EXHIBIT 10.1
STATE OF MINNESOTA DISTRICT COURT
COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT
THE STATE OF MINNESOTA, Case Type: Other Civil
BY HUBERT H. HUMPHREY III, Court File No. C1-94-8565
ITS ATTORNEY GENERAL,
and
BLUE CROSS AND BLUE SHIELD
OF MINNESOTA,
Plaintiffs,
vs.
PHILIP MORRIS INCORPORATED,
R.J. REYNOLDS TOBACCO COMPANY,
BROWN & WILLIAMSON TOBACCO
CORPORATION, B.A.T. INDUSTRIES
P.L.C., BRITISH-AMERICAN TOBACCO
COMPANY LIMITED, BAT (U.K. &
EXPORT) LIMITED, LORILLARD
TOBACCO COMPANY, THE AMERICAN
TOBACCO COMPANY, LIGGETT GROUP,
INC., THE COUNCIL FOR TOBACCO
RESEARCH-U.S.A., INC., and THE
TOBACCO INSTITUTE, INC.,
Defendants.
SETTLEMENT AGREEMENT AND STIPULATION
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FOR ENTRY OF CONSENT JUDGMENT
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THIS SETTLEMENT AGREEMENT AND RELEASE ("Settlement Agreement") is made as
of the date hereof, by and among the parties hereto, as indicated by their
signatures below, to settle
and resolve with finality all claims of the State of Minnesota relating to the
subject matter of this action which have been or could have been asserted by the
State of Minnesota.
WHEREAS, the State of Minnesota, through its Attorney General Hubert H.
Humphrey III, and Blue Cross and Blue Shield of Minnesota, commenced this action
on August 17, 1994, asserting various claims for monetary, equitable and
injunctive relief on behalf of the State of Minnesota and Blue Cross and Blue
Shield of Minnesota against certain tobacco manufacturers and others as
Defendants;
WHEREAS, the Defendants have denied each and every one of Plaintiffs'
allegations of unlawful conduct or wrongdoing and have asserted a number of
defenses to Plaintiffs' claims, which defenses have been contested by
Plaintiffs;
WHEREAS, the parties hereto wish to avoid the further expense, delay,
inconvenience, burden and uncertainty of continued litigation of this matter
(including appeals from any verdict), the State of Minnesota and the Settling
Defendants have agreed to settle this litigation pursuant to terms which will
achieve for the State of Minnesota (and thus for the people of the State of
Minnesota) significant funding for the advancement of public health, the
implementation of important tobacco-related public health measures in
Minnesota, as well as funding for national research dedicated to studying and
significantly reducing the use of Tobacco Products by youth;
WHEREAS, the State of Minnesota and Settling Defendants have agreed to
settle this lawsuit on terms set forth in this Settlement Agreement and
Stipulation for Entry of Consent Judgment and the attached Consent Judgment;
WHEREAS, the parties have further agreed to jointly petition the Court for
approval of the Consent Judgment, on the grounds that settlement would be in the
public interest;
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NOW, THEREFORE, BE IT KNOWN THAT, in consideration of the payments to be
made by the Settling Defendants, the dismissal and release of claims by the
State of Minnesota and such other consideration as described herein, the
sufficiency of which is hereby acknowledged, the parties hereto, acting by and
through their authorized agents, memorialize and agree as follows:
I. GENERAL PROVISIONS
A. Jurisdiction. The State and the Settling Defendants acknowledge that
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this Court has jurisdiction over the subject matter of this action and over each
of the parties to this Settlement Agreement, and that this Court shall retain
jurisdiction for the purposes of implementing and enforcing this Settlement
Agreement. The parties hereto agree to present any disputes under this
Settlement Agreement, including without limitation any claims for breach or
enforcement of this Settlement Agreement, exclusively to this Court. The Court
may, upon the State's application, enter a Consent Judgment in the form attached
hereto as Exhibit A. The cumulative terms of this Settlement Agreement and
Stipulation for Entry of Consent Judgment, and the attached Consent Judgment,
may be referred to for convenience as this "Agreement" or "Settlement
Agreement."
B. Voluntary Agreement of the Parties. The State and the Settling
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Defendants acknowledge and agree that this Settlement Agreement is voluntarily
entered into by all parties hereto as the result of arm's-length negotiations
during which all such parties were represented by counsel. The State and
Settling Defendants understand that Congress may enact legislation dealing with
some of the issues addressed in this Agreement. Settling Defendants and their
assigns, affiliates, agents, and successors hereby waive any right to challenge
this Agreement or the Consent Judgment, directly or through third parties, on
the ground that any term hereof is unconstitutional, outside the power
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or jurisdiction of the Court, preempted by or in conflict with any current or
future federal legislation (except where non-economic terms of future federal
legislation are irreconcilable).
C. Definitions.
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For the purposes of this Settlement Agreement and attached Consent
Judgment, the following terms shall have the meanings set forth below:
1. "State" or "State of Minnesota" means the State of Minnesota acting
by and through its Attorney General;
2. "Blue Cross" means BCBSM, Inc., d/b/a Blue Cross and Blue Shield of
Minnesota, and all of its administrators, representatives, employees,
directors, officers, agents, attorneys, parents and divisions;
3. "Settling Defendants" means those Defendants in this action that
are signatories hereto;
4. "Defendants" means Philip Morris Incorporated, R.J. Reynolds
Tobacco Company, Brown & Williamson Tobacco Corporation, B.A.T Industries
P.L.C., British-American Tobacco Company Limited, BAT (U.K. and Export)
Limited, Lorillard Tobacco Company, The American Tobacco Company, The
Council for Tobacco Research-U.S.A., Inc., and the Tobacco Institute, Inc.
and their successors and assigns;
5. "Consumer Price Index" shall mean the Consumer Price Index for All
Urban Consumers, for the most recent twelve-month period for which such
percentage information is available as published by the Bureau of Labor
Statistics of the U.S. Department of Labor.
