal to the greater of (i) the difference between (A) product of (1) the Class A Adjusted Invested Amount on such day (after giving effect to any increase or decrease thereof on such day) and (2) a fraction, the numerator of which is the Class A Ratio, and the denominator of which is one MINUS the Class A Ratio, and (B) the Class B Invested Amount and (ii) the product of (A) the Series 1998-1 Adjusted Invested Amount on such day (after giving effect to any increase or decrease thereof on such day) and (B) a fraction, the numerator of which is the Class B Ratio, and the denominator of which is one MINUS the Class B Ratio; (b) the product of (i) the Series 1998-1 Invested Amount on such day (after giving effect to any increase or decrease thereof on such day) and (ii) a fraction, the numerator of which is the Carrying Cost Reserve Ratio, and the denominator of which is one MINUS the Class A Ratio; and (c) the product of (i) the aggregate Principal Amount of Receivables in the Trust on such day, (ii) a fraction, the numerator of which is the Series 1998-1 Invested Amount on such day (after giving effect to any increase or decrease thereof on such day), and the denominator of which is the Aggregate Invested Amount on such day, and (iii) a fraction, the numerator of which is the Servicing Reserve Ratio, and the denominator of which is one MINUS the Class A Ratio; and (y) on any date of determination during the Series 1998-1 Amortization Period, an amount equal to the Series 1998-1 Required Reserves on the last Business Day of the Series 1998-1 Revolving Period; PROVIDED, in the case of this clause (y), that such 15 amount shall be adjusted on each Special Allocation Settlement Report Date, if any, to the extent required as set forth in Section 3A.5(b)(i) and Section 3A.5(c)(ii). "SERIES 1998-1 REVOLVING PERIOD" shall mean the period commencing on the Issuance Date and terminating on the earliest to occur of the close of business on (i) the date on which an Early Amortization Period is declared to commence or automatically commences, (ii) the Optional Termination Date and (iii) the Scheduled Revolving Termination Date. "SERIES 1998-1 SUBORDINATED INTEREST" shall have the meaning assigned in subsection 2.2(b). "SERIES 1998-1 TARGET RECEIVABLES AMOUNT" shall mean, on any date of determination, the sum of (i) the Series 1998-1 Adjusted Invested Amount on such day and (ii) the Series 1998-1 Required Reserves for such day. "SERIES 1998-1 TERMINATION DATE" shall mean the Distribution Date that occurs in December, 2003. "SERVICING RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) equal to (i) the product of (A) the Servicing Fee Percentage and (B) 2 TIMES Days Sales Outstanding as of such earlier Settlement Report Date, DIVIDED BY (ii) 360. "SPECIAL DISTRIBUTION DATE" shall have the meaning assigned in subsection 2.6(a). "SUBSEQUENT ISSUANCE DATE" shall mean each Distribution Date, if any, on which the Trustee issues additional Class A Certificates and/or Class B Certificates. "TERM CERTIFICATES" shall mean, collectively, those Certificates designated as the Class A Certificates and the Class B Certificates. "TERM CERTIFICATEHOLDERS" shall mean, collectively, the Class A Certificateholders and the Class B Certificateholders. "TRUST ACCOUNTS" shall have the meaning specified in subsection 3A.2(a). (b) If any term or provision contained herein conflicts with or is inconsistent with any term, definition or provision contained in the Agreement, the terms and provisions of this Supplement shall govern. All capitalized terms not otherwise defined herein are defined in the Agreement. All Article, Section or subsection references herein shall mean Article, Section or subsections of this Supplement, except as otherwise provided herein. Unless otherwise stated herein, the context otherwise requires or such term is otherwise 16 defined in the Agreement, each capitalized term used or defined herein shall relate only to the Term Certificates and no other Series of Investor Certificates issued by the Trust. ARTICLE II DESIGNATION OF CERTIFICATES AND INTERESTS; PURCHASE AND SALE OF THE TERM CERTIFICATES SECTION II.1. DESIGNATION. The Certificates and interests created and authorized pursuant to the Agreement and this Supplement shall be divided into (i) two classes, which shall be designated as (a) the "Class A Certificates, Series 1998-1" and (b) the "Class B Certificates, Series 1998-1", respectively, and (ii) an interest designated as the "Series 1998-1 Subordinated Interest". SECTION II.2. THE TERM CERTIFICATES. (a) The Term Certificates shall represent fractional undivided interests in the Trust, including the right to receive distributions from (i) the Invested Percentage (expressed as a decimal) of Collections received with respect to the Receivables and all other funds on deposit in the Collection Account (other than the Series Collection Subaccounts) and (ii) all other funds on deposit in the Series 1998-1 Collection Subaccounts and any subaccounts thereof (collectively, the "SERIES 1998-1 CERTIFICATEHOLDERS' INTEREST"). (b) The "SERIES 1998-1 SUBORDINATED INTEREST" shall be a fractional undivided interest in the Trust, consisting of the right to receive Collections with respect to the Receivables allocated to the Series 1998-1 Certificateholders' Interest and not required to be distributed to or for the benefit of the Term Certificateholders. The Exchangeable Company Interest and any Series of Investor Certificates (or any related Series Subordinated Interest) outstanding shall represent the ownership interest in the remainder of the Trust not allocated pursuant hereto to the Series 1998-1 Certificateholders' Interest or the Series 1998-1 Subordinated Interest. (c) The Class A Certificates and the Class B Certificates shall be issued in registered form substantially in the forms of Exhibits A and B, respectively, (provided that in the case of any additional Term Certificates issued pursuant to Section 2.7, such Certificates may be modified to reflect that they are being issued on a subsequent Issuance Date, rather than on the Issuance Date), and shall, upon issue, be executed and delivered by the Company to the Trustee for authentication and redelivery as provided in Section 2.4 hereof and Section 5.2 of the Agreement. SECTION II.3. DELIVERY. (a) On the Issuance Date, the Company shall sign, on behalf of the Trust, and shall direct the Trustee in writing pursuant to Section 5.2 of the Agreement to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate, subject to the provisions set forth in subsection 2.3(b), the Term Certificates in such names and such denominations and deliver such Term Certificates to the Initial 17 Purchaser in accordance with such written directions. The Term Certificates shall be issued in minimum denominations of $1,000,000 and in integral multiples of $100,000 in excess thereof. (b) Except with respect to any Term Certificates purchased on the Issuance Date or Subsequent Issuance Date by an entity described in subsection 2.4(a)(ii), which will be issued in the form of Definitive Certificates, the Term Certificates initially shall be issued in the form of one or more global Certificates, representing the Book-Entry Certificates, to be delivered to the Depository. Except as provided in Section 5.13 of the Agreement or Section 2.4 of this Supplement, such Book-Entry Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (i) registration of such Book-Entry Certificates may not be transferred by the Trustee except to a successor to the Depository; (ii) ownership and transfers of registration of such Book-Entry Certificates on the books of the Depository shall be governed by applicable rules established by the Depository and by Section 2.4; (iii) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (iv) the Trustee shall deal with the Depository, Depository Participants and indirect participating firms as representatives of such Certificate Book-Entry Holders of such Book-Entry Certificates for purposes of exercising the rights of such Certificate Book-Entry Holders under the Agreement and this Supplement, and requests and directions for and votes of such representatives shall not be deemed to be inconsistent if they are made with respect to different Certificate Book-Entry Holders; and (v) the Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and Persons shown on the books of such indirect participating firms as direct or indirect Certificate Book-Entry Holders. All transfers by Certificate Book-Entry Holders of interest in Term Certificates shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing such Book-Entry Certificate Holders and, notwithstanding any other provision herein to the contrary, the Trustee shall have no responsibility with respect to any such transfers (except as set forth in subsection 2.4(d) below). Each Depository Participant shall only transfer Term Certificates of Certificate Book-Entry Holders it represents or of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures and in accordance with applicable law. SECTION II.4. RESTRICTIONS ON TRANSFER. (a) On the Issuance Date, the Company shall sell the Term Certificates to the Initial Purchaser pursuant to the Purchase Agreement and deliver the Term Certificates in the form specified therein. The Term Certificates may not, after the Issuance Date or Subsequent Issuance Date, as the case may be, be transferred except in accordance with any applicable state securities laws, in amounts of at least U.S. $1,000,000 each and otherwise as follows: (i) with respect to Term Certificates evidenced by Book-Entry Certificates, to Qualified Institutional Buyers in reliance on the exemption from the registration 18 requirements of the Securities Act provided by Rule 144A promulgated thereunder ("Rule 144A"); and (ii) with respect to Term Certificates evidenced by Definitive Certificates, (A) to Qualified Institutional Buyers in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A thereunder, (B) to other Institutional Accredited Investors who deliver a Purchaser Letter to the Trustee or (C) to a person who is taking delivery of such Certificate in definitive form pursuant to a transaction that is otherwise exempt from the registration requirements of the Securities Act, as confirmed in an Opinion of Counsel addressed to the Trustee and the Company, which counsel and opinion are satisfactory to the Trustee and the Company. The Trustee shall have no obligations or duties with respect to determining whether any transfers of the Certificates are made in accordance with the Securities Act or any other Requirements of Law; PROVIDED that with respect to Definitive Certificates, the Trustee shall enforce such transfer restrictions in accordance with the terms set forth on the related Certificate and the provisions of the Agreement and this Supplement. (b) Each purchaser (other than the Initial Purchaser) of the Term Certificates (including, without limitation, any purchaser of an interest in the Book-Entry Certificates) will be deemed to have represented and agreed as follows: (i) It is (A) a Qualified Institutional Buyer as defined in Rule 144A(a) and is acquiring the Term Certificates for its own institutional account or for the account or accounts of a Qualified Institutional Buyer or (B) purchasing Term Certificates being delivered in the form of Definitive Certificates in a transaction exempt from registration under the Securities Act and in compliance with the provisions of the Agreement and in compliance with the legend set forth in clause (v) below; (ii) It is purchasing one or more Term Certificates in an amount of at least U.S. $1,000,000 and it understands that such Term Certificates may be resold, pledged or otherwise transferred only in an amount of at least U.S. $1,000,000; (iii) It is not an ERISA Entity and it is not acquiring or holding any Term Certificate, directly or indirectly, for or on behalf of an ERISA Entity; (iv) It understands that the Term Certificates are being transferred to it in a transaction not involving any public offering within the meaning of the Securities Act, and that, if in the future it decides to resell, pledge or otherwise transfer any Term Certificates, such Term Certificates may be resold, pledged or transferred only (A) in a transaction meeting the requirements of Rule 144A to a person who the seller reasonably believes is a Qualified Institutional Buyer that purchases for its own account or for the account or accounts of a Qualified Institutional Buyer to whom 19 notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (B) to purchasers of Term Certificates being delivered in the form of Definitive Certificates, pursuant to a transaction otherwise exempt from registration under the Securities Act and in compliance with the provisions of the Agreement and in compliance with the legend set forth in clause (v) below; (v) It understands that each Term Certificate will bear a legend substantially to the following effect: [FOR BOOK-ENTRY CERTIFICATES ONLY: "UNLESS THIS TERM CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("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 IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. INTERESTS IN THIS TERM CERTIFICATE MAY ONLY BE HELD BY QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED).] THIS TERM CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS TERM CERTIFICATE, AGREES THAT SUCH TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, IN AN AMOUNT OF AT LEAST U.S. $1,000,000 AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE ACT ("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (INCLUDING FOREIGN QUALIFIED INSTITUTIONAL BUYER) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER (INCLUDING FOREIGN QUALIFIED INSTITUTIONAL BUYER) TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (2) TO A PERSON (A) WHO IS AN INSTITUTIONAL "ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(a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f)(2) (ANY OF THE FOREGOING, AN "ERISA ENTITY"). THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON. In addition, any Class B Certificate will contain the following additional legend: THE CLASS B CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AS PROVIDED IN THE POOLING AGREEMENT AND THE SERIES 1998-1 SUPPLEMENT. (c) The Transfer Agent and Registrar shall not permit the transfer of any Term Certificates unless such transfer complies with the terms of the foregoing legend and, in the case of a transfer (i) to an Institutional Accredited Investor (other than a Qualified Institutional Buyer), the transferee delivers a completed Purchaser Letter or (ii) to a Person other than a Qualified Institutional Buyer or an Institutional Accredited Investor, upon delivery of an opinion of counsel, satisfactory to the Trustee and the Company, to the effect that the transferee is taking delivery of the Term Certificates in a transaction that is otherwise exempt from the registration requirements of the Securities Act. (d) If a Certificate Book-Entry Holder of Term Certificates wishes at any time to transfer its interest therein to one or more Institutional Accredited Investors or persons described in subsection 2.4(a)(ii)(C) above, such interest may be so transferred only if, in 21 addition to satisfaction of any other applicable requirements pursuant hereto and to the Agreement, the transferor has delivered to the Trustee and the Transfer Agent and Registrar a Definitive Certificate Conversion Letter. Upon (i) receipt by the Trustee and the Transfer Agent and Registrar of (x) such Definitive Certificate Conversion Letter and (y) instructions given in accordance with the Depository's procedures therefor and (ii) satisfaction of any other applicable requirements pursuant hereto and to the Agreement, the Transfer Agent and Registrar shall reflect on the Certificate Register the date and a decrease in the principal amount of the applicable Book-Entry Certificate in an amount equal to the principal amount of the beneficial interest in such Book-Entry Certificate to be transferred, and the Company shall sign, on behalf of the Trust, and shall direct the Trustee in writing to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate and deliver one or more Definitive Certificates of like tenor and amount to the transferee or transferees indicated in the related Definitive Certificate Conversion Letter. SECTION II.5. APPLICATION OF PROCEEDS. On the Issuance Date, the Trustee shall remit to the Company any cash proceeds received by it upon the issuance of the Term Certificates. SECTION II.6. PROCEDURE FOR DECREASING THE SERIES 1998-1 INVESTED AMOUNT; OPTIONAL TERMINATION. (a) If as of the last day of any period of three consecutive Settlement Periods the daily average excess during such period of the Series 1998-1 Invested Amount over the Series 1998-1 Adjusted Invested Amount equals or exceeds the Reduction Threshold, as of the last day of any Settlement Period, the Company shall reduce the Class A Invested Amount and the Class B Invested Amount (a "REDUCTION"), by causing the Trustee to distribute to the Term Certificateholders in accordance with this subsection 2.6(a) an amount (the "REDUCTION AMOUNT") at least equal to such Reduction Threshold, PROVIDED that in no event shall a Reduction be made if it would cause the Series 1998-1 Invested Amount to be reduced below $25,000,000. The Company shall direct the Trustee in writing to make such distribution and shall specify the amount of the Reduction to be distributed as specified below. The distribution of the Reduction Amount shall be made to the Term Certificateholders PRO RATA based on the Initial Invested Amount of each Class, from the funds on deposit in the Series 1998-1 Principal Collection Sub-subaccount on the immediately succeeding Distribution Date (a "SPECIAL DISTRIBUTION DATE"); PROVIDED that no Early Amortization Event or Potential Early Amortization Event has occurred and is continuing and the Servicer on behalf of the Company shall have given the Trustee written notice of such Reduction and the related Reduction Amount (which amount shall not exceed the available funds on deposit in the Series 1998-1 Principal Collection Sub-subaccount as of the date of such notice) at least five Business Days prior to the related Special Distribution Date setting forth the amount of such Reduction and, in the case of such notice to the Trustee, instructions not to distribute to the Company any amounts pursuant to subsection 3A.3(b)(i) until the condition set forth in the second proviso in such subsection is satisfied. The Trustee shall send written notice of any proposed Reduction to the Term Certificateholders and each Rating Agency as promptly as reasonably practicable. 22 (b)(i) On any Business Day, the Company shall have the right to deliver an irrevocable written notice (an "OPTIONAL TERMINATION NOTICE") to the Trustee and the Servicer in which the Company declares that the Series 1998-1 Revolving Period shall terminate on the date (the "OPTIONAL TERMINATION DATE") set forth in such notice (which date, in any event, shall not be less than 10 days from the date on which such notice is delivered); PROVIDED that if the Optional Termination Date occurs prior to the second anniversary of the Issuance Date, the Company shall pay to the Term Certificateholders, in addition to the Invested Amount (and interest accrued thereon) to which such holders are entitled, an amount calculated by the Company equal to the present value of a series of payments equal to the product of (i) the Class A Invested Amount or the Class B Invested Amount, as the case may be, and (ii) the spread over One-Month LIBOR applicable to the Class A Certificates and the Class B Certificates, as the case may be, which would be payable monthly on each Distribution Date in arrears from the Optional Termination Date through the second anniversary of the Issuance Date and discounted at a rate equal to One-Month LIBOR being used to calculate the applicable Certificate Rates on the Optional Termination Date (the "PREPAYMENT PREMIUM"); PROVIDED FURTHER that the Prepayment Premium shall be paid in accordance with the following sentence. On the Distribution Date on which the Series 1998-1 Invested Amount has been repaid in full, the Company shall pay, FIRST, to the Class A Certificateholders, and SECOND, to the Class B Certificateholders, solely from funds available to the Company which are not otherwise needed to be applied to the payment of any amounts by the Company pursuant to any Pooling and Servicing Agreement, the applicable Prepayment Premium. (ii) From and after the Optional Termination Date, the Series 1998-1 Amortization Period shall commence for all purposes under this Agreement and the other Transaction Documents. The Trustee shall give prompt written notice of its receipt of an Optional Termination Notice to the Term Certificateholders and each Rating Agency. SECTION II.7. SALE OF ADDITIONAL TERM CERTIFICATES. (a) The Company may, upon written notice to the Trustee, the Servicer and the Term Certificateholders and upon satisfaction of each of the conditions set forth in subsection (b) of this Section 2.7 and Section 5.10 of the Agreement, direct the Trustee in writing to issue on the following Distribution Date (each such date a "SUBSEQUENT ISSUANCE DATE") additional Class A Certificates and Class B Certificates, identical to the existing Class A Certificates and Class B Certificates (except that the Certificate Rate applicable to such additional Class A Certificates or Class B Certificates, as the case may be, may differ from the Certificate Rate applicable to such existing Class A Certificates or Class B Certificates, as the case may be) in an aggregate principal amount and in such names and denominations as specified by the Company in accordance with subsection 2.7(c) below; PROVIDED that the Series 1998-1 Target Receivables Amount shall not exceed the Series 1998-1 Allocated Receivables Amount after giving effect to any increase in the Invested Amount on such Subsequent Issuance Date; PROVIDED FURTHER that the principal amount of the Class A Certificates and the Class B Certificates issued in any such additional issuance shall be issued in such proportion that would cause, after giving effect to such issuance, the Class B Invested Amount to be no less than the same percentage of the Series 1998-1 Invested Amount as the Class B Initial Invested Amount was of the Series 1998-1 Initial Invested Amount. 23 The Company may arrange for the sale of such additional Class A Certificates and Class B Certificates pursuant to a private placement or any other sale arrangement. On each Subsequent Issuance Date, if any, the Series 1998-1 Invested Amount, the Class A Invested Amount and the Class B Invested Amount (and each other amount set forth herein, the calculation of which is based on such amount) shall be recalculated by the Servicer to include the additional Initial Invested Amounts with respect to the Class A Certificates and Class B Certificates issued on such date. (b) On any Subsequent Issuance Date, the Trustee shall only authenticate and deliver any additional Class A Certificates and Class B Certificates upon satisfaction of the following conditions on or prior to such Subsequent Issuance Date: (i) the Rating Agencies shall have been notified by the Company of the proposed issuance of additional Class A Certificates and Class B Certificates at least 10 days prior to the proposed Subsequent Issuance Date, each Rating Agency shall have issued a rating (as confirmed in a letter delivered to the Trustee) on the additional Class A Certificates and Class B Certificates that is equivalent to that rating issued by such Rating Agency on the Issuance Date and the Rating Agency Condition shall have been satisfied on or prior to such Subsequent Issuance Date with respect to such issuance; (ii) the Trustee shall have received from the Company an Officer's Certificate certifying that no Early Amortization Event or Potential Early Amortization Event has occurred and is continuing with respect to Series 1998-1 or would occur as a result of such issuance; (iii) a Tax Opinion addressed to the Trust and the Trustee shall have been delivered to the Trustee; (iv) an Opinion of Counsel addressed to the Trust and the Trustee shall have been delivered to the Trustee stating that all of the conditions to the issuance of such additional Class A Certificates and Class B Certificates shall have been satisfied (which opinion may, to the extent it concerns questions of fact, rely on an Officer's Certificate with respect to such questions of fact); and (v) a General Opinion addressed to the Trust and the Trustee. (c) On each Subsequent Issuance Date, the Company shall sign, on behalf of the Trust, and shall direct the Trustee in a written communication signed by a Responsible Officer to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate and deliver the related additional Term Certificates in such names and such denominations and deliver such additional Term Certificates in accordance with such written directions. 24 SECTION II.8. OPTIONAL REDEMPTION. (a) On any Distribution Date the Company may, at its option, redeem at any time all of the Term Certificates by delivering an irrevocable written notice (an "OPTIONAL REDEMPTION NOTICE") to the Trustee and the Servicer on such date (the "OPTIONAL NOTICE DATE"; which date shall not be less than 10 days prior to the date fixed for redemption) at a redemption price equal to: (i) for the Class A Certificateholders, the Class A Invested Amount PLUS all accrued, unpaid interest thereon (the "CLASS A REDEMPTION PRICE") to the date fixed for redemption; PROVIDED that if such Optional Redemption Notice is delivered prior to the second anniversary of the Issuance Date, the Company shall pay, in addition to the Redemption Price to which such holders are entitled, an amount calculated by the Company equal to the present value of a series of payments equal to the product of (i) the Class A Invested Amount and (ii) the spread over One-Month LIBOR applicable to the Class A Certificate Rate which would be payable monthly on each Distribution Date in arrears from the Optional Notice Date through the second anniversary of the Issuance Date, discounted at a rate equal to One-Month LIBOR being used to calculate the Class A Certificate Rate on the Optional Notice Date (the "CLASS A REDEMPTION PREMIUM"); and (ii) for the Class B Certificateholders, the Class B Invested Amount PLUS all accrued, unpaid interest thereon (the "CLASS B REDEMPTION PRICE") to the date fixed for redemption; PROVIDED that if such Optional Redemption Notice is delivered prior to the second anniversary of the Issuance Date, the Company shall pay, in addition to the Redemption Price to which such holders are entitled, an amount calculated by the Company equal to the present value of a series of payments equal to the product of (i) the Class B Invested Amount and (ii) the spread over One-Month LIBOR applicable to the Class B Certificate Rate which would be payable monthly on each Distribution Date in arrears from the Optional Notice Date through the second anniversary of the Issuance Date, discounted at a rate equal to One-Month LIBOR being used to calculate the Class B Certificate Rate on the Optional Notice Date (the "CLASS B REDEMPTION PREMIUM"). (b) Each Optional Redemption Notice shall specify the total principal amount to be redeemed, the date fixed for redemption and the Redemption Price at which the Class A Certificates and the Class B Certificates, as the case may be, are to be redeemed. On or prior to the Optional Notice Date, the Company shall deposit with the Trustee immediately available funds (or Eligible Investments which shall mature prior to the date fixed for redemption) sufficient to redeem on the date fixed for redemption all the Class A Certificates and the Class B Certificates, so called for redemption at the appropriate Redemption Price, together with the applicable Redemption Premium, if any. (c) If the giving of the Optional Redemption Notice shall have been completed as above provided, the Class A Certificates and/or the Class B Certificates, as the case may be, shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, together with the applicable Redemption Premium, if any, 25 and on and after such date fixed for redemption (unless the Company shall default in the payment of such Class A Certificates and/or the Class B Certificates, as the case may be, at the Redemption Price, together with the applicable Redemption Premium, if any) interest on the Class A Certificates and/or the Class B Certificates, as the case may be, so called for redemption shall cease to accrue. On presentation and surrender of such Class A Certificates and/or Class B Certificates, as the case may be, at said place of payment in said notice specified, on or after the date fixed for redemption the said Term Certificates shall be paid and redeemed by the Company at the applicable Redemption Price, together with the applicable Redemption Premium to the date fixed for redemption, if any. All Term Certificates surrendered to the Trustee, upon redemption pursuant to the provisions of this Article II, shall be forthwith cancelled by it. ARTICLE III ARTICLE III OF THE AGREEMENT Section 3.1 of the Agreement and each other section of Article III of the Agreement relating to another Series shall read in their entirety as provided in the Agreement. Article III of the Agreement (except for Section 3.1 thereof and any portion thereof relating to another Series) shall read in its entirety as follows and shall be exclusively applicable to the Term Certificates: SECTION 3A.2. ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Trustee shall cause to be established and maintained in the name of the Trustee, on behalf of the Trust, (i) for the benefit of the Class A Certificateholders, (ii) for the benefit, subject to the prior and senior interest of the Class A Certificateholders, of the Class B Certificateholders and (iii) in the case of clauses (A), (B) and (C) below, for the benefit, subject to the prior and senior interest of the Term Certificateholders, of the owner of the Series 1998-1 Subordinated Interest, (A) a subaccount of the Collection Account (the "SERIES 1998-1 COLLECTION SUBACCOUNT"), which subaccount is the Series Collection Subaccount with respect to Series 1998-1; (B) two subaccounts of the Series 1998-1 Collection Subaccount: (1) the Series 1998-1 Principal Collection Sub-subaccount and (2) the Series 1998-1 Non-Principal Collection Sub-subaccount (respectively, the "SERIES 1998-1 PRINCIPAL COLLECTION SUB-SUBACCOUNT" and the "SERIES 1998-1 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT"); and (C) a subaccount of the Series 1998-1 Non-Principal Collection Sub-subaccount (the "SERIES 1998-1 ACCRUED INTEREST SUB-SUBACCOUNT"; all accounts established pursuant to this subsection 3A.2(a) and listed on Schedule 1, collectively, the "TRUST ACCOUNTS"), each Trust Account to bear a designation indicating that the funds deposited therein are held for the benefit of the Persons (and, for each such Person, to the extent) set forth in clauses (i), (ii) and (iii) above. The Trustee, on behalf of the Holders, shall possess all right, title and interest in all funds from time to time on deposit in, and all Eligible Investments credited to, the Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under the sole dominion and control of the Trustee for the exclusive benefit of the Persons (and, for each such Person, to the extent) set forth in clauses (i), (ii) and (iii) above. 26 (b) All Eligible Investments in the Trust Accounts shall be held by the Trustee, on behalf of the Holders, for the exclusive benefit of the Persons (and, for each such Person, to the extent) set forth in clauses (A), (B) and (C) of subsection 3A.2(a) and, subject to the prior interest of such Persons, the owner of the Series 1998-1 Subordinated Interest; PROVIDED, HOWEVER, that funds on deposit in a Trust Account which is a Sub-subaccount of a Collection Account may, at the direction of the Company, be invested together with funds held in other Sub-subaccounts of the Collection Account. After giving effect to any distribution to the Company pursuant to subsection 3A.3(b), amounts on deposit and available for investment in the Series 1998-1 Principal Collection Sub-subaccount shall be invested by the Trustee at the written direction of the Company in Eligible Investments that mature, or that are payable or redeemable upon demand of the holder thereof, (i) in the case of any such investment made during the Series 1998-1 Revolving Period, on or prior to the next Business Day and (ii) in the case of any such investment made during the Series 1998-1 Amortization Period, on or prior to the Business Day immediately preceding the next Distribution Date. Amounts on deposit and available for investment in the Series 1998-1 Non-Principal Collection Sub-subaccount and the Series 1998-1 Accrued Interest Sub-subaccount shall be invested by the Trustee at the written direction of the Company in Eligible Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Distribution Date. As of the Business Day immediately preceding such next Distribution Date, (x) all interest and other investment earnings (net of losses and investment expenses) on funds deposited in the Series 1998-1 Accrued Interest Sub-subaccount shall be deposited in the Series 1998-1 Non-Principal Collection Sub-subaccount and (y) all interest and investment earnings (net of losses and investment expenses) on funds deposited in the Series 1998-1 Principal Collection Sub-subaccount shall be deposited in the Series 1998-1 Non-Principal Collection Sub-subaccount. SECTION 3A.3. DAILY ALLOCATIONS. In accordance with the written direction of the Servicer, upon which the Trustee may conclusively rely: (a) The portion of the Aggregate Daily Collections allocated to the Term Certificates pursuant to Article III of the Agreement shall be allocated and distributed on each Business Day as set forth in this Article III by the Trustee as follows: (i) an amount equal to the Accrued Expense Amount for such day (or, during the Series 1998-1 Revolving Period, such greater amount as the Company may request in writing) shall be transferred from the Series 1998-1 Collection Subaccount to the Series 1998-1 Non-Principal Collection Sub- subaccount; (ii) any remaining funds on deposit in the Series 1998-1 Collection Subaccount shall be transferred by the Trustee to the Series 1998-1 Principal Collection Sub-subaccount. (b)(i) On each Business Day during the Series 1998-1 Revolving Period (including Distribution Dates), after giving effect to all allocations of Aggregate Daily Collections on such Business Day, amounts on deposit in the Series 1998-1 Principal 27 Collection Sub-subaccount shall be distributed by the Trustee to the Company (but only to the extent that the Trustee has received a Daily Report which reflects the receipt of the Collections on deposit therein) not later than 2:00 p.m., New York City time, in accordance with directions contained in such Daily Report; PROVIDED that such distribution shall be made only if no Potential Early Amortization Event or Early Amortization Event, in each case pursuant to Section 7.1 of the Agreement or subsections (a), (d) (but only with respect to a Servicer Default set forth in subsection 6.1(e) of the Servicing Agreement), (g), (i) or (j) of Section 5.1 of this Supplement, has occurred and is continuing and only to the extent that, after giving effect to such distribution, the Series 1998-1 Target Receivables Amount would not exceed the Series 1998-1 Allocated Receivables Amount; PROVIDED FURTHER that if the Company or the Servicer, on behalf of the Company, shall have given a notice of a Reduction and the related Reduction Amount to the Trustee and the Servicer pursuant to subsection 2.6(a) (and the Trustee shall have received such notice), the Trustee shall retain, until the related Special Distribution Date, aggregate amounts on deposit in the Series 1998-1 Principal Collection Sub-subaccount equal to the sum of the Reduction Amount in respect thereof; PROVIDED STILL FURTHER that in the event that an amount less than the Accrued Expense Amount for such day was transferred from the Series 1998-1 Collection Subaccount to the Series 1998-1 Non-Principal Collection Sub-subaccount on such day pursuant to subsection 3A.3(a)(i), the amount on deposit in the Series 1998-1 Principal Collection Sub-subaccount, up to the amount of such deficiency, shall be transferred to the Series 1998-1 Non-Principal Collection Sub-subaccount. Amounts distributed to the Company hereunder shall be deemed to be paid first from Collections received directly by the Servicer and second from Collections received in the Lockboxes. (ii) On each Business Day during the Series 1998-1 Amortization Period (including Distribution Dates), funds deposited in the Series 1998-1 Principal Collection Sub-subaccount shall be invested in Eligible Investments that mature on or prior to the Business Day immediately preceding the next Distribution Date and shall be distributed on such Distribution Date in accordance with subsection 3A.6(c). No amounts on deposit in the Series 1998-1 Principal Collection Sub-subaccount shall be distributed by the Trustee to the Company or the owner of the Series 1998-1 Subordinated Interest during the Series 1998-1 Amortization Period. (c) On each Business Day, an amount equal to the Series 1998-1 Daily Interest Expense for such day shall be transferred by the Trustee from the Series 1998-1 Non-Principal Collection Sub-subaccount to the Series 1998-1 Accrued Interest Sub-subaccount. (d) The allocations to be made pursuant to this Section 3A.3 are subject to the provisions of Sections 2.5, 2.6, 7.2 and 9.1 of the Agreement. SECTION 3A.4. DETERMINATION OF INTEREST. (a) The amount of interest distributable with respect to the Term Certificates on each Distribution Date for the Accrual Period ending on such Distribution Date shall be determined as follows: 28 (i) for the Class A Certificates, an amount (the "CLASS A MONTHLY INTEREST") equal to the product of (A) the Class A Certificate Rate for such Accrual Period, (B) the Class A Invested Amount on the first day of such Accrual Period (after giving effect to any distributions of principal on such date) and (C) the actual number of days in such Accrual Period DIVIDED BY 360; PROVIDED that if any additional Class A Certificates have been issued on any Subsequent Issuance Date, the Class A Monthly Interest shall equal the sum of the monthly interest amount for each outstanding tranche of Class A Certificates (based on the outstanding Invested Amount and the applicable Class A Certificate Rate in respect of such tranche); (ii) for the Class B Certificates, an amount (the "CLASS B MONTHLY INTEREST") equal to the product of (A) the Class B Certificate Rate for such Accrual Period, (B) the Class B Invested Amount on the first day of such Accrual Period (after giving effect to any distributions of principal on such date) and (C) the actual number of days in such Accrual Period DIVIDED BY 360; PROVIDED that if any additional Class B Certificates have been issued on any Subsequent Issuance Date, the Class B Monthly Interest shall equal the sum of the monthly interest amount for each outstanding tranche of Class B Certificates (based on the outstanding Invested Amount and the applicable Class B Certificate Rate in respect of such tranche); and (iii) The Servicer shall notify the Trustee in writing (upon which the Trustee may conclusively rely) on each Settlement Report Date of the amount calculated pursuant to clauses (i) and (ii) above. (b)(i) On each Distribution Date, the Servicer shall determine the excess, if any (the "CLASS A INTEREST SHORTFALL"), of (A) the Class A Monthly Interest for the Accrual Period ending on such Distribution Date OVER (B) the amount which is available to be distributed to the Class A Certificateholders on such Distribution Date in respect thereof pursuant to this Supplement. If the Class A Interest Shortfall with respect to any Distribution Date is greater than zero, an additional amount ("CLASS A ADDITIONAL INTEREST") equal to the product, for the next Accrual Period (or portion thereof) until such Class A Interest Shortfall is repaid, of (A) a rate per annum equal to the sum of (x) the Class A Certificate Rate for the next Accrual Period and (y) 1%, (B) such Class A Interest Shortfall (or the portion thereof which has not been paid to the Class A Certificateholders) and (C) the actual number of days in such Accrual Period (or portion thereof) DIVIDED BY 360, shall be payable as provided herein with respect to the Class A Certificates on each Distribution Date following such Distribution Date, to but excluding the Distribution Date on which such Class A Interest Shortfall is paid in full to the Class A Certificateholders. (ii) On each Distribution Date, the Servicer shall determine the excess, if any (the "CLASS B INTEREST SHORTFALL"), of (A) the Class B Monthly Interest for the Accrual Period ending on such Distribution Date OVER (B) the amount which will be available to be distributed to the Class B Certificateholders on such Distribution Date in respect thereof pursuant to this Supplement. If the Class B Interest Shortfall with respect to any Distribution Date is greater than zero, an additional amount ("CLASS B ADDITIONAL INTEREST") equal to the 29 product, for the next Accrual Period (or portion thereof) until such Class B Interest Shortfall is repaid, of (A) a rate per annum equal to the sum of (x) the Class B Certificate Rate for the next Accrual Period and (y) 1%, (B) such Class B Interest Shortfall (or the portion thereof which has not been paid to the Class B Certificateholders) and (C) the actual number of days in the next Accrual Period (or portion thereof) DIVIDED BY 360, shall be payable as provided herein with respect to the Class B Certificates on each Distribution Date following such Distribution Date, to but excluding the Distribution Date on which such Class B Interest Shortfall is paid in full to the Class B Certificateholders. SECTION 3A.5. DETERMINATION OF SERIES 1998-1 MONTHLY PRINCIPAL. (a) PAYMENTS OF SERIES 1998-1 PRINCIPAL. The amount (the "SERIES 1998-1 MONTHLY PRINCIPAL PAYMENT") distributable from the Series 1998-1 Principal Collection Sub-subaccount on each Distribution Date during the Series 1998-1 Amortization Period shall be equal to the amount on deposit in such account on the immediately preceding Settlement Report Date; PROVIDED, HOWEVER, that the Series 1998-1 Monthly Principal Payment on any Distribution Date shall not exceed the Series 1998-1 Invested Amount on such Distribution Date after giving effect to the reductions and increases pursuant to paragraphs (b) and (c) below. (b) REDUCTIONS TO SERIES 1998-1 PRINCIPAL. If, on any Special Allocation Settlement Report Date, the Series 1998-1 Allocable Charged-Off Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions from the Servicer, upon which the Trustee may conclusively rely) make the following applications of such amounts in the following order of priority: (i) the Series 1998-1 Required Reserves shall be reduced (but not below zero) by an amount equal to the Series 1998-1 Allocable Charged- Off Amount (which shall also be reduced by the amount so applied); (ii) then, to the extent that the Series 1998-1 Allocable Charged-Off Amount is greater than zero following the application in clause (i) above, the Class B Invested Amount shall be reduced (but not below zero) by an amount equal to such remaining Series 1998-1 Allocable Charged-Off Amount (which shall also be reduced by the amount so applied); and (iii) then, to the extent that the Series 1998-1 Allocable Charged-Off Amount is greater than zero following the applications in clauses (i) and (ii) above, the Class A Invested Amount shall be reduced (but not below zero) by an amount equal to such remaining Series 1998-1 Allocable Charged-Off Amount (which shall also be reduced by the amount so applied). (c) INCREASES TO SERIES 1998-1 PRINCIPAL. If, on any Special Allocation Settlement Report Date, the Series 1998-1 Allocable Recoveries Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions from the Servicer upon which the Trustee may conclusively rely) make the following applications 30 (after giving effect to the applications in paragraph (b) of such amount in the following order of priority): (i) the Class A Invested Amount shall be increased (but only to the extent of any previous reductions of the Class A Invested Amount pursuant to subsection 3A.5(b)(iii)) by the amount of the Series 1998-1 Allocable Recoveries Amount (which shall also be reduced by the amount so applied); and (ii) then, to the extent that the Series 1998-1 Allocable Recoveries Amount is greater than zero following the application in clause (i) above, the Class B Invested Amount shall be increased (but only to the extent of any previous reductions of the Class B Invested Amount pursuant to subsection 3A.5(b)(ii)) by such remaining Series 1998-1 Allocable Recoveries Amount (which shall also be reduced by the amount so applied); and (iii) then, to the extent that the Series 1998-1 Allocable Recoveries Amount is greater than zero following the applications in clauses (i) and (ii) above, the Series 1998-1 Required Reserves shall be increased (but only to the extent of any previous reductions of the Series 1998-1 Required Reserves pursuant to subsection 3A.5(b)(i)) by such remaining Series 1998-1 Allocable Recoveries Amount (which shall also be reduced by the amount so applied). SECTION 3A.6. APPLICATIONS. (a) On each Distribution Date, the Trustee shall distribute from amounts on deposit in the Series 1998-1 Accrued Interest Sub-subaccount in the following order of priority to the extent funds are available: (i) to the Class A Certificateholders, an amount equal to the Class A Monthly Interest payable on such Distribution Date, PLUS the amount of any Class A Monthly Interest previously due but not distributed to the Class A Certificateholders on a prior Distribution Date, PLUS the amount of any Class A Additional Interest for such Distribution Date and any Class A Additional Interest previously due but not distributed to the Class A Certificateholders on a prior Distribution Date; PROVIDED, HOWEVER, that during the Series 1998-1 Amortization Period, no Class A Additional Interest will be paid until repayment in full of the Series 1998-1 Invested Amount and payment in full of all Class A Monthly Interest and Class B Monthly Interest. (ii) to the Class B Certificateholders, an amount equal to the Class B Monthly Interest payable on such Distribution Date, PLUS the amount of any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders on a prior Distribution Date, PLUS the amount of any Class B Additional Interest for such Distribution Date and any Class B Additional Interest previously due but not distributed to the Class B Certificateholders on a prior Distribution Date; PROVIDED, HOWEVER, that during the Series 1998-1 Amortization Period, no Class B Additional Interest will be paid until repayment in full of the Series 1998-1 Invested Amount and payment in full of all Class A Monthly Interest and Class B Monthly Interest. 31 (b) On each Distribution Date, the Trustee shall apply funds on deposit in the Series 1998-1 Non-Principal Collection Sub-subaccount in the following order of priority to the extent funds are available: (i) an amount equal to the Series 1998-1 Monthly Servicing Fee for the Accrual Period ending on such Distribution Date shall be withdrawn from the Series 1998-1 Non-Principal Collection Sub-subaccount by the Trustee and paid to the Servicer or the Successor Servicer, as the case may be (less any amounts payable to the Trustee pursuant to Section 8.5 of the Agreement, which shall be paid to the Trustee); and (ii) an amount equal to any unpaid Program Costs due and payable shall be withdrawn from the Series 1998-1 Non-Principal Collection Sub- subaccount by the Trustee and paid to the Persons owed such amounts. Any remaining amounts on deposit in the Series 1998-1 Non-Principal Collection Sub-subaccount on any Distribution Date (in excess of the Accrued Expense Amount as of such day) not allocated pursuant to clauses (i) and (ii) above shall be paid to the owner of the Series 1998-1 Subordinated Interest; PROVIDED, HOWEVER, that during the Series 1998-1 Amortization Period, such remaining amounts shall be deposited in the Series 1998-1 Principal Collection Sub-subaccount for distribution in accordance with subsection 3A.6(c). (c) During the Series 1998-1 Amortization Period, the Trustee shall apply, on each Distribution Date, amounts on deposit in the Series 1998-1 Principal Collection Sub-subaccount in the following order of priority: (i) an amount equal to the Series 1998-1 Monthly Principal Payment for such Distribution Date shall be distributed from the Series 1998-1 Principal Collection Sub-subaccount: (A) first, pro rata, to the Class A Certificateholders until the repayment in full of the Class A Invested Amount; and (B) second, pro rata, to the Class B Certificateholders until the repayment in full of the Class B Invested Amount; and (ii) following the repayment in full of the Series 1998-1 Invested Amount, (x) if any amounts are owed to the Trustee or any other Person, on account of its expenses, advances and disbursements incurred in respect of the performance of its responsibilities hereunder or as Successor Servicer, such amounts shall be transferred from the Series 1998-1 Principal Collection Sub-subaccount and paid to the Trustee or such other Person and (y) if the Optional Termination Date has occurred and any portion of the Prepayment Premium payable to the Term Certificateholders pursuant to subsection 2.6(b) has not been paid, then funds in an amount equal to the unpaid portion of such Prepayment Premium shall be transferred from the Series 1998-1 32 Principal Collection Sub-subaccount and paid, FIRST, to the Class A Certificateholders and, SECOND, to the Class B Certificateholders; and (iii) following the repayment in full of the Series 1998-1 Invested Amount and of all of the amounts set forth in clause (ii), the remaining amount on deposit in the Series 1998-1 Principal Collection Sub-subaccount on such Distribution Date, if any, shall be distributed to the owner of the Series 1998-1 Subordinated Interest. (d) On each Special Distribution Date occurring in respect of a Reduction hereunder, the Trustee shall distribute to the Term Certificateholders on such Special Distribution Date (PRO RATA based on the then outstanding Invested Amount of each Class and PRO RATA within each Class), from amounts on deposit in the Series 1998-1 Principal Collection Sub-subaccount an amount equal to the Reduction Amount to be made on such Special Distribution Date. ARTICLE IV DISTRIBUTIONS AND REPORTS Article IV of the Agreement (except for any portion thereof relating to another Series) shall read in its entirety as follows and the following shall be exclusively applicable to the Term Certificates: SECTION 4A.1. DISTRIBUTIONS. (a) The final distribution of principal in respect of the Term Certificates will be made after due notice by the Trustee of the pendency of such distribution (subject to at least five Business Days' prior written notice from the Servicer to the Trustee containing all information required for the Trustee's notice, upon which the Trustee may conclusively rely) and only upon presentation and surrender of such Term Certificates at the office of the Paying Agent or at the Corporate Trust Office of the Trustee, by check drawn on, or by transfer to an account maintained by the holder with, a bank in New York City. Any other distribution of principal in respect of the Term Certificates or on account of interest or fees on the Term Certificates on each Distribution Date will be made or caused to be made by the Paying Agent or the Trustee to the persons in whose name the Term Certificates are registered at the close of business on the related Record Date. Such payment will be made by a check mailed to the Term Certificateholders at such Term Certificateholders' registered addresses or, upon application by any Term Certificateholder of at least $5,000,000 in original principal amount thereof to the Trustee not later than five Business Days prior to the related Distribution Date, by transfer to an account maintained by the Term Certificateholder with a bank in New York City. (b) All allocations and distributions hereunder shall be in accordance with the Daily Report and the Monthly Settlement Statement and subject to subsection 3.1(h) of the Agreement. 33 SECTION 4A.2. STATEMENTS AND NOTICES. (a) MONTHLY SETTLEMENT STATEMENTS. On each Settlement Report Date, the Servicer shall deliver to the Trustee and each Rating Agency (commencing with the Settlement Report Date occurring on May 15, 1998) a Monthly Settlement Statement in the Form of Exhibit D setting forth, among other things, the Loss Reserve Ratio I, the Loss Reserve Ratio II, the Dilution Reserve Ratio I, the Dilution Reserve Ratio II, the Minimum Ratio, in each case, where applicable, with respect to the Class A Certificates and the Class B Certificates, the Carrying Cost Reserve Ratio and the Servicing Reserve Ratio and the components of the calculation thereof, each as recalculated for the period until the next succeeding Settlement Report Date. The Trustee shall forward a copy of each Monthly Settlement Statement to any Term Certificateholder upon request by such Term Certificateholder. The Company and the Servicer will deliver copies of all notices, reports, statements and other documents delivered by it pursuant to the Pooling and Servicing Agreements to each Rating Agency. A copy of any such items may be obtained by any Certificateholder upon a written request delivered to the Trustee at the Corporate Trust Office. (b) ANNUAL HOLDERS' TAX STATEMENT. On or before January 31 of each calendar year (or such earlier date as required by applicable law), beginning with calendar year 1999, the Trustee shall furnish, or cause to be furnished, to each Person who at any time during the preceding calendar year was a Term Certificateholder, a statement prepared by the Company containing the aggregate amount distributed to such Person for such calendar year or the applicable portion thereof during which such Person was a Term Certificateholder, together with such other information as is required to be provided by an issuer of indebtedness under the Internal Revenue Code and such other customary information as the Company deems necessary or desirable to enable the Term Certificateholders to prepare their tax returns; PROVIDED, that such statement or such other information is delivered to the Trustee by the Company in a reasonably timely fashion to allow the Trustee to fulfill its obligation hereunder. Such obligation of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall have been prepared by the Servicer and provided to the Trustee and to the Term Certificateholders, in each case pursuant to any requirements of the Internal Revenue Code as from time to time in effect. (c) EARLY AMORTIZATION EVENT/DISTRIBUTION OF PRINCIPAL NOTICES. Upon the occurrence of an Early Amortization Event or Potential Early Amortization Event with respect to Series 1998-1, the Company or the Servicer, as the case may be, shall give prompt written notice thereof to the Trustee. As promptly as reasonably practicable after its receipt of notice of the occurrence of an Early Amortization Event with respect to Series 1998-1, the Trustee shall give notice thereof (i) to each Rating Agency (which notice shall be given in writing not later than the second Business Day after such receipt) and (ii) each Term Certificateholder. SECTION 4A.3. NOTICE PROCEDURES. Notices required to be given to the Term Certificateholders hereunder will be delivered by first class mail to the addresses of such holders as they appear in the Certificate Register. Each of the Company and the Servicer will deliver copies of all notices, reports, statements and other documents delivered by it pursuant to the Pooling and Servicing Agreements to each Rating Agency. 