EXHIBIT 10.6
STATE ESCROW AGREEMENT
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This escrow agreement (the "State Escrow Agreement") is entered into as
of May 8, 1998, by and among Xxxxxx Xxxxxx Incorporated, X.X. Xxxxxxxx Tobacco
Company, Xxxxx & Xxxxxxxxxx Tobacco Corporation and Lorillard Tobacco Company
(collectively, the "Settling Defendants" and each individually a "Settling
Defendant"), the State of Minnesota and [NAME OF ESCROW AGENT], as Escrow Agent
(the "State Escrow Agent").
WITNESSETH:
WHEREAS, counsel for the State of Minnesota and Settling Defendants
entered into a settlement agreement and release as of May 8, 1998 (the
"Settlement Agreement"), which settlement agreement set forth the terms and
conditions of an agreement to settle and resolve with finality all present and
future claims relating to the subject matter of the litigation entitled State of
Minnesota v. Xxxxxx Xxxxxx Incorporated, No. C1-94-8565, (filed August 17, 1994)
(the "Action"), in the District Court of the State of Minnesota, County of
Xxxxxx, Second Judicial District (the "Court");
WHEREAS, paragraph II.B. of the Settlement Agreement and Schedule A
thereto provide that, on the dates specified therein, each Settling Defendant
shall pay, severally and not jointly, its respective share of the aggregate
amounts payable by the Settling Defendants pursuant to the terms of that
paragraph, with each Settling Defendant's respective share to be determined
according to the terms thereof;
WHEREAS, paragraph II.D. of the Settlement Agreement provides that, on
December 31, 1998, and on December 31 of each year annually thereafter, each
Settling Defendant shall pay, severally and not jointly, its respective share of
the aggregate annual amount payable by the Settling Defendants pursuant to the
terms of that paragraph, with each Settling Defendant's respective share to be
determined according to the terms thereof;
WHEREAS, paragraph V.B. of the Settlement Agreement further provides
that, in the event of a challenge to the Court's Final Approval of the
Settlement Agreement, any payments due to be paid by Settling Defendants
pursuant to paragraph II.D. of the Settlement Agreement shall be paid into a
special escrow account (the "State Escrow Account"), to be held in escrow
pending resolution of such challenge as set forth in paragraph V.B. and of the
Settlement Agreement;
WHEREAS, paragraph V.B. of the Settlement Agreement further provides
that, in the event of a challenge to the Court's Final Approval of the
Settlement Agreement prior to December 31, 1998, any payments due to be paid by
Settling Defendants pursuant to paragraph II.B. of the Settlement Agreement
shall be paid into the State Escrow Account, to be held in escrow pending
resolution of such challenge as set forth in paragraph V.B. of the Settlement
Agreement;
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NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Appointment of State Escrow Agent.
Settling Defendants and the State of Minnesota hereby appoint the State
Escrow Agent to act as escrow agent on the terms and conditions set forth
herein, and the State Escrow Agent hereby accepts such appointment on such terms
and conditions.
SECTION 2. Deposit.
Any payment pursuant to paragraph II.D. of the Settlement Agreement
that is due to be paid by Settling Defendants before resolution of any challenge
to Final Approval as set forth in paragraph V.B. of the Settlement Agreement,
and any payment pursuant to paragraph II.B. of the Settlement Agreement that is
due to be paid by Settling Defendants before resolution of any challenge to
Final Approval initiated prior to December 31, 1998 as set forth in paragraph
V.B. of the Settlement Agreement shall be delivered to the State Escrow Agent
and shall be deposited into the State Escrow Account (all payments deposited
into the State Escrow Account, together with any interest or other income on
investment with respect to such payments, being herein called the "State Escrow
Amount") and shall be governed by the terms of this State Escrow Agreement. All
such deliveries of funds are subject to the right of the Settling Defendants to
obtain, pursuant to section 4(a) of this State Escrow Agreement, prompt return
of the entire State Escrow Amount (less appropriate deductions for
administrative fees and expenses, including taxes and other related costs) in
the event that the Settlement Agreement is canceled and terminated pursuant to a
court order. The State Escrow Amount shall be maintained, invested and disbursed
by the State Escrow Agent strictly in accordance with this State Escrow
Agreement.
SECTION 3. Investment of State Escrow Amount.
