Manufacturing Agreement-bb

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 th ...