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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 7, 2001
---------------------
LOEWS CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-6541 13-2646102
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
667 Madison Avenue, New York, N.Y. 10021-8087
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 521-2000
--------------------
NOT APPLICABLE
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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Page 1
Item 5. Other Events.
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On May 7, 2001, Registrant issued the press release attached hereto as
Exhibit 99.1 and incorporated herein by reference.
FORWARD LOOKING STATEMENTS
- --------------------------
When included in this Report, the words "believes," "expects," "intends,"
"anticipates," "estimates," and analogous expressions are intended to identify
forward-looking statements. Such statements inherently are subject to a
variety of risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include, among
others, the impact of competitive products, policies and pricing; product and
policy demand and market responses; development of claims and the effect on
loss reserves; the performance of reinsurance companies under reinsurance
contracts; general economic and business conditions; changes in financial
markets (interest rate, credit, currency, commodities and equities) or in the
value of specific investments; changes in foreign, political, social and
economic conditions; regulatory initiatives and compliance with governmental
regulations; changes in foreign and domestic oil and gas exploration and
production activity, and expenditures related to rig conversion and upgrade;
changes in rating agency policies and practices, the results of financing
efforts, and agreements and various other matters and risks, many of which are
beyond the Company's control.
The tobacco industry continues to be subject to health concerns relating to
the use of tobacco products and exposure to environmental tobacco smoke,
legislation, including actual and potential excise tax increases, increasing
marketing and regulatory restrictions, governmental regulation, privately
imposed smoking restrictions, litigation, including risks associated with
adverse jury and judicial determinations, courts reaching conclusions at
variance with the general understandings of applicable law, bonding
requirements and the absence of adequate appellate remedies to get timely
relief from any of the foregoing, and the effects of price increases related
to concluded tobacco litigation settlements and excise tax increases on
consumption rates. Developments in any of these areas, which are more fully
described elsewhere in this Report could cause the Company's results to differ
materially from results that have been or may be projected by or on behalf of
the Company. These forward-looking statements speak only as of the date of
this Report. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which
any statement is based.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Exhibits.
Exhibit 99.1 Press Release issued by Loews Corporation, dated May 7, 2001.
Exhibit 99.2 Stipulation And Agreed Order Regarding Stay Of Execution
Pending Review and Related Matters.
Page 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LOEWS CORPORATION
-----------------
(Registrant)
Dated: May 8, 2001 By: /s/ Barry Hirsch
----------------------
Barry Hirsch,
Senior Vice President,
Secretary and General
Counsel
Page 3
Exhibit 99.1
LOEWS CORPORATION Contact: Peter W. Keegan
- ----------------- Senior Vice President
NEWS RELEASE (212) 521-2950
- -----------------
Candace Leeds
V.P. of Public Affairs
(212) 521-2416
Joshua E. Kahn
Investor Relations
(212) 521-2788
FOR IMMEDIATE RELEASE
---------------------
NEW YORK, May 7, 2001 - Loews Corporation (NYSE:LTR) reported that
its subsidiary, Lorillard Tobacco Company, today issued the attached press
release. [Two pages follow]
# # #
LORILLARD TOBACCO COMPANY
FOR IMMEDIATE RELEASE
May 7, 2001
CONTACT: STEVEN C. WATSON
Vice President, External Affairs
336-335-7713
LORILLARD ANNOUNCES AGREEMENT IN ENGLE CASE APPEAL
- --------------------------------------------------
==============================================================================
Lorillard Tobacco Company today announced that it, along with two other
tobacco companies, has reached an agreement with the class in the Engle case
-----
in Florida which will provide further assurance of the company's ability to
appeal the jury's verdict awarding punitive damages against it. The
agreement, approved by the Dade County Circuit Court in Miami, provides
additional security for the class pending the completion of the appeals
process and assures that the stay of execution, currently in effect pursuant
to a bonding statute enacted last year by the Florida legislature, will not be
lifted or limited at any point during the appeal.
"This agreement is not a settlement of any part of the Engle action, and we
-----
continue to believe we will be successful in overturning the judgment on
appeal," said Ronald S. Milstein, General Counsel and Vice President of
Lorillard. "Although Lorillard believes that the Florida statute currently in
place provides adequate security to stay execution of the judgment, this
agreement further assures that the appeals process will proceed without
obstruction until all available avenues of appeal have been exhausted, up to
and including the U.S. Supreme Court. What we have done today will gain us
the ability to go forward with certainty in the appeals process and provides
for the surest path to that end," he added.
The Engle case is a class action brought by individual smokers against the
-----
country's leading tobacco manufacturers in state court, Miami, Florida. After
a two-and-one-half year trial, the jury awarded a total of $145 billion in
punitive damages against the defendants in the action, $16.25 billion of which
was assessed against Lorillard. Lorillard and the other defendants are now
appealing the verdict and have each posted a bond to secure the judgment
pending this appeal. Lorillard's bond was undertaken pursuant to a Florida
state statute that limited the required bond amount to no more than $100
million, regardless of the size of the judgment.
The agreement calls for the payment by Lorillard of $100 million into an
escrow account to be held for the benefit of the class, and released, along
with Lorillard's existing $100 million statutory bond, to the court for the
benefit of the class upon completion of the appeals process. The court will
ultimately have the right and obligation to direct where these guaranteed
funds are to be paid once the appeal is completed. Lorillard anticipates it
will take a $200 million pre-tax charge to earnings in the 2001 second quarter
in relation to the agreement.
With respect to Lorillard and the other participating tobacco companies, the
Agreement further provides that the judgment is stayed, and that the class
will not pursue any collection of it or execution on it, until the completion
of all appeals, including to the United States Supreme Court. "We believe
that this arrangement is in the best long term interests of the company, its
employees and its shareholder and will allow Lorillard to continue to operate
its business without onerous restrictions or interference," noted Mr.
Milstein.
Lorillard Tobacco Company is a wholly owned subsidiary of Loews Corporation
based in Greensboro, North Carolina.