6. "Court" means the District Court of the State of Minnesota, County
of Ramsey, Second Judicial District;
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7. "Market Share" means a Settling Defendant's respective share of
sales of cigarettes by unit for consumption in the United States during (i)
with respect to payments made pursuant to Paragraph II.D. of this
Settlement Agreement, the calendar year ending on the date on which the
payment at issue is due, regardless of when such payment is made, and (ii)
with respect to all other payments made pursuant to this Settlement
Agreement, the calendar year immediately preceding the year in which the
payment at issue is due, regardless of when such payment is made;
8. "Cigarettes" means any product which contains nicotine, is intended
to be burned or heated under ordinary conditions of use, and consists of or
contains (i) any roll of tobacco wrapped in paper or in any substance not
containing tobacco; or (ii) tobacco, in any form, that is functional in the
product, which, because of its appearance, the type of tobacco used in the
filler, or its packaging and labeling, is likely to be offered to, or
purchased by, consumers as a cigarette; or (iii) any roll of tobacco
wrapped in any substance containing tobacco which, because of its
appearance, the type of tobacco used in the filler, or its packaging and
labeling, is likely to be offered to, or purchased by, consumers as a
cigarette described in subparagraph (i) of this paragraph;
9. "Smokeless Tobacco" means any powder that consists of cut, ground,
powdered, or leaf tobacco that contains nicotine and that is intended to be
placed in the oral cavity;
10. "Tobacco Products" means Cigarettes and Smokeless Tobacco;
11. "Billboards" includes billboards, as well as all signs and
placards in arenas and stadiums, whether open-air or enclosed. "Billboards"
does not include (1) any advertisements
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placed on or outside the premises of retail establishments which sell
tobacco products, or any retail point-of-sale; and (2) billboards or
advertisements in connection with the sponsorship by the Defendants of any
entertainment, sporting or similar event, such as NASCAR, that appears in
the State of Minnesota as part of a national or multi-state tour;
12. "Children" or "youth" means persons under the age of 18;
13. "Depository," unless otherwise specified, means the Minnesota
document depository established by the Court's Order dated June 16, 1995.
"Depositories" includes both the Minnesota depository and the Guildford,
U.K. document depository established by the Court's Order dated September
6, 1995;
14. "Transit Advertisements" means advertising on private or public
vehicles and all advertisements placed at, on or within any bus stop, taxi
stand, waiting area, train station, airport or any similar location.
"Transit Advertisements" does not include any advertisements placed on or
outside the premises of retail establishments licensed to sell Tobacco
Products or any retail point-of-sale;
15. "Special State Counsel" means Robins, Kaplan, Miller & Ciresi
L.L.P. or a successor, if any; and
16. "Final Approval" means the date on which this Settlement Agreement
and the form of State Escrow Agreement are approved by the Court. At the
time of such approval, the settlement between the parties is final.
II. SETTLEMENT PAYMENTS
A. Settlement Receipts. The payments to be made by the Settling
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Defendants under this Settlement Agreement are in satisfaction of all of the
State of Minnesota's claims for damages
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incurred by the State in the year of such payment or earlier years related to
the subject matter of this action, including, without limitation, claims for
equitable and injunctive relief, claims for health care expenditures and claims
for punitive damages, except that no part of any payment under this Settlement
Agreement is made in settlement of an actual or potential liability for a fine,
penalty (civil or criminal) or enhanced damages.
B. Settlement Payments to the State of Minnesota. Each Settling Defendant
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severally shall cause to be paid to an account designated in writing by the
State of Minnesota in accordance with and subject to paragraph II.E. of this
Settlement Agreement, the following amounts: the amount listed for it in
Schedule A hereto, such amount representing its share of $240,000,000, to be
paid on or before September 5, 1998; pro rata in proportion to its Market Share,
its share of $220,800,000, to be paid on or before January 4, 1999; pro rata in
proportion to its Market Share, its share of $242,550,000, to be paid on or
before January 3, 2000; pro rata in proportion to its Market Share, its share of
$242,550,000, to be paid on or before January 2, 2001; pro rata in proportion to
its Market Share, its share of $242,550,000, to be paid on or before January 2,
2002; and pro rata in proportion to its Market Share, its share of $121,550,000,
to be paid on or before January 2, 2003. The payments made by the Settling
Defendants pursuant to this Paragraph shall be adjusted upward by the greater of
3% or the Consumer Price Index applied each year on the previous year, beginning
with the payment due to be made on or before January 3, 2000. The payments due
to be made by the Settling Defendants pursuant to this Paragraph on or before
January 3, 2000, on or before January 2, 2001, on or before January 2, 2002, and
on or before January 2, 2003, will also be decreased or increased, as the case
may be, in accordance with the formula for adjustments of payments as set forth
in Appendix A. The payments due to be made by the Settling Defendants pursuant
to this Paragraph
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on or before September 5, 1998, and on or before January 4, 1999, shall not be
subject to inflation escalation and volume adjustments described in the
preceding sentences.
