AGREEMENT BETWEEN

EXHIBIT 10.1

AMENDED AND RESTATED

AGREEMENT

BETWEEN

XXXXXX XXXXXX INCORPORATED

AND

XXXXXXXXXX-XXXXXXX INTERNATIONAL, INC.

FOR

FINE PAPER SUPPLY

EFFECTIVE APRIL 1, 1998

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN
ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. OMITTED INFORMATION HAS BEEN REPLACED WITH
ASTERISKS.
2

I. Definitions........................................................................................ 3
A. Affiliate................................................................................. 3
B. Annual Forecast........................................................................... 3
C. Auditor................................................................................... 3
D. Base Sheet Attributes..................................................................... 3
E. Bobbin.................................................................................... 3
F. Buyer..................................................................................... 3
G. Buyer's Direct Purchase Requirements...................................................... 3
H. Buyer's Indirect Purchase Requirements.................................................... 4
I. Category.................................................................................. 4
J. Cigarette ................................................................................ 4
K. Cigarette Paper........................................................................... 4
L. Composition List.......................................................................... 4
M. Contractor................................................................................ 4
N. Delivering Carrier........................................................................ 4
O. Direct Purchases.......................................................................... 5
P. Dispute................................................................................... 5
Q. Effective Date............................................................................ 5
R. Event of Default.......................................................................... 5
S. Existing Products......................................................................... 5
T. Excluded Quantities....................................................................... 5
U. Fast Flow Orders.......................................................................... 5
V. Fine Papers............................................................................... 6
W. Firm Orders............................................................................... 6
X. Force Majeure............................................................................. 6
Y. Grade..................................................................................... 6
Z. Group..................................................................................... 6
AA. Guaranteed Sales Period................................................................... 6
AB. Implementation Agreement.................................................................. 7
AC. Index..................................................................................... 7
AD. Indirect Purchases........................................................................ 7
AE. Initial Term.............................................................................. 7
AF. Invoice Price............................................................................. 7
AG. Term...................................................................................... 7
AH. Law....................................................................................... 7
AI. New Product............................................................................... 8
AJ. Order..................................................................................... 8
AK. Original Fine Papers Supply Agreement..................................................... 8
AL. Phaseout Period........................................................................... 8
AM. Plants.................................................................................... 8

(i)
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AN. Plug Wrap................................................................................. 8
AO. Prior Year................................................................................ 8
AP. Prior Year's Purchases.................................................................... 9
AQ. Product or Manufacturing Advance.......................................................... 10
AR. Records................................................................................... 10
AS. Renewal Term.............................................................................. 10
AT. Seller.................................................................................... 10
AU. Seller's Manufacturing Facility........................................................... 11
AV. Seller's Projected U.S. Production Capacity............................................... 11
AW. Shipment.................................................................................. 11
AX. Specifications............................................................................ 11
AY. Specification Change...................................................................... 11
AZ. Term...................................................................................... 11
BA. Tipping Paper............................................................................. 12
BB. Year...................................................................................... 12

II. Restated Agreement................................................................................. 12

III. Term; Early Termination............................................................................ 12
A. Term...................................................................................... 12
B. Early Termination......................................................................... 13
C. Effect of Early Termination............................................................... 14
D. Phaseout Period........................................................................... 14

IV. Quantity of Supply; Seller's Maximum Sales Obligation.............................................. 15
A. General................................................................................... 15
B. Direct Purchase Requirements.............................................................. 15
C. Buyer's Indirect Purchase Requirements.................................................... 16
D. Excluded Quantities....................................................................... 17
E. Seller's Maximum Sales Obligation......................................................... 18
F. Purchase of Fine Papers from Other Suppliers in the Event of Seller's Inability
or Refusal to Deliver Buyer's Requirements................................................ 20
G. Direct Purchases and Indirect Purchases During Phaseout Period............................ 21
H. Purchases of Fine Papers by Buyer for Use by Buyer's Affiliates........................... 21
I. Fine Papers Manufactured by Seller's Affiliates........................................... 22

V. Forecasts of Requirements and Monthly Orders....................................................... 23
A. Forecasts................................................................................. 23
B. Direct Purchases.......................................................................... 23
1. Orders............................................................................ 23
2. Firm Orders....................................................................... 24
3. Schedule of Deliveries............................................................ 24
C. Indirect Purchases........................................................................ 25

(ii)
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VI. Delivery and Transportation........................................................................ 26
A. Delivery.................................................................................. 26
B. Duty Drawbacks............................................................................ 26
C. Transportation/Risk of Loss............................................................... 27
D. Production Sources........................................................................ 27

VII. Receipt Inspection and Acceptance.................................................................. 28

VIII. Compensation....................................................................................... 29
A. General................................................................................... 29
B. Definitions............................................................................... 30
1. "Adjusted Base Price"............................................................. 30
2. "Current Cost".................................................................... 30
3. "Base Price"...................................................................... 30
4. "Extraordinary Cost".............................................................. 30
5. "Index"........................................................................... 30
6. "[******]Price"................................................................... 30
7. "Standard Bobbin"................................................................. 31
8. "Unit"............................................................................ 31
9. "Unit Grade Cost"................................................................. 31
C. Determination of Invoice Price............................................................ 31
D. Adjustments to Base Price................................................................. 31
1. Calculation of Pulp Price Adjustment.............................................. 31
2. Calculation of [******]Adjustment During Phase-Out................................ 32
3. Calculation of Adjustment for Extraordinary Costs................................. 33
E. [******].................................................................................. 33
F. Determination of Base Price for New Products/New Grades................................... 33
G. [******].................................................................................. 34
H. Verification of Calculations/Prices; Audits............................................... 34
I. Changes in Seller's Accounting Methods.................................................... 34
J. Alternate Index........................................................................... 34
K. Price Reopeners........................................................................... 34
L. Changes in Specifications................................................................. 34
M. Precision of Calculations................................................................. 35

IX. Invoices and Payment............................................................................... 35

X. Warranty........................................................................................... 36
A. Title..................................................................................... 36
1. Warranty of Title................................................................. 36
2. Remedy............................................................................ 36
B. Quality................................................................................... 37

(iii)
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1. Warranty of Quality............................................................... 37
2. Remedy............................................................................ 38
C. Exclusivity of Warranties................................................................. 39

XI. Patents, Trademarks, Trade Secrets and Copyrights.................................................. 39

XII. Limitation of Liability/Exceptions................................................................. 40
A. General................................................................................... 40
B. Exception to Limitation of Seller's Liability............................................. 41
C. Exception to Limitation of Buyer's Liabilities............................................ 41

XIII. Strategic Planning and Cooperation................................................................. 41
A. Objectives................................................................................ 41
B. Committees................................................................................ 42
1. Operating Steering Committee...................................................... 42
2. [******].......................................................................... 44
3. Review Team....................................................................... 44
C. Alternate Sources of Supply of Fine Papers................................................ 45
D. Sales to Buyer's Affiliates............................................................... 45
E. Performance Evaluations................................................................... 46
F. Specification Changes or Product or Manufacturing Advances................................ 46
1. Specification Changes............................................................. 46
2. Product or Manufacturing Advance.................................................. 47

XIV. Force Majeure...................................................................................... 48
A. Definition of Force Majeure............................................................... 48
B. Force Majeure Procedure................................................................... 49
C. Effect of Force Majeure................................................................... 49
D. Allocation of Seller's Production Capacity................................................ 50
E. Termination for Extended Force Majeure.................................................... 50
F. Contingency Plans......................................................................... 50

XV. Compliance with Laws; Nondiscrimination; Fines..................................................... 52
A. General................................................................................... 52
B. Nondiscrimination......................................................................... 52
C. No Collusion.............................................................................. 53
D. Fines..................................................................................... 54

XVI. Quality Assurance.................................................................................. 55

XVII. Inspection......................................................................................... 55

XVIII. Confidentiality and Confidential Information....................................................... 55

(iv)
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A. Confidential Information of the Parties................................................... 56
B. Non-Disclosure............................................................................ 57
C. Exception to Non-Disclosure............................................................... 57

XIX. Ownership Of Documents; Development Programs....................................................... 58

XX. Records............................................................................................ 58

XXI. Dispute Resolution................................................................................. 59
A. Intent.................................................................................... 59
B. Procedure................................................................................. 59

XXII. Insurance.......................................................................................... 60

XXIII. Cancellation for Default........................................................................... 61
A. Default by Seller......................................................................... 61
B. Default by Buyer.......................................................................... 63

XXIV. Indemnity.......................................................................................... 65
A. Indemnity by Buyer........................................................................ 65
B. Indemnity by Seller....................................................................... 66

XXV. Notices............................................................................................ 67

XXVI. Governing Law...................................................................................... 68

XXVII. Nonwaiver.......................................................................................... 68

XXVIII. Severability....................................................................................... 69

XXIX. Assignment......................................................................................... 69

XXX. Survival........................................................................................... 69

XXXI. Amendments......................................................................................... 69

XXXII. Independent Contractor............................................................................. 70

XXXIII. Headings........................................................................................... 70

XXXIV. Publicity.......................................................................................... 70

XXXV. Entire Agreement................................................................................... 70

(v)
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AGREEMENT

This Agreement, effective as of April 1, 1998, is by and between
Xxxxxx Xxxxxx Incorporated, a Virginia corporation, doing business as Xxxxxx
Xxxxxx U.S.A., with offices at 0000 Xxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000
("Buyer"), and Xxxxxxxxxx-Xxxxxxx International, Inc., a Delaware corporation,
with a place of business at 000 Xxxxx Xxxxx Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx
00000 ("Seller").

RECITALS

1. Buyer is engaged in the business of manufacturing Cigarettes.

2. In the conduct of its Cigarette manufacturing activities, Buyer
requires Fine Papers, including Cigarette Paper, Plug Wrap and Tipping Paper,
that are incorporated into certain of its finished products and components
thereof.

3. Seller owns and operates manufacturing facilities that are capable
of producing Fine Papers in accordance with the Specifications.

4. Buyer and Seller are currently parties to an agreement, effective
January 1, 1993, through which Buyer purchases, accepts and pays for, and
Seller manufactures, sells and delivers, Fine Papers used by Buyer in its
Cigarette manufacturing activities in the United States (the "Original Fine
Papers Supply Agreement").

5. Buyer and Seller are desirous of amending and restating the Original
Fine Papers Supply Agreement with the effect, among other things, of extending
the term of such Fine Papers Supply Agreement for a period of approximately 24
months beyond the end of its

current Initial Term (presently set to expire July 15, 2000) and possible
24-month renewal terms thereafter.

6. It is the intention of both Buyer and Seller that the contractual
relationship between them be one that, consistent with their respective
interests and corporate objectives, will xxxxxx an ongoing strategic and
cooperative long-term business relationship, based on mutual trust, that will
inure to their common benefit. The parties intend that this relationship shall
enable them to strive jointly for managed continuous improvement in quality,
technological development, superior service, secure source of supply, and the
lowest total cost throughout both Seller's and Buyer's entire supply chain. To
that end, the parties are committed to sharing certain strategic information,
to engaging in joint planning efforts and to forming joint cross-functional
improvement teams such that the contractual relationship will enhance their
competitive positions in the respective markets in which each does business,
all as detailed herein. The parties further intend that their strategic
alliance will lead to Seller's investigation and, if appropriate,
implementation of all proven new or improved methods relating to acquisition of
pulps, materials, processes and technology, so that the parties may benefit
mutually from any cost reductions associated with the manufacture of Fine
Papers.

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NOW THEREFORE, the parties agree as follows:

I. DEFINITIONS

A. AFFILIATE -- any business entity which by means of voting interest
is controlled by or under common control with a party to this Agreement. For
purposes of this definition, an Affiliate includes entities in existence as of
the Effective Date hereof as well as entities that may come into being in the
future so long as such entities are controlled by or under common control with
an entity that is an Affiliate as of the Effective Date hereof.

B. ANNUAL FORECAST -- as defined in Article V.A.

C. AUDITOR -- the independent public accounting firm to be selected by
Buyer and approved by Seller to verify that the compensation payable hereunder
to Seller has been computed in accordance with the terms of Article VIII
hereof.

D. BASE SHEET ATTRIBUTES -- the basis weight, porosity, filler,
appearance or other physical or chemical properties for each Grade.

E. BOBBIN -- an inventory measure of a cylindrical spool of Fine
Papers of varying lengths, widths and properties, all of which are described in
the Specifications for each Grade.

F. BUYER -- Xxxxxx Xxxxxx Incorporated, a Virginia corporation, doing
business as Xxxxxx Xxxxxx U.S.A.

G. BUYER'S DIRECT PURCHASE REQUIREMENTS -- the aggregate quantity of
each Category of Fine Papers (measured in Standard Bobbins or, in the case of
Tipping Paper, by

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weight) Buyer shall purchase directly for delivery to the Plants during any
Year for use in the manufacture of Cigarettes or Cigarette components for Buyer
at the Plants.

H. BUYER'S INDIRECT PURCHASE REQUIREMENTS -- the aggregate quantity of
each Category of Fine Papers (measured in Standard Bobbins or in the case of
Tipping Paper, by weight) Buyer's Contractors shall purchase for delivery to
the Plants during any Year for use in the manufacture of Cigarettes or
Cigarette components for Buyer at the Plants.

