Exhibit 10.7

Non-Qualified Stock Option

Senior Management Grant Letter

CORE-MARK HOLDING COMPANY, INC.

                     , 200  

 

 

     

 

     

 

     

 

  Re:                    Grant of Non-Qualified Stock Option

Dear                     :

Core-Mark Holding Company, Inc., a Delaware corporation (the “Company”), is
pleased to advise you that, pursuant to the Company’s 2004 Long-Term Incentive
Plan (the “Plan”), the Board of Directors of the Company has granted to you an
option (the “Option”) to acquire shares of the Company’s common stock, par value
$0.01 per share (the “Common Stock”), effective as of the “Date of Grant” set
forth below (as defined herein, the “Option Shares”), subject to the terms and
conditions set forth herein:

 

  Number of Option Shares         Date of Grant                         , 200  
     Exercise Price per Option Share    $    .          Vesting Dates of Option
Shares    One-third (1/3) of the Option Shares shall vest on
                      , 200   (the “First Vesting Date”) with the remaining
two-thirds (2/3) of the Option Shares vesting in equal monthly installments at
the end of each month over the following two years.      Expiration Date of the
Option    The seventh anniversary of the Date of Grant.   

Your Option is not intended to be an “incentive stock option” within the meaning
of Section 422 of the Code.

Certain capitalized terms used herein are defined in Section 9 below. Any
capitalized terms used herein and not defined herein have the meanings set forth
in the Plan.

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1.         Option.

(a)        Term.  Subject to the terms and conditions set forth herein, the
Company hereby grants to you (or such other persons as permitted by Section 5
below) an Option to purchase the Option Shares at the exercise price per Option
Share set forth above in the introductory paragraph of this Grant Agreement (the
“Exercise Price”), payable upon exercise as set forth in Section 1(b) below. The
Option shall expire at the close of business on the date set forth above in the
introductory paragraph of this Grant Agreement (the “Expiration Date”), which is
the seventh anniversary of the Date of Grant, subject to earlier expiration as
provided in Section 2(c) below. The Exercise Price and the number and kind of
shares of Common Stock or other property for which the Option may be exercised
shall be subject to adjustment as provided in the Plan.

(b)        Payment of Option Price.  Subject to Section 2 below, the Option may
be exercised in whole or in part upon payment of an amount (the “Option Price”)
equal to the product of (i) the Exercise Price and (ii) the number of Option
Shares to be acquired. Payment of the Option Price shall be made by one or more
of the following means:

     (i)         in cash (including check, bank draft, money order or wire
transfer of immediately available funds);

     (ii)        by delivery of outstanding shares of Common Stock owned by you
(and not subject to any substantial risk of forfeiture) for at least six months
or such longer period as determined from time to time by the Committee with a
Fair Market Value on the date of exercise equal to the Option Price;

     (iii)        by means of any cashless exercise procedures approved by the
Committee and as may be in effect on the date of exercise; or

     (iv)        by any combination of the foregoing.

2.         Exercisability/Vesting and Expiration.

(a)        Normal Vesting.  The Option granted hereunder may be exercised only
to the extent it has become vested, as indicated by the Vesting Dates of Option
Shares set forth in the introductory paragraph of this Grant Agreement.

(b)        Normal Expiration.  In no event shall any part of the Option be
exercisable after the Expiration Date.

(c)        Effect on Vesting and Expiration of Employment; Termination; Change
in Control.  Except as otherwise provided in this Section 2(c) and
notwithstanding Sections 2(a) and (b) above or any other provision hereof to the
contrary, the provisions set forth in Section 6(e) (Vesting; Termination;
Forfeiture) of the Plan shall govern the vesting of your Option Shares in the
event that, prior to all of your Option Shares becoming fully vested and/or
prior to the Expiration Date: (i) your employment with, or performance of
service for, the Company or any Subsidiary terminates, or (ii) there is a
Non-Public Change in Control; provided, however, notwithstanding the provisions
of Section 6(e)(iv) set forth in the Plan, if your employment with

 

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the Company is terminated by the Company without Cause or you resign from your
employment with the Company for Good Reason before all of your Option Shares
have otherwise vested, all of your unvested Option Shares shall become fully
vested and exercisable on the date of such termination of employment or
resignation and shall remain exercisable for, and shall otherwise terminate and
thereafter be forfeited at the end of, a period of 90 days after the date of
such cessation of employment and, further, provided, however, that, if, prior to
the First Vesting Date you cease to be a director, officer or employee of, or to
perform other services for, the Company or any Subsidiary due to your death or
Disability or Retirement, your Option Shares shall thereupon vest on a pro rata
basis based on the ratio of (A) the number of complete months beginning on the
Date of Grant and ending on the date of your cessation of employment to
(B) thirty six (36).

