EXHIBIT 10.2
CIGAR PRODUCTION AGREEMENT
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THIS AGREEMENT, made this ____ day of ______, 1997 by and between TAMBORIL
CIGAR COMPANY, a Delaware corporation with its principal offices at 0000 X.X.
Xxxxx Xxxxxx, Xxxxx, XX 00000 ("Tamboril"); and XXXXXXX IMPORTS, a Florida
general partnership with its principal offices at 0000 X.X. 000xx Xxxxxx, Xxxxx,
XX 00000-0000 ("Xxxxxxx").
W I T N E S S E T H :
WHEREAS, Tamboril is in the business of manufacturing, producing, and
selling premium hand-rolled cigars;
WHEREAS, Xxxxxxx is in the business of distributing cigars throughout the
United States;
WHEREAS, the parties entered into a Cigar Distribution Agreement between
Tamboril Cigar Company and Xxxxxxx Imports, dated July 1, 1997 which is
incorporated herein by reference (the "Distribution Agreement");
WHEREAS, Xxxxxxx desires to create, produce, manufacture and sell a line of
premium hand-rolled cigars under the XXXXXXXX brand name; and
WHEREAS, Xxxxxxx desires to engage Tamboril, and Tamboril desires to be
engaged, to manufacture cigars sold under the XXXXXXXX brand name by Xxxxxxx.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions contained herein, and for such other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO MANUFACTURE CIGARS: Subject to the terms and conditions
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contained in this Agreement, Xxxxxxx hereby engages Tamboril, and Tamboril
accepts said engagement, to be Xxxxxxx'x non-exclusive manufacturer of cigars to
be sold under the XXXXXXXX brand name by Xxxxxxx. The XXXXXXXX cigars shall
consist of a blend of tobaccos comprising the binder and filler and a wrapper as
has already been established and agreed upon by the parties and is evidenced by
the approximately 100,000 cigars already shipped to Xxxxxxx by Tamboril, subject
to modification from time to time by mutual agreement between the parties (the
"Xxxxxxxx Blend"). Tamboril agrees that it will not use or sell the Xxxxxxxx
Blend under any other brand or line of cigars, unless for Xxxxxxx
and Xxxxxxx'x specific request. In this regard, in the event Tamboril has in its
inventory any cigars using the Xxxxxxx Blend after the expiration or termination
of this Agreement, Tamboril agrees to destroy said inventory.
2. QUANTITY OF CIGARS TO BE MANUFACTURED BY TAMBORIL AND PURCHASED BY
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XXXXXXX:
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(a) Tamboril agrees to manufacture at least Eight Hundred Thousand
(800,000) cigars pursuant to the Delivery Schedule which is annexed hereto as
Schedule A and made a part hereof, which shall provide for delivery by Tamboril
and purchase by Xxxxxxx of all said cigars on or before December 31, 1997
(the "Minimum") giving credit for the approximately 100,000 XXXXXXXX cigars
already shipped to Xxxxxxx; provided however, that Tamboril shall use its best
efforts (without any guarantee) to produce One Million (1,000,000) cigars for
sale pursuant to this Agreement.
(b) Subject to the terms and conditions of this Agreement, Xxxxxxx hereby
agrees and guarantees that pursuant to the terms of this Agreement it will
purchase at least Eight Hundred Thousand (800,000) on or before December 31,
1997 pursuant to the Delivery Schedule which is annexed hereto as Schedule A and
made a part hereof (subject to Paragraph 13(c) with regard to said dates only)
in accordance with the Delivery Schedule annexed as Schedule A. In the event
Xxxxxxx fails to purchase the Minimum amount of cigars by December 31, 1997, or
any Subsequent Minimum (as defined below) and date agreed upon pursuant to the
terms of Paragraph 2(c), Xxxxxxx shall , within ten (10) days following the
applicable date, either (i) purchase and pay for that quantity of cigars equal
to the difference between actual purchases through the relevant date and the
Subsequent Minimum, or (ii) pay to Tamboril the Profit that Tamboril would have
earned on the purchase by Xxxxxxx of the Minimum or Subsequent Minimum. For
purposes of the preceding sentence, Profit shall be defined as thirty percent
(30%) of the average invoice price for XXXXXXX cigars purchased hereunder during
the preceding six (6) month period, or entire period said period is less than
six (6) months. The Distribution Agreement is hereby incorporated into this
Agreement by reference.