I. CATEGORY -- the several Groups comprising Cigarette Paper, Plug
Wrap and Tipping Paper, respectively.

J. CIGARETTE -- a quantity of tobacco, rolled in paper for smoking,
with or without a filtering medium.

K. CIGARETTE PAPER -- the Category of Fine Papers that is used to
enclose the tobacco, forming the rod of a Cigarette.

L. COMPOSITION LIST -- Seller's confidential list of components used to
produce each Grade of Fine Papers, as communicated by Seller to Buyer pursuant
to the terms of a Confidentiality Agreement between Buyer and Xxxxxxxx-Xxxxx
Corporation, dated April 22, 1993, as amended from time to time.

M. CONTRACTOR -- one of Buyer's contract manufacturers (including
convertors) of Cigarettes or Cigarette components at the Plants.

N. DELIVERING CARRIER -- the shipping company or companies specified by
Buyer or Seller, in accordance with Article VI, to take receipt and transport
Shipments of Fine Papers

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from Seller's Manufacturing Facility(ies) to such destination(s) as Buyer may
specify for further processing or inclusion in Cigarettes.

O. DIRECT PURCHASES -- purchases of Fine Papers by Buyer directly for
use in manufacturing Cigarettes or Cigarette components at the Plants.

P. DISPUTE -- any dispute, controversy or claim as defined in Article
XXI.A hereof.

Q. EFFECTIVE DATE -- the date set forth in Article III.A hereof.

R. EVENT OF DEFAULT -- any of the events set forth in Article XXIII
hereof.

S. EXISTING PRODUCTS -- the Fine Papers identified in Exhibit A.

T. EXCLUDED QUANTITIES -- (a) Grades of Fine Papers the Specification
for which has not been agreed upon by Buyer and Seller pursuant to Article
XIII.F.1, (b) New Products available for purchase by Buyer from suppliers other
than Seller pursuant to XIII.F.2, (c) Grades of Fine Papers for which Seller
has no qualified manufacturing facility in accordance with Article XVI or (d)
New Products developed jointly by Buyer and another supplier as the result of
the implementation of a Product or Manufacturing Advance concerning which
either Seller failed to commit to develop and/or implement or which the parties
were unable to negotiate the agreement(s) necessary to develop and/or implement
such Product or Manufacturing Advance within the period allowed, all as
provided in Article XIII.F.2.

U. FAST FLOW ORDERS -- An Order communicated electronically or
telephonically requesting delivery of Fine Papers within [******] of Seller's
receipt of such Order or within such earlier period agreed to by the parties.

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V. FINE PAPERS -- Cigarette Paper, Plug Wrap and Tipping Paper to be
used in the manufacture of Cigarettes or Cigarette components.

W. FIRM ORDERS -- as defined in Article V.B.2.

X. FORCE MAJEURE -- the events of force majeure set forth in Article
XIV.A hereof.

Y. GRADE -- a Fine Paper with a unique set of Base Sheet Attributes as
defined in the Specifications and which is identified by Seller's separate
identification number for each such base sheet.

Z. GROUP -- several Grades with the same general Base Sheet Attributes
grouped as follows, unless otherwise agreed:

flax cigarette papers

[******] (sometimes hereinafter referred to as "[******]")

wood cigarette papers

non-porous plug wrap

porous plug wrap

heat sealable plug wrap

regular white tipping paper

regular cork tipping paper

economy white tipping paper

AA. GUARANTEED SALES PERIOD -- the minimum period specified in the
applicable Implementation Agreement, if any, following the initial commercial
production of a New

6
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Product manufactured by Seller during which Buyer shall make Direct Purchases
and Indirect Purchases of such New Product pursuant to this Agreement.

AB. IMPLEMENTATION AGREEMENT -- an agreement, or an amendment or
supplement hereto, between Seller and Buyer setting forth the terms and
conditions of Seller's undertaking to manufacture a New Product, including
amendments thereto.

AC. INDEX -- as defined in Article VIII hereof.

AD. INDIRECT PURCHASES -- purchases of Fine Papers by Buyer's
Contractors for use in manufacturing Cigarettes or Cigarette components for
Buyer at the Plants.

AE. INITIAL TERM -- as defined in Article III.A hereof.

AF. INVOICE PRICE -- the price per bobbin or pound, as determined in
accordance with Article VIII.C hereof or such other method as shall be provided
in an Implementation Agreement between Buyer and Seller, which shall be the
amount Buyer shall pay Seller for each Grade of Fine Papers sold by Seller to
Buyer through Direct Purchases hereunder.

AG. TERM -- as defined in Article III.A.

AH. LAW -- (a) any statute, regulation, rule, order or other
requirement of any competent governmental authority first enacted or
promulgated after the Effective Date hereof or (b) the enforceable decision of
any court interpreting any statute, regulation, rule, order or other
requirement of any competent governmental authority, the effect of which is to
modify Seller's obligations with respect to any statute, regulation, rule,
order or other requirement as reasonably understood by Seller on the later of
the Effective Date hereof or the date of enactment or promulgation of such
statute, regulation, rule, order or other requirement.

7
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AI. NEW PRODUCT -- a Grade, Group or Category of Fine Papers first
produced and sold to Buyer by Seller or another supplier after the Effective
Date of this Agreement for use by Buyer or Buyer's Contractors to manufacture
Cigarettes or Cigarette components at the Plants.

AJ. ORDER -- as defined in Article V.B.1 (including Fast Flow Orders).

AK. ORIGINAL FINE PAPERS SUPPLY AGREEMENT -- that certain agreement,
effective January 1, 1993, by and between Xxxxxx Xxxxxx Incorporated and
Xxxxxxxx-Xxxxx Corporation and assigned by Xxxxxxxx-Xxxxx Corporation to
Xxxxxxxxxx-Xxxxxxx International Inc., including all amendments thereto.

AL. PHASEOUT PERIOD -- the period described in Article III.D.

AM. PLANTS -- all the Cigarette manufacturing facilities owned and
operated by Buyer that are located in the continental United States, whether
presently existing or built or acquired during the Term hereof. In addition,
the Plants shall include those Cigarette or Cigarette component manufacturing
facilities located in the continental United States and operated by Contractors
that Buyer shall designate in writing as being subject to this Agreement. The
term also shall include Cigarette or Cigarette component manufacturing
facilities, other than those identified above, performing Cigarette
manufacturing services for Buyer that the parties shall jointly designate in
writing as being subject to this Agreement.

AN. PLUG WRAP -- the Category of Fine Papers enclosing cellulose
acetate, or such other filtering medium as Buyer may employ, forming the filter
portion of a Cigarette.

AO. PRIOR YEAR -- the Year before the current Year.

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AP. PRIOR YEAR'S PURCHASES -- the aggregate quantities of Fine Papers
purchased in the Prior Year (a) by Buyer through Direct Purchases hereunder
(excluding any purchases by Buyer pursuant to Article IV.H for use by Buyer's
Affiliates and any purchases of New Product which Buyer is obligated by an
Implementation Agreement to purchase exclusively from Seller), (b) by Buyer's
Contractors through Indirect Purchases hereunder (excluding any purchases by
Buyer's Contractors of any New Product which Buyer is obligated by an
Implementation Agreement to purchase exclusively from Seller) and (c) by Buyer
from other suppliers for use in manufacturing Cigarettes or Cigarette components
for Buyer at the Plants (excluding any Grade of Fine Papers for which Seller has
no manufacturing facility qualified pursuant to Article XVI for the manufacture
of such Grade and such Grade is commercially available from another supplier).
The term includes Buyer's Direct Purchases and Indirect Purchases hereunder of a
New Product following the expiration, termination, or cancellation of Buyer's
obligation to purchase such New Product exclusively from Seller under an
Implementation Agreement. The quantities of Fine Papers purchased by Buyer in
any Year through Direct Purchases hereunder shall be the quantities so stated as
delivered as Direct Purchases hereunder in such Year on Seller's several
invoices to Buyer and accepted as such by Buyer, including any quantities
delivered to and credited to Buyer for the replacement of nonconforming Fine
Papers pursuant to Article X.B.2.a during such Year, less any returns, plus any
quantities identified for delivery in such Year in Buyer's Firm Orders for
Direct Purchases hereunder but not delivered. The quantities of Fine Papers
purchased through Indirect Purchases in any Year shall be determined by
quarterly reports submitted by Buyer to Seller pursuant to Article VIII.E. The
quantities of Fine Paper purchased by Buyer from other suppliers for use in the
manufacture of Cigarettes or Cigarette components for Buyer at the Plants shall
be determined by an annual report to be submitted by Buyer to

9
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Seller following the end of each Year. Such report shall identify actual
quantities of Fine Papers (measured in Standard Bobbins, or in the case of
Tipping Paper, by weight) that were purchased by Buyer from other suppliers
(less returns, plus replacements) and delivered to the Plants for incorporation
into Cigarettes or Cigarette components manufactured for Buyer as well as
Buyer's Cigarette production at the Plants during that period.

AQ. PRODUCT OR MANUFACTURING ADVANCE -- any process, product
composition, manufacturing technique, processing technique, idea or the like
applicable to Fine Papers that Buyer desires to investigate or implement
through (a) a material change to the Base Sheet Attributes that define an
existing Grade, (b) a New Product the Base Sheet Attributes of which vary so
materially from the Base Sheet Attributes that define the Grades of an existing
Group that such New Product constitutes a new Group or Category, (c) a change
in the manufacturing or processing technique applicable to Fine Papers that is
currently used by Seller or (d) the implementation of a new manufacturing or
processing technique applicable to Fine Papers.

AR. RECORDS -- as defined in Article XX hereof.

AS. RENEWAL TERM -- as defined in Article III.A hereof.

AT. SELLER -- Xxxxxxxxxx-Xxxxxxx International, Inc., a Delaware
corporation.

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AU. SELLER'S MANUFACTURING FACILITY -- each of the facilities
specified in Article VI.D (or as otherwise agreed in writing by Buyer and
Seller) at which Fine Papers are produced by Seller for incorporation into
Cigarettes and Cigarette components to be manufactured at the Plants.

AV. SELLER'S PROJECTED U.S. PRODUCTION CAPACITY -- Seller's good faith
projection of the production capability of each of Seller's U.S. manufacturing
facilities that are qualified as provided in Article XVI.

AW. SHIPMENT -- the quantity of Fine Papers loaded on a single vehicle
for delivery hereunder.

AX. SPECIFICATIONS -- the physical, chemical, visible and other
properties and attributes of the individual Fine Papers to be purchased and
sold hereunder, all as specified by Buyer in Buyer's General Direct Material
Specification, Class Material Specification and in the individual material code
specification and Buyer's individual Plant requirements applicable to each Fine
Papers product, or such supplements or additions as Buyer may require in writing
from time to time.

AY. SPECIFICATION CHANGE -- a non-material change to the Base Sheet
Attributes that define an existing Grade utilized in the manufacture of
Cigarettes or Cigarette components at the Plants, including reductions in the
tolerance range for variations in Base Sheet Attributes.

AZ. TERM -- the Initial Term and any Renewal Terms.

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BA. TIPPING PAPER -- the Category of Fine Papers (before printing)
used to enclose the filter portion of a Cigarette and to attach the filter to
the rod of the Cigarette.

BB. YEAR -- the 12-month period beginning January 1 and ending
December 31.

II. RESTATED AGREEMENT

This Agreement amends and restates the Original Fine Papers Supply
Agreement. The terms set forth herein shall apply to Direct Purchases and
Indirect Purchases within the scope hereof after the Effective Date and during
the remaining Term hereof.

III. TERM; EARLY TERMINATION

A. TERM

This Agreement shall be effective April 1, 1998, (the "Effective
Date") and shall continue in effect through June 30, 2002 (such period being
hereinafter referred to as the "Initial Term"). Thereafter, the Agreement
automatically shall renew for three successive terms of two years each
("Renewal Terms"); provided, however, either party may cause the Agreement to
terminate effective at the end of the Initial Term or any Renewal Term (whether
or not such Renewal Term has then commenced) by providing written notice of
termination to the other party (a) in the case of a termination to be effective
at the end of the Initial Term, not later than [******], or (b) in the case of
a termination to be effective at the end of a Renewal Term, not later than
[******].

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Notwithstanding the foregoing, this Agreement shall not expire with
respect to any New Product purchased and sold through Direct Purchases and
Indirect Purchases hereunder prior to the expiration of the Guaranteed Sales
Period, if any, specified in any applicable Implementation Agreement between
the parties respecting such New Product.

B. EARLY TERMINATION

In addition to the termination provision provided in Article III.A.,
this Agreement may be terminated effective prior to the expiration of the
Initial Term or any Renewal Term:

1. by mutual written agreement of the parties, such termination to
be effective as provided in such agreement;

2. by either party as provided in Article XIV.E in the event of an
extended Force Majeure;

3. by either Party, at its election, after invoking Article
[******] to [******] the provisions of Article [******] and having failed to
agree on a revised Article [******] within the [******] negotiation period
provided by Article [******], upon written notice to the other in accordance
with Article [******], such notice to specify the effective date of termination,
which date shall be no sooner than (a) [******] to the date when Seller must
[******] referred to in Article [******] or (b) the end of the Phaseout Period
defined in Article III.D hereof, whichever first occurs; or

4. by Seller, at its election, upon [******] prior written notice
to Buyer, if Buyer purchases, or otherwise accepts delivery from its Contractors
of Fine Papers or products that incorporate Fine Papers produced by suppliers
other than Seller for incorporation

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into Cigarettes to be manufactured by the Plants, except (a) as expressly
permitted by this Agreement or (b) as the result of Seller's failure or refusal
to perform in accordance with its contracts with Buyer's Contractors.