3.         Procedure for Exercise.  You may exercise all or any portion of the
Option, to the extent it has vested and is outstanding, at any time and from
time to time prior to the Expiration Date, by delivering written notice to the
Company in the form attached hereto as Exhibit A, together with payment of the
Option Price in accordance with the provisions of Section 1(b) above. The Option
may not be exercised for a fraction of an Option Share.

4.         Withholding of Taxes.

(a)        Participant Election.  Unless otherwise determined by the Committee,
you may elect to deliver shares of Common Stock (or have the Company withhold
Option Shares acquired upon exercise of the Option) to satisfy, in whole or in
part, the amount the Company is required to withhold for taxes in connection
with the exercise of the Option. Such election must be made on or before the
date the amount of tax to be withheld is determined. Once made, the election
shall be irrevocable. The fair market value of the shares to be withheld or
delivered will be the Fair Market Value as of the date the amount of tax to be
withheld is determined.

(b)        Company Requirement.  The Company, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to you, an amount equal to any
federal, state or local taxes of any kind required by law to be withheld with
respect to the delivery of Option Shares under this Grant Agreement and/or may
require you to otherwise make adequate provision for payment to the Company of
such taxes.

5.         Transferability of Option.  You may transfer the Option granted
hereunder only in accordance with the terms of the Plan.

6.         Conformity with Plan.  The Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan (which
is incorporated herein by reference). Inconsistencies between this Grant
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing and returning the enclosed copy of this Grant Agreement, you
acknowledge your receipt of this Grant Agreement and the Plan and agree to be
bound by all of the terms of this Grant Agreement and the Plan.

7.         Optionee Representation.  You hereby represent that you are acquiring
the Option Shares for investment for your own account (or a trust account), not
as a nominee or

 

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agent, and not with a view to the resale or distribution of any part thereof,
and that you have no present intention of granting any participation in or
otherwise distributing the Option Shares. You further represent that (a) you
have had such opportunity as you have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit you to
evaluate the merits and risks of your investment in the Company; (b) you have
sufficient experience in business, financial and investment matters to be able
to evaluate the risks involved in the purchase of the Option Shares and to make
an informed investment decision with respect to such purchase; and (c) you can
afford a complete loss of the value of the Option Shares, and you are able to
bear the economic risk of holding such Option Shares for an indefinite period.
By signing this Grant Agreement, you further represent that you do not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to the Option Shares.

8.         Rights of Participants; No Additional Rights.  Nothing in this Grant
Agreement shall interfere with or limit in any way the right of the Company to
terminate your employment or other performance of services at any time (with or
without Cause), nor confer upon you any right to continue in the employ or as a
director or officer of, or in the performance of other services for, the Company
or a Subsidiary for any period of time, or to continue your present (or any
other) rate of compensation or level of responsibility. Nothing in this Grant
Agreement shall confer upon you any right to be selected again as a Plan
Participant, and nothing in the Plan or this Grant Agreement shall provide for
any adjustment to the number of Option Shares subject to the Option upon the
occurrence of subsequent events except as provided in the Plan.

9.         Certain Definitions.  For the purposes of this Grant Agreement, the
following terms shall have the meanings set forth below:

“Cause” means as defined in the Plan except that the words “that has caused
demonstrable and serious injury to the Company or a Subsidiary, monetary or
otherwise” shall be added to the end of clauses (iii), (iv), and (v) of such
definition. Good Reason shall also include a change in the principal work
location of Participant of more than 50 miles.

“Good Reason” means the resignation of a Participant following the occurrence of
(i) a material reduction in the scope of the Participant’s authorities, duties
or responsibilities or (ii) a material reduction in the Participant’s salary and
benefits (other than benefits under programs that apply to all similarly
situated employees or employees of the Company in general).

“Grant Agreement” means this letter agreement between you and the Company, as
the same may be amended or restated from time to time.

