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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
Amendment No. 2
RJR Nabisco Holdings Corp.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
74960K 87 6
(CUSIP Number)
Richard J. Lampen, Esq.
Executive Vice President and General Counsel
New Valley Corporation, 100 S.E. Second Street,
32nd Floor, Miami, FL 33131 (305) 579-8000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy to:
Lawrence Lederman, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005-1413
(212) 530-5732
March 15, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Check the following box if a fee is being paid with the statement | |.
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: Brooke Group Ltd.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 200
(8) SHARED VOTING POWER: -0-
(9) SOLE DISPOSITIVE POWER: 200
(10) SHARED DISPOSITIVE POWER: -0-
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 200
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): Less
than one-tenth of 1%
(14) TYPE OF REPORTING PERSON: HC; CO
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: BGLS Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: N/A
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: -0-
(8) SHARED VOTING POWER: -0-
(9) SOLE DISPOSITIVE POWER: -0-
(10) SHARED DISPOSITIVE POWER: -0-
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: -0-
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0%
(14) TYPE OF REPORTING PERSON: HC; CO
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: Liggett Group Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 200
(8) SHARED VOTING POWER: -0-
(9) SOLE DISPOSITIVE POWER: 200
(10) SHARED DISPOSITIVE POWER: -0-
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 200
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): Less
than one-tenth of 1%
(14) TYPE OF REPORTING PERSON: CO
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: New Valley Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: New York
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: -0-
(8) SHARED VOTING POWER: 5,161,750
(9) SOLE DISPOSITIVE POWER: -0-
(10) SHARED DISPOSITIVE POWER: 5,161,750
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 5,161,750
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 1.9%
(14) TYPE OF REPORTING PERSON: HC; CO
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: ALKI Corp.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC, OO
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: -0-
(8) SHARED VOTING POWER: 5,161,750
(9) SOLE DISPOSITIVE POWER: -0-
(10) SHARED DISPOSITIVE POWER: 5,161,750
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 5,161,750
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 1.9%
(14) TYPE OF REPORTING PERSON: CO
SCHEDULE 13D
CUSIP NO.: 74960K 87 6
(1) NAME OF REPORTING PERSON: Bennett S. LeBow
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: N/A
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States of
America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: -0-
(8) SHARED VOTING POWER: -0-
(9) SOLE DISPOSITIVE POWER: -0-
(10) SHARED DISPOSITIVE POWER: -0-
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: -0-
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0%
(14) TYPE OF REPORTING PERSON: IN
This Amendment No. 2 amends the statement on Schedule 13D filed with the
Securities and Exchange Commission on March 11, 1996, as amended (the "Schedule
13D"), with respect to the common stock, par value $.01 per share, of RJR
Nabisco Holdings Corp., a Delaware corporation (the "Company" or "RJR Nabisco"),
with its principal executive offices located at 1301 Avenue of the Americas, New
York, New York 10019.
This statement is being filed by the Reporting Persons (as defined in the
Schedule 13D). Other than as set forth herein there has been no material change
in the information set forth in the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended to add the following:
Brooke announced on March 15, 1996 that it has entered into a settlement of
tobacco litigation (the "Medicaid Settlement") with the Attorneys General of
five states. The settlement with the attorneys general releases Brooke and
Liggett from all tobacco-related Medicaid reimbursement claims by the states of
Florida, Louisiana, Massachusetts, Mississippi and West Virginia. A copy of the
press release announcing the Medicaid Settlement is attached hereto as Exhibit
14 and incorporated herein by reference.
The five states have also agreed that they will not seek to enjoin the
spinoff of Nabisco to RJR Nabisco stockholders if the Brooke Group Nominees are
elected to the RJR Nabisco Board of Directors at the Company's 1996 annual
meeting of stockholders.
The Medicaid Settlement would also apply in the event of a merger or other
business combination between Liggett or Brooke and any of the other defendants,
including the Company and its subsidiaries, in the lawsuits, except any entity
with a market share greater than 30%. Any merger of Liggett with another tobacco
company is not required by the Medicaid Settlement provision which allows the
Nabisco spinoff to proceed without the threat of an injunction by the five
states. If the Brooke Group Nominees are elected at the Company's 1996 annual
meeting of stockholders, the Reporting Persons anticipate that the Company will
be afforded the first opportunity to consider whether it wishes to explore
joining the Medicaid Settlement through a merger or other transaction. Any
decision to participate in the benefits of Brooke's settlement through a
combination with Liggett is an entirely separate matter which would have to be
approved by the RJR Nabisco Board of Directors and its stockholders. Mr. LeBow
would not be involved in evaluating the merits of such a transaction. This
process would be directed by the independent directors of RJR Nabisco, assisted
by legal and financial advisors.
The foregoing summary of the settlement agreement with the attorneys
general is qualified in its entirety by reference
2
to the text of such agreement, which is attached hereto as Exhibit 15 and is
incorporate herein by reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5(a) of the Schedule 13D is hereby amended to add the following:
As of the close of business on March 18, 1996, the Icahn Entities have
informed the Reporting Persons that they beneficially owned in the aggregate
12,736,300 shares of Common Stock, which constitute in the aggregate
approximately 4.7% of the Common Stock outstanding.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
14. Press release of Brooke Group Ltd. dated March 15, 1996.
15. Settlement Agreement, entered into March 15, 1996 by and among the State of
West Virginia, State of Florida, State of Mississippi, Commonwealth of
Massachusetts, and State of Louisiana and Brooke Group Ltd., Liggett &
Myers, Inc. and Liggett Group Inc.
3
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
March 18, 1996 BROOKE GROUP LTD.
By: New Valley Corporation
By:/s/RICHARD J. LAMPEN
-----------------------------------
Richard J. Lampen
Executive Vice President
BGLS INC.
By: New Valley Corporation
By:/s/RICHARD J. LAMPEN
-----------------------------------
Richard J. Lampen
Executive Vice President
LIGGETT GROUP INC.
By: New Valley Corporation
By:/s/RICHARD J. LAMPEN
-----------------------------------
Richard J. Lampen
Executive Vice President
NEW VALLEY CORPORATION
By:/s/RICHARD J. LAMPEN
----------------------------------------
Richard J. Lampen
Executive Vice President
ALKI CORP.
By: New Valley Corporation
By:/s/RICHARD J. LAMPEN
-----------------------------------
Richard J. Lampen
Executive Vice President
BENNETT S. LEBOW
By: New Valley Corporation
By:/s/RICHARD J. LAMPEN
-----------------------------------
Richard J. Lampen
Executive Vice President
4
EXHIBIT INDEX
Exhibit No. Title:
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14. Press release of Brooke Group Ltd. dated March 15, 1996.
15. Settlement Agreement, entered into March 15, 1996 by and among the
State of West Virginia, State of Florida, State of Mississippi,
Commonwealth of Massachusetts, and State of Louisiana and Brooke Group
Ltd., Liggett & Myers, Inc. and Liggett Group Inc.
For Immediate Release
Contact: George Sard/Anna Cordasco/Paul Caminiti
Sard Verbinnen & Co
212/687-8080
BROOKE AGREES TO SETTLE TOBACCO LITIGATION WITH 5 STATES
-------------------------------------------------------
MIAMI, FL, MARCH 15, 1996 -- Brooke Group Ltd. (NYSE: BGL) announced today
that it has entered into a settlement of tobacco litigation with the Attorneys
General of five states. Brooke had previously entered into a settlement of the
Castano class action which, subject to federal court approval, releases Brooke
and its Liggett Group tobacco subsidiary from all current and future
addiction-based claims by a nationwide class of smokers.
The settlement with the Attorneys General releases Brooke and Liggett from
all tobacco- related Medicaid reimbursement claims by the states of Florida,
Louisiana, Massachusetts, Mississippi and West Virginia.
The five states and the Castano plaintiffs have agreed that they will not
seek to enjoin the spinoff of Nabisco (NYSE: NA) to RJR Nabisco (NYSE: RN)
shareholders if Brooke's nominees are elected to the RJR Nabisco Board of
Directors. Brooke is proposing directors to replace the existing RJR Nabisco
Board at the Annual Meeting on April 17, 1996.
"This comprehensive settlement is good news for both Brooke and RJR Nabisco
shareholders, and it is also in the long-term financial interests of the entire
tobacco industry," said Bennett S. LeBow, chairman and chief executive officer
of Brooke Group. "A new economic model for the industry based on responsible
coexistence instead of scorched earth confrontation can substantially increase
stock valuations over time as the market begins to realize that abnormally low
cash flow multiples no longer make any sense. At the same time, RJR shareholders
have a clear choice. If they vote for our directors they will get an immediate
spinoff of Nabisco with no injunction risk, a $2 per share tobacco dividend, Ron
Fulford revitalizing the tobacco business, and improved corporate governance.
