<PAGE>

                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                                SUPPLY AGREEMENT

                                 BY AND BETWEEN

                         R. J. REYNOLDS TOBACCO COMPANY

                                       AND

                                   MUNDET INC.

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                                TABLE OF CONTENTS

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I.    DEFINITIONS and interpretation................................................     1

      1.1    Defined Terms..........................................................     1

      1.2    Interpretation.........................................................     7

II.   RESPONSIBILITIES OF PARTIES...................................................     7

      2.1    Term of the Agreement..................................................     7

      2.2    Exclusivity............................................................     7

      2.3    Scope of this Agreement................................................     7

      2.4    Manufacturing Facilities; Transition Costs.............................     8

      2.5    Specifications.........................................................     8

      2.6    Contact Personnel......................................................    10

      2.7    Conferences............................................................    10

      2.8    Visit at Facilities and Inspection.....................................    10

      2.9    Periodic Forecasts.....................................................    10

      2.10   Purchase Orders and Supply Schedules...................................    11

      2.11   Inventory..............................................................    11

      2.12   Quality................................................................    11

      2.13   Supply Activities......................................................    11

      2.14   Delivery and Shipment; Remedies for Failure to Deliver by Agreed
             Delivery Dates.........................................................    11

      2.15   Contingency Manufacturing Plans; Alternative Source of Supply..........    13

      2.16   Art, Prepress and Engraving............................................    14

      2.17   Cylinders and Tooling..................................................    14

      2.18   Capital Expenditures...................................................    14

      2.19   Intellectual Property..................................................    14

      2.20   Sharing of Information.................................................    15

      2.21   New Products...........................................................    15

      2.22   Transition Supply Arrangements.........................................    16

      2.23   Destruction of Waste...................................................    17

III.  COMMERCIAL TERMS..............................................................    17

      3.1    Pricing................................................................    17

      3.2    Payment Terms..........................................................    19
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                                        i
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                                TABLE OF CONTENTS
                                   (continued)

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      3.3    Rejected Products......................................................    19

      3.4    Audit Rights of RJRT...................................................    19

      3.5    Joint Cost Savings Initiatives.........................................    20

      3.6    Insurance..............................................................    20

      3.7    Additional Services....................................................    20

IV.   TERMINATION...................................................................    21

      4.1    Termination............................................................    21

      4.2    Effect of Termination..................................................    22

      4.3    Survival...............................................................    23

V.    CONFIDENTIALITY...............................................................    23

      5.1    Confidentiality Obligation.............................................    23

      5.2    Exceptions.............................................................    24

      5.3    Authorized Disclosure..................................................    24

VI.   WARRANTIES....................................................................    24

      6.1    Warranties.............................................................    24

      6.2    Liability and Damages..................................................    25

      6.3    Representation of Authority............................................    25

      6.4    Compliance with Laws...................................................    26

      6.5    RJRT's Indemnity Obligations...........................................    26

      6.6    Supplier's Indemnity Obligations.......................................    27

      6.7    Supplier for Product...................................................    27

      6.8    RJRT's Rights to Intellectual Property.................................    27

VII.  MISCELLANEOUS.................................................................    27

      7.1    Further Assurances.....................................................    27

      7.2    Waiver.................................................................    27

      7.3    Relationship of Supplier and RJRT......................................    28

      7.4    Force Majeure..........................................................    28

      7.5    Governing Law..........................................................    28

      7.6    Dispute Resolution.....................................................    28

      7.7    Jurisdiction...........................................................    28
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                                       ii
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                                TABLE OF CONTENTS
                                   (continued)

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7.8    Waiver of Jury Trial...................................................    29

7.9    Severability...........................................................    29

7.10   Amendments.............................................................    29

7.11   Notices................................................................    29

7.12   Entire Agreement.......................................................    30

7.13   Assignment.............................................................    30

7.14   Attorney-Client Privilege..............................................    31

7.15   Expenses...............................................................    31

7.16   Publicity..............................................................    31

7.17   No Third Party Beneficiaries...........................................    31

7.18   Counterparts...........................................................    31
</TABLE>

                                       iii
<PAGE>

<TABLE>
<S>                                                                           <C>
List of Annexes

Excluded Products.........................................................    Annex A
Included Products.........................................................    Annex B
Included Products With Qualifications.....................................    Annex C
Specifications for All Products...........................................    Annex D
RJRT Product Testing Protocols............................................    Annex E
Pricing by SKU............................................................    Annex F-1
Transition Pricing by SKU.................................................    Annex F-2
Supplier's Payment Instructions...........................................    Annex G

List of Schedules

Periodic Forecast Procedures..............................................    Schedule 2.9
Weekly Call-Out Procedures................................................    Schedule 2.10
On Time/In Full Delivery Percentage by Category of Product ...............    Schedule 2.14(c)
On Time/In Full Delivery Percentage by SKU................................    Schedule 2.14(d)
Cost Model ...............................................................    Schedule 3.1(b)
Pricing Triggers..........................................................    Schedule 3.1(e)
</TABLE>

                                       iv
<PAGE>

                                SUPPLY AGREEMENT

      This Supply Agreement (the "Agreement") is made and entered into as of
this 2nd day of May, 2005 (the "Effective Date"), by and between R. J. Reynolds
Tobacco Company, a North Carolina corporation ("RJRT") and Mundet Inc., a
Delaware corporation ("Supplier"). RJRT and Supplier shall be referred to herein
individually as a "Party" and collectively as the "Parties."

                                    RECITALS

      A. RJRT is a manufacturer and seller of tobacco products, including
Cigarettes;

      B. RJRT is the sole owner of RJR Packaging, LLC ("RJRP"), and RJRT has in
the past obtained certain materials associated with Cigarettes and packaged
Cigarettes from RJRP;

      C. Supplier has purchased certain assets of RJRP from RJRP used in
connection with the manufacturing of the Products; and

      D. RJRT and Supplier are entering into this Agreement in connection with
the asset purchase.

      NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, RJRT and Supplier hereby agree as follows:

                       I. DEFINITIONS AND INTERPRETATION

      1.1 Defined Terms. For purposes of this Agreement, the following terms
shall have the meanings ascribed below:

      "Acknowledgement" has the meaning set forth in Schedule 2.10.

      "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.

      "Agreement" has the meaning set forth in the introductory paragraph
hereof.

      "Art" has the meaning set forth in Section 2.16.

      "Beneficial Owner" has the meaning ascribed to such term in Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.

      "B&W" means Brown & Williamson Holdings, Inc, formerly known as Brown &
Williamson Tobacco Corporation.

      "Call-Out" has the meaning set forth in Schedule 2.10.

<PAGE>

      "Change in Control of Supplier" shall be deemed to have occurred if an
event set forth in any one of the following paragraphs shall have occurred:

      (a) Any Person, is or becomes the Beneficial Owner, directly or
indirectly, of securities of Supplier or any intermediate or ultimate parent of
Supplier ("Parent"), representing 50% or more of the combined voting power of
Supplier's or Parent's then outstanding securities, excluding the present Parent
of Supplier and any Person who becomes such a Beneficial Owner in connection
with a transaction described in clauses (i) and (ii) of paragraph (b) below; or

      (b) There is consummated a merger or consolidation of Parent other than
(i) a merger or consolidation which results in the voting securities of Parent
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of Parent or any subsidiary of Parent, at least 51% of the
combined voting power of the securities of Parent or such surviving entity or
any parent thereof outstanding immediately after such merger or consolidation,
or (ii) a merger or consolidation effected to implement a recapitalization of
Parent (or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of Parent representing 50% or more
of the combined voting power of Parent's then outstanding securities; or

      (c) There is consummated an agreement for the sale or disposition by
Parent of all or substantially all of Parent's or Supplier's assets, other than
a sale or disposition by Parent of all or substantially all of Parent's assets
to an entity, at least 51% of the combined voting power of the voting securities
of which are owned by stockholders of Parent in substantially the same
proportions as their ownership of Parent immediately prior to such sale.

      "Cigarette" means: (a) any roll of tobacco wrapped in paper or in any
substance not containing tobacco, or (b) any roll of tobacco wrapped in any
substance containing tobacco which, because of its appearance, the type of
tobacco used in the filler, or its packaging or labeling, is likely to be
offered to, or purchased by consumers, as a cigarette described in the foregoing
clause (a).

      "Competitor of RJRT" means any entity that: (a) derived any of its
revenues during the calendar year immediately preceding the relevant date from
the sale of any product containing tobacco or (b) any entity that owns, directly
or indirectly (beneficially or of record), more than 50% of the total common
equity or voting stock of an entity described in clause (a) above.

      "Confidential Information" means (a) any proprietary information of a
Party hereto or of a third party with whom such Party has an obligation of
confidence, or (b) any other information or data relating to any aspect of any
research project, work in progress, test, scientific information, technical
information, engineering information, manufacturing information, marketing plan,
business plan, proposal, financial or personnel matter, present or future
product, sales, supplier, customer, employee, investor or business of a Party,
in each case, whether in oral, written, graphic or electronic form.

                                       2
<PAGE>

      "Contract Manufacturing Agreements" means the Contract Manufacturing
Agreement, dated as of July 30, 2004, by and between RJRT and BATUS Japan, Inc.,
the Contract Manufacturing Agreement, dated July 30, 2004, by and between RJRT
and B.A.T. (U.K. and Export) Limited, and the Agreement, dated January 1, 2005,
by and between R.J. Reynolds Global Products, Inc. and JT International S.A., as
each may hereafter be amended from time to time.

      "Conversion Cost" means the Price of all Products minus the direct cost of
all raw materials used in the production of the Products.

      "Current Facility" has the meaning set forth in Section 2.4

      "Damages" has the meaning set forth in Section 6.5(a).

      "Disclosing Party" has the meaning set forth in Section 5.1.

      "Effective Date" is the date set forth in the introductory paragraph
hereof.

      "Excluded Product" means any product item or service noted on Annex A,
Excluded New Products and any other product item or service not included in the
definition of Products.

      "Excluded New Product" has the meaning set forth in Section 2.21.

      "Force Majeure Event" means, with respect to either party, causes beyond
the control of such Party, including acts of God, fire, flood, storm,
earthquake, explosion, epidemic, embargo, war, acts of war (whether war be
declared or not), acts of terrorism, insurrection, riot, civil commotion, or
acts, omissions or delays in acting by any Governmental Authority (including
legislative, administrative, judicial, police or any other official government
acts) not resulting from any breach or delay by such Party.