EXHIBIT 99.2
IN THE CIRCUIT COURT OF THE
11TH JUDICIAL CIRCUIT IN
AND FOR DADE COUNTY,
FLORIDA
GENERAL JURISDICTION
DIVISION
CASE NO.: 94-08273 CA 22
- ------------------------------------x
:
:
HOWARD A. ENGLE, M.D., et al., :
:
Plaintiffs, :
:
vs. :
:
R.J. REYNOLDS TOBACCO CO., :
PHILIP MORRIS INCORPORATED, :
LORILLARD TOBACCO CO., LORILLARD, :
INC., BROWN & WILLIAMSON :
TOBACCO CORP., individually and as :
successor by merger to THE AMERICAN :
TOBACCO CO., BROOKE GROUP, LTD., :
LIGGETT GROUP, INC., COUNCIL FOR :
TOBACCO RESEARCH -- U.S.A., INC., :
and TOBACCO INSTITUTE, INC. :
:
Defendants. :
:
- ------------------------------------x
STIPULATION AND AGREED ORDER REGARDING STAY
OF EXECUTION PENDING REVIEW AND RELATED MATTERS
-----------------------------------------------
IT IS HEREBY STIPULATED AND AGREED BY AND AMONG plaintiffs and the
plaintiff class herein (plaintiffs and the plaintiff class herein referred to
collectively as the "Class") on the one hand and defendants Philip Morris
Incorporated ("Philip
Morris"), Lorillard Tobacco Co., Lorillard, Inc. (together with Lorillard
Tobacco Co., "Lorillard"), Brooke Group Holding Inc. and Liggett Group, Inc.
(together with Brooke Group Holding Inc., "Liggett") (collectively,
"Participating Defendants") as follows:
1. This Stipulation and Agreed Order Regarding Stay of Execution
Pending Review and Related Matters ("Stipulation") constitutes an agreement
among the parties hereto with respect to security and stay pending review of
the punitive damages aspects of the Judgment entered against each
Participating Defendant and certain related matters, and does not constitute a
settlement or compromise of any claim or judgment (including any claim or
judgment as to punitive damages or any other claim or judgment in this action)
against any Participating Defendant. The Participating Defendants enter into
this Stipulation for the purpose of preserving their ability to obtain review
of the Judgment up to and including, if necessary, the United States Supreme
Court and of avoiding any risk that the Judgment will be unstayed at any point
during the review process; the Class enters into this Stipulation for the
purpose of better securing itself financially during that review, including by
securing Guaranteed Sums, subject to the terms of this Stipulation, of
$709,723,077 regardless of the outcome of that review and by otherwise
increasing its financial security as provided herein. By this Stipulation, the
Class does not release or discharge the Participating Defendants from any
liability embodied in or merged into the Judgment if that Judgment (or portion
thereof) is affirmed after Completion of Review, and the Participating
Defendants do not waive or compromise any position or contention that the
Judgment is illegal and improper and should be reversed on such review.
2
2. Each Participating Defendant shall continue to maintain the bond
it has already posted pursuant to Fla. Stat. Section 768.733 (the "Existing
Bonds").
3. (a) Within the later of (i) 14 days of the approval of this
Stipulation and the forms of Escrow Agreements by the Eleventh Judicial
Circuit Court, Dade County, Florida (the "Court") or (ii) 4 business days
after the execution of the First Escrow Agreement (as defined below), each of
the following Participating Defendants shall pay for the benefit of the Class
the following respective amounts in the manner set forth in the next sentence:
Philip Morris, $500,000,000; Lorillard, $100,000,000; Liggett, $6,273,077
(collectively, the "Class Escrowed Funds"). The Class and class counsel herein
("Class Counsel") hereby irrevocably direct each such Participating Defendant
to make such payment by depositing its respective amount on behalf of the
Class into a restricted escrow in accordance with the terms of an escrow
agreement substantially similar to the form of Escrow Agreement attached
hereto as Exhibit A (the "First Escrow Agreement") in satisfaction of the
Class's obligation to make such deposits under the First Escrow Agreement.
(b) Lorillard and Liggett shall each further pay for the
benefit of the Class the interest or investment income earned after the
Court's approval of this Stipulation and the forms of Escrow Agreements but
prior to Completion of Review on the cash collateral they respectively
provided to their respective sureties in connection with the issuance of their
respective Existing Bonds, as such interest or other investment income is
disbursed to them by such sureties. The Class and Class Counsel hereby
irrevocably direct Lorillard and Liggett to make such payment by depositing on
behalf of the Class such interest or
3
other investment income within 3 business days of its receipt from the surety
in question (and, upon Completion of Review, all such interest or other
investment income that had not yet been deposited) into a restricted escrow in
accordance with the terms of the First Escrow Agreement in satisfaction of the
Class's obligation to make such deposits under the First Escrow Agreement.
Lorillard and Liggett shall arrange for their respective sureties to disburse
such interest or other investment income to them on at least a quarterly
basis.
(c) The Class Escrowed Funds shall include the (i) interest or
other investment income earned on funds provided pursuant to paragraph 3(a)
and (ii) the interest or other investment income provided by Lorillard and
Liggett pursuant to paragraph 3(b) (and any further interest or other
investment income earned thereon), in each case net of the fees to be paid to
the escrow agent under the First Escrow Agreement and of all federal, state or
local income tax or other tax (each, a "Tax," and collectively, "Taxes") owed
on such interest or other investment income. The Class hereby irrevocably
directs each Participating Defendant to pay out of the interest or other
investment income earned on its respective share of the Class Escrowed Funds
(or, as applicable in the case of Lorillard and Liggett, on the cash
collateral it provided to the surety in connection with the issuance of its
respective Existing Bond) any Taxes owed on such interest or other investment
income earned prior to Completion of Review (as such term is defined in
paragraph 6). The amount of such Taxes shall be determined for each taxable
period (and upon Completion of Review) and shall be equal to (x) the amount of
such interest or other investment income earned during the period in question
times (y) the Tax Rate (as
4
such term is defined in paragraph 6). The First Escrow Agreement shall provide
that the escrow agent shall, no later than each April 10, June 10, September
10 and December 10 (and upon Completion of Review) and without further order
of the Court, pay over to each Participating Defendant such portion of the
interest or other investment income earned on its respective share of the
Class Escrowed Funds (or, as applicable in the case of Lorillard and Liggett,
on the cash collateral it provided to the surety in connection with the
issuance of its respective Existing Bond) as equals the amount of the Taxes as
determined in accordance with the preceding sentence.