C. EFFECT OF EARLY TERMINATION

Subject to Article XXX, neither party shall have any further duty,
obligation or liability to the other hereunder as of the effectiveness of the
termination of this Agreement in accordance with Article III.A or Article
III.B; provided, however, with respect to Firm Orders for Direct Purchases
hereunder of Fine Papers that are not delivered as of the effectiveness of such
termination, nothing herein shall be deemed to excuse Seller from its
obligation to manufacture, sell and deliver Fine Papers covered by such Firm
Orders or to excuse Buyer from its obligation to purchase, accept and pay for
Fine Papers delivered pursuant to such Firm Orders provided such deliveries are
timely made.

D. PHASEOUT PERIOD

The final 24 months that this Agreement shall remain in effect prior
to expiration of the last Renewal Term or termination pursuant to Article III.A
or Article III.B above are hereinafter referred to as the Phaseout Period.
Except as otherwise may be agreed in writing, during the Phaseout Period the
quantities of Fine Papers to be purchased and sold as Direct Purchases and
Indirect Purchases hereunder shall be as set forth in Article IV hereof, and
the Invoice Prices during the Phaseout Period shall be determined as set forth
in Article VIII hereof or the applicable Implementation Agreement for a New
Product.

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IV. QUANTITY OF SUPPLY; SELLER'S MAXIMUM SALES OBLIGATION

A. GENERAL

Buyer currently purchases all of the Cigarette Papers and most of the
Plug Wrap used in the manufacture of Cigarettes or Cigarette components for
Buyer at the Plants through Direct Purchases. Buyer currently obtains all of
the Tipping Paper used in the manufacture of Cigarettes or Cigarette components
for Buyer at the Plants through Indirect Purchases. In the future Buyer may
cause some or all of the Cigarette Papers and more of the Plug Wrap used to
manufacture Cigarettes or Cigarette components for Buyer at the Plants to be
purchased through Indirect Purchases made by Buyer's Contractors. Similarly,
Buyer may purchase some or all of the Tipping Paper used to manufacture
Cigarettes or Cigarette components for Buyer at the Plants through Direct
Purchases.

B. DIRECT PURCHASE REQUIREMENTS

During the Term hereof and subject to Article IV.D, Article IV.E,
Article IV.F and Article IV.G, Buyer agrees to purchase, accept and pay for,
and Seller agrees to manufacture, sell and deliver, Buyer's Direct Purchase
Requirements for each Category of Fine Papers; provided, however, at Buyer's
sole discretion and without limiting Buyer's rights during a Phaseout Period as
provided in Article IV.G, Buyer shall have the right during any Year to reduce
its purchase obligation hereunder with respect to Direct Purchases and to
purchase Fine Papers from suppliers other than Seller for use in the
manufacture of Cigarettes or Cigarette components for Buyer at the Plants but
only to the extent (a) that the aggregate of Buyer's Direct Purchases and
Indirect Purchases of any Category of Fine Papers from other suppliers

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do not exceed (i) in 1998, five percent of the Prior Year's Purchases and (ii)
in 1999 and Years thereafter, 10 percent of the Prior Year's Purchases and (b)
that the Fine Papers so purchased from other suppliers do not include any New
Products that Buyer is obligated by an Implementation Agreement to purchase
exclusively from Seller.

Buyer's Direct Purchase Requirements that are to be purchased and sold
hereunder shall be communicated to Seller in accordance with Article V. Nothing
in this Agreement shall be deemed to limit or preclude Buyer from changing its
Cigarette products lines, reducing or eliminating its manufacture of Cigarettes
or Cigarette components within the United States, or altering the physical
constituents of Cigarettes or Cigarette components such that Buyer's Direct
Purchase Requirements for any Category, Group or Grade of Fine Papers are
reduced or eliminated during the Term of this Agreement.

C. BUYER'S INDIRECT PURCHASE REQUIREMENTS

During the Term hereof and subject to Article IV.D, Article IV.E,
Article IV.F and Article IV.G, Buyer shall direct its Contractors purchasing
Fine Papers used to manufacture Cigarettes or Cigarette components for Buyer at
the Plants through Indirect Purchases to obtain Buyer's Indirect Purchase
Requirements of Fine Papers from Seller, and Seller shall manufacture, sell and
deliver Buyer's Indirect Purchase Requirements of Fine Papers ordered by such
Contractors; provided, however, at Buyer's sole discretion and without limiting
Buyer's rights during a Phaseout Period as provided in Article IV.G, Buyer
shall have the right during any Year to reduce its obligation hereunder with
respect to Indirect Purchases and to cause its Contractors to purchase Fine
Papers from suppliers other than Seller for use in the

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23

manufacture of Cigarettes or Cigarette components for Buyer at the Plants but
only to the extent (a) that the aggregate of Buyer's Direct Purchases and
Indirect Purchases of any Category of Fine Papers from other suppliers do not
exceed (i) in 1998, five percent of the Prior Year's Purchases and (ii) in 1999
and Years thereafter, 10 percent of the Prior Year's Purchases and (b) that the
Fine Papers so purchased from other suppliers do not include any New Products
that Buyer is obligated by an Implementation Agreement to purchase exclusively
from Seller.

Nothing in this Agreement shall be deemed to preclude Buyer from
changing its Cigarette products lines, reducing or eliminating its manufacture
of Cigarettes or Cigarette components within the United States, or altering the
physical constituents of Cigarettes or components thereof such that Buyer's
Indirect Purchase Requirements for any Category, Group or Grade of Fine Papers
is reduced or eliminated during the Term of this Agreement.

D. EXCLUDED QUANTITIES

Notwithstanding Article IV.B and Article IV.C above, Buyer shall have
no obligation hereunder to purchase from Seller, directly or indirectly, any
Excluded Quantities except: with respect to (a) a New Product available for
purchase by Buyer from suppliers other than Seller pursuant to Article
XIII.F.2, or (b) a New Product developed jointly by Buyer and a supplier other
than Seller as the result of the implementation of a Product or Manufacturing
Advance as provided in Article XIII.F.2, Buyer shall purchase Buyer's Direct
Purchase Requirements of such New Product, and cause its Contractors to
purchase Buyer's Indirect Purchase Requirements of such New Product, from
Seller if (a) Seller demonstrates to

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24

Buyer's reasonable satisfaction that Seller has qualified manufacturing
facilities with sufficient uncommitted capacity to manufacture such New Product
in quantities sufficient to satisfy the aggregate of Buyer's Direct Purchase
Requirements and Buyer's Indirect Purchase Requirements with respect to such New
Product and (b) Seller commits to sell such New Product to Buyer and Buyer's
Contractors at [******] provided, however, such obligation to purchase from
Seller shall be reduced to the extent and for such period (not including future
discretionary renewal terms) as Buyer is contractually obligated or otherwise
committed to purchase such quantities of the New Product from a supplier other
than Seller. Notwithstanding Seller's inability to satisfy the foregoing
conditions, Buyer will consider purchasing such New Products from Seller where
it is reasonable to do so. Buyer will take into consideration Seller's
development efforts respecting any New Product, and Buyer will minimize its
purchase commitments with other suppliers for such New Products if Buyer, in
Buyer's sole discretion, determines it is reasonable to do so.

E. SELLER'S MAXIMUM SALES OBLIGATION

Each Year, not later than [******], Seller shall prepare and deliver
to Buyer a report that shall identify Seller's Projected U.S. Production
Capacity for each Category of Fine Papers during each of the following [******]
Years. Seller's [******] projections were as follows:

Year Seller's Projected U.S. Production Capacity
---- ------------------------------------------------------------
Cigarette Paper Plug Wrap Tipping Paper
(Standard Bobbins) (Standard Bobbins) (Metric Tons)

[******]
[******]
[******]

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Notwithstanding Article IV.B and Article IV.C, for each Year that this
Agreement is in effect, Seller's maximum sales and delivery obligation for each
Category of Fine Papers hereunder through both Direct Purchases and Indirect
Purchases ("Seller's Maximum Sales Obligation") shall not exceed [******] of
the highest of Seller's Projected U.S. Production Capacities for that Category
and for that Year as reflected in the three most recent annual reports Seller
shall have submitted to Buyer in accordance with this Article IV.E (including
any updates to such reports submitted to Buyer that increase the Seller's
Projected U.S. Production Capacity for any Category for any such Year);
provided, however, for [******], Seller's Maximum Sales Obligation for any
Category shall be [******] of the applicable projection set forth above in this
Article IV.E, and for [******], Seller's Maximum Sales Obligation shall be
[******] of the higher of the projection set forth above in this Article IV.E
and the applicable projection set forth in the [******], and for [******],
Seller's Maximum Sales Obligation for any Category shall be [******] of the
highest of the applicable projection set forth above in this Article IV.E and
the projections set forth in the [******]. (The aggregate limitation imposed by
this Article is inclusive of Fine Papers purchased by Buyer pursuant to Article
IV.H for transfer (or resale) to Buyer's Affiliates.) For each Year that the
Agreement remains in effect, Seller's Maximum Sales Obligation for each
Category shall be reduced by the forecasted amount that Seller's Projected U.S.
Production Capacity for that category will be reduced below Seller's Maximum
Sales Obligation for that Category and for

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that Year (as previously established as provided above) as a result of Seller's
implementation at Buyer's request of a Specification Change or Product or
Manufacturing Advance; provided, however, that Seller shall provide Buyer notice
of the annual forecasted reduction in writing no later than [******] of the Year
preceding the Year that the forecasted reduction shall be applicable and shall
provide forecasts of such reductions no less than [******] days prior to the
implementation of a Specification Change or a Product or Manufacturing Advance
that occurs during the then-current Year.

If the aggregate of Buyer's Direct Purchase Requirements for Fine
Papers and Buyer's Indirect Purchase Requirements for Fine Papers in any Year
exceeds Seller's Maximum Sales Obligation for that Year, then Seller shall use
reasonable efforts to supply such quantities of Fine Papers in excess of
Seller's Maximum Sales Obligation as may be Ordered by Buyer as Direct
Purchases hereunder or by Buyer's Contractors as Indirect Purchases.

F. PURCHASE OF FINE PAPERS FROM OTHER SUPPLIERS IN THE EVENT OF
SELLER'S INABILITY OR REFUSAL TO DELIVER BUYER'S REQUIREMENTS

Notwithstanding Article IV.B or Article IV.C, if Buyer projects at any
time before or during a Year that the aggregate of Buyer's Direct Purchase
Requirements and Buyer's Indirect Purchase Requirements for any Group of Fine
Papers in such Year will exceed Seller's Maximum Sales Obligation for that
Year, Buyer shall so notify Seller and, with such Notice or thereafter, may
request that Seller commit to sell such excess to Buyer and its Contractors, if
ordered. In the event that Seller does not commit to sell and deliver hereunder
Buyer's estimate of the aggregate of Buyer's Direct Purchase Requirements and
Indirect Purchase

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Requirements in excess of such Maximum Sales Obligation within [******] after
receiving such request, Buyer may purchase Fine Papers from other Suppliers or
cause its Contractors to purchase Fine Papers from other Suppliers in quantities
aggregating up to the total quantity of Buyer's projected requirements that
Seller has not committed to supply for that Year; provided, however, insofar as
is reasonable but with due consideration of Buyer's need for secure supplies of
Fine Papers at least equal to Buyer's actual projected requirements, Buyer and
its Contractors [******] in the purchases of Fine Papers from Seller otherwise
required by Article IV.B and Article IV.C.

G. DIRECT PURCHASES AND INDIRECT PURCHASES DURING PHASEOUT PERIOD

During the Phaseout Period, (1) up to [******] of Buyer's Prior Year's
Purchases may be purchased (whether as Direct Purchase or Indirect Purchase, or
both) from suppliers other than Seller during the first [******] of the final
[******] months of the Term, and (2) up to [******] of Buyer's Prior Year's
Purchases may be purchased (whether as Direct Purchase or Indirect Purchase, or
both) from suppliers other than Seller during the [******] of the Term.

H. PURCHASES OF FINE PAPERS BY BUYER FOR USE BY BUYER'S AFFILIATES

In addition to quantities of Fine Papers purchased through Direct
Purchases and Indirect Purchases, Buyer, from time to time, desires to supply
its Affiliates with Fine Papers manufactured in the United States to support
specific, world-wide projects. Buyer shall have the right, but not the
obligation, to place Orders in accordance with the procedures in Article V.B.1
for additional quantities of Fine Papers not to exceed the equivalent of
[******]

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Standard Bobbins per Year for Cigarette Paper, [******] Standard
Bobbins per Year for Plug Wrap and [******]pounds per Year for Tipping Paper
for transfer (or resale) to Buyer's Affiliates for use in the manufacture of
Cigarettes. Such Orders shall be treated as Orders for Direct Purchases for all
purposes hereunder except the calculation of Prior Year's Purchases.