      "Governmental Authority" means any of the following: (a) the government of
the U.S.A. or any foreign country, (b) the government of any state, province,
county, municipality, city, town, or district of the United States or any
foreign country, and any multi-country districts and (c) any ministry, agency,
department, authority, commission, administration, court, magistrate, tribunal,
arbitrator, instrumentality, or political subdivision of, or within the
geographical jurisdiction of, any government described in the foregoing clauses
(a) and (b).

      "Included New Product" has the meaning set for in Section 2.21.

      "Included Products" means those products listed on Annex B.

      "Included Products With Qualifications" means those products listed on
Annex C.

      "Intellectual Property" means all (i) information, concepts, ideas,
discoveries, inventions (whether conceived or reduced to practice, and whether
or not patentable), letters patent, applications for patents, patents, patent
disclosures awaiting filing determination, trade names, trade dress, trademarks,
service marks, registrations of trademarks and service marks, applications for
registration of trademarks and service marks, copyrights, registrations of

                                       3
<PAGE>

copyrights, applications for registrations of copyrights, package designs, UPC
codes, logos, slogans, Internet domain names, toll-free numbers, including
licenses of any of the foregoing and work for hire agreements, art supplier
release agreements and artwork agreements; (ii) all Trade Secrets, know-how,
methods, inventions, processes, formulae, Specifications, requirements, samples
of prototypical Cigarettes and Cigarette components, compositions, designs,
databases, software, codes, business plans and strategies, marketing plans,
customer lists, sourcing and supplier information, promotional materials and
associated artwork, graphics, designs, prints, sketches, Art, drawings and
photographs, developments, background technology, computer files comprising all
web sites, tangible property in any form whatsoever embodying such information
and work in process or under development embodying such information; and (iii)
all rights under or in respect of the foregoing including, but not limited to,
rights to sue for and remedies against past, present and future infringements
thereof, and rights of priority and protection of interests therein under the
laws of any jurisdiction worldwide and all tangible embodiments thereof and all
enhancements, derivatives, and improvements thereof.

      "Law" means any statute, law, ordinance, rule or regulation of any
Governmental Authority.

      "License Agreement" has the meaning set forth on Annex A.

      "Losses" has the meaning set forth in Section 6.2.

      "Measurement Period" has the meaning set forth below under "On Time/In
Full Delivery Percentage."

      "Modified Products" means products that, save for minor amendments to
Specifications, have substantially the same technical, physical and performance
characteristics as existing Products.

      "New Products" means products not currently required by RJRT, that may
from time to time after the Effective Date be required by RJRT, relating either
(i) to the packaging of Cigarettes or (ii) to non-tobacco Cigarette components.
Modified Products are not New Products.

      "On Time/In Full" is the performance metric used to measure Supplier's
delivery performance under this Agreement to determine if Supplier has delivered
(i) one hundred percent (100%) of the volume of Products ordered by RJRT, (ii)
on the firm delivery date established for each Call-Out in accordance with the
Call-Out Procedures set forth in Schedule 2.10 of this Agreement and (iii) in
accordance with the Specifications and the warranties set forth in Section 6.1
of this Agreement. For purposes of tracking this On Time/In Full performance
metric and producing related periodic reports, each order placed pursuant to a
Call-Out in accordance with the Call-Out Procedures set forth in Schedule 2.10
with respect to each SKU shall be deemed an individual order (an "Order Unit")
and accounted for under the Product category listed on Schedule 2.14(c) relevant
to such SKU.

      "On Time/In Full Delivery Percentage" means, with respect to any time
period stated in Section 2.14 (a "Measurement Period"), the percentage of Order
Units ordered pursuant to a Call-Out in accordance with the Call-Out Procedures
set forth in Schedule 2.10, the firm delivery

                                       4
<PAGE>

date for which is within such a Measurement Period and delivered by Supplier On
Time/In Full. On Time/In Full Delivery Percentage shall be measured as follows:
[(total number of Order Units deliverable during the Measurement Period) minus
(total number of such Order Units not delivered by Supplier On Time/In Full)]
divided by (total number of Order Units deliverable during the Measurement
Period) times one hundred (100). Stated formulaically:

 Number of Order Units
 deliverable during the       Number of Order Units not
 Measurement Period by   (-)   delivered On Time/In Full
    Supplier

-------------------------------------------------------- x 100 = On Time/In Full
                                                             Delivery Percentage
 Number of Order Units deliverable during the Measurement
                   Period by Supplier

As applied to Section 2.14(c) by way of illustration, if over the applicable
Measurement Period, 750 Order Units for tipping were deliverable by Supplier and
Supplier delivered 610 such orders On Time/In Full, Supplier's On Time/In Full
Delivery Percentage for such Product category during the Measurement Period
would be as follows:

                             750 (-) 140
                         ------------------- x 100 = 81%
                                 750

As applied to Section 2.14(d) by way of illustration, if over the applicable
Measurement Period, 35 Order Units for a specific SKU were deliverable by
Supplier and Supplier delivered 27 such orders On Time/In Full, Supplier's On
Time/In Full Delivery Percentage for such specific SKU during the Measurement
Period would be as follows:

                              35 (-) 8
                         ------------------- x 100 = 77%
                                 35

      "Order Unit" has the meaning set forth above under "On Time/In Full."

      "Oracle" has the meaning set forth in Section 2.22.

      "Parent" has the meaning set forth in the definition of Change in Control
of Supplier.

      "Party" has the meaning set forth in the introductory paragraph hereof.

      "Person" means any firm, corporation, partnership, limited liability
company, joint venture, trust, unincorporated association or organization,
business, enterprise or other entity, any individual and any Governmental
Authority.

      "Planning" has the meaning set forth on Schedule 2.9.

      "PPI" means the Producer Price Index for Pulp, Paper and Allied Products
(label and wrapper printing for packaging, commodity code WPU 093702), or if
such index becomes

                                       5
<PAGE>

unavailable for any reason, the Producer Price Index for Pulp, Paper and Allied
Products (gravure, commodity code WPU 09370103), both as compiled by the United
States Bureau of Labor Statistics (1982 = 100). If the Bureau of Labor
Statistics substantially revises the manner in which the PPI is determined, an
adjustment shall be made in the revised index that will produce results
equivalent, as nearly as possible, to those that would be obtained if the PPI
had not been so revised. If both commodity codes set forth above in this
definition or the Producer Price Index generally, become unavailable for any
reason, then the Parties shall substitute a mutually acceptable comparable
index, based on changes in the cost of supply measured at the finished goods
level published by an agency of the federal government of the U.S.A.

      "Price" has the meaning set forth in Section 3.1(a).

      "Products" means the products listed on Annexes B and C and is intended to
include Modified Products.

      "Purchase Order" means any purchase order issued by RJRT to Supplier
relating to the Products, that may include delivery instructions, shipping
instructions, contact personnel, matters including "bill to" and "sold to" and
such other requirements as RJRT may specify or Supplier may reasonably require.

      "Receiving Party" has the meaning set forth in Section 5.1.

      "RJRP" has the meaning set forth in the Recitals.

      "RJRT" has the meaning set forth in the introductory paragraph hereof.

      "RJRT Indemnified Party" has the meaning set forth in Section 6.6.

      "SKU" with respect to a Product, means a stock keeping unit designation.

      "Specifications" means specifications and standards set by RJRT for the
Products, and which are consistent with the specifications and manufacturing
standards met by RJRP immediately prior to the Effective Date, as the same may
be amended in accordance with the procedures set forth in this Agreement.
Specifications relate to the size, shape, dimension, composition, physical
properties, chemical properties, weight, configuration, appearance, indicia,
color and tolerances of the Products. For purposes of this Agreement, changes in
raw material requirements or composition to be used in the manufacture of
Products shall be deemed a change of Specifications.

      "Supplier" has the meaning set forth in the introductory paragraph hereof.

      "Supplier Facility" has the meaning set forth in Section 2.4.

      "Supplier Indemnified Party" has the meaning set forth in Section 6.5.

      "Term" means the period in which this Agreement is in effect as defined in
Section 2.1.

                                       6
<PAGE>

      "Trade Secret" means information and data, including, without limitation,
Specifications, that: (a) derive independent economic value, actual or
potential, from not being generally known to the public or other Persons who can
obtain economic value from their disclosure and use and (b) are the subject of
efforts that are reasonable under the circumstances to maintain their secrecy.

      "Transition Period" has the meaning set forth in Section 2.22.

      "Transition Supply Agreement" has the meaning set forth in Section 2.22.

      "United States" means the United States of America and its territories and
possessions.

      "Weekly Forecast" has the meaning set forth in Section 2.9.

      1.2 Interpretation. (a) When a reference is made in this Agreement to
Articles, Sections, Exhibits, Schedules or Annexes, such reference will be to an
Article or Section of or Exhibit, Schedule or Annex to this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." Unless the context otherwise
requires, (i) "or" is disjunctive but not necessarily exclusive, (ii) words in
the singular include the plural and vice versa, (iii) the use in this Agreement
of a pronoun in reference to a party hereto includes the masculine, feminine or
neuter, as the context may require, and (iv) terms used herein which are defined
in GAAP have the meanings ascribed to them therein. All Schedules, Exhibits and
Annexes hereto will be deemed part of this Agreement and included in any
reference to this Agreement. This Agreement will not be interpreted or construed
to require any Person to take any action, or fail to take any action, if to do
so would violate any applicable Law.

      (b) The Parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the parties, and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any provision of this
Agreement.

                        II. RESPONSIBILITIES OF PARTIES

      2.1 Term of the Agreement. This Agreement shall be effective upon the
Effective Date and, unless sooner terminated by either Party pursuant to the
terms and conditions hereof, shall remain in effect until the 7th Anniversary of
the Effective Date (the "Term").

      2.2 Exclusivity. During the Term and subject to the limitations contained
in this Agreement, Supplier is hereby appointed the exclusive supplier of RJRT
for the Products. During the Term, subject to and in accordance with the terms
and conditions of this Agreement, Supplier shall provide all Products to RJRT,
and RJRT shall purchase all of its Product requirements from Supplier. RJRT
shall furnish to Supplier Specifications for all Products to be manufactured and
produced pursuant to this Agreement.

                                       7
<PAGE>

      2.3 Scope of this Agreement. The scope of this Agreement includes Products
to (1) be used by RJRT in the ordinary course of its business in the United
States, including its obligations to provide Products in Puerto Rico (through an
Affiliate), duty free shops in the United States and United States overseas
military installations and (2) satisfy RJRT's obligations pursuant to the
Contract Manufacturing Agreements in accordance with the terms of those Contract
Manufacturing Agreements, including any required consents. Notwithstanding the
foregoing, except as expressly set forth in the preceding sentence, nothing
herein will obligate RJRT to obtain Products from Supplier for (1) any of its
subsidiaries or Affiliates or (2) any business operations outside the United
States. The manufacture and supply of Excluded Products are not included in the
scope of this Agreement.