They will also get first option to benefit from our favorable settlement --
which would cost RJR Nabisco only a little more than a penny a pack -- on terms
set by Dale Hanson and the other independent directors. If they don't vote for
us, they will get business as usual from the existing RJR Nabisco Board."
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2
Under the agreement, the states would share an initial $5 million ($1
million up front and the balance over 10 years), as well as a percentage of
Liggett's pretax income each year from the second through the 25th year. This
annual percentage would range from 2-1/2% to 7-1/2% of Liggett's pretax income,
depending on the number of additional states joining this agreement.
Settlement funds received by the Attorneys General will be used to
reimburse the states' smoking-related healthcare costs. While neither consenting
to FDA jurisdiction nor waiving their objections thereto, Brooke and Liggett
have also agreed to phase in compliance with certain proposed interim FDA
regulations regarding smoking by children and adolescents, including a
prohibition on the use of cartoon characters in tobacco advertising and
limitations on the use of promotional materials and distribution of sample
packages where minors are present.
Brooke and Liggett have the right to terminate the settlement with respect
to any state participating in the settlement if any of the remaining defendants
in the litigation succeed on the merits. Brooke and Liggett may also terminate
the settlement if they conclude that too few additional states have joined. As
pioneers of the settlement, Brooke and Liggett are also entitled to certain
benefits not available to the other defendants that could reduce the payment
obligations of Brooke and Liggett (and any future affiliate) to the plaintiffs
in certain circumstances.
"This settlement gives Brooke the best of both worlds," said LeBow. "We
have capped our potential liability on favorable terms while retaining the right
to benefit from any legal victories by the remaining defendants. In addition, as
the market becomes more familiar with the agreement, it will become clear that
Liggett has not waived any legal privileges."
The settlement would also apply in the event of a merger or other business
combination between Liggett or Brooke and any of the other defendants in the
lawsuits, except any entity with a market share greater than 30%. The combining
defendant would receive the same settlement benefits enjoyed by Brooke and
Liggett. The five states would share an initial $135 million and other states
joining the settlement would share another $25 million.
The states would also share a percentage of the pretax income of the
combined tobacco companies from the second through the 25th year. The percentage
will range from 2-1/2% to 7-1/2% of pretax income depending on how many other
states join the settlement, but the amount will not be less than $30 million a
year. The initial five states will share 2-1/2% of pre-tax income and the other
states will share the next 5% according to a formula based on their Medicaid
populations. The five states will also share $3.75 million ($1.25 million a year
for three years) to monitor point-of-sale advertising by all companies close to
schools.
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3
Brooke Group controls Liggett Group, tobacco and real estate operations in
the former Soviet Union and has a substantial equity interest in New Valley
Corporation.
# # #
ATTORNEYS GENERAL SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT is entered into this 15th day of March, 1996 by
and among the State of West Virginia, State of Florida, State of Mississippi,
Commonwealth of Massachusetts, and State of Louisiana (collectively,
"Plaintiffs") and Brooke Group Ltd., a Delaware corporation ("Brooke Group"),
Liggett & Myers, Inc., a Delaware corporation ("Myers"), and Liggett Group,
Inc., a Delaware corporation (which, with Myers, is hereinafter referred to as
"Liggett").
R E C I T A L S
WHEREAS,
A. On or about May 23, 1994, the State of Mississippi, by and through its
Attorney General, Mike Moore, brought an action entitled Moore v. The American
Tobacco Co., et al., CN 94-1429, Chancery Court of Jackson County, Mississippi,
against, among others, the American Tobacco Company, Inc., R.J. Reynolds Tobacco
Company, Brown & Williamson Tobacco Corporation, Philip Morris, Inc., Liggett &
Myers, Inc., Lorillard Tobacco Company, Inc., and United States Tobacco Company
and their various parent and related companies ("Defendants"), asserting claims
for, among other things, expenses allegedly arising from tobacco-related matters
and injunctive relief concerning sales of cigarettes to minors (the "Mississippi
Action").
B. On or about September __, 1994, the State of West Virginia, by and
through its Attorney General Darrell V. McGraw, Jr., brought an action entitled
McGraw v. The American Tobacco Co., et al., 94-C-1707, Circuit Court of Kanawha
County, West
Virginia, against, among others, the Defendants asserting similar claims
(the "West Virginia Action").
C. On or about February 21, 1995, the State of Florida, by and through its
Attorney General Robert Butterworth, brought an action entitled The State of
Florida, Lawton M. Chiles, Jr., Individually and as Governor of the State of
Florida, Department of Business and Professional Regulation, and the Agency for
Health Care Administration v. The American Tobacco Co., et al., CN 95-1466,
Fifteenth Judicial Circuit, Palm Beach County, Florida, against, among others,
the Defendants asserting similar claims (the "Florida Action").
D. On or about December 19, 1995, the Commonwealth of Massachusetts, by and
through its Attorney General Scott Harshbarger, brought an action entitled
Commonwealth of Massachusetts v. Philip Morris Inc., et al., Civil No. 95-7378,
Massachusetts Superior Court, against, among others, the Defendants asserting
similar claims (the "Massachusetts Action").
E. On or about March 13, 1995, the State of Louisiana, by and through its
Attorney General Richard P. Ieyoub, brought an action entitled Richard P.
Ieyoub, Attorney General ex rel, State of Louisiana v. The American Tobacco
Company, et al., Civil No. 96-1209, 14th Judicial District Court, Parish of
Calcasieu, State of Louisiana, against, among others, the Defendants asserting
similar claims (the "Louisiana Action").
F. Other States are reportedly planning to bring or are considering
bringing actions similar to the above-mentioned actions.
G. On or about March 12, 1996, Brooke Group, Liggett and the plaintiffs in
an action entitled Dianne Castano, et al. v. The American Tobacco Company, Inc.,
Civil No. 94-1044, United States District Court for the Eastern District of
Louisiana ("Castano"), entered into a national class settlement, subject to,
among other things, court approval, with respect to a putative class of
allegedly nicotine-dependent smokers and their families.
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H. Brooke Group and Liggett have denied, and continue to deny, each and all
of the claims and contentions alleged by the plaintiffs in each and all of the
above-mentioned actions, and have denied, and continue to deny, any wrongdoing
or any legal liability of any kind.
I. Plaintiffs and Brooke Group and Liggett recognize and support the public
interest in preventing smoking by, or promotion of smoking to, children and
adolescents.
J. The Food and Drug Administration ("FDA") has proposed certain new
regulations purportedly concerning the sale and distribution of
nicotine-containing cigarettes and smokeless tobacco products to children and
adolescents.
K. Brooke Group and Liggett recognize and acknowledge that defending the
continued prosecution of the Attorney General Actions against them through trial
and appeals would require considerable resources and expense and would entail
uncertainty and risk. Brooke Group and Liggett have determined that the
settlement, in accordance with this Agreement, of the claims in the Attorney
General Actions against them will be beneficial to Brooke Group and Liggett.
L. The Settling States and the Attorneys General recognize and acknowledge
that the continued prosecution of the Attorney General Actions against Brooke
Group and Liggett through trial and appeals would require considerable time and
expense and would entail uncertainty, risk and delay. The Settling States and
the Attorneys General have determined that the settlement, in accordance with
this Agreement, of the claims in the Attorney General Actions against Brooke
Group and Liggett will be beneficial to their respective States.
NOW, THEREFORE, in consideration of the foregoing and of the promises and
covenants set forth in this Agreement, the undersigned Attorneys General, on
their own behalf and on behalf of their respective States, and Brooke Group and
Liggett hereby stipulate
-3-
and agree that the Attorney General Actions shall be settled as against
Brooke Group, Liggett, and upon such Future Affiliate becoming bound by this
Agreement, a Future Affiliate (as defined hereinbelow) of Liggett or Brooke
Group and that all claims asserted in the Attorney General Actions against
Brooke Group, Liggett and such Future Affiliate shall be dismissed, all on the
terms contained herein, as follows:
1. Definitions
As used in and solely for the purpose of this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" means a Present Affiliate or a Future Affiliate.
"Agreement" means this Settlement Agreement.
