Agreement between Kretek International Incorporated ("Kretek") - and - The Commissioner of Competition ("Commissioner")

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WHEREAS the Commissioner is responsible for the administration and enforcement of the
Competition Act, R.S.C. 1985, c. C-34 (the "Act"), and has commenced an Inquiry pursuant to s. 10
of the Act in regard to cigarettes and other tobacco products ("Tobacco Products") for sale to the
public, described as "light" and "mild" and variants thereof, such as, but not limited to, "extra light",
"ultra light", "extra mild" and "ultra mild" ("L/M Descriptors") in Canada;

AND WHEREAS Kretek is engaged in Canada in the manufacture and/or distribution of Tobacco
Products bearing L/M Descriptors;

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Application of this Agreement

   1.1 The provisions of this Agreement are subject to the definitions set forth in Appendix "A."

   1.2 Nothing in this Agreement is intended to modify Kretek's obligations under the Tobacco Act.

2. Cessation of Use of the L/M Descriptors

   2.1 As of December 31,2007, Kretek will cease using L/M Descriptors on it's Tobacco Products
   and packaging. A list of Kretek's Brand Names covered by this Agreement are contained
   in Appendix "B".

3. Sale of Existing Stock

   3.1 Any Tobacco Products bearing L/M Descriptors may be sold or distributed in Canada by
   Kretek, provided they were manufactured and packaged prior to December 31,2007.

4. Other Manufacturers and Distributors

   4.1 The Commissioner shall use reasonable best efforts to obtain from other manufacturers :
   and/or distributors in Canada of Tobacco Products, comparable commitments to
   discontinue their use of L/M Descriptors not later than December, 2007.

5. General

   5.1 This Agreement is entered into without any admission of liability on the part of Kretek,
   and it does not constitute a finding of fact or law on any issue as against Kretek.

   5.2 This Agreement is entered into by Kretek solely for the purpose of voluntarily
   cooperating with a request by the Commissioner to discontinue the use of L/M
   Descriptors and in anticipation of regulatory changes under the Tobacco Act.

   5.3 This Agreement shall be governed by and interpreted in accordance with the laws of the
   Province of Ontario and the laws of Canada applicable therein.

   5.4 This Agreement may be executed in counterpart and by facsimile and each such
   counterpart shall constitute an original and all of which taken together shall constitute one
   and the same instrument, dated as of the date set forth below.

6. Modification or Default

   6.1 If Kretek believes that some modification of this Agreement is justified due to changed
   circumstances, Kretek and the Commissioner agree to engage in good faith efforts to
   resolve the matter.

   6.2 In the event of any dispute between the Parties as to the interpretation or application of
   this Agreement, including a dispute as to whether there has been a default in the
   performance of any of the obligations in this Agreement, the Parties agree to first engage
   in good faith efforts to resolve such dispute, before taking any other steps to resolve the
   dispute. In the event that Kretek does not cease use of the L/M descriptors in accordance
   with clause 2.1 of this Agreement, the Commissioner may deliver a notice of default to
   Kretek. Kretek shall have 30 days to remedy any default. If the default has not been
   remedied during such 30 day period the Commissioner may, following the expiry of the
   30 day period, file this Agreement with the Competition Tribunal for registration as a
   Consent Agreement between the Commissioner and Kretek, pursuant to s.74.12 of the
   Act. Kretek irrevocably consents to the registration of this Agreement as a Consent
   Agreement in such case and to the filing of the signed consent form which is attached as
   Appendix "C."

7. Term of this Agreement

   7.1 This Agreement shall remain in force from the date of its signing until such time as
   regulations pursuant to the Tobacco Act come into force prohibiting the use of L/M
   Descriptors in regard to Tobacco Products, andlor their packaging, whereupon this :
   Agreement will terminate automatically.

8. Notice

   8.1 Any notice required to be given pursuant to any terms of this Agreement is valid if given
   by facsimile transmission or registered mail to:

   1. The Commissioner:
      Sheridan Scott
      Commissioner of Competition
      Competition Bureau Canada
      Place du Portage, Phase I,
      50 Victoria Street
      Gatineau, Quebec KIA 0C9

      Telephone: 819-997-5300
      Facsimile: 819-953-5013

      With copies to:

      Jim Marshall
      Senior Counsel
      Competition Law Division
      Justice Canada
      Place du Portage, Phase I,
      50 Victoria Street
      Gatineau, Quebec KIA 0C9

      Telephone: 819-997-2834
      Facsimile: 819-953-9267

   2. Kretek:
      Patrick Hurd
      Kretek International Incorporated
      5456 Tomken Road, Unit 8
      Mississauga, Ontario
      L4W 225

      Telephone: 905-677-8585
      Facsimile: 905-677-0217

Dated at Gatineau, Quebec, this 27th day of March, 2007.

________________________
Sheridan Scott
Commissioner of Competition

Dated at Mississauga, Ontario, this 23rd day of March, 2007.

________________________
Patrick Hurd
Kretek International Incorporated

Appendix "A"

Definitions

In accordance with Clause 1.1 of this Agreement, the following definitions shall apply:

A. "Agreement" means this Agreement as entered into by Kretek and the Commissioner;

B. "Brand Name" means word(s) used by Kretek to identify its products to consumers and
includes, but is not limited to, trademark names of cigarettes and any words forming part of
such trademark names;

C. "Commissioner" means the Commissioner of Competition, appointed pursuant to section 7
of the Act, and authorized representatives of the Commissioner;

D. "Kretek" means Kretek International Incorporated, a company incorporated under the laws
of Canada;

E. "L/M Descriptors" means the words "light" and "mild", and combinations and variants
thereof such as, but not limited to, "extra light," "ultra light," "extra mild" and "ultra mild"
as descriptors on cigarette packages or elsewhere;

F. "Parties" means the Commissioner and Kretek;

G. "Tobacco Products" means cigarettes, tobacco sticks and fine cut tobacco currently
distributed by Kretek;

Appendix "B"

Kretek Brand Names

In accordance with Clause 2.1 of this Agreement, the following Kretek Brand Names are covered by this Agreement;

Cigarette Products
Natural American Spirit Yellow

Appendix "C"

Consent Form

To: The Competition Tribunal

1. The Commissioner of competition and Kretek International Incorporated ("Kretek") consent
to the filing of an Agreement dated March 23rd ,2000, with the Competition Tribunal
for immediate registration as a consent agreement between the Commissioner of competition
and Kretek pursuant to s. 74.12 of the Competition Act.

2. The name and address ofthe persons in respect of whom the consent agreement is made are:

Commissioner of Competition
50 Victoria Street
Gatineau, Quebec
KIA 0C9

Kretek International Incorporated
5456 Tornken Road, Unit 8
Mississauga, Ontario
L4W 225

Per:_______________________
Sheridan Scott
Commissioner of Competition

Per:_______________________
Patrick Hurd
Kretek International Incorporated