4. Within 46 days after paying its respective share of the Class
Escrowed Funds, Philip Morris shall provide security in addition to its
Existing Bond by depositing an additional $1,200,000,000 into a second,
separate restricted escrow in accordance with the terms of an escrow agreement
substantially similar to the form of Escrow Agreement attached hereto as
Exhibit B (the "Second Escrow Agreement," and together with the First Escrow
Agreement, the "Escrow Agreements"). The additional funds provided by Philip
Morris pursuant to this paragraph are referred to herein as the "Participating
Defendant Escrowed Funds," and collectively with the Class Escrowed Funds as
the "Escrowed Funds." Any interest or other investment income earned on the
Participating Defendant Escrowed Funds shall not be considered part of the
Participating Defendant Escrowed Funds, and the Second Escrow Agreement shall
provide that the escrow agent shall, without further order of the Court and on
a quarterly basis (and upon Completion of Review), pay over to Philip Morris
all such interest or other investment income.
5
5. The Escrowed Funds provided by each Participating Defendant
shall be held by the applicable escrow agent (as defined in the applicable
Escrow Agreement and as selected in accordance with paragraph 28 of this
Stipulation) in separate accounts for each Participating Defendant for the
benefit of the Class in accordance with and subject to the terms set forth in
the applicable Escrow Agreement. The Existing Bond and Escrowed Funds posted
or provided by a Participating Defendant shall not be payable out of escrow to
or accessible by the Class or any of its members or representatives prior to
Completion of Review with respect to such Participating Defendant. Upon
Completion of Review, and subject to the remaining provisions of this
Stipulation and the Escrow Agreements, such Existing Bond and/or Escrowed
Funds (or portions thereof) shall be payable or subject to withdrawal as
provided by paragraph 12(a) below, whichever clause of such paragraph may be
applicable.
6. (a) The term "Completion of Review" shall mean the completion
of all judicial review (whether by appeal, by writ of certiorari, prohibition,
mandamus or quo warranto, by review pursuant to the All Writs power, or
otherwise) of the Judgment against the Participating Defendant in question in
the Third District Court of Appeal of Florida, the Florida Supreme Court and
the United States Supreme Court, such that the Judgment is no longer subject
to any further such consideration or review in any such court (including
because the time for all further such review has expired). Notwithstanding
anything else in this paragraph 6(a), Completion of Review shall occur no
later than the date on which the United States Supreme Court takes final
action (whether by a final ruling on the merits or by denial of a petition for
a writ of certiorari or
6
other form of review) with respect to the Judgment against the Participating
Defendant in question;
(b) The term "Total Contribution" shall mean the combined total
of the amount of the Existing Bond posted by the Participating Defendant in
question and the amount of the Escrowed Funds provided by such Participating
Defendant;
(c) The term "Guaranteed Sum" shall mean: (i) with respect to
Philip Morris, the Class Escrowed Funds provided by Philip Morris ($500
million, plus net interest or other investment income as described in
paragraph 3(c)); (ii) with respect to Lorillard, the Existing Bond posted by
Lorillard and the Class Escrowed Funds provided by Lorillard (together, $200
million, plus net interest or other investment income as described in
paragraphs 3(b)-(c)); and (iii) with respect to Liggett, the Existing Bond
posted by Liggett and the Class Escrowed Funds provided by Liggett (together
$9,723,077, plus net interest or other investment income as described in
paragraphs 3(b)-(c)). In combination, these sums total $709,723,077, plus net
interest or other investment income as described in paragraphs 3(b)-(c), as
applicable;
(d) The term "Judgment" shall mean the judgment against the
Participating Defendant in question that was entered in this action on
November 3, 2000, as heretofore or hereinafter amended;
(e) The terms "Reversed" or "Reversal" shall mean any ruling
that reverses, vacates or remands the punitive damages component of the
Judgment (or, if applicable, a Renewed Judgment or New Judgment) against the
Participating Defendant
7
in question, including any ruling, however styled, that leaves such
Participating Defendant with no present obligation actually to pay at that
time any amount under such component of such Judgment (or, if applicable, such
Renewed Judgment or New Judgment); and
(f) The term "Tax Rate" shall mean a percentage equal to the sum
of (i) the maximum marginal federal corporate income tax rate (such rate being
35% as of the date this Stipulation was executed and approved by the Court) in
effect on the last day of the relevant tax period with respect to which
payment of the Tax in question is due, plus (ii) 4.472 percentage points.
7. No Participating Defendant shall seek to hold the Class, any
member of the Class or Class Counsel responsible, in the event the Judgment
against such Participating Defendant is reversed in whole or in part, for the
costs or premiums incurred by such Participating Defendant in posting the
Existing Bond or providing the Escrowed Funds or for any other taxable or
other costs or attorney's fees incurred by such Participating Defendant in
this case.
8. The Class and each Participating Defendant will not contend that
this Stipulation provides any grounds for staying or delaying the review of
the Judgment and will oppose any such contention by any other person or
entity, including any defendant that is not a Participating Defendant.
9. Each Participating Defendant will: (a) oppose any claim that is
filed in any court (including in any bankruptcy case or proceeding) by any
State, person or entity
8
(other than the Class or any person or entity to which funds provided pursuant
to this Stipulation were ordered paid by order of the Court) claiming to be a
creditor of such Participating Defendant, where such creditor's claim is to
obtain or realize on or against any portion of the Guaranteed Sum, Existing
Bond or Escrowed Funds posted or provided by such Participating Defendant
(including, but not limited to, any portion of such funds that has been paid
into the registry of the Court); (b) take the position in any bankruptcy case
or proceeding that such funds may be paid only in accordance with the terms of
this Stipulation and the Escrow Agreements; and (c) not oppose any proceeding
brought by or on behalf of the Class in any bankruptcy case to obtain relief
from the automatic stay imposed under Bankruptcy Code section 362(a) to permit
the Class to obtain any payment required to be made in accordance with the
terms of this Stipulation.