"Attorney General Actions" means the Mississippi Action, the West Virginia
Action, the Florida Action, the Massachusetts Action, and the Louisiana Action
or any similar action commenced by or on behalf of the other States against the
Defendants.
"Attorney General Settlement Fund" means the fund established as provided
in Section 5 of this Agreement.
"Attorney General Settlement Fund Board" or "Attorney General Board" and
"Attorney General Board Document" mean, respectively, the entity to be
established as provided in Section 5 of this Agreement and the document or
documents that the Attorneys General of the Settling States shall enter into by
which the Attorneys General of the Settling States, or their respective
designees shall administer, among other things, the Attorney General Settlement
Fund provided for under the terms of this Agreement.
"Brooke Group" means Brooke Group, Ltd. and its Present Affiliates other
than Liggett.
-4-
"Castano Settlement Agreement" means the settlement entered into as of
March 12, 1996 by the plaintiffs in Castano and Brooke Group and Liggett.
"Defendants" means the American Tobacco Company, Inc., R.J. Reynolds
Tobacco Company, Brown & Williamson Tobacco Corporation, Philip Morris, Inc.,
Liggett & Myers, Inc., Lorillard Tobacco Company, Inc., and United States
Tobacco Company and their various parent and related companies.
"Domestic Tobacco Operations" means the manufacture and/or sale of
cigarettes in the United States and its possessions.
"Future Affiliate" means any one entity, other than an entity with a Market
Share greater than 30% as of the date of this Agreement, which is a defendant in
the Attorney General Actions and which, with the prior written approval of
Brooke Group, subsequent to the date, and during the term, of this Agreement but
prior to the fifth anniversary (subject to the $5 million payment required by
Section 5.10) of the date of this Settlement Agreement: (i) directly or
indirectly acquires or is acquired by Liggett or Brooke Group; (ii) which
directly or indirectly acquires all or substantially all of the stock or assets
of Liggett or Brooke Group; (iii) all or substantially all of whose stock or
assets are directly or indirectly acquired by Brooke Group or Liggett; or (iv)
directly or indirectly merges with Brooke Group or Liggett or otherwise combines
on any basis with Liggett or Brooke Group.
"Inflation" means the percentage by which the national Consumer Price Index
for all urban consumers issued by the Bureau of Labor Statistics of the U.S.
Department of Labor increases or decreases for the relevant period. The
beginning index figure shall be the consumer price index for March 1996.
"Initial Settling States" means the States of Mississippi, West Virginia,
Florida, the Commonwealth of Massachusetts, Louisiana, and the respective
Attorneys General thereof.
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"Liggett" means Liggett Group, Inc. and Liggett & Myers, Inc.
"Market Share" means, with respect to a Defendant and a specified year, the
domestic market share in that year of all of such Defendant's tobacco products,
as determined by The Maxwell Consumer Report published by Wheat First Butcher
Singer or a comparable successor report.
"Medicaid Population" means, with respect to a Settling State and a
specified date, the Medicaid population of such Settling State as reported by
the most recent United States Census.
"Non-settling Defendant" means each of the American Tobacco Co., Lorillard
Tobacco Co., Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown & Williamson
Tobacco Corp., and United States Tobacco Co., unless and until it becomes a
Settling Defendant, as hereinafter defined.
"Parties" means the Plaintiffs, Brooke Group, Liggett and any other
Settling Defendant, as hereinafter defined, if, as and when such Settling
Defendant becomes bound by this Agreement.
"Present Affiliate" means, with respect to a specified corporation or
entity, another corporation, partnership or other entity which as of the date of
this Agreement, directly or indirectly, controls, is controlled by, or is under
common control with, such specified corporation.
"Present Value" means, with respect to a specified amount or amounts, the
present value of such amount or amounts as calculated using a discount rate
equal to the yield on 10-year Treasury Notes as reported in the Wall Street
Journal at the time of such calculation.
"Pretax Income," with respect to a specified Settling Defendant other than
Liggett for a specified year, means the operating income (or equivalent
designation) from Domestic
-6-
Tobacco Operations of the Settling Defendant and its affiliates, on a
consolidated basis, as determined in accordance with generally accepted
accounting principles ("GAAP") for the Settling Defendant's most recent fiscal
year, as reported in filings to the United States Securities and Exchange
Commission or, if there is no such filing, as reported by the Settling
Defendant's independent outside auditors. For purposes of the consolidation
intended hereby, interest expenses on parent company debt and parent company
corporate and other expenses, less amortization of parent company acquisition
goodwill, shall be allocated pro rata to all operating units according to
operating income. If GAAP changes in any material respect during the term of
this Agreement so that the benefits anticipated by the parties (in light of GAAP
applicable on the date of this Agreement), an appropriate adjustment shall be
made to the formulas and calculations hereunder to achieve the parties'
expectations as of the date hereof.
"Pretax Income," with respect to Liggett, means for a specified year, the
"Income before Income Taxes" as determined in accordance with generally accepted
accounting principles ("GAAP") of Liggett for its most recent fiscal year, as
reported in filings to the United States Securities and Exchange Commission or,
if there is no such filing, as reported by Liggett's independent outside
auditors. If GAAP changes in any material respect during the term of this
Agreement so that the benefits anticipated by the parties (in light of GAAP
applicable on the date of this Agreement), an appropriate adjustment shall be
made to the formulas and calculations hereunder to achieve the parties'
expectations as of the date hereof.
"Proposed Rule" means the regulations proposed by the FDA concerning the
sale and distribution of cigarettes and other products, dated August 9, 1995,
published at 21 C.F.R. Parts 801, 803, 804, and 897, and bearing document number
95N-0253.
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"Settling Defendants" means Brooke Group, Liggett and, if, as, and when it
joins in this Agreement, one Future Affiliate; provided that in the event of any
corporate restructuring, reorganization or spinoff involving any Settling
Defendant, only the entity or entities which, affect such reorganization or
spinoff, retain the Domestic Tobacco Operations of such Settling Defendant shall
thereafter be treated as the Settling Defendant for purposes of the payment
obligations of Section 6 of this Agreement.
"Settling Defendants' Counsel" means the law firm of Kasowitz, Benson,
Torres & Friedman L.L.P.
"Settling States" means the Initial Settling States and Subsequent Settling
States, if any.
"Smoking Claims Expense" means, with respect to a specified year, the
aggregate amount of the out-of-pocket expenses paid during that year by a
Settling Defendant for the payment of legal fees and costs, including attorney's
fees, and any settlements (other than payments made pursuant to the Castano
settlement) or judgments, in connection with litigation arising from
smoking-related claims other than the Attorney General Actions (or other civil
cases pending on January 1, 1996).
"Subsequent Settling States" means States other than the Initial Settling
States which commence an Attorney General Action and which become bound by this
Agreement pursuant to Section 3.1 hereof prior to six months from the date of
this Agreement (unless such six-month period is extended or reopened at the
option of the Settling Defendants).
2. Settlement Purposes Only.
2.1. This Agreement is for settlement purposes only, and neither the fact
of, or any provision contained in, this Agreement nor any action taken hereunder
shall constitute, be construed as, or be admissible in evidence as, any
admission of the validity of any claim, any
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argument or any fact alleged or which could have been alleged by Plaintiffs
as to their standing or as to any jurisdictional, constitutional or any other
legal or factual issue in any Attorney General Action or alleged or which could
have been alleged in any other action or proceeding of any kind or of any
wrongdoing, fault, violation of law, or liability of any kind on the part of any
of the Settling Defendants or any admission by any of them of any claim or
allegation made or which could have been made in any Attorney General Action or
in any other action or proceeding of any kind, or as an admission by any of the
Plaintiffs of the validity of any fact or defense asserted against them in any
Attorney General Action or in any other action or proceeding of any kind.
2.2. Nothing contained in this Agreement shall constitute or be construed
as any admission of the validity of the FDA's assertion of jurisdiction over
cigarettes or any other product.
3. Parties.
3.1. This Agreement shall be binding, in accordance with the terms hereof,
upon Brooke Group, Liggett and the Future Affiliate and the Initial Settling
States and each Subsequent Settling State upon its execution of a copy of this
Agreement; provided that the payment obligations of this Agreement shall be
binding only upon the Affiliates of such Settling Defendants which are engaged
in the Domestic Tobacco Operations.
3.2. The Settling States shall not seek to enjoin a spinoff or like
disposition of the stock of Nabisco Holdings Inc. by RJR Nabisco Holdings Corp.
in the event that a slate of nominees proposed by Brooke Group for election to
the RJR Nabisco Holdings Corp. Board of Directors is elected.