      2.4 Manufacturing Facilities; Transition Costs. (a) Supplier shall
initially manufacture, or cause to be manufactured, Products at Buildings 200
and 604 which currently house the packaging business of RJRP (the "Current
Facility"). After the Effective Date, Supplier intends to relocate the
manufacture of Products under this Agreement to another manufacturing facility
(the "Supplier Facility") with such location to be mutually agreed by RJRT and
Supplier in writing. Supplier shall give RJRT ninety (90) days' prior written
notice of its intention to effect such a relocation and thereafter keep RJRT
reasonably appraised of the status of such relocation. Upon request by RJRT,
Supplier will, at Supplier's sole cost and expense, supply sample Products
manufactured in the Supplier Facility in advance of mass supply for quality
testing by RJRT.

      (b) All transition costs associated with moving production of Products to
Supplier from the third party supplier currently supplying certain products to
RJRT, including printing cylinders, reprographics proofs, press trials and other
material and services will be borne by RJRT.

      (c) All costs and capital expenditures associated with moving production
of the Products from the Current Facility to Supplier Facility, including
printing cylinders, proofs, press trials and other material and services will be
borne by Supplier.

      2.5 Specifications.

      (a) Annex D sets forth the initial Specifications for all Products to be
produced by Supplier for RJRT pursuant to this Agreement.

      (b) Changes Proposed by RJRT.

            (i) In accordance with the procedures stated below in the following
clauses (ii) through (iv), Supplier shall comply with RJRT's reasonable
instructions for any changes in Specifications, including a change in a raw
material component which is required by a third party Supplier (the machine time
and material costs of Supplier's evaluation of any such changes, if such
evaluation is necessary, shall be borne by RJRT, subject to RJRT's prior written
approval of the budget for such costs which approval shall not be unreasonably
withheld).

            (ii) The Parties shall conduct trials, as appropriate, in order to
evaluate the effect of changes in Specifications upon Products, Product pricing
and the Parties' manufacturing environments (the machine time and material costs
of evaluating and

                                       8
<PAGE>

implementing any such changes, other than any resulting capital expenditures
shall be borne by RJRT).

            (iii) Upon completion of the activities set forth in the foregoing
clauses (i) and (ii) to RJRT's satisfaction, RJRT shall provide final written
approval for the changed Specifications. Unless otherwise agreed in writing,
RJRT shall not be required to accept any quantity of Products involving such
changed Specifications for which RJRT has not provided such final approval.

            (iv) Supplier shall accept and acknowledge all changed
Specifications for which RJRT has provided final approval to Supplier, unless
Supplier has demonstrated to RJRT's reasonable satisfaction that it cannot meet
such changed Specifications. If RJRT and Supplier disagree as to Supplier
capability or capacity to meet the changed Specifications, Supplier and RJRT
shall negotiate in good faith to resolve the controversy in accordance with the
procedures set forth in Section 7.6. If (i) RJRT and Supplier still cannot agree
after following such procedures or (ii) RJRT accepts Supplier's claim that it
cannot meet the changed Specification, the products affected by such changed
Specifications will be deemed to be Excluded New Products, and RJRT will be
entitled to have such Excluded New Products manufactured by a third party
supplier selected by RJRT.

            (v) Should mutually agreed changes to Specifications require Product
pricing changes, Supplier and RJRT shall negotiate the applicable pricing
changes (both increases and decreases) based on the documented effects of the
Specification changes on Supplier's direct incremental costs.

      (c) Changes Proposed by Supplier.

            (i) Supplier shall inform RJRT in writing of changes in Supplier's
manufacturing operations proposed at any time during the Term which are
anticipated to have an effect upon or require modifications to Specifications or
upon Supplier's ability to produce the projected volumes of Products anticipated
to be ordered by RJRT (the costs of evaluating and implementing any such changes
shall be borne by Supplier). Supplier shall provide sufficient advance notice of
such proposed changes in manufacturing operations so as to allow RJRT
commercially reasonable time to evaluate and test the effects of the associated
Specification changes on the Products and the Products' consumer acceptability
and in no event shall any such change in Supplier's manufacturing operations be
implemented without RJRT's prior written consent.

            (ii) Supplier and RJRT shall conduct trials, as appropriate, in
order to evaluate the effect of the proposed changes in Specifications upon
Products, Product pricing and the Parties' manufacturing environments and the
Products' consumer acceptability (the costs associated with such trials shall be
borne by Supplier, including the costs of sampling reasonably determined to be
necessary, subject to Supplier's prior written approval of the budget for such
costs which approval shall not be unreasonably withheld or delayed). The
applicable trial, sampling and consumer testing methodologies will be determined
by mutual agreement of the Parties in accordance with RJRT's Product Testing
Protocols attached hereto as Annex E.

                                       9
<PAGE>

            (iii) Upon completion of the activities set forth in the foregoing
clauses (i) and (ii) to RJRT's satisfaction, RJRT shall provide final written
approval for the changed Specifications. Unless otherwise agreed in writing,
RJRT shall not be required to accept any quantity of Products for which RJRT has
not provided such final approval.

            (iv) Supplier shall accept and acknowledge in writing all changed
Specifications for which RJRT has provided final approval to Supplier.

            (v) Should mutually agreed changes to Specifications require Product
pricing changes, Supplier and RJRT shall negotiate the applicable pricing
changes (both increases and decreases) based on the documented effects of the
Specification changes on Supplier's direct incremental costs.

      2.6 Contact Personnel. Promptly after the Effective Date, each of Supplier
and RJRT shall designate primary contact individuals for purposes of this
Agreement. Those individuals shall have responsibility for communicating and
receiving information regarding all matters that are relevant pursuant to the
relationship between Supplier and RJRT in accordance with this Agreement.
Supplier and RJRT shall promptly notify the other if there is a change in the
designation of any contact individual.

      2.7 Conferences. Representatives of Supplier and RJRT shall conduct such
conferences (by video, teleconference or in person) as they deem necessary to
discuss with one another the Products, quality control procedures, and any other
matters relating to the activities involving the supply of Products to RJRT by
Supplier. All issues identified during such conferences shall be evaluated,
addressed and remedied as promptly as commercially practicable.

      2.8 Visit at Facilities and Inspection. (a) Representatives of RJRT may,
upon reasonable notice and at times reasonably acceptable to Supplier, visit the
facilities at which the Products are manufactured. RJRT shall bear its own
expenses with regard to any such visit. If requested by RJRT, Supplier shall
cause the individuals responsible for manufacture of Products pursuant to this
Agreement to be available for meetings at the facilities where such individuals
are employed at times reasonably requested by RJRT. RJRT's inspection rights
shall include the inspection of the inventory of Products maintained by
Supplier, Supplier's manufacturing facilities and processes relating to the
Products, Supplier's quality control procedures relating to the Products, and
all materials used in the manufacturing and packaging of the Products.

      (b) During any such visit, RJRT shall be responsible for ensuring that its
representatives abide by all of Supplier's rules and regulations with regard to
safety, security, personnel matters, computer use and computer network use while
at Supplier's facilities, to the extent such rules and regulations have been
clearly communicated to RJRT at or in advance of such visit. RJRT shall inform
its representatives that have access to Supplier's premises of their obligations
under this Agreement. RJRT shall be responsible for ensuring that its
representatives and visitors refrain from engaging in any conduct that
materially interferes with Supplier's business or operations.

                                       10
<PAGE>

      2.9 Periodic Forecasts. RJRT shall provide Supplier, on a weekly basis,
with a rolling twenty six (26) week forecast (by SKU) (the "Weekly Forecast")
providing projections for volumes of the various Products for which RJRT expects
to place Call-Outs during the period covered by such forecasts. Except to the
extent specifically set forth in Schedule 2.9, any and all such forecasts
supplied will be non-binding and will be supplied for purposes of general
planning of capacity and inventories. Although RJRT shall use reasonable
business judgment to provide an accurate Weekly Forecast, RJRT shall not in any
way be responsible for guaranteeing the accuracy of any such forecast or
precluded from changing any such forecast. RJRT and Supplier shall cooperate in
resolving any issues that are created as a result of forecast inaccuracies.

      2.10 Purchase Orders and Supply Schedules. RJRT shall place a blanket
Purchase Order with Supplier at least annually, for Products that RJRT desires
to order. RJRT shall provide (or reference) to Supplier the Specifications for
each of the Products subject to a blanket Purchase Order. Supplier shall
schedule supply of Products based on the blanket Purchase Orders placed by RJRT,
the Weekly Forecast, in accordance with the Periodic Forecast Procedures set
forth on Schedule 2.9, and the weekly Call-Outs, in accordance with the Weekly
Call-Out Procedures set forth on Schedule 2.10.

      2.11 Inventory. (a) Supplier will be responsible for managing and
maintaining sufficient raw material inventory to supply the Products in
accordance with the Weekly Forecast and in accordance with the Periodic Forecast
Procedures set forth in Schedule 2.9. In accordance with forecast decision
rules, Supplier agrees to produce inventory in the mutually agreed economic run
sizes and agrees to hold that inventory for the agreed duration (8 weeks).
Supplier will release Products it has produced in accordance Call Outs as
required by RJRT over that time period, after which time such Products shall be
automatically shipped and invoiced to RJRT.

      (b) RJRT will have no obligation to purchase any Product produced by
Supplier in excess of the amounts set forth by RJRT in the relevant Weekly
Forecast, subject to decision rules contained in the Periodic Forecast
Procedures set forth in Schedule 2.9. Supplier will bear the costs of any such
excess supply.

      (c) Supplier and RJRT will mutually review excess and/or obsolete
inventory annually to determine its disposition.

      2.12 Quality. Supplier is responsible for providing Products meeting
RJRT's Specifications. Any Products not meeting the Specifications for such
Products may be rejected by RJRT in accordance with the procedures set forth in
Section 3.3.

      2.13 Supply Activities. (a) Supplier shall acknowledge receipt of each
weekly Call-Out in writing in accordance with the procedures set forth on
Schedule 2.10.

      (b) If, after having followed the procedures set forth on Schedule 2.10,
all or part of any Call-Out order placed by RJRT in accordance with such
procedures, is not fulfilled by Supplier, RJRT shall be entitled, but not
obligated, to cover any shortfall resulting from such breach by Supplier by
obtaining such Products from any third-party supplier of its choosing.