10. Nothing in this Stipulation shall: (a) permit the withdrawal
of the bond that a Participating Defendant has posted with respect to the
compensatory damages component of the Judgment; or (b) extend the duration of
the stay of execution of such component of such Judgment beyond that entailed
by the posting of such bond under Florida law and the Florida Rules of
Appellate Procedure.
11. Until Completion of Review, the Participating Defendants shall
not: (a) remove, or join in the removal of, this action to a United States
District Court, except where such removal is based on the commencement of
proceedings under the Bankruptcy Code; (b) file a petition for writ of
certiorari in the United States Supreme Court from the dismissal by the United
States Court of Appeals for the Eleventh Circuit dated February 15, 2001 of
the appeal in Engle, et al. v. R.J. Reynolds Tobacco Co., et al., No. 00-15952
------------ ---------------------------------
9
DD (11th Cir.); or (c) commence an original action in any court (including,
but not limited to, any United States District Court) other than the Third
District Court of Appeal of Florida, the Florida Supreme Court and the United
States Supreme Court contending that a Judgment or any rulings by or
proceedings before the Court in this action violate the United States
Constitution or any other provision of law.
12. (a) Upon Completion of Review, the disposition of the Total
Contribution shall be as follows depending upon the amount (if any) that the
Participating Defendant in question is obligated actually to pay at that time
on account of the punitive damages component of the Judgment (including any
statutory interest owed thereon) as a result of such Judgment having been
Reversed, modified, affirmed or otherwise treated upon such Completion of
Review:
Amount of Punitive Damages Component (if any) Disposition of Total
Contribution
- -------------------------------------------- ------------------------
(i) Zero (including as a result of a (x) The Guaranteed Sum shall
Reversal) be payable into the registry
of the Court (or a restricted
bank escrow designated by
Class Counsel) to be
maintained for the benefit
of the Class, with the Court
determining the allocation
thereof employing procedures
consistent with the Florida
Rules of Civil Procedure;
(y) the Participating
Defendant shall be entitled
to withdraw the entire
balance of the Total
Contribution.
(ii) Less than the Guaranteed Sum (x) Such portion of the
Guaranteed Sum which
equals such reduced
punitive damage component
(including any statutory
interest owed thereon)
shall be payable into the
registry of the Court (or
a restricted bank escrow
designated by Class
Counsel) to be maintained
for the benefit of the
Class; (y) the remainder
10
of the Guaranteed Sum
shall be payable into
the registry of the Court
(or a restricted bank
escrow designated by
Class Counsel) to be
separately maintained for
the benefit of the Class,
with the Court
determining the
allocation thereof
employing procedures
consistent with the
Florida Rules of Civil
Procedure; (z) the
Participating Defendant
shall be entitled to
withdraw the entire
balance of the Total
Contribution.
(iii) The Guaranteed Sum or greater (x) The Guaranteed Sum and
but less than the Total Contribution such additional portion, if
any, of the Total
Contribution which together
equal such reduced punitive
damage component (including
any statutory interest owed
thereon) shall be payable
into the registry of the
Court (or a restricted
bank escrow designated by
Class Counsel) to be
maintained for the benefit of
the Class (the Participating
Defendant having the election
to designate payment of any
such additional portion out
of the Existing Bond or the
Escrowed Funds posted or
provided by it); (y) the
Participating Defendant shall
be entitled to withdraw the
entire balance of the Total
Contribution.
(iv) The Total Contribution or greater The Total Contribution shall
be payable in its entirety
into the registry of the
Court (or a restricted bank
escrow designated by Class
Counsel) to be maintained for
the benefit of the Class.
(b) The Class, and not any Participating Defendant, shall be
responsible for and shall pay (either directly or by reimbursement of the
Participating Defendant in question) all Taxes owed on any interest or other
investment income earned after Completion of Review on any portion of the
Total Contribution that is required to be paid into the registry of the Court
(or a restricted bank escrow designated by Class Counsel) pursuant
11
to paragraph 12(a)(i)-(iv) upon such Completion of Review. The Class shall
promptly reimburse each Participating Defendant for any such Taxes that such
Participating Defendant is required to pay. The amount of such Taxes and such
reimbursement shall be determined for each taxable period and shall be equal
to (x) the amount of such interest or other investment income earned during
the period in question times (y) the Tax Rate.
(c) Nothing in this paragraph 12, this Stipulation or the Escrow
Agreements shall be argued, deemed or construed: (i) to constitute an
acknowledgment or concession by a Participating Defendant of the propriety of
certification of the Class, of the trial plan employed by the Court, of any
award of lump-sum punitive damages or of the propriety of entry of judgment
thereon; (ii) to be any form of waiver or compromise of or limit upon, or in
any way to undermine or impair, the Participating Defendants' position that
such certification, such trial plan and any award of lump-sum punitive damages
and entry of judgment thereon are improper, invalid and/or unconstitutional;
or (iii) to be any form of waiver or compromise of or limit upon, or in any
way to undermine or impair, the Participating Defendants' rights to review of
the Judgment or any of their respective positions in any such review.
(d) Where funds are payable pursuant to paragraph 12(a) into the
registry of the Court or a restricted bank escrow designated by Class Counsel,
Class Counsel shall elect whether such funds are to be paid into the registry
of the Court or a restricted bank escrow.
12
13. (a) If the Judgment against a Participating Defendant is
Reversed or is reduced as described in any of paragraphs 12(a)(i)-(iii), and
either (i) the Judgment is subsequently re-entered, renewed or otherwise
reinstituted ("Renewed Judgment") against such Participating Defendant, or
(ii) a new, modified or substitute judgment ("New Judgment") is entered that
is predicated upon the jury verdict of July 14, 2000 (rather than on a new
trial and jury verdict as to punitive damages) and that contains a punitive
damages award against such Participating Defendant in favor of the Class
(whether as presently defined or as that definition may be modified in the
future), such Participating Defendant shall (at its election) have the right
to a stay of such Renewed Judgment or New Judgment upon terms substantively
identical to those set forth in paragraphs 6-11, 13 and 15-28 of this
Stipulation.