I. FINE PAPERS MANUFACTURED BY SELLER'S AFFILIATES

If due to an event of Force Majeure under Article XIV hereof, Seller is
unable to manufacture, sell and deliver Fine Papers Ordered by Buyer, Seller
shall supplement deliveries of Fine Papers in satisfaction of Buyer's Direct
Purchase Requirements and Buyer's Indirect Purchase Requirements with Fine
Papers manufactured from qualified manufacturing facilities of Seller's
Affiliates, except that for any Category of Fine Papers, Seller shall not be
obligated to supply [******] more than [******] of the [******] of Buyer's
aggregate Direct Purchases and Indirect Purchases of that Category for the
[******] period preceding the event of Force Majeure or sell Buyer and its
Contractors more than the Seller's Maximum Sales Obligation for such Year.

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V. FORECASTS OF REQUIREMENTS AND MONTHLY ORDERS

A. FORECASTS

In the fourth calendar quarter of each Year, Buyer shall provide Seller
with Buyer's forecast of Buyer's Direct Purchases hereunder, Buyer's Indirect
Purchases hereunder and Buyer's Direct Purchases for use by Buyer's Affiliates
for the coming Year (the "Annual Forecast"). Buyer's Annual Forecast shall
include the forecasted quantity of Fine Papers to be purchased through Fast Flow
Orders in that Year. Each month Buyer will issue to Seller a short term forecast
consisting of anticipated Direct Purchases and Indirect Purchases of Fine Papers
for the next four calendar months. The detail of the short term forecasts shall
be as agreed between Buyer and Seller for each Grade, and shall be provided to
Seller by such means as the parties mutually agree (e.g., electronic data
interchange or telecopy notice). The Annual Forecast and short term forecasts
shall be for information purposes only and shall not constitute firm orders for
any quantity of Fine Papers.

B. DIRECT PURCHASES

1. ORDERS

From time to time, Buyer shall place orders for quantities of Fine
Papers to be purchased and sold hereunder through Direct Purchases (an
"Order"). An Order shall be communicated to Seller via Buyer's written forms,
electronic data interchange, telecopy, telephone (confirmed by telecopy) or by
such other means as the parties mutually agree. Each Order shall be governed by
the terms and conditions of this Agreement and shall specify (a) the
quantities, Grades and dimensions (i.e., material codes) of Bobbins of Fine
Papers to be

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delivered by Seller pursuant to the Order, (b) the Delivering Carrier(s), (c)
Seller's Manufacturing Facility(ies), and (d) the delivery schedule. Buyer may
amend or supplement an Order at any time.

Buyer's use of written forms for the placing of Orders (or amendments
or supplements thereto) shall be for administrative convenience only. Any
preprinted commercial terms and conditions contained on Buyer's written forms
shall not be applicable to an Order.

2. FIRM ORDERS

Except for Fast Flow Orders, the Orders issued pursuant to Article
V.B.1 shall be deemed firm (i.e., Buyer shall be required to accept delivery
and pay for such Fine Papers) for the quantities specified to be delivered in
the current week (Sunday through Saturday) and in the next week after the
current week with respect to all quantities Seller shall have manufactured for
delivery in accordance with such Order. Unless otherwise agreed in writing, and
except for Fast Flow Orders, an Order shall not be deemed firm for any
quantities scheduled for delivery following the week next after the current
week or if the Order is for quantities scheduled to be delivered during the
current week, for any quantities not manufactured before such quantities are
reduced, eliminated, or deferred by an amendment or supplement to an Order or
by a subsequent Order. All Fast Flow Orders shall be deemed firm. All orders
that are "firm" in accordance with this Article V.B.2 are hereafter to be
referred to as "Firm Orders."

3. SCHEDULE OF DELIVERIES

All deliveries of Direct Purchases shall be made in accordance with
the delivery

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schedule set forth in the applicable Order or any amendment thereto. Except for
Fast Flow Orders, Seller shall be under no obligation to effect a delivery of an
Order for Fine Papers originating from one of Seller's domestic Manufacturing
Facilities in fewer than [******] (exclusive of Buyer's non-production days) or
to effect a delivery of an Order for Fine Papers originating from the
Manufacturing Facilities of Seller's overseas Affiliates in fewer than [******]
(exclusive of Seller's non-production days). For Fast Flow Orders, Seller shall
effect delivery of the quantity so ordered within [******] of receiving such
Order.

Seller's obligation to effect a "delivery" of Fine Papers under
Article V.B.3 only, shall occur when the applicable Shipment is received at
Buyer's Plant. Time is of the essence with respect to all deliveries. To the
extent Buyer's delivery schedule in an Order or an amendment thereto specifies
delivery of any quantities of Fine Papers in a period shorter than the minimum
period specified in the immediately preceding paragraph above for such an
Order, Seller shall use best efforts to effect delivery of such Fine Papers in
accordance with the delivery schedule.

C. INDIRECT PURCHASES

Indirect Purchases shall be ordered, delivered and shipped in
accordance with procedures to be developed and agreed upon by Seller and Buyer's
Contractors. Unless the parties otherwise agree in writing, Buyer in no way
guarantees the performance of such Contractors and any contracts that may govern
the relationship between such Contractors and Seller with respect to Indirect
Purchases.

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VI. DELIVERY AND TRANSPORTATION

A. DELIVERY

All Fine Papers purchased and sold hereunder shall be delivered F.O.B.
Seller's manufacturing facility except those Fine Papers manufactured by
Seller's Affiliate Papeteries de Mauduit ("PDM") which shall be delivered
F.O.B. Buyer's Plant. To the extent Buyer and Seller agree that Seller may
supply any Fine Papers that are manufactured by Seller's Affiliate PDM, Seller
shall ensure that such Fine Papers are cleared through customs and shall pay
all applicable import and export taxes and duties (without reimbursement from
Buyer) and provide Buyer evidence that such taxes and duties have been paid.

If Buyer and Seller agree that Seller shall specify the Delivering
Carrier for goods manufactured at any of Seller's domestic manufacturing
facilities, the Fine Papers purchased, sold and so delivered shall be delivered
F.O.B. Buyer's Plant, freight collect.

B. DUTY DRAWBACKS

Buyer shall be entitled to 100% of any duty drawback that may be
applicable upon the export of Cigarettes incorporating or deemed to incorporate
Fine Papers originally supplied from the facilities of any of Seller's
non-domestic Affiliates. In no event does Seller guarantee the quantity of Fine
Papers eligible for any duty drawback. For each delivery hereunder for which
the source of Fine Papers is a non-domestic manufacturing facility of Seller's
Affiliate, Seller shall execute and provide to Buyer, not more than 30 days
after such delivery, Customs Form 331 or such other documentation as may be
required to authorize the payment directly to Buyer of duty drawbacks that may
be applicable for such deliveries ("Certificate of Delivery").

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In addition to the federally mandated information required on the Certificate of
Delivery, Seller shall specify on the Certificate of Delivery (a) the duty rate
paid for such Fine Papers upon their entry into the United States and (b) the
actual unit of measure (e.g., kilograms or pounds) utilized as the basis of such
duty payment. Whenever Seller is notified of any adjustment upon liquidation by
U.S. Customs of the duties paid for any delivery of Fine Papers, such that the
actual duties paid are either greater or less than the amount reflected on the
Certificate of Delivery for such Fine Papers, Seller shall immediately notify
Buyer of such adjustment. In the event that Seller fails to provide such notice
of adjustment, Seller shall indemnify Buyer for any fines, penalties and costs
incurred by Buyer and any duty drawback Buyer does not recover as the result of
filing a drawback claim based on the duty reflected on the original Certificate
of Delivery.

C. TRANSPORTATION/RISK OF LOSS

If Buyer selects the Delivering Carrier, Transportation of Fine
Papers from Seller's Manufacturing Facility to Buyer's Plant shall be Buyer's
responsibility unless the Fine Papers are transported from Seller's Affiliate
PDM (from which all Shipments are to be delivered F.O.B. Buyer's Plant). Seller
shall be responsible to make arrangements with the Delivering Carrier to have
trucks available to receive and transport Fine Papers ordered by Buyer.
Seller's personnel shall load the Fine Papers on the Delivery Carrier's trucks.
Buyer shall pay all transportation costs directly to the Delivering Carrier;
provided, however, Seller shall reimburse Buyer for any demurrage or other
charges (e.g., less than truckload rates, air freight) that Buyer may be
required to pay the Delivering Carrier due to Seller's failure to

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34

schedule or load any Shipment of Fine Papers in accordance with applicable terms
and conditions of the transportation agreement between Buyer and the Delivering
Carrier, but only if Buyer has communicated such terms and conditions to Seller
in writing. Notwithstanding the foregoing, in the event that Buyer and Seller
agree that Seller shall specify the Delivering Carrier pursuant to Article VI.A
hereof, Seller shall be responsible for arranging the transportation of any Fine
Papers (including insurance) to be delivered F.O.B. Buyer's Plant, freight
collect.

D. PRODUCTION SOURCES

Unless Buyer agrees differently in writing, the manufacturing
facilities identified below shall be the exclusive production sources for the
Fine Papers to be delivered to Buyer pursuant to both Direct Purchases and
Indirect Purchases hereunder, but such facilities may only be used to the
extent that they continue to be qualified by Buyer in accordance with Article
XVI:

CATEGORY PRODUCTION SOURCE

Cigarette Paper Spotswood, NJ (#5, 6, 7, 12, 14, 17);
Xxxxxxxxxx xx Xxxxxxx (XXX), Xxxxxxxxx, Xxxxxx

Plug Wrap
4500 Ancram, NY (#21); Lee, MA (#8, Niagara); Lee, MA
(#9, Eagle) Xxxxxxxxxx xx Xxxxxxx (XXX),
Xxxxxxxxx, Xxxxxx

00000 Lee, MA (#9, Eagle); Lee, MA (#8, Niagara)

Non Porous Lee, MA (#18, Greylock) (#5, Eagle); Spotswood, NJ (#14)

Heat Seal Lee, MA (#8, Niagara)

Tipping Paper
Xxxxx Xxx, MA (#18, Greylock)

Cork Xxx, MA (#5, Eagle); Xxx, MA (#18, Greylock)

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VII. RECEIPT INSPECTION AND ACCEPTANCE

Upon receipt at Buyer's Plant or storage facility, Buyer may, but
shall not be required to, perform receipt inspections to confirm that the Fine
Papers in each Shipment conform to the Specifications applicable to the
material codes (i.e., Grades and dimensions) to be delivered pursuant to the
subject Order. Buyer may reject any portion of a Shipment delivered hereunder
that does not conform to applicable Specifications. Receipt inspections shall
be cursory in nature, and acceptance of a Shipment by Buyer shall not be deemed
evidence that the Fine Papers in such Shipment conform to applicable
Specifications. Notwithstanding any receipt inspection, Buyer shall be entitled
to revoke its acceptance, in whole or in part, of any Shipment of Fine Papers
that is subsequently found to fail to conform in any respect to applicable
Specifications. Buyer's sole and exclusive remedy for such revocation of
acceptance shall be the remedy provided in Article X.B.2.

VIII. COMPENSATION

A. GENERAL

This Article states the methods by which the Invoice Price for each
Grade of Fine Papers shall be determined for the period [******]. Prior to
[******], Buyer and Seller shall negotiate in good faith in an attempt to agree
upon the methodology to be used to determine the

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Invoice Price for each Grade that is to be applicable beginning [******] if the
Agreement is not terminated in accordance with Article III.A. If the parties so
agree, this Agreement shall be amended accordingly.

B. DEFINITIONS

For purposes of this Article VIII, each of the following terms shall
have the meaning hereinafter set forth:

1. "ADJUSTED BASE PRICE" - for each Grade, the Base
Price adjusted as provided in Article VIII.D hereof for changes in wood pulp
prices, [******] and Extraordinary Costs, as applicable.

2. "CURRENT COST" - the unit manufacturing cost under
normal operating conditions for each Grade based on Seller's actual costs for
labor, materials and utilities at the Seller manufacturing facility where such
Grade is produced, or if produced at more than one facility, by the [******]
where such Grade is produced (provided that in no event shall such costs be
measured at non-domestic facilities), as generated by GEMMS at any given time
based on Seller's actual current and historic costs of manufacturing.

3. "BASE PRICE" - the unadjusted selling price per
Standard Bobbin or per hundredweight, as applicable, for each Grade as set
forth in Exhibit A hereto.

4. "EXTRAORDINARY COST" - increases to Seller's Unit
Grade Cost of producing Fine Papers caused by a [******].

5. "INDEX" - the [******].

6. [******]

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7. "STANDARD BOBBIN" - a Bobbin whose dimensions are
[******].

8. "UNIT" - a Standard Bobbin of Cigarette Paper or Plug
Wrap or a pound of Tipping Paper, as the context requires.

9. "UNIT GRADE COST" - Seller's Current Cost of
manufacturing a Unit of each Grade of Cigarette Paper, Plug Wrap or Tipping
Paper.

C. DETERMINATION OF INVOICE PRICE

The Invoice Price for each Grade for each Year during the period
[******]through [******] shall be determined as follows:

1. for Cigarette Paper and Plug Wrap, the Adjusted Base
Price per Standard Bobbin shall be multiplied by a fraction, the numerator of
which is the number of square meters in the actual Bobbin sold and delivered to
Buyer and the denominator of which is the number of square meters in a Standard
Bobbin;

2. for Tipping Paper, the Adjusted Base Price per
hundredweight.

D. ADJUSTMENTS TO BASE PRICE

1. CALCULATION OF PULP PRICE ADJUSTMENT

Effective [******], the Base Price for each Grade, except Cigarette
Papers containing flax, shall be subject to adjustment, up or down, to reflect
changes in the price paid by Seller for wood pulp used in the production of
Fine Papers purchased through Buyer's Direct Purchases and Indirect Purchases
hereunder, the first such adjustment to be made as of [******].