      2.14 Delivery and Shipment; Remedies for Failure to Deliver by Agreed
Delivery Dates.

                                       11
<PAGE>

      (a) Shipping Instructions. Following the manufacture of Products, Supplier
shall effect delivery of all Products by the delivery date(s) required by the
relevant Purchase Orders or the agreed firm delivery date(s) (if modified
pursuant to Section 2.12). Supplier shall ship Products on a first in/first out
basis as determined by the date of manufacture and shall ship and deliver
Products in the manner prescribed in any instructions that RJRT furnishes;
provided, that all Products must be shipped using shipping terms that require
Supplier to control the Products until delivered to the carrier chosen by RJRT.
No carrier may be used by Supplier for shipment of the manufactured Products
other than a carrier chosen by RJRT, unless otherwise specified in writing by
RJRT. The shipping of Products supplied under this Agreement shall be FOB
shipping point (INCOTERMS 2000). For the avoidance of doubt, risk of loss to
Products shall pass to RJRT once the Products are delivered to the carrier
chosen by RJRT. RJRT shall pay all costs, including insurance costs, relating to
the shipment and delivery of Products.

      (b) Packing. Supplier shall be responsible for packing materials and
packing of the Products for shipment in accordance with RJRT's directions. Such
packing shall be adequate to prevent any damage to and/or deterioration of
Products under normal transport conditions.

      (c) Material Breach of Contract for Failure to Meet Required On Time/In
Full Delivery Percentage.

            (i) If, (A) during any rolling two hundred seventy (270) days or one
hundred twenty (120) consecutive days during the term (the "Transition Period")
of the Supply Agreement (the "Transition Supply Agreement") of even date
herewith by and between the Supplier and Oracle or (B) during any rolling one
hundred eighty (180) days or any consecutive ninety (90) days following the
Transition Period and through the end of the Term, Supplier fails to maintain
the On Time/In Full Delivery Percentage set forth on Schedule 2.14(c) by
category of Product, as ordered by RJRT under this Agreement, such failure shall
constitute a material breach of this Agreement by Supplier, entitling (but not
requiring) RJRT to terminate the entire Agreement for cause without allowing the
cure period provided for other material breaches of contract as provided in
Section 4.1(b). For purposes of this Section 2.14(c), the aggregate On Time/In
Full Delivery Percentage for each category of Product shall be calculated by
averaging the On Time/In Full Delivery Percentage of each SKU relating to, or
contained in, such category of Product.

            (ii) Supplier is responsible for meeting or exceeding the levels of
service and performance established in this Section 2.14(c) and shall maintain
at all times during the Term the necessary capacity to fulfill its obligations
hereunder.

            (iii) RJRT must invoke its termination rights by written notice to
Supplier within ninety (90) calendar days of the accrual of such right or such
right of termination shall be deemed waived with respect to the applicable
material breach. Furthermore, after notice of termination is given, the
termination of this Agreement shall become effective six (6) months from the
date of RJRT's notice or such longer period as is set forth in such notice.
During such period, this Agreement shall remain in full force and effect,
including Supplier's obligation to continue to manufacture Products pursuant to
the Purchase Orders and Call-Outs placed by RJRT, if any.

                                       12
<PAGE>

      (d) Partial Termination for Failure to Meet Required On Time/In Full
Delivery Percentage with Respect to a Specific Product.

            (i) If, (A) during any rolling two hundred seventy (270) days or one
hundred twenty (120) consecutive days during the Transition Period or (B) during
any rolling one hundred eighty (180) days or any consecutive ninety (90) days
following the Transition Period and through the end of the Term, Supplier fails
to maintain the On Time/In Full Delivery Percentage set forth Schedule 2.14(d),
on a SKU by SKU basis, as ordered by RJRT pursuant to this Agreement, such
failure shall constitute a material breach of this Agreement by Supplier with
respect to such SKU, entitling (but not requiring) RJRT to terminate this
Agreement with respect to such SKU only, for cause, without allowing the cure
period provided for other material breaches of contract as provided in Section
4.1(b).

            (ii) Supplier is responsible for meeting or exceeding the levels of
service and performance established in this Section 2.13(b)(d) and shall
maintain at all times during the Term the necessary capacity to fulfill its
obligations hereunder.

      (e) RJRT must invoke this partial termination right by written notice to
Supplier within ninety (90) calendar days of the accrual of such right or such
right of termination shall be deemed waived with respect to such breach.
Furthermore, after notice of partial termination is given, such partial
termination will become effective with respect to the terminated Product on the
date set forth in RJRT's notice. During such period, this Agreement shall remain
in full force and effect with respect to such terminated Product, including
Supplier's obligation to continue to manufacture the terminated Product pursuant
to the Purchase Orders and Call-Outs placed by RJRT, if any.

      (f) Nothing in this Section 2.14 or otherwise in this Agreement shall
limit RJRT's right to pursue any and all remedies available at law or in equity
in the event of a breach of this Agreement by Supplier.

      2.15 Contingency Manufacturing Plans; Alternative Source of Supply.

      (a) Supplier shall provide to RJRT, as promptly as practicable, but in no
event later than thirty (30) days from the Effective Date, a written copy of the
contingency manufacturing plans prepared by Supplier to ensure that Products can
be manufactured and supplied to RJRT in accordance with this Agreement should
Supplier suffer a loss or damage to its manufacturing facilities or any other
interruption to, or interference with, Supplier's ability to comply with its
obligations under this Agreement. During the Term of this Agreement, Supplier
shall notify RJRT in writing of any proposed changes to the contingency
manufacturing plans delivered in connection with the preceding sentence. No
changes to the contingency manufacturing plans will be implemented without the
prior written consent of RJRT which consent will not be unreasonably withheld or
delayed.

      (b) If during the Term of this Agreement, Supplier becomes unable to
provide Product to RJRT in the volumes requested by RJRT, then Supplier may
purchase Products from a third party producer previously identified by RJRT as
an acceptable replacement. In the event Supplier elects to satisfy its
obligations under this Agreement through such a third party

                                       13
<PAGE>

purchase, pricing to RJRT for such third party-purchased Products shall be based
on the pricing matrix set forth on Annex F-1, and such third party-purchased
Products shall be deemed volume ordered by RJRT from Supplier pursuant to this
Agreement. This Agreement covers supply of Products regardless of where such
Products are manufactured.

      2.16 Art, Prepress and Engraving. The cost of all artwork design and
layout and engraving requested by RJRT will be borne by RJRT. RJRT, pursuant to
the terms of Section 2.19, will be the sole owner of all artwork, prepress and
engraving, including all Intellectual Property relating thereto, manufactured or
supplied pursuant to this Agreement or related to RJRT ("Art"). Supplier shall
have no right to, and shall not use, Art without the prior written approval of
RJRT.

      2.17 Cylinders and Tooling. (a) Supplier shall purchase and maintain, at
its expense, cylinders for all New Products and for existing Products the
manufacture and supply of which are relocated to the Supplier Facility.

      (b) If RJRT initiates a specification change that requires changes to
printing cylinders, the direct incremental costs associated with such change in
Specification will be borne by RJRT.

      (c) The costs of replacement of any cylinders in the ordinary course of
business resulting from wear and tear and/or damage will be borne by Supplier.

      (d) Supplier shall own all cylinder cores.

      (e) RJRT shall own the image carrier and engraving of the engraved
cylinders used in the manufacture and supply of the Products, unless otherwise
agreed in writing by the Parties.

      (f) Supplier shall not use the image carriers or engraving of the engraved
cylinders for any purpose other than the manufacture or supply of the Products,
without the prior written consent of RJRT.

      2.18 Capital Expenditures. All costs related to capital expenditures shall
be borne by Supplier. RJRT will not finance or share in the cost of any capital
expenditures incurred by Supplier in connection with the supply of Products
pursuant to this Agreement.

      2.19 Intellectual Property. (a) All Intellectual Property created for RJRT
by Supplier or Supplier's employees, agents, representatives or third party
consultants, or used in the manufacture or supply of Products, shall be owned
solely by RJRT and shall not be used by Supplier for other customers without the
prior written approval of RJRT. Upon its respective conception, reduction to
practice, fixation in a tangible medium of expression or other making, an item
of such Intellectual Property and all worldwide right, title and interest in and
to that Intellectual Property, including all common law, statutory, treaty and
convention rights, shall immediately become and forever remain the sole property
of RJRT without any further act or deed being required and without any
additional consideration from RJRT to Supplier, and Supplier hereby irrevocably
assigns to RJRT, and RJRT hereby accepts, all such Intellectual Property and all
such worldwide right, title and interest. Supplier shall execute, or cause its
employees, agents, representatives or third party consultants to execute, all
such assignments and

                                       14
<PAGE>

other documentation deemed reasonably necessary by RJRT to effectuate this
assignment and the intent of this Section. Without limiting the foregoing:

      (b) all such Intellectual Property created for RJRT which constitutes
patentable subject matter shall be, and hereby is irrevocably assigned to RJRT
by this Agreement, together with all patent rights with respect to such work or
work product. Supplier shall execute and deliver or shall cause Supplier
employees, agents, representatives or third party consultants to execute and
deliver any applications, assignments or other instruments and papers necessary
to secure United States or foreign letters patent or the renewal or continuation
thereof and to transfer to RJRT all right, title and interest in such
Intellectual Property, or the renewal or continuation thereof. Any such further
applications, assignments, documents or other instruments shall be prepared by
RJRT at RJRT's expense;

      (c) all such Intellectual Property created for RJRT which constitutes
copyrightable subject matter under the copyright laws of the United States
shall, from the inception of creation, be deemed to be a "work made for hire"
under the United States copyright laws and all right, title and interest in and
to such copyrightable works shall vest in RJRT. RJRT shall have the exclusive
rights to copyright such works in its name as the sole author and owner thereof
and to secure any and all renewals and extensions of such copyright throughout
the world. In the event that any copyrightable work which is created by Supplier
or Supplier's employees, agents, representatives or third party consultants for
RJRT is determined not to be a "work made for hire" under the United States
copyright laws, this Agreement shall operate as an irrevocable assignment by
Supplier to RJRT of the copyright in and to such copyrightable work, including
all right, title and interest therein, in perpetuity. Supplier will execute all
documents that RJRT may reasonably request in order to assist RJRT in perfecting
the rights granted to RJRT in and to said copyrightable works. Any such further
applications, assignments, documents or other instruments shall be prepared by
RJRT at RJRT's expense. Supplier hereby waives and agrees not to assert any
moral rights or similar rights under the laws of any jurisdiction with respect
to such copyrightable subject matter.

      2.20 Sharing of Information. Supplier and RJRT shall cooperate with one
another (and relevant third Persons) in order to ensure that each is provided
with relevant information regarding the physical and chemical properties
(including toxicological information) of raw materials, equipment, process
conditions, processes or treatment conditions that Supplier may employ when
producing Products for RJRT. If requested by RJRT, Supplier shall provide
samples of raw materials, at the times and in the amounts requested, to RJRT or
an Affiliate designee of RJRT for testing and evaluation. Any change to raw
material, equipment (routine/preventive maintenance and ordinary wear and tear
excepted), processes, process conditions, or treatment conditions that Supplier
may employ when producing Products for RJRT must be approved by RJRT prior to
implementation of the change by Supplier.