(b) In the case of Philip Morris, in order to exercise the right
set forth in paragraph 13(a): (i) if Philip Morris previously withdrew any of
the $1.2 billion Participating Defendant Escrowed Funds pursuant to paragraph
12(a)(i), (ii) or (iii), it must re-deposit into escrow for the benefit of the
Class an amount equal to the amount of the total Participating Defendant
Escrowed Funds that it withdrew, and if Philip Morris withdrew its Existing
Bond pursuant to any of those clauses, it must either re-post such bond or
deposit the amount of such bond into escrow for the benefit of the Class (such
re-deposited escrow funds, re-posted bond and/or bond amount deposited into
escrow collectively being the "Re-deposited Escrowed Funds"); except that (ii)
if the amount of the Renewed Judgment or New Judgment is less than the amount
of the Re-deposited Escrowed Funds that would be required under clause (i),
Philip Morris may exercise such
13
right by depositing or posting Re-deposited Escrowed Funds equal to the amount
of such Renewed Judgment or New Judgment. Nothing in this paragraph shall be
construed as meaning that Philip Morris, in order to exercise the right set
forth in paragraph 13(a), must deposit or re-deposit into escrow any Escrowed
Funds that it did not withdraw, post or re-post any bond that it did not
withdraw, or provide any new or additional Guaranteed Sums.
(c) Re-deposited Escrowed Funds, if any, shall be treated for
purposes of interest or other investment income as Participating Defendant
Escrowed Funds, and no part of any Re-deposited Escrowed Funds shall
constitute Guaranteed Sums. Upon Completion of Review of a Renewed Judgment or
New Judgment against Philip Morris (as the definition of the term "Completion
of Review" is modified to the sole extent of making it applicable to the
Renewed Judgment or New Judgment instead of to the Judgment): if such Renewed
Judgment or New Judgment is Reversed, Philip Morris shall be entitled to
withdraw all of the Re-deposited Escrowed Funds; and if such Renewed Judgment
or New Judgment against Philip Morris is reduced to, or is required to be paid
in, an amount that, after including any statutory interest owed on the
remaining portion, is less than the amount of the Re-deposited Escrowed Funds,
Philip Morris shall be entitled to withdraw the excess of the Re-deposited
Escrowed Funds.
14. The Guaranteed Sum provided by a Participating Defendant (and
any other portion of the Total Contribution that is required to be paid into
the registry of the Court or a restricted bank escrow designated by Class
Counsel pursuant to paragraph 12(a)(i)-(iv) upon Completion of Review) shall
constitute a dollar-for-dollar credit against, and
14
shall not be construed to be a payment obligation in addition to, payment of
the punitive damages component of the Judgment against such Participating
Defendant in the event such component of such Judgment (or any portion
thereof) is affirmed or required to be paid.
15. Prior to the Completion of Review, each Participating Defendant
that is required to provide Escrowed Funds:
(a) shall maintain a balance sheet net worth no lower than the
net worth it presented to the jury in Phase II-B of the trial, meaning:
Philip Morris -- $6,411,000,000; Lorillard -- $921,205,000; Liggett --
$33,781,000. To ensure its compliance with paragraphs 15(a) and (b) (as
determined in accordance with United States generally accepted accounting
principles in effect as of July 14, 2000 and as applied on such date by the
Participating Defendant in question), each such Participating Defendant shall,
at its sole expense, cause a nationally recognized accounting firm (or firms)
to issue reports confirming such compliance to Class Counsel quarterly on the
basis of non-audited financial statements (no later than the latest date on
which such Participating Defendant and/or its parent or other affiliated
companies file reports for the corresponding quarter on Form 10-Q with the
Securities and Exchange Commission ("SEC")) and annually on the basis of
audited financial statements (no later than the latest date on which such
Participating Defendant and/or its parent or other affiliated companies file a
report for the corresponding year on Form 10-K with the SEC). In employing a
balance sheet formula for the purposes of this Stipulation, the Class in no
way agrees to the accuracy of the foregoing balance sheet net worth figures
and in no way waives or compromises its
15
position for all purposes (including for purposes of review of the Judgment)
that a balance sheet measure of net worth does not fully or accurately reflect
the financial condition and value of the Participating Defendants, and each
Participating Defendant (while fully reserving its position contrary to that
held by the Class) agrees that it will not argue that this Stipulation effects
any such waiver or compromise; and
(b) shall not, without the written consent of Class Counsel or
the approval of the Court: (i) sell or otherwise transfer title to, in one
transaction or series of related transactions, any trademark of or flavor and
blend formula comprising a cigarette brand having a market share of 0.5% or
more of the total number of cigarettes sold in the United States during the
preceding calendar year; or (ii) with respect to cigarettes upon which federal
excise tax is collected, license to anyone else the right to manufacture or
sell a cigarette brand having such a market share (other than a license to a
third party to permit that party to manufacture cigarettes to be sold by the
Participating Defendant that gave the license).
16. Until the Completion of Review: (a) the Judgment against each
Participating Defendant and all execution or enforcement of each such Judgment
is stayed; (b) the Class (and each member thereof) agrees that any award or
judgment of punitive damages to an individual member or members of the Class
against any Participating Defendant that depends in whole or in part upon the
punitive damages findings or award giving rise to the Judgment (each such
award or judgment, a "Derivative Judgment"), and all execution or enforcement
of any such Derivative Judgment, is stayed; and (c) the Class (and each member
thereof) is barred and prohibited
16
from seeking to collect, execute on or enforce any such Judgment or Derivative
Judgment in any way or to take any other action with respect to any such
Judgment or Derivative Judgment, including, but not limited to: by hereafter
recording the Judgment or Derivative Judgment (including a certified copy
thereof); by seeking to obtain or perfect any liens on property; by seeking
the appointment of a conservator or receiver or other similar relief; or by
seeking, on the basis of any contention that in any way arises from or relates
to the Judgment or Derivative Judgment or any of the claims that have been or
could have been advanced in this action, any determination or declaration with
respect to any Participating Defendant (other than proceedings to enforce this
Stipulation) or any past or present parent, sister or other affiliated
companies, persons or entities of any Participating Defendant, or any
restrictions or encumbrances upon, injunctions against or other interference
with such parents', sisters' or other affiliates' business, operations or
sales, transfers of title or other dispositions or transfers of assets, or
other transactions (whether undertaken or proposed to be undertaken). Such
parents, sisters or other affiliates are intended beneficiaries of this
paragraph. This paragraph shall not apply with respect to any Participating
Defendant that either files for relief under the Bankruptcy Code or becomes
the debtor in a bankruptcy case in which the order for relief has become
final.