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4. Advertising Limitations.
4.1. Each Settling Defendant, promptly after the later of the Settlement
Date and the date said Settling Defendant becomes bound by this Agreement, shall
(i) withdraw its objections and opposition to the Proposed Rule and to the
assertion of jurisdiction by the FDA for the sole purpose of promulgating the
Proposed Rule with respect to all Defendants; (ii) file pleadings or other
documents necessary to effectuate such withdrawal; and (iii) withdraw as a party
from litigation against state officials in the Settling States related to the
tobacco litigation. By withdrawing said opposition and objections, Settling
Defendants do not and shall not be deemed to consent to or acknowledge such
jurisdiction and do not and shall not be deemed to waive or abandon said
opposition and objections in the event this Agreement is terminated. Each
Settling Defendant, notwithstanding the foregoing, may object to or oppose the
Proposed Rule to the extent that compliance is impractical or excessively
expensive. If, prior to the Proposed Rule taking final nonappealable effect as
to the tobacco industry generally, the FDA asserts that it has acquired or can
or should acquire jurisdiction to promulgate or enforce the Proposed Rule as to
a Settling Defendant by virtue of its entry into or compliance with this
Agreement, then, in such event, this Section 4 and its subparts shall be null
and void ab initio in their entirety.
4.2. Each Settling Defendant shall follow and abide by the provisions of
the Proposed Rule, insofar as they pertain solely to such Settling Defendant's
Domestic Tobacco Operations, as set forth in, and modified by, paragraphs 4.2.1
to 4.2.9 hereof until a final determination is reached respecting the Proposed
Rule, at which time the Settling Defendants will be bound by the Rule only
insofar as, and to the extent that the Rule becomes an enforceable obligation
binding upon all of the Settling Defendants and Non-Settling Defendants.
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4.2.1. Proposed Rule ss. 897.16(a), but only to the extent that such
section applies to a trade or brand name of a non-tobacco product which is
in use in the United States and has a demonstrated or likely appeal to
minors; provided that in any dispute hereunder, the Settling Defendant
shall have the burden to show compliance with this Subsection in binding
arbitration.
4.2.2. Proposed Rule ss. 897.16 (b), as proposed.
4.2.3. Proposed Rule ss. 897.16 (d), except to the extent free samples
are distributed under circumstances where no minors are present or likely
to be present,
4.2.4. Proposed Rule ss. 897.30 (a), as proposed.
4.2.5. Proposed Rule ss. 897.30 (b), but only to the extent that such
section applies to billboards within 1,000 feet of a clearly marked and
state-licensed elementary or secondary school or a clearly marked, outdoor,
municipal or other government-operated public playground for children.
4.2.6. Proposed Rule ss. 897.32(a), except that the requirements of
such section will be applicable only to a publication whose regular readers
aged less than eighteen years constitute 15% or more of the publication's
total regular readership; provided that for those publications in which the
Settling Defendants currently advertise which exceed the 15% rotation,
Settling Defendants will, through incremental reduction, meet the
requirements of this rule within a period of five (5) years.
4.2.7. Proposed Rule ss. 897.34(a), to the extent such section applies
to clothing or outerwear or to any items or services, other than clothing
or outerwear, which have not prior to the date of this Agreement been
marketed, licensed, distributed or sold, and which are more likely to
appeal to minors than to adults; provided that such section does not apply
to
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any clothing, outerwear, items or services customarily marketed,
licensed, distributed or sold at the site and at the time of events
permissible under Section 4.2.9 of this Agreement.
4.2.8. Proposed Rule ss. 897.34(b), to the extent that gifts or items
distributable or redeemable pursuant to this rule are more likely to appeal
to minors than to adults.
4.2.9. Proposed Rule ss. 897.34(c), except that such section will be
applicable only to an athletic, musical, artistic or other social or
cultural event whose past patrons or attendees aged less than eighteen
years constitute 15% or more of the event's total past patronage or
attendance; provided that this section does not apply to any events that
Settling Defendants have sponsored, conducted, engaged or participated in
within the last ten years.
4.3. Notwithstanding anything to the contrary in the Proposed Rule or in
this Agreement, each such Settling Defendant will commence compliance with
Section 4.2 of this Agreement, according priority as to compliance to the
Initial Settling States and then to Subsequently Settling States as soon as
reasonably practicable; provided that such Settling Defendant may limit its
compliance to the extent, if any, necessary to ensure that the net annual
out-of-pocket cost to the Settling Defendant of such compliance not exceed $1
million; and provided further that such Settling Defendant shall not be
obligated pursuant hereto to breach pre-existing legal obligations, if any, it
may have with respect to the matters covered by Section 4.2 (and shall use its
reasonable best efforts to minimize the degree to which any such obligations
would impede its full compliance therewith). For purposes of this paragraph, the
phrase "net annual out-of-pocket costs" means the excess of (a) the additional
out-of-pocket expenditures incurred during a particular year by a particular
Settling Defendant in complying with the matters specified in Section 4.2, over
(b) savings, if any, in out-of-pocket expenditures realized during such year by
such Settlement Defendant directly from the implementation of the matters
covered by Section 4.2.
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4.4. If, when and to the extent that the Proposed Rule, in whole or in
part, becomes an enforceable legal obligation binding upon all of the
Defendants, each Settling Defendant will comply therewith.
4.5. As promptly as reasonably practicable after becoming bound by this
Agreement, each Settling Defendant shall eliminate cartoon characters, such as
"Joe Camel," from all of its advertising and promotional materials and
activities with respect to tobacco products.
4.6. Each Settling Defendant other than Brooke Group and Liggett shall
contribute to a fund to be administered by the Attorneys General of the Settling
States, the amount of $250,000 per year, per Initial Settling State, for a
period of three years from the date such Settling Defendant becomes bound by
this Agreement for the purposes of monitoring the point-of-sale advertising
amounts, types, locations, and proximity to schools, in the Initial Settling
States.
5. Attorney General Settlement Fund.
5.1. All amounts due and owing by Settling Defendants under this Agreement
shall be paid when due into the Attorney General Settlement Fund to be
administered, allocated and distributed by the Attorney General Board to
Settling States in accordance with this Agreement and the Attorney General Board
Document; it being understood that payments shall be first applied by each
Settling State to compensate state health care programs bearing the greatest
percentage of state taxpayer contribution.
5.2. Settling Defendants shall have no interest in or responsibility for
allocations or distributions from the Attorney General Settlement Fund and do
not guarantee any earnings or insure against any losses from any portion of the
Attorney General Settlement Fund assets that may be maintained or administered
as provided in Section 5.1 above.
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5.3. Liggett shall pay into the Attorney General Settlement Fund (a) for
the benefit of the Initial Settling States, an initial amount equal to five
million dollars ($5,000,000), of which one million dollars ($1,000,000) shall be
payable within five business days of the date of this Agreement and the
remaining four million dollars ($4,000,000) shall be paid in equal annual
installments, indexed and adjusted for Inflation, over the following nine years
during the term of this Agreement (except that any then remaining unpaid amount
under this Section 5.3(a) shall be due and payable within sixty (60) days of the
date (i) a Future Affiliate becomes bound by this Agreement or (ii) Liggett
defaults on any of its payment obligations under this Agreement) and (b) in each
year beginning in the second year during the term of this Agreement (i) for the
benefit of the Initial Settling States, an annual amount equal to 2.5% of
Liggett's Pretax Income and (ii) for the benefit of each Subsequent Settling
State, if any, an annual amount equal to the product of (A) the ratio that the
Medicaid Population of such Subsequent Settling State then bears to a total
Medicaid Population of ten million (10,000,000) reduced by the Medicaid
Population of the Initial Settling States and (B) 5% of Liggett's Pretax Income;
provided, however, that in no event shall the aggregate amount to be paid under
clause (b)(ii) of this Section 5.3 ever exceed 5% of Liggett's Pretax Income.
The Attorney General Board shall make all decisions regarding payments to the
Settling States hereunder.
5.4. The Future Affiliate shall, within sixty (60) days of the date such
Settling Defendant becomes bound by this Agreement, (a) pay into the Attorney
General Settlement Fund, for the benefit of the Initial Settling States, an
aggregate amount equal to one hundred thirty-five million dollars
($135,000,000), and (b) make available an amount up to twenty-five million
dollars ($25,000,000) to be paid at the direction of the Attorneys General Board
to Subsequent Settling States in connection with their joining this Agreement.