34 ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS SECTION V.1. ADDITIONAL EARLY AMORTIZATION EVENTS. If any one of the events specified in Section 7.1 of the Agreement (after any grace periods or consents applicable thereto) or any one of the following events (each, an "EARLY AMORTIZATION EVENT") shall occur during the Series 1998-1 Revolving Period with respect to the Term Certificates: (a) (i) failure on the part of the Servicer to direct any payment or deposit to be made or failure of any payment or deposit to be made in respect of interest owing on any Term Certificates within two Business Days of the date such interest is due, (ii) failure on the part of the Servicer to direct any payment or deposit to be made or failure of any payment or deposit to be made in respect of principal owing on any Term Certificates on the date such principal is due or (iii) failure on the part of the Servicer to direct any payment or deposit to be made, or of the Company to make any payment or deposit in respect of any other amounts owing by the Company, under any Pooling and Servicing Agreement within five Business Days of the date such other amount is due or such deposit is required to be made; (b) (i) failure on the part of the Company duly to observe or perform in any material respect any of the covenants or agreements of the Company set forth in Section 2.7(b) or (l) or 2.8 of the Agreement or (ii) failure on the part of the Company duly to observe or perform in any material respect any other covenants or agreements of the Company set forth in any Pooling and Servicing Agreement, which failure continues unremedied 30 days after the earlier of the date on which a Responsible Officer of the Company or the Servicer has knowledge thereof and the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Company by the Trustee, or to the Company and the Trustee by Term Certificateholders representing 25% or more of the Series 1998-1 Invested Amount; (c) any representation or warranty made or deemed made by the Company in any Pooling and Servicing Agreement to or for the benefit of the Term Certificateholders (i) proves to have been incorrect in any material respect when made or when deemed made and (ii) continues to be incorrect 30 days after the earlier of the date on which a Responsible Officer of the Company or the Servicer has knowledge thereof and the date on which notice of such failure, requiring the same to be remedied, has been given by the Trustee to the Company or by Term Certificateholders representing 25% or more of the Series 1998-1 Invested Amount to the Company and the Trustee; PROVIDED, HOWEVER, that an Early Amortization Event with respect to the Term Certificates shall not be deemed to have occurred under this paragraph if the incorrectness of such representation or warranty gives rise to an obligation to repurchase the related Receivables and the Company has repurchased the related Receivable or all such Receivables, if applicable, in accordance with the 35 provisions of any Pooling and Servicing Agreement within ten Business Days of the day on which the Company was obligated to do so; (d) a Servicer Default with respect to the Servicer shall have occurred and be continuing; (e) a Purchase Termination Event (as defined in the Receivables Sale Agreement) with respect to Core-Mark shall have occurred and be continuing under the Receivables Sale Agreement; (f) a Change in Control shall have occurred; (g) the Series 1998-1 Allocated Receivables Amount shall be less than the Series 1998-1 Target Receivables Amount for a period of five consecutive Business Days; (h) any of the Agreement, the Servicing Agreement, this Supplement or the Receivables Sale Agreement shall cease, for any reason, to be in full force and effect in any material respect, or the Company, any Seller, the Servicer, any Sub-Servicer or any Affiliate of any thereof shall so assert in writing; (i) the Trust shall for any reason cease to have a valid and perfected first priority undivided ownership or security interest in substantially all of the Trust Assets (subject to no other Liens other than Permitted Liens described in clauses (i) and (iv) of the definition thereof), or any of Core-Mark, the Company or any Affiliate of any thereof shall so assert; (j) 15 days shall have elapsed after there shall have been filed against Core-Mark, the Company or the Trust (i) a notice of federal tax Lien with respect to taxes exceeding $100,000 in the aggregate from the Internal Revenue Service, (ii) a notice of Lien with respect to amounts exceeding $100,000 in the aggregate from the PBGC under Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which either of such sections applies, (iii) a notice of state tobacco excise tax Lien with respect to taxes exceeding $100,000 in the aggregate from any state Governmental Authority or (iv) a notice of any other Lien the existence of which could reasonably be expected to have a material adverse effect on the business, operations or financial condition of such Person, unless in each case there shall have been delivered to the Trustee and each Rating Agency proof of the release of, or payment of amounts secured by, such Lien; (k) a Reduction shall have occurred and, as a result thereof, the Series 1998-1 Invested Amount shall have been reduced to an amount below $25,000,000; or 36 (l) any action, suit, investigation or proceeding at law or in equity (including, without limitation, injunctions, writs or restraining orders) shall be brought or commenced or filed by or before any arbitrator, court or Governmental Authority against the Company or the Servicer or any properties, revenues or rights of either thereof which could reasonably be expected to have a Material Adverse Effect; then, in the case of (x) any event described in Section 7.1 of the Agreement, after the applicable grace period (if any) set forth in such Section, automatically without any notice or action on the part of the Trustee or the Term Certificateholders, an early amortization period shall immediately commence or (y) any other event described above, after the applicable grace period (if any) set forth in such subsections, the Trustee may, and at the written direction of the Majority Term Certificateholders voting as a single class shall, by written notice then given to the Company and the Servicer, declare that an early amortization period has commenced as of the date of such notice with respect to Series 1998-1 (any such period under clause (x) or (y) above, an "EARLY AMORTIZATION PERIOD"); PROVIDED, HOWEVER, that in the case of the event described in clause (g) above, if an Early Amortization Period has not been declared within ten Business Days after the occurrence of such event, then an Early Amortization Period shall occur automatically unless, (i) prior to the end of such ten Business Day period, the Series 1998-1 Allocated Receivables Amount shall no longer be less than the Series 1998-1 Target Receivables Amount and (ii) so long as the Series 1998-1 Allocated Receivables Amount continues to be equal to or greater than the Series 1998-1 Target Receivables Amount, Term Certificateholders representing 66-2/3% or more of the Series 1998-1 Invested Amount voting as a single class shall have waived the occurrence of such event. Notwithstanding the foregoing, a delay or failure in performance referred to in clause (a) or (b)(i) above for a period of up to five Business Days after the applicable grace period, or in clause (b)(ii) above for a period of up to 30 Business Days after the applicable grace period, will not constitute an Early Amortization Event if such delay or failure could not have been prevented by the exercise of reasonable diligence by the Company and such delay or failure was caused by a Force Majeure Delay. The Company nevertheless will be required to use its best efforts to perform its obligations in a timely manner in accordance with the terms of the Transaction Documents, and the Company shall promptly give the Trustee an Officer's Certificate notifying it of any such failure or delay by the Company. ARTICLE VI SERVICING FEE SECTION VI.1. SERVICING COMPENSATION. A monthly servicing fee (the "SERIES 1998-1 MONTHLY SERVICING FEE") shall be payable to the Servicer on each Distribution Date for the immediately preceding Settlement Period in an amount equal to the product of (a) the Servicing Fee and (b) a fraction the numerator of which is the Series 1998-1 Invested Amount as of the end of such Settlement Period and the denominator of which is the Aggregate Invested Amount as of the end of such Settlement Period. 37 ARTICLE VII REPRESENTATIONS AND WARRANTIES, COVENANTS SECTION VII.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SERVICER. The Company and the Servicer each hereby represents and warrants to the Trustee and each of the Term Certificateholders that each and every of their respective representations and warranties contained in the Agreement is true and correct in all material respects as of the Issuance Date and any Subsequent Issuance Date (except if made as of a specific date). SECTION VII.2. COVENANTS OF THE COMPANY AND THE SERVICER. The Company and the Servicer hereby agree, in addition to observing all their obligations under the Agreement and the Servicing Agreement, that: (a) they shall not terminate the Agreement unless in compliance with the terms of the Agreement and each Supplement relating to an Outstanding Series; (b) no later than 60 days after the date hereof, they will (i) deliver to the Trustee executed copies of software licenses or sublicenses, in a form reasonably acceptable to the Trustee, which grant to the Trustee the right to utilize any of the software owned or licensed by the Servicer that is necessary to perform the collection and administrative functions to be performed by the Trustee under the Transaction Documents, (ii) deliver to the Trustee executed copies of any landlord waivers, in a form reasonably acceptable to the Trustee, that may be necessary to grant to the Trustee access to the leased premises of the Servicer for which the Trustee may require access to perform the collection and administrative functions to be performed by the Trustee under the Transaction Documents, except to the extent the Company or the Servicer, as the case may be, owns such property and (iii) have taken all actions reasonably requested by the Trustee in connection with, and to ensure completion of, each of the Servicer Site Review and the Standby Liquidation System; (c) for so long as any Term Certificates are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will cause to be provided to any holder of Term Certificates or an interest therein and any prospective purchaser of Term Certificates or an interest therein (which prospective purchaser is designated by any holder of Term Certificates), upon the request of such holder or prospective purchaser, the information required to be provided to such holder or prospective purchaser by Rule 144A(d)(4) under the Securities Act; and (d) they shall cooperate in good faith to allow the Trustee to use the Servicer's available facilities and expertise upon the Servicer's termination or default. 38 ARTICLE VIII MISCELLANEOUS SECTION VIII.1. RATIFICATION OF AGREEMENT. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument. SECTION VIII.2. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION VIII.3. FURTHER ASSURANCES. Each of the Company, the Servicer and the Trustee agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments required or reasonably requested by the other more fully to effect the purposes of this Supplement and the sale of the Term Certificates hereunder, including, without limitation, in the case of the Company and the Servicer, the execution of any financing statements or similar documents or notices or continuation statements relating to the Receivables and the other Trust Assets for filing under the provisions of the UCC or similar legislation of any applicable jurisdiction. SECTION VIII.4. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee or any Term Certificateholder, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION VIII.5. AMENDMENTS. (a) This Supplement may be amended, supplemented or otherwise modified in writing from time to time only if such amendment, supplement or modification is effected in accordance with the provisions of Section 10.1 of the Agreement. SECTION VIII.6. SEVERABILITY. If any provision hereof is void or unenforceable in any jurisdiction, such voidness or unenforceability shall not affect the validity or enforceability of (i) such provision in any other jurisdiction or (ii) any other provision hereof in such or any other jurisdiction. SECTION VIII.7. NOTICES. All notices, requests and demands to or upon any party hereto to be effective shall be given (i) in the case of the Company, the Servicer and the Trustee, in the manner set forth in Section 10.5 of the Agreement and (ii) in the case of 39 any other party, in writing (including a confirmed transmission by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Rating Agencies or to such other address as may be hereafter notified by the respective parties hereto: DCR: Duff & Phelps Credit Rating Co. 55 East Monroe Street Chicago, Illinois 60603 Attention: Asset-Backed Research and Monitoring Group Telecopier: (312) 368-2069 S&P: Standard & Poor's Ratings Services 25 Broadway New York, New York 10004 Attention: Asset-Backed Surveillance Group Telecopier: (212) 412-0225 Any notice required or permitted to be mailed to a Term Certificateholder shall be given as provided in Section 4A.3. SECTION VIII.8. COUNTERPARTS. This Supplement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. SECTION VIII.9. LIMITATION ON ADDITION AND TERMINATION OF SELLERS. (a) Notwithstanding anything to the contrary contained in the Receivables Sale Agreement, no Seller or Seller Division shall be added thereunder unless (subject to the proviso contained in clause (iv) below) each of the following conditions shall have been satisfied: (i) (x) in the case of a proposed addition of a Seller, each of the conditions set forth in Section 3.02 of the Receivables Sale Agreement, and (y) in the case of a proposed addition of a Seller Division, the conditions set forth in subsections 3.02(a)(ii), (e), (f), (g), (h), (j) and (k) (in each case, applied to the applicable New Division as if it were a proposed additional Seller) of the Receivables Sale Agreement, shall have been satisfied. (ii) The Company shall have received copies of the Policies of such additional Seller (or such Seller Division, as the case may be, if different from the 40 Policies of the Seller of which it is a New Division), which Policies shall be in form and substance satisfactory to the Company. (iii) The Company shall have received confirmation (A) that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such additional Seller (or such Seller Division, as the case may be) before any Governmental Authority (I) that could reasonably be expected to have a Material Adverse Effect or (II) that purports to affect the legality, validity or enforceability of this Supplement, the Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby. (iv) The Company and the Trustee shall have received evidence that the Rating Agency Condition shall have been satisfied with respect to the addition of such Seller (or addition of such Seller Division, as the case may be); PROVIDED that such satisfaction of the Rating Agency Condition (and such receipt of evidence thereof) shall not be required with respect to the addition of up to two Subsidiaries of Core-Mark (and/or New Divisions) as Sellers (or Seller Divisions) during any calendar year, each of which Subsidiaries (or New Divisions) meets the following criteria: (x) such Subsidiary (or New Division) is in the same line of business as the existing Sellers as of the related Seller Addition Date (as defined in the Receivables Sale Agreement) and (y) as of such date, immediately prior to giving effect to such addition (the "MEASUREMENT DATE"), the ratio (expressed as a percentage) of (A) the aggregate Principal Amount of what would constitute all Eligible Receivables of such Subsidiary (or New Division) at the end of the Business Day immediately preceding the Measurement Date if it were a Seller (or Seller Division) MINUS the amount which would constitute the Overconcentration Amount applicable to such Receivables on the Measurement Date if such Subsidiary (or New Division) were a Seller (or Seller Division) to (B) the sum of the Aggregate Receivables Amount as of the end of such day plus the amount described pursuant to clause (A) is less than 10 percent, provided further, that if such ratio is greater than 5%, the Rating Agencies shall receive notification of such addition and delivery of a pro forma Monthly Settlement Statement. (v) The Trustee shall have received Opinions of Counsel of outside counsel addressed to the Trustee covering matters with respect to such Seller as were covered in the opinions delivered on the Issuance Date with respect to the original Sellers, including "true-sale" and non-substantive consolidation opinions. (vi) The Company and the Trustee shall have received a certificate prepared by a Responsible Officer of the Servicer certifying that after giving effect to the addition of such Seller (or such Seller Division, as the case may be), the Aggregate Target Receivables Amount shall equal the Aggregate Allocated Receivables Amount on the related Seller Addition Date. 41 (b) Notwithstanding anything to the contrary contained in the Receivables Sale Agreement, no Seller shall be terminated under Section 9.13 of the Receivables Sale Agreement, in each case unless (i) no Early Amortization Event, Potential Early Amortization Event or Potential Purchase Termination Event (as defined in the Receivables Sale Agreement) (other than with respect to the Seller to be so terminated) will have occurred and be continuing after giving effect to such termination and (ii) the Trustee shall have received prior notice of such termination (which notice shall be accompanied by a PRO FORMA Daily Report confirming that the Aggregate Target Receivables Amount equals the Aggregate Allocated Receivables Amount, each calculated after giving effect to such termination and excluding all Receivables originated by the Seller to be terminated); PROVIDED, that in no event shall Core-Mark be terminated as a Seller under Section 9.13 of the Receivables Sale Agreement. (c) Upon the termination of a Seller pursuant to Section 9.13 of the Receivables Sale Agreement and the foregoing paragraph (b), the calculation (including, without limitation, for purposes of the PRO FORMA calculations pursuant to paragraph (b) above) of the Aggregate Target Receivables Amount, the Aggregate Allocated Receivables Amount, the Series 1998-1 Required Reserves and all other amounts from which each such amount is directly or indirectly derived shall exclude in each case the Receivables originated by such terminated Seller. ARTICLE IX FINAL DISTRIBUTIONS SECTION IX.1. CERTAIN DISTRIBUTIONS. (a) Not later than 2:00 p.m., New York City time, on the Distribution Date following the date on which the proceeds from the disposition of the Receivables pursuant to subsection 7.2(b) of the Agreement are deposited into the Series 1998-1 Non-Principal Collection Sub-subaccount and the Series 1998-1 Principal Collection Sub-subaccount, the Trustee shall distribute such amounts pursuant to Article III of this Supplement. (b) Notwithstanding anything to the contrary in this Supplement or the Agreement, any distribution made pursuant to this Section 9.1 shall be deemed to be a final distribution pursuant to Section 9.3 of the Agreement with respect to the Term Certificates. 42 IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have caused this Series 1998-1 Supplement to be duly executed by their respective officers as of the day and year first above written. CM CAPITAL CORPORATION By: /s/ ROBERT A. ALLEN ------------------------------- Name: Robert A. Allen Title: President and CEO CORE-MARK INTERNATIONAL, INC., in its individual capacity and as Servicer By: /s/ LEO F. KORMAN ------------------------------- Name: Leo F. Korman Title: Senior Vice President & CFO THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Trustee By: /s/ KIMBERLY K. COSTA ------------------------------- Name: Kimberly K. Costa Title: Second Vice President EX-10.20 7 EXHIBIT 10.20 EXECUTION COPY Exhibit 10.20 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CM CAPITAL CORPORATION as Company, CORE-MARK INTERNATIONAL, INC. as Servicer, THE CHASE MANHATTAN BANK, as Funding Agent, PARK AVENUE RECEIVABLES CORPORATION, as Initial Purchaser THE CHASE MANHATTAN BANK, as an APA Bank and THE CHASE MANHATTAN BANK, as Trustee ------------------------ SERIES 1998-2 SUPPLEMENT Dated as of April 1, 1998 to POOLING AGREEMENT Dated as of April 1, 1998 ------------------------ CORE-MARK RECEIVABLES MASTER TRUST - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II DESIGNATION OF CERTIFICATES; PURCHASE AND SALE OF THE VFC CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.1. Designation . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.2. The Series 1998-2 Interests . . . . . . . . . . . . . . 23 SECTION 2.3. Purchases of Interests in the VFC Certificates. . . . . 24 SECTION 2.4. Delivery. . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.5. Procedure for Initial Issuance and for Increasing the Series 1998-2 Invested Amount . . . . . . . . . . . . 25 SECTION 2.6. Sale by the Initial Purchaser of its Series 1998-2 Purchaser Invested Amount to the APA Banks. . . . . . 27 SECTION 2.7. Procedure for Decreasing the Series 1998-2 Invested Amount; Optional Termination. . . . . . . . . . . . . 29 SECTION 2.8. Reductions of the Commitments . . . . . . . . . . . . . 31 SECTION 2.9. Interest; Fees. . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.10. Indemnification by the Company and the Servicer . . . . 32 ARTICLE III ARTICLE III OF THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3A.2. Establishment of Trust Accounts. . . . . . . . . . . . 33 SECTION 3A.3. Daily Allocations. . . . . . . . . . . . . . . . . . . 35 SECTION 3A.4. Determination of Interest. . . . . . . . . . . . . . . 36 SECTION 3A.5. Determination of Series 1998-2 Monthly Principal . . . 38 SECTION 3A.6. Applications . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE IV DISTRIBUTIONS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 4A.1. Distributions. . . . . . . . . . . . . . . . . . . . . 41 SECTION 4A.2. Daily Reports. . . . . . . . . . . . . . . . . . . . . 41 SECTION 4A.3. Statements and Notices . . . . . . . . . . . . . . . . 41
ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS . . . . . . . . . . . . . . . . . . . 42 SECTION 5.1. Additional Early Amortization Events. . . . . . . . . . 42 ARTICLE VI SERVICING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 6.1. Servicing Compensation. . . . . . . . . . . . . . . . . 45 ARTICLE VII CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 7.1. Illegality. . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 7.2. Increased Costs . . . . . . . . . . . . . . . . . . . . 46 SECTION 7.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 7.4. Break Funding Payments. . . . . . . . . . . . . . . . . 48 SECTION 7.5. Alternate Rate of Interest. . . . . . . . . . . . . . . 49 SECTION 7.6. Mitigation Obligations. . . . . . . . . . . . . . . . . 49 ARTICLE VIII REPRESENTATIONS AND WARRANTIES, COVENANTS. . . . . . . . . . . . . . . . . 50 SECTION 8.1. Representations and Warranties of the Company and the Servicer . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 8.2. Covenants of the Company and the Servicer . . . . . . . 51 SECTION 8.3. Covenants of the Servicer . . . . . . . . . . . . . . . 52 SECTION 8.4. Obligations Unaffected. . . . . . . . . . . . . . . . . 52 ARTICLE IX CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 9.1. Conditions Precedent to Effectiveness of Supplement . . 52 ARTICLE X THE FUNDING AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.2. Delegation of Duties . . . . . . . . . . . . . . . . . 56 SECTION 10.3. Exculpatory Provisions . . . . . . . . . . . . . . . . 56 SECTION 10.4. Reliance by Funding Agent. . . . . . . . . . . . . . . 57 SECTION 10.5. Notice of Servicer Default or Early Amortization Event or Potential Early Amortization Event. . . . . . . . 57 SECTION 10.6. Non-Reliance on the Funding Agent and Other Purchasers . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.7. Indemnification. . . . . . . . . . . . . . . . . . . . 58
SECTION 10.8. The Funding Agent in Its Individual Capacity . . . . . 59 SECTION 10.9. Successor Funding Agent. . . . . . . . . . . . . . . . 59 ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 11.1. Ratification of Agreement. . . . . . . . . . . . . . . 59 SECTION 11.2. Governing Law. . . . . . . . . . . . . . . . . . . . . 59 SECTION 11.3. Further Assurances . . . . . . . . . . . . . . . . . . 60 SECTION 11.4. Payments . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 11.5. Costs and Expenses . . . . . . . . . . . . . . . . . . 60 SECTION 11.6. No Waiver; Cumulative Remedies . . . . . . . . . . . . 60 SECTION 11.7. Amendments . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 11.8. Severability . . . . . . . . . . . . . . . . . . . . . 61 SECTION 11.9. Notices. . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 11.10. Successors and Assigns. . . . . . . . . . . . . . . . 62 SECTION 11.11. Participations; Assignments . . . . . . . . . . . . . 63 SECTION 11.12. Adjustments; Set-off. . . . . . . . . . . . . . . . . 65 SECTION 11.13. Counterparts. . . . . . . . . . . . . . . . . . . . . 65 SECTION 11.14. No Bankruptcy Petition. . . . . . . . . . . . . . . . 65 SECTION 11.15. Limitation on Addition and Termination of Sellers . . 67 ARTICLE XII FINAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 12.1. Certain Distributions. . . . . . . . . . . . . . . . . 68 EXHIBITS Exhibit A Form of VFC Certificate, Series 1998-2 Exhibit B [Reserved] Exhibit C Form of Commitment Transfer Supplement Exhibit D Form of Daily Report Exhibit E Form of Monthly Settlement Statement Exhibit F Form of Notice of Increase Exhibit G Form of Participation Certification Exhibit H Form of UCC Certificate SCHEDULES Schedule 1 Commitments Schedule 2 Trust Accounts
SERIES 1998-2 SUPPLEMENT, dated as of April 1, 1998 (as amended, supplemented or otherwise modified from time to time, this "SUPPLEMENT"), among CM Capital Corporation, a Delaware corporation (the "COMPANY"), Core-Mark International, Inc., a Delaware corporation ("CORE-MARK"), as servicer (except where otherwise noted) (in such capacity, the "SERVICER"), Park Avenue Receivables Corporation, a Delaware corporation (including its successors and assigns and excluding, however, the APA Banks as assignees pursuant to Section 2.6, the "INITIAL PURCHASERS"), the several banks or financial institutions parties to this Supplement as of the Issuance Date and the other banks or financial institutions from time to time parties hereto pursuant to Section 11.11(b) (collectively, the "APA BANKS"; each, individually, an "APA BANK"), The Chase Manhattan Bank, a New York banking corporation ("CHASE"), in its capacity as Funding Agent (the "FUNDING AGENT"), and The Chase Manhattan Bank, in its capacity as Trustee (the "TRUSTEE") under the Agreement (as defined below). W I T N E S S E T H : WHEREAS, the Company, the Servicer and the Trustee have entered into a Pooling Agreement, dated as of April 1, 1998 (as amended, supplemented or otherwise modified from time to time, the "AGREEMENT"); WHEREAS, the Agreement provides, among other things, that the Company, the Servicer and the Trustee may at any time and from time to time enter into supplements to the Agreement for the purpose of authorizing the issuance on behalf of the Trust by the Company for execution and redelivery to the Trustee for authentication of one or more Series of Investor Certificates; and WHEREAS, the Company, the Servicer, the Trustee, the Funding Agent, the Initial Purchaser and the APA Banks wish to supplement the Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION I.1. DEFINITIONS. (a) The following words and phrases shall have the following meanings with respect to Series 1998-2 and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: 2 "ABR": shall mean, 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 Reference 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: "REFERENCE RATE" shall mean the rate of interest per annum publicly announced (or, if not announced publicly, quoted internally) from time to time by the Funding Agent as its reference rate in effect at its principal office in New York, New York; "BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (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 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 Funding 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 Funding Agent from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Reference 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 the Reference Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ACCRUAL PERIOD" shall mean the period from and including a Distribution Date, or, in the case of the initial Accrual Period, the Issuance Date, to but excluding the succeeding Distribution Date. "ACCRUED EXPENSE AMOUNT" shall mean, for each Business Day during an Accrual Period, the sum of (i) the Daily Interest Deposit for such Business Day, (ii) the Daily Commitment Fee Deposit for such Business Day, (iii) the Daily Facility Fee Deposit for such Business Day, (iv) the Daily Servicing Fee Deposit for such Business Day and (v) all Program Costs which have accrued since the preceding Business Day. 3 "ACQUIRING APA BANK" shall have the meaning assigned in subsection 11.11(b). "ADDITIONAL INTEREST" shall have the meaning assigned in subsection 3A.4(b). "ADJUSTED LIQUIDITY PRICE" shall mean, in determining the Purchase Price of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount on the APA Bank Purchase Date, an amount equal to: PI [OC + (NDR/1.04)] where: PI = the Invested Percentage on the APA Bank Purchase Date; OC = the sum of (i) any and all amounts due and owing to the Company in respect of Seller Repurchase Payments and Seller Adjustment Payments pursuant to the Transaction Documents and (ii) (without duplication) any and all amounts due and owing to the Trust as Transfer Deposit Amounts pursuant to Section 2.5(b) of the Pooling Agreement on the APA Bank Purchase Date; and NDR = the aggregate outstanding Principal Amount of all Receivables that are not aged more than 91 days past due PLUS any Receivable which becomes a Charged-Off Receivable prior to 91 days past due as of the APA Bank Purchase Date PLUS the Aggregate Uncleared Funds Amount. Each of the foregoing shall be determined from the most recent Daily Report received from the Servicer. "AGED RECEIVABLES RATIO" shall mean, as of the last day of each Settlement Period, the percentage equivalent of a fraction, (i) the numerator of which shall be the sum of (A) the aggregate unpaid balance of Receivables that were 91-120 days past their respective original due dates as of such last day and (B) the aggregate amount of Receivables of the Sellers which were charged off as uncollectible prior to the day which is 91 days after their respective original due dates during such Settlement Period, and (ii) the denominator of which shall be the aggregate Principal Amount of Receivables originated by the Sellers during the third prior Settlement Period (excluding the Settlement Period ended on such day). 4 "AGGREGATE COMMITMENT AMOUNT" shall mean, with respect to any day, the aggregate amount of the Commitments of all APA Banks on such day, as reduced from time to time pursuant to Section 2.8. "APA BANKS" shall have the meaning specified in the recitals hereto. "APA BANK PURCHASE DATE" shall mean either the date of the Purchase or, if the APA Banks fund the Series 1998-2 Invested Amount on the Issuance Date pursuant to Section 2.3, the Issuance Date. "APPLICABLE MARGIN" shall mean on any date of determination (i) for each Eurodollar Tranche, 2.00% per annum and (ii) for each Floating Tranche, 1.00% per annum; PROVIDED, HOWEVER that, after the occurrence of a PARCO Wind-Down Event described in clause (i) of the definition thereof or an Early Amortization Event, the Applicable Margin shall mean on any date of determination for each Eurodollar Tranche or the Floating Tranche, the applicable rate per annum set forth below under the caption "Eurodollar Spread" or "Floating Rate Spread," as the case may be, based upon the "Leverage Ratio" (as determined in accordance with, the Credit Agreement, as in effect on the date hereof) as of the most recent determination date (it being understood and agreed for purposes of this proviso that until the delivery of the financial statements of Core-Mark pursuant to Section 6.1 of the Credit Agreement for the first full fiscal quarter commencing after March 31, 1998, the Applicable Margin shall be the applicable rate per annum set forth below in Category 1):
Leverage Eurodollar Floating Rate CATEGORY RATIO SPREAD SPREAD -------- -------- ---------- -------- Category 1 greater than 5.00 to 1.00 2.50% 1.50% Category 2 greater than 4.25 to 1.00 and less than or equal to 5.00 to 1.00 2.00% 1.00% Category 3 greater than 3.50 to 1.00 and less than or equal to 4.25 to 1.00 1.75% 0.75% Category 4 greater than 3.00 to 1.00 and less than or equal to 3.50 to 1.00 1.50% 0.50% Category 5 less than or equal to 3.00 to 1.00 1.25% 0.25%
"ARTICLE VII COSTS" shall mean any amounts due pursuant to Article VII. 5 "ASSIGNMENT/PARTICIPATION CERTIFICATION" shall mean an assignment or participation certification, as the case may be, in substantially the form of Exhibit G hereto. "AVAILABLE PRICING AMOUNT" shall mean, on any Business Day, the sum of (i) the Unallocated Balance PLUS (ii) the Increase, if any, on such date. "BASE DAILY INTEREST EXPENSE" shall mean (i) for any day prior to the APA Bank Purchase Date in any Accrual Period, the product of (A) the Series 1998-2 Invested Amount divided by 360 and (B) the CP Rate for such day and (ii) for the APA Bank Purchase Date and any day thereafter in any Accrual Period, the sum of (A) the product of (x) the sum of (a) the portion of the Series 1998-2 Invested Amount (calculated with respect to all APA Banks without regard to clauses (d) and (e) of the definition of Series 1998-2 Purchaser Invested Amount) allocable to the Floating Tranche on such day and (b) for any day during the period from and including the APA Bank Purchase Date to but excluding the Distribution Date immediately succeeding the APA Bank Purchase Date, divided by 365 (or 366, as the case may be) and (y) the ABR plus the Applicable Margin in effect on such day, (B) the product of (x) the portion of the Series 1998-2 Invested Amount (calculated with respect to all Purchasers without regard to clauses (d) and (e) of the definition of Series 1998-2 Purchaser Invested Amount) allocable to Eurodollar Tranches on such day divided by 360 and (y) the weighted average Eurodollar Rate plus the Applicable Margin on such day in effect with respect thereto and (C) on the APA Bank Purchase Date, the Unaccrued Discount Payment Amount; PROVIDED, HOWEVER, that for any such day during the continuance of an Early Amortization Period, the "Base Daily Interest Expense" for such day shall be equal to the greater of (i) the sum of the amounts calculated pursuant to clause (ii) above and (ii) the product of (x) the Series 1998-2 Invested Amount on such day divided by 365 (or 366, as the case may be) and (y) the ABR plus the Applicable Margin in effect on such day plus 2.0%. "BENEFITTED PURCHASER" shall have the meaning assigned in Section 11.12. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States or any successor thereto. "CARRYING COST RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) equal to (a) the product of (i) 2.00 TIMES Days Sales Outstanding as of such day and (ii) 1.3 TIMES a rate per annum equal to the ABR plus the Applicable Margin as of such earlier Settlement Report Date, DIVIDED BY (b) 365 (or 366, as the case may be). 6 "C/D ASSESSMENT RATE" shall mean for any day pertaining to a Floating Tranche, the net annual assessment rate (rounded upwards, if necessary, to the next 1/100 of 1%) in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; PROVIDED that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Funding Agent to be representative of the cost of such insurance to the APA Banks. "C/D RESERVE PERCENTAGE" for any day pertaining to a Floating Tranche, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new negotiable non-personal time deposits in Dollars of over $100,000 having a maturity of 30 days or more. "CERTIFICATE RATE" shall mean, on any date of determination, the weighted average (weighted based on the respective outstanding amounts of the Floating Tranche and each Eurodollar Tranche) of the ABR in effect on such day and the Eurodollar Rates in effect on such day PLUS, in each case, the respective Applicable Margins. "CHANGE IN CONTROL" shall mean the occurrence of any event the result of which causes the Company not to be a direct, wholly-owned Subsidiary of Core-Mark. "CHANGE IN LAW" shall mean (a) the adoption of any law, rule or regulation after the Issuance Date , (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Issuance Date or (c) compliance by any Purchaser with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Issuance Date. "CHASE" shall have the meaning specified in the preamble hereto. "CLEAN-UP CALL AMOUNT" shall mean the Clean-Up Call Percentage of the maximum Series 1998-2 Invested Amount at any time during the Series 1998-2 Revolving Period. "CLEAN-UP CALL PERCENTAGE" shall mean 10%. 7 "COMMERCIAL PAPER" shall mean the short-term promissory notes of the Initial Purchaser issued in the United States commercial paper market. "COMMITMENT" shall mean, as to any APA Bank, its obligation to purchase a VFC Certificate on the Issuance Date, to acquire the Initial Purchaser's VFC Certificate and to maintain and, subject to certain conditions, increase, its Series 1998-2 Purchaser Invested Amount, in each case, in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such APA Bank's name on Schedule 1 under the caption "Commitment", as such amount may be reduced from time to time as provided herein; collectively, as to all APA Banks, the "COMMITMENTS". "COMMITMENT FEE" shall have the meaning assigned in subsection 2.9(b). "COMMITMENT FEE RATE" shall have the meaning assigned in the Fee Letter. "COMMITMENT PERCENTAGE" shall mean, as to any APA Bank and as of any date, the percentage equivalent of a fraction, the numerator of which is such APA Bank's Commitment as set forth on Schedule 1 and the denominator of which is the Aggregate Commitment Amount as of such date. "COMMITMENT PERIOD" shall mean the period commencing on the Issuance Date and terminating on the Commitment Termination Date. "COMMITMENT REDUCTION" shall have the meaning assigned in subsection 2.8(a). "COMMITMENT TERMINATION DATE" shall mean the earliest to occur of (i) the date on which all amounts due and owing to PARCO in respect of the VFC have been indefeasibly paid in full, (ii) the date on which the Aggregate Commitment Amount has been reduced to zero pursuant to Section 2.8 of this Supplement, (iii) the next Business Day following the commencement of an Early Amortization Period and (iv) April 1, 2003 (as may be extended for an additional 364 days from time to time in writing by PARCO, the Funding Agent and the APA Banks). "COMMITMENT TRANSFER SUPPLEMENT" shall have the meaning assigned in subsection 11.11(b). "CORE-MARK" shall have the meaning specified in the preamble hereto. "CP RATE" shall mean for any day the weighted average of the interest rates (or if issued at a discount, the weighted average of the rates, after converting to interest-bearing equivalents) on all outstanding Commercial Paper issued by the Initial Purchaser to fund the Initial Purchaser's Series 1998-2 Purchaser Invested Amount. 8 "CP RATE PERIOD" shall mean, with respect to any CP Tranche, a period of days not to exceed 90 days commencing on a Business Day selected in accordance with subsection 3A.4(c); provided that if a CP Rate Period would end on a day that is not a Business Day, such CP Rate Period shall end on the next succeeding Business Day. "CP TRANCHE" shall mean a portion of the Series 1998-2 Invested Amount for which the Series 1998-2 Monthly Interest is calculated by reference to a particular Discount and a particular CP Rate Period. "CREDIT AGREEMENT" shall mean the Amended and Restated Credit Agreement, dated as of April 1, 1998, among Core-Mark, the several lenders from time to time parties thereto, and The Chase Manhattan Bank, as Administrative Agent, as the same may be amended, supplemented or otherwise modified from time to time. "DAILY COMMITMENT FEE DEPOSIT" shall mean, for any Business Day, an amount equal to (i) the amount of Daily Commitment Fee Expense for each day since the preceding Business Day PLUS (ii) the aggregate amount of all previously accrued Daily Commitment Fee Expense that has not yet been deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount. "DAILY COMMITMENT FEE EXPENSE" shall mean, (i) during the Series 1998-2 Revolving Period, for any day in any Accrual Period, the product of (A) the excess of the Aggregate Commitment Amount over the aggregate Series 1998-2 Purchaser Invested Amounts of the APA Banks on such day multiplied by (B) the Commitment Fee Rate divided by 360, (ii) during the Series 1998-2 Amortization Period, for any day prior to the APA Bank Purchase Date in any Accrual Period, the product of (A) the Series 1998-2 Invested Amount on such day multiplied by (B) the Commitment Fee Rate divided by 360 and (iii) during the Series 1998-2 Amortization Period, for the APA Bank Purchase Date or any day thereafter in any Accrual Period, zero. "DAILY FACILITY FEE DEPOSIT" shall mean, for any Business Day, an amount equal to (i) the amount of Daily Facility Fee Expense for each day since the preceding Business Day PLUS (ii) the aggregate amount of all previously accrued Daily Facility Fee Expense that has not yet been deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount. "DAILY FACILITY FEE EXPENSE" shall mean, (i) for any day in any Accrual Period prior to the APA Bank Purchase Date, the product of (A) (1) for any day prior to the date on which the Series 1998-2 Amortization Period commences, the Aggregate Commitment Amount on such day and (2) for any day on which the Series 1998-2 Amortization Period commences and for any day thereafter, the Series 1998-2 Invested Amount on such day, in each case, multiplied by (B) the Facility Fee Rate divided by 9 360 and (ii) for the APA Bank Purchase Date or any day thereafter in any Accrual Period, zero. "DAILY INTEREST DEPOSIT" shall mean, for any Business Day, an amount equal to (i) the amount of Daily Interest Expense for each day since the preceding Business Day PLUS (ii) the aggregate amount of all previously accrued Daily Interest Expense that has not yet been deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount PLUS (iii) the aggregate amount of all Additional Interest for each day since the preceding Business Day. "DAILY INTEREST EXPENSE" shall mean, for any Business Day, an amount equal to (i) the amount of accrued and unpaid Base Daily Interest Expense in respect of such day PLUS (ii) the aggregate amount of all previously accrued and unpaid Base Daily Interest Expense PLUS (iii) the aggregate amount of all accrued and unpaid Additional Interest. "DAILY REPORT" shall mean a report prepared by the Servicer on each Business Day for the period specified therein, in substantially the form of Exhibit D. "DAILY SERVICING FEE DEPOSIT" shall mean, for any Business Day, an amount equal to (i) the amount of Daily Servicing Fee Expense for each day since the preceding Business Day PLUS (ii) the aggregate amount of all previously accrued Daily Servicing Fee Expense that has not yet been deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount. "DAILY SERVICING FEE EXPENSE" shall mean, for any day in any Accrual Period the Series 1998-2 Interests' PRO RATA portion (determined in accordance with Section 6.1) of the Servicing Fee accruing for such day. "DAYS SALES OUTSTANDING" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, the number of days equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the aggregate Principal Amount of Eligible Receivables as of the last day of the immediately preceding Settlement Period by (ii) the aggregate Principal Amount of Receivables generated by the Sellers for the three Settlement Periods immediately preceding such earlier Settlement Report Date. "DECREASE" shall have the meaning assigned in Section 2.7. "DEFAULTING APA BANK" shall have the meaning assigned in subsection 2.6(c). "DILUTION HORIZON" shall mean, (i) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 5.3 days as representing the time 10 period it takes the Sellers to recognize a Dilution Adjustment, and (ii) for each six-month period (beginning and ending on a Settlement Report Date) to occur after such initial period, the number of days (expressed as a dollar weighted average based upon the Dilution Adjustments for such period) as determined by the Servicer in accordance with the procedures utilized to calculate the dilution horizon in clause (i) above; PROVIDED that in no event shall the Dilution Horizon be less than two days. "DILUTION HORIZON FACTOR" shall mean (a) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 0.18 months, and (b) for each six-month period (beginning and ending on a Settlement Report Date) to occur after such initial period, a fraction, (i) the numerator of which is the Dilution Horizon for such period and (ii) the denominator of which is 30; PROVIDED, HOWEVER, that if the Dilution Horizon Factor for any period is less than the Dilution Horizon Factor for the immediately preceding period, then the actual Dilution Horizon Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Dilution Horizon Factor for such immediately preceding period and such current period and the denominator of which is 30. "DILUTION PERIOD" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, the quotient of (i) the product of (A) the aggregate Principal Amount of Receivables which were originated by the Sellers during the Settlement Period immediately preceding such earlier Settlement Report Date and (B) the Dilution Horizon Factor then in effect and (ii) the Aggregate Receivables Amount as of the last day of the Settlement Period preceding such earlier Settlement Report Date. "DILUTION RATIO" shall mean, for each Settlement Period, an amount (expressed as a percentage) equal to the aggregate amount of Dilution Adjustments (other than Dilution Adjustments related to rebates given by a Seller to its customers relating to general price increases by the Tobacco Companies for which the Tobacco Companies have granted rebates to the Sellers, so long as the Seller has granted the rebate to its customer prior to the time that the merchandise giving rise to the Receivable to which such rebate is applied is shipped by the Seller) made during such Settlement Period DIVIDED BY the aggregate Principal Amount of Receivables which were originated by the Sellers during such Settlement Period. "DILUTION RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated as follows: 11 DRR = [(c * d) + [(e-d) * (e/d)]] * f Where: DRR = Dilution Reserve Ratio; c = 2.0; d = the average of the Dilution Ratio during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; e = the highest Dilution Ratio for any Settlement Period during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; and f = the Dilution Period. "DISCOUNT" shall mean, with respect to any Commercial Paper, the interest or discount component thereof. "EARLY AMORTIZATION EVENT" shall have the meanings assigned in Section 5.1 of this Supplement and Section 7.1 of the Agreement. "EARLY AMORTIZATION PERIOD" shall have the meaning assigned in Section 5.1 of this Supplement and Section 7.1 of the Agreement. "EFFECTIVE DATE" shall have the meaning assigned in Section 9.1. "ELIGIBLE ASSIGNEE" shall mean any financial institution that is a United States Person (within the meaning of Section 7701(a)(30) of the Internal Revenue Code) and that has a short term debt rating of at least A-1 from S&P and P-1 from Moody's. "EUROCURRENCY RESERVE REQUIREMENTS": for any day pertaining to a Eurodollar Tranche, 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, special and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of the Federal Reserve System. 12 "EURODOLLAR BASE RATE" shall mean, with respect to each day during each Eurodollar Period pertaining to a Eurodollar Tranche, the rate per annum determined by the Funding Agent to the rate of interest per annum (rounded upward if necessary to the nearest 1/16 of 1%) notified to the Funding Agent by Chase as the rate of interest at which Dollar deposits in the approximate amount of the portion of the Series 1998-2 Invested Amount allocable to such Eurodollar Tranche as of such day and having a maturity comparable to the Eurodollar Period applicable to such Eurodollar Tranche would be offered to prime banks in the London interbank market at their request at or about 11:00 a.m. (London time) on the second Business Day prior to the commencement of such Eurodollar Period. "EURODOLLAR PERIOD" shall mean, with respect to any Eurodollar Tranche: (a) initially, the period commencing on the Issuance Date or conversion date, as the case may be, with respect to such Eurodollar Tranche and ending one month thereafter (or such other period which is acceptable to the Purchasers and which in no event will be less than 15 days); and (b) thereafter, each period commencing on the last day of the immediately preceding Eurodollar Period applicable to such Eurodollar Tranche and ending one month thereafter (or such other period which is acceptable to the Purchasers and which in no event will be less than 15 days); PROVIDED THAT all Eurodollar Periods must end on the next Distribution Date and all of the foregoing provisions relating to Eurodollar Periods are subject to the following: (1) if any Eurodollar Period would otherwise end on a day that is not a Business Day, such Eurodollar Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Eurodollar Period into another calendar month, in which event such Eurodollar Period shall end on the immediately preceding Business Day; (2) any Eurodollar Period that would otherwise extend beyond the Scheduled Revolving Termination Date shall end on the Scheduled Revolving Termination Date; and (3) any Eurodollar 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 Eurodollar Period) shall end on the last Business Day of the calendar month at the end of such Eurodollar Period. 13 "EURODOLLAR RATE" shall mean, with respect to each day during each Eurodollar Period pertaining to a portion of the Series 1998-2 Invested Amount allocated to a Eurodollar Tranche, a rate per annum determined for such day in accordance with the following formula (rounded upwards, if necessary, to the nearest 1/100th of 1%): EURODOLLAR BASE RATE ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "EURODOLLAR TRANCHE" shall mean a portion of the Series 1998-2 Invested Amount for which the Series 1998-2 Monthly Interest is calculated by reference to a Eurodollar Rate determined by reference to a particular Eurodollar Period. "EXCLUDED TAXES" shall mean, with respect to the Funding Agent, any Purchaser or any other recipient of any payment to be made by or on account of any increased obligation of the Company hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any APA Bank, in which its applicable lending office is located and (b) any branch profits imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Company is located. "FACILITY FEE" shall have the meaning assigned in subsection 2.9(c). "FACILITY FEE RATE" shall have the meaning assigned in the Fee Letter. "FEE LETTER" shall mean, collectively, those certain Fee Letters, dated as of the date hereof, among the Company, the Servicer, the Funding Agent and the Initial Purchaser and acknowledged by the Trustee. "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 Funding Agent from three federal funds brokers of recognized standing selected by it. "FLOATING TRANCHE" shall mean, on or after the APA Bank Purchase Date, that portion of the Series 1998-2 Invested Amount not allocated to a Eurodollar Tranche for which the Series 1998-2 Monthly Interest is calculated by reference to the ABR. "FUNDING AGENT" shall have the meaning specified in the recitals hereto. 14 "INCREASE" shall have the meaning assigned in subsection 2.5(a). "INCREASE AMOUNT" shall have the meaning assigned in subsection 2.5(a). "INCREASE DATE" shall have the meaning assigned in subsection 2.5(a). "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes. "INITIAL PURCHASER" shall have the meaning specified in the recitals hereto. "INITIAL SERIES 1998-2 INVESTED AMOUNT" shall have the meaning assigned in subsection 2.5(a). "INTEREST SHORTFALL" shall have the meaning assigned in subsection 3A.4(b). "INVESTED PERCENTAGE" shall mean, with respect to any Business Day (i) during the Series 1998-2 Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Series 1998-2 Allocated Receivables Amount as of the end of the immediately preceding Business Day and the denominator of which is the Aggregate Receivables Amount as of the end of the immediately preceding Business Day and (ii) during the Series 1998-2 Amortization Period, the percentage equivalent of a fraction, the numerator of which is the Series 1998-2 Allocated Receivables Amount as of the end of the last Business Day of the Series 1998-2 Revolving Period (PROVIDED THAT if during the Series 1998-2 Amortization Period, the amortization periods of all other Outstanding Series which were outstanding prior to the commencement of the Series 1998-2 Amortization Period commence, then, from and after the date the last of such Series commences its Amortization Period, the numerator shall be the Series 1998-2 Allocated Receivables Amount as of the end of the Business Day preceding such date) and the denominator of which is the greater of (A) the Aggregate Receivables Amount as of the end of the immediately preceding Business Day and (B) the sum of the numerators used to calculate the Invested Percentage for all Outstanding Series on the Business Day for which such percentage is determined. "ISSUANCE DATE" shall mean April 1, 1998. "LOSS RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) which is calculated as follows: 15 LRR = [(a * b)/c] * d * e Where: LRR = Loss Reserve Ratio; a = the aggregate Principal Amount of Receivables originated by the Sellers during the three Settlement Periods immediately preceding such earlier Settlement Report Date; b = the highest three-month rolling average of the Aged Receivables Ratio that occurred during the period of twelve consecutive Settlement Periods preceding such earlier Settlement Report Date; c = the Aggregate Receivables Amount as of the last day of the Settlement Period preceding such earlier Settlement Report Date; and d = 2.0 e = Payment Terms Factor "MAJORITY PURCHASERS" shall mean, (i) on any day prior to the APA Bank Purchase Date, the Initial Purchaser and the Required APA Banks and (ii) on the APA Bank Purchase Date and any day thereafter, the Required APA Banks. "MAXIMUM COMMITMENT AMOUNT" shall mean $30,000,000. "MINIMUM RATIO" shall mean 13%. "MONTHLY INTEREST PAYMENT" shall have the meaning assigned in subsection 3A.6(a). "MOODY'S" shall mean Moody's Investors Service or any successor thereto. "NON-DEFAULTING APA BANK" shall have the meaning assigned in subsection 2.6(c). "OPTIONAL TERMINATION DATE" shall have the meaning assigned in subsection 2.7(d). "OPTIONAL TERMINATION NOTICE" shall have the meaning assigned in subsection 2.7(d). 16 "OTHER TAXES" shall mean any and all current or future stamp or documentary taxes or other excise or property taxes, charges or similar levies arising from any payment made under the Transaction Documents or from the execution, delivery or enforcement of, or otherwise with respect to, any Transaction Document. "PARCO INSOLVENCY EVENT" shall mean the occurrence of any one or more of the following: (i) any proceeding shall have been instituted by the Initial Purchaser seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or (ii) any proceeding of the type described in the foregoing clause (i) shall be instituted against the Initial Purchaser and shall have remained undismissed for a period of sixty (60) consecutive days, or an order granting relief requested in any such proceeding shall be entered. "PARCO RESIDUAL AMOUNT" shall have the meaning assigned in subsection 2.6(e). "PARCO WIND-DOWN EVENT" shall mean the occurrence of any of the following events: (i) on the fifteenth Business Day prior to the Scheduled Revolving Termination Date, the Commitments of the APA Banks have not been extended for at least an additional 364 days; (ii) the providers of the Initial Purchaser's program liquidity and/or letter of credit facilities shall have given notice that an event of default has occurred and is continuing under their respective agreements with the Initial Purchaser or shall have given notice that their commitments shall not be extended thereunder; (iii) the Initial Purchaser has notified the Funding Agent, the Company and Trustee that it has elected not to fund the Initial Series 1998-2 Invested Amount or an Increase pursuant to subsection 2.5(b); (iv) the Commercial Paper shall not be rated at least A-1 by S&P and P-1 by Moody's, respectively; and (v) an Early Amortization Period has commenced. "PARTICIPANTS" shall have the meaning assigned in subsection 11.11(a). 17 "PAYMENT TERMS FACTOR" shall mean, (a) for the period from the Issuance Date until the sixth Settlement Report Date to occur thereafter, 0.82 months and (b) for each six-month period to occur after such initial period, a fraction, the numerator of which is the sum of (i) the weighted average payment terms (based upon the principal amount of the Receivables and expressed as a number of days) for the Receivables originated during such period and (ii) 60 and the denominator which is 90; PROVIDED, HOWEVER, that if the Payment Terms Factor for any period is less than the Payment Terms Factor for the immediately preceding period, then the actual Payment Terms Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Payment Terms Factor for such current period and the three immediately preceding periods (without giving effect to this proviso) and the denominator of which is 90. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "POTENTIAL PARCO WIND-DOWN EVENT" shall mean any event or circumstance that with notice, the lapse of time, or both, would become a PARCO Wind-Down Event. "PROGRAM COSTS" shall mean, for any Business Day, the sum of (i) the product of (A) all unpaid fees and expenses due and payable to counsel to, and independent auditors of, the Company (other than fees and expenses payable on or in connection with the closing of the issuance of the Series 1998-2 Interests) and (B) a fraction, the numerator of which is the Aggregate Commitment Amount on such Business Day and the denominator of which is the sum of (x) the Aggregate Invested Amounts on such Business Day (other than the Series 1998-2 Invested Amount and the Invested Amount in respect of any variable funding certificate of any other Outstanding Series) and (y) the Aggregate Commitment Amount on such Business Day plus the aggregate Commitment amount for any variable funding certificate of any other Outstanding Series, and (ii) all unpaid fees and expenses due and payable to any Rating Agencies rating the VFC Certificates; PROVIDED, HOWEVER, that the amount of Program Costs payable pursuant to Section 3A.6(b)(iv) shall not exceed $100,000 in the aggregate in any fiscal year of the Servicer. "PURCHASE" shall mean the assignment by the Initial Purchaser to the APA Banks of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount pursuant to Section 2.6. "PURCHASE PRICE" shall mean, on the APA Bank Purchase Date, an amount equal to the lesser of (i) the Initial Purchaser's Series 1998-2 Purchaser Invested Amount (calculated without regard to clauses (d) and (e) of the definition of Series 1998-2 Invested Amount) and (ii) the Adjusted Liquidity Price on such date, in each 18 case as increased by the sum of (1) all accrued and unpaid Discount on all outstanding Commercial Paper issued to fund the Initial Purchaser's Series 1998-2 Purchaser Invested Amount from the issuance date(s) thereof to but excluding the APA Bank Purchase Date PLUS (2) the aggregate Discount to accrue on all outstanding Commercial Paper issued to fund the Initial Purchaser's Series 1998-2 Purchaser Invested Amount from and including the APA Bank Purchase Date, to and excluding the maturity date of each CP Tranche. "PURCHASE PRICE DEFICIT" shall have the meaning assigned in subsection 2.6(c). "PURCHASER" shall mean, prior to the APA Bank Purchase Date, the Initial Purchaser and, on and after the APA Bank Purchase Date, the APA Banks and each Acquiring APA Bank. "RATING AGENCY" and "RATING AGENCIES" shall mean Moody's, S&P or any other nationally recognized statistical rating organization from which a rating for the Commercial Paper was requested by the Initial Purchaser and is currently in effect. "RATING AGENCY CONDITION" shall mean, with respect to any action, that (i) each Rating Agency shall have been given 10 days' (or such shorter period as shall be acceptable to each Rating Agency) prior notice thereof and that each of the Rating Agencies shall have notified the Initial Purchaser and the Funding Agent in writing that such action will not result in a reduction or withdrawal of the then current rating of the Commercial Paper and (ii) the Required APA Banks shall have given their prior written consent to such action. "RECORD DATE" shall mean the first Business Day prior to each Distribution Date. "REDUCTION PERCENTAGE" shall mean the percentage equivalent of a fraction, the numerator of which is the PARCO Residual Amount and the denominator of which is the sum of the PARCO Residual Amount and the Adjusted Liquidity Price on the APA Bank Purchase Date. "REFERENCE RATE" shall have the meaning assigned in the definition of ABR herein. "REGISTER" shall mean a register maintained by the Funding Agent for recording transfers of the Commitments. "REQUIRED APA BANKS" shall mean APA Banks having Commitment Percentages in the aggregate at least equal to 66-2/3% or, if the Commitments have been terminated, holding at least 66-2/3% of the outstanding Series 1998-1 Invested 19 Amount; PROVIDED that the Commitment of any Defaulting APA Bank that has not paid all amounts due and owing by it in respect of the purchase it was obligated to make shall not be included in the Aggregate Commitment Amount for purposes of this definition. "SALE NOTICE" shall mean an irrevocable written notice given by an authorized signatory or authorized officer of the Initial Purchaser (or on behalf of the Initial Purchaser by Chase, in its capacity as the Initial Purchaser's administrative agent) to the Funding Agent committing to sell, assign and transfer to the APA Banks, the Initial Purchaser's Series 1998-2 Purchaser Invested Amount, which notice shall designate (i) the APA Bank Purchase Date, (ii) the Initial Purchaser's Series 1998-2 Purchaser Invested Amount, (iii) the Purchase Price (including a calculation of the Purchase Price), (iv) that no PARCO Insolvency Event has occurred and (v) wire transfer instructions specifying the account(s) into which the proceeds of the Purchase Price shall be deposited. "SCHEDULED REVOLVING TERMINATION DATE" shall mean the last day of the Settlement Period ending in January 2003. "SERIES 1998-2" shall mean Series 1998-2, the Principal Terms of which are set forth in this Supplement. "SERIES 1998-2 ACCRUED INTEREST SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-2 ADJUSTED INVESTED AMOUNT" shall mean, as of any date of determination, (i) the Series 1998-2 Invested Amount on such date, MINUS (ii) the amount on deposit in the Series 1998-2 Principal Collection Sub-subaccount on such date. "SERIES 1998-2 ALLOCABLE CHARGED-OFF AMOUNT" shall mean, with respect to any Special Allocation Settlement Report Date, the "Allocable Charged-Off Amount", if any, which has been allocated to Series 1998-2. "SERIES 1998-2 ALLOCABLE RECOVERIES AMOUNT" shall mean, with respect to any Special Allocation Settlement Report Date, the "Allocable Recoveries Amount", if any, which has been allocated to Series 1998-2. "SERIES 1998-2 ALLOCATED RECEIVABLES AMOUNT" shall mean, on any date of determination, the lower of (i) the Series 1998-2 Target Receivables Amount on such day and (ii) the product of (x) the Aggregate Receivables Amount on such day and (y) the percentage equivalent of a fraction the numerator of which is the Series 1998-2 20 Target Receivables Amount on such day and the denominator of which is the Aggregate Target Receivables Amount on such day. "SERIES 1998-2 AMORTIZATION PERIOD" shall mean the period commencing on the Business Day following the earliest to occur of (i) the date on which an Early Amortization Period is declared to commence or automatically commences, (ii) the Optional Termination Date and (iii) the Scheduled Revolving Termination Date and ending on the earlier of (i) the date when the Series 1998-2 Invested Amount shall have been reduced to zero and all accrued interest and other amounts owing on the VFC Certificates and to the Funding Agent and the Purchasers hereunder shall have been paid in full and (ii) the Series 1998-2 Termination Date. "SERIES 1998-2 COLLECTION SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-2 INTERESTS" shall mean, collectively, the VFC Certificates and the Series 1998-2 Subordinated Interest. "SERIES 1998-2 INVESTED AMOUNT" shall mean, as of any date of determination, the sum of the Series 1998-2 Purchaser Invested Amounts of all Purchasers on such date. "SERIES 1998-2 MONTHLY INTEREST" shall have the meaning assigned in subsection 3A.4(a). "SERIES 1998-2 MONTHLY PRINCIPAL PAYMENT" shall have the meaning assigned in Section 3A.5. "SERIES 1998-2 MONTHLY SERVICING FEE" shall have the meaning assigned in Section 6.1. "SERIES 1998-2 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-2 PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning assigned in subsection 3A.2(a). "SERIES 1998-2 PURCHASER INVESTED AMOUNT" shall mean, with respect to the Initial Purchaser on the Issuance Date or, if the Initial Purchaser shall not fund the Initial Series 1998-2 Invested Amount, any APA Bank, an amount equal to the Initial Series 1998-2 Invested Amount or such APA Bank's Commitment Percentage of the Initial Series 1998-2 Invested Amount, and with respect to the Initial Purchaser or any other Purchaser on any date of determination thereafter, an amount equal to (a) the 21 Initial Purchaser's or such other Purchaser's Series 1998-2 Purchaser Invested Amount on the immediately preceding Business Day (or, with respect to the day as of which such other Purchaser acquires an interest in the Series 1998-2 Invested Amount, whether pursuant to Section 2.6, by executing a counterpart hereof, a Commitment Transfer Supplement or otherwise, the portion of the transferor's Series 1998-2 Purchaser Invested Amount being purchased), PLUS (b) the amount of any increases in such Purchaser's Series 1998-2 Purchaser Invested Amount pursuant to Section 2.5 made on such day, MINUS (c) the amount of any distributions to such Purchaser in respect of principal received and applied on such day MINUS (d) the aggregate Series 1998-2 Allocable Charged-Off Amount applied to such Purchaser on or prior to such date pursuant to subsection 3A.5(b)(ii) PLUS (e) (but only to the extent of any unreimbursed reductions made pursuant to clause (d) above) the aggregate Series 1998-2 Allocable Recoveries Amount applied to such Purchaser on or prior to such date pursuant to subsection 3A.5(c)(i). "SERIES 1998-2 RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, the greater of (i) the sum of the Loss Reserve Ratio and the Dilution Reserve Ratio and (ii) the Minimum Ratio, in each case, then in effect. "SERIES 1998-2 REQUIRED RESERVES" shall mean, (x) as of any date of determination during the Series 1998-2 Revolving Period, an amount equal to the sum of: (a) an amount equal to the product of (A) the Series 1998-2 Adjusted Invested Amount on such day (after giving effect to any increase or decrease thereof on such day) and (B) a fraction, the numerator of which is the Series 1998-2 Ratio, and the denominator of which is one MINUS the Series 1998-2 Ratio; (b) the product of (i) the Series 1998-2 Invested Amount on such day (after giving effect to any increase or decrease thereof on such day) and (ii) a fraction, the numerator of which is the Carrying Cost Reserve Ratio in effect for the Accrual Period in which such day falls, and the denominator of which is one MINUS the Series 1998-2 Ratio; and (c) the product of (i) the aggregate Principal Amount of Receivables in the Trust on such day, (ii) a fraction, the numerator of which is the Series 1998-2 Invested Amount on such day, and the denominator of which is the sum of the Aggregate Invested Amount on such day (after giving effect to any increase or decrease thereof on such day), and (iii) a fraction, the numerator of which is the Servicing Reserve Ratio, and the denominator of which is one MINUS the Series 1998-2 Ratio; 22 and (y) on any date of determination during the Series 1998-2 Amortization Period, an amount equal to the Series 1998-2 Required Reserves on the last Business Day of the Series 1998-2 Revolving Period; PROVIDED, in the case of this clause (y), that such amount shall be adjusted on each Special Allocation Settlement Report Date, if any, to the extent required as set forth in Section 3A.5(b)(i) and Section 3A.5(c)(ii). "SERIES 1998-2 REVOLVING PERIOD" shall mean the period commencing on the Issuance Date and terminating on the earliest to occur of the close of business on (i) the date on which an Early Amortization Period is declared to commence or automatically commences, (ii) the Optional Termination Date and (iii) the Commitment Termination Date. "SERIES 1998-2 SUBORDINATED INTEREST AMOUNT" shall mean, for any date of determination, an amount equal to (i) the Series 1998-2 Allocated Receivables Amount MINUS (ii) the Series 1998-2 Adjusted Invested Amount. "SERIES 1998-2 SUBORDINATED INTEREST REDUCTION AMOUNT" shall have the meaning assigned in subsection 2.7(b). "SERIES 1998-2 SUBORDINATED INTEREST" shall have the meaning assigned in subsection 2.2(b). "SERIES 1998-2 TARGET RECEIVABLES AMOUNT" shall mean, on any date of determination, the sum of (i) the Series 1998-2 Adjusted Invested Amount on such day and (ii) the Series 1998-2 Required Reserves for such day. "SERIES 1998-2 TERMINATION DATE" shall mean the Distribution Date that occurs in December, 2003. "SERVICING RESERVE RATIO" shall mean, as of any Settlement Report Date and continuing until (but not including) the next Settlement Report Date, an amount (expressed as a percentage) equal to (i) the product of (A) the Servicing Fee Percentage and (B) 2.0 TIMES Days Sales Outstanding as of such earlier Settlement Report Date, DIVIDED BY (ii) 360. "TAXES" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "TRANSACTION PARTIES" shall have the meaning assigned in subsection 2.6(d). "TRANSFER ISSUANCE DATE" shall mean the date on which a Commitment Transfer Supplement becomes effective pursuant to the terms of such Commitment Transfer Supplement. 23 "TRANSFEREE" shall have the meaning assigned in subsection 11.10(f). "TRUST ACCOUNTS" shall have the meaning assigned in subsection 3A.2(a). "UCC CERTIFICATE" shall mean a certificate substantially in the form of Exhibit H to this Supplement. "UNACCRUED DISCOUNT PAYMENT AMOUNT" shall mean the portion of the Purchase Price determined in accordance with clause (2) of the definition thereof. "UNALLOCATED BALANCE" shall mean, as of (i) any Business Day prior to the APA Bank Purchase Date, the portion of the Series 1998-2 Invested Amount allocated to any CP Tranche the CP Rate Period in respect of which expires on such Business Day and (ii) the APA Bank Purchase Date or any Business Day thereafter, the sum of (A) the portion of the Series 1998-2 Invested Amount for which interest is then being calculated by reference to the ABR and (B) the portion of the Series 1998-2 Invested Amount allocated to any Eurodollar Tranche the Eurodollar Period in respect of which expires on such Business Day. "VFC CERTIFICATE" shall mean a VFC Certificate, Series 1998-2, executed by the Company and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A. "VFC CERTIFICATEHOLDERS" shall mean the Purchasers. "VFC CERTIFICATEHOLDERS' INTEREST" shall have the meaning assigned in subsection 2.2(a). (b) If any term or provision contained herein conflicts with or is inconsistent with any term, definition or provision contained in the Agreement, the terms and provisions of this Supplement shall govern. All capitalized terms not otherwise defined herein are defined in the Agreement. All Article, Section or subsection references herein shall mean Article, Section or subsections of this Supplement, except as otherwise provided herein. Unless otherwise stated herein, the context otherwise requires or such term is otherwise defined in the Agreement, each capitalized term used or defined herein shall relate only to the Series 1998-2 Interests and no other Series of Investor Certificates issued by the Trust. 24 ARTICLE II DESIGNATION OF CERTIFICATES; PURCHASE AND SALE OF THE VFC CERTIFICATES SECTION II.1. DESIGNATION. The Certificates and interests created and authorized pursuant to the Agreement and this Supplement shall be divided into two Classes, which shall be designated respectively as (i) the "VFC Certificates, Series 1998-2" and (ii) an interest designated as the "Series 1998-2 Subordinated Interest." SECTION II.2. THE SERIES 1998-2 INTERESTS. (a) The VFC Certificates shall represent fractional undivided interests in the Trust, including the right to receive distributions from (i) the Invested Percentage (expressed as a decimal) of Collections received with respect to the Receivables and all other funds on deposit in the Collection Account and (ii) all other funds on deposit in the Series Collection Subaccounts and any subaccounts thereof (collectively, the "VFC CERTIFICATEHOLDERS' INTEREST"). (b) The "SERIES 1998-2 SUBORDINATED INTEREST" shall be a fractional undivided interest in the Trust, consisting of the right to receive Collections with respect to the Receivables allocated to the VFC Certificateholders' Interest and not required to be distributed to or for the benefit of the Purchasers. The Exchangeable Company Interest and any other Series of Investor Certificates outstanding shall represent the ownership interest in the remainder of the Trust not allocated pursuant hereto to the VFC Certificateholders' Interest or the Series 1998-2 Subordinated Interest. (c) The VFC Certificates shall be substantially in the form of Exhibit A and shall, upon issue, be executed and delivered by the Company to the Trustee for authentication and redelivery as provided in Section 2.4 hereof and Section 5.2 of the Agreement. SECTION II.3. PURCHASES OF INTERESTS IN THE VFC CERTIFICATES. (a) INITIAL PURCHASE. Subject to the terms and conditions of this Supplement, including delivery of notice in accordance with Section 2.4, (i) on the Issuance Date, (A) the Initial Purchaser may, in its sole discretion, purchase a VFC Certificate in an amount equal to the Initial Series 1998-2 Invested Amount or (B) if the Initial Purchaser shall have notified the Funding Agent that it has elected not to purchase a VFC Certificate on the Issuance Date, each APA Bank hereby severally agrees to purchase on the Issuance Date a VFC Certificate in an amount equal to such APA Bank's Commitment Percentage of the Initial Series 1998-2 Invested Amount and (ii) thereafter, (A) if the Initial Purchaser shall have purchased a VFC Certificate on the Issuance Date, the Initial Purchaser may, in its sole discretion, maintain its VFC Certificate, subject to increase or decrease during the Series 1998-2 Revolving Period, in accordance with the provisions of this Supplement and (B) if the APA Banks shall have purchased VFC Certificates on the Issuance Date or, in any case, on or after the APA Bank Purchase Date, the APA Banks hereby severally agree to maintain their respective VFC 25 Certificates, subject to increase or decrease during the Series 1998-2 Revolving Period, in accordance with the provisions of this Supplement. The Company hereby agrees to maintain ownership of the Series 1998-2 Subordinated Interest, subject to increase or decrease during the Series 1998-2 Revolving Period, in accordance with the provisions of this Supplement. Payments by the Initial Purchaser or the APA Banks, as the case may be, in respect of the VFC Certificates shall be made in immediately available funds on the Issuance Date to the Funding Agent for payment to the Company. (b) SUBSEQUENT PURCHASES. Subject to the terms and conditions of this Supplement, each Acquiring APA Bank hereby severally agrees to maintain its VFC Certificate, subject to increase or decrease during the Series 1998-2 Revolving Period, in accordance with the provisions of this Supplement. (c) MAXIMUM SERIES 1998-2 PURCHASER INVESTED AMOUNT. Notwithstanding anything to the contrary contained in this Supplement, at no time shall the Series 1998-2 Purchaser Invested Amount (calculated without regard to clauses (d) and (e) of the definition thereof) of any APA Bank exceed such APA Bank's Commitment at such time. SECTION II.4. DELIVERY. On the Issuance Date, the Company shall sign, on behalf of the Trust, and shall direct the Trustee in writing pursuant to Section 5.2 of the Agreement to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate (i) the VFC Certificates in such names and such denominations and deliver such VFC Certificates to the Funding Agent, on behalf of the Initial Purchaser, or the APA Banks, as the case may be, in accordance with such written directions. The VFC Certificates shall be issued in minimum denominations of $1,000,000 and in integral multiples of $100,000 in excess thereof. The Trustee shall mark on its books the actual Series 1998-2 Invested Amount and Series 1998-2 Subordinated Interest Amount outstanding on any date of determination, which, absent manifest error, shall constitute PRIMA FACIE evidence of the outstanding Series 1998-2 Invested Amount and Series 1998-2 Subordinated Interest Amount from time to time. SECTION II.5. PROCEDURE FOR INITIAL ISSUANCE AND FOR INCREASING THE SERIES 1998-2 INVESTED AMOUNT. (a) Subject to subsection 2.5(c), (i) on the Business Day designated in writing as provided herein (the "ISSUANCE DATE"), the Initial Purchaser may agree, in its sole discretion, and each APA Bank hereby agrees to purchase a VFC Certificate in accordance with Section 2.3 and (ii) on any Business Day during the Commitment Period, the Initial Purchaser may agree, in its sole discretion, and each APA Bank hereby agrees that the Series 1998-2 Invested Amount may be increased by increasing such Purchaser's Series 1998-2 Purchaser Invested Amount (an "INCREASE"), upon the request of the Servicer or the Company on behalf of the Trust (each date on which an increase in the Series 1998-2 Invested Amount occurs hereunder being herein referred to as the "INCREASE DATE" applicable to such Increase); PROVIDED, HOWEVER, that the Servicer or the Company, as the case may be, shall have given the Funding Agent (with a copy to the Trustee) irrevocable written notice 26 (effective upon receipt), substantially in the form of Exhibit F hereto, of such request no later than (i) 1:00 p.m., New York City time, two Business Days prior to the Issuance Date or such Increase Date, as the case may be, in the case of any Increase Date occurring prior to the APA Bank Purchase Date or (ii) (x) if the Initial Series 1998-2 Invested Amount or Increase Amount is to be priced solely with reference to the ABR, on or prior to 12:00 noon, New York City time, on the Issuance Date or such Increase Date, as the case may be, or (y) if all or a portion of the Initial Series 1998-2 Invested Amount or Increase Amount is to be allocated to a Eurodollar Tranche, 1:00 p.m., New York City time, three Business Days prior to the Issuance Date or such Increase Date, as the case may be, in the case of any Increase Date occurring on or after the APA Bank Purchase Date; PROVIDED, FURTHER, that the provisions of this subsection shall not restrict the allocations of Collections pursuant to Article III. Such notice shall state (x) the Issuance Date or the Increase Date, as the case may be, (y) the initial invested amount (the "INITIAL SERIES 1998-2 INVESTED AMOUNT"), or the proposed amount of such Increase (the "INCREASE AMOUNT"), as the case may be, and (z) on and after the APA Bank Purchase Date, what portions thereof will be allocated to a Eurodollar Tranche and the Floating Tranche. (b) If, prior to the APA Bank Purchase Date, the Initial Purchaser elects not to fund any portion of a requested Increase, the Initial Purchaser shall notify the Funding Agent thereof and deliver a Sale Notice in accordance with Section 2.6 and each APA Bank shall purchase its Commitment Percentage of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount in accordance with Section 2.6 and fund such Increase in an amount equal to its Commitment Percentage of such Increase; PROVIDED, HOWEVER that an APA Bank shall not be obligated to fund any portion of an Increase that would cause its Series 1998-2 Purchaser Invested Amount to exceed its Commitment. (c) The Purchasers shall not be required to make the initial purchase of VFC Certificates on the Issuance Date or to increase their respective Series 1998-2 Purchaser Invested Amounts on any Increase Date hereunder unless: (i) the related aggregate initial purchase amount or Increase Amount is equal to $1,000,000 or an integral multiple of $100,000 in excess thereof; (ii) after giving effect to the initial purchase amount or Increase Amount, (A) the Series 1998-2 Invested Amount would not exceed the Maximum Commitment Amount on the Issuance Date or such Increase Date, as the case may be, and (B) the Series 1998-2 Allocated Receivables Amount would not be less than the Series 1998-2 Target Receivables Amount on the Issuance Date or such Increase Date, as the case may be; (iii) no Early Amortization Event or Potential Early Amortization Event shall have occurred and be continuing; 27 (iv) in the case of any funding by the Initial Purchaser, no PARCO Wind-Down Event or Potential PARCO Wind-Down Event shall have occurred and be continuing; and (v) all of the representations and warranties made by each of the Company, the Servicer, each Sub-Servicer and each Seller (other than representations and warranties referred to in Section 2.06 of the Receivables Sale Agreement) in each Transaction Document to which it is a party are true and correct in all material respects on and as of the Issuance Date or such Increase Date, as the case may be, as if made on and as of such date (except to the extent such representations and warranties are expressly made as of another date). The Company's acceptance of funds in connection with (x) the Purchasers' initial purchase of VFC Certificates on the Issuance Date and (y) each Increase occurring on any Increase Date shall constitute a representation and warranty by the Company to the Purchasers as of the Issuance Date or such Increase Date (except to the extent such representations and warranties are expressly made as of another date or relate to particular receivables), as the case may be, that all of the conditions contained in this subsection 2.5(c) have been satisfied. (d) After receipt by the Funding Agent of the notice required by subsection 2.5(a) from the Servicer or the Company on behalf of the Trust, the Funding Agent shall, so long as the conditions set forth in subsections 2.5(a) and (c) are satisfied, promptly provide telephonic notice (i) prior to the APA Bank Purchase Date, to the Initial Purchaser, and (ii) on and after the APA Bank Purchase Date, to each APA Bank, of the Increase Date and of the portion of the Increase Amount allocable to such APA Bank (which shall equal such APA Bank's Commitment Percentage of the Increase Amount). If the Initial Purchaser elects to fund an Increase, the Initial Purchaser agrees to pay in immediately available funds the amount of such Increase on the related Increase Date to the Funding Agent for payment to the Trust for deposit in the Series 1998-2 Principal Collection Sub-subaccount. On or after the APA Bank Purchase Date, each APA Bank agrees to pay in immediately available funds such APA Bank's Commitment Percentage of each Increase on the related Increase Date to the Funding Agent for payment to the Trust for deposit in the Series 1998-2 Principal Collection Sub-subaccount. SECTION II.6. SALE BY THE INITIAL PURCHASER OF ITS SERIES 1998-2 PURCHASER INVESTED AMOUNT TO THE APA BANKS. (a) On any date during the Commitment Period, the Initial Purchaser may, in its own discretion, and the Initial Purchaser shall upon the occurrence of a PARCO Wind-Down Event, in each case, by delivering a Sale Notice to the Funding Agent, the Company and the Trustee, sell to the APA Banks (in accordance with their respective Commitment Percentages) and each APA Bank hereby agrees to purchase its Commitment Percentage of all right, title and interest of the Initial Purchaser in its Series 1998-2 Purchaser Invested Amount. Any Sale Notice shall be delivered by the Initial Purchaser to the Funding Agent, the Company and the Trustee prior to 12:30 p.m., New York 28 City time, on the APA Bank Purchase Date and shall constitute an irrevocable offer by the Initial Purchaser to sell 100% of its Series 1998-2 Purchaser Invested Amount at the Purchase Price. Any Sale Notice shall be deemed to be a representation and warranty by the Initial Purchaser that no PARCO Insolvency Event shall have occurred and be continuing. Each APA Bank hereby agrees to purchase from the Initial Purchaser such APA Bank's Commitment Percentage of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount for a purchase price equal to such APA Bank's Commitment Percentage of the Purchase Price on the APA Bank Purchase Date (which date, subject to subsection 2.6(b), may be the same as the date of the Sale Notice). Notwithstanding anything to the contrary set forth in this Supplement, no APA Bank shall have any obligation to purchase the Initial Purchaser's Series 1998-2 Purchaser Invested Amount if, on such Purchase Date, any PARCO Insolvency Event shall have occurred and be continuing. (b) If, at or prior to 12:30 p.m., New York City time, on any Business Day, the Initial Purchaser delivers the Sale Notice to the Funding Agent specifying that the APA Bank Purchase Date shall be the same date as the date of the Sale Notice, the Funding Agent shall, by no later than 1:00 p.m., New York City time, notify (by telecopy or by telephone call promptly confirmed in writing by telecopy) each APA Bank of the receipt and content of the Sale Notice. Each APA Bank shall purchase its Commitment Percentage of the Initial Purchaser's VFC Certificate by depositing its Commitment Percentage of the Purchase Price in immediately available funds into the account(s) specified by the Initial Purchaser in the Sale Notice no later than 2:00 p.m., New York City time. If the Initial Purchaser delivers the Sale Notice to the Funding Agent after 12:30 p.m., New York City time, on any Business Day or the Initial Purchaser delivers the Sale Notice to the Funding Agent specifying that the APA Bank Purchase Date shall be a date other than the date of the Sale Notice, the Funding Agent shall promptly advise (by telecopy or by telephone call promptly confirmed in writing by telecopy) each APA Bank of the receipt and content of the Sale Notice. Notwithstanding the fact that the APA Bank Purchase Date may occur on a date which is later than the date on which the Sale Notice is delivered to the Funding Agent, the several obligations of each APA Bank to make such purchase and to make payment of the amounts required to be paid by it pursuant to subsection 2.6(a) shall arise immediately upon receipt by the Funding Agent of the Sale Notice. Upon payment of the Purchase Price as provided herein and delivery to the Trustee by the Funding Agent of the Initial Purchaser's VFC Certificate, the Company shall sign, on behalf of the Trust, and shall direct the Trustee in writing to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate, a new VFC Certificate in the name of each APA Bank and in a denomination equal to such APA Bank's Commitment Percentage as set forth in such written direction and shall deliver such VFC Certificate to each such APA Bank in accordance with such written direction. (c) If, by 2:00 p.m., New York City time, one or more APA Banks (each, a "DEFAULTING APA BANK," and each APA Bank other than the Defaulting APA Bank being referred to as a "NON-DEFAULTING APA BANK") fails to make its Commitment Percentage of the Purchase Price available to the Funding Agent pursuant to subsection 2.6(b) (the aggregate 29 amount not so made available to the Funding Agent being herein called the "PURCHASE PRICE DEFICIT"), then the Funding Agent shall, by no later than 2:30 p.m., New York City time, instruct each Non-Defaulting APA Bank to pay, by no later than 3:00 p.m., New York City time, in immediately available funds, to the account designated by the Funding Agent, an amount equal to the lesser of (x) such Non-Defaulting APA Bank's proportionate share (based upon the relative Commitments of the Non-Defaulting APA Banks) of the Purchase Price Deficit and (y) its unused Commitment. A Defaulting APA Bank shall forthwith, upon demand, pay to the Funding Agent for the ratable benefit of the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA Bank on behalf of such Defaulting APA Bank, together with interest thereon, for each day from the date a payment was made by a Non-Defaulting APA Bank until the date such Non-Defaulting APA Bank has been paid such amounts in full, at a rate per annum equal to the sum of the Federal Funds Effective Rate plus 2%. In addition, without prejudice to any other rights that the Initial Purchaser may have under applicable law, each Defaulting APA Bank shall pay to the Initial Purchaser forthwith upon demand, the difference between the Defaulting APA Bank's unpaid Commitment Percentage of the Purchase Price and the amount paid with respect thereto by the Non-Defaulting APA Banks, together with interest thereon, for each day from the date of the Funding Agent's request for such Defaulting APA Bank's Commitment Percentage of the Purchase Price pursuant to Section 2.6(b) until the date the requisite amount is paid to the Initial Purchaser in full, at a rate per annum equal to the sum of the Federal Funds Effective Rate plus 2%. (d) The transfer of the Initial Purchaser's VFC Certificate pursuant to this Section 2.6 shall be without recourse or warranty, express or implied, except that the Initial Purchasers represent that such VFC Certificate is free and clear of adverse claims created by or arising as a result of claims against the Initial Purchaser. By executing and delivering a Sale Notice pursuant to Section 2.6(a),(i) the Initial Purchaser makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the VFC Certificate or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the VFC Certificate, or any other agreement, instrument or other document furnished pursuant thereto or in connection therewith, including without limitation any Transaction Document, and (ii) the Initial Purchaser makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Trust, the Trustee, the Servicer, each Sub-Servicer, each Seller or any Obligor (collectively, the "TRANSACTION PARTIES") or the Funding Agent, or the performance or observance by the Transaction Parties of any of their respective obligations under the VFC Certificate or the Transaction Documents. (e) If the Adjusted Liquidity Price on the APA Bank Purchase Date is less than the Series 1998-2 Invested Amount on the APA Bank Purchase Date (the amount of such insufficiency, the "PARCO RESIDUAL AMOUNT"), each APA Bank agrees that (i) on each Distribution Date after the APA Bank Purchase Date on which interest is distributed to VFC Certificateholders pursuant to subsection 3A.6(a), the Funding Agent shall distribute to the 30 Initial Purchaser its Reduction Percentage of such interest payments and (ii) on each Distribution Date after the APA Purchase Date on which amounts in reduction of the Series 1998-2 Invested Amount are distributed to VFC Certificateholders pursuant to Section 2.7 or subsection 3A.6(c), the Funding Agent shall distribute to the Initial Purchaser its Reduction Percentage of such amounts. SECTION II.7. PROCEDURE FOR DECREASING THE SERIES 1998-2 INVESTED AMOUNT; OPTIONAL TERMINATION. (a) On any Business Day during the Series 1998-2 Revolving Period or the Series 1998-2 Amortization Period (except for Distribution Dates during the Series 1998-2 Amortization Period (which shall be governed by subsection 3A.6(c))), upon the written request of the Servicer or the Company on behalf of the Trust, the Series 1998-2 Invested Amount may be reduced (a "DECREASE") by the distribution by the Trustee to the Funding Agent for the PRO RATA benefit of the Purchasers in accordance with their respective Series 1998-2 Purchaser Invested Amount of funds on deposit in the Series 1998-2 Principal Collection Sub-subaccount on such day in an amount not to exceed the amount of such funds on deposit on such day; PROVIDED that the Servicer shall have given the Funding Agent (with a copy to the Trustee) irrevocable written notice (effective upon receipt), prior to 1:00 p.m., New York City time, (i)on the second Business Day prior to such Decrease, in the case of any Decrease occurring prior to the APA Bank Purchase Date and (ii)(A) if the Decrease relates solely to a Floating Tranche, on the Business Day of such Decrease or (B) if all or any portion of the Decrease relates to a Eurodollar Tranche, on the Business Day that is three Business Days prior to such Decrease, and which notice shall state the amount of such Decrease; PROVIDED, FURTHER, that (x) such Decrease shall be in an amount equal to $1,000,000 and integral multiples of $100,000 in excess thereof or if the Series 1998-2 Invested Amount is less than $1,000,000 then such Decrease shall equal the Series 1998-2 Invested Amount, and (y) prior to the APA Bank Purchase Date, such Decrease shall be in an amount no greater than the Unallocated Balance on such day. (b) Simultaneously with any such Decrease during the Series 1998-2 Revolving Period, the Series 1998-2 Subordinated Interest Amount shall be reduced by an amount (the "SERIES 1998-2 SUBORDINATED INTEREST REDUCTION AMOUNT") such that the Series 1998-2 Subordinated Interest Amount shall equal the Series 1998-2 Required Reserves after giving effect to such Decrease. During the Series 1998-2 Revolving Period, after the distribution described in subsection (a) above has been made, and the Series 1998-2 Subordinated Interest Amount shall have been reduced by the Series 1998-2 Subordinated Interest Reduction Amount, a distribution shall be made to the owner of the Series 1998-2 Subordinated Interest out of remaining funds on deposit in the Series 1998-2 Principal Collection Sub-subaccount in an amount equal to the lesser of (x) the Series 1998-2 Subordinated Interest Reduction Amount and (y) the amount of such remaining funds on deposit in the Series 1998-2 Principal Collection Sub-subaccount. (c) On or after the APA Bank Purchase Date, any reduction in the Series 1998-2 Invested Amount on any Business Day shall be allocated first to reduce the 31 Unallocated Balance and then to reduce the portion of the Series 1998-2 Invested Amount allocated to Eurodollar Tranches in such order as the Company may select in order to minimize costs payable pursuant to Section 7.4. (d)(i) On any Business Day unless the Scheduled Revolving Termination Date, an Early Amortization Event or a Potential Early Amortization Event shall have occurred and be continuing, the Company shall have the right to deliver an irrevocable written notice (an "OPTIONAL TERMINATION NOTICE") to the Trustee, the Servicer and the Rating Agencies in which the Company declares that the Series 1998-2 Revolving Period shall terminate on the date (the "OPTIONAL TERMINATION DATE") set forth in such notice (which date, in any event, shall be the last day of a Settlement Period which is not less than 10 days from the date on which such notice is delivered). (ii) From and after the Optional Termination Date, the Series 1998-2 Amortization Period shall commence for all purposes under this Agreement and the other Transaction Documents. The Trustee shall give prompt written notice of its receipt of an Optional Termination Notice to the Purchasers and each Rating Agency. SECTION II.8. REDUCTIONS OF THE COMMITMENTS. (a) On any Business Day during the Series 1998-2 Revolving Period, the Company, on behalf of the Trust, may, upon three Business Days' prior written notice to the Funding Agent (effective upon receipt) (with copies to the Servicer and the Trustee) reduce or terminate the Commitments (a "COMMITMENT REDUCTION") in an aggregate amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof; PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any reduction in the Series 1998-2 Invested Amount on such date, the Series 1998-2 Invested Amount would exceed the Aggregate Commitment Amount then in effect. Each APA Banks's Commitment shall be reduced by such APA Bank's Commitment Percentage of the amount of such Commitment Reduction. (b) Once reduced, the Commitments may not be subsequently reinstated. Upon effectiveness of any such reduction, the Funding Agent shall prepare a revised Schedule 1 to reflect the reduced Commitment of each APA Bank and Schedule 1 of this Supplement shall be deemed to be automatically superseded by such revised Schedule 1. The Funding Agent shall distribute such revised Schedule 1 to the Company, the Servicer, the Trustee and each APA Bank. SECTION II.9. INTEREST; FEES. (a) Interest shall be payable on the VFC Certificates on each Distribution Date pursuant to subsection 3A.6(a). (b) The Trustee (acting at the written direction of the Servicer upon which the Trustee may conclusively rely) shall distribute pursuant to subsection 3A.6(b), from amounts on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount, to the Funding Agent, for the PRO RATA account of the APA Banks in accordance with their respective 32 Commitment Percentages, on each Distribution Date, a commitment fee with respect to each Accrual Period ending on such date (the "COMMITMENT FEE") (i) during the Series 1998-2 Revolving Period at the Commitment Fee Rate of the average daily excess of the Aggregate Commitment Amount OVER the average aggregate Series 1998-2 Purchaser Invested Amounts of the APA Banks during such Accrual Period and (ii) during the Series 1998-2 Amortization Period at the Commitment Fee Rate of the average daily Series 1998-2 Invested Amount during such Accrual Period; PROVIDED HOWEVER, that no Commitment Fee will be payable hereunder for any Accrual Period or portion thereof during the Series 1998-2 Amortization Period that commences on or after the APA Bank Purchase Date . The Commitment Fee shall be payable (i) monthly in arrears on each Distribution Date and (ii) on the Commitment Termination Date. To the extent that funds on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount at any such date are insufficient to pay the Commitment Fee due on such date, the Servicer shall so notify the Company and the Company shall immediately pay the Funding Agent the amount of any such deficiency. (c) The Trustee (acting at the written direction of the Servicer upon which the Trustee may conclusively rely) shall distribute pursuant to subsection 3A.6(b), from amounts on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount, to the Funding Agent, for the account of the Initial Purchaser, on each Distribution Date prior to the APA Bank Purchase Date and on the Distribution Date immediately succeeding the APA Bank Purchase Date, a facility fee (the "FACILITY FEE") with respect to each Accrual Period ending on such date (or, in the case of the Distribution Date immediately succeeding the APA Bank Purchase Date, the period from and including the immediately preceding Distribution Date to but excluding the APA Bank Purchase Date) (i) during the Series 1998-2 Revolving Period, at the Facility Fee Rate of the average daily Aggregate Commitment Amount during such period and (ii) during the Series 1998-2 Amortization Period, at the Facility Fee Rate of the average daily Series 1998-2 Invested Amount during such period. The Facility Fee shall be payable (i) monthly in arrears on each Distribution Date prior to the APA Bank Purchase Date and (ii) on the Distribution Date immediately succeeding the APA Bank Purchase Date. To the extent that funds on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount at any such date are insufficient to pay the Facility Fee due on such date, the Servicer shall so notify the Company and the Company shall immediately pay the Funding Agent the amount of any such deficiency. (d) Calculations of per annum rates and fees under this Supplement shall be made on the basis of a 360- (or 365-/366-, in the case of interest on the Floating Tranche based on the ABR) day year with respect to Commitment Fees, Facility Fees and interest rates. Each determination of the Eurodollar Rate by the Funding Agent shall be conclusive and binding upon each of the parties hereto in the absence of manifest error. SECTION II.10. INDEMNIFICATION BY THE COMPANY AND THE SERVICER. (a) The Company agrees to indemnify and hold harmless the Funding Agent, each Purchaser and each of their respective officers, directors, agents and employees (each, a "COMPANY INDEMNIFIED 32 PERSON") from and against any loss, liability, expense, damage or injury suffered or sustained by (a "CLAIM") such Company indemnified person by reason of (i) any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Company pursuant to any Pooling and Servicing Agreement or the other Transaction Documents to which it is a party, (ii) a breach of any representation or warranty made or deemed made by the Company (or any of its officers) in any Pooling and Servicing Agreement or other Transaction Documents or (iii) a failure by the Company to comply with any applicable law or regulation or to perform its covenants, agreements, duties or obligations required to be performed or observed by it in accordance with the provisions of any Pooling and Servicing Agreement or the other Transaction Documents, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury (A) resulted from the gross negligence, bad faith or wilful misconduct of such Company indemnified person or its officers, directors, agents, principals, employees or employers, (B) resulted solely from a default by an Obligor with respect to any Receivable or (C) include any income or franchise taxes imposed on (or measured by) any Company indemnified person's net income; PROVIDED that any payments made by the Company pursuant to this subsection shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts (other than amounts payable to the Company) pursuant to any Pooling and Servicing Agreements, shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. (b) The Servicer agrees to indemnify and hold harmless the Funding Agent, each Purchaser and each of their respective officers, directors, agents and employees (each, a "SERVICER INDEMNIFIED PERSON") from and against any Claim by reason of (i) any Claims by third parties against any Seller indemnified person resulting from any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Servicer pursuant to any Pooling and Servicing Agreement or the other Transaction Documents to which it is a party, (ii) a breach of any representation or warranty made or deemed made by the Servicer (or any of its officers) in any Pooling and Servicing Agreement or other Transaction Document or (iii) a failure by the Servicer to comply with any applicable law or regulation or to perform its covenants, agreements, duties or obligations required to be performed or observed by it in accordance with the provisions of any Pooling and Servicing Agreement or the other Transaction Documents, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury resulted from the gross negligence, bad faith or wilful misconduct of such Servicer indemnified person or its officers, directors, agents, principals, employees or employers. 34 ARTICLE III ARTICLE III OF THE AGREEMENT Section 3.1 of the Agreement and each other section of Article III of the Agreement relating to another Series shall read in their entirety as provided in the Agreement. Article III of the Agreement (except for Section 3.1 thereof and any portion thereof relating to another Series) shall read in its entirety as follows and shall be exclusively applicable to the Series 1998-2 Interests: SECTION 3A.2. ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Trustee shall cause to be established and maintained in the name of the Trustee, on behalf of the Trust, (i) for the benefit of the Purchasers and (ii) in the case of clauses (A) and (B) below, for the benefit, subject to the prior and senior interest of the Purchasers, of the owner of the Series 1998-2 Subordinated Interest, (A) a subaccount of the Collection Account (the "SERIES 1998-2 COLLECTION SUBACCOUNT"), which subaccount is the Series Collection Subaccount with respect to Series 1998-2; (B) two subaccounts of the Series 1998-2 Collection Subaccount: (1) the Series 1998-2 Principal Collection Sub-subaccount and (2) the Series 1998-2 Non-Principal Collection Sub-subaccount (respectively, the "SERIES 1998-2 PRINCIPAL COLLECTION SUB-SUBACCOUNT" and the "SERIES 1998-2 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT") and (C) a subaccount of the Series 1998-2 Non-Principal Collection Sub-subaccount (the "SERIES 1998-2 ACCRUED INTEREST SUB-SUBACCOUNT"; all accounts established pursuant to this subsection 3A.2(a) and listed on Schedule 2, collectively, the "TRUST ACCOUNTS"), each Trust Account to bear a designation indicating that the funds deposited therein are held for the benefit of the Persons (and, for each such Person, to the extent) set forth in clauses (i) and (ii) above. The Trustee shall possess all right, title and interest in all funds from time to time on deposit in, and all Eligible Investments credited to, the Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under the sole dominion and control of the Trustee for the exclusive benefit of the Persons (and, for each such Person, to the extent) set forth in clauses (i) and (ii) above. (b) All Eligible Investments in the Trust Accounts shall be held by the Trustee, on behalf of the Certificateholders, for the exclusive benefit of the Purchasers and, subject to the prior interest of the Purchasers, the owner of the Series 1998-2 Subordinated Interest; PROVIDED, HOWEVER, that funds on deposit in a Trust Account which is a Sub-subaccount of a Collection Account may, at the direction of the Company, be invested together with funds held in other Sub-subaccounts of the Collection Account. In the absence of written direction from the Company all funds held in any Trust Account will remain uninvested. After giving effect to any distribution to the Company pursuant to subsection 3A.3(b), amounts on deposit and available for investment in the Series 1998-2 Principal Collection Sub-subaccount shall be invested by the Trustee at the written direction of the Company in Eligible Investments that mature, or that are payable or redeemable upon demand of the holder thereof, (i) in the case of any such investment made during the Series 1998-2 Revolving Period, on or prior to the next Business Day and (ii) in the case of any such 35 investment made during the Series 1998-2 Amortization Period, on or prior to the Business Day immediately preceding the next Distribution Date. Amounts on deposit and available for investment in the Series 1998-2 Non-Principal Collection Sub-subaccount and the Series 1998-2 Accrued Interest Sub-subaccount shall be invested by the Trustee at the written direction of the Company in Eligible Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Distribution Date. As of the Business Day immediately preceding such next Distribution Date, (x) all interest and other investment earnings (net of losses and investment expenses) on funds deposited in the Series 1998-2 Accrued Interest Sub-subaccount shall be deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount and (y) all interest and investment earnings (net of losses and investment expenses) on funds deposited in the Series 1998-2 Principal Collection Sub-subaccount shall be deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount. In the absence of written direction from the Company all funds held in any Trust Account will remain uninvested. SECTION 3A.3. DAILY ALLOCATIONS. In accordance with the written direction of the Servicer, upon which the Trustee may conclusively rely: (a) The portion of the Aggregate Daily Collections allocated to the Series 1998-2 Interests pursuant to Article III of the Agreement shall be allocated and distributed on each Business Day as set forth in this Article III by the Trustee as follows: (i) on each Business Day, an amount equal to the Accrued Expense Amount for such day (or, during the Series 1998-2 Revolving Period, such greater amount as the Company may request in writing) shall be transferred from the Series 1998-2 Collection Subaccount to the Series 1998-2 Non-Principal Collection Sub-subaccount; (ii) any remaining funds on deposit in the Series 1998-2 Collection Subaccount shall be transferred by the Trustee to the Series 1998-2 Principal Collection Sub-subaccount. (b)(i) On each Business Day during the Series 1998-2 Revolving Period (including Distribution Dates), after giving effect to (x) all allocations of Aggregate Daily Collections on such Business Day and (y) any deposit resulting from an Increase, if any, pursuant to subsection 2.5(c) on such Business Day, amounts on deposit in the Series 1998-2 Principal Collection Sub-subaccount shall be distributed by the Trustee to the Company (but only to the extent that the Trustee has received a Daily Report which reflects the receipt of the Collections on deposit therein) not later than 2:00 p.m., New York City time, in accordance with directions contained in the Daily Report; PROVIDED that such distribution shall be made only if no Early Amortization Event or Potential Early Amortization Event relating to an Early Amortization Event set forth in subsections (a), (d) (but only with respect to a Servicer Default set forth in subsection 6.1(e) of the Servicing Agreement), (g), (i) or (j) of 36 Section 5.1 of this Supplement has occurred and is continuing and only to the extent that, if after giving effect to such distribution, the Series 1998-2 Target Receivables Amount would not exceed the Series 1998-2 Allocated Receivables Amount; PROVIDED FURTHER that if the Company or the Servicer, on behalf of the Company, shall have given the Funding Agent irrevocable written notice (effective upon receipt) at least two Business Days prior to such day, in the case of any notice given prior to the APA Bank Purchase Date, on such day, in the case of any notice given on or after the APA Bank Purchase Date with respect to the Floating Tranche, or at least three Business Days prior to such day, in the case of any notice given on or after the APA Bank Purchase Date with respect to the Eurodollar Tranche, the Company or the Servicer may instruct the Trustee in writing (specifying the related amount) to withdraw all or a portion of such amounts on deposit in the Series 1998-2 Principal Collection Sub-subaccount and apply such withdrawn amounts toward the reduction of the Series 1998-2 Invested Amount and the Series 1998-2 Subordinated Interest Amount in accordance with Section 2.6. Amounts distributed to the Company hereunder shall be deemed to be paid first from Collections received directly by the Servicer and second from Collections received in the Lockboxes. (ii) On each Business Day during the Series 1998-2 Amortization Period (including Distribution Dates), funds deposited in the Series 1998-2 Principal Collection Sub-subaccount shall be invested in Eligible Investments that mature on or prior to the Business Day immediately preceding the next Distribution Date and shall be distributed on such Distribution Date in accordance with subsection 3A.6(c). Except as set forth in subsection 3A.6(c), no amounts on deposit in the Series 1998-2 Principal Collection Sub-subaccount shall be distributed by the Trustee to the Company or the owner of the Series 1998-2 Subordinated Interest during the Series 1998-2 Amortization Period. (c) On each Business Day, an amount equal to the Daily Interest Deposit for such day shall be transferred by the Trustee from the Series 1998-2 Non-Principal Collection Sub-subaccount to the Series 1998-2 Accrued Interest Sub-subaccount. (d) The allocations to be made pursuant to this Section 3A.3 are subject to the provisions of Sections 2.5, 2.7, 7.2 and 9.1 of the Agreement. SECTION 3A.4. DETERMINATION OF INTEREST. (a) (i) The amount of interest distributable with respect to the VFC Certificates ("SERIES 1998-2 MONTHLY INTEREST") on each Distribution Date shall be the amount of Daily Interest Expense accrued during the Accrual Period ending on such Distribution Date. (ii) If a change in the CP Rate, the weighted average Eurodollar Rate or the ABR on or after any Settlement Report Date results in a change in Series 1998-2 Monthly Interest for the Accrual Period ending on the Distribution Date immediately succeeding such Settlement Report Date, the Servicer shall amend the Settlement Statement to reflect the adjustment in the Series 1998-2 Monthly Interest for such 37 Accrual Period caused by such change and any consequent adjustments and the Servicer shall also provide written notification to the Trustee of any such change. Any amendment to the Settlement Statement pursuant to this subsection 3A.4(a)(ii) shall be completed by 1:00 p.m. on the day preceding the next Distribution Date. (b) On each Distribution Date, the Servicer shall determine the excess, if any (the "INTEREST SHORTFALL"), of (i) the Series 1998-2 Monthly Interest for the Accrual Period ending on such Distribution Date OVER (ii) the amount which will be available to be distributed to the Purchasers on such Distribution Date in respect thereof pursuant to this Supplement. If the Interest Shortfall with respect to any Distribution Date is greater than zero, an additional amount ("ADDITIONAL INTEREST") equal to the product of (A) the number of days until such Interest Shortfall shall be repaid DIVIDED BY 365 (or 366, as the case may be), (B) the ABR PLUS 2.0% and (C) such Interest Shortfall (or the portion thereof which has not been paid to the Purchasers) shall be payable as provided herein with respect to the VFC Certificates on each Distribution Date following such Distribution Date, to but excluding the Distribution Date on which such Interest Shortfall is paid to the VFC Certificateholders. (c) On any Business Day, the Company may, subject to subsection 3A.4(e), elect to allocate all or any portion of the Available Pricing Amount (i), prior to the APA Bank Purchase Date, to one or more CP Tranches with CP Rate Periods commencing on such Business Day by giving the Funding Agent irrevocable written or telephonic (confirmed in writing) notice thereof, which notice must be received by the Funding Agent prior to 1:00 p.m., New York City time, two Business Days prior to such Business Day or (ii) on or after the APA Bank Purchase Date, to one or more Eurodollar Tranches with Eurodollar Periods commencing on such Business Day by giving the Funding Agent irrevocable written or telephonic (confirmed in writing) notice thereof, which notice must be received by the Funding Agent prior to 1:00 p.m., New York City time, three Business Days prior to such Business Day. Such notice shall specify (i) the applicable Business Day, (ii) the CP Rate Period for each CP Tranche or the Eurodollar Period for each Eurodollar Tranche, as the case may be, to which a portion of the Available Pricing Amount is to be allocated and (iii) the portion of the Available Pricing Amount being allocated to each such CP Tranche or Eurodollar Tranche, as the case may be. On or after the APA Bank Purchase Date, the Funding Agent shall notify each APA Bank of the contents of each such notice promptly upon receipt thereof. Prior to the APA Bank Purchase Date, the Company shall allocate the Series 1998-2 Invested Amount so that the aggregate amounts allocated to outstanding CP Rate Periods at all times equal the Series 1998-2 Invested Amount. (d) Any reduction in the Series 1998-2 Invested Amount on any Business Day shall be allocated in the following order of priority: FIRST, to reduce the Unallocated Balance, as appropriate; and 38 SECOND, to reduce the portion of the Series 1998-2 Invested Amount allocated to Eurodollar Tranches in