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a. An adjustment to the Base Price for each
Grade shall be made as of an Adjustment Date if there is a [******] or more
between the [******], less any discounts or rebates due to Seller, [******]
prior to an Adjustment Date and, initially, the [******] in effect as of
[******] less any discounts or rebates due to Seller [******] and, thereafter,
the [******], less any discounts or rebates due to Seller, [******] to the
effective date of the last change in the pulp price adjustment to the Base
Price pursuant to this Article VIII.D.1. This percentage difference shall be
calculated as follows:

[******]

2. CALCULATION OF [******]ADJUSTMENT DURING PHASE-OUT

In the event either party provides notice of termination prior to
[******] pursuant to Article III.A or III.B hereof, then effective [******] for
each of [******] and [******], the applicable Base Price for each Grade of Fine
Papers shall be adjusted, up or down, based on the percentage change in the
Index first published for [******] and [******] of the current Year. The
[******] adjustment to the Base Price for each Grade shall be calculated as
follows:

[******]

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3. CALCULATION OF ADJUSTMENT FOR EXTRAORDINARY COSTS

Effective each Adjustment Date, the Base Price for each Grade shall be
subject to adjustment, up or down, in an amount which shall permit Seller to
recover, [******], Extraordinary Costs that are then being incurred by Seller,
as measured by the amount of such Extraordinary Cost [******]. Upon determining
the amount of such adjustment for any [******], Seller shall advise Buyer of
the [******] that caused such Extraordinary Cost (for the first adjustment
period only), the amount such Extraordinary Costs allocated to Direct Purchases
and Indirect Purchases hereunder, and the amount of the adjustment to each Base
Price attributable to such Extraordinary Cost. Seller shall provide information
in appropriate detail for Buyer to understand the basis for any adjustment for
Extraordinary Costs.

[******] Seller shall [******]

F. DETERMINATION OF BASE PRICE FOR NEW PRODUCTS/NEW GRADES

The Base Price for each New Product shall be determined as follows:

1. A New Product shall be assigned by mutual agreement
of Buyer and Seller to an existing Group that has essentially similar Base
Sheet Attributes as other Grades within a Category. If the New Product does not
fit within an existing Group due to the absence of similar Base Sheet
Attributes, or, if after good faith discussions the parties cannot agree on the
assignment of a New Product to an existing Group, such New Product shall be
assigned to a new Group within the applicable Category, if any. In the absence
of an applicable Category, such New Product shall not be subject to the terms
of this Agreement.

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2. Seller shall establish the Base Price for a New
Product as follows:

[******]

[******] in accordance with Article VIII.D hereof.

G. [******]

H. VERIFICATION OF CALCULATIONS/PRICES; AUDITS [******]

I. CHANGES IN SELLER'S ACCOUNTING METHODS

Seller shall disclose promptly to Buyer and the Auditor any change in
its method of accounting, the type of costs recorded in or allocated to
specific cost accounts or the recording of other information required by this
Article VIII if such change would materially affect the calculation of any
price, price adjustment, rebate or other item called for by this Article VIII.

J. ALTERNATE INDEX

In the event that (a) the Index is discontinued, (b) the nature of the
Fine Papers purchased by Buyer or Buyer's Contractors is changed such that the
Index [******], or (c) the government materially alters the data included in
the Index or the basis of computation of the Index, either party may request
renegotiation of the Index by giving written notice of such request. The
parties shall negotiate in good faith with the goal of agreeing upon a suitable
alternate index. [******]

K. PRICE REOPENERS
[******]:

L. CHANGES IN SPECIFICATIONS

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If there is a change in the Specification for a Grade which affects,
directly or indirectly, the Unit Grade Cost for such Grade, such Grade shall
become a New Product and its Base Price shall be determined in accordance with
Article VIII.G hereof.

M. PRECISION OF CALCULATIONS

The number of digits to the right of a decimal in any number which
must be calculated pursuant to this Article VIII shall be as specified in
Exhibit C, attached hereto and made a part hereof, unless the parties otherwise
agree in writing.

IX. INVOICES AND PAYMENT

Prior to or upon delivery of each Shipment of Fine Papers ordered by
Buyer in accordance with Article V.B, Seller shall submit an invoice for such
Shipment in the form of an "Advance Shipment Notice" ("ASN"), except for trials
and special orders that are to be invoiced separately. Such invoice shall
specify the number of Bobbins or total pounds of Fine Papers in the Shipment by
material code, Buyer's Delivery Schedule and purchase order or authorization
number, and the place of delivery. Buyer shall then calculate the total
compensation due Seller for such Shipment based on the applicable Invoice
Prices for the Grades specified in Buyer's Order and the number of Bobbins or
pounds of Fine Papers of each such Grade received at the specified place of
delivery. Provided that Seller has delivered the Certificate of Delivery for
such Shipment as required by Article VI.B, Buyer shall pay all proper invoices
[******] from Buyer's receipt of the Shipment at Buyer's Plant.

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42

Payments made to Seller hereunder shall not be considered evidence of
acceptance by Buyer of any non-conforming delivery of Fine Papers, in whole or
in part, or that any such delivery conforms, in whole or in part, to the
requirements of this Agreement. Nor shall payment hereunder be deemed to
relieve Seller of its obligation that any future deliveries of Fine Papers
hereunder conform in all respects with the requirements of this Agreement.

X. WARRANTY

A. TITLE

1. WARRANTY OF TITLE

Seller warrants that title to all Fine Papers received as the
result of Direct Purchases and Indirect Purchases hereunder shall be good, and
its transfer rightful, and that such Fine Papers shall be free from all
security interests, liens and other encumbrances.

2. REMEDY

If any Fine Papers fail to conform to the above warranty, Seller
shall defend the title thereto and, if requested by Buyer and at no cost to
Buyer, shall promptly cause any security interest, lien or other encumbrance to
be removed by discharging such security interest, lien or other encumbrance or
posting a bond therefor. If Seller fails to cause any such security interest,
lien or other encumbrance to be removed by discharge or posting a bond within
five days after Buyer's written request for such removal, then Buyer, at
Buyer's option, either (a) may cause the removal of such security interest,
lien or other encumbrance by bonding, in which case Seller shall be liable to
Buyer for the expenses thereby incurred, or (b) (but only in

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the case of Direct Purchases) may revoke its acceptance of such Fine Papers, in
which case Seller shall promptly refund any compensation Seller shall have
received from Buyer in connection with such Fine Papers.

B. QUALITY

1. WARRANTY OF QUALITY

a. Seller warrants that all Fine Papers
received as the result of Direct Purchases and Indirect Purchases hereunder
shall strictly conform to the applicable Specifications.

b. Seller further warrants that the continuous
quality of each Category of Fine Papers received as the result of Direct
Purchases and Indirect Purchases hereunder shall not result in a rejection rate
greater than the maximum rejection rate provided below:

MAXIMUM REJECTION RATE

[******]

Recalls by Seller and rejects under preliminary specifications shall be
excluded in calculating the maximum rejection rate. Such rate shall be adjusted
equitably to account for changes in Buyer's floor inspection practices or
mutually agreed changes to the Specifications that could affect the rejection
rate. (The parties agree to negotiate in good faith to reach an agreement upon
objective criteria upon which the quality of each Category of Fine Papers
received as the result of Direct Purchases and Indirect Purchases hereunder
shall be evaluated in the future, and upon reaching such agreement, this
Article X.B.1 and Articles X.B.2 and XXIII.A.1 shall be amended to incorporate
such criteria in lieu of the "rejection rates" set forth herein.)

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2. REMEDY

a. If any Fine Papers received as the result
of Direct Purchases and Indirect Purchases hereunder fail to conform to the
warranty set out in Article X.B.1.a, Seller shall promptly replace such Fine
Papers with Fine Papers conforming to the above warranty. Buyer shall give
Seller notice of the nonconforming Fine Papers and a reasonable opportunity to
inspect them after Buyer discovers the nonconforming Fine Papers. Seller shall
take possession of nonconforming Fine Papers within a reasonable time after
Seller has inspected them or has been given a reasonable opportunity to do so.
Seller shall bear all costs, including transportation costs, in fulfilling the
foregoing remedial obligations.

If Seller is unable to replace promptly any nonconforming Fine Papers
with Fine Papers that conform to the warranty set out in Article X.B.1.a, then
Buyer shall have the right to purchase substitute Fine Papers from a supplier
other than Seller but Buyer shall not be entitled to recover damages based on
such substitute purchases.

b. If the rejection rate of any Category of
Fine Papers received hereunder during any calendar quarter exceeds the maximum
rejection rate set forth in Article X.B.1.b, Seller shall promptly take all
necessary action to identify and correct the cause or causes of the
nonconformances that led to the high rejection rate. Seller shall provide Buyer
with a written report evaluating the nonconformances and their causes and
describing Seller's plans for preventing reoccurrence of such nonconformances
in the future. Seller shall bear all costs in fulfilling the foregoing remedial
obligations. [******]

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d. The remedies in this Article X.B.2, shall constitute Buyer's
sole and exclusive remedies for any breach of the Seller's warranties of
quality set forth in Article X.B.1. Seller shall not be liable in damages to
Buyer for breach of Article X.B, except as set forth in Articles X.B.2 and
XII.B.2 or XII.B.3 hereof, as applicable; provided, however, that the parties
expressly agree that if Seller shall contest [******].

C. EXCLUSIVITY OF WARRANTIES

SELLER MAKES NO WARRANTIES OF TITLE AND QUALITY OTHER THAN THE
WARRANTIES SET FORTH IN THIS ARTICLE, AND SELLER HEREBY DISCLAIMS ALL OTHER
WARRANTIES OF QUALITY, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, AND WHETHER
CREATED BY CONTRACT OR BY OPERATION OF LAW, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

XI. PATENTS, TRADEMARKS, TRADE SECRETS AND COPYRIGHTS

Seller shall, at its expense, defend any suit or proceeding brought
against Buyer to the extent based on any allegation that purchase or use of any
Fine Papers received pursuant to Direct Purchases or Indirect Purchases
hereunder or any process employed by Seller to manufacture any such Fine Papers
constitutes an infringement of any patent, trademark, trade secret or copyright
except to the extent that such suit or proceeding is based in whole or in part
on any Specifications for Fine Papers furnished by Buyer or any process
employed by Seller at Buyer's request; provided, however, that Buyer shall
promptly notify Seller in writing and

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give Seller authority, information and assistance for the defense of the suit or
proceeding. Seller shall pay all damages and costs (including reasonable
attorneys' fees) awarded in any suit or proceeding so defended. Neither party
shall settle any such suit or proceeding without the other party's prior written
consent, which consent shall not be unreasonably withheld. Seller's obligation
to indemnify Buyer pursuant to this Article XI shall cease if settlement of any
such suit or proceeding is made without its prior written consent.

If any Fine Papers or the use thereof by Buyer infringes any patent,
trademark, trade secret or copyright and its use by Buyer is enjoined, Seller
shall, at Seller's option and at no cost to Buyer, either (a) procure for Buyer
the right to use the Fine Papers or (b) replace such Fine Papers with
substantially equivalent non-infringing Fine Papers. The provisions of this
Article XI shall not apply to the extent that any claim of infringement is
based on the manner in which the Fine Papers are utilized by Buyer in its
Cigarette or Cigarette component manufacturing processes and a suit or
proceeding is brought against Buyer by reason of such manner of utilization.

XII. LIMITATION OF LIABILITY/EXCEPTIONS

A. GENERAL

Neither Buyer nor Seller shall be liable to the other for any
[******] whether at law or in equity, except as provided in Article XII.B and
XII.C hereof.

B. EXCEPTION TO LIMITATION OF SELLER'S LIABILITY Article XII.
A hereof shall not limit Seller's liability to Buyer for:

[******]

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C. EXCEPTION TO LIMITATION OF BUYER'S LIABILITIES Article XII.
A hereof shall not limit Buyer's liability to Seller for:
[******]

4. Buyer's obligations to Seller as set forth in
Article XXIV. A hereof; and

5. Buyer's obligation to Seller with respect to fines
for noncompliance with laws pursuant to Article XV hereof.

XIII. STRATEGIC PLANNING AND COOPERATION

A. OBJECTIVES

This Agreement is intended to xxxxxx a long-term business relationship
between Buyer and Seller regarding Buyer's Direct Purchase Requirements and
Buyer's Indirect Purchase Requirements. It is intended to facilitate both
parties' efforts to improve the quality of Fine Papers subject to this Agreement
and to reduce costs in the entire supply chain of each party. The parties
acknowledge that Buyer's selection of Seller as a strategic supplier of direct
materials and Seller's agreement to so act are significant departures from the
usual practices of each party, and that this approach is based on the
anticipated mutual benefits that the parties expect to achieve through a
long-term business relationship. The parties will pursue their objectives
through (a) mutual efforts to increase productivity and efficiency in the
ordering, manufacture, shipping, delivery, receipt, inspection, processing and
use of Fine Papers, (b) jointly developing and implementing, as appropriate,
technological advances in Fine Papers

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production and handling machinery and Cigarette manufacturing machinery as
provided herein, (c) reevaluation of the Specifications for Fine Papers;
integrated quality assurance programs, (d) enhanced inventory management;
electronic data interchange and (e) such other joint efforts as the parties
shall deem appropriate.