17. Until the Completion of Review, neither the Class nor any
member thereof shall:
(a) seek, on the basis of any contention that in any way arises
from or relates to the Judgment or Derivative Judgment or any of the claims
that have been or could have
17
been advanced in this action, any restrictions or encumbrances upon,
injunctions against or other interference with any business, operation or
sale, transfer of title or other disposition or transfer of assets, or other
transaction undertaken or proposed to be undertaken by the Participating
Defendant in question, or its past or present parent, sister or other
affiliated companies, persons or entities, that is not barred by paragraph
15(b). Such parents, sisters or other affiliates are intended beneficiaries of
this paragraph 17(a)-(b). This paragraph 17(a) shall not apply with respect to
any Participating Defendant that either files for relief under the Bankruptcy
Code or becomes the debtor in a bankruptcy case in which the order for relief
has become final; or
(b) seek from the Participating Defendant in question or any of
its past or present parent, sister or other affiliated companies, persons or
entities (including, but not limited to, under the provisions of Fla. Stat.
Section 768.733(3) or otherwise) any increase in or supplement to the Existing
Bond or other security beyond that provided for in this Stipulation, any
determination that the security provided by such Participating Defendant
pursuant to this Stipulation is inadequate, or any elimination of or limit on
the stay of execution of the Judgment or Derivative Judgment against such
Participating Defendant (including all restrictions on collection, execution
and enforcement described in paragraph 16), including on the ground of any
business, operation or sale, transfer of title or other disposition of assets,
or other transaction undertaken or proposed to be undertaken by any defendant
in this action or any of its past or present parent, sister or other
affiliated companies, persons or entities (other than as prohibited by this
Stipulation).
18
18. Neither the Class nor any member thereof shall object to or
challenge the existing stay of execution of the punitive damages components of
the Judgment with respect to any Participating Defendant that exists by virtue
of Fla. Stat. (S) 768.733 (including, but not limited to, challenging the
constitutionality or applicability of that statute (or any of its provisions)
as it applies to any Participating Defendant). This Stipulation and the Escrow
Agreements shall remain in effect without regard to any development with
respect to Fla. Stat. (S) 768.733 (including, but not limited to, any repeal,
invalidation or interpretation of, or amendment to, such statute, or the
outcome of any challenge to such statute with respect to any other party) in
this or any other litigation or forum.
19. The Class shall hereafter not agree with any defendant to a
stay of execution of the judgment in this action (as heretofore and
hereinafter amended) against that defendant or to refrain from challenging or
objecting to the stay of execution of such judgment (or portion thereof) that
exists by virtue of Fla. Stat. Section 768.733 where that agreement contains
any term more favorable to such defendant than any of the terms provided by
this Stipulation to any Participating Defendant without adjusting this
Stipulation (and, if applicable, the Escrow Agreements) so that each
Participating Defendant will receive the benefit of such more favorable terms.
With respect to the Guaranteed Sum, such an agreement shall be deemed to
contain a term more favorable to a defendant than the terms provided by this
Stipulation to each of the Participating Defendants if it provides for payment
of a Guaranteed Sum by such defendant that is lower in amount than a
Guaranteed Sum from such defendant that would be strictly
19
proportionate to the Guaranteed Sum being provided by Lorillard pursuant to
this Stipulation, based on the size of the punitive damages award against such
defendant pursuant to paragraph 12 of the judgment in this action entered on
November 3, 2000 (as heretofore and hereinafter amended) relative to the size
of the punitive damages award against Lorillard pursuant to such paragraph. In
the event this Stipulation is adjusted pursuant to this paragraph, all other
provisions of this Stipulation shall remain in full force and effect. Each
Participating Defendant may, at its sole election, waive the provisions of
this paragraph insofar as this paragraph would provide for an adjustment of
this Stipulation in its own favor. Nothing in this paragraph shall obligate
the Class to challenge the stay of execution of the judgment (or portion
thereof) against any non-participating defendant that exists by virtue of Fla.
Stat. Section 768.733; in the absence of an agreement on the part of the Class
as described in the first sentence of this paragraph, any election by the
Class not to undertake such a challenge shall not create any right to
adjustment of this Stipulation under this paragraph in favor of any
Participating Defendant.
20. Notwithstanding anything else in this Stipulation, this
Stipulation and the Escrow Agreements shall not be argued, deemed or
construed: (a) to be an admission or evidence of any violation of any statute
or law or of any liability or wrongdoing by any defendant, of the truth of any
of the claims or allegations in this action or otherwise, or of the legality,
validity, propriety or constitutionality of the Judgment (including the
propriety of its having been entered at this stage of the action); (b) to be
an admission or evidence regarding the constitutionality, validity,
applicability, interpretation or operation
20
of Fla. Stat. Section 768.733 or the duration of the stay provided for by that
statute; (c) to be any form of waiver or compromise of or limit upon, or in
any way to undermine or impair, any of the Class's or the Participating
Defendants' rights to review of the Judgment or any of their respective
positions in any such review, including, but not limited to, (i) the Class's
rights to object to or contest on any grounds the exercise of jurisdiction
over and review of some or all issues by the Florida Third District Court of
Appeal, the Florida Supreme Court or the United States Supreme Court, and (ii)
Participating Defendants' position that the certification of the Class, the
trial plan employed by the Court and any award of lump-sum punitive damages
are improper, invalid and/or unconstitutional; (d) to be any form of waiver of
the Class's right, if any, to challenge, after Completion of Review, any
business operation or sale, transfer of title or other disposition of assets,
or other transaction undertaken prior to that time; or (e) to be or constitute
a settlement or compromise of any claim or judgment (including any claim or
judgment as to punitive damages or any other claim or judgment in this action)
against any Participating Defendant. Nothing in this paragraph shall limit the
provisions of paragraph 11.