In the event that any of the Settling Defendants fails to make any payment
required of it pursuant to this Paragraph (a "Defaulting Defendant") by the
applicable date set forth in this paragraph II.B. (a "Missed Payment"), the
State of Minnesota shall provide notice to each of the Settling Defendants of
such non-payment. The Defaulting Defendant shall have 15 days after receipt of
such notice to pay the Missed Payment, together with interest accrued from the
original applicable due date at the prime rate as published in the Wall Street
Journal on the latest publication date on or before the date of default plus 3%.
If the Defaulting Defendant does not make such payment within such 15-day
period, the State of Minnesota shall provide notice to each of the Settling
Defendants of such continued non-payment. Any or all of the Settling Defendants
(other than the Defaulting Defendant) shall thereafter have 15 days after
receipt of such notice to elect (in such Settling Defendant's or such Settling
Defendants' sole and absolute discretion) to pay the Missed Payment, together
with interest accrued from the original applicable due date at the prime rate as
published in the Wall Street Journal on the latest publication date on or before
the date of default plus 3%. In the event that the State of Minnesota does not
receive the Missed Payment, together with such accrued interest, within such
additional 15-day period, all payments required to be made by each of the
respective Settling Defendants pursuant to this Paragraph shall at the end of
such additional 15-day period be accelerated and shall immediately become due
and owing to the State of Minnesota from each Settling Defendant pro rata in
proportion to its Market Share; provided, however, that any such accelerated
payments (a) shall all be adjusted upward by the greater of (i) the rate of 3%
per annum or (ii) the actual total percent change in the CPI, in either instance
for the period between January 1
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of the year in which the acceleration of payments pursuant to this Paragraph
occurs and the date on which such accelerated payments are due pursuant to this
subsection, and (b) shall all immediately be adjusted in accordance with the
formula for adjustments of payments set forth in Appendix A.
Nothing in this Paragraph shall be deemed under any circumstance to create
any obligation on the part of any Settling Defendant to pay any amount owed or
payable to the State of Minnesota by any other Settling Defendant. All
obligations of the Settling Defendants pursuant to this Paragraph are intended
to be and shall remain several, and not joint.
C. Public Health Foundation. The Attorney General will propose, and the
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Settling Defendants have agreed not to oppose, that the Legislature appropriate
to a foundation one-half the payments due in September 1998, and in January of
the years 1999 through 2003, to be used for such activities as the directors of
the foundation may determine will diminish the human and economic consequences
of tobacco use. It is contemplated that the directors of the foundation will
include public representatives, and representatives of such groups as the
American Lung Association, Minnesota Chapter; the University of Minnesota School
of Public Health; the Minnesota SmokeFree 2000 Coalition; the American Cancer
Society, Minnesota Division; the American Heart Association, Minnesota Chapter;
the Association for Non-Smokers' Rights--Minnesota; and the Mayo Clinic Nicotine
Dependence Center.
D. Annual Payments. Each of the Settling Defendants agrees that,
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beginning on December 31, 1998, and annually thereafter on December 31st of each
year after 1998 (subject to final adjustment within 30 days), it shall severally
cause to be paid to an account designated in writing by the State of Minnesota
in accordance with and subject to paragraph II.E. of this Settlement
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Agreement, pro rata in proportion to its respective Market Share, its share of
2.55% of the following amounts (in billions):
Year 1998 1999 2000 2001 2002 2003 thereafter
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1 2 3 4 5 6
Amount $4B $4.5B $5B $6.5B $6.5B $8B $8B
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The payments made by Settling Defendants pursuant to this Paragraph shall be
adjusted upward by the greater of 3% or the Consumer Price Index applied each
year on the previous year, beginning with the annual payment due on December 31,
1999. Such payments will also be decreased or increased, as the case may be,
beginning with the annual payment due on December 31, 1999, in accordance with
the formula for adjustments of payments set forth in Appendix A.
E. Payment of Settlement Proceeds. Any payment made pursuant to this
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Settlement Agreement shall be made to an account designated in writing by the
State of Minnesota or the Court, as applicable; provided that after Final
Approval, if the Court's approval is challenged by any third party, payments due
to be made shall be paid into a special escrow account (the "State Escrow
Account"), and held in escrow pursuant to this Section V.B. and the State Escrow
Agreement.
F. Adjustments in Event of Federal Legislation. The enactment of federal
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tobacco-related legislation shall not affect the payments required by this
Agreement except as follows:
1. If federal tobacco-related legislation providing for the resolution
or other disposition of State Attorney General actions brought against
tobacco companies is enacted on or before November 30, 2000, and if such
legislation provides for payment(s) by tobacco companies (whether by
settlement payment, tax or any other means), all or part of which is made
available to States, the State of Minnesota shall elect to receive any
funds that are (i)
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unrestricted as to their use, or (ii) are restricted to any form of health
care or to any use related to tobacco (collectively "Federal Settlement
Funds"), and Settling Defendants shall receive a dollar-for-dollar offset
up to the full amount of payments required under Section II.D of this
Agreement for any and all Settlement Funds received by the State of
Minnesota, until all Federal Settlement Funds provided however:
a. There shall be no offset to payments required by this
Agreement on account of any federal program, subsidies, payments,
credits or other aid to the State which are not conditioned or tied to
the settlement of a state tobacco-related suit or the relinquishment
of state tobacco-related claims;
b. The State relinquishes no rights or benefits under this
Agreement except for payments subject to the offset;
c. There are no federally imposed preconditions to the receipt of
Federal Settlement Funds other than (i) the settlement of any state
tobacco-related lawsuit or the relinquishment of state tobacco-related
claims, (ii) actions or expenditures related to tobacco, including but
not limited to, education, cessation, control or enforcement, or (iii)
actions or expenditures related to health care;
d. If Settling Defendants enter into any pre-verdict settlement
agreement (subsequent to the date of this Agreement) of similar
litigation brought by a non-federal governmental plaintiff which does
not require such an offset, this Section is null and void;
e. If Settling Defendants enter into any pre-verdict settlement
agreement (subsequent to the date of this Agreement) of similar
litigation brought by a non-
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federal governmental plaintiff which has an offset term more favorable
to the plaintiff, this Settlement Agreement shall, at the option of
the Office of the Attorney General of the State of Minnesota, be
revised to include a comparable term.
