Exhibit 99.1
MISSISSIPPI FEE PAYMENT AGREEMENT
This Mississippi Fee Payment Agreement (the "Agreement") is
entered into as of July 2, 1998, by and among Philip Morris Incorporated, R.J.
Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation and Lorillard
Tobacco Company (collectively and severally "Settling Defendants" and each
individually a "Settling Defendant"), the State of Mississippi and private
counsel retained by the State of Mississippi in connection with the lawsuit In
re Mike Moore, Attorney General, ex rel. State of Mississippi Tobacco Litig.,
No. 94-1429 (Miss. Ch. Ct., Jackson County) (the "Action").
WITNESSETH:
WHEREAS, on October 17, 1997, the State of Mississippi and
Settling Defendants entered into a comprehensive settlement agreement to settle
and resolve with finality all present and future civil claims relating to the
subject matter of the Action (the "Settlement Agreement"), which Settlement
Agreement was approved by the Chancery Court for the Jackson County (the
"Court") and adopted as an enforceable order of the Court pursuant to Court
Order dated December 29, 1997;
WHEREAS, paragraph 16 of the Settlement Agreement provides that
Settling Defendants shall pay reasonable attorneys' fees to private counsel for
the State of Mississippi, in an amount set by arbitration, subject to an
appropriate annual cap on all such payments of attorneys' fees by Settling
Defendants, as well as other conditions;
WHEREAS, paragraph 16 of the Settlement Agreement did not and was
not intended to reflect the entire agreement of Settling Defendants and the
State of Mississippi as to the procedures and conditions that would govern
Settling Defendants' payment of fees to private counsel retained by the State of
Mississippi in connection with the Action ("Mississippi Counsel"), including an
agreed specific annual aggregate national cap on all payments of attorneys' fees
and certain other professional fees by Settling Defendants, as well as other
essential terms;
WHEREAS, Settling Defendants and Mississippi Counsel have entered
into a letter agreement dated October 10, 1997 (the "October 10th Letter") which
describes the essential terms of Settling Defendants' agreement to pay fees to
Mississippi Counsel pursuant to paragraph 16 of the Settlement Agreement;
WHEREAS, paragraph 15 of the Settlement Agreement contains a
"Most Favored Nation" clause which provides that, in the event that Settling
Defendants enter into a future pre-verdict settlement agreement of other
litigation brought by a non-federal governmental plaintiff on terms more
favorable to such governmental plaintiff than the terms of the Settlement
Agreement (after due consideration of relevant differences in population or
other appropriate factors), the terms of the Settlement Agreement shall be
revised so that the State of Mississippi will obtain treatment at least as
relatively favorable as any such non-federal governmental entity;
WHEREAS, on January 16, 1998, Settling Defendants entered into a
pre-verdict settlement agreement with the State of Texas, which sets forth the
terms of Settling Defendants' agreement to pay attorneys' fees to private
counsel for the State of Texas and includes provisions for advances on such
attorneys' fees by Settling Defendants and the State of Texas;
WHEREAS, on May 8, 1998, certain Settling Defendants entered into
a pre-verdict settlement agreement with the State of Minnesota (the "Minnesota
Settlement"), which includes provisions for payment of attorneys' fees to
private counsel for the State of Minnesota;
WHEREAS, on July 2, 1998, Settling Defendants and the State of
Mississippi entered into a Stipulation of Amendment to Settlement Agreement and
for Entry of Agreed Order (the "Stipulation of Amendment") to resolve any
disputes with respect to the Most Favored Nation clause of the Settlement
Agreement, including any disputes regarding payment of attorneys' fees, in light
of the Texas and Minnesota Settlements; and
WHEREAS, Settling Defendants, the State of Mississippi and
Mississippi Counsel, in order to resolve any disputes with respect to paragraphs
15 and 16 of the Settlement Agreement, and to describe more fully the procedures
that will govern Settling Defendants' payment of fees to Mississippi Counsel,
have agreed to the terms of this Agreement:
NOW, THEREFORE, BE IT KNOWN THAT, in consideration of their
mutual agreement to the terms of this Agreement, the State of Mississippi's and
Settling Defendants' mutual agreement to the terms of the Stipulation of
Amendment, and such other consideration described herein, including the release
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of certain claims against Settling Defendants, the sufficiency of which is
hereby acknowledged, the parties hereto, acting by and through their authorized
agents, memorialize and agree as follows:
SECTION 1. Agreement to Pay Fees
Settling Defendants will pay reasonable attorneys' fees to
Mississippi Counsel for their representation of the State of Mississippi in
connection with the Action. The amount of such fees will be set by a panel of
three independent arbitrators (the "Panel") whose decision as to the amount of
fees for Mississippi Counsel arbitrated in connection with this Agreement (the
"Mississippi Fee Award") shall be final and not appealable. The procedures
governing Settling Defendants' obligation to pay the Mississippi Fee Award,
including the procedures for making, and the timing of payments in satisfaction
of, the Mississippi Fee Award, shall be as provided herein.