21. If any unstayed court ruling either (a) eliminates or limits
the stay of execution of the Judgment, or portion thereof, against a
Participating Defendant provided for in paragraph 16(a); or (b) would permit
the Class or any member of the Class to take any action (or if the Class or
any member of the Class has taken any such action) that the Class is barred
from taking under paragraphs 16 or 17 hereof, then this Stipulation shall be
cancelable and terminable at the option of each individual Participating
Defendant; provided, however, (i) that an attempt by a member of the Class to
obtain leave of court
21
to take any such action that is unsuccessful because such court rules that
such member of the Class is bound by this Stipulation or otherwise declines to
afford such member of the Class leave to seek to take such action shall not in
and of itself permit the exercise of the foregoing option, (ii) that the
exercise of the foregoing option by one Participating Defendant shall not
operate to cancel or terminate this Stipulation as to any other Participating
Defendant that determines not to exercise such option, (iii) that the
foregoing option shall not be available to a Participating Defendant that has
voluntarily filed for relief under the Bankruptcy Code unless such voluntary
filing was occasioned by any action taken by the Class or any member of the
Class that would give rise to such option under this paragraph, and (iv) that
no court ruling or action by a member of the Class arising from a Derivative
Judgment, as opposed to the Judgment, shall give rise to an option under this
paragraph to terminate or cancel this Stipulation (although such action
remains subject to the remedies set forth in paragraphs 24-26). If this
Stipulation is canceled and terminated with respect to a Participating
Defendant pursuant to this paragraph: it and the Escrow Agreements shall be
null and void as to such Participating Defendant; the Class and such
Participating Defendant shall be restored to their original positions,
including that the Class shall return the Class Escrowed Funds paid by such
Participating Defendant and that such Participating Defendant shall have the
right to withdraw the Existing Bond and all Participating Defendant Escrowed
Funds it had posted or provided; and the Class and such Participating
Defendant shall have no obligations under the Escrow Agreements or this
Stipulation (including that such Participating Defendant shall not be
obligated to pay the Guaranteed Sum) except as to
22
the provisions of paragraph 20 and the Class's obligation to return the Class
Escrowed Funds paid by such Participating Defendant.
22. The Class and each Participating Defendant will jointly submit
this Stipulation for approval by the Court. The Class and each Participating
Defendant will oppose: any claim that the Court's approval of this
Stipulation and the Escrow Agreements should be modified or set aside or that
this Stipulation should be otherwise invalidated or declared unlawful; any
claim that any member of the Class is not bound by or subject to this
Stipulation or the Escrow Agreements; and any attempt by any member of the
Class to take any action that the Class may not take under this Stipulation or
the Escrow Agreements.
23. The obligations of the Participating Defendants under this
Stipulation and the Escrow Agreements shall be several, not joint; a breach by
any Participating Defendant of any provision of this Stipulation or the Escrow
Agreements, including but not limited to the failure of any Participating
Defendant to maintain the Existing Bond or to provide Escrowed Funds as
required by this Stipulation, shall constitute a breach only by that
Participating Defendant and shall not be deemed a breach by any other
Participating Defendant. Except as provided in paragraph 19, nothing in this
Stipulation shall be applicable to any defendant herein that is not a
Participating Defendant.
24. The Participating Defendants shall give notice to Class Counsel
of any alleged breach of this Stipulation or either of the Escrow Agreements
by any member of the Class or Class Counsel. Class Counsel, on behalf of the
Class, shall give notice of
23
any alleged breach of this Stipulation or either of the Escrow Agreements by
any Participating Defendant to the General Counsel of each Participating
Defendant (and, if a Participating Defendant so desires, to a single outside
counsel designated and identified to Class Counsel by such Participating
Defendant). The party committing the alleged breach shall, upon receiving such
notice, be given an opportunity to cure (including, but not limited to, an
alleged breach by a Participating Defendant of paragraph 15(a)). If that party
fails to cure within a reasonable period of time, the Participating Defendants
or the Class (as the case may be) may bring a proceeding in the Court for
breach of this Stipulation. This Stipulation and the Escrow Agreements have
been negotiated by the Class through Class Counsel, and by the Participating
Defendants through Wachtell, Lipton, Rosen & Katz, counsel for Philip Morris
Inc and Lorillard (together with Class Counsel, "negotiating counsel"). Prior
to bringing a proceeding in the Court regarding any dispute between a
Participating Defendant and Class Counsel on the interpretation or enforcement
of this Stipulation or the Escrow Agreements, the moving party (through its
counsel) shall attempt to resolve the matter without a hearing and shall
certify in the motion or notice of hearing that he or she made a good faith
attempt to contact negotiating counsel and take their thoughts into
consideration, and made a good faith attempt to resolve the dispute without a
hearing, but that the matter could not be resolved. Prior to exercising a
right to cancel and terminate this Stipulation pursuant to paragraph 21, a
Participating Defendant shall make a good faith attempt to contact negotiating
counsel and take their thoughts into consideration. The Participating
Defendants and the Class further agree that they will cooperate on a
reasonable basis to attempt to make negotiating counsel available to provide
requested evidence in connection with any such
24
proceeding regarding such a dispute; provided, however, that no waiver of
attorney-client privilege or work product privilege shall be effected by this
Stipulation or shall be sought or required in connection with any such
testimony. Negotiating counsel shall be deemed to be the draftspersons of this
Stipulation and the Escrow Agreements; no party shall be deemed to be the
drafter of any particular provision or provisions of this Stipulation or the
Escrow Agreements; and no part of the Stipulation or the Escrow Agreements
shall be construed against any party on the basis of its identity as the
drafter of any part of the Stipulation.
25. A breach of this Stipulation or either of the Escrow Agreements
shall subject the breaching party (whether it be a Participating Defendant,
the Class or any member thereof) to court-ordered injunction and/or specific
performance; provided, however, that in the case of an uncured breach by a
Participating Defendant of paragraph 15(a): the sole remedy shall be to
relieve the Class from the stays and restrictions provided for in paragraphs
16 and 17 as to such Participating Defendant; the Existing Bond and Escrowed
Funds posted or provided by such Participating Defendant shall continue to be
payable or subject to return and/or withdrawal as provided by paragraph 12 and
the remaining terms of this Stipulation; and there shall be no effect on the
stay imposed by Fla. Stat. Section 768.733 or on the Class's and such
Participating Defendant's rights and obligations under this Stipulation with
respect to that statute (except for those set forth in paragraphs 16 or 17).