(c) On or before January 1 of each year during the term of this Agreement,
and any renewals or extensions hereof, the parties shall consult with each other
and mutually agree upon a gross production for that calendar year (the
"Subsequent Minimums"). The dates (and not the quantities) are subject to the
provisions of Paragraph 13(c) below. The parties shall agree upon said quantity
by January 30 of each year. In the event the parties are unable to reach an
agreement within said period, either party shall have the right to terminate
this Agreement on thirty (30) days written notice to the
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other.
(d) In order to effectuate the manufacture and sale of cigars under the
terms of this Agreement, Xxxxxxx shall deliver purchase orders to Tamboril for
the quantities, reasonable shipping dates, and specifications desired. The
parties shall agree, in advance of any purchase orders, upon a delivery schedule
for each order of cigars. In the event Tamboril fails to deliver cigars
according to the agreed upon delivery schedule and does not cure the late
shipment within seven (7) days of notice by Xxxxxxx, Xxxxxxx shall have the
right to reject any delinquently shipped orders and those rejected orders shall
be credited towards Xxxxxxx'x Minimum or Subsequent Minimum hereunder. In the
event Tamboril causes five (5) or more uncured defaults as defined in this
paragraph 2(d) to occur in any six (6) month period, Xxxxxxx shall have the
right to terminate this Agreement on thirty (30) days written notice to
Tamboril.
3. PURCHASE PRICES FOR CIGARS AND PAYMENT:
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(a) The purchase prices for the cigars Xxxxxxx purchases under the terms
of this Agreement are set forth in Schedule B annexed hereto and made part
hereof. All cigars shall be purchased F.O.B. Miami, Florida. These prices
shall remain current for the first twelve (12) month period of the term of this
Agreement, provided, however, that Tamboril reserves the exclusive right to
change these prices, and any subsequently agreed upon prices, without notice in
the event their costs of raw materials, labor, or manufacturing costs increase
or decrease more than ten percent (10%) (a "Material Change") (in the event of a
decrease, Tamboril shall have the obligation to decrease the purchase price).
Within ten (10) business days of a Material Change, Tamboril shall provide
written notice of same with the details of said change to Xxxxxxx and the
purchase price to Xxxxxxx shall be modified accordingly. In the event Xxxxxxx
has already received a purchase order from one or more of its customers during
such ten (10) day period, and Xxxxxxx is not already in possession of inventory
of Xxxxxxx cigars to fill said order, the prices for those particular cigars
shall be unaffected by the Material Change. Upon request from Xxxxxxx, Tamboril
agrees to provide reasonable documentation to permit Xxxxxxx to verify the
increase in said costs to Tamboril.
(b) Tamboril will invoice Xxxxxxx for all purchases of cigars made
hereunder. Invoices for any particular order will not be issued until cigars for
that order have been shipped by Tamboril. Payment for said invoices shall be due
thirty (30) days from the later of (i) the receipt of the cigars shipped
pursuant to a particular purchase order; or (ii) the receipt of the invoice.
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4. PRODUCTION SCHEDULE: Upon complete execution of this Agreement,
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Tamboril shall, to the extent not already done, provide Xxxxxxx with Tamboril's
current sales information, quantities and types for at least the twelve (12)
month period preceding the date of this Agreement. In addition, Tamboril shall
provide Xxxxxxx with a manufacturing schedule Tamboril reasonably expects to
conform with for Tamboril's manufacturing over the period through December 31,
1997 so that Xxxxxxx may plan for its distribution schedule. Tamboril makes no
warranties or representations with regard to its sales information (except that
it accurately reflects sales for the period covered) or its manufacturing
schedule (except that it reasonably expects to follow that schedule).
5. QUALITY STANDARDS: All cigars produced for Xxxxxxx under this
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Agreement shall be produced, labeled and packaged in conformity with all laws
and regulations applicable for use in the United States of America.