      2.21 New Products.

      (a) Upon establishing its need for any New Product, RJRT shall determine
in good faith (i) whether such New Product is within Supplier's then-existing
manufacturing capacity and capability and (ii) whether Supplier's pricing of
such New Products is competitive taking into

                                       15
<PAGE>

account, among other things, such factors as the pricing of current Products
manufactured by Supplier.

      (b) New Products that (i) are determined by RJRT to be within Supplier's
then-existing manufacturing capacity and capability and (ii) for which
Supplier's pricing is determined by RJRT to be competitive pursuant to Section
2.21(a) above shall be Included Products ("Included New Products").

      (c) New Products that (i) are determined by RJRT not to be within
Supplier's then-existing manufacturing capacity and capability or (ii) for which
Supplier's pricing is determined by RJRT not to be competitive pursuant to
Section 2.21(a) above shall be Excluded Products ("Excluded New Products") and
give rise to the Supplier's right of negotiation set forth in Section 2.21(d)
below.

      (d) Notwithstanding anything herein to the contrary, RJRT may at any time
solicit proposals from any third party for the supply of Excluded New Products.
Within 30 days of receiving notice from RJRT that it is soliciting proposals for
the supply of an Excluded New Product, Supplier may submit a proposal containing
terms (including, without limitation, pricing) under which Supplier proposes to
supply such Excluded New Product to RJRT. The conditions, other than the timing,
for submission of a proposal by Supplier will be no less favorable than the
conditions, other than timing, imposed on third parties submitting proposals for
such Excluded New Product. If Supplier submits a proposal to supply an Excluded
New Product, the Parties will negotiate in good faith to reach an agreement with
respect to the supply of such Excluded New Product by Supplier, provided,
however, that in no event shall RJRT be required to accept any terms from
Supplier with respect to the supply of an Excluded New Product. Notwithstanding
anything herein to the contrary, Supplier shall have the right, but not the
obligation, to agree to supply the Excluded New Products to RJRT on terms and
conditions that are at least as favorable to RJRT as the terms of the best
proposal received by RJRT from a third party. If RJRT and Supplier agree to the
supply of an Excluded New Product, in accordance with this Section 2.21(d), such
Excluded New Product will be deemed to be an Included Product for purposes of
this Agreement, immediately upon the effectiveness of such agreement.

      2.22 Transition Supply Arrangements.

      (a) RJRT acknowledges that, pursuant to the terms of the Supply Agreement
(the "Transition Supply Agreement") of even date herewith by and between the
Supplier and Oracle Flexible Packaging, Inc. ("Oracle"), Oracle will fulfill
certain of Supplier's obligations relating to the supply of the Products, for a
period not to exceed the term of the Transition Supply Agreement (such period,
the "Transition Period").

      (b) Supplier hereby agrees that RJRT is an intended third-party
beneficiary under the Transition Supply Agreement with the same rights to take
action, including, without limitation, to inspect, audit and consult with Oracle
as RJRT has with respect to Supplier under the terms of this Agreement. RJRT
shall be entitled, without the consent of Supplier, to initiate, or join
Supplier in, any dispute, action, claim or proceeding against Oracle for breach
of Oracle's obligations under the Transition Supply Agreement, to enforce the
provisions of the Transition Supply Agreement and to pursue any remedies or
claims with respect to any breach thereof.

                                       16
<PAGE>

Supplier hereby covenants that the provisions of this Section 2.22(b) shall be
specifically reflected in the Transition Supply Agreement.

      (c) Supplier shall promptly notify RJRT in writing when and to the extent
Supplier terminates all or any portion of Oracle's obligations to supply
Products under the Transition Supply Agreement and in no event shall such notice
be made later than thirty (30) days prior to the date on which Oracle is
scheduled to cease the supply of such Products. Such notice shall identify
specifically those Products which Oracle shall no longer produce on Supplier's
behalf. The Parties hereby agree that during the Transition Period unless
otherwise notified in writing by Supplier in accordance with the preceding
sentence, RJRT shall be deemed to have fulfilled its obligations to Supplier
under this Agreement if RJRT delivers any deliverables under this Agreement,
including payment and notice, to Oracle instead of and not in addition to,
Supplier.

      (d) Except as set forth in clause (c) above, Supplier agrees not to amend,
waive or terminate any of its rights under the Transition Supply Agreement
without the prior written consent of RJRT.

      (e) Nothing herein or in the Transition Supply Agreement shall relieve
Supplier of (i) any liability under this Agreement, which it agrees will be
joint and several with the liability of Oracle and which shall be primary and a
continuing obligation of Supplier during the Transition Period or (ii) its
obligations under this Agreement, including its obligation to initiate
contingency manufacturing plans as set forth in Section 2.15.

      (f) Notwithstanding anything in Section 3.1 to the contrary, so long as
Oracle shall supply Products to RJRT on behalf of Supplier in accordance with
this Section 2.22, the Price shall not be adjusted, except to reflect changes in
Oracle's costs related to board and ink, if applicable. In the event of an
increase in the cost of board or ink during such time, Supplier will provide, or
cause Oracle to provide to RJRT, documentation evidencing the changes resulting
in such Price increase and the impact of such changes on Oracle's direct
incremental costs. Subject to the foregoing, all other cost increases shall be
borne solely by Oracle and shall not result in a price adjustment with respect
to any Products. Any adjustments made in accordance with Section 2.22 and
resulting in a Price decrease shall be passed through to RJRT as promptly as
practicable and will be reflected in the first invoice following the
effectiveness of such downward adjustment.

      (g) RJRT acknowledges and agrees that Supplier shall have the right to
assign to Oracle, and Oracle shall have the right to enforce, Supplier's rights
to indemnification set forth in Section 6.5.

      2.23 Destruction of Waste. Supplier hereby agrees that prior to removal
from the facility at which Products are being manufactured, all excess materials
used in the manufacture of the Products, all non-conforming Products, all
Products not delivered to RJRT and all returned or rejected Products
constituting waste shall be destroyed, by shredding or otherwise, or, if
destruction is not commercially feasible, shall be altered or otherwise disposed
of in a manner that will not result in the use of such material or Product in
counterfeit products. Supplier shall deliver to RJRT a certification of
compliance with this Section 2.23 upon the reasonable request

                                       17
<PAGE>

of RJRT which shall not be made more often than once during each fiscal quarter
during the Term.

                             III. COMMERCIAL TERMS

      3.1 Pricing.

      (a) Annex F-1 details the base price (the "Price") of each Product by SKU.

      (b) Subject to the limitations contained in Section 3.1(d) below, the
Price may be adjusted upward or downward as follows:

            (i) with respect to costs of paper used to manufacture and produce
the Products, and subject to the provisions of Section 3.1(c) below, such
adjustments will be made as necessary on an ongoing basis in accordance with the
cost model set forth on Schedule 3.1(b);

            (ii) with respect to costs of other materials used to manufacture
and produce the Products, including inks, solvents and packaging, and subject to
the provisions of Section 3.1(c) below, such adjustments will be made annually
relative to an established baseline in accordance with the cost model set forth
on Schedule 3.1(b); provided, however, that if, at any time during the Term, the
cost of such other raw materials has increased or decreased by 20% or more since
the last annual adjustment, an interim adjustment will be made within ten (10)
days of such fluctuation; and

            (iii) other adjustments will be made annually solely to the extent
they directly result from:

                  (A) duties and excise taxes applicable to imported materials;

                  (B) exchange rate fluctuation on imported materials; and

                  (C) adjustments to the Conversion Cost based on the PPI.

such adjustments will be made proportionately such that any increase or decrease
in such costs shall be reflected pro rata on the Price.

      (c) Notwithstanding anything herein to the contrary, RJRT shall be solely
responsible for, and Supplier accepts not to participate in (i) identifying and
approving any and all suppliers of raw materials used to manufacture and produce
the Products, (ii) determining the specifications relating to such raw materials
and (iii) negotiating with such suppliers the price of such raw materials,
resulting in RJRT's exclusive control over the input costs of such materials.
Specifically, any and all rebates obtained by RJRT from such suppliers shall be
for the exclusive benefit of RJRT without prejudice to Supplier's right to
separately negotiate and obtain additional rebates or such materials. Supplier
must maintain records related to all raw materials utilized in the manufacture
and supply of the Products.

      (d) (i) Prior to making any adjustment pursuant to Section 3.1(b)
resulting in a Price increase, Supplier will have (i) provided to RJRT
documentation evidencing the changes

                                       18
<PAGE>

resulting in each price adjustment and the impact of such changes on Supplier's
direct incremental costs (ii) obtained RJRT's written consent to such
adjustment, which written consent shall be issued by RJRT within thirty (30)
days after RJRT's receipt of such proof, if at all, and not unreasonably
withheld.

            (ii) All adjustments resulting in a Price decrease shall be passed
through to RJRT as promptly as practicable and will be reflected in Supplier's
first invoice following the effectiveness of such downward adjustment.

      (e) The parties hereto agree that volume variations would be linked to the
pricing triggers set forth on Schedule 3.1(e).

      (f) All other cost increases shall be borne solely by Supplier and shall
not result in a price adjustment with respect to any Product.

      (g) Notwithstanding the provisions of Section 3.1(a), the Price of each
product by SKU shall be as set forth in Annex F-2 for a period beginning on the
Effective Date and ending, with respect to each such SKU, on the earlier of (i)
twenty four (24) months from the Effective Date or (ii) the date on which
Supplier ceases the manufacture of any Product identified by such SKU at the
Current Facility. Supplier shall give written notice to RJRT five (5) business
days in advance of such transfer of manufacture or production of any such
Product from the Current Facility to the Supplier Facility.

      3.2 Payment Terms. Supplier shall deliver to RJRT an invoice issued
against the relevant blanket Purchase Order for the payment of Products
manufactured by Supplier pursuant to any Call-Out, simultaneously with the
shipment of such Products. Each invoice shall be payable by RJRT no later than
10 days after receipt by RJRT of such Products. All payments by RJRT to Supplier
shall be made by wire transfer of funds to Supplier's bank account as specified
from time to time in writing by Supplier. Supplier's current payment
instructions are set forth in Annex G of this Agreement. Payments by RJRT to
Supplier in accordance with this Section 3.2 are without prejudice to any claims
or other rights RJRT may have for any reason whatsoever, and any liability of
Supplier for breach of this Agreement shall not be terminated or reduced by
reason of such payment.