SECTION 2. Aggregate National Caps on Payment of Certain Fees
Settling Defendants' payment of the Mississippi Fee Award pursuant to this
Agreement shall be subject to the payment schedule and the annual and quarterly
aggregate national caps specified in sections 11, 12, 13, 14 and 15 hereof,
which shall apply to:
(a) all payments of attorneys' fees pursuant to an award arbitrated by the
Panel ("Fee Award") in connection with the settlement of any tobacco and health
cases (other than non-class action personal injury cases brought directly by or
on behalf of a single natural person or the survivor of such person or for
wrongful death, or any non-class action consolidation of two or more such cases)
("Tobacco Cases") on terms that provide for payment by Settling Defendants or
other defendants acting in agreement with Settling Defendants (collectively,
"Participating Defendants") of fees with respect to private counsel retained by
the plaintiff in connection with any such case ("Private Counsel"), subject to
an annual cap on payment of all such fees;
(b) all payments of attorneys' fees (other than fees for attorneys of
Participating Defendants) pursuant to a Fee Award for activities in connection
with Tobacco Cases resolved by operation of federal legislation that either (i)
implements the terms of the June 20, 1997 Proposed Resolution (or a
substantially equivalent federal program) (the "Proposed Resolution") or (ii)
imposes an enforceable obligation on Participating Defendants to pay attorneys'
fees with
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respect to Private Counsel (any such legislation hereinafter referred
to as "Federal Legislation"); and
(c) all payments of attorneys' fees and certain other professional fees
(other than fees for attorneys or agents of Participating Defendants) pursuant
to a Fee Award for contributions made toward enacted Federal Legislation. In the
event that Federal Legislation is enacted, the terms "Private Counsel" and
"Eligible Counsel" shall apply not only to persons otherwise falling within the
definitions of such terms herein but also to all persons granted Fee Awards for
such contributions (such persons being Eligible Counsel with respect to each
month beginning with the month the Federal Legislation was enacted).
Nothing in this Agreement shall be construed to require any Settling
Defendant to pay Fee Awards in connection with any litigation other than the
Action.
SECTION 3. Exclusive Obligation of Settling
Defendants; Release
The provisions set forth herein constitute the entire obligation of
Settling Defendants with respect to payment of attorneys' fees in connection
with the Action and the exclusive means by which Mississippi Counsel may seek
payment of fees by Settling Defendants in connection with the Action. The
parties hereto acknowledge that the provisions for payment set forth herein are
the entirety of Settling Defendants' obligations with respect to payment of
attorneys' fees pursuant to paragraph 16 of the Settlement Agreement and the
October 10th Letter. The State of Mississippi agrees that Settling Defendants
shall have no other obligation to pay fees or otherwise compensate Mississippi
Counsel, any other counsel or representative of the State of Mississippi or the
State of Mississippi itself with respect to attorneys' fees in connection with
the Action. Each Mississippi Counsel hereby irrevocably releases Settling
Defendants and their respective present and former parents, subsidiaries,
divisions, affiliates, officers, directors, employees, representatives,
insurers, agents and attorneys (as well as the predecessors, heirs, executors,
administrators, successors and assigns of each of the foregoing) from any and
all claims that such counsel ever had, now has or hereafter can, shall or may
have in any way related to the Action (including but not limited to any
negotiations related to the settlement of the Action). The foregoing shall not
be construed as a release of any person or entity as to any of the obligations
undertaken in this Agreement in connection with a breach thereof.
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SECTION 4. Composition of the Panel
(a) The first and the second members of the Panel shall both be permanent
members of the Panel and, as such, will participate in the determination of all
Fee Awards. The third Panel member shall not be a permanent Panel member, but
instead shall be a state-specific member selected to determine Fee Awards on
behalf of Private Counsel retained in connection with litigation within a single
state. Accordingly, the third, state-specific member of the Panel for purposes
of determining Fee Awards with respect to litigation in the State of Mississippi
shall not participate in any determination as to any Fee Award with respect to
litigation in any other state (unless selected to participate in such
determinations by such persons as may be authorized to make such selections
under other agreements).
(b) The members of the Panel shall be selected as follows:
(i) The first member shall be a natural person selected by
Participating Defendants, who shall advise Mississippi Counsel of the name
of the person selected by October 8, 1998.
(ii) The second member shall be a natural person selected by agreement
of Participating Defendants and a majority of the members of a committee
composed of the following members: Joseph F. Rice, Richard F. Scruggs,
Steven W. Berman, Walter Umphrey, two representatives of the Castano
Plaintiffs' Legal Committee and, at the option of Participating Defendants,
one additional representative to serve on behalf of counsel for any one or
more states that, subsequent to the date hereof, enter into settlement
agreements with Participating Defendants that provide for payment of such
states' Private Counsel pursuant to an arbitrated award of fees; such
second member shall be selected by October 1, 1998.
(iii) The third, state-specific member for purposes of determining Fee
Awards with respect to litigation in the State of Mississippi shall be a
natural person selected by Mississippi Counsel, who shall notify Settling
Defendants of the name of the person selected by October 15, 1998.
SECTION 5. Commencement of Panel Proceedings
No application for a Fee Award shall be presented to the Panel or any Panel
member until November 3, 1998. The Panel shall consider and render decisions on
applications for Fee Awards in the order in which they
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are submitted or pursuant to notice by counsel having priority that they have
ceded their place to others. In the event that more than one application for a
Fee Award is submitted on the same date, the Panel shall consider and render
decisions on such applications in the order in which their respective cases were
settled. Counsel may seek permission from the Panel to make combined
presentations of aspects of their respective applications. Settling Defendants
shall not oppose any request to combine presentations of applications for Fee
Awards in connection with the Action, the lawsuit State of Florida v. American
Tobacco Co., No. 95-1466AH (15th Jud. Circuit, Palm Beach County), or the
lawsuit State of Texas v. American Tobacco Co., No. 5-96CV-91 (E.D. Tex. filed
Mar. 28, 1996).