The State Escrow Agent shall invest and reinvest the State Escrow
Amount in either (i) direct obligations of, or obligations the principal and
interest on which are unconditionally guaranteed by, the United States of
America (including government-sponsored agencies) or the State of Minnesota;
(ii) repurchase agreements fully collateralized by securities of the kind
specified in clause (i) above; (iii) money market accounts maturing within 30
days of the acquisition thereof and issued by a bank or trust company organized
under the laws of the United States of America or a State thereof (a "United
States Bank") and having a combined capital surplus in excess of $250,000,000;
or (iv) demand deposits with any United States Bank or any federal savings and
loan institution having a combined capital surplus in excess of $250,000,000.
Any loss on any such investment, including, without limitation, any penalty for
any liquidation required to fund a disbursement, shall be borne pro rata by the
parties in proportion to their ultimate entitlement to the State Escrow Amount.
The State Escrow Agent's fees and all expenses, including taxes and other
related costs, shall, to the extent possible, be paid out of income earned.
Whenever the State Escrow Agent shall pay all or any part of the State Escrow
Amount to any party as provided herein, the State Escrow Agent shall also pay
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to such party all interest and profits earned to the date of payment on such
amount, less deductions for fees and all expenses, including taxes and other
related fees.
SECTION 4. Release of the State Escrow Amount.
After receipt, the State Escrow Agent shall deliver the State Escrow
Amount as set forth below:
a. In the event that the Settlement Agreement is canceled and
terminated pursuant to paragraph V.B. of the Settlement Agreement, and
upon receipt of a court order so directing, the State Escrow Agent
shall disburse the entire State Escrow Amount (including any interest
thereon, as provided in Section 3) to the Settling Defendants on the
same pro rata basis as the Settling Defendants' contributions to the
State Escrow Account.
b. Upon receipt of written notice signed by counsel for the
Settling Defendants and counsel for the State of Minnesota notifying
the State Escrow Agent that all challenges to Final Approval have been
resolved as provided in paragraph V.B. of the Settlement Agreement and
that all escrow funds may be released, the State Escrow Agent shall
proceed to distribute the State Escrow Amount to an account designated
in writing by the State of Minnesota.
c. For its services, the State Escrow Agent shall receive fees
in accordance with the State Escrow Agent's customary fees in similar
matters. All such fees shall constitute a direct charge against the
State Escrow Amount, but the State Escrow Agent shall not debit the
State Escrow Amount for any such charge until it shall have presented
its statement to and received approval by counsel for the Settling
Defendants and counsel for the State of Minnesota, which approval shall
not be unreasonably withheld. Such approval shall be deemed given if
the State Escrow Agent has not received written objections from either
counsel for Settling Defendants or counsel for the State of Minnesota
within 30 days after presentment of its statement. Such fees and all
expenses charged against the State Escrow Amount shall, to the extent
possible, be paid out of interest earned. In the event that counsel for
the Settling Defendants or counsel for the State of Minnesota objects
in writing to such fees, the State Escrow Agent shall not debit the
State Escrow Amount except upon a court order approving such fees.
SECTION 5. Substitute Form W-9; Qualified Settlement Fund.
Each of the signatories to this State Escrow Agreement shall provide
the State Escrow Agent with a correct taxpayer identification number on a
substitute Form W-9 within 90 days of the date hereof and indicate thereon that
it is not subject to backup withholding. It is anticipated that the State Escrow
Account established pursuant to this State Escrow Agreement shall be treated as
a Qualified Settlement Fund for federal tax purposes pursuant to Treas. Reg. ss.
1.468X-x.
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SECTION 6. Termination of State Escrow Account.
This State Escrow Agreement (other than the State Escrow Agent's right
to indemnification set forth in Section 7) shall terminate when the State Escrow
Agent shall have released from the State Escrow Account all amounts pursuant to
Section 4 hereof.
SECTION 7. State Escrow Agent.
a. The State Escrow Agent shall have no duty or obligation
hereunder other than to take such specific actions as are required of
it from time to time under the provisions hereof, and it shall incur no
liability hereunder or in connection herewith for anything whatsoever
other than as a result of its own negligence or willful misconduct. In
the event the State Escrow Agent fails to receive the instructions
contemplated by Section 4 hereof or receives conflicting instructions,
the State Escrow Agent shall be fully protected in refraining from
acting until such instructions are received or such conflict is
resolved by written agreement or court order.
b. Settling Defendants, on the same pro rata basis as the funds
constituting the State Escrow Amount were contributed to the State
Escrow Account, agree to indemnify, hold harmless and defend the State
Escrow Agent from and against any and all losses, claims, liabilities
and reasonable expenses, including the reasonable fees of its counsel,
which it may suffer or incur hereunder or in connection herewith prior
to the date of the termination of this Escrow Agreement as provided in
Section 6 hereof, except such as shall result solely and directly from
its own negligence or willful misconduct. The State Escrow Agent shall
not be bound in any way by any agreement or contract between Settling
Defendants and the State of Minnesota (whether or not the State Escrow
Agent has knowledge thereof) other than this State Escrow Agreement,
and the only duties and responsibilities of the State Escrow Agent
shall be to hold and invest the State Escrow Amount received hereunder
and to release such State Escrow Amount in accordance with the terms of
this State Escrow Agreement.