such order as the Company may select in order to minimize costs payable pursuant to Section 7.4. (e) Notwithstanding anything to the contrary contained in this Section 3A.4, (i) prior to the APA Bank Purchase Date, (A) the Initial Purchaser shall approve the length of each CP Rate Period and the portion of the Series 1998-2 Invested Amount allocated to such CP Rate Period, (B) the Initial Purchaser may select, in its sole discretion, any new CP Rate Period if (x) the Company fails to provide notice of a new CP Rate Period on a timely basis or (y) the Funding Agent, on behalf of the Initial Purchaser, determines, in its sole discretion, that the CP Rate Period requested by the Company is unavailable or for any reason commercially undesirable, (C) the portion of the Series 1998-2 Invested Amount allocable to each CP Tranche must be in an amount equal to $1,000,000 or an integral multiple of $100,000 in excess thereof and (D) no more than ten CP Tranches shall be outstanding at any one time and (ii) on and after the APA Bank Purchase Date, (A) the portion of the Series 1998-2 Invested Amount allocable to each Eurodollar Tranche must be in an amount equal to $500,000 or an integral multiple of $500,000 in excess thereof, (B) no more than five Eurodollar Tranches shall be outstanding at any one time, (C) after the occurrence and during the continuance of any Early Amortization Event or Potential Early Amortization Event relating to an Early Amortization Event set forth in subsections (a), (d) (but only with respect to a Servicer Default set forth in subsection 6.1(e) of the Servicing Agreement), (g) or (j) of Section 5.1 of this Supplement, the Company may not elect to allocate any portion of the Available Pricing Amount to a Eurodollar Tranche and (D) after the end of the Series 1998-2 Revolving Period, the Company may not select any Eurodollar Period that does not end on or prior to the next succeeding Distribution Date. SECTION 3A.5. DETERMINATION OF SERIES 1998-2 MONTHLY PRINCIPAL. (a) PAYMENTS OF SERIES 1998-2 PRINCIPAL. The amount (the "SERIES 1998-2 MONTHLY PRINCIPAL PAYMENT") distributable from the Series 1998-2 Principal Collection Sub-subaccount on each Distribution Date during the Series 1998-2 Amortization Period shall be equal to the amount on deposit in such account on the immediately preceding Settlement Report Date; PROVIDED, HOWEVER, that the Series 1998-2 Monthly Principal Payment on any Distribution Date shall not exceed the Series 1998-2 Invested Amount on such Distribution Date after giving effect to the reductions and increases pursuant to paragraphs (b) and (c) below. In addition, on the last day of any Eurodollar Period that is not a Distribution Date, the Trustee, at the written direction of the Servicer, shall distribute from amounts on deposit in the Series 1998-2 Accrued Interest Sub-subaccount an amount equal to the interest due on the Eurodollar Tranche on the last day of such Eurodollar Period. (b) REDUCTIONS TO SERIES 1998-2 PRINCIPAL. If, on any Special Allocation Settlement Report Date, the Series 1998-2 Allocable Charged-Off Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions from 39 the Servicer, upon which the Trustee may conclusively rely) make the following allocations of such amounts in the following order of priority: (i) the Series 1998-2 Required Reserves shall be reduced (but not below zero) by an amount equal to the Series 1998-2 Allocable Charged-Off Amount (which shall also be reduced by the amount so applied); and (ii) then, to the extent that the Series 1998-2 Allocable Charged-Off Amount is greater than zero following the application in clause (i) above, the Series 1998-2 Invested Amount shall be reduced (but not below zero) by such remaining Series 1998-2 Allocable Charged-Off Amount (which shall also be reduced by the amount so applied). (c) INCREASES TO SERIES 1998-2 PRINCIPAL. If, on any Special Allocation Settlement Report Date, the Series 1998-2 Allocable Recoveries Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions from the Servicer upon which the Trustee may conclusively rely) make the following allocations (after giving effect to the applications in paragraph (b) of such amount in the following order of priority): (i) the Series 1998-2 Invested Amount shall be increased (but only to the extent of any previous reductions of the Series 1998-2 Invested Amount pursuant to subsection 3A.5(b)(ii)) by the amount of the Series 1998-2 Allocable Recoveries Amount (which shall also be reduced by the amount so applied); (ii) then, to the extent that the Series 1998-2 Allocable Recoveries Amount is greater than zero following the applications in clause (i) above, the Series 1998-2 Required Reserves shall be increased (but only to the extent of any previous reductions of the Series 1998-2 Required Reserves pursuant to subsection 3A.5(b)(i)) by such remaining Series 1998-2 Allocable Recoveries Amount (which shall also be reduced by the amount so applied). SECTION 3A.6. APPLICATIONS. (a) On each Distribution Date, the Trustee shall distribute to the Purchasers, from amounts on deposit in the Series 1998-2 Accrued Interest Sub-subaccount, an amount equal to the Series 1998-2 Monthly Interest payable on such Distribution Date (such amount, the "MONTHLY INTEREST PAYMENT"), PLUS the amount of any Monthly Interest Payment previously due but not distributed to the Purchasers on a prior Distribution Date, PLUS the amount of any Additional Interest for such Distribution Date and any Additional Interest previously due but not distributed to the Purchasers on a prior Distribution Date. 40 (b) On each Distribution Date, the Trustee shall apply funds on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount in the following order of priority to the extent funds are available: (i) an amount equal to the Series 1998-2 Monthly Servicing Fee for the Accrual Period ending on such Distribution Date shall be withdrawn from the Series 1998-2 Non-Principal Collection Sub-subaccount by the Trustee and paid to the Servicer or, if Core-Mark or any Affiliate thereof is not the Servicer, an amount equal to the Series 1998-2 Monthly Servicing Fee shall be paid to the Person acting as Successor Servicer (less, in each case, any amounts payable to the Trustee pursuant to Section 8.5 of the Agreement, which shall be paid to the Trustee); (ii) an amount equal to the Facility Fee for the Accrual Period ending on such Distribution Date shall be withdrawn from the Series 1998-2 Non-Principal Collection Sub-subaccount by the Trustee and paid to the Funding Agent, for the account of the Initial Purchaser; (iii) an amount equal to the Commitment Fee for the Accrual Period ending on such Distribution Date shall be withdrawn from the Series 1998-2 Non-Principal Collection Sub-subaccount by the Trustee and paid to the Funding Agent, for the PRO RATA account of the APA Banks, in accordance with their respective Commitment Percentages; and (iv) an amount equal to any unpaid Program Costs due and payable shall be withdrawn from the Series 1998-2 Non-Principal Collection Sub-subaccount by the Trustee and paid to the Persons owed such amounts. Any remaining amounts on deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not allocated pursuant to clauses (i) through (v) above shall be paid to the owner of the Series 1998-2 Subordinated Interest; PROVIDED, HOWEVER, that during the Series 1998-2 Amortization Period, such remaining amounts shall be deposited in the Series 1998-2 Principal Collection Sub-subaccount for distribution in accordance with subsection 3A.6(c). (c) During the Series 1998-2 Amortization Period, the Trustee shall apply, on each Distribution Date, amounts on deposit in the Series 1998-2 Principal Collection Sub-subaccount in the following order of priority: (i) an amount equal to the Series 1998-2 Monthly Principal Payment for such Distribution Date shall be distributed from the Series 1998-2 Principal Collection Sub-subaccount to the Purchasers; and 41 (ii) if, following the repayment in full of the Series 1998-2 Invested Amount, any amounts are owed to the Trustee, the Purchasers or any other Person hereunder, such amounts shall be transferred from the Series 1998-2 Principal Collection Sub-subaccount and paid to the Trustee, the Purchasers or such other Person; and (iii) following the repayment in full of the Series 1998-2 Invested Amount and of all of the amounts set forth in clause (ii), the remaining amount on deposit in the Series 1998-2 Principal Collection Sub-subaccount on such Distribution Date, if any, shall be distributed to the owner of the Series 1998-2 Subordinated Interest. Further, on any other Business Day during the Series 1998-2 Amortization Period, funds may be distributed from the Series 1998-2 Principal Collection Sub-subaccount to the Purchasers in accordance with Section 2.7(a) of this Supplement. ARTICLE IV DISTRIBUTIONS AND REPORTS Article IV of the Agreement (except for any portion thereof relating to another Series) shall read in its entirety as follows and the following shall be exclusively applicable to the VFC Certificates: SECTION 4A.1. DISTRIBUTIONS. (a) On each Distribution Date, the Trustee shall distribute to each Purchaser its applicable pro rata share (based on each such Purchaser's Series 1998-2 Invested Amount) of the amount to be distributed to the Purchasers pursuant to Article III. (b) All allocations and distributions hereunder shall be in accordance with the Daily Report and the Monthly Settlement Statement and shall be made in accordance with the provisions of Section 11.4 hereof and subject to Section 3.1(g) of the Agreement. SECTION 4A.2. DAILY REPORTS. The Servicer shall provide the Funding Agent and the Trustee with a Daily Report in accordance with subsection 4.1(a) of the Servicing Agreement. The Funding Agent shall make copies of the Daily Report available to the Purchasers at their reasonable request at the Funding Agent's office in New York, New York. SECTION 4A.3. STATEMENTS AND NOTICES. (a) MONTHLY SETTLEMENT STATEMENTS. On each Settlement Report Date, the Servicer shall deliver to the Trustee and the Funding Agent (commencing with the Settlement Report Date occurring on May 15, 1998) a Monthly Settlement Statement in the Form of Exhibit E setting forth, among other things, the Loss Reserve Ratio, the Dilution Reserve Ratio, the Minimum Ratio, the Carrying Cost Reserve Ratio, the Servicing Reserve Ratio and the components of the calculation thereof, the Series 42 1998-2 Monthly Interest, the Additional Interest, the Series 1998-2 Monthly Servicing Fee, the Commitment Fee and the Series 1998-2 Monthly Principal Payment, each as recalculated for the period until the next succeeding Settlement Report Date. The Funding Agent shall forward a copy of each Monthly Settlement Statement to any Purchaser upon request by such Purchaser. The Company and the Servicer will deliver copies of all notices, reports, statements and other documents delivered by it pursuant to the Pooling and Servicing Agreements to each Rating Agency. A copy of any such items may be obtained by any Certificateholder upon a written request delivered to the Trustee at the Corporate Trust Office. (b) ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or before January 31 of each calendar year (or such earlier date as required by applicable law), beginning with calendar year 1999, the Trustee shall furnish, or cause to be furnished, to each Person who at any time during the preceding calendar year was a Purchaser, a statement prepared by the Company containing the aggregate amount distributed to such Person for such calendar year or the applicable portion thereof during which such Person was a Purchaser, together with such other information as is required to be provided by an issuer of indebtedness under the Internal Revenue Code and such other customary information as the Company deems necessary or desirable to enable the Purchasers to prepare their tax returns. Such obligation of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall have been prepared by the Servicer and provided to the Trustee or the Funding Agent and to the Purchasers, in each case pursuant to any requirements of the Internal Revenue Code as from time to time in effect. (c) EARLY AMORTIZATION EVENT/DISTRIBUTION OF PRINCIPAL NOTICES. Upon the occurrence of an Early Amortization Event or Potential Early Amortization Event with respect to Series 1998-2, the Company or the Servicer, as the case may be, shall give prompt written notice thereof to the Trustee and the Funding Agent. As promptly as reasonably practicable after its receipt of notice of the occurrence of an Early Amortization Event with respect to Series 1998-2, the Trustee shall give notice thereof (i) to each Rating Agency (which notice shall be given in writing not later than the second Business Day after such receipt) and (ii) to the Funding Agent, who in turn shall give notice to each Purchaser. In addition, on the Business Day preceding each day on which a distribution of principal is to be made during the Series 1998-2 Amortization Period, the Servicer shall direct the Funding Agent to send notice to each Purchaser, which notice shall set forth the amount of principal to be distributed on the related date to the Purchasers with respect to the outstanding VFC Certificates. ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS SECTION V.1. ADDITIONAL EARLY AMORTIZATION EVENTS. If any one of the events specified in Section 7.1 of the Agreement (after any grace periods or consents 43 applicable thereto) or any one of the following events (each, an "EARLY AMORTIZATION EVENT") shall occur during the Series 1998-2 Revolving Period with respect to the Series 1998-2 Interests: (a) (i) failure on the part of the Servicer to direct any payment or deposit to be made or failure of any payment or deposit to be made in respect of interest owing on any VFC Certificates or the Commitment Fee within two Business Days of the date such interest or Commitment Fee is due, (ii) failure on the part of the Servicer to direct any payment or deposit to be made in respect of principal owing on any VFC Certificates on the date such principal is due or (iii) failure on the part of the Servicer to direct any payment or deposit to be made, or of the Company to make any payment or deposit in respect of any other amounts owing by the Company, under any Pooling and Servicing Agreement within five Business Days of the date such other amount is due or such deposit is required to be made; (b) (i) failure on the part of the Company to duly observe or perform in any material respect any of the covenants or agreements of the Company set forth in Sections 2.7(b) or (l) or Section 2.8 of the Agreement or (ii) failure on the part of the Company duly to observe or perform in any material respect any other covenants or agreements of the Company set forth in any Pooling and Servicing Agreement, which failure continues unremedied 30 days after the earlier of the date on which a Responsible Officer of the Company or the Servicer has knowledge thereof and the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Company by the Trustee, or to the Company and the Trustee by the Funding Agent or Purchasers representing 25% or more of the Series 1998-2 Invested Amount; (c) any representation or warranty made or deemed made by the Company in any Pooling and Servicing Agreement to or for the benefit of the Purchasers (i) proves to have been incorrect in any material respect when made or when deemed made and (ii) continues to be incorrect until 30 days after the earlier of the date on which a Responsible Officer of the Company or the Servicer has knowledge thereof and the date on which notice of such failure, requiring the same to be remedied, has been given by the Trustee to the Company or by Purchasers representing 25% or more of the Series 1998-2 Invested Amount to the Company and the Trustee; PROVIDED, HOWEVER, that an Early Amortization Event with respect to the Series 1998-2 Interests shall not be deemed to have occurred under this paragraph if the incorrectness of such representation or warranty gives rise to an obligation to repurchase the related Receivables and the Company has repurchased the related Receivable or all such Receivables, if applicable, in accordance with the provisions of any Pooling and Servicing Agreement within ten Business Days of the day on which the Company was obligated to do so; 44 (d) a Servicer Default with respect to the Servicer shall have occurred and be continuing; (e) a Purchase Termination Event (as defined in the Receivables Sale Agreement) shall have occurred with respect to Core-Mark and be continuing under the Receivables Sale Agreement; (f) a Change in Control shall have occurred; (g) the Series 1998-2 Allocated Receivables Amount shall be less than the Series 1998-2 Target Receivables Amount for a period of five consecutive Business Days; (h) any of the Agreement, the Servicing Agreement, this Supplement or the Receivables Sale Agreement shall cease, for any reason, to be in full force and effect in any material respect, or the Company, any Seller, the Servicer, any Sub-Servicer or any Affiliate of any thereof shall so assert in writing; (i) the Trust shall for any reason cease to have a valid and perfected first priority undivided ownership or security interest in substantially all of the Trust Assets (subject to no other Liens other than Permitted Liens described in clauses (i) and (iv) of the definition thereof), or any of Core-Mark, the Company or any Affiliate of either thereof shall so assert; or (j) 15 days shall have elapsed after there shall have been filed against Core-Mark, the Company or the Trust (i) a notice of federal tax Lien with respect to taxes exceeding $100,000 in the aggregate from the Internal Revenue Service, (ii) a notice of Lien with respect to amounts exceeding $100,000 in the aggregate from the PBGC under Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which either of such sections applies, (iii) a notice of state tobacco excise tax Lien with respect to taxes exceeding $100,000 in the aggregate from any state Governmental Authority or (iv) a notice of any other Lien the existence of which could reasonably be expected to have a material adverse effect on the business, operations or financial condition of such Person, unless in each case there shall have been delivered to the Trustee and each Rating Agency proof of the release of, or payment of amounts secured by, such Lien; (k) Core-Mark or any of its Subsidiaries shall default in the observance or performance of any agreement or condition relating to any of its outstanding Indebtedness (including, without limitation, Indebtedness outstanding under the Credit Agreement) 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 45 default or other event or condition is to cause such Indebtedness to become due prior to its stated maturity; PROVIDED, HOWEVER, that no Early Amortization Event shall be deemed to occur under this paragraph unless the aggregate amount of Indebtedness in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $5,000,000; (l) any action, suit, investigation or proceeding at law or in equity (including, without limitation, injunctions, writs or restraining orders) shall be brought or commenced or filed by or before any arbitrator, court or Governmental Authority against the Company or the Servicer or any properties, revenues or rights of either thereof which could reasonably be expected to have a Material Adverse Effect; (m) the Trust shall issue any Series of Investor Certificates other than the VFC Certificates or the Series 1998-1 Certificates; or (n) one or more judgments or decrees shall be entered against the Servicer or the Company involving in the aggregate a liability (not paid or fully covered by insurance) of $1,000,000 or more and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof. then, in the case of (x) any event described in Section 7.1 of the Agreement, after the applicable grace period (if any) set forth in such Section, and paragraph (m) above, automatically without any notice or action on the part of the Trustee or Purchasers, an early amortization period shall immediately commence or (y) any other event described above, after the applicable grace period (if any) set forth in such subsections, the Trustee may, and at the written direction of the Required APA Banks shall, by written notice then given to the Company and the Servicer, declare that an early amortization period has commenced as of the date of such notice with respect to Series 1998-2 (any such period under clause (x) or (y) above, an "EARLY AMORTIZATION PERIOD"); PROVIDED, HOWEVER, that in the case of the event described in clause (g) above, if an Early Amortization Period has not been declared within ten Business Days after the occurrence of such event, then an Early Amortization Period shall occur automatically unless, (i) prior to the end of such ten Business Day period, the Series 1998-2 Allocated Receivables Amount shall no longer be less than the Series 1998-2 Target Receivables Amount and (ii) so long as the Series 1998-2 Allocated Receivables Amount continues to be equal to or greater than the Series 1998-2 Target Receivables Amount, the Majority Purchasers shall have waived the occurrence of such event. 46 ARTICLE VI SERVICING FEE SECTION VI.1. SERVICING COMPENSATION. A monthly servicing fee (the "SERIES 1998-2 MONTHLY SERVICING FEE") shall be payable to the Servicer on each Distribution Date for the preceding Settlement Period in an amount equal to the product of (a) the Servicing Fee and (b) a fraction the numerator of which is the daily average Aggregate Commitment Amount for such Settlement Period and the denominator of which is the sum of (i) the Aggregate Invested Amounts (other than the Series 1998-2 Invested Amount and the Invested Amount in respect of any variable funding certificate of any other Outstanding Series) on the first day of such Settlement Period and (ii) the Aggregate Commitment Amount on the first day of such Settlement Period plus the Aggregate Commitment amount for any variable funding certificate of any other Outstanding Series. ARTICLE VII CHANGE IN CIRCUMSTANCES SECTION VII.1. ILLEGALITY. Notwithstanding any other provision herein, if, after the Issuance Date, the adoption of or any change in any Requirement of Law or in the interpretation, administration or application thereof shall make it unlawful for any APA Bank to make or maintain its portion of the VFC Certificateholders' Interest in any Eurodollar Tranche and such APA Bank shall notify in writing the Funding Agent, the Trustee and the Company, then the portion of each Eurodollar Tranche applicable to such APA Bank shall thereafter be calculated by reference to the ABR. If any such change in the method of calculating interest occurs on a day which is not the last day of the Eurodollar Period with respect to any Eurodollar Tranche, the Company shall pay to the Funding Agent for the account of such APA Bank the amounts, if any, as may be required pursuant to Section 7.4. SECTION VII.2. INCREASED COSTS. (a) If any Change in Law (except with respect to Taxes which shall be governed by Section 7.3) shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any APA Bank (except any such reserve requirement reflected in the Eurodollar Rate); or (ii) impose on any APA Bank or the London interbank market any other condition affecting the Transaction Documents or the funding of Eurodollar Tranches by such APA Bank; 47 and the result of any of the foregoing shall be to increase the cost to such APA Bank of making, converting into, continuing or maintaining Eurodollar Tranches (or maintaining its obligation to do so) or to reduce any amount received or receivable by such APA Bank hereunder (whether principal, interest or otherwise), then the Company will pay to such APA Bank such additional amount or amounts as will compensate such APA Bank for such additional costs incurred or reduction suffered. (b) If any APA Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such APA Bank's capital or the capital of any corporation controlling such APA Bank as a consequence of its obligations hereunder to a level below that which such APA Bank or such corporation could have achieved but for such Change in Law (taking into consideration such APA Bank's or such corporation's policies with respect to capital adequacy), then from time to time, the Company shall pay to such APA Bank such additional amount or amounts as will compensate such APA Bank for any such reduction suffered. (c) A certificate of an APA Bank setting forth the amount or amounts necessary to compensate such APA Bank as specified in subsections (a) and (b) of this Section 7.2 shall be delivered to the Company (with a copy to the Funding Agent) and shall be conclusive absent manifest error. The agreements in this Section shall survive the termination of this Supplement and the Agreement and the payment of all amounts payable hereunder and thereunder. (d) Failure or delay on the part of any APA Bank to demand compensation pursuant to this Section 7.2 shall not constitute a waiver of such APA Bank's right to demand such compensation; PROVIDED that the Company shall not be required to compensate an APA Bank pursuant to this Section 7.2 for any increased costs or reductions incurred more than 270 days prior to the date that such APA Bank notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such APA Bank's intention to claim compensation therefor; PROVIDED FURTHER that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION VII.3. TAXES. (a) Any and all payments by or on account of any obligation of the Company hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that if the Company shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 7.3) the Funding Agent or such APA Bank receives an amount equal to the sum that it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. 48 (b) In addition, the Company shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Company shall indemnify the Funding Agent and each APA Bank within the later of 10 days after written demand therefor and the Distribution Date next following such demand for the full amount of any Indemnified Taxes or Other Taxes paid by the Funding Agent or such APA Bank on or with respect to any payment by or on account of any obligation of the Company hereunder or under any other Transaction Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 7.3) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Company by the Funding Agent or an APA Bank shall be conclusive absent manifest error. Any payments made by the Company pursuant to this subsection shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts (other than amounts payable to the Company) pursuant to any Pooling and Servicing Agreements, shall be non-recourse other than with respect to funds in excess of the funds needed to make such payment, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. The agreements in this subsection shall survive the termination of this Supplement and the Agreement and the payment of all amounts payable hereunder and thereunder. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Company to a Governmental Authority, the Company shall deliver to the Funding Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Funding Agent. (e) The Funding Agent and any APA Bank that is entitled to an exemption from or reduction of an Indemnified Tax or Other Tax with respect to payments made under this Supplement and the Agreement shall (but with respect to any Indemnified Tax or Other Tax arising from a Change in Law, only to the extent the Funding Agent or such APA Bank is legally able to do so) deliver to the Company (with a copy to the Funding Agent) such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Company on the later of (i) 30 Business Days after such request is made and the applicable forms are provided to such APA Bank or (ii) 30 Business Days before prescribed by applicable law as will permit such payments to be made without withholding or with an exemption from or reduction of Indemnified Taxes or Other Taxes. (f) If the Funding Agent or an APA Bank (or a Transferee) receives a refund solely in respect of Taxes or Other Taxes, it shall pay over such refund to the Company to the extent that it has already received indemnity payments or additional amounts pursuant to 49 this Section 7.3 with respect to such Taxes or Other Taxes giving rise to the refund, net of all out-of-pocket expenses and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); PROVIDED, HOWEVER, that the Company shall, upon request of the Funding Agent or such APA Bank (or Transferee), repay such refund (plus interest or other charges imposed by the relevant Governmental Authority) to the Funding Agent or such APA Bank (or Transferee) if the Funding Agent or such APA Bank (or Transferee) is required to repay such refund to such Governmental Authority. Nothing contained herein shall require the Funding Agent or an APA Bank (or Transferee) to make its tax returns (or any other information relating to its taxes which it deems confidential) available to the Company or any other Person. SECTION VII.4. BREAK FUNDING PAYMENTS. The Company agrees to indemnify each APA Bank and to hold each APA Bank harmless from any loss or expense which such APA Bank may sustain or incur as a consequence of (a) default by the Company in making a borrowing of, conversion into or continuation of a Eurodollar Tranche after the Company has given irrevocable notice requesting the same in accordance with the provisions of this Supplement, or (b) default by the Company in making any prepayment in connection with a Decrease after the Company has given irrevocable notice thereof in accordance with the provisions of Section 2.7 of this Supplement or (c) the making of a prepayment of a Eurodollar Tranche prior to the termination of the Eurodollar Period for such Eurodollar Tranche. 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 the Eurodollar Period (or in the case of a failure to borrow, convert or continue, the Eurodollar Period that would have commenced on the date of such prepayment or of such failure) in each case at the Eurodollar Rate for such Eurodollar Tranche provided for herein over (ii) the amount of interest (as reasonably determined by such APA Bank) which would have accrued to such APA Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market; PROVIDED that any payments made by the Company pursuant to this subsection shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts (other than amounts payable to the Company) pursuant to any Pooling and Servicing Agreements, shall be non-recourse other than with respect to funds in excess of the funds needed to make such payment, and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. This covenant shall survive the termination of this Supplement and the Agreement and the payment of all amounts payable hereunder and thereunder. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by any APA Bank to the Company shall be conclusive absent manifest error. SECTION VII.5. ALTERNATE RATE OF INTEREST. If prior to the commencement of any Eurodollar Period: 50 (a) the Funding Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Eurodollar Period, or (b) the Funding Agent is advised by the Majority Purchasers that the Eurodollar Rate for such Eurodollar Period will not adequately and fairly reflect the cost to such Purchasers of making or maintaining the Eurodollar Tranches during such Eurodollar Period, then the Funding Agent shall forthwith give telecopy or telephonic notice thereof to the Company, the Trustee and the Purchasers, whereupon until the Funding Agent notifies the Company and the Trustee that the circumstances giving rise to such notice no longer exist, the Available Pricing Amount shall not be allocated to any Eurodollar Tranche. SECTION VII.6. MITIGATION OBLIGATIONS. (a) If any APA Bank requests compensation under Section 7.2, or if the Company is required to pay any additional amount to any APA Bank or any Governmental Authority for the account of any APA Bank pursuant to Section 7.3, then such APA Bank shall use reasonable efforts to designate a different lending office for funding or booking its obligations under this Supplement and the Agreement or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such APA Bank, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 7.2 or 7.3, as the case may be, in the future and (ii) would not subject such APA Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to such APA Bank. The Company hereby agrees to pay all reasonable costs and expenses incurred by any APA Bank in connection with any such designation or assignment. (b) If any APA Bank requests compensation under Section 7.2, or if the Company is required to pay any additional amount to any APA Bank or any Governmental Authority for the account of any APA Bank pursuant to Section 7.3, or if any APA Bank defaults in its obligations hereunder, then the Company may, at its sole expense and effort, upon notice to such APA Bank and the Funding Agent, require such APA Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.11), all its interests, rights and obligations under this Supplement to an assignee that shall assume such obligations (which assignee may be another APA Bank, if an APA Bank accepts such assignment); PROVIDED that (i) the Company shall have received the prior written consent of the Funding Agent, which consent shall not unreasonably be withheld, (ii) such APA Bank shall have received payment of an amount equal to its Series 1998-2 Purchaser Invested Amount, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such Series 1998-2 Purchaser Invested Amount and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 7.2 or payments required to be made pursuant to Section 7.3, such assignment 51 will result in a reduction in such compensation or payments. An APA Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such APA Bank or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply. ARTICLE VIII REPRESENTATIONS AND WARRANTIES, COVENANTS SECTION VIII.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SERVICER. The Company and the Servicer each hereby represents and warrants to the Trustee, the Funding Agent and each of the Purchasers that each and every of their respective representations and warranties contained in the Agreement is true and correct in all material respects as of the Issuance Date and as of the date of each Increase. SECTION VIII.2. COVENANTS OF THE COMPANY AND THE SERVICER. The Company and the Servicer hereby agree, in addition to their obligations under the Agreement and the Servicing Agreement, that: (a) they shall not terminate the Agreement unless in compliance with the terms of the Agreement and each Supplement relating to an Outstanding Series; (b) within 60 days of the date hereof, they will (i) deliver to the Trustee executed copies of software licenses or sublicenses, in a form reasonably acceptable to the Trustee, which grant to the Trustee the right to utilize any of the software owned or licensed by the Servicer that is necessary to perform the collection and administrative functions to be performed by the Trustee under the Transaction Documents, (ii) deliver to the Trustee executed copies of any landlord waivers, in a form reasonably acceptable to the Trustee, that may be necessary to grant to the Trustee access to the leased premises of the Servicer for which the Trustee may require access to perform the collection and administrative functions to be performed by the Trustee under the Transaction Documents, except to the extent the Company or the Servicer, as the case may be, owns such property and (iii) have taken all actions reasonably requested by the Trustee in connection with, and to ensure completion of, each of the Servicer Site Review and the Standby Liquidation System; (c) they shall afford the Funding Agent or any representatives of the Funding Agent access to all records relating to the Receivables at any reasonable time during regular business hours, upon reasonable prior notice (and without prior notice if an Early Amortization Event has occurred), according to the Servicer's normal security and confidentiality requirements, for purposes of inspection and shall permit the 52 Funding Agent or any representative of the Funding Agent to visit any of the Company's or the Servicer's, as the case may be, offices or properties during regular business hours and as often as may reasonably be desired to discuss the business, operations, properties, financial and other conditions of the Company or the Servicer with their respective officers and employees and with their independent certified public accountants; PROVIDED that Funding Agent shall notify the Company or the Servicer, as the case may be, prior to any contact with such accountants and shall give the Company or the Servicer the opportunity to participate in such discussions; (d) neither the Company nor the Servicer shall take any action, nor permit any Seller to take any action, requiring the satisfaction of the Rating Agency Condition pursuant to any Transaction Document without the prior written consent of the Majority Purchasers; (e) it shall cooperate in good faith to allow the Trustee to use the Servicer's available facilities and expertise upon the Servicer's termination or default; (f) it shall only direct investments in Eligible Investments which are rated by Moody's and, for purposes of Moody's, references in the definition of Eligible Investments to "one of the two highest rating category" shall be deemed to read "the highest rating category". SECTION VIII.3. COVENANTS OF THE SERVICER. The Servicer hereby agrees that: (a) it shall provide to the Funding Agent (i) no later than 45 days after the Initial Closing Date and (ii) in the case of an addition of a Seller, prior to the related Seller Addition Date (as defined in the Receivables Sale Agreement), evidence that each Seller, or such Seller, as the case may be, maintains disaster recovery systems and back-up computer and other information management systems that are reasonably satisfactory to the Funding Agent; (b) it shall provide to the Funding Agent, simultaneously with delivery to the Trustee or the Rating Agencies, all reports, notices, certificates, statements and other documents required to be delivered to the Trustee or the Rating Agencies pursuant to the Agreement, the Servicing Agreement and the other Transaction Documents and furnish to the Funding Agent promptly after receipt thereof a copy of each material notice, material demand or other material communication (excluding routine communications) received by or on behalf of the Company or the Servicer with respect to the Transaction Documents; and (c) it shall provide notice to the Funding Agent of the appointment of a Successor Servicer pursuant to Section 6.2 of the Servicing Agreement. 53 SECTION VIII.4. OBLIGATIONS UNAFFECTED. The obligations of the Company and the Servicer to the Funding Agent and the Purchasers under this Supplement shall not be affected by reason of any invalidity, illegality or irregularity of any of the Receivables or any sale of any of the Receivables. ARTICLE IX CONDITIONS PRECEDENT SECTION IX.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SUPPLEMENT. This Supplement shall become effective on the date (the "EFFECTIVE DATE") on which the following conditions precedent have been satisfied: (a) DOCUMENTS. The Funding Agent shall have received an original copy for the Initial Purchaser and each APA Bank, each executed and delivered in form and substance satisfactory to it of (i) the Agreement, executed by a duly authorized officer of each of the Company, the Servicer and the Trustee, (ii) this Supplement, executed by a duly authorized officer of each of the Company, the Servicer, the Trustee, the Funding Agent, the Initial Purchaser and the APA Banks and (iii) the other Transaction Documents, each duly executed by the parties thereto. (b) CORPORATE DOCUMENTS; CORPORATE PROCEEDINGS OF THE COMPANY AND SERVICER. The Funding Agent shall have received, with a copy for the Initial Purchaser and each APA Bank, from the Company, each Seller and the Servicer, true and complete copies of: (i) the certificate of incorporation, including all amendments thereto, of such Person, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, as the case may be, and a certificate of compliance, of status or of good standing, as and to the extent applicable, of each such Person as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction; (ii) a certificate of the Secretary of such Person, dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Person, as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Funding Agent, of the Board of Directors of such Person or committees thereof authorizing the execution, delivery and performance of the Transaction Documents to which it is a party and the transactions contemplated thereby, and that such resolutions 54 have not been amended, modified, revoked or rescinded and are in full force and effect, (C) that the certificate of incorporation of such Person has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer executing any Transaction Documents or any other document delivered in connection herewith or therewith on behalf of such Person; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above. (c) GOOD STANDING CERTIFICATES. The Funding Agent shall have received copies of certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to the Company, the Servicer and each Seller, in each State where the ownership, lease or operation of property or the conduct of business requires it to qualify as a foreign corporation, except where the failure to so qualify would not have a material adverse effect on the business, operations, properties or condition (financial or otherwise) of the Company, the Servicer or such Seller, as the case may be. (d) CONSENTS, LICENSES, APPROVALS, ETC. The Funding Agent shall have received, with a counterpart for the Initial Purchaser and each APA Bank, certificates dated the date hereof of a Responsible Officer of the Company, the Servicer and each Seller either (i) attaching copies of all material consents, licenses and approvals required in connection with the execution, delivery and performance by the Company, the Servicer or such Seller, as the case may be, of this Supplement or the Receivables Sale Agreement, as the case may be, and the validity and enforceability of this Supplement and the Agreement against the Company and the Servicer and the Receivables Sale Agreement against such Seller, and such consents, licenses and approvals shall be in full force and effect or (ii) stating that no such consents, licenses or approvals are so required. (e) NO LITIGATION. The Funding Agent shall have received confirmation that there is no pending or, to their knowledge after due inquiry, threatened action or proceeding affecting Core-Mark or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect with respect to Core-Mark and its Subsidiaries taken as a whole. (f) LIEN SEARCHES. The Funding Agent shall have received a written search report listing all effective financing statements that name the applicable Seller or the Company as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to paragraph (h) below and in any other jurisdictions that 55 the Funding Agent determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in paragraph (g) below shall cover any Receivables or Receivables Property), and tax and judgment lien searches showing no such liens that are not permitted by the Transaction Documents (g) UCC CERTIFICATE. The Funding Agent shall have received from each Seller and the Company a UCC Certificate, completed in a manner satisfactory to the Funding Agent, duly executed by a Responsible Officer of such Seller or the Company, as the case may be, and dated the Issuance Date. (h) FILINGS, REGISTRATIONS AND RECORDINGS. Any documents (including, without limitation, financing statements) required to be filed in order (i) to perfect the sale of the Receivables by each Seller to the Company pursuant to the Receivables Sale Agreement and (ii) to create, in favor of the Trustee, a perfected ownership/security interest in the Trust Assets under the Agreement with respect to which an ownership/security interest may be perfected by a filing under the UCC or other comparable statute, shall, in each case, have been properly prepared and executed for immediate filing in each office in each jurisdiction listed in the Agreement or the Receivables Sale Agreement, as the case may be, and such filings are the only filings required in order to perfect the sale of the Receivables to the Company under the Receivables Sale Agreement or to the Trust, under the Agreement, as the case may be, in the jurisdictions listed therein. The Funding Agent shall have received evidence reasonably satisfactory to it of each such filing, registration or recordation and reasonably satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto. (i) LEGAL OPINIONS. The Funding Agent shall have received, with a counterpart for the Initial Purchaser and each APA Bank and the Trustee, opinions of counsel to the Company and the Servicer, dated the Issuance Date, as to corporate, tax, bankruptcy ("true sale" and "non-substantive consolidation"), perfection and priority of security and/or ownership interests and other matters in form and substance acceptable to the Funding Agent and their counsel. (j) FEES. The Funding Agent shall have received payment of all fees and other amounts due and payable to it, the Initial Purchaser or the APA Banks on or before the Effective Date, pursuant to the Fee Letter. (k) ESTABLISHMENT OF ACCOUNTS. The Funding Agent (x) shall have received evidence reasonably satisfactory to it that the Collection Account, the Lockbox Accounts, the Eligible Segregated Account and all other Trust Accounts shall have been established in accordance with the terms and provisions of the Pooling and Servicing Agreements, and (y) shall otherwise be satisfied with the arrangements for collection of the Receivables pursuant thereto. 56 (l) POLICIES. The Funding Agent shall have received, with sufficient copies for the Initial Purchaser and each APA Bank, a copy of the Policies of each Seller, which shall be satisfactory in form and substance to the Funding Agent. (m) FINANCIAL STATEMENTS. The Funding Agent shall have received, with a counterpart for the Initial Purchaser, each APA Bank and the Trustee, on or prior to the Effective Date consolidated balance sheets, consolidated statements of income, consolidated and consolidating statements of shareholders' equity and consolidated statements of cash flows of Core-Mark and its consolidated Subsidiaries as of and for the Fiscal Years ended December 31, 1995, and December 31, 1996 and December 31, 1997, in each case audited by and accompanied by the opinion of KPMG Peat Marwick LLP, which shall be satisfactory in form and substance to the Funding Agent, the Initial Purchaser and the Trustee. (n) EXECUTION OF THE CREDIT AGREEMENT. The Credit Agreement shall have been executed prior to or on the date hereof. (o) INSURANCE. The Funding Agent shall have received, with a counterpart for each Purchaser and the Trustee, on or prior to the Effective Date a schedule listing all policies of product liability insurance maintained by each Seller and certification by a Responsible Officer of such Seller with respect thereto. (p) BACK-UP SERVICING ARRANGEMENTS. The Funding Agent shall have received evidence that each Seller maintains disaster recovery systems and back-up computer and other information management systems that, in the Funding Agent's reasonable judgment, are sufficient to protect such Seller's business against material interruption or loss or destruction of its primary computer and information management systems. (q) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company and the Servicer in the Agreement and this Supplement shall be true and correct in all material respects. ARTICLE X THE FUNDING AGENT SECTION X.1. APPOINTMENT. Each Purchaser hereby irrevocably designates and appoints the Funding Agent as the agent of such Purchaser under this Supplement and each such Purchaser irrevocably authorizes the Funding Agent, in such capacity, to take such action on its behalf under the provisions of this Supplement and to exercise such powers and perform such duties as are expressly delegated to the Funding Agent by the terms of this Supplement, together with such other powers as are reasonably incidental thereto. 57 Notwithstanding any provision to the contrary elsewhere in this Supplement, the Funding Agent shall not have any duties or responsibilities except those expressly set forth herein, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Supplement or otherwise exist against the Funding Agent. SECTION X.2. DELEGATION OF DUTIES. The Funding Agent may execute any of its duties under this Supplement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel (who may be counsel for the Company or the Servicer), independent public accountants and other experts selected by it concerning all matters pertaining to such duties. The Funding Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. SECTION X.3. EXCULPATORY PROVISIONS. Neither the Funding Agent nor any of its officers, directors, employees, 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 the Agreement or this Supplement (x) with the consent or at the request of the Majority Purchasers or (y) in the absence of its own gross negligence or willful misconduct or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Supplement or any other Transaction Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Funding Agent under or in connection with, this Supplement or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Supplement or any other Transaction Document or for any failure of the Company to perform its obligations hereunder or thereunder. The Funding Agent shall not be under any obligation to any Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Supplement or any other Transaction Document, or to inspect the properties, books or records of the Company. SECTION X.4. RELIANCE BY FUNDING AGENT. The Funding Agent shall be entitled to rely, and shall be fully protected in relying, upon any Certificate, 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 Company or the Servicer), independent accountants and other experts selected by the Funding Agent and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. The Funding Agent may deem and treat the payee of any Certificate as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Funding Agent. The Funding Agent shall be fully justified in failing or refusing to take any action under this Supplement or any other Transaction Document unless it shall first receive such advice or 58 concurrence of the Majority Purchasers as it deems appropriate or it shall first be indemnified to its satisfaction by the Purchasers 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 Funding Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Supplement and the other Transaction Documents in accordance with a request of the Majority Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Purchasers. SECTION X.5. NOTICE OF SERVICER DEFAULT OR EARLY AMORTIZATION EVENT OR POTENTIAL EARLY AMORTIZATION EVENT. The Funding Agent shall not be deemed to have knowledge or notice of the occurrence of any Servicer Default with respect to the Servicer or any Early Amortization Event or Potential Early Amortization Event hereunder unless the Funding Agent has received notice from a Purchaser, the Company or the Servicer referring to the Agreement or this Supplement, describing such Servicer Default or Early Amortization Event or Potential Early Amortization Event and stating that such notice is a "notice of a Servicer Default with respect to the Servicer" or a "notice of an Early Amortization Event or Potential Early Amortization Event", as the case may be. In the event that the Funding Agent receives such a notice, the Funding Agent shall give notice thereof to the Purchasers, the Trustee, the Company and the Servicer. The Funding Agent shall take such action with respect to such Servicer Default or Early Amortization Event or Potential Early Amortization Event as shall be reasonably directed by the Majority Purchasers, PROVIDED that unless and until the Funding Agent shall have received such directions, the Funding Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Servicer Default or Early Amortization Event or Potential Early Amortization Event as it shall deem advisable in the best interests of the Purchasers. SECTION X.6. NON-RELIANCE ON THE FUNDING AGENT AND OTHER PURCHASERS. Each Purchaser expressly acknowledges that neither the Funding Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Funding Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Funding Agent to any Purchaser. Each Purchaser represents to the Funding Agent that it has, independently and without reliance upon the Funding Agent or any other Purchaser, 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 Company and made its own decision to enter into this Supplement. Each Purchaser also represents that it will, independently and without reliance upon the Funding Agent or any other Purchaser, 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 Supplement and the other Transaction 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 Company. Except for notices, reports and other documents expressly required to be 59 furnished to the Purchasers by the Funding Agent hereunder, the Funding Agent shall not have any duty or responsibility to provide any Purchaser with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Company which may come into the possession of the Funding Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION X.7. INDEMNIFICATION. The Purchasers agree to indemnify the Funding Agent in its capacity as such (to the extent not reimbursed by the Company and the Servicer and without limiting the obligation of the Company and the Servicer to do so), ratably according to their respective Series 1998-2 Purchaser Invested Amounts 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 be imposed on, incurred by or asserted against the Funding Agent in any way relating to or arising out of the Commitments, this Supplement, any of the other Transaction 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 Funding Agent under or in connection with any of the foregoing; PROVIDED that no Purchaser 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 Funding Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of all amounts payable hereunder. SECTION X.8. THE FUNDING AGENT IN ITS INDIVIDUAL CAPACITY. The Funding Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company, the Servicer or any of their Affiliates as though the Funding Agent were not the Funding Agent hereunder. With respect to any VFC Certificate held by the Funding Agent, the Funding Agent shall have the same rights and powers under this Supplement and the other Transaction Documents as any Purchaser and may exercise the same as though it were not the Funding Agent, and the terms "APA Bank" and "Purchaser" shall include the Funding Agent in its individual capacity. SECTION X.9. SUCCESSOR FUNDING AGENT. The Funding Agent may resign as Funding Agent upon 10 days' notice to the Purchaser and the Company, such resignation not to be effective until a successor funding agent is appointed. If the Funding Agent shall resign as Funding Agent under this Supplement, then the Majority Purchasers shall appoint from among the Purchasers a successor administrative agent for the Purchasers, which successor administrative agent shall be approved by the Company and the Servicer (which approval shall not be unreasonably withheld), whereupon such successor administrative agent shall succeed to the rights, powers and duties of the Funding Agent, and the term "Funding Agent" shall mean such successor administrative agent effective upon such appointment and approval, and the former Funding Agent's rights, powers and duties as Funding Agent shall be terminated, without any other or further act or deed on the part of such former Funding Agent 60 or any of the parties to this Supplement. After any retiring Funding Agent's resignation as Funding Agent, the provisions of this Article 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Funding Agent under this Supplement. ARTICLE XI MISCELLANEOUS SECTION XI.1. RATIFICATION OF AGREEMENT. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument. SECTION XI.2. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION XI.3. FURTHER ASSURANCES. Each of the Company, the Servicer and the Trustee agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments required or reasonably requested by the Funding Agent or the Majority Purchasers more fully to effect the purposes of this Supplement and the sale of the VFC Certificates hereunder, including, without limitation, in the case of the Company and the Servicer, the execution of any financing or registration statements or similar documents or notices or continuation statements relating to the Receivables and the other Trust Assets for filing or registration under the provisions of the UCC or similar legislation of any applicable jurisdiction. SECTION XI.4. PAYMENTS. Each payment to be made hereunder shall be made on the required payment date in lawful money of the United States and in immediately available funds, if to the Purchasers, at the office of the Funding Agent set forth in Section 11.9. Except in the circumstances described in subsection 2.6(c), then on each Distribution Date, the Funding Agent shall remit in like funds to each Purchaser its applicable PRO RATA share (based on each such Purchaser's Series 1998-2 Purchaser Invested Amount) of each such payment received by the Funding Agent for the account of the Purchasers. SECTION XI.5. COSTS AND EXPENSES. The Company agrees to pay all reasonable out-of-pocket costs and expenses of the Funding Agent (including, without limitation, reasonable fees and disbursements of one counsel to the Funding Agent) in connection with (i) the preparation, execution and delivery of this Supplement, the Agreement and the other Transaction Documents and amendments or waivers of any such documents and 61 (ii) the enforcement by the Funding Agent of the obligations and liabilities of the Company and the Servicer under the Agreement, this Supplement, the other Transaction Documents or any related document; PROVIDED that any payments made by the Company pursuant to this subsection shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts (other than amounts payable to the Company) pursuant to any Pooling and Servicing Agreements, shall be non-recourse other than with respect to funds in excess of the funds needed to make such payment, and shall not constitute a claim against the Company to the extent that insufficient proceeds exist to make such payment. SECTION XI.6. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee, the Funding Agent or any Purchaser, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION XI.7. AMENDMENTS. (a) Subject to subsection (c) of this Section 11.7, this Supplement may be amended in writing from time to time by the Servicer, the Company and the Trustee, with the consent of the Funding Agent but without the consent of any holder of any outstanding VFC Certificate, to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or to add any other provisions to or change in any manner or eliminate any of the provisions with respect to matters or questions raised under this Supplement which shall not be inconsistent with the provisions of any Pooling and Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Officer's Certificate or, to the extent in the reasonable view of the Company, a question of law exists, an Opinion of Counsel delivered to the Trustee, adversely affect in any material respect the interests of the VFC Certificateholders. The Trustee may, but shall not be obligated to, enter into any such amendment pursuant to this paragraph or paragraph (b) below which affects the Trustee's rights, duties or immunities under any Pooling and Servicing Agreement or otherwise. (b) Subject to subsection (c) of this Section 11.7, this Supplement may also be amended in writing from time to time by the Servicer, the Company and the Trustee with the consent of the Majority Purchasers for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Supplement or of modifying in any manner the rights of the VFC Certificateholders (including, without limitation, the acceleration of the payment of sums payable to or for the account of the Purchasers under any provision of this Supplement); PROVIDED, HOWEVER, that no such amendment shall, unless signed or consented to in writing by all Purchasers, (i) extend the time for payment, or reduce the amount, of any sum payable to or for the account of any Purchaser under any provision of this Supplement or extend the Series 1998-2 Termination Date, (ii) subject any Purchaser to 62 any additional obligation (including, without limitation, any change in the determination of any amount payable by any Purchaser) or (iii) change the Aggregate Commitment Amount, the amount of any interest or fees or the percentage of Purchasers which shall be required for any action under this subsection or any other provision of this Supplement. (c) Any amendment hereof can be effected without the Funding Agent's being party thereto; PROVIDED, HOWEVER, that no such amendment, modification or waiver of this Supplement that affects rights or duties of the Funding Agent shall be effective unless the Funding Agent shall have given its prior written consent thereto. (d) No amendment hereof shall be effective until the Rating Agency Condition has been satisfied (unless Series 1998-2 has not been rated, in which case this subsection 11.7(d) shall not apply). SECTION XI.8. SEVERABILITY. If any provision hereof is void or unenforceable in any jurisdiction, such voidness or unenforceability shall not affect the validity or enforceability of (i) such provision in any other jurisdiction or (ii) any other provision hereof in such or any other jurisdiction. SECTION XI.9. NOTICES. All notices, requests and demands to or upon any party hereto to be effective shall be given (i) in the case of the Company, the Servicer and the Trustee, in the manner set forth in Section 10.5 of the Agreement and (ii) in the case of the Funding Agent, the Initial Purchaser, each APA Bank and the Rating Agencies (if the Series 1998-2 has been rated), in writing, and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, or, in the case of facsimile notice, when received, (A) in the case of each APA Bank, at its address set forth on Schedule 1 hereto, (B) addressed as follows in the case of the Funding Agent and (C) addressed to the Rating Agencies (if the Series 1998-2 has been rated) as notified by such Rating Agencies; or to such other address as may be hereafter notified by the respective parties hereto: Funding Agent: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Andrew Taylor Fax: 212-946-7776 63 S&P: Standard & Poor's Ratings Service 25 Broadway New York, New York 10004 Attention: Asset-Backed Surveillance Group Fax: 212-412-0225 Moody's: Moody's Investors Service 99 Church Street New York, New York 10007 Attention: Sam Pilcer Fax: 212-553-3850 Initial Purchaser: Park Avenue Receivables Corporation 25 West 43rd Street, Suite 704 New York, New York 10036 Attention: Andy Stidd Fax: 212-302-8767 SECTION XI.10. SUCCESSORS AND ASSIGNS. This Supplement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights under this Supplement without the prior written consent of all of the Purchasers, the Initial Purchaser may not assign or transfer any of its rights under this Supplement except as set forth in Section 2.6 and each APA Bank may not assign or transfer any of its rights under this Supplement except as set forth in Section 11.11. SECTION XI.11. PARTICIPATIONS; ASSIGNMENTS. (a) Any APA Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more financial institutions or other entities ("PARTICIPANTS") participations in its VFC Certificate and its rights hereunder pursuant to documentation in form and substance satisfactory to such APA Bank and the Participant; PROVIDED, HOWEVER, that (i) in the event of any such sale by an APA Bank to a Participant, (A) such APA Bank's obligations under this Supplement shall remain unchanged, (B) such APA Bank shall remain solely responsible for the performance thereof and (C) the Company shall continue to deal solely and directly with such APA Bank in connection with its rights and obligations under the Pooling and Servicing Agreements, (ii) no APA Bank shall sell any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, any Pooling and Servicing Agreement, except to the extent that the approval of such amendment, consent or waiver otherwise would require the unanimous consent of all APA Banks hereunder, (iii) no sale by an APA Bank to a Participant shall be given effect if such sale is not otherwise permitted under subsection 5.3(e) of the Agreement, and (iv) each Participant shall, prior to becoming a Participant, execute and deliver to the Funding Agent an 64 Assignment/Participation Certification. The Company agrees that each APA Bank is entitled, in its own name, to enforce for the benefit of, or as agent for, any Participant any and all rights, claims and interest of such Participant in respect of the Trust and the Company's obligations under this Supplement. A Participant shall have the right to receive Article VII Costs but only to the extent that the related selling APA Bank would have had such right absent the sale of the related participation. (b) Any APA Bank may, upon the satisfaction of all applicable requirements under Section 5.3 of the Agreement, in the ordinary course of its business and in accordance with applicable law, at any time sell all or any part of its rights and obligations under this Supplement and the VFC Certificate to (i) its Affiliates and to any other APA Bank and, (ii) upon prior written notice to the Funding Agent and the Rating Agency, one or more banks or other entities (an "ACQUIRING APA BANK"), in each case pursuant to a commitment transfer supplement, substantially in the form of Exhibit C (the "COMMITMENT TRANSFER SUPPLEMENT"), executed by such Acquiring APA Bank, such assigning APA Bank and the Funding Agent (and, in the case of an Acquiring APA Bank that is not then an existing APA Bank or an Affiliate thereof, by the Company and the Servicer), and delivered to the Funding Agent for its acceptance and recording in the Register. Notwithstanding the foregoing, no APA Bank shall so sell its rights or obligations hereunder (other than to its Affiliate or any other APA Bank) without the prior written consent of the Company, which consent shall not be unreasonably withheld, and no APA Bank shall sell its rights hereunder (w) if such sale is not otherwise permitted under subsection 5.3(e) of the Agreement, (x) if such sale is for any amount less than $5,000,000 (y) if such Acquiring APA Bank is not an Eligible Assignee and (z) unless, prior to such sale, the purchaser of such rights shall have executed and delivered to the Funding Agent and the Transfer Agent and Registrar an Assignment/Participation Certification. Upon such execution, delivery, acceptance and recording, (A) the Company shall sign, on behalf of the Trust, and shall direct the Trustee in writing to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate, a new VFC Certificate in the name and the denomination determined pursuant to the related Commitment Transfer Supplement and set forth in such written direction and shall deliver such VFC Certificate to the Acquiring APA Bank in accordance with such written direction, and (B) from and after the Transfer Issuance Date determined pursuant to such Commitment Transfer Supplement, (I) the Acquiring APA Bank thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of an APA Bank hereunder with a Commitment as set forth therein and (II) the transferor APA Bank thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Supplement. Such Commitment Transfer Supplement shall be deemed to amend this Supplement (including the Schedules attached hereto) to the extent, and only to the extent, necessary to reflect the addition of such Acquiring APA Bank as a "APA Bank" and the resulting adjustment of Commitment Percentages arising from the purchase by such Acquiring APA Bank of all or a portion of the rights and obligations of such transferor APA Bank under this Supplement and the VFC Certificates. 65 (c) The Funding Agent shall maintain at its address referred to in Section 11.9 a copy of each Commitment Transfer Supplement delivered to it. (d) Upon its receipt of a Commitment Transfer Supplement executed by a transferor APA Bank and an Acquiring APA Bank (and, in the case of a Transferee that is not then an existing APA Bank or an Affiliate thereof, by the Company and the Servicer) and a processing fee of $3,500, the Funding Agent shall (i) promptly accept such Commitment Transfer Supplement and (ii) on the Transfer Issuance Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Initial Purchaser, the APA Banks, the Servicer and the Company. (e) The Company and the Servicer each authorizes each APA Bank to disclose to any Participant or Acquiring APA Bank (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such APA Bank's possession concerning the Company, the Servicer or the Receivables which has been delivered to such APA Bank by the Company or the Servicer pursuant to this Supplement or which has been delivered to such APA Bank by or on behalf of the Company in connection with such APA Bank's credit evaluation of the Company, the Servicer, the Trust and the Trust Assets prior to becoming a party to this Supplement; PROVIDED, HOWEVER, if any such information is subject to a confidentiality agreement between such APA Bank and the Company or the Servicer, the Transferee or prospective Transferee shall have agreed to be bound by the terms and conditions of such confidentiality agreement. (f) Notwithstanding any other provisions herein, no transfer or assignment of any interests or obligations of any APA Bank hereunder or any grant of participations therein shall be permitted if such transfer, assignment or grant would result in a prohibited transaction under Section 4975 of the Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be regarded as plan assets pursuant to 29 C.F.R. Section 2510.3-101. SECTION XI.12. ADJUSTMENTS; SET-OFF. (a) If any Purchaser (a "BENEFITTED PURCHASER") shall at any time receive in respect of its Series 1998-2 Invested Amount any distribution of principal, interest, Commitment Fees or other fees, or any interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such distribution received by any other Purchaser, if any, in respect of such other Purchaser's Series 1998-2 Invested Amount, or interest thereon, such Benefitted Purchaser shall purchase for cash from the other Purchasers such portion of each such other Purchaser's interest in the VFC Certificates, or shall provide such other Purchasers with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Purchaser to share the excess payment or benefits of such collateral or proceeds ratably with each of the Purchasers; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Purchaser, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Purchaser so 66 purchasing a portion of the VFC Certificateholders' Interest may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Purchaser were the direct holder of such portion. (b) In addition to any rights and remedies of the Purchasers provided by law, each Purchaser shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon any amount becoming due and payable by the Company hereunder or under the VFC Certificates to set-off and appropriate and apply against 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 Purchaser to or for the credit or the account of the Company. Each Purchaser agrees promptly to notify the Company and the Funding Agent after any such set-off and application made by such Purchaser; PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. SECTION XI.13. COUNTERPARTS. This Supplement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. SECTION XI.14. NO BANKRUPTCY PETITION. (a) The Funding Agent and each Purchaser hereby covenants and agrees that, prior to the date which is one year and one day after the later of (i) the last day of the Series 1998-2 Amortization Period and (ii) the last day of the amortization period of any other Outstanding Series, it will not institute against, or join any other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any federal or state bankruptcy or similar law. (b) The Company, the Servicer, the Trustee, the Funding Agent and each APA Bank hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper, it will not institute against, or join any other Person in instituting against, the Initial Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any federal or state bankruptcy or similar law. 67 SECTION XI.15. LIMITATION ON ADDITION AND TERMINATION OF SELLERS. (a) Notwithstanding anything to the contrary contained in the Receivables Sale Agreement, no Seller or Seller Division shall be added thereunder unless (subject to the proviso contained in clause (iv) below) each of the following conditions shall have been satisfied: (i) (x) in the case of a proposed addition of a Seller, each of the conditions set forth in Section 3.02 of the Receivables Sale Agreement, and (y) in the case of a proposed addition of a Seller Division, the conditions set forth in subsections 3.02(a)(ii), (e), (f), (g), (h), (j) and (k) (in each case, applied to the applicable New Division as if it were a proposed additional Seller) of the Receivables Sale Agreement, shall have been satisfied. (ii) The Company shall have received copies of the Policies of such additional Seller (or such Seller Division, as the case may be, if different from the Policies of the Seller of which it is a New Division), which Policies shall be in form and substance satisfactory to the Company. (iii) The Company shall have received confirmation (A) that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such additional Seller (or such Seller Division, as the case may be) before any Governmental Authority (I) that could reasonably be expected to have a Material Adverse Effect or (II) that purports to affect the legality, validity or enforceability of this Supplement, the Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby. (iv) The Company and the Trustee shall have received evidence that the Rating Agency Condition shall have been satisfied with respect to the addition of such Seller (or addition of such Seller Division, as the case may be); PROVIDED that such satisfaction of the Rating Agency Condition (and such receipt of evidence thereof) shall not be required with respect to the addition of up to two Subsidiaries of Core-Mark (and/or New Divisions) as Sellers (or Seller Divisions) during any calendar year, each of which Subsidiaries (or New Divisions) meets the following criteria: (x) such Subsidiary (or New Division) is in the same line of business as the existing Sellers as of the related Seller Addition Date (as defined in the Receivables Sale Agreement) and (y) as of such date, immediately prior to giving effect to such addition (the "MEASUREMENT DATE"), the ratio (expressed as a percentage) of (A) the aggregate Principal Amount of what would constitute all Eligible Receivables of such Subsidiary (or New Division) at the end of the Business Day immediately preceding the Measurement Date if it were a Seller (or Seller Division) MINUS the amount which would constitute the Overconcentration Amount applicable to such Receivables on the Measurement Date if such Subsidiary (or New Division) were a Seller (or Seller Division) to (B) the sum of the Aggregate Receivables Amount as of the end of such day plus the amount described pursuant to clause (A) is less than 10 percent. 68 (v) The Trustee shall have received Opinions of Counsel of outside counsel addressed to the Trustee covering matters with respect to such Seller as were covered in the opinions delivered on the Issuance Date with respect to the original Sellers, including "true-sale" and non-substantive consolidation opinions. (vi) The Company and the Trustee shall have received a certificate prepared by a Responsible Officer of the Servicer certifying that after giving effect to the addition of such Seller (or such Seller Division, as the case may be), the Aggregate Target Receivables Amount shall equal the Aggregate Allocated Receivables Amount on the related Seller Addition Date. (b) Notwithstanding anything to the contrary contained in the Receivables Sale Agreement, the Company shall not consent to any request made pursuant to Section 9.13 thereof, nor shall any Seller which is the subject of such request be terminated under the Receivables Sale Agreement, in each case unless (i) no Early Amortization Event, Potential Early Amortization Event or Potential Purchase Termination Event (as defined in the Receivables Sale Agreement) (other than with respect to the Seller to be so terminated) has occurred and is continuing (both before and after giving effect to such termination) and (ii) the Trustee shall have received prior notice of such termination (which notice shall be accompanied by a PRO FORMA Daily Report confirming that the Aggregate Target Receivables Amount equals or exceeds the Aggregate Allocated Receivables Amount, each calculated after giving effect to such termination and excluding all Receivables originated by the Seller to be terminated). (c) Upon the termination of a Seller pursuant to Section 9.13 of the Receivables Sale Agreement and the foregoing paragraph (b), all calculations for purposes of Series 1998-2 (including, without limitation, for purposes of the PRO FORMA calculations pursuant to paragraph (b) above) shall exclude in each case the Receivables originated by such terminated Seller.] ARTICLE XII FINAL DISTRIBUTIONS SECTION XII.1. CERTAIN DISTRIBUTIONS. (a) Not later than 2:00 p.m., New York City time, on the Distribution Date following the date on which the proceeds from the disposition of the Receivables pursuant to subsection 7.2(b) of the Agreement are deposited into the Series 1998-2 Non-Principal Collection Sub-subaccount and the Series 1998-2 Principal Collection Sub-subaccount, the Trustee shall distribute such amounts pursuant to Article III of this Supplement. 69 (b) Notwithstanding anything to the contrary in this Supplement or the Agreement, any distribution made pursuant to this Section shall be deemed to be a final distribution pursuant to Section 9.3 of the Agreement with respect to the VFC Certificates. 70 IN WITNESS WHEREOF, the Company, the Servicer, the Trustee, the Funding Agent and the Initial Purchasers have caused this Series 1998-2 Supplement to be duly executed by their respective officers as of the day and year first above written. CM CAPITAL CORPORATION By: /s/ ROBERT A. ALLEN ------------------------------------- Name: Robert A. Allen Title: President & CEO CORE-MARK INTERNATIONAL, INC., in its individual capacity and as Servicer By: /s/ LEO F. KORMAN ------------------------------------- Name: Leo F. Korman Title: Senior Vice President & CFO THE CHASE MANHATTAN BANK, as Funding Agent By: /s/ BRADLEY S. SCHWARTZ ------------------------------------- Name: Bradley S. Schwartz Title: Vice President THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Trustee By: /s/ KIMBERLY K. COSTA ------------------------------------- Name: Kimberly K. Costa Title: Second Vice President PARK AVENUE RECEIVABLES CORPORATION, as the Initial Purchaser By: /s/ ANDREW L. STIDD ------------------------------------- Name: Andrew L. Stidd Title: President 71 THE CHASE MANHATTAN BANK, as an APA Bank By: /s/ BRADLEY S. SCHWARTZ ------------------------------------- Name: Bradley S. Schwartz Title: Vice President EX-10.21 8 EXHIBIT 10.21 EXECUTION COPY Exhibit 10.21 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- --------------- CM CAPITAL CORPORATION, as Company, CORE-MARK INTERNATIONAL, INC., as Servicer, SUBSIDIARIES OF CORE-MARK INTERNATIONAL, INC., NAMED HEREIN, as Sub-Servicers and THE CHASE MANHATTAN BANK, as Trustee --------------- SERVICING AGREEMENT Dated as of April 1, 1998 --------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . . . . . . . . . 2 2.1. Appointment of Servicer and Sub-Servicers . . . . . . . . . . . . . . . 2 2.2. Servicing Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.3. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4. Reconciliation of Deposits. . . . . . . . . . . . . . . . . . . . . . . 8 2.5. Servicing Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SERVICER AND THE SUB-SERVICERS . . . . . . . . . . . 9 3.1. Corporate Existence; Compliance with Law. . . . . . . . . . . . . . . . 9 3.2. Corporate Power; Authorization; Consents. . . . . . . . . . . . . . . . 10 3.3. Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.4. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.5. No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6. Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.7. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.8. Servicing Ability . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.9. Location of Records . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE IV COVENANTS OF THE SERVICER. . . . . . . . . . . . . . 11 4.1. Delivery of Daily Reports . . . . . . . . . . . . . . . . . . . . . . . 11 4.2. Delivery of Monthly Settlement Statement. . . . . . . . . . . . . . . . 12 4.3. Delivery of Quarterly Servicer's Certificate. . . . . . . . . . . . . . 12 4.4. Delivery of Independent Public Accountants' Servicing Reports . . . . . 13 4.5. No Guarantee or Assumption of Company's Liabilities.. . . . . . . . . . 13 4.6. Extension, Amendment and Adjustment of Receivables; Amendment of and Compliance with Policies . . . . . . . . . . . . . . . . . . . . 13 4.7. Servicer's Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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PAGE ---- 4.8. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.9. Location of Records . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.10. Visitation Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.11. Lockbox Agreement; Lockbox Accounts; Eligible Segregated Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.12. Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . 15 4.13. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V OTHER MATTERS RELATING TO THE SERVICER AND THE SUB-SERVICERS . . . 16 5.1. Merger, Consolidation, etc. . . . . . . . . . . . . . . . . . . . . . . 16 5.2. Indemnification of the Trust and the Trustee. . . . . . . . . . . . . . 17 5.3. Servicer Not to Resign. . . . . . . . . . . . . . . . . . . . . . . . . 18 5.4. Access to Certain Documentation and Information Regarding the Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VI SERVICER DEFAULTS. . . . . . . . . . . . . . . . 18 6.1. Servicer Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 6.2. Trustee to Act; Appointment of Successor. . . . . . . . . . . . . . . . 21 6.3. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE VII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . 24 7.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.5. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 24 7.7. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . . . 24 7.8. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.9. No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.10. No Bankruptcy Petition . . . . . . . . . . . . . . . . . . . . . . . . 25 7.11. Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBITS EXHIBIT A Form of Quarterly Servicer's Certificate EXHIBIT B Form of Agreed Upon Procedures SCHEDULE 1 Lockbox Accounts, Lockbox Processors, Collection P.O. Boxes and Eligible Segregated Accounts -ii- SERVICING AGREEMENT, dated as of April 1, 1998, among CM Capital Corporation, a Delaware corporation (the "COMPANY"); Core-Mark International, Inc. a Delaware corporation ("CORE-MARK"), as servicer (in such capacity, the "SERVICER") and each of its other subsidiaries from time to time parties hereto (each, a "SUB-SERVICER") and The Chase Manhattan Bank, a New York banking corporation, not in its individual capacity, but solely as trustee (in such capacity, the "TRUSTEE"). W I T N E S E T H : WHEREAS, the Company and the Sellers (as defined in the Pooling Agreement referred to below) have entered into a Receivables Sale and Contribution Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "RECEIVABLES SALE AGREEMENT"); WHEREAS, pursuant to the Receivables Sale Agreement, the Sellers sell and contribute to the Company, and the Company purchases and receives from the Sellers, all of the Sellers' right, title and interest in, to and under the Receivables (as defined in the Pooling Agreement referred to below) now existing or hereafter created and in the rights of the Seller in, to and under all Related Property related thereto; WHEREAS, the Company in turn has transferred the Receivables now existing or hereafter created and the rights of the Company in, to and under all Related Property related thereto to a master trust pursuant to a Pooling Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "POOLING AGREEMENT"), among the Company, the Servicer and the Trustee; and WHEREAS, the parties hereto wish to enter into this Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS I.1. DEFINITIONS. Unless otherwise defined herein, capitalized terms which are used herein shall have the meanings assigned to such terms in Section 1.1 of the Pooling Agreement, as defined above, and each Supplement defined therein, among the Company, the Servicer and the Trustee. 2 I.2. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined herein or in the Pooling Agreement or any Supplement shall have their defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 of the Pooling Agreement or any Supplement, and accounting terms partly defined in Section 1.1 of the Pooling Agreement or any Supplement to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under GAAP, the definitions contained herein shall control. (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 contained in this agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (d) The definitions contained in Section 1.1 of the Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine, the feminine and the neuter genders of such terms. (e) Where reference is made in this Agreement or the Pooling Agreement to the principal amount of Receivables, such reference shall, unless explicitly stated otherwise, be deemed a reference to the Principal Amount (as such term is defined in Section 1.1 of the Pooling Agreement) of such Receivables. (f) Any reference herein or in any other Transaction Document to a provision of the Internal Revenue Code or ERISA shall be deemed a reference to any successor provision thereto. (g) All references herein to any agreement or instrument shall be deemed references to such agreement or instrument as amended, supplemented or otherwise modified from time to time. ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES II.1. APPOINTMENT OF SERVICER AND SUB-SERVICERS. Core-Mark hereby agrees to act as the Servicer under the Pooling and Servicing Agreement, the Company and the Trustee hereby consent to Core-Mark's acting as the Servicer, and the Investor 3 Certificateholders by their acceptance of the Certificates consent to Core-Mark's acting as the Servicer. In addition, Core-Mark hereby agrees to act as, the Company and the Trustee hereby consent to Core-Mark's being appointed to act as, and the Investor Certificateholders by their acceptance of the Certificates consent to Core-Mark's being appointed to act as, such parties' agent to coordinate the servicing of the Receivables by the Sub-Servicers. In such agency capacities, the Servicer will have responsibility for the management of the servicing and administration of Receivables and receipt of Collections in respect of the Receivables and will have the authority to make any management decisions relating to the Receivables to the extent such authority is granted to the Servicer under any Pooling and Servicing Agreement. The Company, the Trustee and the Investor Certificateholders shall treat Core-Mark as the Servicer and may conclusively rely on the instructions, notices and reports of Core-Mark as Servicer for so long as Core-Mark is the Servicer. In addition, (x) each Sub-Servicer agrees to act as a Sub-Servicer under each Pooling and Servicing Agreement, (y) the Company and the Trustee hereby consent to such Sub-Servicer's acting as a Sub-Servicer and being appointed their agent to service and administer the Receivables originated by it, and (z) the Investor Certificateholders by their acceptance of the Certificates consent to such Sub-Servicer's acting as a Sub-Servicer and being appointed their agent to service and administer the Receivables originated by it. Each Sub-Servicer will be responsible, as directed by the Servicer, for the servicing and administration of the Receivables originated by such Sub-Servicer. II.2. SERVICING PROCEDURES. (a) The Servicer shall manage the servicing and administration of the Receivables, the collection of payments due under the Receivables and the charging off of any Receivables as uncollectible, all in accordance with the Policies and all the terms and provisions of the Pooling and Servicing Agreements. The Servicer shall have full power and authority, acting alone or through any party properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable, but at all times subject to the terms of this Agreement and the other Transaction Documents. Without limiting the generality of the foregoing and subject to Section 6.1, the Servicer or its designee is hereby authorized and empowered (i) to give direction to the Trustee with respect to withdrawals from, and payments to, the Collection Account (including the subaccounts thereof) in accordance with the Daily Report and as otherwise specified in the Pooling and Servicing Agreements, (ii) to execute and deliver, on behalf of the Trust for the benefit of the Investor Certificateholders, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables and, after the delinquency of any Receivable and to the extent permitted under and in compliance with applicable Requirements of Law, to commence enforcement proceedings with respect to such Receivables and (iii) to make any filings, refilings, reports, notices, applications and registrations with, and to seek any consents or authorizations from, the Securities and Exchange Commission and any state securities authority on behalf of the Trust as may be necessary or advisable to comply with any federal or state securities or reporting requirements or laws. 4 (b) Each Servicing Party shall, at its cost and expense and as agent for the Company, the Trust and the Investor Certificateholders, collect, consistent with its past practices and in accordance with the Policies, as and when the same becomes due, the amount owing on each Receivable with respect to which it is the Servicing Party. No Servicing Party will make any material changes that deviate from the Policies in its administrative, servicing and collection systems except (i) as expressly permitted by the terms of any Pooling and Servicing Agreement and (ii) after giving written notice to the Trustee and the Rating Agencies of any such change. In the event of default under any Receivable, the responsible Servicing Party shall have the power and authority, on behalf of the Company and the Trust for the benefit of the Investor Certificateholders, to take such action in respect of such Receivable as such Servicing Party may deem advisable. In the enforcement or collection of any Receivable, the relevant Servicing Party shall be entitled to sue thereon (i) in its own name or (ii) if, but only if, the Company consents in writing (which consent shall not be unreasonably withheld), as agent for the Company. In no event shall any Servicing Party be entitled to take any action which would make the Company, the Trustee or the Investor Certificateholders a party to any litigation without the express prior written consent of such Person. (c) Without limiting the generality of the foregoing and subject to Section 6.2, each Servicing Party is hereby authorized and empowered to delegate any or all of its servicing, collection, enforcement and administrative duties hereunder with respect to the Receivables to a Person who agrees to conduct such duties in accordance with the Policies. Such Servicing Party shall notify the Company, the Trustee and any Rating Agency of the appointment of a designee as provided for herein; PROVIDED, HOWEVER, that, in the event that such delegation would reasonably be expected to adversely affect the ability of such Servicing Party or the Servicer to perform its obligations in the manner contemplated by any Pooling and Servicing Agreement, or otherwise to have a material adverse effect upon the Receivables taken as a whole, such Servicing Party shall give prior written notice to the Company, the Trustee, each Agent and the Rating Agencies of any such delegation, and prior to such delegation's being effective, such Servicing Party and the Servicer shall have received notice that the Rating Agency Condition shall be satisfied after giving effect to such delegation and shall have obtained the consent of the Company and each Agent to such delegation. No delegation of duties by a Servicing Party permitted hereunder will relieve such Servicing Party or the Servicer of its liability and responsibility with respect to such duties. (d) Except as provided in any Pooling and Servicing Agreement, neither any Servicing Party nor any Successor Servicer shall be obligated to use servicing procedures, offices, employees or accounts for servicing the Receivables transferred to the Company and, subsequently, to the Trust, which are separate from the procedures, offices, employees and accounts used by such Servicing Party or such Successor Servicer, as the case may be, in connection with servicing other receivables. (e) Each Servicing Party shall maintain reasonable and customary fidelity bond coverage insuring against losses through wrongdoing of its officers and employees who are involved in the servicing of the Receivables, including, without limitation, depositor's forgery. 5 (f) Each Servicing Party shall comply with and perform its servicing obligations with respect to the Receivables in accordance with the contracts, if any, relating to the Receivables and the Policies, except insofar as any failure to so comply or perform would not have (a) a material impairment of the ability of the Servicer to perform its obligations under the Transaction Documents, (b) a material impairment of the validity or enforceability of any of the Transaction Documents against the Servicer, (c) a material impairment of the collectibility of the Receivables serviced by the Servicer taken as a whole or (d) a material impairment of the interests, rights or remedies of the Company under or with respect to the Transaction Documents or the Receivables taken as a whole (collectively, a "MATERIAL ADVERSE EFFECT"). (g) No Servicing Party shall take any action to cause any Receivable to be evidenced by any "instrument" (other than an instrument which constitutes or together with a security agreement constitutes "chattel paper" (each as defined in the UCC as in effect in any state in which the Company's or the applicable Seller's chief executive office or books and records relating to such Receivable are located)) or any title in bearer form except in connection with its enforcement or collection of an Aged Receivable, in which event such Servicing Party shall deliver such instrument to the Trustee as soon as reasonably practicable but in no event more than 5 days after the execution thereof. Each Servicing Party shall comply with the provisions of Schedule 3 to the Pooling Agreement with respect to any chattel paper evidencing a Receivable. II.3. COLLECTIONS. (a) As of the Initial Closing Date, the Servicer shall have established Lockbox Accounts with Lockbox Banks, engaged Lockbox Processors, opened Collection P.O. Boxes, and established Eligible Segregated Accounts, in each case listed on Schedule 1 hereto and meeting the requirements of clause (b) below, which are sufficient to allow collection of the Receivables in accordance with the Pooling and Servicing Agreements. The Sub-Servicers, or the Servicer on their behalf, shall instruct at all times all Obligors to make all payments in respect of the Receivables to a Lockbox, a Lockbox Account, a Collection P.O. Box, an Eligible Segregated Account or the Collection Account; PROVIDED that to the extent that any Servicing Party in the normal course of its business and consistent with past practices has permitted such Obligors to remit payments to a Collector such Obligors may be instructed to continue to remit payments to a Collector, subject in all cases to the provisions of this Section 2.3. Each Servicing Party is hereby authorized to collect payments in accordance with the foregoing sentence. With respect to any payments in respect of the Receivables that are made directly to any Servicing Party (including, without limitation, to any Collection P.O. Box, or any employees of such Servicing Party or independent contractors employed thereby other than a Collector), such Servicing Party shall, within one Business Day of receipt thereof, deposit such amounts (in the form received) to a Lockbox Account, or an Eligible Segregated Account and, prior to forwarding such amounts, such Servicing Party shall hold such payments in trust as custodian for the Trustee. Any payments collected by a Collector shall be deposited (in the form received) by a Collector, into a Lockbox Account or an Eligible Segregated Account within one Business Day following receipt thereof; PROVIDED, that on any Business Day all Collectors may hold in the aggregate up to $150,000 provided that in all events such payments shall be deposited within three 6 Business Days following receipt thereof. All Collections received in a Lockbox shall, within one Business Day of receipt thereof, be deposited by the applicable Lockbox Processor in a Lockbox Account. All immediately available funds on deposit in a Lockbox Account shall be transferred by the relevant Lockbox Bank to the Collection Account within one Business Day of such funds becoming immediately available. All immediately available funds on deposit in an Eligible Segregated Account shall be transferred by the Eligible Segregated Account Bank to the Collection Account within one Business Day of such funds becoming immediately available. Each of the Company and each Servicing Party represents, warrants and agrees that all Collections shall be collected, processed and deposited by it pursuant to, and in accordance with the terms hereof and the other Pooling and Servicing Agreements, the Lockbox Agreements and the Eligible Segregated Account Agreements. (b)(i) No Person shall act as a Lockbox Bank or a Lockbox Processor unless it has entered into a Lockbox Agreement with the Company and, in the case of a Lockbox Bank, unless the unsecured and uncollateralized obligations of such Person (or its holding company parent) are rated in one of the three highest long-term or short-term rating categories by each Rating Agency rating such Person and, in the case of a Lockbox Processor, unless such person is bonded against loss for an amount not less than $5,000,000 by a nationally recognized bonding company. Each Lockbox Agreement shall provide that the Lockbox Bank or the Lockbox Processor thereunder, as the case may be, is irrevocably directed, and such Lockbox Bank or Lockbox Processor, as the case may be, irrevocably agrees, to (i) deposit funds received in the Lockbox directly into the Lockbox Account and (ii) in the case of a Lockbox Bank only, transfer immediately available funds on deposit in the Lockbox Account within one Business Day of such funds becoming immediately available to the Trustee for deposit in the Collection Account. A new Lockbox Account may be designated by the Company and the Servicer; PROVIDED that the Lockbox Bank or the Lockbox Processor, as the case may be, chosen to maintain or process payments for deposit into such new Lockbox Account shall have entered into a Lockbox Agreement with the Company, the Servicer and the Trustee. The Company or the Servicer shall notify each Rating Agency and the Trustee of the designation of a new Lockbox Account and the related Lockbox and Lockbox Bank or Lockbox Processor, as the case may be. Prior to any resignation of a Lockbox Bank or a Lockbox Processor or termination of a Lockbox Bank or a Lockbox Processor by the Company or the Trustee, the Servicer hereby agrees to obtain a replacement Lockbox Bank or Lockbox Processor, as the case may be (which may be a Person currently acting as a Lockbox Bank or Lockbox Processor, as the case may be), in the case of a Lockbox Bank the unsecured and uncollateralized obligations of which (or of its holding company parent) are rated in one of the three highest long-term or short-term rating categories by each Rating Agency rating such replacement Lockbox Bank or, in the case of a Lockbox Processor, which is bonded against loss for an amount not less than $5,000,000 by a nationally recognized bonding company to serve under a Lockbox Agreement. (ii) No Person shall act as a Eligible Segregated Bank unless it has entered into a Eligible Segregated Account Agreement with the Company and the uncollateralized obligations of such Person (or its holding company parent) are rated in one of the three highest long-term or short-term rating categories by each Rating Agency rating such Person. 7 Each Eligible Segregated Account Bank Agreement shall provide that the Eligible Segregated Account Bank is irrevocably directed, and such Eligible Segregated Account Bank, irrevocably agrees, to transfer immediately available funds on deposit in the Eligible Segregated Account within one Business Day of such funds becoming immediately available to the Trustee for deposit in the Collection Account. A new Eligible Segregated Account may be designated by the Company and the Servicer; PROVIDED that the Eligible Segregated Account Bank chosen to maintain such new Eligible Segregated Account shall have entered into an Eligible Segregated Account Bank Agreement with the Company, the Servicer and the Trustee. The Company or the Servicer shall notify each Rating Agency and the Trustee of the designation of a new Eligible Segregated Account. Prior to any resignation of an Eligible Segregated Account Bank or termination of an Eligible Segregated Account Bank by the Company or the Trustee, the Servicer hereby agrees to obtain a replacement Eligible Segregated Account Bank the unsecured and uncollateralized obligations of which (or of its holding company parent) are rated in one of the three highest long-term or short-term rating categories by each Rating Agency rating such replacement Eligible Segregated Account Bank. (iii) Each Collection P.O. Box shall be opened in the name of the Company (but which shall accept mail addressed to the Servicer or the Sellers) and the Trustee shall be irrevocably authorized to collect mail from such Collection P.O. Box in the event of a Servicer Default. (c) The Trustee shall administer amounts on deposit in the Collection Account, and the Servicer, on behalf of the Trust, shall, have the authority revocable by the Trustee upon the occurrence and during the continuance of a Servicer Default, to administer amounts on deposit in the Lockbox Accounts and the Eligible Segregated Accounts, in each case in accordance with the terms of the Pooling and Servicing Agreements. The Servicer and the Sub-Servicers, on behalf of the Trust, (i) shall enforce all terms of each Lockbox Agreement and Eligible Segregated Account Agreement against the relevant Lockbox Processor, Lockbox Bank and Eligible Segregated Account Bank, as the case may be, and (ii) shall take steps in a prompt and timely manner to replace any Lockbox Processor, Lockbox Bank and Eligible Segregated Account Bank which does not comply with the provisions of the relevant Lockbox Agreement or Eligible Segregated Account Bank, as the case may be in all material respects. Each of the Company and each Servicing Party acknowledges and agrees that (i) it shall not have any right to withdraw any funds on deposit in the Collection Account, an Eligible Segregated Account or any Lockbox Account and (ii) all amounts deposited in the Collection Account, an Eligible Segregated Account or any Lockbox Account shall be under the sole dominion and control of the Trustee (subject to the Servicer's revocable right to direct the application of such amounts as provided by the terms of any Pooling and Servicing Agreement). (d) As soon as practicable but in any event not later than the Business Day following the date that the Servicer determines, identifies and certifies in writing to the Trustee that any of the collected funds received in any of the Lockboxes, the Lockbox Accounts, the Eligible Segregated Accounts or the Collection Account do not constitute Collections on account of the Receivables, such monies which do not constitute such 8 Collections shall be remitted to the applicable Seller to the extent such determination and identification is reasonably satisfactory to the Trustee. (e) All collections received or deposited in the Collection Account as "Collections" shall be deemed, for purposes of the Transaction Documents, to have been received or deposited as of the Business Day Received (as defined in the immediately succeeding sentence). As used herein, the term "BUSINESS DAY RECEIVED" shall mean (i) if funds are deposited in the Collection Account by 1:00 p.m., New York City time, such day of deposit and (ii) if funds are deposited in the Collection Account after 1:00 p.m., New York City time, the Business Day next following such day of deposit. (f) Unless otherwise required by law or unless an Obligor designates that a payment be applied to a specific Receivable, all Collections received from an Obligor shall be applied to the oldest Receivables of such Obligor. II.4. RECONCILIATION OF DEPOSITS. If in respect of a Collection of a Receivable any Servicing Party deposits into a Lockbox Account or Eligible Segregated Account (a) a check received in respect of such Collection which check is not honored for any reason or (b) an amount that is less than or more than the actual amount of such Collection, such Servicing Party or the Servicer shall, in lieu of making a reconciling withdrawal or deposit, as the case may be, adjust the amount subsequently deposited into such Lockbox Account or Eligible Segregated Account to reflect such dishonored check or mistake. Any Receivable in respect of which a dishonored check is received shall be deemed not to have been paid; PROVIDED that no adjustments made pursuant to this Section 2.4 will change any amount previously reported pursuant to Section 4.2. II.5. SERVICING COMPENSATION. (a) As full compensation for its servicing activities hereunder and reimbursement for its expenses as set forth in subsection 2.5(b), the Servicer shall be entitled to receive on each Distribution Date for the preceding Settlement Period prior to the termination of the Trust pursuant to Section 9.1 of the Pooling Agreement a servicing fee (the "SERVICING FEE"). The Servicing Fee shall be an amount equal to (i) the product of (A) the Servicing Fee Percentage and (B) the daily average aggregate Principal Amount of the Receivables in the Trust for the Settlement Period immediately preceding such Settlement Period (or, if such later Settlement Period is the initial Settlement Period, the aggregate Principal Amount of the Receivables at March 27, 1998) and (C) the number of days in such Settlement Period, DIVIDED BY (ii) 360. Except as otherwise set forth in the related Supplement, the share of the Servicing Fee allocable to each Outstanding Series for any Settlement Period shall be an amount equal to the product of (i) the Servicing Fee for such Settlement Period and (ii) a fraction (expressed as a percentage) (A) the numerator of which is the daily average Invested Amount for such Settlement Period with respect to such Series and (B) the denominator of which is the daily average Aggregate Invested Amount for such Settlement Period (with respect to any such Series, the "MONTHLY SERVICING FEE"). The Servicing Fee shall be payable to the Servicer solely pursuant to the terms of, and to the extent amounts are available for payment under, Article III of the Pooling Agreement. 9 (b) The Company hereby directs the Servicer, and the Servicer hereby agrees, to pay amounts due to the Trustee pursuant to Section 8.5 of the Pooling Agreement and the reasonable fees and disbursements of independent accountants and counsel, including the Trustee's reasonable out-of-pocket expenses relating to the Trustee's inspections, if any, of the Servicer's servicing facility in connection with the Trustee's role as potential Successor Servicer, which inspections shall occur not more frequently than once per calendar year, and all other fees and expenses of the Trustee (including counsel fees, if any) not expressly stated in the Pooling and Servicing Agreements to be for the account of the Investor Certificateholders; PROVIDED, HOWEVER, that in no event shall the Servicer be liable for any federal, state or local income or franchise tax, or any interest or penalties with respect thereto, assessed on the Trust, the Trustee or the Investor Certificateholders except in accordance with Section 5.2 and as otherwise expressly provided herein. Notwithstanding anything to the contrary herein or in any other Pooling and Servicing Agreement, if the Servicer is Core-Mark or an Affiliate thereof, in the event that the Servicer fails to pay any amount due to the Trustee pursuant to Section 8.5 of the Pooling Agreement, or following the commencement and continuance of an Early Amortization Period, the Trustee shall be entitled, in addition to any other rights it may have under law and under the Pooling Agreement, to receive directly such amounts owing to it under the Pooling and Servicing Agreements from, and in the same order of priority as, the Servicing Fee before payment to the Servicer of any portion thereof; PROVIDED, that in the event the Servicer shall have elected to waive its rights to payment of the Servicing Fee or the Servicing Fee is deferred pursuant to subsection 2.5(a), the Trustee shall nonetheless be entitled to receive such amounts from payments which would ordinarily be applied to the payment of the Servicing Fee, in the same order of priority as though such Servicing Fee were payable. The Servicer shall be required to pay expenses for its own account, and shall not be entitled to any payment therefor other than the Servicing Fee. Nothing contained herein shall be construed to limit the obligation of the Servicer or the Company to pay any amounts due the Trustee pursuant to Section 8.5 of the Pooling Agreement or pursuant to the terms of any applicable Supplement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SERVICER AND THE SUB-SERVICERS As of (a) the Initial Closing Date and (b) each Issuance Date, each Servicing Party hereby makes the following representations and warranties to each of the other parties hereto: III.