MANUFACTURING AGREEMENT FOR "BEST BUY" CIGARETTES
THIS AGREEMENT is made as of the 1st day of July, 1993 (this
"Agreement"), between FAMOUS VALUE BRANDS, a division of PHILIP MORRIS
INCORPORATED, a Virginia corporation with offices at 120 Park Avenue, New York,
New York 10017 ("Manufacturer"), and C/M PRODUCTS, INC., a California
corporation with offices at 395 Oyster Point Boulevard, Suite 415, South San
Francisco, California 94080 ("C/M Products").
PRELIMINARY STATEMENTS
A. C/M Products has been engaged in the business of marketing and
selling cigarette products bearing the trademarks "BEST BUY" and "BEST BUY AND
DESIGN," as more particularly identified in EXHIBIT A attached hereto (together
with all amendments, variations or modifications thereto, the "Trademarks"),
pursuant to a license agreement with its corporate affiliate, Core-Mark
Interrelated Companies, Inc. ("Licensor"), which owns all rights, title and
interests to the Trademarks.
B. Manufacturer desires to manufacture and sell, and C/M Products
desires to purchase, on the terms and conditions contained in this Agreement,
C/M Products'
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requirements for private label brand cigarettes utilizing the Trademarks in the
product and packaging configurations currently manufactured by Manufacturer for
C/M Products or otherwise accepted by Manufacturer as described herein (the
"Products").
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
ARTICLE I
MANUFACTURE AND SALE OF PRODUCTS
Section 1.1 PURCHASE OF REQUIREMENTS. C/M Products agrees to
purchase from Manufacturer, and Manufacturer agrees, subject to the terms and
conditions of this Agreement, including, without limitation, Section 1.4, to
manufacture and sell to C/M Products, C/M Products' entire requirements for the
Products for all of C/M Products' outlets, divisions, distributors and
affiliates.
[Section 1.2 has been omitted and filed separately
with the Commission pursuant to Rule 406.]
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Section 1.3 PRE-EXISTING CONTRACTUAL ARRANGEMENT. Manufacturer
acknowledges that C/M Products has a pre-existing manufacturing agreement with
another tobacco company pursuant to which certain private label brand cigarettes
bearing the Trademarks are manufactured for C/M Products for sale to a single
account located in California (as and to the extent the same is in effect on the
date hereof, the "Pre-existing Agreement"). Manufacturer agrees that C/M
Products' performance of its obligations under the Pre-existing Agreement in
accordance with this Section 1.3 shall not constitute a breach of any provision
of this Agreement; PROVIDED that C/M Products will not exercise any option or
right to extend the term of the Pre-existing Agreement beyond the shortest
applicable termination date, and consistent with its rights under the Pre-
existing Agreement, will terminate such agreement at the earliest opportunity;
PROVIDED FURTHER that C/M Products shall not be required
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to terminate or exercise any right to terminate the Pre-existing Agreement with
respect to products manufactured thereunder bearing the Trademarks for the
single account referenced above so long as such account specifically requires
that products bearing the Trademark manufactured for C/M Products be
manufactured under the Pre-existing Agreement. C/M Products represents and
warrants to Manufacturer that the terms and provisions of this Agreement will
not cause a breach by C/M Products of its obligations under the Pre-existing
Agreement.
Section 1.4 FORCE MAJEURE. Manufacturer's obligation to manufacture
and deliver the Products under this Agreement shall be to use its reasonable
efforts to satisfy the requirements of C/M Products for the Products, which
shall not imply any obligation to incur costs, expenses or liabilities other
than usual and customary costs and expenses associated with the manufacture of
private label cigarette products consistent with Manufacturer's past experience.
Without limiting the generality of the foregoing or other provisions in this
Agreement with respect to the limitation of Manufacturer's obligations or
liabilities hereunder, Manufacturer shall have no obligation or liability for
satisfying the requirements of C/M
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Products, and shall have no liability for the consequences of (including
without limitation for consequential damages for) any failure to perform, or
default in performing, any of its obligations under this Article I of this
Agreement if that failure arises out of, is based upon or results from Force
Majeure (as defined below). For purposes of this Agreement, "Force Majeure"
shall mean war (whether declared or not); revolution; invasion; insurrection;
riot; civil commotion; mob violence; sabotage; blockage; military or usurped
power; lightning; serious destruction; explosion; fire; storm; high winds;
drought or other shortage of water; flood; earthquake; strike; labor
disturbances; acts or restraints of governmental or quasi-governmental
authorities; or any act of God beyond the control of Manufacturer. To the
extent that a Force Majeure condition or conditions exists which prevents
Manufacturer from manufacturing and delivering to C/M Products its full
requirement of the Products, C/M Products shall have the right to purchase such
Products from other manufacturers for so long as Manufacturer is unable to
fulfill its obligations under this Agreement.
Section 1.5 NEW PRODUCT CONFIGURATIONS. In the event that C/M
Products shall desire to market and sell private label brand cigarettes
utilizing the Trademarks
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but in product or package configurations other than those of the Products ("New
Products"), C/M Products shall present to Manufacturer detailed specifications
with respect to such New Products, whereupon Manufacturer shall have the option
exercisable for a period of 45 days to include such New Products within the
meaning of the term "Products" as used in this Agreement.
[A sentence has been omitted and filed separately
with the Commission pursuant to Rule 406.]
In the event that Manufacturer elects not to include such New Products within
the meaning of "Products" as used in this Agreement, C/M Products shall be
entitled to obtain its requirements for such New Products from a manufacturer
other than Manufacturer.
Section 1.6 TRADEMARK DESIGN MODIFICATIONS AND PACKAGING CHANGES.
C/M Products agrees that it will give Manufacturer reasonable prior notice, but
in any event not less than 45 days prior notice, of any design modifications or
changes to the Trademarks after the date of this Agreement.
[A sentence has been omitted and filed separately
with the Commission pursuant to Rule 406.]
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Section 1.7 has been omitted and filed separately
with the Commission pursuant to Rule 406.]
Section 1.8 AUTHORIZED DISTRIBUTORS. From time to time C/M Products
may enter into agreements with distributors or other persons ("Authorized
Distributors") for the distribution and sale of the Products, and upon written
notification to Manufacturer
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by C/M Products, Manufacturer shall sell the Products manufactured by it
directly to such Authorized Distributors to satisfy their requirements for the
Products on and subject to all the provisions of this Agreement, including
without limitation Section 1.2 hereof, with respect to the manufacture and sale
of the Products for C/M Products' and its affiliates' requirements. Nothing
contained in this Section 1.8 shall prevent Manufacturer from paying to C/M
Products any Allowances that may be offered by Manufacturer in connection with
sales of Products to Authorized Distributors. Without limiting the generality
of the foregoing, Manufacturer reserves the right to refuse orders from
Authorized Distributors in the event such Authorized Distributors are ineligible
to purchase product from Manufacturer based on Manufacturer's then current
terms, conditions and requirements, including, without limitation, standard
credit terms. Manufacturer shall have no liability or obligation to any
Authorized Distributor arising out of or based upon this Agreement, and such
Authorized Distributors shall not be entitled to reliance upon or the benefit of
any of the provisions of this Agreement as a third party beneficiary or
otherwise.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF MANUFACTURER.
Manufacturer hereby represents and warrants to C/M Products as follows:
(a) Manufacturer has the requisite corporate power and authority
to enter into this Agreement, and to perform its obligations hereunder. The
execution and performance of this Agreement by Manufacturer has been duly
authorized by all necessary corporate action on the part of Manufacturer and
will not contravene or violate any agreements or obligations of Manufacturer.
This Agreement constitutes the valid and binding obligations of Manufacturer
enforceable in accordance with its terms.
(b) Manufacturer shall comply with all applicable U.S. federal
laws relating to the manufacture and packaging of the Products under this
Agreement.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF C/M PRODUCTS. C/M
Products hereby represents and warrants to Manufacturer as follows:
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(a) C/M Products has the requisite corporate power and authority
to enter into this Agreement, and to perform its obligations hereunder. The
execution and performance of this Agreement by C/M Products has been duly
authorized by all necessary corporate action on the part of C/M Products and
will not contravene or violate any agreements to which either C/M Products or
Licensor, as the case may be, is a party. This Agreement constitutes the legal,
valid and binding obligations of C/M Products enforceable against C/M Products
in accordance with its terms.
(b) C/M Products has engaged in the business of marketing and
selling the Products pursuant to a valid and effective license from Licensor,
and Licensor is the legal and beneficial owner of the Trademarks. For the
remaining term of this Agreement, C/M Products will maintain its rights to use
the Trademarks as set forth in its license from the Licensor.
(c) If Licensor or C/M Products shall sell, convey or otherwise
transfer any or all of their respective rights in, to or relating to the
Products, including, without limitation, any right, title or interest in or to
the Trademarks, Licensor and C/M Products shall ensure that any such sale,
conveyance or
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other transfer will be subject to and will in no way whatsoever abrogate, limit
or modify Manufacturer's rights to manufacture and supply, and the obligation of
Core-Mark International Inc., Licensor and C/M Products (together with their
respective affiliates, the "Core-Mark Group") to purchase, all the Core-Mark
Group's requirements for all the Products pursuant to the terms and conditions
of this Agreement.
(d) C/M Products shall comply with all applicable laws and
regulations concerning the marketing and distribution of the Products.
(e) C/M Products shall feature and promote the Products as its
primary cigarette in the private label cigarette product category.
ARTICLE III
TERM OF AGREEMENT
Section 3.1 TERM. Unless earlier terminated pursuant to Section 3.2
hereof, this Agreement shall continue for an initial term (the "Initial Term")
ending on December 31, 1998. Following the Initial Term, this Agreement shall
continue in effect upon the same terms and conditions for one or more additional
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one-year periods (each a "Renewal Period") unless, at least ninety (90) days
prior to the end of the Initial Term, or any successive Renewal Period, either
party provides the other with written notice of its intent not to renew this
Agreement.
[Section 3.2 has been omitted and filed separately
with the Commission pursuant to Rule 406.]
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Section 3.3 OBLIGATION OF C/M PRODUCTS UPON TERMINATION. Upon the
termination of this Agreement, C/M Products shall be obligated to pay to
Manufacturer
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reasonable packaging and unfinished Product inventory costs resulting from such
termination. Manufacturer shall furnish C/M Products with a written accounting
of all such costs which shall be due and payable by C/M Products within thirty
(30) days. All finished Product inventory shall be purchased by C/M Products at
the then prevailing list prices of Manufacturer and upon the terms and
conditions of this Agreement. Notwithstanding the forgoing, C/M Products shall
not be obligated to purchase finished Product inventory hereunder if this
Agreement is terminated pursuant to Section 3.2 hereof, but Manufacturer shall
be entitled to sell such finished Product inventory to third persons in the
ordinary course of its business. The volume of packaging and finished Product
inventory which C/M Products may be required to purchase hereunder shall not be
unreasonably large or excessive based on the usual and customary course of
dealings among Manufacturer and C/M Products pursuant to this Agreement.
Section 3.4 SURVIVAL. The representations and warranties of C/M
Products and Manufacturer made under this Agreement shall survive the
termination of this Agreement.
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ARTICLE IV
GENERAL PROVISIONS
Section 4.1 RELATIONSHIP OF PARTIES. The relationship of the parties
is that of independent contractors. Neither party shall in furtherance of this
Agreement represent or hold itself out as agent, legal representative, joint
venturer, partner, employee or servant of the other. Nothing contained in this
Agreement is intended to create, nor should be construed as creating, an
association of agent and principal, partners, or joint venturers between the
parties, or their affiliates, employees and agents.