      3.3 Rejected Products. (a) Supplier shall ensure that the Products it
manufactures for RJRT comply with the Specifications. RJRT may reject any
Product within one year of the delivery date of such Product that does not
comply with the Specifications for such Product. In such case, RJRT's written
notice of rejection to Supplier shall state in commercially reasonable detail
the Products which RJRT deems non-compliant, the Purchase Order and/or Call-Out
date pursuant to which those Products were manufactured and the Specification
defects.

      (b) Within ten (10) business days of receipt of a notice of rejection,
Supplier may contest such rejection and provide documentation or other evidence
demonstrating that the rejected Products comply with the Specifications.
Supplier and RJRT shall negotiate in good faith to resolve the controversy in
accordance with the procedures set forth in Section 7.6.

      (c) Supplier will replace, or, if replacement is not commercially
feasible, reimburse RJRT for, any properly rejected Products, at no cost to
RJRT, in a time period reasonably

                                       19
<PAGE>

appropriate under the circumstances and no more than ten (10) days after receipt
thereof or the final resolution of any disagreement in accordance with Section
3.3(b) above. Supplier shall bear any and all shipping and handling costs
incurred in connection with the delivery of such replacement Products and RJRT's
costs in connection with the inspection, disposal and return of any properly
rejected non-conforming Products. In addition to the costs set forth in the
preceding sentence, Supplier shall bear all costs incurred by RJRT in inspecting
or disposing of non-conforming Products that were properly rejected.
Notwithstanding anything to the contrary, this Section 3.3 is subject to the
warranties and provisions relating to liability and damages set forth in Section
6.1 and 6.2.

      (d) Non-complying Products returned to Supplier that cannot be readily
rendered conforming shall be destroyed by Supplier within ten (10) business days
of receipt thereof and Supplier will provide reasonably acceptable evidence of
such destruction to RJRT.

      3.4 Audit Rights of RJRT. (a) Supplier shall maintain accurate and
complete records including, but not limited to, correspondence, instructions,
receipts, quality assurances records, Specifications, Purchase Orders,
Call-Outs, raw material procurement records, warehousing records and cost data,
export records, transportation records and cost data, other manufacturing cost
records and data, and similar documents and data relating to RJRT's order and
receipt of Products from Supplier and Supplier's supply and delivery of Products
for RJRT. Supplier shall keep such records in sufficient detail to enable RJRT
to evaluate, determine or verify raw materials inventories, process conditions
and quality controls for Products supplied pursuant to each Call-Out. RJRT shall
have the right to review and audit Supplier's records relating to projected and
actual Product cost increases or decreases derived from changes in
Specifications made pursuant to the procedures set forth above in Section 2.5.

      (b) Supplier shall keep such records for a period of time as determined by
its normal document retention policies, but in any event not less than eighteen
(18) months after the date of the transaction to which those records relate, or
longer if required by law. Supplier shall permit RJRT to examine Supplier's
records and its facilities from time to time (during regular business hours and
upon not less than ten (10) business days written notice) to the extent
necessary for RJRT to make the foregoing evaluations, determinations and
verifications, and such examination shall be made at the expense of RJRT either
by its employees (or those of its Affiliates) or by an independent registered
public accounting firm appointed by RJRT (at RJRT's expense) which shall report
to RJRT on matters associated with such examination.

      3.5 Joint Cost Savings Initiatives. (a) The Parties hereto will work
cooperatively to identify and implement incremental savings initiatives,
including the employment of new technology.

      (b) RJRT and Supplier will establish a joint review committee to define
and evaluate mutually beneficial incremental savings initiatives to be included
in annual price adjustments.

      (c) Cost savings associated with RJRT-driven Specification harmonization
opportunities will benefit RJRT and will not be required to be shared with
Supplier.

                                       20
<PAGE>

      3.6 Insurance. Supplier shall maintain insurance with financially sound
and reputable insurers covering such risks as are normally insured against in
the same general area by companies engaged in the same or a similar business.
Such insurance shall be maintained for the benefit of RJRT. Mundet agrees that
no cancellation or material change in coverage shall be effective until 30 days'
written notice thereof has been provided to RJRT. Supplier shall promptly
provide RJRT with certificates of insurance as proof that all such insurance
maintained by the Supplier, is placed with such insurance companies, in such
amounts, against such risks and in such form as is customary in the same general
area by or for companies engaged in the same or similar businesses and
constituting similarly situated insureds, together with evidence that such
insurance, and all policies with respect thereto, otherwise satisfies the
requirements of this Section.

      3.7 Additional Services. Upon the written request by RJRT, Supplier may,
at Supplier's sole discretion, provide additional services to RJRT. Supplier and
RJRT shall negotiate in good faith towards separate agreement setting forth the
terms and conditions by which Supplier shall provide any such services for RJRT,
and by which RJRT shall pay Supplier for such services.

                                IV. TERMINATION

      4.1 Termination.

      (a) Mutual. This Agreement may be terminated by the mutual written
agreement of the Parties.

      (b) By Either Party. Either Party may terminate this Agreement at any time
upon written notice to the other if:

            (i) the other Party makes a filing for voluntary bankruptcy or a
petition for involuntary bankruptcy of the other Party is not dismissed within
sixty (60) calendar days of its filing, in which case, the termination shall
become effective immediately upon notice of termination or at such later date as
is specified in the termination notice;

            (ii) the other Party ceases to pay its debts as they mature in the
ordinary course of business, or makes an assignment for the benefit of its
creditors, in which case the termination shall become effective immediately upon
the delivery of the notice of termination or at such later date as is specified
in the termination notice;

            (iii) a receiver is appointed for the other Party or its property,
in which case the termination shall become effective immediately upon the
delivery of the notice of termination or at such later date as is specified in
the termination notice;

            (iv) the other Party is in breach of any material term of this
Agreement and the breaching Party fails to cure such breach within thirty (30)
calendar days of receipt of notice of breach from the other Party, or if such
breach is not reasonably capable of cure within such thirty (30) calendar day
period, such breaching Party fails to cure the breach within ninety (90)
calendar days of receipt of notice of breach from the other Party provided that
the terminating Party must invoke its rights of termination under this Section
4.1(b)(iv) by providing written

                                       21
<PAGE>

notice to the breaching Party within thirty (30) calendar days of the accrual of
such right or such right of termination shall be waived with respect to the
applicable material breach and further provided that after notice of such
termination is given, the termination of the Agreement shall become effective
six (6) months from the date of the termination notice or such longer period of
time as my be set forth in such notice. During such period, this Agreement shall
remain in full force and effect.

      (c) By RJRT.

            (i) RJRT shall have the right, but not the obligation, to terminate
this Agreement for cause as provided in Section 2.13(b).

            (ii) RJRT shall have the right, but not the obligation, to terminate
this Agreement within three years of the Effective Date if a Change in Control
of Supplier occurs;

            (iii) RJRT shall have the right, but not the obligation, to
terminate this Agreement, at any time, upon the sale of stock of Supplier or
substantially all of the assets of Supplier to a Competitor of RJRT;

            (iv) RJRT shall have the right, but not the obligation, to terminate
this Agreement upon the occurrence of a Force Majeure Event with respect to
Supplier, if Supplier is unable to perform its obligations hereunder, including
its obligation to implement contingency manufacturing plans as set forth in
Section 2.15, for a period in excess of ninety (90) days, provided, however,
that, during a period, not to exceed one hundred and eighty (180) days, in which
Supplier is unable to perform its obligations hereunder as a result of a Force
Majeure Event, if Supplier fails to satisfy its obligations under this Agreement
through a third party purchase in accordance with Section 2.15 promptly after
the occurrence of such Force Majeure Event, RJRT shall be entitled, but not
obligated, to cover any shortfall in Products required by RJRT under this
Agreement by obtaining such Products from a third global party supplier selected
by RJRT. The reasonable costs incurred by RJRT during such one hundred and
eighty (180) day period in obtaining such replacement Products and any positive
difference in price paid by RJRT for such replacement Products over the Price
set forth on Annex F-1, as the same may be adjusted in accordance with the terms
of this Agreement, shall be borne by Supplier, and such replacement Products
from Supplier, shall be deemed volume ordered by RJRT pursuant to this
Agreement.

            (v) RJRT shall have the right, but not the obligation, to terminate
this Agreement upon the occurrence of a Force Majeure Event with respect to
RJRT, if RJRT is unable to perform its obligations hereunder for a period in
excess of ninety (90) days.

            (vi) RJRT shall have the right to terminate this Agreement without
cause or any further justification or explanation, solely with respect to
solvent-based Low Ignition Propensity paper if RJRT determines to cease use of
such Low Ignition Propensity paper in connection with its Products.

            (vii) RJRT shall have the right, but not the obligation, to
terminate this Agreement if Supplier fails to use its commercially reasonable
efforts to hire by the end of the term of the Transition Supply Agreement, by
and between Supplier and Oracle, dated the date

                                       22
<PAGE>

hereof, 33 individuals from Oracle that were employees of RJRP as of the date of
this Agreement.

      4.2 Effect of Termination.

      (a) Actions by Supplier. Upon the effective date of termination of this
Agreement, Supplier shall:

            (i) deliver to RJRT or its designee all raw materials, finished
Products, and/or specialized manufacturing equipment that have been, or must be,
paid for by RJRT in accordance with this Agreement;

            (ii) execute all documents and take all actions reasonably necessary
to enable RJRT to carry out its obligations to customers, and use commercially
reasonable efforts to cooperate with RJRT in making the necessary transition to
another supplier of Products;

            (iii) use commercially reasonable efforts to cooperate with RJRT in
the preparation of a final accounting; and

            (iv) cease supply of Products, except as Supplier and RJRT may agree
in writing.

      (b) Actions by RJRT. Upon the effective date of termination of this
Agreement, RJRT shall promptly pay Supplier for Products in accordance with the
terms of this Agreement, together with any other amounts that are due and owing
by RJRT to Supplier. RJRT also shall promptly pay Supplier for such unique raw
materials, in amounts consistent with the relevant Weekly Forecast, that
Supplier has purchased to produce Products for RJRT and such raw materials shall
be shipped to RJRT or its designee at RJRT's expense.

      (c) Effect of Termination. Subject to the provisions of Section 4.2, if
either RJRT or Supplier choose to terminate this Agreement as provided in this
Article IV, this Agreement will be of no further force and effect, and except as
set forth in Section 4.3, there will be no liability or obligation on the part
of either Party to the other. Termination of this Agreement does not impair or
extinguish any accrued right, obligation or liability that a Party hereto may
have under this Agreement at the time it is terminated.