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Such Servicing Party (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite corporate power and authority, and all legal right, to own and operate its properties, to lease the properties it operates as lessee and to conduct its business as now conducted, (iii) is duly qualified as a foreign corporation to do business and in good standing (or is exempt from such requirements) under the laws of each 10 jurisdiction in which the servicing of Receivables as required by this Agreement requires such qualification and (iv) is in compliance with all Requirements of Law applicable to the collection and servicing of Receivables and the transactions contemplated by the Transaction Documents, except, in the case of clauses (ii), (iii) and (iv), to the extent that a failure to have such power, authority or right, to qualify and be in good standing or to comply, as the case may be, would not reasonably be expected to have a Material Adverse Effect. III.2. CORPORATE POWER; AUTHORIZATION; CONSENTS. Such Servicing Party has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction 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 or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which it is a party by or against such Servicing Party other than (i) those consents which have duly been obtained or made and are in full force and effect on the Initial Closing Date or the relevant Issuance Date, as the case may be, (ii) any filings of UCC-1 financing statements necessary to perfect the Company's or the Trust's interest in the Receivables and the Related Property, (iii) those that may be required under state securities or "blue sky" laws in connection with the offering or sale of Certificates and (iv) any such consent, authorization, filing, notice or other act, the absence of which would not reasonably be expected to have a Material Adverse Effect with respect to such Servicing Party or the Servicer. This Agreement and each other Transaction Document to which it is a party have been duly executed and delivered on behalf of such Servicing Party. III.3. ENFORCEABILITY. This Agreement and each other Transaction Document to which it is a party constitute the legal, valid and binding obligation of such Servicing Party enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). III.4. NO LEGAL BAR. The execution, delivery and performance of this Agreement and each other Transaction Document to which it is a party will not violate any Requirement of Law or Contractual Obligation of such Servicing Party (other than any violation which would not reasonably be expected to have a Material Adverse Effect with respect to such Servicing Party or the Servicer), and will not result in, or require, the creation or imposition of any Lien (other than Permitted Liens) on any of its properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. III.5. NO MATERIAL LITIGATION. (a) There are no actions, suits, investigations or proceedings at law or in equity or by or before any arbitrator, court or Governmental Authority now pending or, to the knowledge of such Servicing Party, threatened against or 11 affecting it or any of its properties, revenues or rights which (i) involve this Agreement, any of the other Transaction Documents to which such Servicing Party is a party or any of the transactions contemplated hereby or thereby or (ii) which could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. III.6. REQUIREMENTS OF LAW. Such Servicing Party is not in default under or with respect to any Requirement of Law applicable to the collection and servicing of Receivables and the transactions contemplated by the Transaction Documents where such default would be reasonably likely to have a Material Adverse Effect with respect to such Servicing Party or the Servicer. The transactions hereunder and the use of the proceeds thereof will not violate any Requirement of Law. III.7. NO DEFAULT. Such Servicing Party is not in default under or with respect to any of its Contractual Obligations applicable to the collection and servicing of Receivables and the transactions contemplated by the Transaction Documents in any respect which would be reasonably likely to have a Material Adverse Effect with respect to such Servicing Party or the Servicer. No Servicer Default or Potential Servicer Default has occurred and is continuing. III.8. SERVICING ABILITY. As of the related Issuance Date, there has not been since the date of this Agreement any material adverse change in the ability of such Servicing Party to perform its obligations as Servicer under any Transaction Document. III.9. LOCATION OF RECORDS. The offices at which such Servicing Party keeps its records concerning the Receivables serviced by it either (i) are located at the addresses set forth on Schedule 2 to the Receivables Sale Agreement or (ii) have been notified to the Company and the Trustee in accordance with the provisions of Section 4.9. The chief executive office of such Servicing Party is located at one of such locations and is the place where such Servicing Party is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York. ARTICLE IV COVENANTS OF THE SERVICER AND THE SUB-SERVICERS IV.1. DELIVERY OF DAILY REPORTS. Unless otherwise specified in the Supplement with respect to any Series, for each Business Day (a "REPORTED DAY") and with respect to each Outstanding Series, the Servicer shall submit to the Trustee and the relevant Agent, if any, no later than 2:00 p.m., New York City time, on the Business Day following each Reported Day, a written report substantially in the form attached to the related Supplement of each such Series (the "DAILY REPORT") setting forth for the Reported Day total Collections, Receivables and Eligible Receivables created, and such other information as the Trustee or such Agent may reasonably request. The Daily Report may be delivered in an electronic format mutually agreed upon by the Servicer and the Trustee, or pending such agreement, by 12 facsimile. By delivery of a Daily Report, the Servicer shall be deemed to have made a representation and warranty that all information set forth therein is true and correct in all material respects. IV.2. DELIVERY OF MONTHLY SETTLEMENT STATEMENT. Unless otherwise specified in the Supplement with respect to any Outstanding Series, the Servicer hereby covenants and agrees that it shall deliver to the Trustee, each Agent and each Rating Agency by 11:00 a.m., New York City time, on each Settlement Report Date, a certificate of a Responsible Officer of the Servicer substantially in the form attached to the related Supplement of each such Series (a "MONTHLY SETTLEMENT STATEMENT") setting forth, as of the last day of the Settlement Period most recently ended and for such Settlement Period,(a) the information described in the form of such Monthly Settlement Statement, with such changes as may be agreed to by the Servicer and the Trustee, subject to satisfaction of the Rating Agency Condition (unless a Responsible Officer of the Servicer certifies that such changes could not reasonably be expected to have a materially adverse effect on the interests of the Trust or the Investor Certificateholders for the applicable Series under the Transaction Documents) and (b) such other information as the Trustee may reasonably request. Such certificate shall include a certification by a Responsible Officer of the Servicer that, to the best of such Responsible Officer's knowledge, the information contained therein is true and correct and the Servicer has performed in all material respects all of its obligations under each Transaction Document throughout such preceding Settlement Period (or, if there has been a material default in the performance of any such obligation, specifying each such default known to such officer and the nature and status thereof). A copy of each Monthly Settlement Statement may be obtained by any Investor Certificateholder upon a request in writing to the Trustee addressed to the Corporate Trust Office. IV.3. DELIVERY OF QUARTERLY SERVICER'S CERTIFICATE. The Servicer agrees that it shall deliver to the Trustee, each Agent and each Rating Agency, a certificate of a Responsible Officer of the Servicer, substantially in the form of Exhibit A hereto, stating that: (a) a review of the activities of each of the Company and the Servicer during the preceding calendar quarter (or in the case of the first such certificate issued after the Initial Closing Date, during the period from the Initial Closing Date) and of its performance under each Transaction Document was made under the supervision of such Responsible Officer; and (b) to the best of such Responsible Officer's knowledge, based on such review, (i) each of the Company and the Servicer has performed in all material respects its obligations under each Transaction Document throughout the period covered by such certificate (or, if there has been a material default in the performance of any such obligation, specifying each such default known to such Responsible Officer and the nature and status thereof) and (ii) each Daily Report and Monthly Settlement Statement delivered during such period was accurate and correct in all material respects, except as specified in such certificate. 13 Such certificate shall be delivered by the Servicer within 45 days after the end of each calendar quarter commencing with the quarter ending on or about June 30, 1998. A copy of such certificate may be obtained by any Investor Certificateholder by a request in writing to the Trustee addressed to the Corporate Trust Office. IV.4. DELIVERY OF INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORTS. The Servicer shall cause Independent Public Accountants to furnish to the Company, the Trustee and each Rating Agency within 120 days following December 31 of each year (beginning December 31, 1998) a letter to the effect that such firm has performed certain agreed upon procedures (as set forth in Exhibit B hereto) relating to the Receivables, the Servicer and each Sub-Servicer with respect to the Receivables and each such Person's performance hereunder during the preceding fiscal year and describing such firm's findings with respect to such procedures. A copy of such report may be obtained by any Investor Certificateholder upon a request in writing to the Trustee addressed to the Corporate Trust Office. IV.5. NO GUARANTEE OR ASSUMPTION OF COMPANY'S LIABILITIES. Each Servicing Party hereby covenants and agrees that it will not guarantee or assume the obligations or liabilities of the Company under the Pooling and Servicing Agreements, or any other obligations or liabilities of the Company. IV.6. EXTENSION, AMENDMENT AND ADJUSTMENT OF RECEIVABLES; AMENDMENT OF AND COMPLIANCE WITH POLICIES. (a) Each Servicing Party hereby covenants and agrees with the Trustee that it shall not extend, rescind, cancel, amend or otherwise modify, or attempt or purport to extend, rescind, cancel, amend or otherwise modify, the terms of, or grant any Dilution Adjustment to, any Receivable, or otherwise take any action which is intended to cause or permit an Eligible Receivable to cease to be an Eligible Receivable, except in any such case (i) in accordance with the terms of the Policies, (ii) as required by any Requirement of Law or (iii) in the case of any Dilution Adjustments (whether or not permitted by any other clause of this sentence), upon the payment by or on behalf of the applicable Seller of a Seller Adjustment Payment pursuant to Section 2.05 of the Receivables Sale Agreement. Any Dilution Adjustment authorized to be made pursuant to the preceding sentence shall result in the reduction, on the Business Day on which such Dilution Adjustment arises or is identified, in the aggregate Principal Amount of Receivables used to calculate the Aggregate Receivables Amount. If, as a result of such a reduction, the Aggregate Receivables Amount is less than the Aggregate Target Receivables Amount, the Company (in addition to but without duplication of the obligation of the applicable Seller under the Receivables Sale Agreement in respect of such Dilution Adjustment) shall be required to pay into the Series Principal Collection Sub-subaccount with respect to each Outstanding Series in immediately available funds within one Business Day of such determination such Series' PRO RATA share of the amount (the "CASH DILUTION PAYMENT") by which the Aggregate Target Receivables Amount exceeds the Aggregate Receivables Amount. (b) No Servicing Party shall make or permit to be made any change or modification to the Policies in any material respect, except (i) if such changes or modifications are necessary under any Requirement of Law, (ii) if such changes or 14 modifications would not reasonably be expected to have a Material Adverse Effect or (iii) if the Rating Agency Condition is satisfied with respect thereto. The Servicer shall provide notice to the Company, the Trustee and each Rating Agency of any modification of the Policies; PROVIDED; HOWEVER, that if any change or modification, other than a change or modification permitted pursuant to clause (i) or (ii) above, would be reasonably likely to have a Material Adverse Effect on the interests of the Investor Certificateholders of a Series which is not rated by a Rating Agency, the consent of the applicable Agent (or as specified in the related Supplement) shall be required to effect such a change or modification. (c) Each Servicing Party shall perform its obligations in accordance with and comply in all material respects with the Policies. IV.7. SERVICER'S CONDUCT. Each Servicing Party hereby agrees with the Trustee that as Servicer or Sub-servicer it shall exercise the same degree of skill and care in managing the administration and servicing of the Receivables, and performing its obligations hereunder, as it would exercise if it were the beneficial owner of all of such Receivables. IV.8. SECURITY INTEREST. Each Servicing Party hereby covenants and agrees that it shall not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on, any Receivable sold and assigned to the Company or the Trust, whether now existing or hereafter created, or any interest therein, and such Servicing Party shall defend the right, title and interest of the Company and the Trust in, to and under any Receivable sold and assigned to the Company or the Trust, whether now existing or hereafter created, against all claims of third parties claiming through or under such Servicing Party or the Company; PROVIDED, HOWEVER, that nothing in this Section 4.8 shall prevent or be deemed to prohibit any Servicing Party from suffering to exist upon any of the Receivables any Permitted Liens described in clauses (i) and (iv) of the definition thereof. IV.9. LOCATION OF RECORDS. Each Servicing Party hereby covenants and agrees that it (a) shall not move its chief executive office or any of the offices where it keeps its records with respect to the Receivables outside of the location specified in respect thereof on Schedule 2 to the Receivables Sale Agreement, in any such case, without giving 30 days' prior written notice to the Company, the Trustee and the Rating Agencies and (b) shall promptly take all actions reasonably required (including but not limited to all filings and other acts necessary or reasonably requested by the Trustee as being advisable under the UCC) in order to continue the valid and enforceable interest of the Company and the Trust in all Receivables now owned or hereafter created. IV.10. VISITATION RIGHTS. (a) Each Servicing Party shall, at any reasonable time during normal business hours on any Business Day and from time to time, upon reasonable prior notice, according to such Servicing Party's normal security and confidentiality requirements, permit (i) the Company, the Trustee, any Agent or any of their respective agents or representatives (A) to examine and make copies of and abstracts from the records, books of account and documents (including computer tapes and disks) of such Servicing Party relating to the Receivables and (B) following the occurrence of a Servicer Default or the 15 termination of the appointment of such Servicing Party, to be present at the offices and properties of such Servicing Party to administer and control the Collection of the Receivables and (ii) the Company, the Trustee, any Agent or any of their respective agents or representatives to visit the properties of such Servicing Party to discuss the affairs, finances and accounts of such Servicing Party relating to the Receivables or such Servicing Party's performance hereunder or under any of the other Transaction Documents to which it is a party with any of its officers or directors and with its independent certified public accountants; PROVIDED that the Company, the Trustee or such Agent, as the case may be, shall notify such Servicing Party prior to any contact with such accountants and shall give such Servicing Party the opportunity to participate in such discussions. (b) Each Servicing Party shall provide the Trustee with such other information as the Trustee may reasonably request in connection with the fulfillment of the Trustee's obligations under any Pooling and Servicing Agreement. IV.11. LOCKBOX AGREEMENT; LOCKBOX ACCOUNTS; ELIGIBLE SEGREGATED ACCOUNTS. The Servicer shall (a) maintain, and keep in full force and effect, each Lockbox Agreement, and Eligible Segregated Account Agreement, except to the extent otherwise permitted under the terms of the Transaction Documents, and (b) ensure that each related Lockbox Account and any Eligible Segregated Account shall be free and clear of, and defend each such Lockbox Account and Eligible Segregated Account against, any writ, order, stay, judgment, warrant of attachment or execution or similar process. IV.12. DELIVERY OF FINANCIAL STATEMENTS. The Servicer shall furnish to the Trustee and the Rating Agencies: (a) as soon as available, but in any event not later than 90 days after the end of each fiscal year of Core-Mark, and so long as Core-Mark is the Servicer, a copy of the audited consolidated balance sheets of Core- Mark and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, shareholders' equity and cash flows of Core-Mark and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Deloitte & Touche LLP or another nationally- recognized independent public accounting firm, together with a certificate of a Responsible Officer of Core-Mark, in each case stating that such consolidated financial statements present fairly the financial position and results of operations and changes in cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by such accountant of any material portion of Core- Mark's or any of its Subsidiaries' records; and (b) as soon as practicable, but in any event not later than 45 days after the end of the first three fiscal quarters, a copy of the unaudited consolidated balance sheets of Core-Mark and its Subsidiaries as at the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows of Core-Mark 16 and its Subsidiaries for such fiscal quarter, and for the elapsed portion of the fiscal year then ended, certified by an appropriate Responsible Officer as being complete and correct and fairly presenting the financial position and the results of operations of Core-Mark and its Subsidiaries, setting forth in each case in comparative form the figures as of and for the corresponding dates and periods in the previous fiscal year. All such financial statements shall be complete and correct in all material respects and 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). IV.13. NOTICES. The Servicer shall furnish to the Company, the Trustee and each Rating Agency, promptly upon a Responsible Officer of the Servicer obtaining knowledge of the occurrence of any Purchase Termination Event, Potential Purchase Termination Event (each as defined in the Receivables Sale Agreement), Early Amortization Event, Potential Early Amortization Event, Servicer Default or Potential Servicer Default, written notice thereof. ARTICLE V OTHER MATTERS RELATING TO THE SERVICER AND THE SUB-SERVICERS V.1. MERGER, CONSOLIDATION, ETC. No Servicing Party shall consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person (other than the Servicer or another Servicing Party), unless: (a) the corporation formed by such consolidation or into which such Servicing Party is merged or the Person which acquires by conveyance or transfer the properties and assets of such Servicing Party substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America or any State thereof or the District of Columbia, and, if such Servicing Party is not the surviving entity, such corporation shall assume, without the execution or filing of any paper or any further act on the part of any of the parties hereto (except as may be required in the context of an acquisition by conveyance or transfer of the properties and assets of such Servicing Party substantially as an entirety to such other Person), the performance of every covenant and obligation of such Servicing Party hereunder; and (b) such Servicing Party has delivered to the Trustee an officer's certificate executed by a Vice President or more senior officer and an Opinion of Counsel addressed to the Trust and the Trustee, each stating (i) that such consolidation, merger, conveyance or transfer complies with this Section 5.1 and (ii) that all conditions precedent herein provided for relating to such transaction have been complied with; PROVIDED that such Opinion of Counsel, in the case of clause (ii) above, may, to the 17 extent that such opinion concerns questions of fact, rely on such officer's certificate with respect to such questions of fact. V.2. INDEMNIFICATION OF THE TRUST AND THE TRUSTEE. (a) The Servicer hereby agrees to indemnify and hold harmless the Trust and the Trustee, for the benefit of the Investor Certificateholders and the Trustee and its directors, officers, agents and employees (each of the foregoing, an "INDEMNIFIED PERSON"), from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Servicer pursuant to the Pooling and Servicing Agreements, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; PROVIDED that the Servicer shall not so indemnify any Indemnified Person for any loss, liability, damage, injury, cost or expense of such Indemnified Person (i) arising solely from a default by an Obligor with respect to any Receivable (other than arising out of (A) any discharge, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Purchased Receivable (as defined in the Receivables Sale Agreement) arising from the actions of the Servicer (including, without limitation, a defense based on such Purchased Receivable's not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms as a result of such actions), or (B) a failure by the Servicer to perform its duties or obligations under this Agreement), or (ii) to the extent that such liability, cost or expense arises from the gross negligence (or, in the case of the Trustee, negligence), bad faith or wilful misconduct of such Indemnified Person or any other Indemnified Person (or any of their respective directors, officers, agents or employees). The provisions of this indemnity shall run directly to, and be enforceable by, an injured party and shall survive the termination of this Agreement and the resignation of the Servicer. (b) In addition to and without giving effect to any limitations set forth in subsection (a) above, the Servicer agrees to pay, indemnify and hold each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against such Indemnified Person in any way relating to or arising out of any Servicing Party's breach of any covenant contained in subsections 2.2(f), 2.2(g), 4.6, 4.7 or 4.8 with respect to any Receivable which materially and adversely affects the interest of the Trust or the Investor Certificateholders pursuant to the Transaction Documents in any Receivable or the collectibility of any Receivable (an "INDEMNIFICATION EVENT"). (c) The Servicer shall indemnify and hold harmless the relevant Indemnified Person for such affected Receivable pursuant to subsection 5.2(b) by depositing into the Collection Account in immediately available funds no later than the next Settlement Report Date occurring at least 30 days after receipt by the Servicer of written notice of an Indemnification Event given by the applicable Seller, the Company or the Trustee or upon a Responsible Officer of the Servicer obtaining knowledge of an Indemnification Event, an amount equal to the outstanding Principal Amount of such Receivable (the "SERVICER 18 INDEMNIFICATION AMOUNT"). Upon each such indemnification by the Servicer, the Trust shall automatically and without further action be deemed to transfer, assign, and set over, and otherwise convey to the Servicer, without recourse, representation or warranty, all right, title and interest of the Trust in and to such Receivable, all monies due or to become due with respect thereto and all proceeds thereof; and such Receivable shall be treated by the Trust as collected in full as of the date on which it was transferred. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall be reasonably requested by the Servicer to effect the conveyance of any Receivable pursuant to this subsection. The obligation of the Servicer to indemnify the Trust for any such Receivables shall constitute the sole remedy respecting any breach of the covenants set forth in subsection 2.2(f), 2.2(g), 4.6, 4.7 or 4.8 with respect to such Receivables available to Investor Certificateholders. V.3. SERVICER NOT TO RESIGN. The Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon determination that (i) the performance of its duties hereunder is no longer permissible under applicable law and (ii) there is no reasonable action which the Servicer could take to make the performance of its duties hereunder permissible under applicable law or (b) if the Servicer is terminated as Servicer pursuant to Section 6.1. Any such determination permitting the resignation of the Servicer shall be evidenced as to clause (a)(i) above by an Opinion of Counsel to such effect delivered to the Trustee. No such resignation shall become effective until a Successor Servicer or the Trustee shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 6.2. The Trustee, the Company, each Agent and each Rating Agency shall be notified of such resignation in writing by the Servicer. V.4. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE RECEIVABLES. The Servicer and the other Servicing Parties will hold in trust for the Trustee at their respective offices such computer programs, books of account and other records as are reasonably necessary to enable the Trustee to determine at any time the status of the Receivables and all collections and payments in respect thereof (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof). ARTICLE VI SERVICER DEFAULTS VI.1. SERVICER DEFAULTS. If, with respect to any Servicing Party, any one of the following events (a "SERVICER DEFAULT") shall occur and be continuing: (a) failure by the Servicer to deliver, within two Business Days of when due, any Daily Report or, within three Business Days of when due, any Monthly Settlement Statement, in each case conforming in all material respects to the requirements of Section 4.1 or 4.2; 19 (b) failure by such Servicing Party to pay any amount required to be paid by it under the Agreement or to give any direction with respect to the allocation or transfer of funds under any Pooling and Servicing Agreement, in each case on or before the date occurring five Business Days after the date such payment is due or such allocation or transfer is required to be made; (c) failure on the part of such Servicing Party duly to observe or perform in any material respect any other covenants or agreements of such Servicing Party set forth in any Pooling and Servicing Agreement, which failure has a material adverse effect on the holders of any Outstanding Series or on the collectibility of the Receivables as a whole and which material adverse effect continues unremedied for 30 days after the earlier to occur of (i) the date upon which a Responsible Officer of such Servicing Party obtains knowledge of such failure or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Company and the Servicer by the Trustee, or to the Company, the Servicer and the Trustee by holders of Investor Certificates evidencing 25% or more of the Invested Amount of any Outstanding Series or by any Agent; PROVIDED that no Servicer Default shall be deemed to occur under this subsection (c) if, to the extent applicable, any Servicing Party shall have complied with the provisions of subsections 5.2(b) and (c) with respect thereto; (d) any representation, warranty or certification made by such Servicing Party in any Pooling and Servicing Agreement or in any certificate delivered pursuant thereto shall prove to have been incorrect when made or deemed made, which incorrectness has a material adverse effect on the holders of any Outstanding Series or on the collectibility of the Receivables as a whole and which material adverse effect continues unremedied for 30 days after the earlier to occur of (i) the date upon which a Responsible Officer of such Servicing Party obtains knowledge of such failure or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Company and the Servicer by the Trustee, or to the Company, the Servicer and the Trustee by holders of Investor Certificates evidencing 25% or more of the Invested Amount of any Outstanding Series or by any Agent; PROVIDED that no Servicer Default shall be deemed to occur under this subsection (d) if, to the extent applicable, any Servicing Party shall have complied with the provisions of subsections 5.2(b) and (c) with respect thereto; (e) (i) such Servicing Party 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 or other similar official for it or for all or any substantial part of its assets, or such Servicing Party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against 20 such Servicing Party 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 such Servicing Party 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 such days from the entry thereof; or (iv) such Servicing Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clauses (i), (ii), or (iii) above; or (v) such Servicing Party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (f) there shall have occurred and be continuing an Early Amortization Event under Sections (a), (b), (h) or (l) of the Supplement for Series 1998-1, or such similar provisions as may be applicable to any other Series of Investor Certificates issued by the Trust; then, in the event of any Servicer Default, so long as the Servicer Default shall not have been remedied (or waived in accordance with the terms of the Transaction Documents), the Trustee may, and at the written direction of the holders of Investor Certificates evidencing more than 50% of the Aggregate Invested Amount voting as a single class, the Trustee shall, by notice then given in writing to such Servicing Party, each Agent and each Rating Agency (a "TERMINATION NOTICE"), terminate all or any part of the rights and obligations of such Servicing Party as Servicer or as a Sub-Servicer, as the case may be, under the Pooling and Servicing Agreements. Notwithstanding anything to the contrary in this Section 6.1, a delay in or failure of performance referred to under clause (a) or (b) above for a period of 10 Business Days after the applicable grace period or a delay in or failure of performance referred to under clause (c) above for a period of 30 Business Days after the applicable grace period shall not constitute a Servicer Default, if such delay or failure could not have been prevented by the exercise of reasonable diligence by such Servicing Party and such delay or failure was caused by a Force Majeure Delay. After receipt by a Servicing Party of a Termination Notice, and on the date that a Successor Servicer shall have been appointed by the Trustee pursuant to Section 6.2, all authority and power of such Servicing Party under any Pooling and Servicing Agreement to the extent specified in such Termination Notice shall pass to and be vested in a Successor Servicer (a "SERVICE TRANSFER"); and, without limitation, the Trustee is hereby authorized and empowered (upon the failure of a Servicing Party to cooperate) to execute and deliver, on behalf of such Servicing Party, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of such Servicing Party to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such Service Transfer. Each Servicing Party agrees to cooperate with the Trustee and such Successor Servicer in effecting the termination of the responsibilities and rights of a Servicing Party to conduct servicing hereunder, including, without limitation, the transfer to such Successor Servicer of all 21 authority of a Servicing Party to service the Receivables provided for under the Pooling and Servicing Agreements, including, without limitation, all authority over all Collections which shall on the date of transfer be held by a Servicing Party for deposit, or which have been deposited by a Servicing Party, in the Collection Account, or which shall thereafter be received with respect to the Receivables, and in assisting the Successor Servicer. Upon a Service Transfer, the relevant Servicing Party shall promptly (x) assemble all of its documents, instruments and other records (including credit files, licenses, rights, copies of all relevant computer programs and any necessary licenses for the use thereof, related material, computer tapes, disks, cassettes and data) that (i) evidence or will evidence or record Receivables sold and assigned to the Trust and (ii) are otherwise necessary or desirable to enable a Successor Servicer to effect the immediate Collection of such Receivables, with or without the participation of the applicable Seller and Servicing Party or the Servicer and (y) deliver or license the use of all of the foregoing documents, instruments and other records to the Successor Servicer at a place designated thereby. In recognition of such Servicing Party's need to have access to any such documents, instruments and other records which may be transferred to such Successor Servicer hereunder, whether as a result of its continuing responsibility as a servicer of accounts receivable which are not sold and assigned to the Trust or otherwise, such Successor Servicer shall provide to such Servicing Party reasonable access to such documents, instruments and other records transferred by such Servicing Party to it in connection with any activity arising in the ordinary course of such Servicing Party's business; PROVIDED that such Servicing Party shall not disrupt or otherwise interfere with the Successor Servicer's use of and access to such documents, instruments and other records. To the extent that compliance with this Section 6.1 shall require a Servicing Party to disclose to the Successor Servicer information of any kind which such Servicing Party reasonably deems to be confidential, the Successor Servicer shall be required to enter into such customary licensing and confidentiality agreements as such Servicing Party shall deem necessary to protect its interest. All costs and expenses incurred by the defaulting Servicing Party, the Successor Servicer and the Trustee in connection with any Service Transfer shall be for the account of such defaulting Servicing Party. VI.2. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On and after (i) the receipt by a Servicing Party of a Termination Notice pursuant to Section 6.1 or (ii) the date on which such Servicing Party notifies the Trustee, the Company, each Agent and each Rating Agency in writing of its resignation pursuant to Section 5.3 (the "RESIGNATION NOTICE"), such Servicing Party shall continue to perform (and shall continue to receive its Servicing Fee) all servicing functions under the Pooling and Servicing Agreements until the earlier of (x) the date on which a Successor Servicer is appointed and (y) 60 days after the delivery of such Termination Notice or Resignation Notice, as the case may be. The Trustee shall, as promptly as reasonably possible after the giving of or receipt of a Termination Notice or Resignation Notice, as the case may be, appoint an Eligible Successor Servicer as successor servicer (the "SUCCESSOR SERVICER"); PROVIDED that in the event that any Sub-Servicer shall cease to be a Servicing Party for any reason, the Servicer shall be the Successor Servicer with respect to such terminated Sub-Servicer for so long as the Servicer shall continue to serve in its capacity as Servicer under the Pooling and Servicing Agreements. The Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. 22 (b) In the event that a Successor Servicer has not been appointed or has not accepted its appointment at the time that the relevant Servicing Party ceases to act as such, the Trustee without further action shall be appointed Successor Servicer, PROVIDED that the Trustee shall only be responsible for the duties and liabilities of such Successor Servicer which are consistent with an orderly collection of the Receivables and other Trust Assets, in each case in accordance with the Pooling and Servicing Agreements and, to the extent applicable, the liquidation of the Receivables and the other Trust Assets. in the manner contemplated for such liquidations in Section 7.2 of the Pooling Agreement and the application of such funds in accordance with the Pooling and Servicing Agreements. Consistent with the foregoing, in the event that the Trustee becomes Successor Servicer, the Successor Servicer shall take such collection actions as are commercially reasonable under the circumstances, including, without limitation, electing not to pursue legal collection efforts with respect to Receivables that it reasonably determines to be uncollectible. The Trustee, as Successor Servicer, shall have no liability to the Investor Certificateholders, the Company or the predecessor Servicer in electing such actions. The Trustee may delegate any of its servicing obligations to an affiliate or agent in accordance with subsection 2.2(c). Notwithstanding the above, the Trustee shall, if the Trustee is legally unable so to act, petition a court of competent jurisdiction to appoint any Person qualifying as an Eligible Successor Servicer as the Successor Servicer hereunder. The Servicer shall immediately give notice to each Rating Agency of the receipt of any Termination Notice and the appointment of a Successor Servicer. The Successor Servicer and any director or officer or employee or agent of the Successor Servicer may rely in good faith on any document delivered hereunder believed by it to be genuine. The Successor Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Receivables in accordance with this Agreement or any other Pooling and Servicing Agreement, PROVIDED, HOWEVER, that this provision shall not protect the Successor Servicer or any such Person against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of reckless disregard of its obligations and duties hereunder. The Successor Servicer may undertake any legal action which it may deem necessary or desirable for the benefit of Investor Certificate Holders with respect to this Agreement and any other Pooling and Servicing Agreement and the rights and duties of the parties thereto and the interest of the Investor Certificate Holders thereunder. (c) Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicing Party to which it is successor with respect to servicing functions under the Pooling and Servicing Agreements (with such changes as are agreed to between such Successor Servicer and the Trustee) and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on such Servicing Party by the terms and provisions hereof, and all references in any Pooling and Servicing Agreement to the Servicer or the Sub-Servicer, as the case may be, shall be deemed to refer to the Successor Servicer. The Successor Servicer shall manage the servicing and administration of the Receivables, the collection of payments due under the Receivables and the charging off of any Receivables as uncollectible, with reasonable care, using that degree of skill and attention that is the customary and usual standard of practice of prudent receivables servicers with respect to all 23 comparable receivables serviced for itself or others. The Successor Servicer shall not be liable for, and the Servicer shall indemnify the Successor Servicer against costs incurred by the Successor Servicer as a result of, any acts or omissions of any Servicing Party or any events or occurrences occurring prior to the Successor Servicer's acceptance of its appointment as Successor Servicer. (d) The Company and the Trustee will review any bids obtained from Eligible Successor Servicers and the Company and the Trustee, or the Company (with the consent of the Trustee), may appoint any Eligible Successor Servicer submitting such a bid as a Successor Servicer for servicing compensation not in excess of the Servicing Fee. (e) All authority and power granted to the Successor Servicer under any Pooling and Servicing Agreement shall automatically cease and terminate on the Trust Termination Date, and shall pass to and be vested in the Company and, without limitation, the Company is hereby authorized and empowered to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights from and after the Trust Termination Date. The Successor Servicer agrees to cooperate with the Company in effecting the termination of the responsibilities and rights of the Successor Servicer to conduct servicing on the Receivables. The Successor Servicer shall transfer all of its records relating to the Receivables to the Company in such form as the Company may reasonably request and shall transfer all other records, correspondence and documents to the Company in the manner and at such times as the Company shall reasonably request. To the extent that compliance with this Section 6.2 shall require the Successor Servicer to disclose to the Company information of any kind which the Successor Servicer deems to be confidential, the Company shall be required to enter into such customary licensing and confidentiality agreements as the Successor Servicer shall reasonably deem necessary to protect its interests. VI.3. WAIVER OF PAST DEFAULTS. Holders of Investor Certificates evidencing more than 50% of the Aggregate Invested Amount may waive any continuing default by any Servicing Party or the Company in the performance of their respective obligations hereunder and its consequences, except a default in the failure to make any required deposits or payments in respect of any Series of Certificates, which shall require a waiver by the holders of all of the affected Investor Certificates. Upon any such waiver of a past default, such default shall cease to exist, and any default arising therefrom shall be deemed to have been remedied for every purpose of the Pooling and Servicing Agreements. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. Either the Company or the Servicer shall provide notice to each Rating Agency of any such waiver. 24 ARTICLE VII MISCELLANEOUS PROVISIONS VII.1. AMENDMENT. This Agreement may only be amended, supplemented or otherwise modified from time to time if such amendment, supplement or modification is effected in accordance with the provisions of Section 10.1 of the Pooling Agreement. VII.2. TERMINATION. The respective obligations and responsibilities of the parties hereto shall terminate on the Trust Termination Date (unless such obligations or responsibilities are expressly stated to survive the termination of this Agreement). VII.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAWS PROVISIONS THEREOF), AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF EACH OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. VII.4. NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of facsimile notice, when received, addressed as set forth in Section 10.5 of the Pooling Agreement, or to such other address as may be hereafter notified by the respective parties hereto. VII.5. COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement. VII.6. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the benefit of and be binding upon the parties hereto and the Investor Certificateholders and their respective successors and permitted assigns. Except as otherwise provided in this Article VII, no other person will have any right or obligation hereunder. VII.7. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement and the other Transaction Documents set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the other Transaction Documents. This Agreement may not be modified, amended, waived, or supplemented except as provided herein. 25 VII.8. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. VII.9. NO SET-OFF. Except as expressly provided in this Agreement or any other Transaction Document, each Servicing Party agrees that it shall have no right of set-off or banker's lien against, and no right to otherwise deduct from, any funds held in the Collection Account for any amount owed to it by the Company, the Trust, the Trustee or any Investor Certificateholder. VII.10. NO BANKRUPTCY PETITION. Each Servicing Party hereby covenants and agrees that, prior to the date which is one year and one day after the Trust Termination Date, it will not institute against, or join any other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law. VII.11. CONSEQUENTIAL DAMAGES. In no event shall The Chase Manhattan Bank, in its capacity as Successor Servicer (if applicable), be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if it has been advised of the likelihood of such loss or damage and regardless of the form of action. 26 IN WITNESS WHEREOF, the Company, the Servicer, the Sub-Servicers and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. CM CAPITAL CORPORATION, as Company By: /s/ ROBERT A. ALLEN ------------------------- Name: Robert A. Allen Title: President & CEO CORE-MARK INTERNATIONAL, INC., as Servicer By: /s/ LEO F. KORMAN ------------------------- Name: Leo F. Korman Title: Sr. VP & CFO CORE-MARK MIDCONTINENT, INC., as a Sub- Servicer By: /s/ LEO F. KORMAN ------------------------- Name: Leo F. Korman Title: Sr. VP & CFO CORE-MARK INTERRELATED COMPANIES, INC., as a Sub-Servicer By: /s/ LEO F. KORMAN ------------------------- Name: Leo F. Korman Title: Sr. VP & CFO THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Trustee By: /s/ KIMBERLY K. COSTA ------------------------- Name: Kimberly K. Costa Title: Second Vice President EX-10.22 9 EXHIBIT 10.22 EXECUTION COPY Exhibit 10.22 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CM CAPITAL CORPORATION AND CORE-MARK INTERNATIONAL, INC. CORE-MARK MIDCONTINENT, INC. CORE-MARK INTERRELATED COMPANIES, INC. AND THE OTHER SELLERS NAMED HEREIN ---------------------------------------- RECEIVABLES SALE AND CONTRIBUTION AGREEMENT ---------------------------------------- Dated as of April 1, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 6 ARTICLE II PURCHASE AND SALE OF RECEIVABLES Section 2.01. Purchase and Sale of Receivables. . . . . . . . . . . . . . . . . . 7 Section 2.02. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.03. Payment of Purchase Price.. . . . . . . . . . . . . . . . . . . . . 10 Section 2.04. No Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.05. Rebates, Adjustments, Returns and Reductions; Modifications . . . . 11 Section 2.06. Limited Repurchase Obligation . . . . . . . . . . . . . . . . . . . 12 Section 2.07. Obligations Unaffected. . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.08. Certain Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.09. Certain Allocations . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.10. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.11. Purchase of Sellers' Interest in Receivables and Receivables Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE III CONDITIONS TO PURCHASES Section 3.01. Conditions Precedent to Company's Initial Purchase. . . . . . . . . 14 Section 3.02. Conditions Precedent to the Addition of a Seller. . . . . . . . . . 17 Section 3.03. Conditions Precedent to All the Company's Purchases of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3.04. Condition Precedent to Each Seller's Obligations. . . . . . . . . . 20 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Company . . . . . . . . . . . 20 Section 4.02. Representations and Warranties of the Sellers . . . . . . . . . . . 21 ARTICLE V GENERAL COVENANTS Section 5.01. Affirmative Covenants of the Sellers. . . . . . . . . . . . . . . . 28 Section 5.02. Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . 33 Section 5.03. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE VI PURCHASE TERMINATION EVENTS Section 6.01. Purchase Termination Events . . . . . . . . . . . . . . . . . . . . 36 Section 6.02. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE VII
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PAGE ---- INDEMNIFICATION; EXPENSES; COSTS Section 7.01. Indemnities by the Sellers. . . . . . . . . . . . . . . . . . . . . 39 Section 7.02. Indemnities by the Company. . . . . . . . . . . . . . . . . . . . . 41 ARTICLE VIII SUBORDINATED NOTE Section 8.01. Subordinated Note . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 8.02. Restrictions on Transfer of Subordinated Note . . . . . . . . . . . 42 Section 8.03. Aggregate Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE IX MISCELLANEOUS Section 9.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 9.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 9.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 43 Section 9.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 9.06. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . 43 Section 9.07. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . 44 Section 9.08. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 9.09. Captions and Cross References . . . . . . . . . . . . . . . . . . . 44 Section 9.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 44 Section 9.11. No Petition in Bankruptcy . . . . . . . . . . . . . . . . . . . . . 45 Section 9.12. Addition of Sellers . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 9.13. Treatment of Sellers other than Core-Mark; Termination Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 9.14. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
EXHIBIT A Form of Subordinated Note EXHIBIT B Form of Additional Seller Supplement EXHIBIT C Form of UCC Certificate SCHEDULE 1 Sellers' Authorized Officers SCHEDULE 2 Location of Each Seller's Chief Executive Office SCHEDULE 3 Lockbox Processors, Eligible Segregated Account Banks and Accounts SCHEDULE 4 Address for Notice to Servicer SCHEDULE 5 Seller Trade Names SCHEDULE 6 Definition of Discounted Percentage SCHEDULE 7 ERISA Matters SCHEDULE 8 Form of Financial Statement Note SCHEDULE 9 Form of General Legend -ii- RECEIVABLES SALE AND CONTRIBUTION AGREEMENT This RECEIVABLES SALE AND CONTRIBUTION AGREEMENT dated as of April 1, 1998 (this "AGREEMENT"), is among CORE-MARK INTERNATIONAL, INC., a Delaware corporation ("CORE-MARK"), CORE-MARK INTERRELATED COMPANIES, INC., a California corporation ("CORE-MARK INTERRELATED"), CORE-MARK MIDCONTINENT, INC., an Arkansas corporation ("CORE-MARK MIDCONTINENT"; Core-Mark, Core-Mark Interrelated and Core-Mark Midcontinent, being collectively referred to herein as the "SELLERS" and individually as a "SELLER"), CM CAPITAL CORPORATION, a Delaware corporation (the "COMPANY") and Core-Mark, in its capacity as servicer (the "SERVICER"). W I T N E S S E T H: WHEREAS, the Sellers intend to sell and/or, in the case of Core-Mark only, in its capacity as a Seller, contribute Receivables and Receivables Property (both as hereinafter defined) to the Company on the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Company desires to purchase and/or accept Receivables and Receivables Property from the Sellers on the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Sellers and the Company desire the transfer of Receivables and Receivables Property from the Sellers to the Company to be a true sale or other absolute transfer providing the Company with the full benefits of ownership of the Receivables; and WHEREAS, to obtain the necessary funds to purchase such Receivables and Receivables Property, the Company has entered into the Pooling Agreement (as hereinafter defined); NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. CERTAIN DEFINED TERMS. Unless otherwise defined herein, capitalized terms which are used herein shall have the meanings assigned to such terms in Section 1.1 of the Pooling Agreement and each Supplement thereto, among the Company, the Servicer and the Trustee. As used in this Agreement, the following terms shall have the 2 following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADDITIONAL SELLER SUPPLEMENT" means an instrument substantially in the form of EXHIBIT B hereto pursuant to which a Subsidiary of Core-Mark becomes a Seller party hereto. "AUTHORIZED OFFICERS" means those officers of the Sellers designated in SCHEDULE 1 hereto (or in such other Schedule as may be delivered by the Sellers to the other parties hereto from time to time) as duly authorized to execute and deliver this Agreement and any instruments or documents in connection herewith on behalf of the Sellers and to take, from time to time, all other actions on behalf of the Sellers in connection herewith. "CLOSING DATE" means the date of the initial issuance of the Investor Certificates. "CODE" shall mean the Internal Revenue Code of 1986, and regulations promulgated thereunder or any successor statute and related regulations. "COLLECTIONS" shall mean all collections, including the Aggregate Uncleared Funds Amount, and all amounts received in respect of the Receivables, including Recoveries, Seller Repurchase Payments, Seller Adjustment Payments, Servicer Indemnification Amounts paid by the Servicer and any other payments received in respect of Dilution Adjustments, together with all collections received in respect of the Related Property in the form of cash, checks, wire transfers or any other form of cash payment, and all proceeds of Receivables and collections thereof (including, without limitation, collections constituting an account or general intangible or evidenced by a note, instrument, letter of credit, security, contract, security agreement, chattel paper or other evidence of indebtedness or security, whatever is received upon the sale, exchange, collection or other disposition of, or any indemnity, warranty or guaranty payable in respect of, the foregoing and all "proceeds", as defined in Section 9-306 of the UCC as in effect in the State of New York, of the foregoing). "CONTRACT" means a contract between any Seller and any Person pursuant to or under which such Person shall be obligated to make payments to such Seller. "CORE-MARK PERSONS" means each Seller and each of its Affiliates other than the Company. "DISCOUNTED PERCENTAGE" has the meaning specified in SCHEDULE 6 hereto. "EARLY TERMINATION" shall have the meaning specified in Section 6.01. "EFFECTIVE DATE" means (i) with respect to each Seller on the date hereof, the date hereof and (ii) with respect to each Subsidiary of Core-Mark added as a Seller pursuant to Section 9.12, the Seller Addition Date with respect to each such Subsidiary. 3 "EXCLUDED RECEIVABLE" means Receivables (without giving effect to the proviso in the definition thereof) (i) owed by Canadian Obligors, which are denominated in Canadian currency, (ii) owed by other Obligors not resident in the United States, which are denominated in a currency other than U.S. dollars, or (iii) owed to a Seller by a vendor of merchandise to such Seller, which relates to the merchandise sold by such vendor or promotional programs of such vendor. "ERISA AFFILIATE" shall mean, with respect to any Person, any trade or business (whether or not incorporated) that is a member of a group of which such Person is a member and which is treated as a single employer under Section 414 of the Internal Revenue Code. "INSOLVENCY EVENT" with respect to the Seller, shall mean the occurrence of any one or more of the Purchase Termination Events specified in subsection 6.01(g). "LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or other similar right of a third party with respect to such securities; PROVIDED, HOWEVER, that if a lien is imposed under Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which Section 412(n) of the Internal Revenue Code or Section 302(f) of ERISA applies, then such lien shall not be treated as a "Lien" from and after the time any Person who is obligated to make such payment pays to such plan the amount of such lien determined under Section 412(n)(3) of the Internal Revenue Code or Section 302(f)(3) of ERISA, as the case may be, and provides to the Trustee, any Agent and each Rating Agency a written statement of the amount of such lien together with written evidence of payment of such amount, or such lien expires pursuant to Section 412(n)(4)(B) of the Internal Revenue Code or Section 302(f)(4)(B) of ERISA. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Seller, (a) a material impairment of the ability of such Seller to perform its obligations under the Transaction Documents, (b) a material impairment of the validity or enforceability of any of the Transaction Documents against such Seller, (c) a material impairment of the collectibility of the Receivables originated by such Seller taken as a whole or (d) a material impairment of the interests, rights or remedies of the Company under the Transaction Documents or the Receivables taken as a whole. "MULTIEMPLOYER PLAN" shall mean, with respect to any Person, a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) as to which such Person or any ERISA Affiliate of such Person (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal Revenue Code) is making or accruing an obligation to make contributions, or has within any of the preceding five years made or accrued an obligation to make contributions. "PAYMENT DATE" has the meaning specified in subsection 2.03(a). 4 "PLAN" shall mean, with respect to any Person, any pension plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Internal Revenue Code which is maintained for employees of such Person or any ERISA Affiliate of such Person. "POOLING AGREEMENT" means the Pooling Agreement dated as of the date hereof, among the Company, the Servicer and the Trustee on behalf of the Certificateholders, as such agreement may be amended, supplemented, waived, or otherwise modified from time to time, including without limitation the Series 1998-1 Supplement dated as of the date hereof among the Company, the Servicer and the Trustee. "POTENTIAL PURCHASE TERMINATION EVENT" means any condition or act specified in Section 6.01 that, with the giving of notice or the lapse of time or both, would become a Purchase Termination Event. "PURCHASED RECEIVABLE" means, at any time, any Receivable sold and/or contributed to the Company by any Seller pursuant to, and in accordance with the terms of, this Agreement and not theretofore resold to such Seller pursuant to subsection 2.01(b) or Section 2.06. "PURCHASED RECEIVABLES PERCENTAGE" means, with respect to any Seller as to which Core-Mark has submitted a Seller Termination Request, the percentage equivalent of a fraction, the numerator of which is an amount equal to the aggregate outstanding Principal Amount of Purchased Receivables sold by such Seller as of the applicable Seller Termination Request Date, and the denominator of which is an amount equal to the aggregate outstanding Principal Amount of all Purchased Receivables as of such date. "PURCHASE PRICE" has the meaning specified in Section 2.02. "PURCHASE TERMINATION DATE" means, with respect to any Seller, the date on which the Company's obligation to purchase Receivables from such Seller shall terminate, which shall be the date on which an Early Termination occurs with respect to such Seller. "PURCHASE TERMINATION EVENT" has the meaning specified in Section 6.01. "RECEIVABLE" shall mean the indebtedness and payment obligations of any Person to a Seller or acquired by a Seller (including, without limitation, obligations constituting an account or general intangible or evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security) arising from a sale of merchandise or the provision of services by such Seller or the Person from whom such indebtedness and payment obligation was acquired by a Seller, including, without limitation, any right to payment for goods sold or for services rendered, and including the right to payment of any interest, sales taxes, finance charges, returned check or late charges and other obligations of such Person with respect thereto other than Excluded Receivables; PROVIDED that for purposes of Article 2 hereof in the event that an Excluded Receivable is included on any Daily Report, such Excluded Receivable shall be deemed to be a Receivable but not an Eligible Receivable. 5 "RECEIVABLES PROPERTY" has the meaning specified in Section 2.01. "REFERENCE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If The Chase Manhattan Bank shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of The Chase Manhattan Bank to obtain quotations in accordance with the terms of the definition thereof, the Reference Rate shall be determined without regard to clause (b) of the immediately preceding sentence, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Reference Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. The term "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. The term "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 that is a Business Day, the average of the quotations for the day for such transactions received by The Chase Manhattan Bank from three Federal funds brokers of recognized standing selected by it. "RELATED PROPERTY" shall mean, with respect to each Receivable: (a) all of the applicable Seller's interest in the goods (other than returned goods), if any, sold and delivered to an Obligor which gave rise to such Receivable; (b) all other security interests or Liens purporting to secure payment of such Receivable, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; and (c) all guarantees, credit or similar types of insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable; in the case of clauses (b) and (c), whether pursuant to the contract related to such Receivable or otherwise or including without limitation, pursuant to any obligations evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security and the proceeds thereof. "RELEVANT UCC STATE" means each jurisdiction in which the filing of a UCC financing statement is necessary or desirable to perfect the Company's interest in the Receivables. 