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5.5. The Future Affiliate shall, commencing one year after the date such
Settling Defendant becomes bound by this Agreement and on each anniversary of
such date during the term of this Agreement, pay into the Attorney General
Settlement Fund (a) for the benefit of the Initial Settling States, an amount
equal to 2.5% of such Settling Defendant's Pretax Income, provided that the
amounts payable under this Section 5.5(a) shall not be less than thirty million
dollars ($30,000,000) per year (except as otherwise provided herein), indexed
and adjusted for Inflation, and (b) for the benefit of each Subsequent Settling
State, if any, an annual amount equal to the product of (i) the ratio that the
Medicaid Population of such Subsequent Settling State then bears to a total
Medicaid Population of ten million (10,000,000) reduced by the Medicaid
Population of the Initial Settling States and (ii) 5% of the Settling
Defendant's Pretax Income; provided, however, that in no event shall the
aggregate amount to be paid under clause (b)(ii) of this Section 5.5 ever exceed
5% of Liggett's Pretax Income in the aggregate.
5.6. With respect to each Settling State, in the event of the entry of any
final non-appealable monetary judgment in such Settling State's Attorney General
Action (other than by way of settlement) against any one or more of the
Non-Settling Defendants, then each Settling Defendant shall have the right to
reduce the payments it is obligated to make pursuant to this Agreement to the
extent necessary to make (i) the then Present Value of all amounts theretofore
paid and thereafter payable to that Settling State pursuant to this Agreement by
any Settling Defendant per percentage point of the then Market Share of such
Settling Defendant no more than seventy-five percent (75%) of (ii) the then
Present Value of the dollar amount of such judgment per percentage point of the
then Market Share of each such Non-Settling Defendant; provided that such
Settling Defendant give written notice of such reduction and the method of
calculating such reduction to the Settling State's Attorney
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General as soon as practicable after the entry of judgment; and provided
further that to the extent any such reduction would reduce the Settling
Defendant's annual payment to less than $30 million, indexed and increased for
Inflation such Settling Defendant shall have the right to reduce payments it is
obligated to make under this Agreement only to the extent necessary to make the
quotients in Sections 5.6(i) and (ii) equal.
For purposes of this Section 5.6, computations based on future payments due
any of the Initial Settling States shall be based on the minimum payments in
Sections 5.3 and 5.5, indexed and increased for inflation at 5% per annum
(computations based on future payments due any Subsequent Settling States shall
assume, solely for this purpose, that each such state would be entitled to a
payment proportionate to the total minimum payments due the Initial States (as
so indexed and increased above), adjusted solely for relative size of Medicaid
Population.
5.7. Each Settling Defendant shall, during the term of this Agreement, have
the right to a credit against amounts due in each year pursuant to this
Agreement in an amount equal to fifty percent (50%) of the difference between
(a) such Settling Defendant's Smoking Claims Expense in the prior year and (b)
such Settling Defendant's Smoking Claims Expense for the twelve months prior to
the date of this Agreement; provided that the amount of such credit shall not be
greater than ten percent of the amounts that would otherwise be due from such
Settling Defendant in such year; provided further that each Settling Defendant
shall have the right to terminate this Agreement with respect to that Settling
Defendant in the event that the amount of such difference is greater than
twenty-five percent (25%) of the amount so due from such Settling Defendant in
such year; and provided further that such credit shall not apply to the extent
that it would render the amounts payable under Section 5.5 less than thirty
million dollars ($30,000,000) per year.
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5.8. With respect to each Settling Defendant, in each year beginning with
the second year such Settling Defendant becomes bound by this Agreement, the
annual payment amount due under Sections 5.3 and 5.5 of this Agreement from such
Settling Defendant shall be decreased in proportion to any decrease and (only if
there shall have been a prior such decrease) increased in proportion to any
increase, in such Settling Defendant's Market Share from the prior year;
provided, however, that (a) such annual payment amount shall not be so decreased
to the extent, if any, that such annual payment amount in such year is decreased
as a result of a decrease in such Settling Defendant's Pretax Income and (b)
such annual payment amount shall never be increased such that the aggregate
amount of any such increases exceeds the aggregate amount of any such decreases
(and in no event more than the maximum amount set forth in Sections 5.3, 5.4 and
5.5 hereof).
5.9. Insofar as the Castano Settlement Agreement is terminated (and no
settlement contemplated by Section 11.2 thereof is entered into in any putative
class action subsequent to Castano), the Castano CTCIR research fund
contemplated by Section 6.4(b) of the Castano Settlement Agreement shall be
administered by the Attorney General Board. At the time a Future Affiliate or
other entity becomes bound by this Agreement and the Castano Settlement
Agreement to the extent the CTCIR Research Fund is not funded under the Castano
Settlement Agreement, that $10 million shall be paid into the Attorney General
Settlement Fund and used for the same or similar purposes set forth in the
Castano Settlement Agreement. If at any time under the terms of the Castano
Settlement Agreement the funds with regard to the CTCIR Research Fund are due
and payable, all future funds shall be paid under the Castano Settlement
Agreement. But if a lapse in the obligation occurs under Castano, the funds
shall be paid under this Agreement.
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5.10. If the Brooke Group or Liggett fails to consummate a merger or other
transaction with a Non-Settling Defendant which results in the creation or
acquisition of a Future Affiliate within three years of the date of the
execution of this Agreement, Liggett shall pay into the Attorney General
Settlement Fund $5 million for distribution to each of the Initial Settling
States on an equal share basis.
5.11. No Non-Settling Defendant may become a Future Affiliate if after the
date of this Agreement that Non-Settling Defendant has by spin off, sale or
other transaction substantially changed its Domestic Tobacco Operations so as to
result in a material reduction in Market Share caused by such voluntary
corporate action. No Settling Defendant shall sell, dispose or transfer any of
its cigarette brands or business without first causing the acquiror, on behalf
of itself and its successors, to be bound by all of the obligations of a
Settling Defendant hereunder as to such transferred brand or business.
6. Release.
6.1. Upon the effective date of this Agreement, or, in the case of a
Future Affiliate, the date such Future Affiliate becomes bound by this
Agreement, for good and sufficient consideration as described herein, each such
Settling State and each Attorney General thereof shall for the duration or term
of this Agreement (whichever is shorter) be deemed to and hereby does release,
dismiss and discharge each and every civil claim, right, and cause of action
(including, without limitation, all claims for damages, restitution, medical
monitoring, or any other legal or equitable relief) known or unknown, asserted
or unasserted, which they had, now have or may hereafter have against each such
Settling Defendant (including its past and present parents, subsidiaries,
affiliates, employees, directors and shareholders, but only in such capacities,
vis-a-vis, each such Settling Defendant, and downstream distribution entities of
Liggett or other Settling Defendant to the extent of their distribution on
behalf of Liggett
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or other Settling Defendant, but not including any individual Non-Settling
Defendants or other defendants in the Attorney General Actions to the extent
they would otherwise be part of the foregoing), (i) which was asserted in that
State's Attorney General Action, and/or (ii) which was not asserted in said
Action but which is smoking-related or otherwise arises out of, or concerns, the
acts, facts, transactions, occurrences, representations, or omissions set forth,
alleged, referred to or otherwise embraced in the complaint of that Settling
State's Attorney General Action.
Upon the later of the date of each Settling Defendant becoming bound by
this Agreement and the date of each Settling State becoming bound by this
Agreement, for good and sufficient consideration as described herein, each such
Settling Defendant shall for the duration or term of this Agreement (whichever
is shorter) be deemed to and hereby does release, dismiss and discharge each and
every claim, right, and cause of action (including, without limitation, all
claims for damages, restitution, fees, expenses, or any other legal or equitable
relief), whether known or unknown, asserted or unasserted, which they had, now
have or may hereafter have as of the effective date of this Agreement against
each such Settling State, its public officials and employees in connection with,
arising out of or related to the acts, facts, transactions, occurrences,
representations, or omissions set forth, alleged or referred to or otherwise
embraced in the complaints of the settling Attorney General Actions.
Provided, however, as follows:
1) If this Agreement expires upon completion of its full term, this release
shall continue in full force and effect with respect to all released claims
through and including the date of such expiration, but only as to such claims
through and including such date; if this Agreement terminates for any reason
prior to its full term, this release shall be of no further force and effect and
Settling Defendants shall be entitled to a credit to the extent otherwise
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provided in this Agreement against all claims covered by the release for the
full amount paid by such Settling Defendants hereunder.
