CIGAR DISPLAY AND MERCHANDISING AGREEMENT
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This Cigar Display and Merchandising Agreement (this "Agreement") is
entered into as of the 1st day of April, 1997 (the "Effective Date"), between
Premium Cigars International, Ltd. ("PCI") and The Southland Corporation
("Southland").
1. General Program Description. As more fully set forth in this
Agreement, PCI shall provide to participating 7-Eleven convenience stores cigar
humidor counter displays in connection with the retail sale of PCI cigar
products (the "Products") at the stores (the "Program").
2. Stores.
2.01 For purposes of this Agreement, corporate-owned and
operated 7-Eleven convenience stores shall be referred to as "Corporate Stores"
or "Stores." "Stores" shall not include, except to the extent section 2.02 below
applies, any 7-Eleven convenience stores which are or hereafter may be operated
by Southland's franchisees or area licensees.
2.02 PCI acknowledges that Southland's 7-Eleven franchisees or
area licensees are independent contractors who determine the manner and means of
operating the 7-Eleven stores pursuant to the respective franchise or license
agreement with Southland and arrangements relating thereto and, as such,
generally determine the selection of products and services for the stores and
the establishment of retail selling prices for such products and services and,
therefore, solely determine whether to participate in the Program. The term
"Participating Stores" or "Stores" shall include Southland's franchisees or area
licensees to the extent each such franchisee or area licensee independently
elects to participate in the Program. In such event, all rights, duties and
obligations running from PCI to Southland will also run between PCI and each
such franchisee or area licensee. Unless otherwise described herein, Corporate
Stores and Stores operated by participating franchisees and licensees may
collectively at times, be referred to as "Participating Stores."
2.03 Southland shall not be responsible for any Program
obligation or the breach of any such obligation as it may relate to a
Participating Store operated by a franchisee or area licensee. Southland will
reasonably cooperate with PCI to communicate the terms and conditions of the
Program to franchisees and area licensees. Southland will use its reasonable
efforts, to the extent it is permitted, to solicit franchisee and area licensee
participation under the Program and will reasonably cooperate with PCI as to
issues regarding Program eligibility and participation.
3. Participation Agreement. PCI requires that each franchisee that
independently elects to participate in the Program execute the Participation
Form attached to this Agreement as Exhibit A (the "Participation Agreement").
PCI acknowledges that as to an area licensee, A
* Confidential portions omitted and filed
separately with the Commission.
separate agreement of participation agreement may be necessary in connection
with area licensee participation. Southland shall make available the Program
materials and Participation Agreement to its franchisees and shall provide PCI
with copies of the executed Participation Agreements as they become available to
Southland.
4. Term of Agreement.
4.01 The term of this Agreement shall begin on the Effective
Date and shall continue until March 30, 1999. unless otherwise extended or
renewed only upon the mutual agreement of the parties (the "Term"). Except as
otherwise specified by Section 4.03 below, either party may terminate this
Agreement, at any time, without cause, upon sixty (60) days prior written notice
to the other party.
4.02 Except as otherwise specified by Section 4.3 below,
participating Stores operated by franchisees or area licensees may terminate
their participation in the Program, at any time, without cause, upon sixty (60)
days prior written notice to Southland.
4.03 Except as otherwise provided under Section 14 herein,
during the first full year of the term of this Agreement: (i) Southland may
terminate this Agreement as to all stores only upon thirty (30) days written
notice to PCI that PCI has breached PCI's obligations under this Agreement and
such breach is not cured by PCI within fifteen (15) calendar days of PCI's
receipt of such notice from Southland and (ii) Participating Stores operated by
franchisees or area licensees may terminate their participation in the Program
only upon thirty (30) days written notice to Southland that PCI has breached
PCI's obligations under this Agreement and such breach is not cured by PCI
within fifteen (15) calendar days of PC"s receipt from Southland of a copy of
such notice from a Participating Store.