6 "REPORTABLE EVENT" shall mean any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate which is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal Revenue Code). "SEC" means the United States Securities and Exchange Commission. "SELLER ADDITION DATE" has the meaning specified in Section 3.02. "SELLER ADJUSTMENT PAYMENT" has the meaning specified in Section 2.05. "SELLER REPURCHASE PAYMENT" has the meaning specified in Section 2.06. "SELLER TERMINATION REQUEST" has the meaning specified in subsection 9.13(b). "SELLER TERMINATION REQUEST DATE" has the meaning specified in subsection 9.13(b). "SUBORDINATED NOTE" has the meaning specified in Section 8.01. "WITHDRAWAL LIABILITIES" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined herein or in the Pooling Agreement or any Supplement shall have their defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 of the Pooling Agreement or any Supplement, and accounting terms partly defined in Section 1.1 of the Pooling Agreement or any Supplement to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under GAAP, the definitions contained herein shall control. All terms used in Article 9 of the UCC that are used but not specifically defined herein are used herein as defined therein. (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 contained in this agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (d) The definitions contained in Section 1.01 of this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine, the feminine and the neuter genders of such terms. 7 (e) Any reference herein or in any other Transaction Document to a provision of the Internal Revenue Code or ERISA shall be deemed a reference to any successor provision thereto. (f) All references herein to any agreement or instrument shall be deemed references to such agreement or instrument as amended, supplemented or otherwise modified from time to time, subject to compliance with any restrictions herein on the amendment, supplementation or modification of such agreement or instrument. ARTICLE II PURCHASE AND SALE OF RECEIVABLES Section 2.01. PURCHASE AND SALE OF RECEIVABLES. (a) Upon the terms set forth herein, each of the Sellers hereby sells, assigns, transfers and conveys to the Company, without recourse (except to the limited extent provided herein), all its respective present and future right, title and interest in, to and under: (i) all Receivables now existing and hereafter arising from time to time; (ii) all Related Property in respect of such Receivables; (iii) all Collections; (iv) all payment, enforcement and other rights (including rescission, replevin or reclamation), but none of the obligations, relating to any Receivable or arising therefrom; and (v) all monies due or to become due and all amounts received with respect to the items listed in clauses (i), (ii), (iii) and (iv) and all proceeds (including, without limitation, whatever is received upon the sale, exchange, collection or other disposition of the foregoing and all "proceeds" as defined in Section 9-306 of the UCC as in effect in the State of New York) thereof, including all Recoveries relating thereto (the property described in the foregoing clauses (ii) through (v) are hereinafter collectively referred to as the "RECEIVABLES PROPERTY"). Subject to the terms and conditions set forth herein, the Company hereby agrees to purchase the Receivables and Receivables Property of each Seller. (b) On each applicable Effective Date and on the date of creation of each newly created Receivable, all of the applicable Seller's right, title and interest in, to and under (i) in the case of each such Effective Date, all then existing Receivables and all Receivables Property in respect of such Receivables and (ii) in the case of each such date of creation, all such newly created Receivables and all Receivables Property in respect of such Receivables, shall be immediately and automatically sold, assigned, transferred and conveyed to the Company pursuant to paragraph (a) above without any further action by such Seller or any other Person. If any Seller shall not have received payment (including as a result of the failure to satisfy the conditions set forth in Section 3.03) from the Company of the Purchase 8 Price for any newly created Receivable and the related Receivables Property on the Payment Date therefor in accordance with the terms of subsection 2.03(c), unless such Seller has elected to contribute such Receivables to the Company in accordance with subsection 2.03(b), such newly created Receivable and the Receivables Property with respect thereto shall, upon receipt of notice by the Company and the Trustee from the applicable Seller of such failure to receive payment, immediately and automatically be sold, assigned, transferred and reconveyed by the Company to such Seller without any further action by the Company or any other Person. (c) The parties to this Agreement intend that the transactions contemplated by subsections 2.01(a) and (b) hereby shall be, and shall be treated as, a purchase and receipt by the Company and a sale and/or contribution by the applicable Seller of the Purchased Receivables and the Receivables Property in respect thereof and not a lending transaction. All transfers of Receivables and Receivables Property by any Seller hereunder shall be without recourse to, or representation or warranty of any kind (express or implied) by, any Seller, except as otherwise specifically provided herein. The foregoing sale, assignment, transfer and conveyance does not constitute and is not intended to result in a creation or assumption by the Company of any obligation of any Seller or any other Person in connection with the Receivables, the Receivables Property or any agreement or instrument relating thereto, including any obligation to any Obligor. If, and to the extent, this Agreement does not constitute a valid sale, assignment, transfer and conveyance of all right, title and interest of each Seller in, to and under the Purchased Receivables and the Receivables Property in respect thereof despite the intent of the parties hereto, such Seller hereby grants a "security interest" (as defined in the UCC as in effect in the State of New York) in the Purchased Receivables, the Receivables Property in respect thereof and all proceeds thereof to the Company, and the parties agree that this Agreement shall constitute a security agreement under the UCC in effect in New York. (d) In connection with the foregoing conveyances, each Seller agrees to record and file, at its own expense, financing statements (and continuation statements with respect to such financing statements when applicable) or, where applicable, registrations in the appropriate records, with respect to the Receivables and Receivables Property now existing and hereafter acquired by the Company from the Sellers meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect the Company's purchases of ownership interests in the Receivables and Receivables Property from the Sellers, and to deliver a file-stamped copy or certified statement of such financing statement or registration or other evidence of such filing or registration to the Company and the Trustee on or prior to the Effective Date. (e) In connection with the foregoing conveyances, each Seller agrees at its own expense, as agent of the Company on or prior to the Effective Date, (i) to indicate or cause to be indicated on the computer files (but not on individual invoices or individual collection files) relating to such Receivables (by means of a general legend, substantially in the form described on SCHEDULE 9 hereto, that will automatically appear each time a Person enters the Sellers' Receivables program) that, unless otherwise specifically identified as a receivable not so sold, transferred, assigned and conveyed, all Receivables (and any such other receivables) included therein and all other Receivables Property (and any other similar 9 related property) have been sold, transferred, assigned and conveyed to the Company in accordance with this Agreement and (ii) to deliver to the Company computer files, microfiche lists or typed or printed lists (the "RECEIVABLES LISTS") containing true and complete lists of all such Receivables, identified by Obligor and setting forth the Receivables balance for each Receivable as of the Cut-Off Date. (f) As further confirmation of the sale of the Receivables, it is understood and agreed that the Company shall have the following rights: (A) the Company (and its assignees) shall have the right at any time to (I) notify, or require that such Seller at its own expense notify, the respective Obligors of the Company's ownership of the Purchased Receivables and Receivables Property, (II) direct that payment of all amounts due or to become due under the Purchased Receivables be made directly to the Company or its designee (III) sue for collection on any Purchased Receivable or (IV) sell any Purchased Receivables to any Person for a price that is acceptable to the Company (or its assignee); (B) Such Seller shall, upon written request of the Company, and at such Seller expense (I) deliver to the Company or a party designated by the Company all documents, instruments and other records (including credit files) that evidence or Record the Receivables sold by such Seller and all licenses, rights, computer programs, related material, computer tapes, disks, cassettes and data necessary to the immediate collection of the Purchased Receivables by the Company, with or without the participation of such Seller and (II) make such arrangements with respect to the collection of the Purchased Receivables as may be reasonably required by the Company. In recognition of such Seller's need to have access to any Documents which may be transferred to the Company hereunder, whether as a result of its continuing business relationship with any Obligor for Receivables purchased hereunder or as a result of its responsibilities as a Sub-Servicer, the Company hereby grants to such Seller an irrevocable license to access the Documents transferred by such Seller to the Company and to access any such transferred computer software in connection with any activity arising in the ordinary course of such Seller's business or in performance of such Seller's duties as a Servicing Party, PROVIDED that such Seller shall not disrupt or otherwise interfere with the Company's use of and access to the Documents and its computer software during such license period; and (C) such Seller hereby grants to the Company an irrevocable power of attorney (coupled with an interest) to take any and all steps in such Seller's name necessary or desirable, in the reasonable opinion of the Company, to collect all amounts due under the Purchased Receivables, including without limitation, endorsing such Seller's name on checks and other instruments representing Collections, enforcing the Purchased Receivables and exercising all rights and remedies in respect thereof; and 10 Section 2.02. PURCHASE PRICE. The amount payable by the Company to a Seller (the "PURCHASE PRICE") for Receivables and Receivables Property on any Payment Date under this Agreement shall be equal to the product of (a) the aggregate outstanding Principal Amount of such Receivables as set forth in the applicable Daily Report TIMES (b) the Discounted Percentage with respect to such Seller. Section 2.03. PAYMENT OF PURCHASE PRICE. (a) Upon the fulfillment of the conditions set forth in Article III, the Purchase Price for Receivables and the Receivables Property (other than Receivables contributed pursuant to subsection 2.03(c) below) shall be paid or provided for by the Company in the manner provided below on each day for which a Daily Report is delivered to the Company (each such day, a "PAYMENT DATE") in respect of a Reported Day (which Daily Report shall specify, by Seller, the Principal Amount of Receivables being sold on such Payment Date, the aggregate Purchase Price for such Receivables and the components of payment as provided in paragraph (b) below). (b) The Purchase Price for Receivables and Receivables Property shall be paid by the Company on each Payment Date (including the initial Payment Date) as follows: (i) by netting the amount of any Seller Adjustment Payments or Seller Repurchase Payments pursuant to Section 2.05 or 2.06 against such Purchase Price; (ii) to the extent available for such purpose, in cash from Collections released to the Company pursuant to the Pooling Agreement; (iii) to the extent available for such purpose, in cash from the net proceeds of a transfer of interests in Purchased Receivables by the Company to other Persons; (iv) at the option of the Company (subject to the provisions of Section 8.01), by means of an addition to the principal amount of the Subordinated Note in an aggregate amount equal to the remaining portion of the Purchase Price; PROVIDED, HOWEVER, that on the initial Payment Date, amounts available pursuant to clause (v) below shall be used prior to making any payments of the Purchase Price by means of an addition to the Subordinated Note. Any such addition to the principal amount of the Subordinated Note shall be allocated among the Sellers (PRO RATA according to the Principal Amount of Receivables sold by each Seller) by the Servicer in accordance with the provisions of this subsection 2.03(b)(iv) and Section 8.01. The Servicer may evidence such additional principal amounts by recording the date and amount thereof on the grid attached to such Subordinated Note; PROVIDED that the failure to make any such recordation or any error in such grid shall not adversely affect any Seller's rights; and (v) in cash from the proceeds of capital contributed by Core- Mark to the Company, if any, in respect of its equity interest in the Company. (c) On the Initial Closing Date, in consideration of the capital stock of the Company issued to Core-Mark, Core-Mark hereby agrees to contribute and does hereby contribute pursuant to the terms of the Agreement (including without limitation Section 2.01) 11 to the Company, and the Company hereby agrees to accept and does hereby accept from Core-Mark, Receivables and the Receivables Property with respect thereto existing on the date hereof, starting with the oldest of such Receivables such that the aggregate Principal Amount of all such Receivables shall be as close as possible to, but not less than, $10,000,000. After the Initial Closing Date, Core-Mark may elect to contribute pursuant to the terms of the Agreement (including without limitation Section 2.01) additional Receivables and the Receivables Property with respect thereto to the Company, and the Company agrees to accept each such contribution; provided that Receivables may only be contributed on any Business Day after all amounts available on such day to pay the Purchase Price of Receivables pursuant to clauses (i), (ii), (iii) and (v) of paragraph (b) above have been applied. Each such contribution shall be evidenced by a notation to the effect that such Receivables shall have been contributed in the Daily Report delivered by the Servicer with respect to the date of such contribution. (d) The Servicer shall be responsible, in its sole discretion but in accordance with the preceding subsection 2.03(b), for allocating among the Sellers the payment of the Purchase Price for Receivables and any amounts netted therefrom pursuant to subsection 2.03(c)(i), either in the form of cash received from the Company or as an addition to the principal amount of a Seller's interest in the Subordinated Note. The Company shall be entitled to pay all amounts in respect of the Purchase Price of Receivables and Receivables Property to an account of the Servicer for allocation by the Servicer to the Sellers, and the Sellers hereby appoint the Servicer as their agent for purposes of receiving such payments and making such allocations and hereby authorizes the Company to make all payments due to such Seller directly to, or as directed by, the Servicer. The Servicer hereby accepts and agrees to such appointment. All payments under this Agreement shall be made not later than 3:00 p.m (New York City time) on the date specified therefor in Dollars in same day funds or by check, as the Servicer shall elect and to the bank account designated in writing by the Servicer to the Company. (e) Whenever any payment to be made under this Agreement shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. Amounts not paid when due in accordance with the terms of this Agreement shall bear interest at a rate equal at all times to the Reference Rate PLUS 2%, payable on demand. Section 2.04. NO REPURCHASE. Except to the extent expressly set forth herein, no Seller shall have any right or obligation under this Agreement, by implication or otherwise, to repurchase from the Company any Purchased Receivables or Receivables Property or to rescind or otherwise retroactively affect any purchase of any Purchased Receivables or Receivables Property after the Payment Date relating thereto. Section 2.05. REBATES, ADJUSTMENTS, RETURNS AND REDUCTIONS; MODIFICATIONS. From time to time, a Seller may make Dilution Adjustments to Receivables in accordance with this subsection 2.05 and subsection 5.03(c). The Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, agree to pay to the Company, on the first Business Day immediately succeeding the date of the grant of any Dilution Adjustment (regardless of which Seller shall have granted such Dilution 12 Adjustment), the amount of any such Dilution Adjustment (a "SELLER ADJUSTMENT PAYMENT"); PROVIDED that, prior to the occurrence of any Early Termination with respect to all Sellers, any such Seller Adjustment Payment due to the Company on any Payment Date shall, on such Payment Date, be netted against the Purchase Price of newly created Receivables in accordance with subsection 2.03(c)(i) to the extent of such Principal Amount and the remaining amount of such Seller Adjustment Payment due to the Company after such netting, if any, shall be paid to the Company on such date in cash. The amount of any Dilution Adjustment made on any Reported Day shall be set forth on the Daily Report prepared with respect to such Reported Day. Section 2.06. LIMITED REPURCHASE OBLIGATION. In the event that (i) any representation or warranty contained in Section 4.02(c)(i), (d)(i), (h), (i), (n) and (x) in respect of any Receivable transferred to the Company is not true and correct in any material respect on the applicable Payment Date, or (ii) there is a breach of any covenant contained in subsection 5.01(c), (f), (k) or (n) or Section 5.03 with respect to any Receivable in any material respect or (iii) the Company's interest in any Receivable is not a first priority perfected ownership or security interest at any time as a result of any action taken by, or any failure to take action by, any Seller, then the Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, agree to pay to the Company an amount equal to the Principal Amount (determined as of the Payment Date or Contribution Date for such Receivable) of such Receivable (whether the Company paid such Purchase Price in cash or otherwise) less Collections received by the Company in respect of such Receivable, regardless of which Seller shall have been responsible for such incorrectness or breach, such payment to occur no later than the Payment Date occurring on the 30th day (or, if such 30th day is not a Payment Date, on the Payment Date immediately succeeding such 30th day) after the day such breach or incorrectness becomes known (or should have become known with due diligence) to any Seller (unless such breach or incorrectness shall have been cured on or before such day); PROVIDED that, prior to any Early Termination with respect to all Sellers, any such payment due and owing to the Company on such Payment Date shall be netted against the Purchase Price of newly created Receivables in accordance with subsection 2.03(c)(i) to the extent of such Principal Amount and the remaining amount of such payment due to the Company after such netting, if any, (or following an Early Termination with respect to all Sellers, the full amount) shall be paid to the Company in cash to the extent still unpaid on such Payment Date. Any payment by any Seller pursuant to this Section 2.06 is referred to as a "SELLER REPURCHASE PAYMENT". The obligation to reacquire any Receivable shall, upon satisfaction thereof, constitute the sole remedy respecting the event giving rise to such obligation available to the Company. Simultaneously with any Seller Repurchase Payment with respect to any Receivable, such Receivable and the Receivables Property with respect thereto shall immediately and automatically be sold, assigned, transferred and conveyed by the Company to the applicable Seller without any further action by the Company or any other Person. Section 2.07. OBLIGATIONS UNAFFECTED. The obligations of the Sellers to the Company under this Agreement shall not be affected by reason of any invalidity or illegality of any Receivable or any sale of a Receivable. 13 Section 2.08. CERTAIN CHARGES. Each Seller and the Company agree that late charge revenue, reversals of discounts, other fees and charges and other similar items, whenever created, accrued in respect of Purchased Receivables shall be the property of the Company notwithstanding the occurrence of an Early Termination and all Collections with respect thereto shall continue to be allocated and treated as Collections in respect of Purchased Receivables. Section 2.09. CERTAIN ALLOCATIONS. The Sellers hereby agree that, following the occurrence of an Early Termination, all Collections and other proceeds received in respect of Receivables generated by the Sellers shall be applied, FIRST, to pay the outstanding Principal Amount of Purchased Receivables (as of the date of such Early Termination) of the Obligor to whom such Collections are attributable until such Purchased Receivables are paid in full and, SECOND, to the related Seller to pay Receivables of such Obligor not sold to the Company; PROVIDED, HOWEVER, that notwithstanding the foregoing, if the Seller can attribute a Collection to a specific Obligor and a specific Receivable, then such Collection shall be applied to pay such Receivable of such Obligor. The Company and the Servicer shall take such action as the Seller may reasonably request, at the expense of the Seller, to assure that any Receivable not sold to the Company, the Related Property and Collections with respect thereto do not remain commingled with other Collections hereunder and are immediately paid to the Seller. Section 2.10. FURTHER ASSURANCES. From time to time at the request of a Seller, the Company shall deliver to such Seller such documents, assignments, releases and instruments of termination as such Seller may reasonably request to evidence the reconveyance by the Company to such Seller of a Receivable pursuant to the terms of Section 2.01(b), 2.06 or 2.11(b), PROVIDED that the Company shall have been paid all amounts due thereunder; and the Company and the Servicer shall take such action as such Seller may reasonably request, at the expense of such Seller, to assure that any such Receivable, the Related Property and Collections with respect thereto do not remain commingled with other Collections hereunder. Section 2.11. PURCHASE OF SELLERS' INTEREST IN RECEIVABLES AND RECEIVABLES PROPERTY. (a) In the event of any breach of any of the representations and warranties set forth in subsection 4.02(a), (b), (c), (e), (f) or (g), as of the date made, which breach has a material adverse effect on the interests of the Company in the Receivables or the Receivables Property, then the Company, by notice then given in writing to the Sellers, may direct the Sellers to purchase all Receivables and Receivables Property and the Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, shall be obligated to make such purchase 30 days after receipt of such notice on the terms and conditions set forth in subsection 2.11(b) below; PROVIDED, HOWEVER, that no such purchase shall be required to made if, by such date, the representations and warranties contained in subsections 4.02(a), (b), (c), (e), (f) or (g) shall be satisfied in all material respects, and any material adverse effect on the Company caused thereby has been cured. (b) The Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, shall, as the purchase price for the Receivables and Receivables Property to be purchased pursuant to subsection 2.11(a) 14 above, pay to the Company, on the Business Day preceding such Distribution Date, an amount equal to the Principal Amount of the Purchased Receivables (determined as of the Payment Date or contribution date for such Purchased Receivables), less Collections received by the Company in respect of such Purchased Receivables, as of such Distribution Date. Upon payment of such amount, in immediately available funds, to the Company, the Company's rights with respect to the Purchased Receivables shall terminate and such interest therein shall immediately and automatically be sold, assigned, transferred and conveyed by the Company to the Sellers without any further action by the Company or any other Person and the Company shall have no further rights with respect thereto. If the Company gives notice directing the Sellers to purchase the Purchased Receivables as provided above, the obligation of the Sellers to purchase the Purchased Receivables pursuant to this Section 2.11 shall, upon satisfaction thereof, constitute the sole remedy respecting an event of the type specified in the first sentence of this Section 2.11 available to the Company. ARTICLE III CONDITIONS TO PURCHASES Section 3.01. CONDITIONS PRECEDENT TO COMPANY'S INITIAL PURCHASE. The obligation of the Company to purchase Receivables and Receivables Property hereunder on the Effective Date from the Sellers is subject to the conditions precedent that the Company shall have received on or before the date of such purchase the following, each (unless otherwise indicated) dated the day of such sale and in form and substance satisfactory to the Company: (a) SECRETARY'S CERTIFICATE. A certificate of the Secretary or an Assistant Secretary of each Seller, dated the Closing Date, and certifying (i) that attached thereto is a true and complete copy of the by-laws of such Seller, as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (ii) below, (ii) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Company, of the Board of Directors of such Seller or committees thereof authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (iii) that the certificate of incorporation of such Person has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to subsection (b) below and (iv) as to the incumbency and specimen signature of each officer executing this Agreement and any other Transaction Documents or any other document delivered in connection herewith or therewith on behalf of such Seller (on which certificates the Company may conclusively rely until such time as the Company shall receive from such Seller a revised certificate with respect to such Seller meeting the requirements of this subsection (a)); 15 (b) CORPORATE DOCUMENTS. The certificate of incorporation, including all amendments thereto, of the Seller, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, as the case may be; (c) GOOD STANDING CERTIFICATES. Certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to each Seller in California, Oregon, Nevada, Arizona and each other State from which the Sellers generate at least 10% of their gross sales; (d) CONSENTS, LICENSES, APPROVALS, ETC. A Certificate dated the Closing Date of a Responsible Officer of each Seller either (i) attaching copies of all consents (including without limitation consents under loan agreements and indentures to which any Seller or its Affiliates are parties), licenses and approvals required in connection with the execution, delivery and performance by such Seller of this Agreement and the validity and enforceability of this Agreement against such Seller, and such consents, licenses and approvals shall be in full force and effect or (ii) stating that no such consents, licenses or approvals are so required; (e) NO LITIGATION. Confirmation that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such Seller or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect; (f) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (i) A UCC Certificate, substantially in the form of EXHIBIT C hereto, duly executed by a Responsible Officer of the applicable Seller and dated such date of purchase and (ii) executed copies of such proper financing statements, filed and recorded at such Seller's expense prior to the Closing Date, naming the applicable Seller as the seller and the Company as the purchaser of the Receivables and the Receivables Property, in proper form for filing in each jurisdiction in which the Company (or any of its assignees) deems it necessary or desirable to perfect the Company's ownership interest in all Receivables and Receivables Property under the UCC or any comparable law of such jurisdiction; (g) UCC SEARCHES. Written search reports, listing all effective financing statements that name the applicable Seller as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (f) above and in any other jurisdictions that the Company determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in subsection (f) above, shall cover any Receivables or Receivables Property), and tax and judgment lien searches showing no such liens that are not permitted by the Transaction Documents; (h) OTHER TRANSACTION DOCUMENTS. Original copies, executed by each of the parties thereto, of each of the other Transaction Documents to be executed and delivered in connection herewith; 16 (i) BACK-UP SERVICING ARRANGEMENTS. Evidence that each Seller maintains disaster recovery systems and back-up computer and other information management systems that, in the Company's reasonable judgment as of the date hereof, are sufficient to protect such Seller's business against material interruption or loss or destruction of its primary computer and information management systems; (j) LEGAL OPINIONS. (i) One or more legal opinions from counsel to the Sellers and counsel to the Company to the effect that: (A) the sales of Receivables by each Seller to the Company pursuant to this Agreement are true sales or other absolute transfers and that such Receivables would not be property of such Seller's bankruptcy estate; and (B) a court would not order the substantive consolidation of the assets and liabilities of the Company with those of any Seller. (ii) One or more legal opinions from counsel to the Sellers and counsel to the Company: (A) to the effect that each Seller and the Company, as applicable, has all approvals, judicial, regulatory, legal or otherwise, needed to execute, deliver and perform each Transaction Document to which it is a party and that no conflict or default will occur as a result of the execution, delivery and performance thereof; (B) to the effect that the Company has a perfected, first priority, security interest in the Receivables and Receivables Property; and (C) addressing other customary matters. (iii) Each such legal opinion shall also be addressed to the Rating Agencies, the Initial Purchaser and the Trustee; (k) LOCK-BOX AGREEMENT. Lockbox Agreements signed by the Servicer, each Seller (if necessary), the Company, each Lockbox Processor and the Trustee and Eligible Segregated Account Bank Acknowledgements with respect to each Eligible Segregated Accounts; (l) POLICIES. A copy of the Policies, which shall be satisfactory in form and substance to the Company; (m) LIST OF OBLIGORS. The Receivables List of each Seller showing, as of the Cut-Off Date, the Obligors whose Receivables are to be transferred to the Company on the Effective Date and the balance of the Receivables with respect to each such Obligor as of such prior date; and 17 (n) SYSTEMS. Evidence, reasonably satisfactory to the Company, the Trustee and the Agents that such Seller's systems, procedures and record keeping relating to the Purchased Receivables is in all material respects sufficient and satisfactory in order to permit the purchase and administration of the Purchased Receivables in accordance with the terms and intent of this Agreement. Section 3.02. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER. The obligation of the Company to purchase Receivables and Receivables Property hereunder from a Subsidiary of Core-Mark approved by the Company as an additional Seller pursuant to Section 9.12 is subject to the conditions precedent that the Company shall have received on or before the date designated for the addition of such Seller (the "SELLER ADDITION DATE") and in form and substance satisfactory to the Company: (a) ADDITIONAL SELLER SUPPLEMENT; UCC CERTIFICATE. (i) an Additional Seller Supplement (with a copy for the Trustee and each Agent) duly executed and delivered by such Seller and (ii) a UCC Certificate duly executed by a Responsible Officer of such Seller and dated the related Seller Addition Date. (b) SECRETARY'S CERTIFICATE. A certificate of the Secretary or an Assistant Secretary of such Seller, dated the Effective Date, and certifying (i) that attached thereto is a true and complete copy of the by-laws of such Seller, as in effect on the Seller Addition Date and at all times since a date prior to the date of the resolutions described in clause (ii) below, (ii) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Company, of the Board of Directors of such Seller or committees thereof authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (iii) that the certificate of incorporation of such Seller has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to subsection (d) below and (iv) as to the incumbency and specimen signature of each officer executing the Additional Seller Supplement and any other Transaction Documents or any other document delivered in connection therewith on behalf of such Seller (on which certificates the Company may conclusively rely until such time as the Company shall receive from such Seller a revised certificate with respect to such Seller meeting the requirements of this subsection (b)); (c) CORPORATE DOCUMENTS. The certificate of incorporation, including all amendments thereto, of such Seller, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, as the case may be; (d) GOOD STANDING CERTIFICATES. Certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to such Seller in each State where the ownership, lease or operation of property or the conduct of business requires 18 it to qualify as a foreign corporation, except where the failure to so qualify would not have a Material Adverse Effect; (e) CONSENTS, LICENSES, APPROVALS, ETC. A Certificate dated the related Seller Addition Date of a Responsible Officer of such Seller either (i) attaching copies of all consents (including without limitation consents under loan agreements and indentures to which any Seller or its Affiliates are parties), licenses and approvals required in connection with the execution, delivery and performance by such Seller of the Additional Seller Supplement and the validity and enforceability of the Additional Seller Supplement against such Seller, and such consents, licenses and approvals shall be in full force and effect or (ii) stating that no such consents, licenses or approvals are so required; (f) NO LITIGATION. Confirmation that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such Seller or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect; (g) LOCKBOXES; ELIGIBLE SEGREGATED ACCOUNTS. A Lockbox Account with respect to Receivables to be sold by such Seller shall have been established in the name of the Company, and the Servicer shall have delivered with respect to such Lockbox Account a Lockbox Agreement signed by it, the Company, the Trustee and applicable Lockbox Processor or an Eligible Segregated Account Bank Acknowledgement, as the case may be. (f) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (i) A UCC Certificate duly executed by a Responsible Officer of such Seller and dated the related Seller Addition Date and (ii) executed copies of such proper financing statements, filed and recorded at such Seller's expense prior to the related Seller Addition Date, naming such Seller as the seller and the Company as the purchaser of the Receivables and the Receivables Property, in proper form for filing in each jurisdiction in which the Company (or any of its assignees) deems it necessary or desirable to perfect the Company's ownership interest in all Receivables and Receivables Property under the UCC or any comparable law of such jurisdiction; (g) UCC SEARCHES. Written search reports, listing all effective financing statements that name such Seller as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (f) above and in any other jurisdictions that the Company determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in subsection (f) above, shall cover any Receivables or Receivables Property), and tax and judgment lien searches showing no such liens that are not permitted by the Transaction Documents; (h) LIST OF OBLIGORS. A microfiche, typed or printed list or other tangible evidence reasonably acceptable to the Company showing as of a date acceptable to the Company prior to the related Seller Addition Date the Obligors whose Receivables are 19 to be transferred to the Company and the balance of the Receivables with respect to each such Obligor as of such date. (i) OPINIONS. Legal opinions with respect to such Seller conforming to the requirements of Section 3.01(j). (j) BACK-UP SERVICING ARRANGEMENTS. Evidence that such Seller maintains disaster recovery systems and back-up computer and other information management systems that, in the Company's reasonable judgment, are sufficient to protect such Seller's business against material interruption or loss or destruction of its primary computer and information management systems. (k) PARTY TO SERVICING AGREEMENT. Evidence that such additional Seller shall have become a party to the Servicing Agreement in its capacity as a Sub-Servicer thereunder. (l) SYSTEMS. Evidence, reasonably satisfactory to the Company, the Trustee and the Agents, that such additional Seller's systems, procedures and record keeping relating to the Purchased Receivables remain in all material respects sufficient and satisfactory in order to permit the purchase and administration of the Purchased Receivables in accordance with the terms and intent of this Agreement. Section 3.03. CONDITIONS PRECEDENT TO ALL THE COMPANY'S PURCHASES OF RECEIVABLES. The obligation of the Company to pay for any Receivable and the Receivables Property with respect thereto on each Payment Date (including the Effective Date) shall be subject to the further conditions precedent that, on and as of such Payment Date: (a) the following statements shall be true (and the acceptance by the relevant Seller of the Purchase Price for such Receivable on such Payment Date shall constitute a representation and warranty by such Seller that on such Payment Date such statements are true): (i) the representation and warranties of such Seller contained in Section 4.02 shall be true and correct in all material respects on and as of such Payment Date as though made on and as of such date except to the extent any such representation or warranty is expressly made only as of another date (in which case it shall be true and correct in all material respects on and as of such other date); (ii) after giving effect to such purchase, no (A) Early Termination with respect to such Seller or (B) Potential Purchase Termination Event with respect to a Purchase Termination Event set forth in clause (g)(ii) of Section 6.01 shall have occurred and be continuing; and (iii) there has been no material adverse change since the date of this Agreement in the collectibility of the Receivables taken as a whole (other than due to a change in the creditworthiness of the Obligors); 20 (b) the Company shall have received (after giving effect to subsection 2.03(c)(i)) payment in full of all amounts for which payment is due from such Seller pursuant to Sections 2.05, 2.06 or 7.01; (c) the Company shall have received such other approvals, opinions or documents as the Company may reasonably request; and (d) such Seller shall have complied with all of its covenants in all material respects and satisfied all of its obligations in all material respects under this Agreement required to be complied with or satisfied as of such date; PROVIDED, HOWEVER, that the failure of such Seller to satisfy any of the foregoing conditions shall not prevent such Seller from subsequently selling Receivables upon satisfaction of all such conditions or exercising its rights under subsection 2.01(b). Section 3.04. CONDITION PRECEDENT TO EACH SELLER'S OBLIGATIONS. The obligation of a Seller to sell any Receivable generated by it on any date (including on the Effective Date) shall be subject to the condition precedent that, on the related Payment Date, the following statement shall be true (and the payment by the Company of the Purchase Price for such Receivable on such date shall constitute a representation and warranty by the Company that on such Payment Date the statements in clause (ii) are true): (i) no Purchase Termination Event set forth in paragraph (g) (other than clause (v) thereof) of Section 6.01 shall have occurred and be continuing and (ii) no Early Amortization Event or Potential Early Amortization Event in each case of a type set forth in paragraph (a) of (other than clause (v) thereof) Section 7.1 of the Pooling Agreement shall have occurred and be continuing. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants as to itself for the benefit of the Sellers as follows: (a) It (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect, (ii) has all requisite corporate power and authority and the legal right to own, pledge, mortgage and operate its properties, and to conduct its business as now or currently proposed to be conducted and (iii) is in compliance with all Requirements of Law. (b) It has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party. 21 (c) The execution, delivery and performance by it of this Agreement and the other Transaction Documents to which it is a party and all instruments and documents to be delivered hereunder by it, and the transactions contemplated hereby and thereby, (i) do not (A) violate its certificate or articles of incorporation and by-laws or other organizational or governing documents or, in any material respect, any other Requirement of Law, (B) conflict with or result in the breach of, or constitute a default under, any indenture, mortgage or deed of trust or any material lease, agreement or other instrument binding on or affecting it or any of its respective subsidiaries or any of its properties in any material respect or (C) result in or require the creation or imposition of any Lien EXCEPT as created or imposed hereunder or under the Pooling Agreement, and no transaction contemplated hereby requires compliance on its part with any bulk sales act or similar law, and (ii) do not require the consent of, authorization by or approval of or notice to or filing or registration with, any governmental body, agency, authority, regulatory body or any other Person other than those which have been obtained or made EXCEPT for the filing of the Financing Statements referred to in Article III hereof, which filings the Sellers hereby represent shall have been duly made prior to or substantially contemporaneously with any purchases of Receivables and other Receivables Property and shall at all times be in full force and effect (except as they may be terminated by the Company). (d) This Agreement has been duly executed and delivered by the Company and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms except (A) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and (B) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). Section 4.02. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each Seller hereby represents and warrants, as to itself only, for the benefit of the Company and its assigns (including the Trustee) on the applicable Effective Date and on each Payment Date as follows: (a) CORPORATE EXISTENCE. Such Seller (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite corporate power and authority, and all legal right, to own and operate its properties, to lease the properties it operates as lessee and to conduct its business as now conducted and (iii) is duly qualified as a foreign corporation to do business and in good standing (or is exempt from such requirements) under the laws of each jurisdiction in which the ownership or lease of property or the conduct of its business requires such qualification, except, in the case of clauses (ii) and (iii), to the extent that a failure to have such power, authority or right or to qualify and be in good standing, as the case may be, would not be reasonably likely to have a Material Adverse Effect. (b) CORPORATE POWER; AUTHORIZATION; CONSENTS. The Seller has the corporate power and authority, and the legal right, to execute, deliver and perform this 22 Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction 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 or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which it is a party by or against the Seller other than (i) those consents which have duly been obtained or made and are in full force and effect on the Effective Date or the relevant Payment Date, as the case may be, (ii) the filing of the UCC financing statements referred to in Article III, all of which, at the time required in Article III, shall have been duly made and shall be in full force and effect, (iii) those that may be required under state securities or "blue sky" laws in connection with the offering or sale of Certificates and (iv) any such consent, authorization, filing, notice or other act, the absence of which would not be reasonably likely to have a Material Adverse Effect. This Agreement and each other Transaction Document to which it is a party have been duly executed and delivered on behalf of the Seller. (c) NO DEFAULT. (i) Such Seller is not in default under or with respect to any of its Contractual Obligations in any respect which would be reasonably likely to have a Material Adverse Effect. (ii) No (A) Early Termination or (B) Potential Purchase Termination Event with respect to a Purchase Termination Event set forth in clause (g)(ii) of Section 6.01, in each case with respect to such Seller, has occurred and is continuing. (d) VALID SALE; BINDING OBLIGATIONS. (i) Each transfer of Receivables and Receivables Property made pursuant to this Agreement shall constitute a valid sale, transfer and assignment of the Receivables and the Receivables Property to the Company which is perfected and of first priority under applicable law, enforceable against creditors of, and purchasers of Receivables from, such Seller. (ii) This Agreement constitutes, and each other Transaction Document to be signed by such Seller when duly executed and delivered will constitute, an enforceable obligation of such Seller in accordance with its terms, except (A) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and (B) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (e) NO VIOLATION. The execution, delivery and performance of, and the consummation of the transactions contemplated by, this Agreement and the other Transaction Documents and the fulfillment of the terms hereof and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the Certificate of Incorporation or By-laws of such Seller or any indenture, loan agreement, mortgage, deed of trust, or other material contract, agreement or instrument to which such Seller is a party or by which such Seller or any of its properties is bound (ii) result in the creation or imposition of any Lien upon any of its properties 23 pursuant to the terms of any such contract, indenture, loan agreement, mortgage, deed of trust, lease or other agreement or instrument, other than this Agreement and the other Transaction Documents, or (iii) violate in any material respect, any other Requirement of Law. (f) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the knowledge of such Seller, threatened against such Seller before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity or unenforceability of this Agreement or any other Transaction Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document, or (iii) seeking any determination or ruling that, in the reasonable judgment of such Seller, would materially and adversely affect the performance by such Seller of its obligations under this Agreement or any other Transaction Document. (g) BULK SALES ACT. No transaction contemplated by this Agreement or any other Transaction Document with respect to such Seller requires compliance with, or will be subject to avoidance under, any bulk sales act or similar law. (h) BONA FIDE RECEIVABLES; ELIGIBLE RECEIVABLES. Each Receivable of such Seller is or will be an account receivable arising out of such Seller's performance in accordance with the terms of the Contract, if any, giving rise to such Receivable. Each Receivable sold by it hereunder, other than Receivables which such Seller states in writing (in the applicable Daily Report or otherwise) are not Eligible Receivables, is at its respective Payment Date an Eligible Receivable. The aggregate outstanding Principal Amount of Receivables so sold by it on any Payment Date is correctly set forth on the Daily Report with respect to such Payment Date. (i) QUALITY OF TITLE. Each Receivable and all Receivables Property which is to be transferred to the Company by such Seller shall be transferred by such Seller free and clear of any Lien (other than any Lien arising under any other Transaction Document or arising solely as the result of any action taken by the Company hereunder or the Trustee); immediately prior to such transfer such Seller shall have made all filings under applicable law in each relevant jurisdiction in order to protect and perfect the Company's ownership interest in all Receivables and Receivables Property against all creditors of, and purchasers of Receivables from, such Seller; and upon such transfer, the Company shall have acquired a valid and perfected first priority ownership interest in each Receivable and the Receivables Property free and clear of any Lien (other than Permitted Liens described in clauses (i) and (iv) of the definition of Permitted Liens and any Lien arising solely as the result of any action taken by the Company hereunder or the Trustee); and no effective financing statement or other instrument similar in effect covering any Receivable, any interest therein or any Receivables Property with respect thereto is on file in any recording office except such as may be filed in favor of the Company pursuant to this Agreement, in favor of the Trustee. 24 (j) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. The chief executive office of such Seller is as indicated on SCHEDULE 2 hereto and is the place where the Seller is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York. The state and county where the chief executive office of such Seller is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York has not changed in the past four months. The offices where such Seller keeps its records concerning the Receivables and related Contracts and all other agreements related to the Receivables are as indicated for such Seller on SCHEDULE 2 hereto (or at such other locations, notified to the Company and the Trustee in accordance with Section 5.01(h), in jurisdictions where all action required by Section 9.2 has been taken and completed). (k) MARGIN REGULATIONS. No use of any funds obtained by such Seller under this Agreement or the other Transaction Documents will conflict with or contravene any of Regulations G, T, U and X promulgated by the Board of Governors of the Federal Reserve System from time to time. (l) ACCURACY OF INFORMATION. All factual written information, reports, financial statements, exhibits and schedules heretofore or contemporaneously furnished by such Seller or its Affiliates (other than the Company) to the Company or the Trustee for purposes of or in connection with any Transaction Document or any transaction contemplated hereby or thereby is, and all other such factual, written information hereafter furnished (if prepared by such Seller or any Affiliate or, if not prepared by such Seller or any Affiliate, to the extent that information contained therein was supplied by such Seller or any Affiliate) by such Seller or any Affiliate (other than the Company) to the Company or the Trustee pursuant to or in connection with any Transaction Document shall be, true and accurate in every material respect on the date as of which such information is or will be furnished (unless such information relates to another date, in which case as of such other date), and such information is not, and shall not be (as the case may be) incomplete by omitting to state a material fact or any fact necessary to make the statements contained therein not misleading as of such date. (m) PROCEEDS BANKS; PAYMENT INSTRUCTIONS. The names and addresses of all the Lockbox Banks, the Lockbox Processors, the Collection P.O. Boxes and Eligible Segregated Account Banks, together with the account numbers of the Lockbox Accounts and the Eligible Segregated Accounts into which Collections are deposited at such institutions, are specified in SCHEDULE 3. The Sellers have transferred all of their right, title and interest in each Lockbox Account and Eligible Segregated Account to the Company. Each Lockbox Bank or Lockbox Processor has executed and delivered to the Company and the Trustee a Lockbox Agreement. Each Eligible Segregated Account Bank has executed and delivered to the Company and the Trustee an Eligible Segregated Account Bank Agreement. With respect to any payments in respect of Receivables and Related Property that are made directly to any Seller (including without limitation, any Collectors, other employees thereof or independent contractors employed thereby), such Seller agrees to deposit payments in the form received within one Business Day of receipt directly to one of the Lockbox Accounts, or Eligible 25 Segregated Accounts. Each Seller has instructed all Obligors to submit all payments on Receivables and Related Property directly to one of the Lockbox Accounts, Collection P.O. Boxes or Eligible Segregated Accounts or as otherwise provided in Section 2.3 of the Servicing Agreement. (n) VALID TRANSFERS. No transfer of any Receivables or any Receivables Property to the Company by such Seller constitutes a fraudulent transfer or fraudulent conveyance or is otherwise void or voidable under similar laws or principles, the doctrine of equitable subordination or for any other reason. The transfers of Receivables and Receivables Property by such Seller to the Company pursuant to this Agreement, and all other transactions between such Seller and the Company, have been and will be made in good faith and without intent to hinder, delay or defraud creditors of such Seller, and such Seller acknowledges that it has received and will receive fair consideration and reasonably equivalent value for the purchases by the Company of Receivables and Receivables Property hereunder. The purchase of Receivables and Receivables Property by the Company from such Seller constitutes a true sale or other absolute transfer of such Receivables and Receivables Property under applicable state law. (o) TRADE NAMES. Such Seller uses no trade name in the furnishing of its products or services which generate Receivables other than its actual corporate name and the trade names set forth for such Seller in SCHEDULE 5. During the five years preceding the date hereof, except as set forth in SCHEDULE 5, (i) such Seller has not been known by any legal name or trade name other than its corporate name, (ii) nor has such Seller been the subject of any merger or other corporate reorganization within the last five years, other than mergers occurring more than one year prior to the date hereof in which the Seller was the surviving company and the merged entity did not include in its name the name "Core-Mark". (p) LITIGATION; COMPLIANCE WITH APPLICABLE LAWS. There are no actions, suits or proceedings at law or in equity or by or before any governmental authorities (federal, state, local or foreign) now pending or, to the knowledge of such Seller, threatened against or affecting such Seller or any business, property or rights of such Seller (A) that involve any Transaction Documents or the transactions contemplated thereby or (B) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Such Seller is in compliance with the requirements of all applicable laws, rules, regulations, and orders of all governmental authorities (federal, state, local or foreign, and including, without limitation, environmental laws), a breach of any of which, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect. (q) TAXES. Such Seller has filed all tax returns (federal, state and local) required by law to be filed and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges due from such Seller or is contesting any such tax, assessment or other governmental charge in good faith through appropriate proceedings. No tax Lien has been filed with respect to taxes 26 exceeding in the aggregate $2,500,000, and, to the best knowledge of the Seller, no claim is presently being asserted with respect to taxes exceeding in the aggregate $2,500,000. For purposes of this paragraph, "taxes" shall mean any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any Governmental Authority. Such Seller knows of no basis for any material additional tax assessment for any fiscal year for which adequate reserves have not been established. (r) ERISA MATTERS. (i) Except as specifically disclosed in SCHEDULE 7 hereto, such Seller and each of its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to each Plan of such Seller or any of its ERISA Affiliates, except for such noncompliance which could not reasonably be expected to result in a Material Adverse Effect. (ii) No Reportable Event has occurred as to which such Seller or any of its ERISA Affiliates was required to file a report with the PBGC, other than reports for which the 30-day notice requirement is waived, reports that have been filed and reports the failure of which to file would not reasonably be expected to result in a Material Adverse Effect. (iii) Except as specifically disclosed in SCHEDULE 7 hereto, as of the Effective Date, the present value of all benefit liabilities under each Plan of such Seller or any of its ERISA Affiliates (on an ongoing basis and based on those assumptions used to fund such Plan) did not, as of the last valuation report applicable thereto, exceed the value of the assets of such Plan. (iv) Neither such Seller nor any of its ERISA Affiliates has incurred any Withdrawal Liability that could reasonably be expected to result in a Material Adverse Effect. (v) Neither such Seller nor any of its ERISA Affiliates has received any notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, or that a reorganization or termination has resulted or could reasonably be expected to result, through increases in the contributions required to be made to such Plan or otherwise, in a Material Adverse Effect. (s) SOLVENCY. Both prior to and after giving effect to the transactions occurring on each Payment Date, (i) the fair value of the assets of the Seller at a fair valuation will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Seller; (ii) the present fair salable value of the property of such Seller will be greater than the amount that will be required to pay the probable liability of such Seller on its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; (iii) such Seller will be able to pay 27 its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) such Seller will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. For all purposes of clauses (i) through (iv) above, the amount of contingent liabilities at any time shall be computed as the amount that, in the 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. Such Seller does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it and the timing of and amounts of cash to be payable in respect of its debt. (t) INVESTMENT COMPANY ACT. Neither such Seller nor any of such Seller's Subsidiaries is (i) an "investment company" registered or required to be registered under the 1940 Act, or (ii) a "holding company", or a "subsidiary company" or an "affiliate" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (u) OWNERSHIP. All of the issued and outstanding capital stock of such Seller (other than Core-Mark) is owned, directly or indirectly, by Core-Mark. (v) INDEBTEDNESS TO COMPANY. Such Seller had no outstanding Indebtedness to the Company other than amounts permitted by this Agreement or amounts outstanding under the Subordinated Note. (w) RECEIVABLES DOCUMENTS. Upon the delivery, if any, by such Seller to the Company of licenses, rights, computer programs, related materials, computer tapes, disks, cassettes and data relating to the administration of the Purchased Receivables pursuant to subsection 5.01(p), the Company shall have been furnished with all materials and data necessary to permit orderly collection of the Purchased Receivables without the participation of such Seller in such collection. (x) RECEIVABLES LISTS. The Receivables Lists set forth in all material respects an accurate and complete listing as of the Cut-Off Date of all Receivables to be transferred to the Company on the Effective Date and the information contained therein with respect to the identity and Principal Amount of each such Receivable is true and correct in all material respects as of the Cut-Off Date. The representations and warranties set forth in this Section 4.02 shall survive the transfer and assignment of the respective Receivables to the Company pursuant to this Agreement. Upon discovery by any Seller or the Company of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other. 