B. COMMITTEES

In order to achieve the objectives set forth above, the parties
hereto acknowledge the need to cooperate. To that end, the parties have formed
the following three committees:

1. the Operating Steering Committee;

2. the [******]; and

3. the Review Team.

The roles and responsibilities of each of these committees are described in more
detail below.

1. OPERATING STEERING COMMITTEE

Buyer and Seller shall establish an Operating Steering Committee
(hereafter referred to as the "OSC") composed of an equal number of
representatives of each party. Buyer's Manager of Direct Materials Purchasing
shall be the chairman of the OSC. Seller's Senior Account Executive - Buyer,
shall be vice-chairman.

The OSC shall endeavor (a) to achieve the orderly administration of
this Agreement, including the achievement of the goals set forth in Article
XIII.A, (b) to identify and promote development of those areas where strategic
cooperation between Buyer and Seller might be mutually beneficial, (c) to
discuss appropriate methods to reward Seller (including possible additional
compensation) for developing a Grade, Group or Category of Fine Papers or

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recommending changes to Buyer's receiving and inspection systems or
manufacturing processes, which development or changes would materially reduce
Buyer's cost of producing Cigarettes or Cigarette components and (d) to identify
opportunities to improve the quality of Fine Papers produced by Seller.

The OSC shall function only as an advisory body and shall have no
authority to take any action or make any decision concerning this Agreement or
any other agreements between the parties unless the parties mutually agree, in
writing, to refer such action or decision to the OSC. The parties agree to
cooperate with the OSC and to provide such support and staff services to the OSC
as it shall reasonably request.

The OSC shall meet at least once each calendar quarter during the
Term hereof, and more often if the majority of its members so agree. The OSC
shall consider such matters as are referred to it by the parties and such other
matters as its members deem appropriate and consistent with its charge,
including technology and product development, requirements and ordering, raw
materials, visible and other attributes, specifications, productivity
improvements and cost review. In addition, each party shall report the substance
of any major business decision to the OSC promptly after any such decision is
made (a) that could affect such party's ability to perform its obligations under
this Agreement, including decisions that could affect Buyer's Direct Purchase
Requirements, Buyer's Indirect Purchase Requirements or Seller's ability to sell
and deliver such requirements, or (b) with respect to the acquisition,
construction or development of additional domestic Cigarette or Fine Papers
manufacturing facilities, as the case may be.

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2. [******]

3. REVIEW TEAM

There shall be a Review Team comprised of the following "from both
parties: from Seller [*****] and from Buyer [*****]." This Review Team shall
meet on a semi-annual basis, or more frequently if either party so requests, to
"assess the continuing viability of the strategic alliance between Buyer and
Seller, discuss their respective future plans and identify and agree upon those
changes or refinements to the relationship that are necessary to its continued
success and achievement of the goals identified herein."

Specifically, Review Team meetings shall address issues raised by
either party, including but not limited to the following:

[******][******][******][******][******][******][******][******][******][******]
[******][******][******][******][******][******][******][******][******][******]
[******][******][******][******][******][******][******][******][******][******]
Each party's senior representative at any such meeting of the Review Team shall
be authorized to make decisions and commitments binding on the parties, but no
such decision or commitment shall effect an amendment to this Agreement or any
of the agreements between the parties unless reduced to writing and signed by
the authorized representative of each party.

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C. ALTERNATE SOURCES OF SUPPLY OF FINE PAPERS

If during the Term hereof Seller purchases or constructs facilities
which it uses to manufacture Fine Papers, in addition to the manufacturing
facilities for Fine Papers identified as production sources in this Agreement,
Seller will notify Buyer of the possibility that some or all of the quantities
of Fine Papers subject to this Agreement could be manufactured at such
additional facilities at prices and on terms mutually advantageous to each
party. In the event that Seller reports the existence of such possibility to
Buyer, the parties shall negotiate in good faith with the goal of amending this
Agreement in a mutually agreeable way to achieve such mutual advantages, but
nothing herein shall be deemed to obligate Buyer or Buyer's Contractors to agree
to accept deliveries of Fine Papers manufactured at facilities other than those
identified as production sources in this Agreement and then only if such
facilities have been qualified in accordance with Article XVI of this Agreement.

D. SALES TO BUYER'S AFFILIATES

Buyer's Affiliates use Fine Papers for Cigarette manufacturing
operations in various locations outside the United States. Buyer is in the
process of investigating the benefits of global purchasing. Upon Buyer's
request, the parties will negotiate in good faith with the objective of reaching
mutual agreement on the terms and conditions of appropriate amendments to this
Agreement or other agreements between the parties by which Seller would agree to
supply Fine Papers to some or all of Buyer's Affiliates.

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E. PERFORMANCE EVALUATIONS

The parties intend that this Agreement should result in a
world-class supply relationship respecting Fine Papers quality, service,
technical cooperation and prices. To that end, it is contemplated that Buyer
shall be entitled [******]. Should Buyer reasonably conclude, as the result of
any such evaluation, that the above-stated goals are not being achieved, Buyer
shall refer any concerns it has to the OSC for the OSC's recommendation of those
measures, if any, that may be appropriate in furtherance of the above-stated
goals.

F. SPECIFICATION CHANGES OR PRODUCT OR MANUFACTURING ADVANCES

From time to time Buyer may desire to develop or implement either
(a) a Specification Change or (b) a Product or Manufacturing Advance. This
Article describes the processes that will be followed in developing and/or
implementing any such Specification Change or Product or Manufacturing Advance.
To the extent the parties may disagree whether a particular change or
development is subject to the process provided below for a Specification Change
or a Product or Manufacturing Advance, the determination of Buyer's Manager,
Cigarette Components Materials Purchasing shall be controlling and binding on
the parties.

1. SPECIFICATION CHANGES

Buyer shall communicate a proposed Specification Change to Seller in
writing. Seller shall have no obligation hereunder to sell and deliver Fine
Papers conforming to a new Specification until such time as Seller has agreed to
the Specification Change; provided, however, if Seller disagrees with any
Specification Change proposed by Buyer, Buyer and Seller shall negotiate in good
faith with the intention of resolving such disagreement as quickly

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as possible but in no event later than 30 days after Buyer communicates the
proposed Specification Change to Seller.

2. PRODUCT OR MANUFACTURING ADVANCE

Buyer shall allow Seller the opportunity to become involved in the
development and/or implementation of all proposed Product or Manufacturing
Advances requiring development prior to requesting or obtaining development
support from another supplier. To that end, Buyer shall solicit Seller's support
and assistance in investigating and implementing all Product or Manufacturing
Advances requiring development by notifying Seller in writing of such request
for support and assistance (a "Request for Assistance"). Any such Request for
Assistance shall (a) identify the Product or Manufacturing Advance in general or
specific terms reasonably sufficient for Seller to understand the nature of the
request, (b) advise Seller of the date by which Buyer seeks to have the Product
or Manufacturing Advance developed and/or implemented into a new or existing
Fine Papers product or a manufacturing or processing technique respecting Fine
Papers, (c) request that Seller commit to participate in the development and/or
implementation of the Product or Manufacturing Advance and complete negotiation
of any agreement(s) necessary for Seller to develop and/or implement such
Product or Manufacturing Advance by either (a) the date to be specified in
Buyer's Request for Assistance or (b) another date agreeable to both parties.
Thereafter, [******]that may result from the development and/or implementation
effort respecting such Product or Manufacturing Advance. [******]

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Notwithstanding the preceding paragraph of this Article XIII.F,
[******]. With respect to any proposed Product or Manufacturing Advance, if (a)
Seller declines to support or assist Buyer in response to a Buyer Request for
Assistance related to such Product or Manufacturing Advance, (b) Buyer and
Seller fail to reach agreement on the terms of a mutually acceptable
agreement(s) for development and/or implementation of such Product or
Manufacturing Advance within the period allowed pursuant to the preceding
paragraph, or (c) on request by Buyer Seller fails to demonstrate to Buyer's
reasonable satisfaction that Seller is able to implement such Product or
Manufacturing Advance into Seller's manufacturing processes or Fine Papers
products for sale and delivery to Buyer or Buyer's Contractors without
infringing patent(s) or without violating or misappropriating the trade secrets
or other intellectual property rights of persons or entities other than Seller
or Buyer, Buyer shall be free to participate in joint development programs with
Fine Papers suppliers other than Seller and subject to Article IV.D, to purchase
New Products resulting from such joint development programs from suppliers other
than Seller, notwithstanding Article IV.B and Article IV.C.

XIV. FORCE MAJEURE

A. DEFINITION OF FORCE MAJEURE

Neither Buyer nor Seller shall be responsible or liable, or deemed
in breach hereof, to the extent any delay or failure to perform hereunder
results from an occurrence, event or circumstance which could not have been
reasonably avoided by the party experiencing such delay or impediment to
performance, including, but not limited to, acts of God; unusually

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severe weather; war; riots, civil commotions; act, demand or requirement of law
or of any competent governmental authority; inability despite due diligence to
obtain required licenses; strikes or other labor disturbances at Seller's or
Buyer's manufacturing facilities; explosion, fire, or flood; unavailability or
shortage of material, equipment or transportation, to the extent beyond such
party's reasonable control; or other similar causes beyond such party's
reasonable control (such causes are hereinafter called "Force Majeure"). If
Seller is delayed or its performance prevented due to delays experienced by or
failures to perform of Seller's Affiliates, such delay or impediment to
performance shall not constitute an event of Force Majeure hereunder except to
the extent such delay or impediment to performance is caused by Force Majeure as
defined above.

B. FORCE MAJEURE PROCEDURE

The party experiencing the Force Majeure shall exercise reasonable
efforts in endeavoring to overcome any resulting delay or impediment to its
performance. The party experiencing the Force Majeure shall promptly give
written notification to the other party. This written notification shall include
a full and complete description of the Force Majeure and its cause, the status
of the Force Majeure, and the actions such party is taking and proposes to take
to overcome the Force Majeure.

C. EFFECT OF FORCE MAJEURE

If performance by either party is delayed or prevented due to Force
Majeure, the time for that performance shall be extended for a period reasonably
necessary to overcome the effect of the Force Majeure. The party experiencing
the Force Majeure shall undertake

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reasonable measures to make up for the time lost without additional
compensation. Any quantities of Fine Papers not delivered due to Force Majeure
affecting Seller shall not be made up, and such quantities shall be treated as
Direct Purchases or Indirect Purchases (as applicable) for purposes of
calculating Buyer's Prior Year purchases hereunder. Buyer shall have the right
to obtain alternate supplies of Fine Papers during any event of Force Majeure
that delays or prevents Seller's performance hereunder.

D. ALLOCATION OF SELLER'S PRODUCTION CAPACITY

If any event of Force Majeure hereunder delays or prevents Seller
from fulfilling its obligations to deliver the full quantities of Fine Papers to
all of its regular customers, including Buyer, [******].

E. TERMINATION FOR EXTENDED FORCE MAJEURE

If either party's ability to perform hereunder is reduced, delayed
or prevented, in whole or in part, for a period [******]as a result of an event
of Force Majeure, the other party shall have the right, at its sole option, to
terminate this Agreement in whole or in part, and any and all remaining
deliveries hereunder without further obligation, such option to be exercised, if
at all, by such other party giving written notice of termination to the
non-performing party. [******]

F. CONTINGENCY PLANS

1. Buyer and Seller acknowledge that although the
occurrence of any event of Force Majeure will be outside the control of either
party, certain types of Force Majeure are more likely to occur than others and
the adverse effects of such events can often

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be reduced or minimized through advance planning. Upon Buyer's request, Seller
shall prepare and submit for Buyer's review and comment a contingency plan to
address the possible occurrence of a strike or similar labor disturbance at
Seller's manufacturing facilities for Fine Papers and such other events of Force
Majeure as Buyer and Seller mutually agree. If, following Buyer's request,
Seller fails to develop reasonable contingency plans for each such event, or if
upon the occurrence of such an event, Seller fails to implement the applicable
contingency plan, any delay in or impediment to Seller's performance due to the
occurrence of such event of Force Majeure shall be deemed to have been within
the reasonable control of Seller and therefore not excused under this
Article[******]

From time to time during the term of this Agreement, Seller shall,
upon request of the OSC, review its strike contingency plan and any other of its
contingency plans developed pursuant to this Article to determine whether such
plans need revision. If requested by the OSC, Seller shall revise such
contingency plan in accordance with such review and shall notify the OSC of any
such revision.

2. If either party has reason to believe a strike or any
other event of Force Majeure is likely to occur at one or more of its facilities
and would interrupt the sale and purchase of Fine Papers contemplated hereunder,
the party likely to experience such event of Force Majeure shall notify the
other party, as soon as reasonably possible, of such likely occurrence and of
the expected duration of the period in which performance is likely to be delayed
or prevented. The party having reason to believe that it may experience a strike

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affecting production shall advise the other party of any production changes that
are planned in anticipation of such strike.

XV. COMPLIANCE WITH LAWS; NONDISCRIMINATION; FINES

A. GENERAL

Each party shall comply with all foreign and United States (federal,
state and local) laws, rules, regulations and ordinances applicable to the
performance of their respective obligations under this Agreement.