2) This release does not pertain or apply to any other existing or
potential defendant in any present or future Attorney General Action, except the
"Future Affiliate" which joins in and complies with the provisions of this
Agreement, including but not limited to Sections 4 and 5.
6.2. Nothing in this Agreement shall prejudice or in any way interfere with
the rights of Settling States or Settling Defendants to pursue any or all of
their rights and remedies against Non-Settling Defendants or other parties not
released hereunder.
7. Exclusive Remedy; Dismissal of Action; Jurisdiction of Court.
7.1. Except as otherwise provided in this Agreement, this Agreement shall
be the sole and exclusive remedy for any and all claims of Settling States
released hereby against the Settling Defendants, and upon the later of the date
a Settling State becomes bound by this Agreement and the date a Settling
Defendant becomes bound by this Agreement, each such Settling State shall be
barred from initiating, asserting, or prosecuting any claims released hereby
against each such Settling Defendant.
7.2. On the later of the date each Settling State becomes bound by this
Agreement and the date a Settling Defendant becomes bound by this Agreement,
each such Settling State shall dismiss without prejudice its corresponding
Attorney General Action as against such Settling Defendant.
7.3. On the later of the date each Settling State becomes bound by this
Agreement and the date a Settling Defendant becomes bound by this Agreement,
each such Settling Defendant shall withdraw without prejudice from any action
brought against any Settling State with respect to claims released hereby.
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8. Term.
8.1. Unless earlier terminated in accordance with the provisions of this
Agreement, the duration of this Agreement shall be twenty-five (25) years from
the date of this Agreement.
8.2. Each Settling Defendant shall have the right to terminate this
Agreement with respect to that Settling Defendant and with respect to the
Settling State in which there is a full and final dismissal on the merits as to
any of the Defendants in that Settling State's Attorney General Action; provided
that in the event of any such termination, the payments due from such Settling
Defendant pursuant to this Agreement shall be reduced by the amount payable to
that Settling State; provided further that any and all payments made pursuant to
this Agreement prior to any such termination by such Settling Defendant shall be
retained by the Attorney General Settlement Fund. The Attorney General Board
shall provide the Settling Defendant with the information necessary to determine
the amount of such reduction.
8.3. Each Settling Defendant shall have the right at any time during the
term of this Agreement to terminate this Agreement with respect to such Settling
Defendant in the event that, in its sole and exclusive discretion, it determines
that too many states have filed Attorney General Actions and have not resolved
such cases with respect to the Settling Defendant by becoming bound by this
Agreement in accordance with the terms hereof; provided that such Settling
Defendant give written notice of such termination to the Attorneys General of
the Settling States and provided further that any and all payments due up to the
date of such termination shall be paid and all payments made pursuant this
Agreement prior to the giving of such notice by such Settling Defendant shall be
retained by the Attorney General Settlement Fund.
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8.4. In the event of a termination of this Agreement with respect to any
Settling State by any Settling Defendant, such Settling Defendant shall be
entitled to offset any payments made to such Settling State prior thereto
against any judgments thereafter obtained by such Settling State against such
Settling Defendant in an Attorney General Action.
8.5. If any Settling Defendant subsequently withdraws from this Agreement,
or this Agreement, for whatever reason, is terminated other than by reason of
the expiration of its term, then the applicable statute of limitations or any
similar time requirement for a Settling State or a terminating Settling
Defendant to file a claim that would otherwise be released hereunder against or
by any Settling Defendant shall be tolled from the date such Settling State
became bound by this Agreement until the later of the time permitted by
applicable law or for one year from the date of such termination with the effect
that the parties shall be in the same position as they were at the time the
Settling State filed its original Attorney General Action with respect to the
statute of limitations.
8.6. Except as may be otherwise specifically provided in this Agreement, a
termination by a Settling Defendant hereunder shall have the effect of rendering
this Agreement as having no force or effect whatsoever, null and void ab initio,
and not admissible as evidence for any purpose in any pending or future
litigation in any jurisdiction.
9. Continuing Enforceability.
Unless earlier terminated, as to the Settling States, this Agreement and
each provision of or obligation arising from this Agreement shall continue and
remain fully executory and enforceable if a Settling Defendant institutes or is
subject to the institution against it of any proceeding or voluntary case under
title 11, United States Code, or other proceeding seeking to adjudicate it
insolvent or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to
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bankruptcy, insolvency or reorganization or relief or protection of debtors or
other proceeding seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or for any
part of its property (each, a "Bankruptcy Proceedings"). The Settling States
acknowledge and agree that Brooke Group has the right but not the obligation to
cure and to perform any and all obligations of Liggett under this Agreement
notwithstanding the occurrence and continuation of any Bankruptcy Proceeding
with respect to Liggett; provided, however, that until such time as Liggett
decides whether to reject or assume this Agreement, Brooke Group shall have the
obligation to pay the annual installments as provided in Section 5.3(a) hereof
and so long as the Brooke Group is paying all amounts due hereunder and no such
payments are voidable, then the Settling States waive any and all rights they
may have not to accept such cure or performance in any Bankruptcy Proceeding.
10. Entry of Good Faith Bar Order on Contribution and Indemnity Claims.
10.1. The Parties shall request that the respective courts in the Attorney
General Actions enter orders barring and prohibiting the commencement and
prosecution of any claim or action by any Non-Settling Defendant against any
Settling Defendant, including but not limited to any contribution, indemnity
and/or subrogation claim seeking reimbursement for payments made or to be made
to any Settling State for claims settled under this Agreement. Settling
Defendants shall be entitled to dismissal with prejudice of any Non-Settling
Defendants' claims against them which violate or are inconsistent with this bar,
if granted.
10.2. Upon entering into this Agreement, each Settling State shall seek to
amend its pleadings, or take such other appropriate steps (including, but not
limited to, moving to dismiss third-party claims asserted against a Settling
Defendant), such that each Settling State is seeking only recovery of amounts
from Non-Settling Defendants as to which said Non-Settling Defendants have no
claim or right to contribution or indemnification from Settling
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Defendants. The Settling States shall not seek to collect any amount on any
judgment against a Non-Settling Defendant to the extent that such Non-Settling
Defendant has a right of contribution or indemnification against any of the
Settling Defendants. Brooke Group and Liggett represent and warrant to the
Settling States that none of them are subject to any agreement or understanding,
written or otherwise, with any Non-Settling Defendants or any other party that
entitles any Non-Settling Defendant to indemnity or contribution from the Brooke
Group or Liggett.
10.3 Should a Settling State receive a final non-appealable monetary
judgment against a Non-Settling Defendant which then results in the Non-Settling
Defendant being legally entitled to require a Settling Defendant to make payment
toward that judgment, the Settling States shall to seek Court approval to reduce
the judgment by an amount sufficient to result in the Settling Defendant having
no obligation toward the judgment.
10.4. In the event that a Settling Defendant has entered into any contract
or series of contracts, the effect of which is to render the Settling Defendant
liable for all or any portion of a tobacco liability judgment entered against a
Non-Settling Defendant, and to render a Non-Settling Defendant liable for all or
any portion of a tobacco liability judgment entered against such Settling
Defendant (a "Reciprocal Payment Arrangement"), the Settling Defendant shall
endeavor to terminate such Reciprocal Payment Arrangement or have same
judicially declared to be null and void. In the event that a Settling State
obtains a judgment in its Attorney General Action against a Non-Settling
Defendant (the "NSD Obligee") which, pursuant to a Reciprocal Payment
Arrangement, would have to be paid in whole or in part by a Settling Defendant,
such Settling Defendant shall permit the Settling State to enter judgment
against it in the same or other Attorney General Action in an amount sufficient
to require a Non-Settling Defendant (the "NSD Obligor") to pay, pursuant to a
Reciprocal Payment
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Obligation, a sum equal to the amount of the judgment against the NSD
Obligee which the NSD Obligee claims must be paid by such Settling Defendant,
and such Settling State shall accept an assignment from the Settling Defendant
of its right to payment by the NSD Obligor as full satisfaction of said
judgment. The NSD Obligee and the NSD Obligor may, but need not, be the same
entity.