6. DEFECTIVE PRODUCTS: All products hereunder shall be sold to Xxxxxxx
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F.O.B. Miami, Florida. Any products which are returned by customers of Xxxxxxx
due to defects or damage arising from the manufacture or delivery of the cigars
up to the F.O.B. point in Miami shall be returnable to Tamboril in exchange for
a refund of the purchase price as set forth above to be taken as a credit on
Tamboril's next invoice to Xxxxxxx. In the event there are no further invoices
to Tamboril as a result of the termination or expiration of this Agreement
Tamboril shall remit payment to Xxxxxxx of the amount due to be refunded within
ten business days of such termination or expiration. Any returns for defects or
damage arising from the storage, handling, delivery or other act/omission after
the F.O.B. point in Miami shall be borne exclusively by Xxxxxxx.
Notwithstanding anything herein to the contrary, no refunds/credits will be due
Xxxxxxx on any products more than sixty (60) days following delivery of said
products to the F.O.B. point.
7. PACKAGING: All cigars manufactured for Xxxxxxx hereunder shall be
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packaged in standard cigar packaging/boxes according to specifications provided
to and agreed upon by the parties in advance of any production.
8. This paragraph intentionally deleted.
9. WARRANTIES AND REPRESENTATIONS:
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(a) BY XXXXXXX: Xxxxxxx represents and warrants that:
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(i) it is a partnership authorized to conduct its business and own
its assets as contemplated in
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this Agreement and the Distribution Agreement;
(ii) it is either the owner or has full right, license and
authority to use the XXXXXXXX name, likeness (i.e. Xxxxxx
Xxxxxxxx), photograph, image and trademarks/service marks,
including but not limited to those marks set forth in Schedule C
hereto and those which are added thereto from time to time, in
connection with the manufacture, production, sale, distribution,
marketing, promotion and advertising of cigars and cigar related
accessories, as is contemplated in this Agreement; and
(iii) it shall market, sell, promote and advertise the sale of the
XXXXXXXX cigars in accordance with all applicable federal, state
and local laws, rules and regulations.
(b) BY TAMBORIL: Tamboril represents and warrants that:
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(i) it is a corporation duly organized and validly existing, and
that it is authorized and empowered to conduct its business and own
its assets as contemplated in this Agreement and the Distribution
Agreement;
(ii) it will not seek to register in any country whatsoever, or
oppose Xxxxxxx'x registration or use of the XXXXXXXX
trademarks/service marks; and
(iii) the cigars produced for Xxxxxxx hereunder shall be free from
material defect (subject to paragraph 6 above) and shall be
manufactured in compliance with all laws and regulations applicable
within the United States (up through the F.O.B. point).
(iv) it shall not sell or distribute cigars bearing the Xxxxxxxx
name to any other third person, firm or entity under any type of
arrangement other than to Xxxxxxx hereunder.
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10. INDEMNIFICATION: Each party hereby indemnifies and holds harmless the
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other, its officers, directors, employees, agents and attorneys, from and
against any and all loss, liability, damage and expense (including reasonable
attorney's fees) arising from the breach of any its warranties or
representations contained above.
11. INSURANCE: Tamboril shall procure and maintain for the term of this
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Agreement product liability insurance in the minimum amounts of
$1,000,000/$3,000,000 providing coverage for death or personal injury as a
result of the defective production of the cigars sold hereunder. Said policy
shall name Xxxxxxx as an additional insured, for a broad form vendors
endorsement, and shall provide that the policy cannot be canceled or modified
without providing thirty (30) days written notice to Xxxxxxx. Upon request,
Tamboril shall provide Xxxxxxx with a copy of the declaration page of said
policy.