Each party shall obtain and maintain all governmental licenses,
permits and approvals necessary for the operation of their facilities required
to perform their respective obligations under this Agreement. Seller shall
obtain all necessary licenses, permits and other clearances required to import
Fine Papers into the United States from the manufacturing facilities of its
non-domestic Affiliates. No later than the last day of January during each year,
each party, upon request of the other, shall provide the other a written
certification that their respective manufacturing facilities are being
maintained and operated in accordance with all applicable environmental laws,
rules, regulations, orders and permits.

B. NONDISCRIMINATION

Seller shall comply with all applicable provisions of Executive
Order 11246, as amended; ss. 503 of the Rehabilitation Act of 1973, as amended;
ss. 402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974, as
amended; ss. 5152 of the Drug-Free Workplace Act of 1988; and the implementing
regulations set forth in 41 C.F.R. xx.xx. 60-1,

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60-250 and 60-741 and 48 C.F.R. ss. 23.5. Each party shall comply with all
provisions of the Americans with Disabilities Act that are applicable to them.
The equal opportunity clause set forth in 41 C.F.R. ss. 60-1.4 and the
affirmative action clauses set forth in 41 C.F.R. ss. 60-250.4 and 41 C.F.R. ss.
60-741.4 are hereby incorporated by reference and made a part of this Agreement.
Seller certifies that it does not and will not maintain any facilities it
provides for its employees in a segregated manner and that it does not and will
not permit its employees to perform their services at any location under
Seller's control where segregated facilities are maintained. Seller further
agrees to submit and obtain such certifications of nonsegregated facilities as
are required by 41 C.F.R. ss. 60-1.8. The provisions of this paragraph shall
apply to Seller only to the extent that (a) such provisions are required of
Seller under existing law, (b) Seller is not otherwise exempt from said
provisions and (c) compliance with said provisions is consistent with and not
violative of 42 U.S.C. ss. 2000 et seq., 42 U.S.C. ss. 1981 et seq., or other
acts of Congress.

C. NO COLLUSION

Neither Seller nor any person or entity acting or purporting to act
on Seller's behalf shall enter into any combination, conspiracy, agreement or
other form of collusive arrangement with any person, corporation, partnership or
other entity that directly or indirectly lessens competition between potential
contractors, vendors or suppliers from whom goods or services may be obtained
that will be used by Seller in the performance of its obligations hereunder.
Furthermore, in performing its obligations hereunder, Seller shall submit to
Buyer such information as it may have respecting the occurrence of such
collusion among or between

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potential contractors, vendors, suppliers or any other person.

D. FINES

Any fines or other penalties incurred by either party or its agents,
employees or subcontractors for noncompliance with any laws, rules, regulations
or ordinances with which compliance is required herein shall be the
responsibility of the non-complying party except that any non-compliance
relating to the payment of duties on imported materials shall not be reimbursed
by Buyer but shall be the sole responsibility of Seller. If fines, penalties or
legal costs are assessed against either party by any government authority or
court due to noncompliance by the other party or its agents, employees or
subcontractors with any of the laws, rules, regulations or ordinances with which
compliance is required herein, including but not limited to any laws, rules,
regulations or ordinances relating to the payment of duties on imported
materials, the noncomplying party shall indemnify and hold harmless the other
against any and all losses, liabilities, damages, claims and costs (including
reasonable attorneys' fees) suffered or incurred because of the failure of the
noncomplying party or its agents, employees or subcontractors to comply
therewith.

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XVI. QUALITY ASSURANCE

Each Manufacturing Facility of Seller and its non-domestic
Affiliates used to produce Fine Papers to be incorporated into Cigarettes and
Cigarette components manufactured at the Plants must be qualified by Buyer as
capable of manufacturing Fine Papers that conform to the applicable
Specifications for each Grade of Fine Papers to be manufactured at that
facility. Buyer shall not unreasonably withhold any such qualification. In the
event that Buyer withholds its qualification of any Grade at any of Seller's or
its Affiliates' Manufacturing Facilities, Buyer shall give Seller written notice
of its specific reasons for so doing.

At Buyer's request, Seller shall develop and submit to Buyer for its
review a written plan for quality assurance and quality control at each such
Manufacturing Facility.

The parties acknowledge that they have undertaken to strive jointly
for managed continuous improvement in quality. To this end, Buyer and Seller
shall form a joint quality improvement team to identify opportunities to improve
the quality of Fine Papers produced by Seller.

XVII. INSPECTION

Buyer shall have reasonable access to Seller's Manufacturing
Facilities, as well as the facilities of Seller's suppliers or contractors who
are willing to permit such access, for the purpose of (a) auditing compliance
with Seller's quality control and quality assurance programs and (b) inspecting
Seller's manufacturing operations. Such inspections shall not relieve Seller of
its obligation to provide Fine Papers that conform in all respects with the
Specifications.

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Buyer shall also be entitled to review all quality control and quality assurance
records, to inspect Fine Papers to be delivered to Buyer or Buyer's Contractors
during manufacture and to witness all tests. Seller shall seek from suppliers of
materials incorporated into Fine Papers to be delivered to Buyer or Buyer's
Contractors permission for Buyer to inspect such supplier's facilities upon
reasonable notice.

Seller shall have reasonable access to Buyer's manufacturing
facilities and the facilities of Buyer's Contractors who are willing to permit
such access to investigate Fine Papers quality complaints or claims and to
identify changes or refinements in Buyer's receiving and inspection systems and
its manufacturing processes that might enable Seller to improve the quality of
Fine Papers that it manufactures.

XVIII. CONFIDENTIALITY AND CONFIDENTIAL INFORMATION

A. CONFIDENTIAL INFORMATION OF THE PARTIES

The parties hereby acknowledge that all information disclosed to
each other pursuant to this Agreement, either orally, in writing or by
observation, including, but not limited to, the contents of this Agreement and
its Exhibits and any disclosure arising out of the implementation of Article
XVIII.B hereof (hereafter "Confidential Information") shall at all times, both
during and after the term of this Agreement, remain the exclusive property of
the party making the disclosure and that, in receiving such disclosure, the
other party shall not acquire any proprietary interest whatsoever therein. Each
party shall make use of the other

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party's Confidential Information only during the term of and solely to carry out
the purposes and intent of this Agreement.

B. NON-DISCLOSURE

Neither party shall directly or indirectly disclose, or permit
anyone on its behalf to disclose, except as may be required by law, any
Confidential Information disclosed to it by the other party, and each shall
carefully guard and keep secret all such Confidential Information of the other
with the same degree of care which it uses in protecting its own Confidential
Information. Confidential Information received by each party herein shall be
disclosed within such party's organization only on a need-to-know basis. Neither
party shall, at any time, allow anyone except the other party, or those
expressly authorized by such other party in writing, to have access to or use
any Confidential Information disclosed by the other party. Upon the termination
of this Agreement, however occurring, each party shall surrender to the other
all documents then in their possession including, but not limited to, plans,
Specifications, literature, samples and other tangible things relating to
Confidential Information disclosed by the other.

C. EXCEPTION TO NON-DISCLOSURE

Neither party shall be liable to the other for disclosure of
information:
1. which can be demonstrated to have been in the other
party's possession lawfully prior to receipt of the same from the party making
such disclosure; or

2. which was received from a third party having no
obligation to hold the same in confidence; or

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3. which can be demonstrated to have been public prior
to the date of the disclosure; or

4. which thereafter becomes public through no fault of
the party receiving the disclosure.

XIX. OWNERSHIP OF DOCUMENTS; DEVELOPMENT PROGRAMS

All drawings, designs, blueprints, photographs, sketches, software
(including but not limited to each party's or its affiliates' CAD menus, cell
symbologies and user commands) and other materials prepared by or for the other
party or furnished to such other party in the course of this Agreement shall
belong to the disclosing party and shall not be used for, or revealed, divulged
or made known to, any person, firm or corporation without the prior written
consent of the disclosing party. Upon the disclosing party's request, the other
party shall return to the disclosing party all such materials, together with any
reproductions of such materials that the other party may have made, provided
that such other party may retain one copy of such materials for record purposes.

XX. RECORDS

Each party shall keep and maintain complete and accurate records,
books of account, reports and other data necessary for the proper administration
hereof ("Records"). Each party shall retain such Records in accordance with
their respective record retention programs and shall not dispose of such Records
without giving the other party at least 60 days prior written

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notice of its intent to discard such Records; provided, however, that no such
notice need be given unless such other party is entitled under the terms hereof
to inspect the Records in question. If the party to whom such notice is given so
requests, the party who gave the notice shall deliver the originals or copies of
such Records to the other party.

XXI. DISPUTE RESOLUTION

A. INTENT

It is the intention of the parties to make a good faith effort to
resolve, without resort to litigation, any dispute, controversy or claim arising
out of or relating to this Agreement or any breach, termination or invalidity
hereof (a "Dispute") according to the procedures set forth in this Article.

B. PROCEDURE

Buyer's and Seller's designated representatives shall attempt to
resolve all Disputes by negotiation. In the event of a Dispute that cannot be
resolved promptly by Buyer's and Seller's representatives, each party shall
immediately designate a senior executive with authority to resolve the Dispute.
The designated senior executives shall promptly begin discussions in an effort
to agree upon a resolution of the Dispute. If the senior executives do not agree
upon a resolution of the Dispute within 45 days of the referral to them, either
party may elect to abandon negotiations. If a Dispute cannot be resolved
pursuant to the procedures outlined in this paragraph, the parties may pursue
any remedy available to them at law or in equity.

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XXII. INSURANCE

Seller shall maintain the following insurance:

1. Statutory workers' compensation coverage in
accordance with the law of the state where the facilities of Seller are used
to produce Fine Papers sold to Buyer hereunder.

2. Employer's liability with a limit of not less than
$1,000,000 per occurrence;

3. Comprehensive general liability, including coverage
for property damage, products liability/completed operations (for two years
after performance hereof) and contractual obligations, with a combined single
limit of $5,000,000 per occurrence; and

4. Comprehensive automobile liability with a combined
single limit of $1,000,000 per occurrence covering all vehicles of Seller
whether owned or nonowned.

Upon Buyer's request, Seller shall furnish certificates of insurance
in a form and manner reasonably acceptable to Buyer evidencing that the above
insurance is in effect and otherwise complies with the requirements of this
Article. Seller shall require its insurance carriers to give Buyer 30 days
written notice of any material change or alteration in or cancellation of any
policy of insurance required hereunder. Seller shall require its comprehensive
general liability carrier and its comprehensive automobile liability carrier to
name Buyer as an additional insured on those policies and to include on such
policies endorsements indicating that such coverage is intended to be primary to
any other coverage

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Buyer may maintain in connection with liability Buyer may incur for which Buyer
may be entitled to coverage under such policy.

XXIII. CANCELLATION FOR DEFAULT

A. DEFAULT BY SELLER

1. If, during the term of this Agreement, one or more
of the following events (an "Event of Default") shall occur, Seller shall be
deemed in default:

a. The rejection rate for any Category of Fine
Papers delivered by Seller shall exceed either [******]

b. Seller shall, for any reason other than (a)
delays to the extent caused by Buyer or Force Majeure, where such delays are not
the result of a breach by Seller of its obligations hereunder, or (b) material
breach by Buyer of its obligations hereunder, fail to meet [******]specified in
Buyer's monthly orders issued in accordance with Article V hereof in [******];

c. Seller shall default in the payment of any
sum which it acknowledges to be due and payable to Buyer hereunder and such
default shall continue for [******]after receipt of written demand from Buyer
for payment of such sum;

d. Any representation made by Seller herein or
in any certificate, statement or document required to be made by Seller pursuant
to the terms of this Agreement shall prove to be false in any material respect
as of the date on which it was made, and any material adverse consequences to
Buyer directly caused thereby shall not have been remedied

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within 30 days after written notice thereof shall have been given to Seller by
Buyer; provided, however, that if the material adverse consequences cannot
reasonably be remedied in a 30-day period, and if Seller shall have commenced a
remedy based on a plan of remedy and a schedule acceptable to Buyer, the 30-day
period shall be extended consistent with such plan of remedy;

e. Seller shall (a) file a petition commencing
a voluntary case under the United States Bankruptcy Code, (b) file a petition
for liquidation, reorganization or an arrangement pursuant to any other federal
or state bankruptcy law, (c) be adjudicated a debtor or be declared bankrupt or
insolvent under any federal or state law relating to bankruptcy, insolvency,
winding-up or adjustment of debts, as now or hereafter in effect, (d) make an
assignment for the benefit of creditors, (e) admit in writing its inability to
pay its debts as they become due; or if a petition commencing an involuntary
case under the United States Bankruptcy Code or an answer proposing the
adjudication of Seller as a debtor or a bankrupt or proposing its liquidation or
reorganization pursuant to the United States Bankruptcy Code or any other
federal or state bankruptcy law shall be filed in any court and Seller shall
consent to or acquiesce in the filing thereof, if such petition or answer shall
not be discharged or denied within 60 days after the filing thereof;

f. A custodian, receiver, trustee or liquidator
of Seller, or of all or substantially all of the assets of Seller shall be
appointed in any proceeding brought against Seller and shall not be discharged
within 60 days after such appointment, or if Seller shall consent to or
acquiesce in such appointment; or

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g. Seller shall default in any material respect
in the observance or performance of any covenant, condition or obligation of
Seller contained herein (other than as provided in paragraphs a, b, c and d of
this Article XXIII.A.1, and such default continues for 30 days after written
notice to Seller specifying the default and demanding that the same be remedied;
provided, however, that if the default cannot reasonably be remedied in a 30-day
period and if Seller shall have commenced a remedy based on a plan of remedy and
a schedule acceptable to Buyer, the 30-day period shall be extended consistent
with such plan of remedy.