SECTION 6. Costs of Arbitration
All costs and expenses of the arbitration proceedings held by the Panel,
including compensation of Panel members (but not including any costs, expenses
or compensation of counsel making applications to the Panel), shall be borne by
Settling Defendants in proportion to their respective Market Shares.
SECTION 7. Panel Procedures Regarding Application of Mississippi Counsel
Mississippi Counsel shall make a collective written application to the
Panel for a Fee Award on behalf of all Mississippi Counsel not later than
November 3, 1998. All interested persons, including persons not parties hereto,
may submit to the Panel any information that they wish; but interested persons
not parties hereto may submit only written materials. The Panel shall consider
all such submissions by any party hereto and may consider any such materials
submitted by other interested persons. All written submissions relating to
applications for a Fee Award in connection with the Action shall be served on
all parties hereto by November 13, 1998. Presentations to the Panel shall, to
the extent possible, be based on affidavit rather than live testimony. The Panel
shall preserve the confidentiality of any attorney work-product materials or
other similar confidential information that may be submitted. Settling
Defendants will not take any position adverse to the amount of the Fee Award
requested by Mississippi Counsel, nor will they or their representatives express
any opinion (even upon request) as to the appropriateness or inappropriateness
of the amount of any proposed Mississippi Fee Award. The undersigned
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outside counsel for Settling Defendants Philip Morris Incorporated and R.J.
Reynolds Tobacco Company will appear, if requested, to provide information as to
the nature and efficacy of the work of Mississippi Counsel and to advise the
Panel that they support a Mississippi Fee Award of full reasonable compensation
under the circumstances.
SECTION 8. Award of Fees to Mississippi Counsel
The members of the Panel will consider all relevant information submitted
to them in reaching a decision as to a Fee Award that fairly provides for full
reasonable compensation of Mississippi Counsel for their representation of the
State of Mississippi in connection with the Action. The Panel shall determine
the amount of fees for all Mississippi Counsel collectively no later than
December 10, 1998. Given the significance and uniqueness of the Action, the
Panel shall not be limited to an hourly-rate or lodestar analysis in determining
the amount of the Mississippi Fee Award, but shall take into account the
totality of the circumstances. In considering the amount of the Mississippi Fee
Award, the Panel shall not consider Fee Awards that already have been or yet may
be awarded to others. The Panel's decisions as to Fee Awards shall be in writing
and shall report the amount of the fee awarded (with or without explanation or
opinion, at the Panel's discretion).
SECTION 9. Allocation of Payments among Mississippi Counsel
All payments (including advances) made by Settling Defendants in
satisfaction of the Mississippi Fee Award pursuant to this Agreement shall be
paid in the first instance to an account designated in writing by Joseph F.
Rice, Esq. Each Mississippi Counsel shall be entitled to receive a percentage of
each such payment equal to the percentage such counsel would receive of any fee
recovery in the Action, under the terms of the fee-sharing agreement among
Mississippi Counsel (such percentage being such counsel's "Fee Percentage" of
the payment in question).
SECTION 10. Advances on Payment of Fees
Settling Defendants shall severally make two payments as an advance against
later payments of the Mississippi Fee Award pursuant to this Agreement, to be
credited as provided in section 15 hereof, as follows:
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(a) On or before July 6, 1998, each Settling Defendant shall pay to
Mississippi Counsel, pro rata in proportion to its Market Share indicated on
Schedule A hereto, its respective share of $50 million.
(b) On or before July 31, 1998, each Settling Defendant shall pay to
Mississippi Counsel, pro rata in proportion to its Market Share indicated on
Schedule A hereto, its respective share of $50 million.
SECTION 11. Annual Amount for 1997; Allocation
(a) For 1997, Settling Defendants shall pay, in the manner described in
section 13 hereof, the unsatisfied amount of the Fee Award (the "Unpaid Fees")
of Mississippi Counsel, and those Participating Defendants so obligated shall
make payments with respect to the Unpaid Fees of Private Counsel retained in
connection with the lawsuits State of Florida v. American Tobacco Co., No.
95-1466 AH (15th Jud. Circuit, Palm Beach County), and Mangini v. R.J. Reynolds
Tobacco Co., No. 939359 (Cal. Super. Ct., San Francisco County), in an amount
not to exceed $250 million for all payments described in this subsection.
(b) In the event that the sum of the Unpaid Fees of those Private Counsel
identified in subsection (a) of this section exceeds $250 million, such amount
shall be allocated among the payments to be made with respect to such Private
Counsel in proportion to the amount of their respective Unpaid Fees (the amount
so allocated with respect to the Unpaid Fees of each such Private Counsel being
such counsel's "Allocable Share" for 1997).
SECTION 12. Annual Amount for 1998; Allocation
(a) For 1998, Settling Defendants shall pay, in the manner described in
section 13 hereof, the Unpaid Fees of Mississippi Counsel, and those
Participating Defendants so obligated shall make payments with respect to the
Unpaid Fees of all other Private Counsel, in an amount not to exceed $500
million for all such payments described in this subsection.