2. Nothing in this section is intended to or shall reduce the total
amounts payable to the State under this Agreement by Settling Defendants
beyond the amount of Federal Settlement Funds actually received by the
State of Minnesota.
III. DISMISSAL OF CLAIMS AND RELEASES
A. State of Minnesota's Dismissal of Claims. Upon approval of this
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Settlement Agreement by the Court, the Court shall enter a Final Judgment
dismissing with prejudice all claims as to all Defendants.
This Agreement resolves all claims between the State and the Defendants,
except for issues pending before the court pertaining to the discoverability or
production of documents for which the Defendants reserve their rights of appeal.
B. State of Minnesota's Release and Discharge. Upon Final Approval, the
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State of Minnesota shall release and forever discharge all Defendants and their
present and former parents, subsidiaries (whether or not wholly owned) and
affiliates, and their respective divisions, organizational units, officers,
directors, employees, representatives, insurers, suppliers, agents, attorneys
and distributors (and the predecessors, heirs, executors, administrators,
successors and assigns of each of the foregoing) from any and all manner of
civil claims, demands, actions, suits and causes of action, damages whenever
incurred, liabilities of any nature whatsoever, including civil penalties, as
well as costs, expenses and attorneys' fees, known or unknown, suspected or
unsuspected, accrued or unaccrued, whether legal, equitable or statutory
("Claims") that the State
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of Minnesota (including any of its past, present or future administrators,
representatives, employees, officers, attorneys, agents, representatives,
officials acting in their official capacities, agencies, departments,
commissions, and divisions, and whether or not any such person or entity
participates in the settlement), whether directly, indirectly, representatively,
derivatively or in any other capacity, ever had, now has or hereafter can, shall
or may have, as follows:
a. for past conduct, as to any Claims relating to the subject
matter of this action which have been asserted or could be asserted
now or in the future in this action or a comparable Federal action by
the State; and
b. for future conduct, only as to monetary Claims directly or
indirectly based on, arising out of or in any way related to, in whole
or in part, the use of or exposure to Tobacco Products manufactured in
the ordinary course of business, including without limitation any
future claims for reimbursement for health care costs allegedly
associated with use of or exposure to Tobacco Products;
(such past and future Claims hereinafter referred to as the "Released Claims");
provided, however, that the foregoing shall not operate as a release of any
person, party or entity (whether or not a signatory to this Agreement) as to any
of the obligations undertaken in this Agreement in connection with a monetary
breach or default of this Agreement.
The State of Minnesota hereby covenants and agrees that it shall not
hereafter sue or seek to establish civil liability against any person or entity
covered by the release provided under Paragraph III.B based, in whole or in
part, upon any of the Released Claims, and the State of Minnesota agrees that
this covenant and agreement shall be a complete defense to any such civil action
or proceeding.
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C. Settling Defendants' Release and Discharge. Upon Final Approval,
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Settling Defendants shall release and forever discharge the State of Minnesota
(including any of its past, present or future administrators, representatives,
employees, officers, attorneys, agents, representatives, officials acting in
their official capacities, agencies, departments, commissions, and divisions,
and whether or not any such person or entity participates in the settlement)
from any and all manner of civil claims, demands, actions, suits and causes of
action, damages whenever incurred, liabilities of any nature whatsoever,
including costs, expenses, penalties and attorneys' fees, known or unknown,
suspected or unsuspected, accrued or unaccrued, whether legal, equitable or
statutory, arising out of or in any way related to, in whole or in part, the
subject matter of the litigation of this lawsuit, that Settling Defendants
(including any of their present and former parents, subsidiaries, divisions,
affiliates, officers, directors, employees, witnesses (fact or expert),
representatives, insurers, agents, attorneys and distributors and the
predecessors, heirs, executors, administrators, successors and assigns of each
of the foregoing, and whether or not any such person participates in the
settlement), whether directly, indirectly, representatively, derivatively or in
any other capacity, ever had, now has or hereafter can, shall or may have.
D. Limited Most-Favored Nation Provision. In partial consideration for
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the monetary payments to be made by the Settling Defendants pursuant to this
Settlement Agreement, the State of Minnesota agrees that if the Settling
Defendants enter into any future pre-verdict settlement agreement of other
similar litigation brought by a non-federal governmental plaintiff on terms more
favorable to such non-federal governmental plaintiff than the terms of this
Settlement Agreement (after due consideration of relevant differences in
population or other appropriate factors), the terms of this Settlement Agreement
shall not be revised except as follows: to the extent, if any, such other
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pre-verdict settlement agreement includes terms that provide (a) for joint and
several liability among the Settling Defendants with respect to monetary
payments to be made pursuant to such agreement; (b) a guarantee by the parent
company of any of the Settling Defendants or other assurances of payment or
creditors' remedies with respect to monetary payments to be made pursuant to
such agreement; or (c) for the implementation of non-economic tobacco-related
public health measures different from those contained in this Settlement
Agreement, then this Settlement Agreement shall, at the option of the Office of
the Attorney General of the State of Minnesota, be revised to include terms
comparable to such terms.