12. TERM: Subject to the terms and conditions set forth in this Agreement,
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the term of this Agreement shall commence on June 30, 1997 and shall endure
until December 31, 2000. In addition, but subject to meeting all terms and
conditions hereof, including but not limited to meeting minimum performance and
purchase requirements as set forth in paragraph 2 hereof, Xxxxxxx shall have
three (3) additional three (3) year options to renew this Agreement. The
options to renew shall only be exercisable if: (a) Xxxxxxx shall have meet the
minimum purchase requirements as set forth in paragraph 2 hereof and for all
subsequent years during the term hereof; (b) Xxxxxxx shall give Tamboril not
less than ninety days written notice of its intention to exercise its option;
and (c) any option after the first option shall be contingent upon the
satisfaction of subsections (a) and (b) above, and the previous option having
been exercised.
13. TERMINATION. This Agreement may be terminated in the following
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circumstances:
(a) if either party files, has filed against it, or consents to the filing
of any petition in bankruptcy or for other relief under any bankruptcy law
or law for the relief of debtors, or be adjudicated insolvent, or be
dissolved or liquidated, or make any assignment for the benefit of
creditors, or a receiver or similar person should be appointed ("bankrupt
event") then the other party may terminate this Agreement by notice in
writing, in the event such bankrupt event is not terminated within twenty
(20) days; or
(b) in the event that force majeure as defined in Section 14 hereof, shall
prevent one party from fulfilling its obligations for
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a period in excess of 180 days, the other party hereto may terminate this
Agreement immediately by notice in writing.
(c) in the event that Xxxxxxx fails to meet its minimum purchase
requirements as set forth in paragraph 2 hereof, Tamboril shall the right,
but not the obligation, to terminate this Agreement upon fifteen (15) days
prior written notice to Xxxxxxx. Notwithstanding the preceding to the
contrary, Xxxxxxx shall have the right, but not the obligation, to cure the
failure to meet the Minimum or Subsequent Minimums by up to 10% (solely
for the purposes of this paragraph and the dates set forth in Paragraph
2(b)) by purchasing the amount of the shortfall in January of the following
calendar year and having said purchases applied toward the Minimum or
Subsequent Minimum, as applicable, of the preceding year, but not towards
the Subsequent Minimum for the then current year.
(d) in the event Xxxxxxx is unable to obtain and continue in force at
usual and customary rates then in effect for similar business, insurance
insuring against products liability resulting from the cigars sold by
Xxxxxxx hereunder, Xxxxxxx shall have the right, by giving Tamboril fifteen
days' written notice to cancel this Agreement, effective that the date the
products liability insurance and/or general liability insurance is no
longer able to be obtained at said rate.
(e) the parties agree that the non-performance or breach of any of the
essential obligations of either party under this Agreement or any action or
omission by either party that adversely and substantially affects the other
party shall be a valid cause for the termination of this Agreement prior to
the expiration of its term, including but not limited to, the payments of
Tamboril's invoices hereunder.
14. TAXES, DUTIES, ETC.: Xxxxxxx shall bear and pay any and all customs,
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duties, excise taxes or other charges or taxes for the importation of the
products manufactured hereunder.
15. FORCE MAJEURE:
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(a) Any delay or failure of performance of any part of this Agreement shall
be excused if and to the extent caused, directly or indirectly, by an
occurrence beyond either party's control, including, but not limited to,
disputes with workmen,
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fires, strikes, epidemics, floods, accidents, earthquakes, hurricanes,
delays in transportation, shortage of freight cars, trucks or vessels,
shortages of fuel or other materials, war, riot, civil commotion,
radiological contamination, blockages, embargoes, acts, demands or
requirements of any governmental body of the United States of America or
Dominican Republic or of any other country from which shipments of the
brand shall be sent or received, or any state or municipality thereof,
restraining order of any courts, acts of God or other events of force
majeure. Written notice of an occurrence of Force Majeure shall be given by
the affected party to the other party within twenty (20) days after such
event occurs.
(b) Should force majeure, legislation or governmental action, subsequently
frustrate either party in complying with this Agreement for a period of one
hundred and eighty (180) days, the aggrieved party may terminate this
Agreement on notice to the other party.
16. REPRESENTATION: It is expressly agreed and understood that neither
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party hereto is the agent or legal representative of the other and neither party
has the authority, express or implied to bind the other or pledge its credit.
This Agreement does not create a partnership or joint venture between the two
parties.
17. NOTICES: All notices, whenever required in this Agreement, will be in
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writing and sent by certified mail, return receipt requested, or by overnight
courier service where verification of delivery is available and simultaneously
by facsimile to the following addresses, or such other address as either party
may furnish the other in writing:
If to Xxxxxxx:
Xxxxxxx Imports
c/o Xxxxx Xxxxxxx
00000 X.X. 00 Xxxxx
Xxxxx, XX 00000
Fax No.
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With a copy to:
Xxxxxx Xxxxxx, Esq.
Xxxxxx and Xxxx, P.A.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000.
Fax No. 000-000-0000
If to Tamboril:
Tamboril Cigar Company
Attn: Xxxxxxx Xxxxxxxxx
0000 X.X. Xxxxx Xxxxxx
Xxxxx, XX 00000
Fax No. 000-000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. 000-000-0000
Notices will be deemed to have been given one business day following the mailing
and facsimile transmission of said notice.
18. CONTROLLING LAW: This Agreement shall be construed in accordance with
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the laws of the State of Florida, United States of America and jurisdiction over
the parties and subject matter over any controversy arising hereunder shall be
in the Courts of the State of Florida, County of Dade or the Federal courts
therein. Both parties hereby irrevocably consent to said jurisdiction and
venue.
19. ASSIGNMENT:
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This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement, nor any of the rights, interests or obligations
hereunder shall be assigned by either party without the prior written consent of
the other party, and any attempts to do so without the consent of the other
party shall be void and of no effect; provided however that Xxxxxxx shall have
the right to assign or transfer this Agreement to an entity at least as credit-
worthy as Xxxxxxx (as determined by Tamboril), and which includes as a majority
owner one or more of the current partners of Xxxxxxx as of the
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date of this Agreement. Notwithstanding anything to the contrary, Tamboril shall
have the right to assign its rights to receive payments hereunder; provided
however that advance written notice be given to Xxxxxxx and that any of Hubbards
rights to a set off of any amounts due hereunder shall be unaffected thereby.
20. ENTIRE AGREEMENT:
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This writing and the Distribution Agreement constitute the entire agreement
and understanding between the parties with respect to the subject matter herein.
Any and all other agreements concerning the subject matter herein are hereby
canceled and superseded by this Agreement. No other oral or written agreements
or representations exist or are being relied upon by either party. Any
modifications or additions hereto must be made in writing and signed by both
parties.
21. MISCELLANEOUS:
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(a) The paragraph headings used herein are for reference purposes only and
do not effect the meaning or interpretation of this Agreement. If any
provisions of this Agreement are for any reason declared to be invalid or
illegal, the remaining provisions shall not be affected thereby.
(b) The failure of either party to enforce any or all of its rights
hereunder as they accrue shall not be deemed a waiver of those rights, all of
which are expressly reserved.
(c) This Agreement may be executed in more than one counterpart, all of
which shall be deemed to be originals.
(d) If a petition in bankruptcy is filed by or against either party, or
either party becomes insolvent, or makes an assignment for the benefit of
creditors, or any other arrangement pursuant to any bankruptcy law, or if either
party discontinues its business or if a receiver is appointed for either party's
business, to the fullest extent permitted by law at the time of the occurrence,
this Agreement shall automatically terminate without any notice whatsoever being
necessary.
REMAINDER OF THIS PAGE BLANK; SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
eleven (11) pages as of the date first written above.
TAMBORIL CIGAR COMPANY XXXXXXX IMPORTS
By: By:
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Title: Title:
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SCHEDULE A
TAMBORIL CIGAR COMPANY
DELIVERY SCHEDULE
# OF CIGARS DATE TO BE PURCHASED/SHIPPED BY
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SCHEDULE B
PRICING FOR XXXXXXXX BRAND
BRAND DESCRIPTION SIZE SINGLE PACK BASE PURCHASE PRICE PURCHASE PRICE
BASE PRICE PRICE INCLUDING INCLUDING 898
PER CIGAR IMPORT DUTIES BOX *
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*As requested by Xxxxxx Xxxxxxxx
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SCHEDULE C
To be prepared and incorporated into this agreement by reference at a future
date by the parties.
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