Section 4.2 CONFIDENTIALITY. The parties agree to keep strictly
confidential, and not disclose to third parties, any information, either oral or
written, concerning the terms of this Agreement and the transactions
contemplated herein. Disclosure may be made when required by applicable law
(but only to the extent so required). Any party from whom disclosure is
required shall notify the other party prior to any such disclosure.
Section 4.3 NOTICES. All notices, requests, demands and other
communications under this Agreement
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shall be in writing and shall be deemed to have been duly given either upon
personal delivery or upon transmission by telecopier or one (1) business day
after deposit with an overnight, private courier delivery service, addressed as
follows:
Manufacturer: Philip Morris Incorporated
Famous Value Brands Division
120 Park Avenue
New York, New York 10017
Attention: Director, National Accounts
C/M Products: C/M Products, Inc.
395 Oyster Point Boulevard, Suite 415
South San Francisco, California 94080
Attention: President
Section 4.4 SEVERABILITY. If any provision of this Agreement is
determined to be invalid or unenforceable, the provisions shall be deemed to be
severable from the remainder of this Agreement and shall not cause the
invalidity or unenforceability of the remainder of this Agreement.
Section 4.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (other than the
choice of law provisions thereof).
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Section 4.6 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.7 ASSIGNABILITY. Either party shall have the right to
assign this Agreement and all of its rights and obligations hereunder to any
affiliate thereof upon the written consent of the other party, which consent
shall not be unreasonably withheld; PROVIDED that no such assignment shall
relieve the assigning party of its obligations under this Agreement, including,
without limitation, in the case of an assignment by C/M Products of C/M
Products' obligation to purchase all of its requirements for Products from
Manufacturer; and PROVIDED, FURTHER, that no such consent shall be effective
unless and until the assignee has executed an instrument in favor of the non-
assigning party agreeing to be bound by all the terms and conditions of this
Agreement. For purposes of this Agreement (whether by operation of law or
otherwise), an affiliate of a party hereto is defined as any entity which
controls, is controlled by, or is under common control with such party. No
other assignments of this Agreement, or of any of the rights hereunder, shall be
permitted without the express written consent of the
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other party, which consent may be withheld in such party's sole and absolute
discretion.
Section 4.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the Products and supersedes all
prior and contemporaneous agreements, contracts, negotiations and understandings
between them (other than the Grant of Exclusive Manufacturing Rights, dated the
date hereof, between Manufacturer, C/M Products and certain of its affiliates),
including, without limitation, that certain Private Label Cigarette
Manufacturing and Sales Agreement, dated as of January 1, 1990 (the
"Manufacturing Agreement"), between Manufacturer and C/M Products. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all parties hereto. No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provision. Nothing in this Agreement shall be deemed to limit, modify or
otherwise amend the Amended and Restated Trademark License Agreement, dated the
date hereof, between Manufacturer and Licensor.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the date first above written.
C/M PRODUCTS, INC. FAMOUS VALUE BRANDS,
a division of PHILIP MORRIS
INCORPORATED, a Virginia corporation
By: /s/ GARY L. WALSH By: /s/Michael E. Szymanczyk
----------------------- ------------------------------
Gary L. Walsh
President Its: Senior Vice President - Sales
------------------------------
Dated: 12/20/93 Dated: 12/20/93
Each of the undersigned hereby
agrees and consents to each of the
terms and conditions of this Agreement:
CORE-MARK INTERNATIONAL INC.
By: /s/Gary L. Walsh
-----------------------
Gary L. Walsh
President
Dated: 12/20/93
CORE-MARK INTERRELATED COMPANIES, INC.
By: /s/ Gary L. Walsh
-------------------------
Gary L. Walsh
President
Dated: 12/20/93
Exhibit A
NOTE: Product description, warning notice, UPC symbol and other elements to
be modified as appropriate
[Picture of "Best Buy" packaging.]