(b) The amount payable to Mississippi Counsel by Settling Defendants for
1998 shall be determined as follows: The $500 million annual cap for 1998 shall
be allocated equally among each month of the year. Except as provided in section
13(b) hereof, each monthly amount shall be allocated to those Private Counsel
retained in connection with Tobacco Cases settled by Participating Defendants or
resolved by Federal Legislation before or during such month, up to the amounts
of their respective Unpaid Fees (such counsel being "Eligible
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Counsel" with respect to such monthly amount). In the event that the monthly
amount is less than the sum of Eligible Counsel's Unpaid Fees, the monthly
amount shall be allocated to Eligible Counsel in proportion to the amounts of
their respective Unpaid Fees (the amount so allocated to each Eligible Counsel
for a given month being such counsel's Allocable Share for such month, and the
sum of each Private Counsel's Allocable Shares for each month being such
counsel's Allocable Share for 1998).
(c) Settling Defendants represent that, as of the date of this Agreement,
the only Tobacco Cases (other than the Action) that have been settled by
Participating Defendants on terms that allow for Private Counsel retained in
connection with such cases to seek a Fee Award from the Panel are State of
Florida v. American Tobacco Co., No. 95-1466AH (15th Jud. Circuit, Palm Beach
County), State of Texas v. American Tobacco Co., No. 5- 96CV-91 (E.D. Tex.), and
Mangini v. R.J. Reynolds Tobacco Co., No. 939359 (Cal. Super. Ct., San Francisco
County).
SECTION 13. Payments with Respect to Annual Amounts for 1997 and 1998
(a) On the earlier of December 15, 1998 or 15 days after the date of the
Panel's decision with respect to the Mississippi Fee Award (the "Initial
Mississippi Fee Payment Date"), each Settling Defendant shall severally pay, pro
rata in proportion to its Market Share, its share of an initial fee payment with
respect to the Mississippi Fee Award (the "Initial Mississippi Fee Payment"),
which shall include:
(i) Mississippi Counsel's Allocable Share for 1997 as provided in
section 11 hereof or, in the event that the Panel has not rendered Fee
Awards with respect to all Private Counsel described in section 11(a)
hereof as of five business days prior to the Initial Mississippi Fee
Payment Date, Settling Defendants' reasonable estimation of Mississippi
Counsel's Allocable Share for 1997; and
(ii) Mississippi Counsel's Allocable Share for 1998 as provided in
section 12 hereof for each month of 1998 except those with respect to which
Mississippi Counsel's Allocable Share could not be determined as of five
days prior to the Initial Mississippi Fee Payment Date, as a result of
there being other Eligible Counsel that, as of such date, had not yet been
granted or denied a Fee Award by the Panel (either because such counsel's
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application for a Fee Award was still under consideration by the Panel or
for any other reason).
(b) On January 15, 1999, each Settling Defendant shall severally pay, pro
rata in proportion to its Market Share, its share of Mississippi Counsel's
Allocable Share for those months of 1998 not included in the Initial Mississippi
Fee Payment. Mississippi Counsel's Allocable Share for any such month shall be
based on an allocation of the monthly amount among Eligible Counsel having Fee
Awards as of December 31, 1998, without regard to whether there may be other
Eligible Counsel that have not been granted or denied a Fee Award by the Panel
as of such date.
(c) In the event that Settling Defendants pay an estimation of Mississippi
Counsel's Allocable Share for 1997, as provided in subsection (a)(i) of this
section, subsequent payments pursuant to this Agreement shall be adjusted to
ensure that Mississippi Counsel receive their actual Allocable Share for 1997.
(d) Notwithstanding any provision of this Agreement, Mississippi Counsel
agree to defer payment of $62 million of the payment due from Settling Defendant
R.J. Reynolds Tobacco Company ("Reynolds") on the Initial Mississippi Fee
Payment Date. In the event that (i) Reynolds' share of the Initial Mississippi
Fee Payment is less than $62 million or (ii) the Mississippi Fee Award has not
been determined as of the date of any other payment by Reynolds in 1998 with
respect to Fee Awards, individual Mississippi Counsel Scruggs, Millette, Bozeman
& Dent, P.A. ("Scruggs, Millette") and Ness, Motley, Loadholt, Richardson &
Poole ("Ness, Motley") shall also defer the amounts of their respective Fee
Percentages of such other 1998 payments, until the sum of all deferred amounts
equals $62 million. Under no circumstances shall this subsection require any
increase in any payment to be made by any other Settling Defendant. On January
5, 1999, Reynolds shall pay to the appropriate persons the amounts of its 1998
payments deferred pursuant to this section.