10.5. In the event that any potential Future Affiliate shall have entered
into any contract the effect of which is to render the potential Future
Affiliate liable for all or any portion of a tobacco liability judgment entered
against another Non-Settling Defendant and which is not part of a Reciprocal
Payment Arrangement (a "Unilateral Payment Obligation"), then at the time the
potential Future Affiliate seeks to join this Agreement, it will advise the
Settling States of the existence of any such contract, and the Settling States
and the potential Future Affiliate shall thereupon cooperate in seeking a
judicial determination that the Unilateral Payment Obligation is null and void
and, until resolution of said request for judicial declaration, all payment
obligations of the Settling Defendant under this Agreement will be suspended. In
the event that such determination is judicially denied, or there is no
resolution within a period of one year, the potential Future Affiliate may
either terminate within thirty (30) days thereafter its election to join this
Agreement, or if the potential Future Affiliate fails to so terminate, then it
shall join in this Agreement and honor all of its obligations hereunder
notwithstanding such Unilateral Payments Obligation.
11. Tax Status of Attorney General Settlement Fund.
11.1 The Attorney General Settlement Fund created under this Agreement will
be established and maintained as a Qualified Settlement Fund ("QSF") in
accordance with Section 468B of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder. Any Settling Defendant shall be
permitted, in its discretion, and at
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its own cost, to seek a private letter ruling from the Internal Revenue
Service ("IRS") regarding the tax status of the Attorney General Settlement
Fund. The parties agree to negotiate in good faith any changes to the Agreement
which may be necessary to obtain IRS approval of the Attorney General Settlement
Fund as a QSF.
11.2. The Attorney General Board is appointed to act as administrator of
the Attorney General Settlement fund. As administrator, such board will
undertake the following actions in accordance with the regulations under IRC
section 468B: (a) the Board shall apply for the tax identification number
required for the Attorney General Settlement Fund; (b) the Board shall file, or
cause to be filed, all tax returns the Attorney General Settlement Fund is
required to file under federal or state laws; (c) the Board shall pay from the
Attorney General Settlement Fund all taxes that are imposed upon the Attorney
General Settlement Fund by federal or state laws; and (d) the Board shall file,
or cause to be filed, tax elections available to the Attorney General Settlement
Fund, including a request for a prompt assessment under IRC section 6501(d) if
and when the board deems it appropriate to do so.
11.3. The Settling Defendants, as transferors of the Attorney General
Settlement Fund, shall prepare and file the information statements concerning
their settlement payments to the Attorney General Settlement Fund as required to
be provided to the IRS pursuant to the regulations under IRC section 468B.
12. Effect of Default of Any Settling Defendant.
In the event any Settling Defendant fails to make a payment due and owing
under the terms of this Agreement, or is in default of this Agreement in any
other respect, Plaintiffs' Counsel shall so notify the defaulting Settling
Defendant, which shall then be given 60 calendar days to "cure" the default. If
the defaulting Settling Defendant does not "cure" the
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default in the time provided in this Section 12, the Settling State may
apply to the court for relief in addition to any other remedies it may have
hereunder.
13. Representations and Warranties.
13.1. Each Settling Defendant represents and warrants that (i) it has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby; (ii) the
execution, delivery and performance by such Settling Defendant of this Agreement
and the consummation by it of the actions contemplated herein have been duly
authorized by all necessary corporate action on the part of such Settling
Defendant; (iii) the Agreement has been duly and validly executed and delivered
by such Settling Defendant and constitutes its legal, valid and binding
obligation; and (iv) this Agreement does not violate the charter or bylaws of
such Settling Defendant or any agreement to which the Settling Defendant (other
than the Future Affiliate) is a party.
13.2. Each Settling State represents and warrants that pursuant to its
statutory and/or common law authority (i) it has all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; (ii) the execution, delivery and performance
by such Settling State of this Agreement and the consummation by it of the
actions contemplated herein have been duly authorized by all necessary action on
the part of such Settling State; and (iii) the Agreement has been duly executed
and authorized by such Settling State and constitutes its legal, valid and
binding obligation.
14. Arbitration.
In the event that the Parties are unable to agree, after good faith
efforts, as to the determination or calculation for any applicable year of
Market Share or Pretax Income
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hereunder, such determination or calculation shall be submitted to binding
arbitration in accordance with the rules of the American Arbitration
Association.
15. Most Favored Nation.
15.1. It is the intent of the parties hereto that the Settling Defendants
enjoy a preferred position with respect to Non-Settling Defendants, in
recognition of the Settling Defendants' willingness to enter into this
Agreement. Accordingly, it is generally contemplated that settlements which
involve all Settling States, and a Non-Settling Defendant (a "Group Other
Settlement") or involving one Settling State and a Non-Settling Defendant (a
"Single State Other Settlement") shall meet certain requirements in terms of the
initial, periodic or lump sum payments to be made by the Non-Settling Defendant
(each a "Benchmark Figure"). For purposes of this Section, a settlement
involving a Non-Settling Defendant and some, but not all, Settling States shall
be deemed a Single State Other Settlement, and the preferred position of the
Settling Defendant shall be governed by subsections 15.1.4, 15.1.5 and 15.1.6
hereof, and determined on a state-by-state basis.
15.1.1. In the case of a Group Other Settlement which includes an
Initial Payment such as that provided for in Section 5.3 hereof, the
Benchmark Figure shall be that figure which represents three times the
Present Value of the Initial Payment made hereunder, adjusted for Market
Share at the time of such payment. Thus, if at the time of the Initial
Payment hereunder, the Future Affiliate had a market share of 20 percent,
and made a payment the Present Value of which is $150 million, and the
Settling States subsequently enter into a Group Other Settlement with a
Non-Settling Defendant which has a market share of 10 percent, the
Benchmark Figure for the Initial Payment shall be $225 million. To the
extent that the Initial Payment actually provided for in such Group Other
Settlement is less than the Benchmark Figure, the Settling Defendant shall
receive a credit in like amount, up to
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the amount of the present value of the Initial Payment made hereunder,
against all future payment obligations hereunder.
15.1.2. In the case of (i) a Group Other Settlement which includes
only a lump sum or periodic payments, and (ii) with respect to the periodic
payments included in a Group Other Settlement which also includes an
Initial Payment, if the percentage of Pretax Income payable by a Settling
Defendant hereunder is between 2.0 and 5.0 percent, the Benchmark Figure
shall be that amount which constitutes three times the Present Value of all
amounts paid or payable by the Settling Defendant hereunder (excluding, if
the Group Other Settlement contains an Initial Payment, the Initial Payment
hereunder), assuming, in the case of future payments, no increase or
decrease in Market Share but assuming Inflation in revenues, all adjusted
for Market Share. Thus, if the Present Value of a Settling Defendant's
payments made or to be made hereunder is $600 million and such Settling
Defendant enjoys a Market Share of 20%, the Benchmark Figure for a
Non-Settling Defendant which at the time of a Group Other Settlement enjoys
a Market Share of 15% would be $1,350 million. Similarly, the Benchmark
Figure for a Non-Settling Defendant which at the time of a Group Other
Settlement enjoys a Market Share of 5% would be $450 million. To the extent
that the Present Value of the lump sum or periodic payments to be made
under a Group Other Settlement is less than the Benchmark Figure, the
Settling Defendant shall receive a credit in like amount, up to the amount
of any remaining payment obligations hereunder.
15.1.3. In the case of a Group Other Settlement such as described in
15.1.2, if the percentage of Pretax Income payable by a Settling Defendant
hereunder is in excess of 5.0 percent, the Benchmark Figure computed as in
15.1.2 above, except that the multiplier shall be the quotient yielded by
dividing the percentage of Pretax Income payable by the Settling Defendant
plus 10 by the percentage of Pretax Income payable by the Settling
Defendant.
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Thus, if the Settling Defendant is paying 6.0 percent Pretax Income, the
multiplier is 6 + 10 divided by 6 = 2-2/3; if the Settling Defendant is
paying 7.5 percent of Pretax Income, the multiplier is 7.5 + 10 divided by
7.5 = 2-1/3.
15.1.4. In the case of a Single State Other Payment which includes an
Initial Payment such as that provided for in Section 5.3 hereof, the
Benchmark Figure shall be that figure which represents three times the
present value of the Initial Payment made hereunder to such Settling State,
adjusted for Market Share at the time of such payment, computed in
accordance with Section 15.1.1. To the extent that the Initial Payment
actually provided for in such Single State Other Settlement is less than
the Benchmark Figure, the Settling Defendant shall receive a credit in like
amount, up to the amount of the present value of the Initial Payment made
to the Settling State hereunder, against all future payment obligations to
the Settling State hereunder.