5. Humidor Displays.
5.01 PCI shall provide each Participating Store with either a
* humidor counter display or * humidor counter display in connection with the
sale of the Products (the "Display"). The designations specified by this Section
5.01 are for descriptive purposes only and are not exact size specifications for
the Displays.
5.02 The Display shall be provided to Participating Stores at
the sole cost of PCI. Participating Stores shall be responsible for the care and
maintenance of the Displays. Any damaged, lost or stolen Displays shall be
replaced by PCI, with the cost of such replacement to be charged to the
Participating Store. The cost for Display replacement shall be prorated to the
Store based upon a * schedule of PCI's cost as set forth in Exhibit B.
Replacement of Displays due to manufacturing defects or normal wear and tear
shall be made by PCI at no charge or cost to the Participating Store.
* Confidential portions omitted and filed
separately with the Commission.
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5.03 PCI represents that the Displays provided under this
Agreement are available to other PCI's customers on a comparable basis and that
such Displays are being provided under this Agreement based on PCI's belief that
the Displays shall increase the visibility and sales of the Products. PCI
further represents that the Displays are provided at PCI's sole cost and expense
and without any additional charge or xxxx-up on PCI Products above PCI's
standard wholesale price for such products.
5.04 Title and ownership to the Displays provided under this
Agreement, including any replacements for lost or stolen Displays, shall remain
with PCI. Upon the expiration or termination of this Agreement, Southland and
Participating Stores shall cooperate in making available to PCI for return all
Displays placed in the Stores. All costs relating to the removal of the Displays
from the Stores and the return of Displays to PCI shall be the responsibility of
PCI.
6. Program Display and Merchandising Requirements.
6.01 At least one Display shall be placed in a mutually agreed
upon location at or near the front or main sales counter at the Store or such
other location as may be required by any law or local ordinance. To the extent
reasonably possible, such location shall provide customers of the Store with a
complete view of the Display.
6.02 Products shall only be placed in and sold from the
Displays. Only PCI Products may be merchandised in the Displays. PCI and
Southland acknowledge that specially packaged Products or other accessory
Products available for purchase through PCI may be merchandised outside the
Display.
6.03 Stores may continue to market and sell tobacco and other
cigar and related products not provided by PCI so long as such products are not
sold in or from the Displays or other non-PCI humidors.
6.04 PCI and Southland shall develop mutually agreed upon
sales and merchandising programs in connection with the sale of the Products
that will be recommended and presented to the Participating Stores for
implementation.
7. Program Disqualification. Notwithstanding the provisions of Section
4 above, PCI may disqualify a Participating Store if, in PCI's determination,
the Store is not in compliance with the Display and merchandising requirements
set forth in section 6 of this Agreement. PCI shall provide each such Store with
written notice of non-compliance and if such non-compliance is not remedied by
the Store within ten (10) days, PCI may permanently disqualify the Store from
participation under the Program. In such an event, PCI, at its sole cost, may
remove the Displays from the disqualified Store.
* Confidential portions omitted and filed
separately with the Commission.
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8. Inspection Rights. Southland and the Participating Stores grant PCI
representatives the right to inspect Participating Stores for Program compliance
during normal business hours so long as such inspection does not interfere with
the operation of the Store.
9. Ordering.
9.01 It is Southland's intent that most Corporate Stores will
participate in the Program. Southland also believes that a number of franchisees
and area licensees may also be interested in the Program. Notwithstanding, the
execution of this Agreement does not in any way obligate Southland or
Participating Stores to order or purchase any minimum amount of Products. PCI
acknowledges and agrees that Southland is under no obligation of any kind
whatsoever to order or purchase any minimum amount of Product for the Stores or
to commit to PCI a minimum number of Stores that will participate under the
Program.
9.02 Product orders received by PCI shall be billed and
shipped no later than the end of the business day following the day the order
was received by PCI.