26. The Participating Defendants and the Class agree that the Court
has exclusive subject-matter jurisdiction over disputes arising out of this
Stipulation and that
25
the Stipulation is to be interpreted, construed, enforced and administered in
accordance with the internal substantive laws (and not the choice of law
rules) of the State of Florida. Solely for purposes of such proceedings, the
Participating Defendants and the Class waive any claim or objection that they
are not subject to the jurisdiction of the Court or that the Court is an
improper venue or an inconvenient forum. The Court reserves jurisdiction over
the allocation of all funds payable into the registry of the Court (or a
restricted bank escrow designated by Class Counsel) pursuant to this
Stipulation, and will direct that notice be provided to the Class and will
conduct a hearing prior to ordering any such allocation. The Court further
reserves jurisdiction to award attorney's fees and costs to Class Counsel out
of such funds (whether such funds were payable into the registry of the Court
(or a restricted bank escrow designated by Class Counsel) pursuant to
paragraphs 12(a)(i), (ii), (iii) or (iv)).
27. This Stipulation is subject to being approved and adopted by
the Court as constituting an enforceable order of the courts of the State of
Florida, and to each of the forms of Escrow Agreement being approved by the
Court, and will become effective upon such approval and adoption. In the event
that such approval is not forthcoming or is set aside, or if this Stipulation
or the Escrow Agreements is otherwise invalidated or declared unlawful in
whole, this Stipulation shall be canceled and terminated as to all parties. If
this Stipulation (or the Court's approval of it and the forms of Escrow
Agreements) is modified, or if this Stipulation or either of the Escrow
Agreements is invalidated or declared unlawful in part, this Stipulation shall
be cancelable and terminable at the option of any party adversely affected by
the modification, invalidation
26
or declaration; provided, however, (a) that the exercise of the foregoing
option by one Participating Defendant shall not operate to cancel or terminate
this Stipulation as to any other Participating Defendant that does not possess
or determines not to exercise such option, and (b) that the foregoing option
shall not be available to a Participating Defendant that has voluntarily filed
for relief under the Bankruptcy Code unless such voluntary filing was
occasioned by any action taken by the Class or any member of the Class that
would give rise to an option to cancel and terminate this Stipulation under
paragraph 21. With respect to each Participating Defendant as to which this
Stipulation is canceled and terminated pursuant to this paragraph: this
Stipulation and the Escrow Agreements shall be null and void as to each such
Participating Defendant; the Class and each such Participating Defendant shall
be restored to their original positions, including that the Class shall return
the Class Escrowed Funds paid by each such Participating Defendant and that
each such Participating Defendant shall have the right to withdraw the
Existing Bond and all Participating Defendant Escrowed Funds it had posted or
provided; and the Class and each such Participating Defendant shall have no
obligations under the Escrow Agreements or this Stipulation (including that
each such Participating Defendant shall not be obligated to pay the Guaranteed
Sum) except as to the provisions of paragraph 20 and the Class's obligation to
return the Class Escrowed Funds paid by each such Participating Defendant.
28. The escrow agent with respect to each of the Escrow Agreements
shall be selected by the Participating Defendants from among the following
institutions: Bank of New York; Citibank, N.A.; The Chase Manhattan Bank;
Credit Suisse First Boston; and
27
Deutsche Bank Bankers Trust; provided, however, that if the First Escrow
Agreement has not been executed within 14 days after the Court's approval of
this Stipulation and the forms of Escrow Agreements, Class Counsel shall be
entitled to cause the parties to engage in negotiations with another
institution of Class Counsel's choice from among those listed above. Each
Escrow Agreement shall provide that it is to be interpreted, construed,
enforced and administered in accordance with the internal substantive laws
(and not the choice of law rules) of the State of Florida and that the Court
shall have exclusive subject- matter jurisdiction over disputes arising out of
such Escrow Agreement. If none of the institutions listed above agrees to
serve as escrow agent on terms acceptable to the parties, then the
Participating Defendants shall select another banking or trust institution to
serve as escrow agent that will agree to such terms. The identity of such
other banking or trust institution shall be subject to the consent of Class
Counsel, which consent shall not be unreasonably withheld.
FOR THE CLASS
/s/ Stanley M. Rosenblatt
-----------------------
Stanley M. Rosenblatt
Class Counsel
/s/ Susan Rosenblatt
-----------------------
Susan Rosenblatt
Class Counsel
Stanley M. Rosenblatt, P.A.
12th Floor - Concord Building
66 West Flagler Street
Miami, FL 33130
(305) 374-6131
28
FOR PHILIP MORRIS INCORPORATED
/s/ Kenneth J. Reilly
-----------------------
Kenneth J. Reilly
Shook, Hardy & Bacon
Miami Center, Suite 2400
201 S. Biscayne Boulevard
Miami, FL 33131-4332
(305) 358-5171
FOR LORILLARD TOBACCO CO. and
LORILLARD, INC.
/s/ Kenneth J. Reilly
-----------------------
Kenneth J. Reilly
Shook, Hardy & Bacon
Miami Center, Suite 2400
201 S. Biscayne Boulevard
Miami, FL 33131-4332
(305) 358-5171
FOR LIGGETT GROUP, INC. and
BROOKE GROUP HOLDING INC.
/s/ Marc Kasowitz
-----------------------
Marc Kasowitz
Kasowitz, Benson, Torres &
Friedman
1633 Broadway, 22nd Floor
New York, NY 10019
(212) 506-1700
29
May 7, 2001
The Court, having reviewed the Stipulation and Agreed Order Regarding Stay of
Execution Pending Review and Related Matters and each of the forms of Escrow
Agreement, approves the Stipulation and adopts it as the Order of this Court
and approves the forms of Escrow Agreements.
Done and Ordered in Chambers, Miami, Dade County, Florida, this 7th day of
May, 2001. ---
/s/ Gerald D. Hubbart
-----------------------
Circuit Court Judge
Copies furnished to: All counsel of record
30