SECTION 14. Quarterly Amounts for 1999 and Subsequent Years; Allocation
Within 10 business days after the end of each calendar quarter beginning
with the first calendar quarter of 1999, Settling Defendants shall pay, in the
manner provided in subsection (d) of this section, the Unpaid Fees of
Mississippi Counsel, and those Participating Defendants so obligated shall make
payments with
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respect to the Unpaid Fees of all other Private Counsel, in an
amount not to exceed $125 million for all such payments, as follows:
(a) In the event that Federal Legislation has been enacted by the end of
the calendar quarter with respect to which such quarterly payment is being made
(the "Applicable Quarter"):
(i) the quarterly amount shall be allocated among Private Counsel, up
to the amount of their respective Unpaid Fees. Each Private Counsel shall
be allocated an amount of each quarterly payment for the calendar year up
to (or, in the event that the sum of such Private Counsel's Unpaid Fees
exceeds the quarterly amount, in proportion to) the amount of such Private
Counsel's Unpaid Fees. Each quarterly payment shall be allocated among
Private Counsel having Unpaid Fees, without regard to whether there are
other Private Counsel that have not yet been granted or denied a Fee Award
by the Panel as of the end of the Applicable Quarter. Subsequent quarterly
payments shall be adjusted, if necessary, to account for Private Counsel
that are granted Fee Awards in a subsequent quarter of the calendar year,
as provided in paragraph (ii)(B) of this subsection.
(ii) In the event that a quarterly payment for the calendar year is
less than the sum of all Private Counsel's Unpaid Fees:
(A) in the case of the first such quarterly payment, the
quarterly amount shall be allocated among Private Counsel in
proportion to the amounts of their respective Unpaid Fees.
(B) in the case of a quarterly payment after the first quarterly
payment that is less than the sum of all such Unpaid Fees, the
quarterly amount shall be allocated only to those Private Counsel, if
any, that were not paid a proportionate share of all prior quarterly
payments for the calendar year (either because such Private Counsel's
applications for Fee Awards were still under consideration as of the
end of the calendar quarters with respect to which such quarterly
payments were made or for any other reason), until each such Private
Counsel has been allocated a proportionate share of all prior
quarterly payments. In the event that the sum of all such shares
exceeds the amount of the quarterly payment, such payment shall be
allocated among such Private Counsel in proportion to the amounts of
their respective Unpaid Fees (without regard to whether there are
other Private Counsel that have not yet
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been granted or denied a Fee Award by the Panel as of the end of the
Applicable Quarter).
(b) In the event that Federal Legislation has not been enacted by the end
of the Applicable Quarter:
(i) the quarterly amount shall be allocated equally among each of the
three months of the calendar quarter. The amount for each such month shall
be allocated among those Private Counsel retained in connection with
Tobacco Cases settled before or during such month (such Private Counsel
being "Eligible Counsel" with respect to such monthly amount), each of whom
shall be allocated a portion of each such monthly amount up to (or, in the
event that the sum of Eligible Counsel's respective Unpaid Fees exceeds
such monthly amount, in proportion to) the amount of such Eligible
Counsel's Unpaid Fees. The monthly amount for each month of the calendar
quarter shall be allocated among Eligible Counsel having Unpaid Fees,
without regard to whether there may be Eligible Counsel that have not yet
been granted or denied a Fee Award by the Panel as of the end of the
Applicable Quarter. Subsequent quarterly payments shall be adjusted, as
necessary, to account for Eligible Counsel that are granted Fee Awards in a
subsequent quarter of the calendar year, as provided in paragraph (ii)(B)
of this subsection.
(ii) In the event that the amount for a given month is less than the
sum of all Eligible Counsel's Unpaid Fees:
(A) in the case of a first quarterly payment, such monthly amount
shall be allocated among Eligible Counsel for such month in proportion
to the amount of their respective Unpaid Fees.
(B) in the case of a quarterly payment after the first quarterly
payment, the quarterly amount shall be allocated among only those
Private Counsel, if any, that were Eligible Counsel with respect to
any monthly amount paid in a prior quarter of the calendar year but
were not allocated a proportionate share of such monthly amount
(either because such counsel's applications for Fee Awards were still
under consideration as of the end of the calendar quarter containing
the month in question or for any other reason), until each such
Eligible Counsel has been allocated a proportionate share of all such
prior monthly payments for the calendar year. In the event that the
sum of all such shares exceeds
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the amount of the quarterly payment, the quarterly payment shall be
allocated among Eligible Counsel in proportion to the amounts of their
respective Unpaid Fees (without regard to whether there may be other
Eligible Counsel with respect to such prior monthly amounts that have
not yet been granted or denied a Fee Award by the Panel as of the end
of the Applicable Quarter).
(c) Adjustments pursuant to paragraphs (a)(ii)(B) and (b)(ii)(B) of this
section shall be made separately for each calendar year. No amounts paid in any
calendar year shall be subject to refund, nor shall any payment in any given
calendar year affect the allocation of payments to be made in any subsequent
calendar year.
(d) Each Settling Defendant shall severally pay, pro rata in proportion to
its respective Market Share, its share of the amounts, if any, allocated to
Mississippi Counsel pursuant to this section.
SECTION 15. Credits and Limitations
Notwithstanding any other provision of this Agreement, all payments by
Settling Defendants with respect to Fee Awards shall be subject to the
following:
(a) Notwithstanding any other provision of this Agreement, the advances
against future payments to Mississippi Counsel made pursuant to section 10
hereof shall be credited against and shall reduce the payments due to
Mississippi Counsel hereunder, beginning with the first quarterly payment for
1999 pursuant to section 14 hereof, in an amount equal to 50% of the payment in
question, until the advances paid by Settling Defendants are fully credited;
provided, however, that the sum of all such credits applied in any calendar year
with respect to the advances made to Mississippi Counsel pursuant to section 10
hereof shall not exceed $50 million. The amount of any credit made against any
such payment to Mississippi Counsel shall be counted in computing the annual and
quarterly aggregate national caps on all payments made with respect to Private
Counsel, in the amount of the credit applied to any such payment to Mississippi
Counsel in any quarterly or annual period.
