Manufacturing Agreement-fvb

GRANT OF EXCLUSIVE MANUFACTURING RIGHTS


THIS AGREEMENT is made as of the 1st day of July, 1993 (the "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"), CORE-MARK INTERNATIONAL INC., a Nevada corporation with offices at 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94080 ("Parent"), CORE-MARK INTERRELATED COMPANIES, INC., a California corporation with offices as 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94080 ("Licensor"), and C/M PRODUCTS, INC., a California corporation with offices a 395 Oyster Point Boulevard, Suite 415, South San Francisco, California 94080 ("C/M Products").


PRELIMINARY STATEMENTS


A. C/M Products engages in the business of marketing and selling private label brand cigarettes, including cigarettes utilizing the trademarks "BEST BUY-C-" and "BEST BUY AND DESIGN-TM-", as more particularly identified in EXHIBIT A attached hereto (together with all amendments, variations or modifications thereto, the "Trademarks"), which C/M Products licensed pursuant to a license agreement with its corporate affiliate,


Licensor, which owns all right, title and interests to the Trademarks.


B. Parent, Licensor and C/M Products (together with their respective affiliates, the "Core-Mark Group") desire to grant and convey to Manufacturer exclusive rights to manufacture for the Core-Mark Group any and all proprietary private label brand cigarettes for sale and distribution in the United States for the term of this Agreement, and Manufacturer desires to acquire such exclusive manufacturing rights, on the terms and conditions contained in this Agreement.


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


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ARTICLE I.
EXCLUSIVE MANUFACTURING RIGHTS


Section 1.1 GRANT OF EXCLUSIVE MANUFACTURING RIGHTS. Subject to the terms and provisions of Section 2.1(b), Parent, Licensor and C/M Products, each of them for themselves and for their respective affiliates, successors and assigns (collectively and individually, the "Grantor") do hereby grant, sell, coney, 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 for sale and distribution in the United States all and any private label brand cigarettes bearing the Trademarks or any other trademarks or trade names owned or licensed now or hereafter by or to the Grantor in connection with such private label brand cigarettes ("Private Label Products") for a period commencing on and as of the date hereof and continuing until the termination of this Agreement as provided in Section 4.1 hereof.


[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 Products 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 hereby grants C/M products a license and interest in the exclusive manufacturing rights granted to Manufacturer hereby, for a period equal to the shortest applicable term of the Pre-existing Agreement, to the extent necessary to allow such Pre-existing Agreement to be performed in accordance with its terms and without contravening the


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terms of this Agreement or infringing upon the right, title and interest of Manufacturer in and to the exclusive manufacturing rights granted to Manufacturer hereby. Manufacturer further agrees that C/M Products' performance of its obligations under 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 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.


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Section 1.4 OTHER EXCLUSIVE RELATIONSHIPS. None of Parent, Licensor or C/M Products, or any of their respective affiliates, will 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 private label brand cigarettes manufactured by any manufacturer other than Manufacturer, and each of such persons hereby represents to Manufacturer that none of such persons is on the date hereof a party to any such agreements, arrangements or understandings. Without limiting the generality of the foregoing and subject to Section 1.3, Parent, Licensor or C/M Products, and their respective affiliates, will only distribute 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 any member of the Core-Mark Group becomes the exclusive supplier to two or more competing retail customers.


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ARTICLE II.


MANUFACTURE AND SALE OF PRIVATE LABEL PRODUCTS


Section 2.1 MANUFACTURING AGREEMENT.


(a) Simultaneously with the execution of this Agreement, C/M Products and Manufacturer have entered into that certain Manufacturing Agreement for "Best Buy" Cigarettes, dated as of the date hereof, a copy of which is attached hereto as EXHIBIT B.


(b) Manufacturer shall have the option to enter into a manufacturing and sales agreement, substantially in the form of EXHIBIT C hereto (including, without limitation, Section 1.2 of said EXHIBIT C), with respect to each Private Label Product (other than Private Label Products bearing the Trademarks) now or hereafter during the term of this Agreement sold by or proposed to be sold by, through or on behalf of any member of the Core-Mark Group ("Other Private Label Products") in the United States. The Manufacturer's option with respect to Other Private Label Products shall be exercisable for a period of 45 days following the detailed presentation to Manufacturer by the Core-Mark Group of the requirements (including package and product configuration requirements) for such Other Private Label Product. In the event that Manufacturer declines to


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exercise its option with respect to Other Private Label Products, or such option expires without having been exercised by Manufacturer, then the Core-Mark Group, or any of them, shall be entitled to have such Other Private Label Product manufactured according to the requirements presented to Manufacturer by another manufacturer of the Core-Mark Group's selection.


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


Section 3.1 REPRESENTATION 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.


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(b) Manufacturer shall comply with all applicable U.S. federal laws relating to the manufacture and packaging of Private Label Products under this Agreement.


Section 3.2 REPRESENTATIONS AND WARRANTIES OF THE CORE-MARK GROUP. Parent, Licensor and C/M Products each, jointly and severally, hereby represents and warrants to Manufacturer as follows:


(a) Each of Parent, Licensor and 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 each of Parent, Licensor and C/M Products has been duly authorized by all necessary corporate action on the part of such party and will not contravene or violate any agreements to which any of such party or any member of the Core-Mark Group, as the case may be, is a party. This Agreement constitutes the legal, valid and binding obligations of Parent, Licensor and C/M Products enforceable against Parent, Licensor and C/M Products in accordance with its terms.


(b) C/M Products has engaged in the business of marketing and selling Private Label Products bearing the


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Trademarks pursuant to a valid and effective license to use the Trademarks for such purpose from the 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 pursuant to this Agreement as set forth in its license from the Licensor.


(c) Parent, Licensor and C/M Products shall comply with all applicable laws and regulations concerning the marketing and distribution of the Private Label Products.


ARTICLE IV.


TERMINATION


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") ending on December 31, 1998 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


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provides the other with written notice of its intent not to renew this Agreement.


Section 4.2 TERMINATION RIGHTS. Manufacturer shall have the right to terminate this Agreement following the breach by any of Parent, Licensor and C/M Products of any representation or warranty made by Parent, Licensor or C/M Products or of any other term or provision of this Agreement or following the occurrence of any of the following events:


(a) if any trademark or trade name owned by any member of the Core-Mark Group, including, without limitation, the Trademarks, relating to Private Label Products that are manufactured by Manufacturer, are, directly or indirectly, sold, transferred or assigned to any person not a member of the Core-Mark Group; or


(b) if the Core-Mark Group, for any reason, shall cease, or shall have ma ...