24 Ekim 2007 Çarşamba
LIGGETT SETTLEMENT WITH 5 INITIAL SETTLING STATES
ATTORNEYS GENERAL
SETTLEMENT AGREEMENT
WITH BROOKE GROUP LTD. and
LIGGETT GROUP, INC.
March 15, 1996
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. ("Brooke Group"), a Delaware corporation, and Liggett Group, Inc. ("Liggett"), a Delaware corporation.
RECITALS
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 20, 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 Caleasieu, 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. et al., 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.
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 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 Castano (or a similar putative class action) 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 Castano 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 Attorneys 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 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 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 purposes 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 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.
"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 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 Company., Philip Morris Inc., R.J. Reynolds Tobacco Company, 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 it becomes bound by this Agreement.
"Present Affiliate" means, with respect to a specified corporation, 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, means, for a specified year, the operating income (or equivalent designation) from Domestic Tobacco Operations of the Settling Defendant and its Present Affiliates, on a consolidated basis, 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 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.
"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, after such reorganization or spinoff, retains 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 attorneys' 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 filed on or before 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 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 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.
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 (ii) 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.
4.2.1. Proposed Rule § 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 § 897.16 (b), as proposed.
4.2.3. Proposed Rule § 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 § 897.30 (a), as proposed.
4.2.5. Proposed Rule § 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 § 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% limitation, Settling Defendants will, through incremental reduction, meet the requirements of this section within a period of five ( 5) years.
4.2.7. Proposed Rule § 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 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 § 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 § 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 obl-igated 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 cost" 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 Settling Defendant directly from the implementation of the matters covered by Section 4.2.
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 States 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.
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.
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 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 proportional 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.
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.
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 spinoff, 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.
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SETTLEMENT AGREEMENT
WITH BROOKE GROUP LTD. and
LIGGETT GROUP, INC.
March 15, 1996
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. ("Brooke Group"), a Delaware corporation, and Liggett Group, Inc. ("Liggett"), a Delaware corporation.
RECITALS
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 20, 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 Caleasieu, 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. et al., 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.
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 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 Castano (or a similar putative class action) 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 Castano 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 Attorneys 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 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 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 purposes 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 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.
"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 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 Company., Philip Morris Inc., R.J. Reynolds Tobacco Company, 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 it becomes bound by this Agreement.
"Present Affiliate" means, with respect to a specified corporation, 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, means, for a specified year, the operating income (or equivalent designation) from Domestic Tobacco Operations of the Settling Defendant and its Present Affiliates, on a consolidated basis, 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 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.
"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, after such reorganization or spinoff, retains 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 attorneys' 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 filed on or before 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 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 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.
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 (ii) 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.
4.2.1. Proposed Rule § 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 § 897.16 (b), as proposed.
4.2.3. Proposed Rule § 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 § 897.30 (a), as proposed.
4.2.5. Proposed Rule § 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 § 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% limitation, Settling Defendants will, through incremental reduction, meet the requirements of this section within a period of five ( 5) years.
4.2.7. Proposed Rule § 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 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 § 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 § 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 obl-igated 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 cost" 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 Settling Defendant directly from the implementation of the matters covered by Section 4.2.
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 States 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.
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.
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 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 proportional 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.
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.
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 spinoff, 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.
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Etiketler: INITIAL, LIGGETT, SETTLEMENT, SETTLING, STATES, WITH
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