(b) Under no circumstances shall Settling Defendants be required to make
payments that would result in aggregate national payments by Participating
Defendants with respect to Fee Awards:
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(i) for 1997, totaling more than $250 million;
(ii) during 1998, totaling more than $500 million, except insofar as
payments under the separate $250 million cap for 1997 are made in 1998
pursuant to section 13 hereof, and except insofar as advances are made in
1998 against payments due in years after 1998;
(iii) during any year beginning with 1999, totaling more than $500
million, excluding payments with respect to any Private Counsel's Allocable
Shares for 1998 that are paid in 1999; and
(iv) during any calendar quarter beginning with the first calendar
quarter of 1999, totaling more than $125 million, excluding payments with
respect to any Private Counsel's Allocable Shares for 1998 that are paid in
1999 and except to the extent that payments with respect to any prior
quarter of the calendar year did not total $125 million.
SECTION 16. Contribution to National Legislation
If Federal Legislation is enacted that implements the Proposed Resolution,
a three-member national panel including the two permanent members of the Panel
shall consider any application for Fee Awards on behalf of Private Counsel for
contributions made toward the enactment of such Federal Legislation, along with
all applications for Fee Awards for professional fees by any other persons who
claim to have made similar contributions (other than attorneys or agents of
Participating Defendants). No person shall make more than one application for a
Fee Award in connection with any such contributions toward enactment of such
Federal Legislation. All payments with respect to such Fee Awards, if any, shall
be paid on the payment schedule and subject to, and counted in computing, the
annual and quarterly national caps described in sections 12, 13, 14 and 15
hereof.
SECTION 17. Payments on Market Share Basis
All payments to Mississippi Counsel pursuant to this Agreement shall be
paid by Settling Defendants pro rata in proportion to their respective Market
Shares. Each Settling Defendant shall be severally liable for its
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share of all such payments. Under no circumstances shall any such payment
or portion thereof become the joint obligation of Settling Defendants or the
obligation of any party other than the Settling Defendant from which such
payment is originally due, nor shall any Settling Defendant be required to pay a
portion of any such payment greater than its respective Market Share. With
respect to payment of the advances described in section 10 hereof and the
payment for 1997 described in section 11 hereof, the Market Share of each
Settling Defendant shall be as provided in Schedule A hereto. With respect to
the payment for 1998 described in section 12 hereof, the Market Share of each
Settling Defendant shall be its respective share of sales of cigarettes, by
number of individual cigarettes shipped for consumption in the United States,
for 1998. With respect to all other payments pursuant to this Agreement, each
Settling Defendant's Market Share shall be its respective share of sales of
cigarettes, by number of individual cigarettes shipped for consumption in the
United States, for the 12 month period preceding the end of the calendar quarter
with respect to which such payment is made.
SECTION 18. Determination of Market Share
In the event of a disagreement between or among any Settling Defendants as
to their respective shares of any payment pursuant to this Agreement (except
payments for which each Settling Defendant's Market Share is expressly provided
herein), each Settling Defendant shall pay its undisputed share of such payment
promptly, on or before the date on which such payment is due, and shall within
21 days submit copies of its federal excise tax reports for the period in
question to a third party to be selected by agreement of Settling Defendants
(the "Third Party"), who shall within three days determine the Market Share of
each Settling Defendant. The decision of the Third Party shall be final and
non-appealable, and shall be communicated by facsimile to each party hereto.
Each Settling Defendant shall, within two business days of receipt of the Third
Party's decision, pay Mississippi Counsel or such other Settling Defendant, as
appropriate, the difference, if any, between (1) the amount that such Settling
Defendant has already paid with respect to the payment in question and (2) the
amount of the payment in question that corresponds to such Settling Defendant's
Market Share as determined by the Third Party, together with interest accrued
from the original date on which the payment in question was due, at the prime
rate, as published in the Wall Street Journal on the latest publication date on
or before the original date on which the payment in question was due, plus 3%.
15
SECTION 19. Limited Waiver as to Other Terms
In consideration of Settling Defendants' agreement to the terms hereof,
each Mississippi Counsel hereby covenants and agrees that it will not argue in
any forum (other than in proceedings before the Panel relating to Mississippi
Counsel's application) that the arrangements made in connection with the Texas
Settlement or the Minnesota Settlement for payment of fees to private counsel
for the States of Texas or Minnesota give rise to any claim or entitlement on
the part of Mississippi Counsel (or any other person) in connection with this
Action.
SECTION 20. State's Identification of Mississippi Counsel
The Attorney General represents and warrants that Schedule B hereto
contains the names of all Mississippi Counsel.
SECTION 21. Intended Beneficiaries
No part of this Agreement creates any rights on the part of, or is
enforceable by, any person or entity that is not a party hereto or a person
covered by the release described in section 3 hereof. Nor shall any part of this
Agreement bind any non-party or determine, limit or prejudice the rights of any
such person or entity.