“Option Shares” means (i) all shares of Common Stock issued or issuable upon the
exercise of the Option, including any shares of Common Stock which become
subject to the Option pursuant to the terms of Section 15 (Adjustments) of the
Plan and (ii) all shares of Common Stock issued with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with any conversion, merger, consolidation or recapitalization or
other reorganization affecting the Common Stock.

 

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“Non-Public Change in Control” means a Change in Control, as defined in the
Plan, that is not a Public Change in Control as defined herein.

“Public Change in Control” means any Change in Control if, upon the consummation
of such Change in Control, the Shares available for issuance under the Plan and
the Awards issued thereunder (or other securities to be issued in lieu of Shares
as a result of such Change in Control) are publicly traded on the Toronto Stock
Exchange, a U.S. national securities exchange (including the NASDAQ Stock
Market), the OTC Bulletin Board or the OTC Pink Sheets.

10.         Registration.  If the Company’s Common Stock becomes registered
under the Securities Exchange Act of 1934, as amended, the Company shall take
such steps as are reasonably required so that any Option Shares awarded to you
hereunder shall, as soon as practicable after the award or awards of such Option
Shares, be covered by a registration statement on Form S-8 or a successor form
and any other appropriate forms determined by the parties.

11.         Amendment.  The terms of the Option may be amended from time to time
by the Committee in its discretion in any manner that it deems appropriate
(including, but not limited to, acceleration of the date of exercise of the
Option); provided that, except as otherwise provided in Sections 15, 16 and 17
of the Plan, no such amendment shall adversely affect in a material manner any
of your rights under this Grant Agreement without your written consent.

12.         Relation to Other Benefits.  Any economic or other benefit to you
under this Grant Agreement or the Plan shall not be taken into account in
determining any benefits to which you may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of
the Company or a Subsidiary.

13.         Successors and Assigns.  Except as otherwise expressly provided
herein, all covenants and agreements contained in this Grant Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto whether so
expressed or not.

14.         Severability. Whenever possible, each provision of this Grant
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Grant Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Grant Agreement.

15.         Counterparts. This Grant Agreement may be executed simultaneously in
two or more counterparts, each of which shall constitute an original, but all of
which taken together shall constitute one and the same Grant Agreement.

16.         Descriptive Headings.  The descriptive headings of this Grant
Agreement are inserted for convenience only and do not constitute a part of this
Grant Agreement.

 

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17.         Governing Law.  THE VALIDITY, CONSTRUCTION, INTERPRETATION,
ADMINISTRATION AND EFFECT OF THE PLAN, AND OF ITS RULES AND REGULATIONS, AND
RIGHTS RELATING TO THE PLAN AND TO THIS GRANT AGREEMENT, SHALL BE GOVERNED BY
THE SUBSTANTIVE LAWS, BUT NOT THE CHOICE OF LAW RULES, OF THE STATE OF DELAWARE.

18.         Notices.  All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Grant Agreement shall
be in writing and shall be deemed to have been given when (i) delivered
personally, (ii) mailed by certified or registered mail, return receipt
requested and postage prepaid, (iii) sent by facsimile or (iv) sent by reputable
overnight courier, to the recipient. Such notices, demands and other
communications shall be sent to you at the address specified in this Grant
Agreement and to the Company at 495 Oyster Point Blvd., South San Francisco, CA
94080, Attn: Hank Hautau, or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party.

19.         Entire Agreement.  This Grant Agreement and the terms of the Plan
constitute the entire understanding between you and the Company, and supersede
all other agreements, whether written or oral, with respect to your acquisition
of the Option Shares.

*****

 

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Signature Page to Stock Option Agreement

Please execute the extra copy of this Grant Agreement in the space below and
return it to the Company to confirm your understanding and acceptance of the
agreements contained in this Grant Agreement.

 

   

Very truly yours,

 

 

 

  

                                                             

    By:                                                                    
Name:                                                                
Title:                                                              

 

Enclosures:      1.      Extra copy of this Grant Agreement      2.      Copy of
the Plan attached hereto as Exhibit B

The undersigned hereby acknowledges having read this Grant Agreement and the
Plan and hereby agrees to be bound by all provisions set forth herein and in the
Plan.

 

Dated as of      OPTIONEE

                                                                     

    

 

                                       
                                                  

     Name: