Amendment No. 1 To Grant Of Exclusive Manufacturing Rights,

AMENDMENT NO. 1 TO


GRANT OF EXCLUSIVE MANUFACTURING RIGHTS


THIS AMENDMENT NO. 1 is made as of the 1st day of October, 1998 (this "Amendment"), 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 AMCON DISTRIBUTING COMPANY, a Delaware corporation with offices at 10228 L Street, Omaha, Nebraska 68127 (together with its successors, permitted assigns and affiliates, "Grantor").


PRELIMINARY STATEMENTS


A. Manufacturer and Grantor entered into that certain Grant of Exclusive Manufacturing Rights dated as of October 1, 1993 (the "Grant Agreement"), providing for, among other things, Grantor to grant and convey to Manufacturer exclusive rights to manufacture for Grantor any and all proprietary private label brand cigarettes for sale and distribution in the United States, including cigarettes utilizing the trademark(s) and package designs identified on EXHIBIT A attached thereto.


B. Manufacturer and Grantor desire to amend certain provisions of the Grant Agreement as more particularly described herein, and to continue the Grant Agreement, as amended hereby, the Private Label Manufacturing Agreement, dated as of October 1, 1993, as amended by Amendment No. 1 dated as of the date hereof, between Manufacturer and Grantor (the "Private Label Manufacturing Agreement"), and the Amended and Restated Trademark License Agreement, dated as of October 1, 1993, as amended by Amendment No. 1 dated as of the date hereof, between Manufacturer and Grantor (the "Amended and Restated Trademark License Agreement"), in full force and effect on the terms contained therein and herein.


NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I


AMENDMENTS


SECTION 1.1 AMENDMENT TO SECTION 1.1. The Grant Agreement is hereby amended by deleting Section 1.1 thereof in its entirety and inserting in lieu thereof the following new Section 1.1:


"SECTION 1.1 GRANT OF EXCLUSIVE MANUFACTURING RIGHTS.
Subject to the terms and provisions of Section 2.1(b), Grantor does
hereby grant, sell, convey, transfer, assign and deliver to
Manufacturer and its successors and assigns, free and clear of all
liens, charges, claims, encumbrances or rights or interests of
third parties of any nature and description whatsoever, exclusive
rights to manufacture all and any private label brand cigarettes
bearing the trademarks or any other trademarks or trade names owned,
used or licensed now or hereafter by the Grantor ("Private Label
Products") for a period commencing on the date hereof and
continuing until the expiration of the Initial Term. (as defined in
Section 4.1) or any later date to which this Agreement is extended
pursuant to Section 4.1 hereof."


SECTION 1.2 AMENDMENT TO SECTION 1.2. The Grant Agreement is hereby amended by deleting the words "Section 4.2(b) or" from the fourth sentence appearing in Section 1.2.


SECTION 1.3 AMENDMENT TO SECTION 1.3. The Grant Agreement is hereby amended by deleting Section 1.3 in its entirety and inserting in lieu thereof the following new Section 1.3:


"SECTION 1.3 EXCLUSIVE RELATIONSHIPS.
Grantor has advised Manufacturer, and Manufacturer acknowledges,
that Grantor has certain pre-existing agreements pursuant to which
certain Private Label Products listed on Schedule A hereto (as the
same may be amended or supplemented from time to time with the
consent of the parties) are manufactured for and sold exclusively
by Grantor within certain prescribed geographical areas to retail
and wholesale customers (as and to the extent the same are in
effect on the date hereof, the "Pre-existing Agreements").
Manufacturer hereby grants the Grantor, effective as of the date
Grantor acquired such rights under the Pre-existing Agreements, a
license and interest in the exclusive manufacturing rights granted
to Manufacturer hereby, for a period equal to the applicable term
of each Pre-existing Agreement. Manufacturer further agrees that
the exercise of the Grantor's rights and the performance of the
Grantor's obligations under the Pre-existing Agreements shall not
constitute a breach of any provision of this Agreement or entitle
Manufacturer to reduce Manufacturer's Annual Payment pursuant to
Section 1.2. Except as expressly contemplated by this Section 1.3,
Grantor will not enter into any agreements, arrangements or
understandings with respect to the exclusive distribution within
any regional or national geographic area within the United States
of any brand of cigarettes manufactured by any manufacturer other
than Manufacturer, and Grantor hereby represents to Manufacturer
that Grantor is not on the date hereof a party to any such
agreements, arrangements or understandings. Without limiting the
generality of the foregoing, Grantor will only distribute Private
Label Products manufactured by Manufacturer, other than Private
Label Products that Manufacturer has declined to manufacture
pursuant to the terms of this Agreement. For purposes of this
Agreement, Private Label Products shall also include without
limitation any private label brand cigarettes for which Grantor
becomes the supplier to two or more competing retail customers."


SECTION 1.4 AMENDMENT TO SECTION 4.1. The Grant Agreement is hereby amended by deleting Section 4.1 in its entirety and inserting in lieu thereof the following new Section 4.1:


"SECTION 4.1 TERM. Unless earlier terminated pursuant to
Section 4.2 of this Agreement, this Agreement shall continue for
an initial term (the "Initial Term") of eight (8) years following
the date of this Agreement, beginning on October 1, 1993 and
ending on September 30, 2001, and thereafter this Agreement shall
continue in effect upon the same terms and conditions for one or
more additional 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 1.5 AMENDMENT TO SECTION 4.2. The Grant Agreement is hereby amended by deleting clause (3) of paragraph (a) of Section 4.2 in its entirety and by deleting paragraph (b) of section 4.2 in its entirety.


SECTION 1.6 AMENDMENT TO SECTION 4.3. Section 4.3 of the Grant Agreement is hereby amended as follows:


(a) By replacing the reference in clause (1) of Section 4.3(a) to
"thirty (30)" with a reference to "sixty (60)";


(b) By deleting the words "the expiration of the Non-Exclusive
Period" in the fourth sentence of Section 4.3(a) and inserting
in lieu thereof "delivery to Manufacturer of the Offer;" and


(c) By deleting the words "which is thirty (30) days following the
Scheduled Expiration Date" appearing at the end of the
penultimate sentence in Section 4.3(a).


ARTICLE II


GENERAL PROVISIONS


SECTION 2.1 GOVERNING LAW. This Amendment 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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