28 ARTICLE V GENERAL COVENANTS Section 5.01. AFFIRMATIVE COVENANTS OF THE SELLERS. Each Seller covenants that, until the Purchase Termination Date shall have occurred with respect to such Seller and there are no amounts outstanding with respect to the Purchased Receivables previously sold by such Seller to the Company (other than Charged-off Receivables): (a) PRESERVATION OF CORPORATE EXISTENCE AND NAME. Such Seller will preserve and maintain in all material respects its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification could have a Material Adverse Effect. (b) MAINTENANCE OF PROPERTY. Such Seller will keep all property and assets useful and necessary to permit the origination, monitoring and collection of Receivables. (c) COMPLIANCE WITH LAWS, ETC. Such Seller shall comply in all material respects with all applicable laws, rules, regulations and orders applicable to the Receivables and the Receivables Property, including, without limitation, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy, where failure to so comply could reasonably be expected to have a materially adverse impact on the amount of Collections thereunder. (d) VISITATION RIGHTS. At any reasonable time during normal business hours and from time to time upon reasonable notice, according to the Seller's normal security and confidentiality provisions with respect to customer lists, such Seller shall permit (i) the Company, the Trustee or any of its agents or representatives, (A) to examine and make copies of and abstracts from the records, books of account and documents (including, without limitation, computer tapes and disks) of such Seller relating to Receivables and Related Property owned or to be purchased by the Company hereunder, including without limitation, the related Contracts and purchase orders and other agreements and (B) following the termination of the appointment of Core-Mark as Servicer or of such Seller as a Servicing Party with respect to the Receivables, to be present at the offices and properties of such Seller to administer and control the collection of amounts owing on the Purchased Receivables and (ii) the Company, the Trustee or any of its agents or representatives, or the Trustee (upon the giving of appropriate notice to the Company) to visit the properties of such Seller for the purpose of examining such records, books of account and documents, and to discuss the affairs, finances and accounts of such Seller relating to the Receivables or such Seller's performance hereunder with any of its officers or directors and with its independent certified public accountants; PROVIDED, that the Company, the Trustee or such agents or representatives, as the case may be, shall notify such Seller prior to any 29 contact with such accountants and permit representatives of the Seller to participate in such discussions. (e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Such Seller will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables and the Receivables Property in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information which, in each case, in the reasonable discretion of the Company, are necessary or advisable for the collection of all Receivables and the Receivables Property (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). Upon the request of the Company, such Seller will deliver copies of all books and records maintained pursuant to this Section 5.01(e) to the Trustee. (f) PERFORMANCE AND COMPLIANCE WITH POLICIES, RECEIVABLES AND CONTRACTS. Such Seller will (i) perform its obligations in accordance with and comply in all material respects with the Policies, as amended from time to time in accordance with the Transaction Documents and (ii) at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Receivables and the Contracts related to the Receivables and Related Property and all purchase orders and other agreements related to such Receivables and Related Property. (g) OBLIGATIONS. Seller shall pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its other obligations of whatever nature, except where (i) the amount of 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 its books, or (ii) the failure to so pay, discharge or satisfy all such obligations would not, in the aggregate, be reasonably likely to have a Material Adverse Effect and would not subject any of its properties to any Lien prohibited by subsection 5.03(b). (h) LOCATION OF RECORDS. Such Seller will keep its principal place of business and chief executive office, and the offices where it keeps its records concerning the Receivables, all Receivables Property, all Contracts and purchase orders and other agreements related to such Receivables (and all original documents relating thereto), at the address(es) of such Seller referred to in SCHEDULE 2 or, upon 30 days' prior written notice to the Company and the Agents, at such other locations in jurisdictions where all action required by Section 5.01(m) shall have been taken and completed; PROVIDED, HOWEVER, that the Rating Agency Condition shall have been satisfied with respect to any changes in location if such location is not in a state which is within the Tenth Circuit unless it delivers an opinion of counsel reasonably acceptable to the Rating Agencies to the effect that OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993) (other than for records maintained by the Denver, Colorado division of Core-Mark, the Salt Lake City, Utah division of Core- 30 Mark and the Albuquerque, New Mexico division of Core-Mark Midcontinent), is no longer controlling precedent in the Tenth Circuit. (i) OBLIGATION TO RECORD AND REPORT. Such Seller shall to the fullest extent permitted by GAAP and by applicable law, record each purchase of the Purchased Receivables as a sale on its books and records, reflect each purchase of Purchased Receivables in its financial statements as a sale. (j) COLLECTIONS. Instruct each Obligor to make payments in respect of its Receivables to a Lockbox or a Collection P.O. Box or a Lockbox Account or an Eligible Segregated Account or by wire transfer or other electronic payment to a Lockbox Account an Eligible Segregated Account or the Collection Account or as otherwise provided in Section 2.3 of the Servicing Agreement and to comply in all material respects with procedures with respect to Collections reasonably specified from time to time by the Company; including, without limitation, the procedures specified in the Servicing Agreement. In the event that any payments in respect of any such Receivables are made directly to the Seller (including, without limitation, any Collector, any other employees thereof or independent contractors employed thereby), the Seller shall, within one Business Day (except as provided in the Servicing Agreement) of receipt thereof, deposit such amounts to a Lockbox, a Lockbox Account, an Eligible Segregated Account or the Collection Account and, prior to forwarding such amounts, the Seller shall hold such payments in trust as custodian for the Company and the Trustee. (k) TAXES. Such Seller will file all tax returns and reports required by law to be filed by it and will pay all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. (l) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. Such Seller hereby acknowledges that the Trustee and the Investor Certificateholders are entering into the transactions contemplated by the Transaction Documents in reliance upon the Company's identity as a legal entity separate from the Sellers and all other Core-Mark Persons. Therefore, from and after the date hereof, such Seller will take (or refrain from taking, as the case may be) such actions and will cause each other Core-Mark Person to take (or refrain from taking, as the case may be) such actions, as shall be required in order that: (i) No Core-Mark Person will pay the Company's operating expenses and liabilities, recognizing, however, that certain organizational expenses of the Company and expenses relating to creation and initial implementation of the securitization program contemplated by the Transaction Documents have been or shall be paid by such Seller. (ii) Each Core-Mark Person will conduct its business in a separate space within, but segregated from, the Company's offices. 31 (iii) Each Core-Mark Person will maintain corporate records and books of account separate from those of the Company and telephone numbers, mailing addresses, stationery and other business forms that are separate and distinct from those of the Company. (iv) Any financial statements of any Core-Mark Person which are consolidated to include the Company will contain a detailed note substantially in the form, and to the effect, of the note set forth on SCHEDULE 8. (v) The Company's assets will be maintained in a manner that facilitates their identification and segregation from those of such Seller and the other Core-Mark Persons. (vi) Each Core-Mark Person will strictly observe corporate formalities in its dealings with the Company, and no material amount of funds or other assets of the Company will be commingled or pooled with those of any Core-Mark Person. No Core-Mark Person will maintain joint bank accounts with the Company or other depository accounts with the Company to which any Core-Mark Person has independent access. (vii) Any transaction between the Company and any Core-Mark Person will be fair and equitable to the Company, will be the type of transaction which would be entered into by a prudent Person in the position of the Company with an Core-Mark Person, and will be on terms which are at least as favorable to the Company as may be obtained from a Person which is not an Core-Mark Person, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (vii). (viii) No Core-Mark Person will hold itself out, or permit itself to be held out, as having agreed to pay or be liable for the debts of the Company. (ix) The duly elected Board of Directors of the Company and the Company's duly appointed officers shall at all times have sole authority to control decisions and actions with respect to the daily business affairs of the Company. (x) Such Seller will comply in all material respects with the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions which are applicable to such Seller, except, in each case above, for such failure to take actions or refrain from taking actions that are in the aggregate, not material. (m) FURTHER ACTION EVIDENCING PURCHASES. (i) Such Seller agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take 32 all further action, that may be necessary or desirable or that the Company may reasonably request, to protect or more fully evidence the Company's ownership, right, title and interest in the Receivables and Receivables Property sold by such Seller and its rights under the Contracts with respect thereto, or to enable the Company to exercise or enforce any of its rights hereunder or under any other Transaction Document. Without limiting the generality of the foregoing, such Seller will upon the request of the Company (A) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or, in the reasonable opinion of the Company or the Agents, desirable, (B) indicate on its books and records (including, without limitation, master data processing records) that the Receivables and Receivables Property have been sold and assigned to the Company and, in turn, the Company has sold and assigned its interest therein to the Trustee, and provide to the Company, upon request, copies of any such records, (C) after the occurrence of a Purchase Termination Event, contact customers to confirm and verify Receivables and (D) obtain the agreement of any Person having a Lien on any Receivables owned by such Seller (other than any Lien created or imposed hereunder or under the Pooling Agreement or any Permitted Lien) to release such Lien upon the purchase of any such Receivables by the Company. (ii) Such Seller hereby irrevocably authorizes the Company and the Trustee to file one or more financing or continuation statements substantially in the form of the originally agreed upon financing statements, and amendments thereto, relative to all or any part of the Receivables and Receivables Property sold or to be sold by such Seller, without the signature of such Seller where permitted by law. (iii) If such Seller fails to perform any of its agreements or obligations under this Agreement, the Company or its assignees may (but shall not be required to) perform, or cause performance of, such agreements or obligations, and the expenses of the Company incurred in connection therewith shall be payable by such Seller as provided in Section 9.06. (n) LEGEND REQUIREMENT FOR CHATTEL PAPER. Such Seller agrees (i) at all times to comply with the terms and provisions set forth in Schedule 3 to the Pooling Agreement and (ii) that any Receivable that constitutes or is evidenced by "chattel paper" as defined in Article 9 of the UCC as in effect in the Relevant UCC State shall bear a legend stating that such Receivable has been conveyed to the Trust. (o) COMPUTER FILES. At its own cost and expense, each Seller shall retain the ledger used by such Seller as a master record of the Obligors and retain copies of all documents relating to each Obligor as custodian and agent for the Company and other Persons with interests in the Purchased Receivables, and each Seller shall assure continued compliance with Section 2.01(e). 33 Section 5.02. REPORTING REQUIREMENTS. Each Seller shall furnish to the Company and its assigns (including the Trustee) from the date hereof until the Purchase Termination Date shall have occurred with respect to such Seller and until there are no amounts outstanding with respect to Purchased Receivables previously sold by such Seller to the Company: (a) COMPLIANCE CERTIFICATE. Not later than 90 days after the end of each fiscal year and not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year, a certificate of a Responsible Officer of such Seller stating that, to the best of such Responsible Officer's knowledge, such Seller during such period, has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in the Transaction Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Purchase Termination Event or Potential Purchase Termination Event except as specified in such certificate; (b) ERISA. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event defined in Title of ERISA which such Seller files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which such Seller receives from the Pension Benefit Guaranty Corporation if, in each case, such report or notice relates to an event or condition that could reasonably be expected to give rise to a Purchase Termination Event, Amortization Event or a Material Adverse Effect; (c) TERMINATION EVENTS: OTHER MATERIAL EVENTS. Such Seller shall furnish to the Company (i) upon the Company's request, a certificate of a Responsible Officer of such Seller certifying, as of the date thereof, that no Purchase Termination Event has occurred and is continuing and setting forth the computations used by the chief financial officer of such Seller in making such determination; (ii) as soon as possible and in any event within two Business Days after a Responsible Officer of such Seller obtains knowledge of the occurrence of any Purchase Termination Event, Potential Purchase Termination Event, Servicer Default, Potential Servicer Default or a written statement of a Responsible Officer of such Seller setting forth details of such event and the action that such Seller proposes to take or has taken with respect thereto; (iii) promptly after obtaining knowledge that a Receivable was, at the time of the Company's purchase thereof, not an Eligible Receivable, notice thereof; (iv) promptly after obtaining knowledge of any threatened action or proceeding affecting such Seller or its Subsidiaries before any court, governmental agency or arbitrator that may reasonably be expected to materially and adversely affect the enforceability of this Agreement and the other Transaction Documents, notice of such action or proceeding; (v) by June 1999, a certificate of a Responsible Officer of such Seller (with a copy to each Rating Agency) certifying, as of the date thereof, that such Seller's computer systems shall be "year 2000 compliant" by September 1999; and (vi) promptly following the Company's request therefor, such other information, documents, records or reports with respect to the Receivables or the related Contracts; 34 (d) INELIGIBLE RECEIVABLE. Promptly upon determining that any Purchased Receivable originated by it designated as an Eligible Receivable on the applicable Daily Report or Monthly Settlement Statement was not an Eligible Receivable as of the date provided therefor, written notice of such determination; and (e) OTHER. Promptly, from time to time, such other information, documents, records or reports respecting the Receivables or the condition or operations, financial or otherwise, of such Seller as the Company or the Agents may from time to time reasonably request in order to protect the interests of the Company and the Agents under or as contemplated by the Transaction Documents. Section 5.03. NEGATIVE COVENANTS. Each Seller covenants that, until the Purchase Termination Date shall have occurred with respect to such Seller and there are no amounts outstanding with respect to Purchased Receivables previously sold by such Seller to the Company: (a) RECEIVABLES TO BE ACCOUNTS, GENERAL INTANGIBLES OR CHATTEL PAPER. Such Seller will take no action to cause any Receivable to be evidenced by any "instrument" other than in compliance with Section 2.2(g) of the Servicing Agreement or, provided that the procedures set forth in Schedule 3 to the Pooling Agreement are fully implemented with respect thereto, an instrument which together with a security agreement constitutes "chattel paper" (each as defined in the UCC as in effect in the Relevant UCC State). Such Seller will take no action to cause any Receivable to be anything other than an "account", "general intangible" or "chattel paper" (each as defined in the UCC as in effect in the Relevant UCC State). (b) SECURITY INTERESTS; SALE OF RECEIVABLES. Except for the conveyances hereunder and as provided below, such Seller will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any other Lien on any Receivable or Receivables Property, whether now existing or hereafter created, or any interest therein; such Seller will immediately notify the Company of the existence of any other Lien on any Receivable or Receivables Property; and such Seller shall defend the right, title and interest of the Company in, to and under the Receivables or Receivables Property, whether now existing or hereafter created, against all claims of third parties claiming through or under such Seller; PROVIDED, HOWEVER, that nothing in this subsection 5.03(b) shall prevent or be deemed to prohibit such Seller from suffering to exist upon any of the Receivables any Permitted Lien. (c) EXTENSION OR AMENDMENT OF RECEIVABLES. Such Seller will not extend, rescind, cancel, make any Dilution Adjustment to, amend or otherwise modify, or attempt or purport to extend, rescind, cancel, make any Dilution Adjustment to, amend or otherwise modify, the terms of any Purchased Receivables, except in any such case (i) in accordance with the terms of the Policies, (ii) as required by any Requirement of Law or (iii) in the case of Dilution Adjustments (whether or not permitted by any other clause of this sentence), upon making a Seller Adjustment Payment pursuant to Section 2.05. 35 (d) CHANGE IN BUSINESS. Such Seller will not make or permit to be made any change in the character of its business in any material respect if such change could reasonably be expected to have a Material Adverse Effect. (e) CHANGE IN POLICIES. Such Seller shall not make or permit to be made any change in the Policies in any material respect, except (i) if such changes or modifications are required under any Requirement of Law, (ii) if such changes or modifications would not reasonably be expected to have a Material Adverse Effect or (iii) if the Rating Agency Condition is satisfied with respect thereto. The Seller shall provide notice to the Company, the Trustee and each Rating Agency of any modification of the Polices; PROVIDED, HOWEVER, that if any change or modification is to be made, other than a change or modification permitted pursuant to clause (i) or (ii) above, and any Investor Certificateholders of a Series are outstanding which are not rated by a Rating Agency, the consent of the applicable Agent (or as specified in the related Supplement) shall be required to effect such change or modification. (f) CHANGE IN NAME. Such Seller will not change its name, identity or corporate structure in any manner including by way of any merger, consolidation, amalgamation, liquidation, a winding up or dissolution which would or might make any financing statement or continuation statement (or other similar instrument) relating to this Agreement seriously misleading within the meaning of Section 9-402(7) of the UCC, or impair the perfection of the Company's interest in any Receivable under any other similar law, without having (i) delivered 30 days' prior written notice to the Company, the Servicer and the Trustee and (ii) taken all action required by subsection 5.01(a). (g) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Such Seller shall not instruct any Obligor of any Purchased Receivables to make any payments with respect to any Receivables other than to a Lockbox, a Lockbox Account, a Collection P.O. Box, an Eligible Segregated Account or the Collection Account or otherwise in accordance with the Servicing Agreement. (h) ACCOUNTING CHANGES. Such Seller shall not (i) prepare any financial statements which shall account for the transactions contemplated hereby in any manner other than as a sale of the Purchased Receivables by such Seller to the Company; nor (ii) in any other respect account for or treat the transactions contemplated hereby (including for financial accounting purposes, except as required by law) in any manner other than as sales of the Purchased Receivables originated by such Seller to the Company. (i) INELIGIBLE RECEIVABLES. Such Seller shall not take any action to cause an Eligible Receivable to cease to be an Eligible Receivable, except in any such case upon making a Seller Repurchase Payment pursuant to Section 2.06; PROVIDED that in no event shall an Eligible Receivable becoming an Aged Receivable constitute a breach of this paragraph (i). 36 ARTICLE VI PURCHASE TERMINATION EVENTS Section 6.01. PURCHASE TERMINATION EVENTS. If, with respect to any Seller, any of the following events (each, a "PURCHASE TERMINATION EVENT" with respect to such Seller) shall have occurred and be continuing: (a) The Seller shall fail to make any payment or deposit to be made by it hereunder when due and such failure shall remain unremedied for two Business Days; or (b) There shall have occurred (i) an Early Amortization Event set forth in Section 7.1 of the Pooling Agreement or (ii) the Amortization Period with respect to all Outstanding Series shall have occurred and be continuing; or (c) Any representation or warranty made or deemed to be made by such Seller or any of its officers under or in connection with any Transaction Document, Daily Report, Monthly Settlement Statement or other information, statement, record, certificate, document or report delivered pursuant to a Transaction Document shall prove to have been false or incorrect in any material respect when made or deemed made (including in each case by omission of material information necessary to make such representation, warranty, certificate or statement not misleading); PROVIDED, that no such event shall constitute a Purchase Termination Event unless such event shall continue unremedied for a period of 30 days from the earlier of (A) the date any Responsible Officer of such Seller obtains knowledge thereof and (B) the date such Seller receives notice of the incorrectness of such representation or warranty from the Company or the Trustee; PROVIDED, FURTHER,that a Purchase Termination Event shall not be deemed to have occurred under this paragraph (c) based upon a breach of any representation or warranty set forth in Section 4.02 with respect to any Receivable if the Sellers shall have complied with the provisions of subsection 2.06, as the case may be; or (d) Such Seller shall fail to perform or observe any other term, covenant or agreement contained in subsection 5.01(c) or (i), subsections 5.02(b), (c) or (d) or Section 5.03 of this Agreement on its part to be performed or observed and any such failure shall remain unremedied for five Business Days; or such Seller shall fail to perform or observe any other such term, covenant or agreement contained in Section 5.01 or 5.02 of this Agreement; PROVIDED, that no failure to perform or observe any other term, covenant or agreement contained in Section 5.01 or 5.02 of this Agreement shall constitute a Purchase Termination Event unless such event shall continue unremedied for a period of 30 days from the earlier of (A) the date any Responsible Officer of such Seller obtains knowledge of such failure and (B) the date such Seller receives notice of such failure from the Company or the Trustee; PROVIDED, FURTHER, that a Purchase Termination Event shall not be deemed to have occurred under this paragraph (d) based upon a breach of any covenant set forth in subsection 5.01(c), (f) or (g) or Section 5.03 with respect to any Receivable if the Sellers shall have complied with the provisions of subsection 2.06, as the case may be; or 37 (e) Such Seller shall fail to perform or observe any other term, covenant or agreement contained in any Transaction Document on its part to be performed or observed and any such failure shall remain unremedied for a period of 30 days from the earlier of (A) the date any Responsible Officer of such Seller obtains knowledge of such failure and (B) the date such Seller receives notice thereof from the Company, the Servicer, the Trustee or any Agent; or (f) Any Transaction Document to which such Seller is a party shall cease, for any reason, to be in full force and effect, or Core-Mark or such Seller shall so assert in writing, or the Company shall fail to have a valid and perfected first priority ownership interest in substantially all of the Receivables and the Receivables Property; or (g) (i) such Seller 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 or other similar official for it or for all or any substantial part of its assets, or such Seller shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against such Seller 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 such Seller 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) such Seller or any of its respective Subsidiaries shall take any action in furtherance of any of the acts set forth in clause (i), (ii), or (iii) above; or (v) such Seller shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (h) Core-Mark has been terminated as Servicer following a Servicer Default with respect to Core-Mark under the Servicing Agreement; or (i) 15 days shall have elapsed after there shall be filed against such Seller a (i) a notice of federal tax Lien from the Internal Revenue Service with respect to taxes exceeding $100,000 or (ii) a notice of Lien with respect to taxes exceeding $100,000 from the PBGC under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which Section 412(n) of the Code or Section 302(f) of ERISA applies; or (iii) a notice of state tobacco excise tax Lien with respect to taxes exceeding $100,000 in the aggregate from any state Governmental Authority, unless in each case there shall have been 38 delivered to the Trustee and each Rating Agency proof of the release of, or payment of amounts secured by, such Lien; (j) there shall be filed against such Seller a notice of any other Lien, the existence of which could reasonably be expected to have a Material Adverse Effect unless there has been delivered to the Trustee proof of release of, or payment of amounts secured by, such Lien; or then, (x) in the case of any Purchase Termination Event described in paragraph (b)(i) or (g) (other than clause (v) thereof), the obligation of the Company to purchase Receivables shall thereupon automatically terminate without further notice of any kind, which is hereby waived by such Seller, (y) in the case of any Purchase Termination Event described in paragraph (b)(ii) above, the obligation of the Company to purchase Receivables shall thereupon terminate without notice of any kind, which is hereby waived by such Seller, unless both the Company and such Seller agree in writing that such event shall not trigger an Early Termination hereunder and (z) in the case of any other Purchase Termination Event, so long as such Purchase Termination Event shall be continuing, the Company may terminate its obligation to purchase Receivables from such Seller by written notice to such Seller (any termination with respect to any Seller pursuant to clause (x), (y) or (z) of this Article VI is herein called an "EARLY TERMINATION" with respect to such Seller); PROVIDED, HOWEVER, that in the event of (A) the filing of any notice of Lien described in paragraph (i) above or (B) an involuntary petition or proceeding as described in paragraphs (g)(ii) and (g)(iii) above, the Company shall not purchase Receivables from such Seller until such time, if any, as such Lien is released or paid (and evidence of such release is received and verified by S&P) as described above or such involuntary petition or proceeding has been dismissed, PROVIDED that such dismissal shall have occurred within 60 days of the filing of such petition or the commencement of such proceeding; PROVIDED, FURTHER, that upon the occurrence of an Early Termination of a Seller, such the Seller shall have no further obligation to sell any additional Receivables to the Company. Notwithstanding anything to the contrary in this Section 6.01, a delay in or failure of performance referred to under clause (a) above for a period of 10 Business Days after the applicable grace period shall not constitute a Purchase Termination Event, if such delay or failure could not have been prevented by the exercise of reasonable diligence by such Seller and such delay or failure was caused by a Force Majeure Delay. Section 6.02. ADDITIONAL REMEDIES. Upon the occurrence of any Purchase Termination Event, the Company shall have, in addition to all other rights and remedies under this Agreement or otherwise all other rights and remedies provided under the UCC of each applicable jurisdiction and other applicable laws, which rights shall be cumulative. Without limiting the foregoing, the occurrence of a Purchase Termination Event shall not deny to the Company any remedy (in addition to termination of the Company's obligation to purchase Receivables from any relevant Seller or Sellers) to which the Company may be otherwise appropriately entitled, whether by statute or other applicable law, at law or in equity. 39 ARTICLE VII INDEMNIFICATION; EXPENSES; COSTS Section 7.01. INDEMNITIES BY THE SELLERS. Core-Mark and the other Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, agree (i) to pay or reimburse the Company for all its out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Agreement, the other Transaction Documents and any other documents prepared in connection herewith and therewith, the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, all reasonable and documented fees and disbursements of counsel, (ii) to pay or reimburse the Company for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and any of the other Transaction Documents, including, without limitation, the reasonable fees and disbursements of counsel to the Company, (iii) to pay, indemnify and hold the Company 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 similar 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 transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement and any such other documents and (iv) to pay, indemnify and hold the Company harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (all such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements being herein called "INDEMNIFIED LIABILITIES") (A) which may at any time be imposed on, incurred by or asserted against the Company in any way relating to or arising out of this Agreement or the Transaction Documents or the transactions contemplated hereby and thereby or in connection herewith or any action taken or omitted by the Company under or in connection with any of the foregoing or (B) which would not have been imposed on, incurred by or asserted against the Company but for its having purchased the Receivables hereunder; PROVIDED, that such indemnity shall not be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of the Company; and PROVIDED, FURTHER, that the Sellers shall have no obligation under this subsection 7.01 to the Company with respect to Indemnified Liabilities arising from (1) any action taken, or omitted to be taken, by a Servicer which is not an Affiliate of the Sellers, (2) any action taken by the Trustee or the Company at the direction of the Trustee in collecting from an Obligor or (3) a delay in payment, or a default, by an Obligor with respect to any Purchased Receivable (other than arising out of (x) any discharge, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Purchased Receivable (including, without limitation, a defense based on such Purchased Receivable not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms) or any other claim resulting from the sale of the merchandise or services related to any such Purchased Receivable or the furnishing or failure to furnish such merchandise or services, (y) a failure by any Seller to perform its duties or obligations under this Agreement or (z) the sale of any Purchased Receivable that is designated on the applicable Daily Report 40 to be an Eligible Receivable and is determined to have been at the date of such sale not an Eligible Receivable). Without limiting or being limited by the foregoing, but subject to the final proviso in the immediately preceding paragraph, the Sellers (other than those Sellers from which the Company has no Receivables outstanding at such time), jointly and severally, indemnify the Company from and against any and all Indemnified Liabilities relating to or resulting from: (a) the transfer by any Seller of any interest in any Receivable or Receivables Property or proceeds thereof to any Person other than the Company; (b) reliance on any representation or warranty or statement made or deemed made by any Seller (or any of its officers) under or in connection with this Agreement or in any certificate or report delivered pursuant hereto that, in either case, shall have been false or incorrect in any material respect when made or deemed made; (c) the failure by any Seller to comply with any applicable law, rule or regulation of any governmental authority with respect to any Receivable or Receivables Property, or the nonconformity of any Receivable or Receivables Property with any such applicable law, rule or regulation; (d) the failure to vest and maintain vested in the Company an ownership interest in any Receivable or Receivables Property, free and clear of any Lien, other than a Lien arising under the Transaction Documents, whether existing at the time of the purchase of such Receivable or Receivables Property or at any time thereafter; (e) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables or Receivables Property of any Seller; (f) any dispute, claim, offset or defense (other than discharge in bankruptcy of a Seller) of the Obligor to the payment of any Receivable of any Seller (including, without limitation, a defense based on such Receivable or the related Contract not being fully enforceable against the Obligor in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to any such Receivable or the furnishing or failure to furnish such merchandise or services; (g) any failure of any Seller to perform its duties or obligations under this Agreement or the Transaction Documents; (h) any products liability claim arising out of or in connection with merchandise, insurance or services that are the subject of any Receivable or Receivables Property; 41 (i) the commingling of Collections of Receivables at any time with other funds of any Seller; (j) any claim involving environmental liability that relates to any property that has been, is now or hereafter will be owned, leased, operated or otherwise used by any Seller; (k) any tax or governmental fee or charge (but not including franchise taxes and taxes upon or measured by net income of the Company), all interest and penalties thereon or with respect thereto, and all out-of- pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of any Receivable or Receivables Property, or any interest therein or in any goods which secure any such Receivables, any Receivables Property or any other rights or assets transferred hereunder; or (l) any investigation, litigation or proceeding related to this Agreement or in respect of any Receivable or Receivables Property of any Seller. Section 7.02. INDEMNITIES BY THE COMPANY. Without limiting any other rights that the Sellers may have hereunder or under applicable law, the Company hereby agrees to indemnify each Seller from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) arising out of or resulting from such Seller's reliance on any representation or warranty made by the Company in this Agreement or in any certificate delivered pursuant hereto that, in either case, shall have been false or incorrect in any material respect when made or deemed made; PROVIDED that any payments made by the Company in respect of any of the foregoing items shall be made solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts pursuant to any Pooling and Servicing Agreements (other than to the Company), shall be non-recourse other than with respect to such funds and shall not constitute a claim against the Company to the extent that insufficient funds exist to make such payment. ARTICLE VIII SUBORDINATED NOTE Section 8.01. SUBORDINATED NOTE. (a) On the initial Effective Date, the Company shall issue to each Seller a subordinated note substantially in the form of EXHIBIT A (as amended, supplemented or otherwise modified from time to time, the "SUBORDINATED NOTE"). The aggregate principal amount of the Subordinated Note at any time shall be equal to the difference between (a) the aggregate principal amount on the issuance thereof and each addition to the principal amount of such Subordinated Note with respect to each Seller pursuant to the terms of Section 2.03 as of such time, MINUS (b) the aggregate amount of all payments made in respect of the principal of such Subordinated Note as of such time. All payments made in respect of the Subordinated Note shall be allocated among the Sellers by the Servicer. Each Seller's interest in the Subordinated Note shall equal the sum of each addition thereto allocated to such Seller pursuant to subsection 2.03(d) less the sum of each repayment thereof allocated to such Seller. Interest on the outstanding principal amount of 42 the Subordinated Note shall accrue on the last day of each Settlement Period at a rate per annum equal to the Reference Rate in effect from time to time plus 2% from and including the initial Effective Date to but excluding the last day of each Settlement Period and shall be paid (x) on each Distribution Date with respect to the principal amount of the Subordinated Note outstanding from time to time during the Settlement Period immediately preceding such Distribution Date and/or (y) on the maturity date thereof. Principal hereunder not paid or prepaid pursuant to the terms hereof shall be payable on the maturity date of the Subordinated Note. Default in the payment of principal or interest under the Subordinated Note shall not constitute a Purchase Termination Event under this Agreement, a Servicer Default under any Servicing Agreement or an Early Amortization Event under the Pooling Agreement or any Supplement thereto. Section 8.02. RESTRICTIONS ON TRANSFER OF SUBORDINATED NOTE. Neither the Subordinated Note, nor any right of any Seller to receive payments thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated, participated or otherwise conveyed. Section 8.03. AGGREGATE AMOUNT. Anything herein to the contrary notwithstanding, the Company may not make any payment of any Purchase Price in the form of Indebtedness of the Company under the Subordinated Note unless the aggregate principal amount of Indebtedness evidenced by the Subordinated Note, incurred on or before such Payment Date and outstanding on such Payment Date (after giving effect to all repayments thereof on or before such Payment Date) would not exceed 25% of the outstanding balance of the Receivables on such Payment Date, unless such Seller shall be satisfied (and for purposes hereof, in the absence of notice to the contrary by such Seller to the Company and the Trustee, such Seller shall be deemed satisfied) that, in the ordinary course of its business, the Company will pay the principal of, and interest on, such Indebtedness in accordance with the terms thereof. ARTICLE IX MISCELLANEOUS Section 9.01. AMENDMENT. Neither this Agreement nor any of the terms hereof may be amended, supplemented or modified except in a writing signed by the Company and the Sellers. Any amendment, supplement or modification shall not be effective until the Rating Agency Condition, if applicable, has been satisfied. Section 9.02. NOTICES, ETC. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including facsimile communication) and shall be personally delivered or sent by certified mail, postage-prepaid, by facsimile or by overnight courier, to the intended party at the address or facsimile number of such party set forth under its name on the signature pages hereof or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto given in accordance with this Section 9.02. Copies of all notices and other communications provided for hereunder shall be delivered, if to the Trustee, at its address at 450 West 33rd Street, New York, New York 10001, Attention: Structured Finance Services, and if to the Servicer, at its address set forth on SCHEDULE 4. All notices and communications 43 provided for hereunder shall be effective, (a) if personally delivered by express mail or courier, when received, (b) if sent by certified mail, three Business Days after having been deposited in the mail, postage prepaid and (c) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means. Section 9.03. NO WAIVER; REMEDIES. No failure on the part of the Company, the Sellers or the Agents to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 9.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Sellers and the Company and their respective successors (whether by merger, consolidation or otherwise) and assigns. Each Seller agrees that it will not assign or transfer all or any portion of its rights or obligations hereunder without the prior written consent of the Company and the Trustee. Each Seller hereby acknowledges and consents to the assignment by the Company of the Receivables and Receivables Property and the rights of the Company under this Agreement pursuant to the Pooling and Servicing Agreements. The Company may not otherwise assign or transfer all or any portion of its rights or obligations hereunder without the prior written consent of the Sellers, except rights relating to the Receivables and the Receivables Property and the rights to receive payments hereunder. Each Seller hereby acknowledges and consents that the Company will grant a security interest in the Lockbox Accounts, the Collection Account and the Eligible Segregated Accounts to the Trust for the benefit of the Certificateholders. Each Seller agrees to take any action that the Company or the Trust may reasonably request in connection with such assignment or security interest. Each Seller agrees that the Trustee shall be entitled to enforce the terms of this Agreement and the rights (including, without limitation, the right to grant or withhold any consent or waiver or give any notice) of the Company directly against such Seller, whether or not a Purchase Termination Event or a Termination Event has occurred and that no consent, waiver or notice given hereunder by the Company shall be effective unless the Trustee has given its written consent thereto. Each of the Trustee and the Certificateholders shall have the rights of third-party beneficiaries under this Agreement. Section 9.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PROTECTION OF THE COMPANY'S OWNERSHIP OF THE RECEIVABLES AND RECEIVABLES PROPERTY, OR REMEDIES HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Section 9.06. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR 44 DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. Section 9.07. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Transaction Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Company may otherwise have to bring any action or proceeding relating to this Agreement or the other Transaction Documents against any Seller or its properties in the courts of any jurisdiction. (b) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent they may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Transaction Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.02. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. Section 9.08. INTEGRATION. This Agreement and the other Transaction Documents contain a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and thereof and shall together constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof, superseding all prior oral or written understandings. Section 9.09. CAPTIONS AND CROSS REFERENCES. The various captions (including, without limitation, the table of contents) in this Agreement are provided solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. Unless otherwise provided herein, references in this Agreement to any 45 "Section," "EXHIBIT," "ANNEX" or "SCHEDULE" are to such Section of or Exhibit or Annex or Schedule to this Agreement, as the case may be. Section 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Section 9.11. NO PETITION IN BANKRUPTCY. Each Seller covenants and agrees that prior to the date which is one year and one day after the date of termination of this Agreement pursuant to Section 9.14, it will not institute against or join any other Person in instituting against the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any State of the United States. Section 9.12. ADDITION OF SELLERS. Subject to the terms and conditions hereof, from time to time one or more wholly-owned Subsidiaries of Core-Mark may become additional Sellers parties hereto. If any such Subsidiary wishes to become an additional Seller, it shall submit a request to such effect in writing to the Company. The Company, in its sole and absolute discretion, may, subject to the terms and provisions of the Pooling and Servicing Agreements, agree to or deny any such request, PROVIDED that, if the Company shall have failed to respond to any such request within 30 days after receipt thereof, such request shall be deemed to have been denied. If the Company shall have agreed to any such request, such wholly-owned Subsidiary shall become an additional Seller party hereto on the related Seller Addition Date upon satisfaction of the conditions set forth in Section 3.02 and the conditions, if any, set forth in the Pooling and Servicing Agreements. Section 9.13. TREATMENT OF SELLERS OTHER THAN CORE-MARK; TERMINATION THEREOF. (a) Core-Mark hereby covenants and agrees with the Company that Core-Mark shall not permit any Seller (other than Core-Mark) at any time to cease to be a wholly-owned Subsidiary of Core-Mark, except as provided in the following paragraph (b). (b) If Core-Mark wishes to permit any Seller (other than Core-Mark) to cease to be a wholly-owned Subsidiary of Core-Mark, then Core-Mark shall submit a request (a "SELLER TERMINATION REQUEST") to such effect in writing to the Company, which request shall be accompanied by a certificate prepared by a Responsible Officer of the Servicer indicating the Purchased Receivables Percentage applicable to such Seller as of the date of submission of such request (the "SELLER TERMINATION REQUEST DATE"). The Company, in its sole and absolute discretion may, subject to the terms and provisions hereof and of the Pooling and Servicing Agreements, consent to or deny any such Seller Termination Request, PROVIDED that, if the Company shall have failed to respond to any such Seller Termination Request within 30 days after receipt thereof, such Seller Termination Request shall be deemed to have been denied. If the Company shall have consented to any such Seller Termination Request, and such consent shall not be in violation of any applicable provision of the Pooling and Servicing Agreements, then the relevant Seller shall be terminated as a Seller hereunder immediately upon the consummation of the transaction in connection with which such Seller ceases to be a wholly-owned Subsidiary of Core-Mark; PROVIDED that, if the Purchased Receivables Percentage applicable to such Seller as of the relevant Seller Termination Request 46 Date is less than 10%, then the Company shall consent to such Seller Termination Request unless such consent would violate the terms and provisions of the Pooling and Servicing Agreements. From and after the date any such Seller is terminated as a Seller pursuant to this subsection, the Company shall cease buying Receivables and Receivables Property from such Seller. Each such Seller shall be released as a Seller party hereto for all other purposes and shall cease to be a party hereto on such termination date. (c) A terminated Seller shall have no further obligation under any Transaction Document, other than pursuant to Section 2.06, to repurchase Receivables previously sold by it to the Company. Section 9.14. TERMINATION. This Agreement will terminate at such time as (a) an Early Termination shall have occurred with respect to all Sellers herewith and (b) all Receivables purchased hereunder have been collected, and the proceeds thereof turned over to the Company and all other amounts owing to the Company hereunder shall have been paid in full or, if Receivables sold hereunder have not been collected, such Receivables have become Defaulted Receivables and the Company shall have completed its collection efforts with respect thereto; PROVIDED, HOWEVER, that the indemnities of the Sellers to the Company set forth in Article 7 of this Agreement shall survive such termination and PROVIDED further that the Company shall remain entitled to receive any Collections on Receivables sold hereunder which have become Defaulted Receivables. 47 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE SELLERS: Core-Mark International, Inc. By: /s/ LEO F. KORMAN ------------------------------------ Name: Leo F. Korman Title: Sr. VP & CFO Address: 395 Oyster Point Blvd. Suite 415 South San Francisco, CA 94080 Telephone: (650) 589-9445 Facsimile: (650) 589-4010 Core-Mark Midcontinent, Inc. By: /s/ LEO F. KORMAN ------------------------------------ Name: Leo F. Korman Title: Sr. VP & CFO Address: 395 Oyster Point Blvd. Suite 415 South San Francisco, CA 94080 Telephone: (650) 589-9445 Facsimile: (650) 589-4010 Core-Mark Interrelated Companies, Inc. By: /s/ LEO F. KORMAN ------------------------------------ Name: Leo F. Korman Title: Sr. VP & CFO Address: 395 Oyster Point Blvd. Suite 415 48 South San Francisco, CA 94080 Telephone: (650) 589-9445 Facsimile: (650) 589-4010 THE COMPANY: CM Capital Corporation By: /s/ ROBERT A. ALLEN ------------------------------------ Name: Robert A. Allen Title: President & CEO Address: 395 Oyster Point Blvd. Suite 415, Room A South San Francisco, CA 94080 Telephone: (650) 589-9445 Facsimile: (650) 589-4010 THE SERVICER: Core-Mark International, Inc. By: /s/ LEO F. KORMAN ------------------------------------ Name: Leo F. Korman Title: Sr. VP & CFO Address: 395 Oyster Point Blvd. Suite 415 South San Francisco, CA 94080 Telephone: (650) 589-9445 Facsimile: (650) 589-4010 EX-21 10 EX-21 SUBSIDIARIES
PERCENTAGE STATE OF DATE OF SHARE 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: Corae-Mark Interrelated Companies, Inc. C/M PRODUCTS, INC. California 7/19/98 C: 1,000 C: 100 10% P: N/A P: N/A N/A 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.
SUBSIDIARIES
PERCENTAGE STATE OF DATE OF SHARE 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% 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 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.
SUBSIDIARIES
PERCENTAGE STATE OF DATE OF SHARE 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.
SUBSIDIARIES
PERCENTAGE STATE OF DATE OF SHARE 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. CM Capital Corporation Delaware 4/1/98 C: 1000 C: 1000 100% Sole Shareholder: Core-Mark International Inc.
EX-27 11 EXHIBIT 27
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 12,971 0 111,339 2,728 77,394 206,259 59,069 31,241 307,990 136,096 162,625 0 0 55 (50) 307,990 1,172,271 1,172,271 1,087,160 73,050 1,573 0 7,988 2,500 1,149 1,351 0 0 0 1,351 0 0
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