IV. DEFENDANTS' ASSURANCES
A. Settling Defendants agree not to directly or indirectly, including
through any third party or affiliate:
1. Oppose the passage of those future Minnesota legislative proposals
or administrative rules intended by their terms to reduce tobacco use by
children listed on Schedule B. (The foregoing does not prohibit Settling
Defendants from resisting enforcement of, or suing for declaratory or
injunctive relief with respect to any such legislation or rule on any
grounds.)
2. Facially challenge the enforceability or constitutionality of
existing Minnesota laws or rules relating to tobacco control, including,
but not limited to, Minnesota Statutes Section 461.17 regarding the
disclosure of certain ingredients in cigarettes; Minnesota Statutes
Sections 461.12, et. seq., and 609.685 regarding the sale of tobacco to
minors; Minnesota Statutes Section 325F.77 regarding the distribution of
samples; and Minnesota Statutes Section 144.411 et. seq. regarding clean
indoor air.
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3. Support in Congress or any forum, legislation, rules or policies
which would preempt, override, or abrogate or diminish the State's rights
or recoveries under this Agreement. Except as specifically provided in the
foregoing sentence, nothing in this Agreement shall be deemed to restrain
the parties from advocating terms of any national settlement or taking any
other positions on issues relating to tobacco. The State and its attorneys
specifically reserve the right to continue to litigate or advocate for
additional document disclosure beyond that ordered by the Ramsey County
District Court, in any forum outside of Minnesota.
4. Settling Defendants' obligation to produce documents in discovery
pertaining to enactment or repeal of, or opposition to, state legislation
or state executive action relating to tobacco in Minnesota is extended
beyond August 17, 1994, to the date of this Agreement, with Settling
Defendants required to produce these documents within thirty (30) days of
the date of this Agreement.
B. Disclosure of Payments Likely to Affect Public Policy.
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1. Each Settling Defendant shall disclose to the Office of the
Attorney General and the Office of the Governor, at the times and in the
manner provided below, information about the following payments:
a. Any payment to a "lobbyist" or "principal" within the meaning
of Minnesota Statutes, Section 10A.01, subdivisions 11 and 28, if
Settling Defendant knows or has reason to know that the payment will
be used, directly or indirectly, to influence legislative or
administrative action, or the official action of state or local
government in Minnesota in any way relating to Tobacco Products or
their use.
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b. Any payment to a third party, if the Settling Defendant knows
the payment is partly in consideration for the third party attending,
offering testimony at, or participating before a state or local
government hearing in Minnesota in any way relating to Tobacco
Products or their use; and
c. Any payment (other than a "political contribution" under Minn.
Stat. Section 10.01, subd. 7, or 2 USC Section 431(8)(A)) to, or for
the benefit of, a state or local official in Minnesota, whether made
directly by a defendant or indirectly through an employee acting in
the scope of his employment, affiliate, lobbyist, or other agent
acting under the substantial control of a defendant.
2. Disclosures required under this section shall be filed with the
Office of the Attorney General and with the Office of the Governor on the
first day of January, April, July and October of each year for any and all
payments made through the first day of the previous month and shall be
transmitted in electronic format or such format as the attorney general may
require, with the following information:
a. The name, address, telephone number and e-mail address of the
recipient.
b. The amount of each payment described in Paragraph B(1).
c. The aggregate amount of all payments described in Paragraph
B(1) to the recipient in the calendar year.
3. Information filed under this section is "public data" within the
meaning of the Minnesota Government Data Practices Act.
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C. Settling Defendants agree to discontinue all Billboards and Transit
Advertisements of Tobacco Products in the State. Settling Defendants shall use
their best efforts in cooperation with the State to identify all such Billboards
that are located within 1000 feet of any public or private school or playground
in the State, and shall provide the State with a preliminary list of the
location of all Billboards and stationary Transit Advertisements within 30 days
from the date hereof, such list to be finalized within an additional 15 days.
Settling Defendants shall, at the earlier of the expiration of applicable
contracts or four months from the date the final list is supplied to the State,
remove all Billboards and Transit Advertisements for Tobacco Products from
within the State, leaving the space unused or used for advertising unrelated to
Tobacco Products; or at the option of the State of Minnesota, will allow the
State, at its expense, to substitute for the remaining term of the contract,
alternative advertising intended to discourage the use of Tobacco Products by
children and their exposure to second-hand smoke. The parties also agree to
secure the expedited removal of up to 50 Billboards or stationary Transit
Advertisements for Tobacco Products designated by the State within 30 days after
their designation. Each Settling Defendant which has Billboard advertising in
the State shall provide the Court and the Attorney General, or his designee,
with the name of a contact person to whom the State may direct inquiries during
the time such Billboards and Transit Advertisements are being eliminated, from
whom the State may obtain periodic reports as to the progress of their
elimination and who will be responsible for ensuring that appropriate action is
taken to remove any Billboards that have not been timely eliminated.
D. Settling Defendants shall not make, in the connection with any motion
picture made in the United States, or cause to be made any payment, direct or
indirect, to any person to use, display, make reference to, or use as a prop any
cigarette, cigarette package, advertisement for
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cigarettes, or any other item bearing the brand name, logo, symbol, motto,
selling message, recognizable color or pattern of colors, or any other indicia
of product identification identical or similar to, or identifiable with, those
used for any brand of domestic tobacco products.
E. On and after December 31, 1998, Settling Defendants shall permanently
cease marketing, licensing, distributing, selling or offering, directly or
indirectly, including by catalogue or direct mail, in the State of Minnesota,
any service or item (other than tobacco products or any item of which the sole
function is to advertise tobacco products) which bears the brand name (alone or
in conjunction with any other word), logo, symbol, motto, selling message,
recognizable color or pattern of colors, or any other indicia of product
identification identical or similar to, or identifiable with, those used for any
brand of domestic tobacco products.
F. Settling Defendants and the Law Firm of Robins, Kaplan, Miller &
Ciresi L.L.P. ("RKM&C") have reached a separate agreement for the payment of the
State's costs and attorneys fees. In consideration for said agreement, RKM&C has
released the State from its obligation to pay costs and attorneys fees under the
Special Attorney Appointment dated May 23, 1994.
V. MISCELLANEOUS PROVISIONS
A. Representations of Parties. The respective parties hereto hereby
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represent that this Settlement Agreement has been duly authorized and, upon
execution, will constitute a valid and binding contractual obligation,
enforceable in accordance with its terms, of each of the parties hereto.
The State represents that all of its outside counsel that have represented it
in this action are, by and through their authorized representatives, signatores
to this Settlement Agreement.
B. Court Approval. The Parties agree to submit this Settlement Agreement
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to the Court for its review and approval on Friday, May 8, 1998. If the Court
declines to approve this Settlement
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Agreement, the Blue Cross Settlement Agreement, the form of State Escrow
Agreement, and the form of Blue Cross Escrow Agreement, the matter will be
immediately submitted to the jury. If the Court, as a condition of approval or
otherwise, requires any change in the Agreements which any signatory is
unwilling to make, the case will be immediately submitted to the jury. If before
the Court approves the Agreements, any third-party seeks to intervene for the
purpose of opposing the Settlement Agreement, the Blue Cross Settlement
Agreement, the State Escrow Agreement, and the Blue Cross Escrow Agreement, any
Party at its sole election, may withdraw from this Agreement, after first giving
notice to the Court and all of the Parties before the jury is dismissed, and
submit the case to the jury. If the Court approves the Settlement Agreement as
submitted, the Agreement will be final and binding upon all Parties.
In the event that there is a challenge to any provision of this Settlement
Agreement by anyone other than the Attorney General of the State of Minnesota as
of the date of this Agreement, BCBS or Settling Defendants ("a third-party
challenge") after Final Approval, any amounts required to be paid by Settling
Defendants pursuant to this Settlement Agreement shall be paid into escrow
pursuant to the State Escrow Agreement. If, as a result of such a challenge, any
material term of Sections II, III, IV of this Settlement Agreement is modified
or rendered unenforceable, the parties shall negotiate an equivalent or
comparable substitute term or other appropriate credit or adjustment. In the
event that the parties are unable to agree on such a substitute term or
appropriate credit or adjustment, then the parties will submit the issue to the
Court for resolution, subject to any available appeal rights. In the event that
any third-party challenge is made after December 31, 1998, any payments due
under Paragraph II.B. shall be made to the State according to the terms of this
Settlement Agreement, and only those payments due under Paragraph II.D. shall be
placed into escrow as provided above.
20
In the event that the Court determines that there has been a failure of
consideration legally sufficient to warrant termination of this Settlement
Agreement, then this Settlement Agreement may be terminated by the party
adversely affected. In the event of such termination, the action will be
reinstated and all decisions of the trial court, and any party's appeal or other
rights with respect thereto, will have the same force and effect as if this
Settlement Agreement had never been entered into.
C. Obligations Several, Not Joint. All obligations of the Settling
------------------------------
Defendants pursuant to this Settlement Agreement are intended to be and shall
remain several, and not joint.
D. Headings. The headings of the paragraphs of this Settlement Agreement
--------
are not binding and are for reference only and do not limit, expand or otherwise
affect the contents of this Settlement Agreement.
E. No Determination or Admission. This Settlement Agreement and any
-----------------------------
proceedings taken hereunder are not intended to be and shall not in any event be
construed as, or deemed to be, an admission or concession or evidence of any
liability or any wrongdoing whatsoever on the part of any party hereto or any
person covered by the releases provided under paragraphs III.B. and C. hereof.
The Settling Defendants specifically disclaim and deny any liability or
wrongdoing whatsoever with respect to the allegations and claims asserted
against them in this action and enter into this Settlement Agreement solely to
avoid the further expense, inconvenience, burden and uncertainty of litigation.
F. Non-Admissibility. The settlement negotiations resulting in this
-----------------
Settlement Agreement have been undertaken by the parties hereto in good faith
and for settlement purposes only, and neither this Settlement Agreement nor any
evidence of negotiations hereunder shall be offered or received
21
in evidence in this action, or any other action or proceeding, for any purpose
other than in an action or proceeding arising under this Settlement Agreement.
G. Amendment; Waiver. This Settlement Agreement may be amended only by a
-----------------
written instrument executed by the Attorney General and the Settling Defendants.
The waiver of any rights conferred hereunder shall be effective only if made by
written instrument executed by the waiving party. The waiver by any party of any
breach of this Settlement Agreement shall not be deemed to be or construed as a
waiver of any other breach, whether prior, subsequent or contemporaneous, of
this Settlement Agreement.