SECTION 22. Definitions
Terms used herein that are defined in the Settlement Agreement or the
Stipulation of Amendment are, unless otherwise defined herein, used in this
Agreement as defined in the Settlement Agreement or the Stipulation of
Amendment, as applicable.
SECTION 23. Representations of Parties
The parties hereto hereby represent that this Agreement has been duly
authorized and, upon execution, will constitute a valid and binding
16
contractual obligation, enforceable in accordance with its terms, of each of the
parties hereto.
SECTION 24. No Admission
This Agreement is 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 wrongdoing whatsoever on the part of any party hereto or any person
covered by the release provided under section 3 hereof. Settling Defendants
specifically disclaim and deny any liability or wrongdoing whatsoever with
respect to the claims released under section 3 hereof and enter into this
Agreement for the sole purposes of memorializing Settling Defendants' rights and
obligations with respect to payment of attorneys' fees pursuant to the
Settlement Agreement and avoiding the further expense, inconvenience, burden and
uncertainty of potential litigation.
SECTION 25. Non-admissibility
This Agreement having been undertaken by the parties hereto in good faith
and for settlement purposes only, neither this Agreement nor any evidence of
negotiations relating hereto shall be offered or received in evidence in any
action or proceeding other than an action or proceeding arising under this
Agreement.
SECTION 26. Amendment and Waiver
This Agreement may be amended only by a written instrument executed by the
Attorney General, Mississippi Counsel and 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
Agreement shall not be deemed to be or construed as a waiver of any other
breach, whether prior, subsequent or contemporaneous, of this Agreement.
SECTION 27. Notices
All notices or other communications to any party hereto shall be in writing
17
(including but not limited to telex, telecopy or similar writing) and shall be
given to the respective parties listed on Schedule C hereto at the addresses
therein indicated. 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 section including an updated list conformed to Schedule C
hereto.
SECTION 28. Governing Law
This Settlement Agreement shall be governed by the laws of the State of
Mississippi, without regard to the conflict of law rules of such State.
SECTION 29. Construction
None of the parties hereto shall be considered to be the drafter of this
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.
SECTION 30. Captions
The captions of the sections of this Agreement are included for convenience
of reference only and shall be ignored in the construction and interpretation
hereof.
SECTION 31. Counterparts
This 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.
SECTION 32. Entire Agreement of Parties
This Agreement contains an entire, complete and integrated statement of
each and every term and provision agreed to by and among the parties
18
hereto with respect to payment of attorneys' fees by Settling Defendants in
connection with the Action and is not subject to any condition not provided for
herein.
IN WITNESS WHEREOF, the parties hereto, through their fully authorized
representatives, have agreed to this Mississippi Fee Payment Agreement as of
this 2nd day of July, 1998.
STATE OF MISSISSIPPI acting by and through
Michael C. Moore, its duly elected and authorized
Attorney General
By:_________________________________
Michael C. Moore
Attorney General
PHILIP MORRIS INCORPORATED
By:_________________________________
Meyer G. Koplow
Counsel
By:_________________________________
Martin J. Barrington
General Counsel
19
R.J. REYNOLDS TOBACCO COMPANY
By:_________________________________
Arthur F. Golden
Counsel
By:_________________________________
Charles A. Blixt
General Counsel
BROWN & WILLIAMSON TOBACCO
CORPORATION
By:_________________________________
Stephen R. Patton
Counsel
By:_________________________________
F. Anthony Burke
Vice President & General Counsel
20
LORILLARD TOBACCO COMPANY
By:_________________________________
Arthur J. Stevens
Senior Vice President & General Counsel
MISSISSIPPI COUNSEL
By:_________________________________
Joseph F. Rice
Ness, Motley, Loadholt, Richardson & Poole
By:_________________________________
Richard F. Scruggs
Scruggs, Millette, Bozeman & Dent, P.A
By:_________________________________
Don Barrett
Barrett Law Offices
21
By:_________________________________
Paul T. Benton
By:__________________________________
Frederick B. Clark
By:__________________________________
Michael T. Lewis
Lewis & Lewis
By:_________________________________
David O. McCormick
By:_________________________________
Charles Victor McTeer
McTeer & Associates
By:_________________________________
Robert H. Oswald
22
Oswald & Reed
By:_________________________________
Crymes G. Pittman
Pittman, Germany, Roberts & Welsh
By:_________________________________
Thomas H. Rhoden
Rhoden, Lacy, Downey & Colbert
By:_________________________________
Paul S. Minor
23
SCHEDULE A
MARKET SHARE PERCENTAGES
Settling Defendant Percentage
Philip Morris Incorporated ......................................49.9
R.J. Reynolds Tobacco Company....................................24.8
Brown & Williamson Tobacco Corp..................................16.4
Lorillard Tobacco Company.........................................8.9
-----
TOTAL 100
SCHEDULE B
DESIGNATION of MISSISSIPPI COUNSEL
by the Attorney General
Ness, Motley, Loadholt, Richardson & Poole (Ronald L.
Motley, Joseph F. Rice, Charles W. Patrick, Jr., Edward J.
Westbrook, Ann K. Ritter, J. Anderson Berly, III, John J.