      4.3 Survival. The provisions of Article V and Sections 3.4,
4.1(c)(iv),4.2, 5.1 6.2, 6.5, 6.6 and 6.8 will continue in effect after
expiration or termination of this Agreement.

                               V. CONFIDENTIALITY

      5.1 Confidentiality Obligation. During the Term of this Agreement and for
a period of five (5) years thereafter, Supplier and RJRT, each a "Receiving
Party" shall maintain in confidence all Confidential Information disclosed to it
by the other Party, as a "Disclosing Party." Notwithstanding the foregoing,
subject to Section 5.2, Supplier and RJRT's respective obligations of
confidentiality with respect to the other Party's Trade Secrets, including the
Specifications, shall be perpetual. Unless otherwise agreed in writing, neither
Supplier nor RJRT will use, disclose or grant the use of such Confidential
Information except as expressly

                                       23
<PAGE>

authorized by this Agreement. To the extent that disclosure is authorized by
this Agreement, the Receiving Party shall obtain prior agreement from its
employees, representatives and contracting parties to whom disclosure is to be
made to hold in confidence and not make use of such information for any purpose
other than those purposes permitted by this Agreement. Supplier and RJRT, as a
Receiving Party, will use at least the same standard of care (but not less than
a reasonable standard of care) as it uses to protect its own proprietary and
Trade Secret information to ensure that such employees, representatives and
contracting parties do not disclose or make any unauthorized use of such
Confidential Information. Supplier and RJRT, as a Receiving Party, will promptly
notify the other upon discovery of any unauthorized use or disclosure of the
Confidential Information. The Receiving Party shall be responsible to the
Disclosing Party for any loss of Confidential Information of the Disclosing
Party or breach of the provisions of this Section 5.1 by any employee,
representative or contracting party of the Receiving Party.

      5.2 Exceptions. The confidentiality obligations set forth in Section 5.1
will not apply to the extent that it can be established by the Receiving Party
by competent proof that such Confidential Information:

      (a) was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of receipt from the Disclosing Party;

      (b) was generally available to the public or otherwise part of the public
domain at the time of its receipt from the Disclosing Party;

      (c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the Receiving Party in breach of this Agreement;

      (d) was received by the Receiving Party, other than under an obligation of
confidentiality, by a third Person lawfully in possession of the information; or

      (e) was independently developed by the Receiving Party, without reference
or access to any Confidential Information of the Disclosing Party.

      5.3 Authorized Disclosure.

      (a) In the event that a Receiving Party or any of its Affiliates are
requested pursuant to, or are required by, applicable law, regulation or legal
process, including in connection with filing or prosecuting any patent
application, to disclose any of the Confidential Information, the Receiving
Party will promptly notify the Disclosing Party and otherwise cooperate with the
Disclosing Party so that the Disclosing Party may seek a protective order or
other appropriate remedy or, in the Disclosing Party `s sole discretion, waive
compliance with the terms of this Section 5.3. In the event that no such
protective order or other remedy is obtained, or that the Disclosing Party does
not waive compliance with the terms of this Section 5.3, the Receiving Party
will furnish only that portion of the Confidential Information which it is
advised by counsel is legally required and will exercise all reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded the
Confidential Information.

                                       24
<PAGE>

      (b) Supplier may, solely on a need-to-know basis, disclose to Oracle such
Confidential Information as may be necessary for Oracle to perform its
obligations under a supply agreement with Supplier, provided that, prior to the
receipt of any Confidential Information in accordance with this Section 5.3(b),
Oracle shall have agreed in writing to comply with all confidentiality
obligations imposed on Supplier hereunder as if Oracle were a Party to this
Agreement.

                                 VI. WARRANTIES

      6.1 Warranties. SUPPLIER WARRANTS THAT FOR A PERIOD OF ONE YEAR PRODUCTS
MANUFACTURED AND PACKAGED PURSUANT TO THIS AGREEMENT SHALL BE FREE FROM DEFECTS
IN MATERIALS AND WORKMANSHIP AND SUCH PRODUCTS SHALL BE MANUFACTURED, PACKAGED
AND SHIPPED IN CONFORMITY WITH THE APPLICABLE SPECIFICATIONS AND THE PACKAGING
AND SHIPPING REQUIREMENTS OF THIS AGREEMENT. ANY MEASURES TAKEN TO REMEDY
NON-CONFORMANCE WITH THIS WARRANTY WILL BE AT SUPPLIER'S SOLE COST AND EXPENSE.

      6.2 Liability and Damages. (a) In addition to the remedies set forth in
Section 3.3 of this Agreement and subject to the limitations set forth in
Section 6.2(b), Supplier shall be liable to RJRT for any direct damages, claims,
losses, changes, actions, suits, proceedings, deficiencies, interest, penalties
and costs and expenses (collectively, "Losses") resulting from a breach of its
obligations under this Agreement.

      (b) Supplier shall not be liable to RJRT for any breach of its obligations
under this Agreement except to the extent (and then only to the extent) the
Losses from such breach exceed $25,000 and then only for such Losses in excess
thereof up to $250,000 per occurrence or occurrences related to the same
production lot or production run. Notwithstanding the foregoing, nothing herein
shall be deemed to limit Supplier's indemnification obligations set forth in
Section 6.6.

      (c) RJRT's liability to Supplier hereunder shall be limited to any unpaid
amounts owed to Supplier for conforming Products shipped by Supplier.
Notwithstanding the foregoing, nothing herein shall be deemed to limit RJRT's
indemnification obligations set forth in Section 6.5.

      (d) Notwithstanding anything to the contrary set forth in this Agreement,
neither Party hereto shall be liable to the other for any punitive or exemplary
losses or damages.

      6.3 Representation of Authority. Each of Supplier and RJRT hereby
represents and warrants to the other that:

      (a) it is duly incorporated, is validly existing and is in good standing
under the laws of its jurisdiction or incorporation;

      (b) it has all requisite corporate power to carry on its business as now
conducted, and is duly qualified to do business and is in good standing as a
foreign entity in each other jurisdiction where the ownership or operation of
its assets or the conduct of its business requires

                                       25
<PAGE>

such qualification, except where the failure to have such authority or to be so
qualified or be in good standing, as the case may be, would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on it
or materially impair or delay its ability to satisfy its obligations under this
Agreement;

      (c) it has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder;

      (d) the execution and delivery by it of this Agreement and the performance
by it of its obligations hereunder have been authorized by all respective
corporate action; and

      (e) that this Agreement has been duly authorized, executed and delivered
by it and, assuming the due authorization, execution and delivery of this
Agreement by the other party hereto, constitutes a valid and binding obligation
of it, enforceable against it in accordance with its terms.

      6.4 Compliance with Laws. In performance of their respective obligations
under this Agreement, Supplier and RJRT shall comply with, and shall ensure that
their respective employees and Affiliates shall comply with, all laws,
regulations, agreements, licenses and consents applicable to or otherwise
relating to the subject matter of this Agreement. Without limitation to the
foregoing, Supplier and RJRT represent and warrant that they shall not transfer,
provide, resell, export, re-export, distribute, or dispose of any Product or
component thereof or any related technology or technical data, directly or
indirectly, without first obtaining all necessary written consents, permits and
authorizations and completing such formalities as may be required by any
applicable laws, rules and regulations.

      6.5 RJRT's Indemnity Obligations.

      (a) In General. RJRT, severally, will indemnify, defend and hold harmless
Supplier, its Affiliates and their respective current and former officers,
directors, employees, representatives and agents (each a "Supplier Indemnified
Party") from and against any and all losses, damages, claims, liabilities,
demands, assessments, judgments, settlements, compromises and related costs and
expenses (including without limitation reasonable attorneys' fees and costs)
(collectively, "Damages") resulting from demands, actions, suits or proceedings
initiated by any third-Person (including any Governmental Authority) and arising
out of:

            (i) A material breach by RJRT of its obligations under this
Agreement; or

            (ii) The marketing, advertising, distribution or sale by RJRT of any
Products manufactured under this Agreement for RJRT, including any Damages which
relate to any claimed adverse health effects or health risks relating to the use
of such Products, including any product liability Damages.

      (b) Exceptions. Notwithstanding Section 6.5(a), RJRT shall not be required
to indemnify any Supplier Indemnified Party for any portion of Damages to which
such Supplier Indemnified Party may become subject to the extent (but only to
the extent) they relate to, result from or arise out of:

                                       26
<PAGE>

            (i) The failure of Supplier to comply with its obligations under
this Agreement; or

            (ii) The negligence or willful misconduct or willful failure to act
of Supplier.

      (c) Notice. Supplier shall give RJRT prompt written notice of any claim or
suit that may be brought directly against Supplier or any other Supplier
Indemnified Party by a third-Person for which Supplier may seek indemnification,
and RJRT shall thereafter be entitled to employ counsel, control the defense of,
and settle or compromise, such claim or suit, provided, however, that RJRT shall
not settle or compromise any such claim or suit without the prior written
consent of Supplier, if such settlement or compromise would result in the
imposition of an injunction or decree that would restrict the future activity or
conduct of Supplier.

      6.6 Supplier's Indemnity Obligations.

      (a) In General. Subject to Section 6.1, Supplier will indemnify, defend
and hold harmless RJRT, and their respective current and former officers,
directors, employees, representatives and agents (each an "RJRT Indemnified
Party") from and against all Damages resulting from demands, actions, suits, or
proceedings initiated by any third-Person (including any Governmental Authority)
and arising out of a material breach of the obligations of Supplier under (i)
this Agreement including, but not limited to, Supplier's failure to produce
Products meeting the required Specifications and/or to comply with the packaging
and shipment requirements of this Agreement, as described in Section 2.13(b) or
(ii) the Sublicense Agreement, dated the date hereof, by and among RJRT,
Supplier and Schweitzer-Mauduit International, Inc., a Delaware corporation.

      (b) Exceptions. Notwithstanding anything set forth in Section 6.6(a),
Supplier shall not be required to indemnify any RJRT Indemnified Party for any
portion of Damages to which such RJRT Indemnified Party may become subject, to
the extent (but only to the extent) they relate to, result from or arise out of:

            (i) The failure of RJRT to comply with its obligations under this
Agreement; or

            (ii) The negligence or willful misconduct or willful failure to act
of RJRT.

      (c) Notice. RJRT shall give Supplier prompt written notice of any claim or
suit that may be brought directly against RJRT or any other RJRT Indemnified
Party by a third Person for which RJRT may seek indemnification, and Supplier
shall thereafter be entitled to employ counsel, control the defense of, and
settle or compromise, such claim or suit.