9.03 Product orders will be shipped to the Stores at PCI's
cost by a carrier of PCI's choosing. Product order will be delivered to the
Store no later than five (5) business days from the day the order was received
by PCI.
9.04 Product orders shall be filled at an average rate of not
less than ninety percent (90%) of the quantity ordered. Product brands may be
substituted by PCI as provided by Section 11, but such substituted brands must
be of equal or greater quality and value and at a cost not to exceed the order
cost.
9.05 If the terms and conditions of Product orders conflict
with the terms and conditions of this Agreement, the terms and conditions of
this Agreement will control.
10. EDI Agreement. Contemporaneously with this Agreement, the parties
have agreed to enter into an Electronic Data Interchange ("EDI") Agreement
covering electronic invoicing, electronic remittance advice and Electronic Funds
Transfer ("EFT") payment procedures.
11. Products. From time to time, PCI shall provide Southland and
Participating Stores with a list of available Products including the costs of
the Products delivered to the Stores. The initial Product order shall be shipped
to the Store along with the Display. Because all of the Products are categorized
by PCI into price point groupings, PCI shall have the right to substitute, at no
additional charge to Southland or the Participating Stores, a Product in the
same or higher price point group for any ordered Products and such Products may
not be returned on the basis of such substitution
* Confidential portions omitted and filed
separately with the Commission.
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12. Product Payment Terms. Terms for the payment of Products ordered by
the Corporate Stores and the Stores operated by participating franchisees shall
be payable by Southland on terms of net * days from date of invoice via * EFT.
Invoices from Monday through Sunday shall be paid by Southland through EFT to
PCI's designated bank account no later than * following the invoice date. EDI
invoices for payment will be dated with anticipated date of Product delivery to
the stores and will be paid by Southland using this date in accordance with the
provisions herein.
13. Product Price. The Product prices will remain firm during * of the
Term. Thereafter, PCI will reduce its Product prices for the stores to the
extent PCI reduces its prices to the general trade for the same type of products
with such price decrease to be effective immediately upon notice to Southland.
14.__*__ . During the * of the Term, PCI agrees to use its best efforts
to * .
15. Taxes. PCI shall be responsible for accruing and remitting all
taxes relating to the Displays provided under this Agreement and all taxes
relating to PCI's performance or the supplying of the Products, (except for the
taxes that must legally be collected by the Stores from consumers at the time of
Product purchase).
16. Warranty.
16.01 PCI hereby warrants, guarantees and certifies to
Southland, and to any subsidiary, division, affiliate, franchisee or license of
Southland that at the time of delivery of such Products to Stores and
Participating Stores, any and all Products (i) have been, are and will be
produced and furnished in compliance with the provisions of the Federal Fair
Labor Standards Act; (ii) have been, are and will be produced in compliance with
and have not been, are not and will not be, adulterated or misbranded within the
meaning of the Federal Food Drug and Cosmetic Act of 1938, as amended, and the
regulations promulgated thereunder (the "Act"), or the pure food or drug laws or
ordinances of any state or city to which the Products are shipped by PCI, and
have not been, are not and will not be articles which may not be introduced into
interstate commerce under the Act; (iii) if the Products contain a color
additive, said color additive has been, is and will be from a batch certified by
the Secretary of Health, Education and Welfare as required by the Act; (iv) have
not been, are not and will not be misbranded hazardous substances or banned
hazardous substances, and have not been, are not and will not be in a misbranded
package within the meaning of that term in the Federal Hazardous Substance
Labeling Act or the consumer Product Safety Act; (v) have been, are and will be
placed in packages that reflect true net weight, measure, contents and size
pursuant to applicable federal and state requirements; (vi) have been, are and
will be in compliance with all applicable federal, state and local laws,
regulations and other legal requirements, including but not limited to those
related to health, safety, labeling, flammability and price discrimination; and
(vii) have been, are and will be good and merchantable and fit for the purposes
for which they are sold. PCI will
* Confidential portions omitted and filed
separately with the Commission.