McConnell, Jr., Susan Nial, Robert J. McConnell, Richard L. Akel,
Nancy Worth Davis, Alexandra M. Wagner, Kimberly S. Vroon, Jodi
W. Flowers, Frederick C. Baker, R. Brian Johnson, Cindi Anne
Solomon, Jerry Hudson Evans, Gregory S. Lofstead, William Michael
Gruenloh)
Scruggs, Millette, Bozeman & Dent, P.A. (Richard F. Scruggs,
W. Steve Bozeman, Charles J. Mikhail, Lee E. Young, Jennifer A.
Coley, Ashley Hutchings Hendren)
Barrett Law Offices (Don Barrett)
Paul T. Benton
Frederick B. Clark
Lewis & Lewis (Michael T. Lewis, Pauline Shular Lewis)
David O. McCormick
McTeer & Associates (Charles Victor McTeer)
Oswald & Reed (Robert H. Oswald, William T. Reed)
Pittman, Germany, Roberts & Welsh (Crymes G. Pittman,
Robert G. Germany, Joseph E. Roberts, Jr., C. Victor Welsh)
Rhoden, Lacy, Downey & Colbert (Thomas H. Rhoden)
Paul S. Minor
SCHEDULE C
NOTICES
State of Mississippi
Hon. Michael C. Moore
Attorney General's Office
450 High Street
Post Office Box 220
Jackson, MS 39205
Fax: (601) 359-3441
With copies to:
Richard F. Scruggs
Scruggs, Millette, Bozeman & Dent, P.A.
743 Delmas Avenue
Pascagoula, MS 39568-1425
Fax: (228) 762-1207
and:
Joseph F. Rice, Esq.
Ness, Motley, Loadholt, Richardson & Poole
151 Meeting Street, Suite 600
Charleston, SC 29402
Fax: (843) 720-9290
and:
David O. McCormick
707 Watts Avenue
P.O. Box 865
Pascagoula, MS 39568-0865
Fax: (228) 762-4864
(continued)
Settling Defendants
-------------------
Philip Morris Incorporated: R.J. Reynolds Tobacco Company:
- --------------------------- ------------------------------
Martin J. Barrington, Esq. Charles A. Blixt, Esq.
Philip Morris Incorporated R.J. Reynolds Tobacco Company
120 Park Avenue 401 North Main Street
New York, NY 10017-5592 Winston-Salem, NC 27102
Fax: (212) 907-5399 Fax: (336) 741-2998
With a copy to: With a copy to:
- --------------- ---------------
Meyer G. Koplow, Esq. Arthur F. Golden, Esq.
Wachtell, Lipton, Rosen & Katz Davis Polk & Wardwell
51 West 52nd Street 450 Lexington Avenue
New York, NY 10019 New York, NY 10017
Fax: (212) 403-2000 Fax: (212) 450-4800
Brown & Williamson Tobacco Corp.: Lorillard Tobacco Company:
- --------------------------------- --------------------------
F. Anthony Burke, Esq. Arthur J. Stevens, Esq.
Brown & Williamson Tobacco Corp. Lorillard Tobacco Company
200 Brown & Williamson Tower 714 Green Valley Road
401 South Fourth Avenue Greensboro, NC 27408
Louisville, KY 40202 Fax: (336) 335-7707
Fax: (502) 568-7297
With a copy to:
- ---------------
Stephen R. Patton, Esq.
Kirkland & Ellis
200 East Randolph Dr.
Chicago, IL 60601
Fax: (312) 861-2200
(continued)
2
Mississippi Counsel
-------------------
Joseph F. Rice, Esq. Richard F. Scruggs
Ness, Motley, Loadholt, Scruggs, Millette, Bozeman &
Richardson & Poole Dent, P.A.
151 Meeting Street, Suite 600 743 Delmas Avenue
Charleston, SC 29402 Pascagoula, MS 39568-1425
Fax: (843) 720-9290 Fax: (228) 762-1207
Don Barrett, Esq. Paul T. Benton, Esq.
Barrett Law Offices Attorney At Law
P.O. Box 987 P.O. Box 1341
Lexington, Mississippi 39095 Biloxi, MS 39533-1341
Fax 1: (850) 654-4072 Fax: (228) 432-0336
Fax 2: (601) 948-6187
Frederick B. Clark, Esq. Michael T. Lewis
Attorney At Law Lewis & Lewis
P.O. Box 1806 P.O. Box 1600
Greenwood, MS 38930 Clarksdale, MS 38614
Fax: (601) 455-1282 Fax: (601) 627-2267
David O. McCormick, Esq. Charles Victor McTeer, Esq.
707 Watts Avenue McTeer & Associates
P.O. Box 865 P.O. Box 1835
Pascagoula, MS 39568-0865 Greenville, MS 38702
Fax: (228) 762-4864 Fax: (601) 334-6847
Robert H. Oswald, Esq. Crymes Pittman, Esq.
Oswald & Reed Pittman, Germany, Roberts & Welsh
3106 Canty Street 401 S. President Street
Pascagoula, MS 39567 Jackson, MS 39201
Fax: (228) 769-9019 Fax: (601) 948-6187
(continued)
3
Thomas H. Rhoden, Esq. Paul S. Minor, Esq.
Rhoden, Lacy, Downey & Colbert Minor & Associates
111 Park Circle Drive 400 Main Street
Flowood, MS 39208 Biloxi, MS 39530
Fax: (601) 936-2515 Fax: (228) 374-6630
4