2. In the event of a Default by Seller, Buyer, at its
option, may (a) cancel this Agreement by providing written notice to Seller,
such cancellation to be effective as of the date set forth in such notice but
not earlier than 15 days after such notice is received by Seller, and in any
event, (b) subject to the provisions of Article XII, pursue such remedies as may
be available at law or equity as a consequence of such default.

B. DEFAULT BY BUYER

1. If during the term of this Agreement, one or more
of the following events (an "Event of Default") shall occur, Buyer shall be
deemed in Default:

a. Buyer shall fail or refuse to pay Seller's
invoice as required by Article IX hereof and such failure or refusal shall
continue for 10 business days after receipt of written demand from Seller;

b. Buyer fails or refuses to accept delivery of
any Direct Purchase of Fine Papers as required by this Agreement, and such
failure or refusal has not been

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remedied by Buyer within 30 days after written notice thereof shall have been
given by Seller to Buyer;

c. Buyer shall (a) file a petition commencing a
voluntary case under the United States Bankruptcy Code, (b) file a petition for
liquidation, reorganization, or for an arrangement pursuant to any other federal
or state bankruptcy law, (c) be adjudicated a debtor or be declared bankrupt or
insolvent under the United States Bankruptcy Code, or any other federal or state
law as now or hereafter in effect relating to bankruptcy, insolvency, winding-up
or adjustment of debts, (d) make an assignment for the benefit of creditors or
(e) admit in writing its inability to pay its debts as they become due; or if a
petition commencing an involuntary case under the United States Bankruptcy Code
or an answer proposing its liquidation or reorganization pursuant to the United
States Bankruptcy Code or any other federal or state bankruptcy law shall be
filed in any court and Buyer shall consent to or acquiesce in the filing thereof
or such petition or answer shall not be discharged or denied within 60 days
after the filing thereof;

d. A custodian, receiver, trustee or liquidator
of Buyer or of all or substantially all of the assets of Buyer, shall be
appointed in any proceeding brought against Buyer and shall not be discharged
within 60 days after such appointment, or if Buyer shall consent to or acquiesce
in such appointment; or

e. Buyer shall default in any material respect
in the observance or performance of any covenant, condition or obligation of
Buyer contained herein, (other than as provided in paragraphs a. and b. of this
Article XXIII.B.1 and such default continues for 30

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days after written notice to Buyer specifying the default and demanding that the
same be remedied; provided, however, that if the default cannot reasonably be
remedied in a 30-day period, and if Buyer shall have commenced a remedy based on
a plan of remedy and a schedule acceptable to Seller, the 30-day period shall be
extended consistent with such plan of remedy.

2. In the event of a Default by Buyer, Seller may (a)
cancel this Agreement by providing written notice to Buyer, such cancellation to
be effective as of the date set forth in such notice but not earlier than 15
days after such notice is received by Buyer, and in any event, (b) subject to
the provisions of Article XII, to pursue such remedies as may be available at
law or equity as a consequence of such default.

XXIV. INDEMNITY

A. INDEMNITY BY BUYER

Buyer shall indemnify and hold Seller harmless from and against any
and all claims, actions, causes of action, losses, liabilities, damages
(including punitive damages), costs and expenses, including reasonable
attorneys' fees, arising out of a claim or claims for [******] except that this
indemnity shall not apply to any actions, causes of action, liabilities, damages
(including punitive damages), costs and expenses, including reasonable
attorneys' fees, caused solely and directly by [******]or otherwise as
authorized by Buyer. Buyer's indemnity obligation pursuant to the preceding
sentence shall be conditioned upon (a) Seller providing Buyer timely notice of
such claim, suit or proceeding ("Claim"), (b) Seller not settling,

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releasing or otherwise disposing of such Claim without Buyer's written consent
and (c) Buyer having exclusive control over the defense of any such Claim. Buyer
shall notify Seller of important developments affecting the defense of any such
Claim and shall conduct or otherwise provide such defense in a manner consistent
with Seller's best interests. Prior to the settlement, release or other
disposition ("Disposition") of any such Claim as it relates to Seller, Buyer
shall give written notice to Seller of the proposed terms and conditions of the
proposed Disposition. Within 10 days of Buyer's notice, Seller shall either give
written notice to Buyer of its consent to the proposed Disposition or its
objection to the proposed Disposition. If Seller objects to the proposed
Disposition of such Claim, Buyer shall not settle, release, or otherwise dispose
of such Claim as it relates to Seller, but shall withdraw from and promptly
surrender to Seller the defense of such Claim as it relates to Seller. Upon such
withdrawal, Buyer's obligation to Seller pursuant to this Article XXIV.A shall
cease.

B. INDEMNITY BY SELLER

Seller shall indemnify and hold Buyer harmless from and against any
and all claims, actions, causes of action, losses, liabilities, damages
(including punitive damages), costs and expenses, including reasonable
attorneys' fees, arising out of a claim or claims for [******]or otherwise as
authorized by Buyer. Seller's indemnity obligation pursuant to the preceding
sentence shall be conditioned upon (a) Buyer providing Seller timely notice of
such claim, suit or proceeding ("Claim"), (b) Buyer not settling, releasing or
otherwise disposing of such Claim without Seller's written consent and (c)
Seller having exclusive control of the defense of

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any such Claim. Seller shall notify Buyer of important developments affecting
the defense of any such Claim and shall conduct or otherwise provide such
defense in a manner consistent with Buyer's best interests. Prior to the
settlement, release or other disposition ("Disposition") of any such Claim as it
relates to Buyer, Seller shall give written notice to Buyer of the proposed
terms and conditions of the proposed Disposition. Within 10 days of Seller's
notice, Buyer shall either give written notice to Seller of its consent to the
proposed Disposition or its objection to the proposed Disposition. If Buyer
objects to the proposed Disposition of such Claim, Seller shall not settle,
release, or otherwise dispose of such Claim as it relates to Buyer, but shall
withdraw from and promptly surrender to Buyer the defense of such Claim as it
relates to Buyer. Upon such withdrawal, Seller's obligation to Buyer pursuant to
this Article XXIV.B shall cease.

XXV. NOTICES

All certificates or notices required hereunder shall be given in
writing and addressed or delivered to the representative(s) specified in this
Agreement. Any notice or communication required hereunder shall be given by
hand; courier service; registered, certified, express or first class mail
(postage prepaid); TWX, telex or facsimile transmission. The date of receipt of
any notice sent by mail (except for confirmatory notices) shall be the date the
notice shall be deemed to have been given.

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Notices required hereunder shall be directed to the following
individuals:

Notices to Seller:

President, U.S. Operations

000 Xxxxx Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000

Copy to: Director of Sales
General Counsel

Notices to Buyer:

Buyer's Manager-Cigarette Components,
Direct Materials Purchasing
Xxxxxx Xxxxxx U.S.A.
P. O. Xxx 00000
Xxxxxxxx, Xxxxxxxx 00000

Copy to: Director of Materials Purchasing

Buyer or Seller may change the representative(s) designated to receive notice
hereunder by written notice to the other party.

XXVI. GOVERNING LAW

The statutes and judicial interpretations of the Commonwealth of
Virginia shall govern this Agreement without regard to conflict of law
principles.

XXVII. NONWAIVER

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The failure of either party to demand strict performance of the
terms hereof or to exercise any right conferred hereby shall not be construed as
a waiver or relinquishment of its right to assert or rely on any such term or
right in the future.

XXVIII. SEVERABILITY

The remainder hereof shall not be voided or otherwise affected by
the invalidity of one or more of the terms herein.

XXIX. ASSIGNMENT

Neither party shall assign or transfer any of its rights or
obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld.

XXX. SURVIVAL

All warranties, limitations of liability, indemnities and
confidentiality rights and obligations provided herein shall survive the
cancellation, expiration or termination hereof.

XXXI. AMENDMENTS

No amendment, modification or waiver of any term hereof shall be
effective unless set forth in a writing signed by Buyer and Seller.

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XXXII. INDEPENDENT CONTRACTOR

Seller is an independent contractor for all purposes hereof. This
Agreement is a contract for the sale of goods and the relationship between the
parties is that of buyer and seller, and is not intended to be one of hiring
under the provisions of any workers' compensation or other laws and shall not be
so construed. Nothing herein shall be deemed to constitute a partnership or
joint venture between the parties hereto.

XXXIII. HEADINGS

Headings contained herein are inserted for convenience and shall
have no effect on the interpretation or construction hereof.

XXXIV. PUBLICITY

Except as required by Law (with prior written notice to the
non-disclosing party), neither party shall release any information relative to
this Agreement for publication, advertising or any other purpose without the
other party's prior written consent.

XXXV. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement of the parties with
respect to its subject matter and supersedes any prior or contemporaneous
agreement or understanding between the parties.

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IN WITNESS WHEREOF, the parties have executed this Agreement by
their authorized representatives, effective as of the date set forth in Article
III.A. hereof.

XXXXXX XXXXXX INCORPORATED
By
Name Xxxxx X. Xxxx, Xx.
Title Director of Purchasing

XXXXXXXXXX-XXXXXXX INTERNATIONAL, INC.
By
Name N. Xxx Xxxxxxxxx
Title President -- U.S. Operations

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EXHIBIT A
XXXXXX XXXXXX/XXXXXXXXXX-XXXXXXX
1998 STRATEGIC SUPPLY AGREEMENT
BASE YEAR PRICING

SWM SWM BASE PRICE
SALES GRADE
PRODUCT CODE CODE

[******] [******] [******] [******] [******]

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EXHIBIT B

METHOD FOR CONVERSION FROM BOBBINS OF FINISHED TIPPING PAPER TO POUNDS AND FROM
NUMBER OF ARTICLES (ITEMS) TO STANDARD BOBBINS OF CIGARETTE OR PLUG WRAP PAPER.

1. Determine the quantity of Tipping Paper in pounds included
in a number of Bobbins of Finished Tipping Paper as follows:

a) for each size of Bobbin made using a Grade of
Tipping Paper, multiply the length in meters of such Bobbin by the Bobbin width
in meters to determine the area of each such Bobbin;

b) multiply the area for each size made using a Grade
of Tipping Paper by the target basis weight of the Grade in grams per square
meter and divide the products so obtained by [*****]to determine the weight of
each different size Bobbin in pounds;

c) multiply the Bobbin weight obtained above for each
size of Bobbin made using a Grade of Tipping Paper by the number of such Bobbins
purchased by the Buyer during the specified period and add the several products
so obtained to determine the pounds of Tipping Paper of each Grade.

2. Determine the quantity of Cigarette Paper or Plug Wrap
Paper in Standard Bobbins included in a number of articles as follows:

a) for each article made using a Grade of Fine Paper,
multiply the length of paper in meters incorporated into such article by the
width of the paper in meters incorporated into the article to determine the area
of paper incorporated into the article;

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b) multiply the area of paper incorporated into each
article using a Grade of Fine Paper by the number of such articles purchased by
or delivered to the Buyer in the specified period and sum the several products
so obtained for each Grade;

c) for each Grade divide the sum obtained above by
[*****] to determine the number of Standard Bobbins of such Grade purchased by
the Buyer during the specified period.

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EXHIBIT C

PRECISION OF CALCULATION

INPUT DATA

QUANTITY UNIT PRECISION
-------- ---- ---------

Bobbin Length meter Nearest [******]
Bobbin Width millimeter Nearest [******]
[******] Invoice Price
Cigarette $ per bobbin Nearest [******]
Plug Wrap $ per bobbin Nearest [******]
Tipping Paper $ per CWT Nearest [******]
Volumes:
Cigarette Standard Bobbin Nearest [******]
Plug Wrap Standard Bobbin Nearest [******]
Tipping Paper pound Nearest [******]
Pulp Price $ per metric ton Nearest [******]
Net Book Value dollars Nearest [******]
Unit Grade Cost
Cigarette $ per Standard Bobbin Minimum nearest
[******]

Plug Wrap $ per Standard Bobbin Minimum nearest
[******]

Tipping Paper $ per pound Minimum nearest
[******]

Standard Grade Cost
Cigarette $ per Standard Bobbin Minimum nearest
[******]
Plug Wrap $ per Standard Bobbin Minimum nearest
[******]
Tipping Paper $ per pound Minimum nearest
[******]

[******] Dimensionless Minimum nearest
[******]
CALCULATED DATA

QUANTITY PRECISION
-------- ---------

All calculated values
Minimum [******][******]

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COMPARATIVE VALUES

QUANTITY UNIT PRECISION
-------- ---- ---------

Percentage Change 1/ percent Nearest [******]

OUTPUT DATA

QUANTITY UNIT PRECISION
-------- ---- ---------

Prices
Cigarette $ per Standard Bobbin Minimum [******]
Plug Wrap $ per Standard Bobbin Minimum [******]
Tipping Paper $ per pound Minimum [******]

Invoice Prices
Cigarette $ per bobbin Nearest [******]
Plug Wrap $ per bobbin Nearest [******]
Tipping Paper $ per CWT Nearest [******]

Carry Forward percent Nearest [******]

--------
1/ To use in comparisons for decision making.

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AGREEMENT BETWEEN

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