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not, however, warrant in any way or be liable for any Products that have been
damaged, modified or allowed to spoil after delivery by PCI to a Corporate
Store, Store or Participating Store.
16.02 PCI agrees that it will promptly reimburse Southland for
all costs involved in any Product recall or other market withdrawal of the
Products attributable to the breach of any representations or warranties
contained herein, such costs to include, but not be limited to, the cost of (i)
handling and preparing the Products for reshipment to PCI or other designee,
(ii) destroying the Products if necessary, and (iii) replenishing inventory as a
result of the Products' removal, return or necessary destruction.
17. Indemnification. PCI agrees, in addition to any other rights or
remedies of Southland and unless the applicable Products have been damaged,
modified or allowed to spoil after delivery of such Products by PCI to a Store
or Participating Store, to defend, indemnify and hold Southland harmless from
any and all losses, damages, liabilities or expenses (including attorneys' fees
and court costs) arising out of or resulting from, or in connection with: (i)
any allegation or finding of a violation of any patent, trademark, copyright or
contractual or other rights of any third parties arising from the purchase, use
or sale of the Products; (ii) any allegation or finding of any breach of any
warranty, guarantee or certification to Southland; (iii) any allegation or
finding of a violation pertaining to, or arising in connection with, the
manufacture, production or sale of the Products; or (iv) any complaint, claim or
legal action whatsoever, whether foreseen or unforeseen, alleging damages,
death, illness, injury or damage to property, resulting from the purchase or use
of any of the Products.
18. Insurance.
18.01 PCI agrees to keep in force, at ail times while any of
the Products are being offered for sale by PCI, adequate comprehensive general
liability insurance endorsed to include both "products" and "contractual"
coverage, with a combined single limit of at least * each occurrence for bodily
injury or property damage.
18.02 PCI agrees to furnish Southland with a certificate from
a financially responsible insurance company evidencing that the insurance
required hereunder is in force, including a broad form seller's endorsement
naming Southland as an additional insured and providing that such coverage may
not be terminated, canceled or materially changed without thirty (30) days prior
written notice to Southland at its office at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxx 00000-0000, Attn: Legal Department. PCI shall furnish Southland a copy of
such certificate of insurance prior to its first shipment of Products to
Southland.
19. Goodwill. Southland agrees that it neither has, nor will acquire,
any vested or proprietary right or interest with respect to the marketing and
sale of the Products, and that any such goodwill created or increased during the
term of this Agreement shall be considered the property of PCI.
* Confidential portions omitted and filed
separately with the Commission.
6
20. Effect of Termination or Expiration. In the event or termination or
expiration of this Agreement, PCI, at its sole cost, will remove any and all
Displays from each Store within sixty (60) days of termination or expiration.
21. Remedies. All rights and remedies conferred by this Agreement or by
law shall be cumulative and in addition to every other right and remedy
available. No failure on the part of the injured party to exercise and no delay
in exercising any right or remedy hereunder shall operate as a waiver thereof
unless specifically waived in writing, nor shall any single or partial exercise
of any right or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right or remedy.
22. Confidential Information. PCI and Southland will and will use all
reasonable efforts to cause their respective employees to hold in confidence all
Confidential Information, hereinafter defined, and PCI and Southland will not,
and will use all reasonable efforts to ensure that any employees having access
to the Confidential information through them will not, disclose the same and
will not use except in connection with this Agreement. For purposes hereof,
"Confidential Information" means this Agreement, all information of any kind
(including, without limitation, sales, pricing, financial and promotional
information) obtained directly or indirectly from PCI or Southland, as the case
may be, or from any of their respective employees, agent, accountants, counsel
or other representatives, relating to either PCI or Southland's business, except
information that:
1. constitutes readily ascertainable public information,
including, without limitation, any information filed with the Securities and
Exchange Commission;
2. subsequently becomes public information through no fault of
the party to whom it was revealed.
