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Master Settlement Agreement (MSA)

In 1998, the Attorneys General and other representatives of 46 states, Puerto Rico, the U.S. Virgin Islands and the District of Columbia signed an agreement with the four largest tobacco manufacturers (Brown & Williamson Tobacco corporation, Lorillard Tobacco Company, Philip Morris Incorporated and R.J. Reynolds Tobacco Company,). Four states (Florida, Minnesota, Mississippi and Texas) had previously settled with tobacco manufacturers. KMM signed the agreement in 1999 and is considered a participating manufacturer.

The agreement settles all antitrust, consumer protection, common law negligence, statutory, common law and equitable claims for monetary, restitutionary, equitable and injunctive relief alleged by any of the settling states with respect to the year of payment or earlier years and cannot be modified in any way unless all the parties agree to the modification.

In terms of public health and youth access to tobacco, the MSA:

· Prohibits youth targeting in advertising, marketing and promotions by:
· Bans cartoon characters in advertising
· Restricts brand-name sponsorships of events with significant youth audiences
· Bans outdoor advertising
· Bans youth access to free samples
· Sets minimum cigarette package size at 20
· Creates a National Foundation and a Public Education Fund

To help change corporate culture, the MSA:

· Requires the industry to make a commitment to reducing youth access and consumption.
· Disbanded tobacco trade associations.
· Restricts industry lobbying
· Opens industry records and research to the public enforcement
· Provides court jurisdiction for implementation and enforcement
· Establishes a state enforcement fund and attorney fees
· Requires the industry to reimburse states for attorney fees
· Requires the industry to pay for outside counsel hired by the states.

Financial Provisions

· States will receive over $206 billion over 25 years.
· Up-front payments – $12.742 billion.
· Annual Payments, beginning April 15, 2000 – $183.177 billion through 2025.
· Strategic Contribution Fund, 2008-2017 – $8.61 billion.
· National Foundation ($250 million over next 10 years).
· Public Education Fund (at least $1.45 billion 2000-2003).
· State Enforcement Fund ($50 million, one-time payment).
· National Association of Attorneys General ($1.5 billion over next 10 years).
Source: National Association of Attorneys General

Our participation in the MSA means immunity and protection for our customers from future state liability claims, which is considered very valuable and essential by the Trade.

Several brands are currently available from manufacturers that are not participating in the MSA and as a result can give no assurances their customers will not be sued by the states in the future. To help retailers distinguish which brand are not be paying into the MSA fund, we have developed this chart:

A cigarette manufacturer is not participating in the MSA, and not providing immunity from future state liability claims, if:

1. The price per thousand for an average line of cigarettes, excluding profits and promotions, is lower than $9.00 for an imported brand or $8.75 for a domestically produced brand.
2. There is a variance in pricing in the four states that settled separately (Mississippi, Florida, Texas and Minnesota).
3. The manufacturer denies access to tax information, to the States. All MSA participants are required to pay into the fund for all brands / All volume of product sold in the US. This is evidenced by their FET paid information, which is required to be accessible to the States.

Additional information on this topic can be found at www.naag.org. Please call Bhavani Parameswar for additional clarifications @ 800 317 0377.