      6.7 Supplier for Product. RJRT represents and warrants that as of the
Effective Date, it has not entered into any agreement with any third Person that
obligates RJRT to purchase any Product subject to this Agreement from any third
Person.

      6.8 RJRT's Rights to Intellectual Property. RJRT represents and warrants
that it (or its Affiliates) have the right to use all Intellectual Property
associated with the Products

                                       27
<PAGE>

manufactured for it under this Agreement. Supplier shall obtain no rights with
respect to Intellectual Property owned by RJRT or its Affiliates as a result of
this Agreement.

                               VII. MISCELLANEOUS

      7.1 Further Assurances. Each Party agrees to enter into or execute, or
procure the entering into or execution, of such agreements, assignments or
further assurances, or do such other acts as the other Party may reasonably
request to carry out the terms and conditions of this Agreement. Further,
Purchase Orders issued by RJRT under this Agreement shall provide that such
Purchase Orders are issued pursuant to, and governed by, the terms and
conditions of this Agreement.

      7.2 Waiver. Except as set forth in Section 2.11(b) of this Agreement, no
waiver by either Supplier or RJRT of any of the provisions of this Agreement
will be effective unless explicitly set forth in writing and executed by that
entity. Any waiver by either Supplier or RJRT of a breach of this Agreement will
not operate or be construed as a waiver of any subsequent breach.

      7.3 Relationship of Supplier and RJRT. Supplier and RJRT shall be and
shall remain independent contractors as to each other, and this Agreement shall
not be construed as establishing a general agency, employment, partnership, or
joint venture relationship between them. Neither Supplier nor RJRT shall have
the authority to make any statements, representations or commitments of any kind
(whether express or implied), or to take any action, which shall be binding on
the other or create any liability or obligation on behalf of the other, without
the prior written authorization of the entity to be bound.

      7.4 Force Majeure. (a) Notwithstanding anything to the contrary herein,
neither Party shall be liable for loss, injury, delay, damage or other casualty
suffered by such Party due to any inability to perform any obligation hereunder,
and neither Party shall be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term or provision
of this Agreement (other than payment of monies due), when such failure or delay
is caused by or results from a Force Majeure Event with respect to such Party.
Notwithstanding the foregoing, nothing set forth in this Section 7.4 shall
relieve Supplier of its obligation to initiate its contingency manufacturing
plans as set forth in Section 2.15.

      (b) At the request of the non-affected Party, the affected Party shall
provide such supporting documentation as may reasonably be required to support
its Force Majeure claim, and shall provide detailed progress reports to the
other Party as the same may be reasonably requested by the non-affected Party
describing actions taken to remedy consequences of the Force Majeure event.

      7.5 Governing Law. This Agreement and the legal relations among the
signatories hereto will be governed by and construed in accordance with the
substantive laws of the State of North Carolina, without giving effect to the
principles of conflict of laws thereof.

      7.6 Dispute Resolution. To the extent that controversies arising from this
Agreement cannot be resolved by the respective personnel of Supplier and RJRT
responsible for the administration of this Agreement, Supplier and RJRT shall
attempt in good faith to resolve any

                                       28
<PAGE>

such dispute. Supplier or RJRT may give the other entity written notice of any
dispute which has not been resolved in the ordinary course of business. Within
ten (10) calendar days of receipt of such notice, the receiving entity shall
submit a written response to such notice. The notice and response shall include:
(a) a detailed description of the dispute; (b) a statement of the entity's
position which respect to such dispute; and (c) the name and title of the senior
executive officer who will negotiate on behalf of such entity. Within fifteen
(15) calendar days of delivery of the initial notice, or within a time mutually
agreed by Supplier and RJRT, the designated senior executive officers will meet
or otherwise confer in an attempt to resolve the dispute. Such negotiations
shall continue either until the controversy is resolved or until one of the
entities initiates judicial action as set forth in Section 7.7. During the
negotiation process, all reasonable requests for information and documents from
one entity to the other shall be honored.

      7.7 Jurisdiction.

      (a) The parties hereby agree that any suit, action or proceeding (a
"Proceeding") seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the United States District
Court for the Southern District of New York.

      (b) The parties hereto further agree to waive, to the fullest extent
permitted by law, the defense of any inconvenient forum to the maintenance of
such suit, action or proceeding in any such New York proceeding, and agree to
waive, to the fullest extent it may legally and effectively do so any objection
which it may now or hereafter have to venue of any such Proceeding in the United
States District Court for the Southern District of New York. In addition, the
parties to this Agreement consent to submit themselves to the personal
jurisdiction of the United States District Court for the Southern District of
New York (and of the appropriate appellate courts therefrom) and agree that they
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court. The parties to this Agreement agree that
process in any such Proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court.

      7.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

      7.9 Severability. If any provision of this Agreement shall be held to be
invalid or unlawful, the same shall be deemed to be deleted from this Agreement,
but this Agreement shall remain in full force and effect as if the deleted
provision had never been contained in it. The Parties shall negotiate in good
faith as to the terms of a mutually acceptable and satisfactory provision in
place of any deleted provision, and if such terms shall be agreed, this
Agreement shall be amended accordingly.

      7.10 Amendments. This Agreement (including the Schedules and Annexes
hereto) may be amended, or any term hereof modified, only by a written
instrument duly executed by the Parties hereto. In the event of any conflict
between this Agreement and the terms of a Purchase Order, the terms of this
Agreement shall govern.

                                       29
<PAGE>

      7.11 Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given upon the earliest of (a) delivery in
person, (b) dispatch by electronic facsimile transfer (confirmed in writing by
courier service as in (c) simultaneously dispatched) or (c) one business day
after having been dispatched by a nationally recognized overnight courier
service, in any such case to the appropriate party at the address specified
below:

                              (i) If to Supplier, to:

                              Mundet Inc.
                              823 East Main Street, 12th Floor
                              Richmond, Virginia 23219
                              Facsimile No.: (804) 644-3979
                              Attention: Stephen F. Young, President

                      with a copy to:

                              Kirkpatrick & Lockhart Nicholson Graham
                              201 South Biscayne Blvd., Suite 2000
                              Miami, Florida 33131
                              Facsimile No.: (305) 358-7095
                              Attention: Clayton E. Parker, Esquire

                              (ii) If to RJRT, to:

                              R. J. Reynolds Tobacco Company
                              401 North Main Street
                              Winston-Salem, North Carolina 27102-2866
                              Facsimile No.: (336) 741-0974
                              Attention: Vice President-Procurement

                      with a copy to:

                              R. J. Reynolds Tobacco Company
                              401 North Main Street
                              Winston-Salem, North Carolina 27102-2866
                              Facsimile No.: (336) 741-2998
                              Attention: General Counsel

or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.

      7.12 Entire Agreement. This Agreement (including the Schedules and Annexes
hereto), together with any Purchase Order issued hereunder, contains the entire
agreement and understanding between Supplier and RJRT regarding the subject
matter hereof, and supercedes

                                       30
<PAGE>

(i) any prior agreement or negotiation between them with respect to the subject
matter hereof and (ii) any standard or boilerplate terms that may be contained
in any document issued by Supplier or otherwise issued by or to either party in
connection with this Agreement, provided, however, this Agreement shall not in
any way affect, modify or amend the letter agreement among Supplier and Brown &
Williamson Tobacco Corporation, dated as of December 12, 2002, relating to the
supply of cigarette and tipping paper.

      7.13 Assignment. This Agreement shall be binding upon and inure to the
benefit of Supplier and RJRT and their respective legal successors and assigns.
This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligation hereunder be assigned,
subcontracted, licensed or transferred by Supplier or RJRT without the other
entity's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that Supplier and RJRT may,
without the other entity's prior consent, assign its respective rights and
obligations hereunder to a wholly owned subsidiary or entity under common
control with such assigning entity through 100% ownership of the equity
interests therein. Any permitted assignee shall assume all the rights and
obligations of its assignor under this Agreement. Any assignment in violation of
the foregoing shall be null and void.

      7.14 Attorney-Client Privilege. The Parties hereto acknowledge that all
attorney-client privileged communications occurring prior to the Effective Date
between RJRT and RJRP were for the benefit of RJRT. Accordingly, only RJRT has
the right to waive such privileged communications and Supplier shall not have
the right to compel disclosure of such attorney-client privileged communication
without the prior written consent of RJRT.

      7.15 Expenses. Except as expressly provided otherwise in this Agreement or
by any other written agreement of the Parties, each Party will bear its own
expense, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by it, incurred in connection with this Agreement or any other
agreements provided for herein or entered into in connection herewith.

      7.16 Publicity. Neither Party shall publish or issue any news release or
other public announcement, written or oral, or otherwise make any disclosure
relating to the existence or terms of or performance under this Agreement
without the prior written approval of the other Party, excepts as may otherwise
be required by law.

      7.17 No Third Party Beneficiaries. This Agreement is not intended to and
shall not be construed to give any Person, including any employee or former
employee, any interest or rights (including, without limitation, any third-party
beneficiary rights) with respect to or in connection with any agreement or
provisions contained herein or contemplated hereby; provided, however,
notwithstanding the foregoing, (a) for the term of the Transition Period and for
a period of 90 days thereafter (but only for the purpose of providing additional
time to assert any claim that arose during the term of the Transition Period),
and (b) to the extent that Oracle is the supplier during the Transition Period
of Products that are the subject of a claim, Oracle shall be deemed an intended
third party beneficiary of RJRT's obligations and Supplier's rights under
Sections 2.5, 2.8, 2.9, 2.10, 2.13, 2.14, 2.16, 2.17, 3.1 (to the extent related
to Prices during the Transition

                                       31
<PAGE>

Period only), 3.2, 3.3, 3.4, 4.2, 5.1, 5.3, 6.1 (solely with respect to the
limitation of the duration of the warranty), 6.2, 6.7, 7.5, 7.6, 7.7 and 7.8 of
this Agreement.

      7.18 Counterparts. This Agreement and any amendment may be executed in
multiple counterparts, each of which is an original and all which constitute one
agreement or amendment, as the case may be, notwithstanding that all of the
Parties are not signatories to the original or the same counterpart, or that
signature pages from different counterparts are combined, and the signature of
any Party to any counterpart is a signature to and may be appended to any other
counterpart.

                     [Remainder of page intentionally blank]

                                       32
<PAGE>

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives effective as of the Effective Date.

                                  MUNDET INC.

                                  By: /s/ Stephen F. Young
                                      -------------------------------------
                                      Name: Stephen F. Young
                                      Title: President

                                  R. J. REYNOLDS TOBACCO COMPANY

                                  By: /s/ Thomas R. Adams
                                      -------------------------------------
                                  Name: Thomas R. Adams
                                  Title: Senior Vice President and
                                             Chief Accounting Officer