3. either party obtains from a third party who they have no
reason to believe is under any obligation of confidentiality; or
4. either party becomes legally obligated to disclose,
provided that the other party is afforded an opportunity prior to such
disclosure to apply to the court or other appropriate authority for a form of
restrictive order preventing disclosure of any such information.
23. Miscellaneous.
23.01 Force Majeure. Except with respect to each party's
outstanding payment obligations, neither party to this Agreement shall be
required to perform any term, covenant or condition of this Agreement as long as
such performance is delayed or prevented by force majeure, which shall mean any
acts of God, strike, lockout, material or labor restriction by any governmental
authority, civil riot and any other cause not reasonably within the control of
such
* Confidential portions omitted and filed
separately with the Commission.
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party and which by exercise of due diligence such party is unable, wholly or in
part to prevent or overcome.
23.02 Titles. All headings, titles and subdivisions are for
the convenience of the parties and are not to be used in interpreting this
Agreement.
23.03 Successor and Assigns. All of the terms of this
Agreement will be binding upon, and inure to the benefit of, and be enforceable
by the parties and their respective successors, assigns; provided, however,
neither party can assign their respective interests herein without the written
consent of the other, except to a parent, subsidiary or affiliate holding in
excess of fifty percent (50%) of the controlling interest of such party.
23.04 Texas Law. This Agreement will be construed and in all
respects take effect in accordance with the laws of the State of Texas and venue
with respect to any judicial proceeding will be Dallas County, Texas.
23.05 Notices. Any notice or other instruments required or
permitted by the Agreement to be served on or given to a party shall be
sufficiently served or given for all purposes (a) when personally delivered to
any officer of the party to whom it is addressed, or (b) if sent by (i)
certified or registered mail postage prepaid, or (ii) overnight express mail,
addressed to the party at the appropriate address set forth below, or at such
other address as the party has directed in writing. The effective date of any
notice shall be the date of delivery if by personal delivery or date of mailing
thereof to the party to whom such notice is addressed.
2. Addresses. All correspondence shall be addressed as follows:
If to Southland:
The Southland Corporation
0000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Vice President, Merchandising
With a copy given in the manner described above to:
The Southland Corporation
0000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel, Legal Department
* Confidential portions omitted and filed
separately with the Commission.
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If to PCI:
Premium Cigars International, Ltd.
0000 Xxxx Xxx Xxxxx
Xxxxx XX. 000-000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
23.06 Waiver. Neither the failure nor any delay on the part of
either party to exercise any right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or of any other right nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
23.07 Independent Contractor. The parties to this Agreement
will be independent contractors under this Agreement and in no event will their
relationship be deemed that of employer/employee. It is not the intent of the
parties to form any partnership or joint venture, and it is understood that each
party will exercise full power and authority, except as specifically provided
otherwise in this Agreement, to select the means, method and manner of
performing all obligations under this Agreement. PCI and Southland specifically
agree that for all purposes hereunder, Southland, its franchisees and area
licensees are independent contractors.
23.08 Attorney's Fees. Except as otherwise provide in section
17 herein, in the event any legal proceeding is initiated by either party
regarding the construction or enforcement of this Agreement, each party will be
responsible for its own attorney's fees, costs and expenses incurred in such
proceeding.
23.09 Costs and Expenses. Each party will be responsible for
its own costs and expenses relating to the execution and performance of its
respective obligations under this Agreement, except as otherwise stated herein.
23.10 Press Release. Neither Southland nor PCI will issue
press releases regarding the Program or any terms or conditions of this
Agreement without receiving prior written permission from the other party, which
permission will not be unreasonably withheld.
23.11 Exhibits and Schedules. All Exhibits and Schedules
attached hereto are hereby incorporated by reference into, and made a part of,
this Agreement.
23.12 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon; and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof,
* Confidential portions omitted and filed
separately with the Commission.