H. Notices. All notices or other communications to any party to this
-------
Settlement Agreement shall be in writing (and shall include telex, telecopy or
similar writing) and shall be given to the respective parties hereto at the
following addresses. Any party hereto may change the name and address of the
person designated to receive notice on behalf of such party by notice given as
provided in this paragraph.
For the State of Minnesota:
- --------------------------
Hubert H. Humphrey III
Attorney General
102 State Capitol
St. Paul, MN 55155
Fax: 612.297.4193
with copies to:
--------------
Michael V. Ciresi
Robins, Kaplan, Miller & Ciresi L.L.P.
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, MN 55402-2015
Fax: 612.339.4181
22
Chief Deputy Attorney General
State of Minnesota
102 State Capitol
St. Paul, MN 55155
Fax: 612.297.4193
For Philip Morris Incorporated:
- ------------------------------
MARTIN J. BARRINGTON
Philip Morris Incorporated
120 Park Avenue
New York, NY 10017-5592
Fax: 212.907.5399
With a copy to:
--------------
Meyer G. Koplow
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Fax: 212.403.2000
For R.J. Reynolds Tobacco Company:
- ---------------------------------
Charles A. Blixt
General Counsel
R.J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, NC 27102
Fax: 910.741.2998
With a copy to:
--------------
Arthur F. Golden
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Fax: 212.450.4800
23
For Brown & Williamson Tobacco Corporation:
- ------------------------------------------
F. Anthony Burke
Brown & Williamson Tobacco Corporation
200 Brown & Williamson Tower
401 South Fourth Avenue
Louisville, KY 40202
Fax: 502.568.7297
With a copy to:
--------------
Stephen R. Patton
Kirkland & Ellis
200 East Randolph Dr.
Chicago, IL 60601
Fax: 312.861.2200
For Lorillard Tobacco Company:
- -----------------------------
Arthur J. Stevens
Lorillard Tobacco Company
714 Green Valley Road
Greensboro, NC 27408
Fax: 910.335.7707
I. Cooperation. The parties hereto agree to use their best efforts and to
-----------
cooperate with each other to cause this Settlement Agreement to become
effective, to obtain all necessary approvals, consents and authorizations, if
any, and to execute all documents and to take such other action as may be
appropriate in connection therewith. Consistent with the foregoing, the parties
hereto agree that they will not directly or indirectly assist or encourage any
challenge to this Settlement Agreement by any other person. All parties hereto
agree to support the integrity and enforcement of the terms of this Settlement
Agreement.
J. Governing Law. This Settlement Agreement shall be governed by the laws
-------------
of the State of Minnesota, without regard to the conflicts of law rules of such
state.
24
K. Construction. None of the parties hereto shall be considered to be the
------------
drafter of this Settlement Agreement or any provision hereof for the purpose of
any statute, case law or rule of interpretation or construction that would or
might cause any provision to be construed against the drafter hereof.
L. Severability. Subject to the provisions of Paragraph V.B., the terms
------------
of this Agreement are severable. If any term of this Agreement is found to be
unlawful, the remaining terms shall remain in full force and effect, and the
parties agree to negotiate a substitute term of equivalent value.
M. Intended Beneficiaries. This action was brought by the State of
----------------------
Minnesota, through its Attorney General, and by Blue Cross to recover certain
monies and to promote the health and welfare of the people of Minnesota. No
portion of this Settlement Agreement shall provide any rights to, or be
enforceable by, any person or entity that is neither a party hereto nor a person
encompassed by the releases provided in paragraphs III.B. and C. of this
Settlement Agreement. Except as expressly provided in this Settlement Agreement,
no portion of this Settlement Agreement shall bind any non-party or determine,
limit or prejudice the rights of any such person or entity. None of the rights
granted or obligations assumed under this Settlement Agreement by the parties
hereto may be assigned or otherwise conveyed without the express prior written
consent of all of the parties hereto.
N. Counterparts. This Settlement Agreement may be executed in
------------
counterparts. Facsimile or photocopied signatures shall be considered as valid
signatures as of the date hereof, although the original signature pages shall
thereafter be appended to this Settlement Agreement.
25
IN WITNESS WHEREOF, the parties hereto, through their fully authorized
representatives, have agreed to this Comprehensive Settlement Agreement and
Release as of this 8th day of May, 1998.
STATE OF MINNESOTA, acting by and through
Hubert H. Humphrey III, its duly elected and
authorized Attorney General
By: /s/ Hubert H. Humphrey III
-------------------------------------------
Hubert H. Humphrey III
Attorney General
By: /s/ Lee E. Sheehy
--------------------------------------------
Lee E. Sheehy
Chief Deputy Attorney General
By: /s/ Eric A. Johnson
--------------------------------------------
Eric A. Johnson
Executive Assistant to the Attorney General
By: /s/ Thomas F. Pursell
--------------------------------------------
Thomas F. Pursell
Senior Counsel to the Attorney General
By: /s/ D. Douglas Blanke
--------------------------------------------
D. Douglas Blanke
Director of Consumer Policy
COUNSEL TO THE STATE OF MINNESOTA
By: /s/ Michael V. Ciresi
-------------------------------------------
Michael V. Ciresi
Robins, Kaplan, Miller & Ciresi L.L.P.