15.1.5. In the case of a Single State Other Settlement which includes
only a lump sum or periodic payments, and with respect to the periodic
payments included in a Single State Other Settlement which also includes an
Initial Payment, if the percentage of Pretax Income payable by a Settling
Defendant to all Settling States hereunder is between 2.5 and 5.0 percent,
the Benchmark Figure shall be that amount which constitutes three times the
Present Value of all amounts paid or payable by the Settling Defendant to
the Settling State hereunder (excluding, if the Single State Other
Settlement contains an Initial Payment, the Initial Payment hereunder),
assuming, in the case of future payments, no increase or decrease in Market
Share but assuming Inflation in revenues, all adjusted for Market Share,
computed as set forth in Section 15.1.2. To the extent that the Present
Value of the lump sum or periodic payments to be made under a Single State
Other Settlement is less than the Benchmark
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Figure, the Settling Defendant shall receive a credit in like amount, up to
the amount of any remaining payment obligations to the Settling State
hereunder.
15.1.6. In the case of a Single State Other Settlement such as
described in 15.1.5, if the percentage of Pretax Income payable by a
Settling Defendant to all Settling States hereunder is in excess of 5.0
percent, the Benchmark Figure shall be computed as in 15.1.2 above, except
that the multiplier shall be the quotient yielded by dividing the
percentage of Pretax Income payable by the Settling Defendant to all
Settling States plus 10 by the percentage of Pretax Income payable by the
Settling Defendant to all Settling States.
15.1.7. Solely for the purposes of Sections 15.1.5 and 15.1.6, the
payments due to each of the Initial Settling States shall be deemed to be
equivalent to 0.5% of the Settling Defendant's Pretax Income. In cases of
determining Present Value of future payments, each Initial Settling State's
share shall be one-fifth of the amount computed in accordance with the
second paragraph of Section 5.6 hereof.
15.2. Except as provided in Section 15.1 hereof, in the event that,
subsequent to the date of this Agreement, any settlement of any Settling State's
Attorney General Action is reached with any Non-Settling Defendant which is not
a Party hereto and such settlement is on any terms more favorable to such
Non-Settling Defendant than are the terms of this Agreement to a Settling
Defendant, such Settling Defendant shall have the right to replace or modify any
or all of the terms of this Agreement with, or add to this Agreement, any or all
of such more favorable terms.
15.3. In the event that, subsequent to the date of this Agreement, any of
the Settling Defendants enters into a settlement agreement with any State other
than a Settling State on terms relating to the then Present Value of amounts
payable under such settlement agreement, compliance with the Proposed Rule or
cooperation that are more favorable to the State than
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those contained herein (as adjusted for relative Medicaid Population), the
Settling States shall have the right with respect to such Settling Defendant to
replace or modify any or all of the terms of this Agreement with, or add to this
Agreement, any or all such more favorable terms (adjusted for relative Medicaid
Populations).
16. Miscellaneous.
16.1. All terms of this Agreement and/or obligations created thereby shall
be deemed to include a covenant of good faith and fair dealing on behalf of all
parties.
16.2. Brooke shall provide to the Settling States at the time of execution
of this Agreement and at the time the Future Affiliate joins this Agreement, an
opinion in form satisfactory to the Settling States from legal counsel for the
Brooke Group (or Future Affiliate, as the case may be) as to the due execution
of the Settlement Agreement by the Brooke Group and Liggett (or Future
Affiliate, as the case may be) and its enforceability against the Brooke Group,
Liggett (or Future Affiliate, as the case may be) and such other matters
contemplated by Section 13.1 (other than the "agreements" referenced in clause
(iv)).
16.3. In the event that a termination occurs pursuant to any sections of
this Agreement, no Settling State shall be required to return any payment.
16.4. This Agreement, including all Exhibits attached hereto, if any, shall
constitute the entire Agreement among the Parties with regard to the subject of
this Agreement and shall supersede any previous agreements and understandings
between the Parties with respect to the subject matter of this Agreement. This
Agreement may not be changed, modified, or amended except in writing signed by
all Parties.
16.5. With respect to each Settling State, this Agreement shall be
construed under and governed by the laws of such State applied without regard to
its laws applicable to choice of law.
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16.6. This Agreement may be executed by the Parties in one or more
counterparts and by facsimile, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
16.7. This Agreement shall be binding upon and inure to the benefit of the
Settling States, the Settling Defendants, and their representatives, heirs,
successors, and assigns.
16.8. Nothing in this Agreement shall be construed to subject any Settling
Defendant's parent or affiliated company to the obligations or liabilities of
that Settling Defendant except as otherwise provided herein.
16.9. The headings of the Sections of this Agreement are included for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect its construction.
16.10. Any notice, request, instruction, application for Court orders
sought in connection with this Agreement or other document to be given by any
Party to any other Party shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, if to the Settling Defendants to
the attention of each Settling Defendant's respective representative and to
Plaintiffs' Counsel on behalf of the Settling States. As of the date of this
Agreement, the respective representatives are as follows:
Mike Moore, Attorney General of the State of Mississippi
Office of the Attorney General
Jackson, Mississippi
Darrell V. McGraw, Jr., Attorney General of the State of West Virginia
Office of the Attorney General
Charleston, West Virginia
Robert Butterworth, Attorney General of the State of Florida
Office of the Attorney General
The Capitol, Suite PL01
Tallahassee, Florida 32399-0150
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Scott Harshbarger, Attorney General of the Commonwealth of Massachusetts
Office of the Attorney General
One Ashburton Place
Boston, Massachusetts
Richard P. Ieyoub, Attorney General of the State of Louisiana
Office of the Attorney General
Baton Rouge, Louisiana
Marc Kasowitz, Settling Defendants Counsel
Kasowitz, Benson, Torres & Friedman LLP
875 3rd Avenue
New York, New York 10022
212 407-3800
Fax 212 319-6756
Bennett S. LeBow, for Settling Defendants
Brooke Group Ltd.
International Place
100 SE 2nd Street
Miami, Florida 33131
Michael L. Hirschfeld, for Settling Defendants
Milbank Tweed Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005-1413
The above designated representatives may be changed from time to time by
any Party upon giving notice to all other Parties in conformance with this
Section 16.7.
16.11. References to or use of a singular noun or pronoun in this Agreement
shall include the plural, unless the context implies otherwise.
16.12. Brooke Group and Liggett shall:
(1) cooperate with the Attorneys General in that they will take no steps to
impede or frustrate the Attorneys General's investigations into, or prosecutions
of, any of the Non-Settling Defendants, so as to secure the just, speedy and
inexpensive determination of the Attorney General Actions against the
Non-Settling Defendants;
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(2) cooperate in and facilitate reasonable non-party discovery from the
Brooke Group or Liggett in connection with any pending Attorney General Action,
provided that such information is not disclosed to any third parties except as
required by law, including non-settling Attorneys General, without the written
consent of the Brooke Group or Liggett, and provided that such cooperation shall
not be deemed a waiver of applicable privileges;
(3) review the issues relating to discovery propounded by the Attorneys
General against Brooke Group or Liggett, confer with such Attorneys General and,
if appropriate, take reasonable steps to facilitate judicial determinations of
the privileged nature of any documents or other information within the
possession, custody or control of Brooke Group or Liggett which have been sought
in discovery by the Attorneys General;
(4) insofar as Brooke Group or Liggett have or obtain any material
information concerning any fraudulent or illegal conduct on the part of any
parties, including Non-Settling Defendants or their agents, designed to
frustrate or defeat the Attorney General Actions against the Non-Settling
Defendants, or which have the effect of unlawfully suppressing evidence relevant
to the Attorney General Actions, such information will be disclosed to the
appropriate judicial, regulatory agencies, and such Attorneys General.
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IN WITNESS WHEREOF the parties have executed this Agreement under seal as
of the day and date first written above.
STATE OF MISSISSIPPI STATE OF LOUISIANA
/s/ MIKE MOORE /s/ RICHARD P. IEYOUB
- -------------------------- -----------------------------------
Mike Moore, Attorney General Richard P. Ieyoub, Attorney General
STATE OF WEST VIRGINIA BROOKE GROUP Ltd.
/s/ DARRELL V. MCGRAW, JR. By: /s/ BENNETT S. LEBOW
- --------------------------
Darrell V. McGraw, Jr.,
Attorney General
STATE OF FLORIDA LIGGETT GROUP, INC.
/s/ ROBERT BUTTERWORTH By: /s/ BENNETT S. LEBOW
- --------------------------
Robert Butterworth,
Attorney General
COMMONWEALTH OF LIGGETT & MYERS, INC.
MASSACHUSETTS
/s/ SCOTT HARSHBARGER By: /s/ BENNETT S. LEBOW
- --------------------------
Scott Harshbarger,
Attorney General
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