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individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
23.13 Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified, amended, extended or renewed
other than by an agreement in writing and in the case of Southland, executed by
a Senior Vice President.
IN WITNESS WHEREOF, the parties have executed, or caused to be
executed, this Agreement as of the day and year written above.
ATTEST: PREMIUM CIGARS INTERNATIONAL, LTD.
By: /s/ Xxx Xxxx By: /s/ Xxxxxx X. Xxxxxxxxx
------------------ -------------------------------
Attorney Name: Xxxxxx X. Xxxxxxxxx
------------------ -----------------------------
Its: C.E.O.
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ATTEST: THE SOUTHLAND CORPORATION
By /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxx
------------------ -------------------------------
Assistant Secretary Name: Xxxx X. Xxxx
------------------ -----------------------------
Vice President
* Confidential portions omitted and filed
separately with the Commission.
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EXHIBIT A
CIGAR DISPLAY AND MERCHANDISING AGREEMENT
PARTICIPATION AGREEMENT
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1. Premium Cigars International Limited ("PCI") and The Southland
Corporation ("Southland") have entered into an agreement (the
"Agreement") wherein PCI shall provide to designated 7-Eleven corporate
stores humidor counter displays (the "Displays") in connection with the
sale of PCI cigar Products (the "Products") at the store (the
"Program").
2. You may also wish to participate in the Program. The general Program
requirements include: (i) placing the Display at a location that is
near the front or main sales counter at the Store unless as otherwise
required by law; (ii) merchandising only PCI Products in the Display
and selling only such Products from the Display; (iii) implementing
mutually agreed upon and reasonable Product sales and marketing
programs as presented by PCI and (iv) not selling Products or non-PCI
cigars or cigar related items from or in non-PCI humidor units.
3. The Displays are initially provided at PCI's cost and without an
additional charge or xxxx-up on PCI Products above PCI's standard
wholesale price for such products. Replacement of damaged, stolen or
lost displays are available through PCI at a * prorated cost. There is
no ongoing or minimum Product purchase requirement under the Program.
The minimum term under the Program is one (1) year. After the first
year of the Program, you may terminate your participation in the
Program for any reason and at any time, upon sixty (60) days notice to
Southland in which case the Display will be removed by PCI. In the
event of Program termination, PCI has the right to remove the Display.
The Program is more fully described in the Cigar Display and
Merchandising Agreement (the "Agreement") a copy of which is available
for review through your field consultant or market manager.
4. By executing this Participation Agreement, you hereby agree to the
applicable Program terms and conditions contained in the Agreement. You
understand that PCI shall solely determine compliance under the
Program, and that PCI shall be solely responsible for disqualifying
stores from Program participation including your Store In the event of
disqualification, the Display may be removed by PCI from the Store.
5. PCI and Southland recognize that franchisees are independent
contractors who determine the manner and means of operating their
7-Eleven franchises pursuant to the terms of the franchise agreement
and, as such, solely determine whether to participate in the Program.
* Confidential portions omitted and filed
separately with the Commission.
IF YOU WISH TO PARTICIPATE IN THE PROGRAM, YOU MUST SIGN IN THE SPACE PROVIDED
BELOW AND RETURN THIS FORM TO YOUR FIELD CONSULTANT BY ________________________,
1997.
Franchisee(s)
_______________________________________ 7-Eleven Store No._________________
Signature
Store
_______________________________________ Address:___________________________
Full Name (Printed)
Date:__________________________________ ___________________________
The Southland Corporation
_______________________________________
Signature
_______________________________________
Market Manager (Printed Name)
* Confidential portions omitted and filed
separately with the Commission.
EXHIBIT B
DISPLAY COST/REPLACEMENT SCHEDULE
ORDER COST PER INITIAL ORDER REPLACEMENT
NUMBER DESCRIPTION CIGAR COUNT DISPLAY PER STORE COST COST:
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* * * * * *
* * * * * *
* [FOOTNOTE OMITTED]