26
PHILIP MORRIS INCORPORATED
By: /s/ Meyer G. Koplow
-------------------------------------------
Meyer G. Koplow
Counsel
By: /s/ Martin J. Barrington
-------------------------------------------
Martin J. Barrington
General Counsel
R.J. REYNOLDS TOBACCO COMPANY
By: /s/ D. Scott Wise
-------------------------------------------
D. Scott Wise
Counsel
By: /s/ Charles A. Blixt
-------------------------------------------
Charles A. Blixt
General Counsel
BROWN & WILLIAMSON TOBACCO CORPORATION
By: /s/ Stephen R. Patton
-------------------------------------------
Stephen R. Patton
Counsel
By: /s/ F. Anthony Burke
-------------------------------------------
F. Anthony Burke
Vice President and General Counsel
LORILLARD TOBACCO COMPANY
By: /s/ Arthur J. Stevens
-------------------------------------------
Arthur J. Stevens
Senior Vice President & General Counsel
27
SCHEDULE A
AMOUNTS PAYABLE BY SETTLING DEFENDANTS ON OR
BEFORE SEPTEMBER 5, 1998 PURSUANT TO
PARAGRAPH II.B. OF THE SETTLEMENT AGREEMENT
Date 9/5/98
- ------------------------------------------------------ --------------
Settling Defendants
- -------------------
Philip Morris Incorporated............................ $ 163,200,000
R.J. Reynolds Tobacco Company......................... $ 16,320,000
Brown & Williamson Tobacco Corporation................ $ 42,960,000
Lorillard Tobacco Company............................. $ 17,520,000
Total Amount.......................................... $ 240,000,000
1
SCHEDULE B
Potential Future Legislation to Reduce Tobacco Use by Children
. Legislation to expand the self-service-sale restrictions of the youth
access to tobacco law and to remove the current exception for sales of
cigars.
. Legislation to clarify the current youth access law provision on
vending machines, making clear that machines equipped with automatic
locks or that use tokens are vending machines within the meaning of the
law.
. Legislation providing enhanced or coordinated funding for enforcement
efforts under sales-to-minors provisions of the criminal code or the
youth access statute and ordinances.
. Legislation to encourage or support the use of technology to increase
effectiveness of age-of-purchase laws, such as, without limitation, the
use of programmable scanners or scanners to read drivers' licenses.
. Legislation or rules restricting the wearing, carrying or display of
tobacco indicia in school-related settings, including, without
limitation, in school facilities, on school premises, or in connection
with school-sponsored activities.
. Legislation to create or stiffen non-monetary incentives for youth not
to smoke, such as expansion of youth community service programs.
2
APPENDIX A
----------
FORMULA FOR CALCULATING
-----------------------
STATE OF MINNESOTA VOLUME ADJUSTMENTS
-------------------------------------
Any payment that by the terms of the Settlement Agreement is to be adjusted
pursuant to this Appendix (the "Applicable Base Payment") shall be adjusted
pursuant to this Appendix in the following manner:
(A) in the event the aggregate number of units of Tobacco Products sold
domestically by the Settling Defendants in the Applicable Year (as defined
hereinbelow) (the "Actual Volume") is greater than the aggregate number of
units of Tobacco Products sold domestically by the Settling Defendants in
1997 (the "Base Volume"), the Applicable Base Payment shall be multiplied
by the ratio of the Actual Volume to the Base Volume;
(B) in the event the Actual Volume is less than the Base Volume,
(i) the Applicable Base Payment shall be multiplied by the ratio of
the Actual Volume to the Base Volume, and the resulting product shall
be divided by 0.98; and
(ii) if a reduction of the Applicable Base Payment results from the
application of subparagraph (B)(i) of this Appendix, but the Settling
Defendants' aggregate net operating profits from domestic sales of
Tobacco Products for the Applicable Year (the "Actual Net Operating
Profit") is greater than the Settling Defendants' aggregate net
operating profits from domestic sales of Tobacco Products in 1997 (the
"Base Net Operating Profit") (such Base Net Operating Profit being
adjusted upward by the greater of the rate of 3% per annum or the
actual total percent change in the Consumer Price Index, in either
instance for the period between January 1, 1998 and the date on which
the payment at issue is made), then the amount by which the Applicable
Base Payment is reduced by the application of
3
subparagraph (B)(i) shall be reduced (but not below zero) by 2.55% of
25% of such increase in such profits. For purposes of this Appendix,
"net operating profits from domestic sales of Tobacco Products" shall
mean net operating profits from domestic sales of Tobacco Products as
reported to the United States Securities and Exchange Commission
("SEC") for the Applicable Year or, in the case of a Settling
Defendant that does not report profits to the SEC, as reported in
financial statements prepared in accordance with generally accepted
accounting principles and audited by a nationally recognized
accounting firm. The determination of the Settling Defendants'
aggregate net operating profits from domestic sales of Tobacco
Products shall be derived using the same methodology as was employed
in deriving such Settling Defendants' aggregate net operating profits
from domestic sales of Tobacco Products in 1997. Any increase in an
Applicable Base Payment pursuant to this subparagraph B(ii) shall be
payable within 120 days after the date that the payment at issue was
required to be made.
(C) "Applicable Year" means (i) with respect to the payments made
pursuant to paragraph II.D of the Settlement Agreement, the calendar year
ending on the date on which the payment at issue is due, regardless of when
such payment is made; and (ii) with respect to all other payments made
pursuant to this Settlement Agreement, the calendar year immediately
preceding the year in which the payment at issue is due, regardless of when
such payment is made.
4