c. The State Escrow Agent may resign at any time by giving
written notice thereof to the other parties hereto, but such
resignation shall not become effective until a successor escrow agent,
selected by the Settling Defendants and agreeable to the State of
Minnesota, shall have been appointed and shall have accepted such
appointment in writing. If an instrument of acceptance by a successor
escrow agent shall not have been delivered to the State Escrow Agent
within 30 days after the giving of such notice of resignation, the
resigning State Escrow Agent may, at the expense of the Settling
Defendants and the State of Minnesota (to be shared equally between the
Settling Defendants and the State of Minnesota), petition the Court for
the appointment of a successor escrow agent.
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d. Upon resolution of any challenge to Final Approval as
provided in paragraph V.B. of the Settlement Agreement, provided that
Settling Defendants have performed all of their obligations required to
be performed hereunder prior to such date, all duties and obligations
of Settling Defendants hereunder shall cease, with the exception of any
indemnification obligation of Settling Defendants incurred prior to the
date of the termination of this Escrow Agreement.
SECTION 8. Miscellaneous.
a. Notices. All notices or other communications to any party or
other person hereunder shall be in writing (which shall include telex,
telecopy or similar writing) and shall be given to the respective
parties or persons at the following addresses. Any party or person may
change the name and address of the person designated to receive notice
on behalf of such party or person by notice given as provided in this
paragraph.
State of Minnesota:
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Xxxxxx X. Xxxxxxxx, III
Attorney General
000 Xxxxx Xxxxxxx
Xx. Xxxx, XX 00000
Fax: 000.000.0000
Xxxxxxx X. Xxxxxx
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Fax: 000.000.0000
Chief Deputy Attorney General
State of Minnesota
000 Xxxxx Xxxxxxx
Xx. Xxxx, XX 00000
Fax: 612.297-4193
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Settling Defendants:
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For Xxxxxx Xxxxxx Incorporated:
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Xxxxxx X. Xxxxxxxxxx
Xxxxxx Xxxxxx Incorporated
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax: 000.000.0000
With a copy to:
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Xxxxx X. Xxxxxx
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000.000.0000
For X.X. Xxxxxxxx Tobacco Company:
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Xxxxxxx X. Xxxxx
General Counsel
X.X. Xxxxxxxx Tobacco Company
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Fax: 000.000.0000
With a copy to:
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Xxxxxx X. Xxxxxx
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000.000.0000
For Xxxxx & Xxxxxxxxxx Tobacco Corporation:
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Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxxxxx Tobacco Corporation
200 Xxxxx & Xxxxxxxxxx Tower
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000.000.0000
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With a copy to:
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F. Xxxxxxx Xxxxx
Xxxxx & Xxxxxxxxxx Tobacco Corporation
200 Xxxxx & Xxxxxxxxxx Tower
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000.000.0000
For Lorillard Tobacco Company:
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Xxxxxx X. Xxxxxxx
Lorillard Tobacco Company
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Fax: 000.000.0000
State Escrow Agent:
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[NAME OF BANK]
[ADDRESS]
Phone: [PHONE NUMBER]
Fax: [FAX NUMBER]
Wire Transfer Instructions
ABA: [NUMBER]
Account: [NUMBER]
b. Successors and Assigns. The provisions of this State Escrow
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
c. Governing Law. This State Escrow Agreement shall be construed
in accordance with and governed by the laws of the State of Minnesota,
without regard to the conflicts of law rules of such state.
d. Jurisdiction and Venue. The parties hereto irrevocably and
unconditionally submit to the jurisdiction of the Court for purposes of
any suit, action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this State Escrow Agreement, and the
parties hereto agree not to commence any such suit, action or
proceeding except in the Court. The parties hereto hereby irrevocably
and unconditionally waive any objection to the laying of venue of any
such suit, action or proceeding in the Court and hereby further
irrevocably waive and agree not to plead or claim in the Court that any
such suit, action or proceeding has been brought in an inconvenient
forum.
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e. Definitions. Terms used herein that are defined in the State
Settlement Agreement are, unless otherwise defined herein, used in this
State Escrow Agreement as defined in the State Settlement Agreement.
f. Amendments. This State Escrow Agreement may be amended only
by written instrument executed by all parties hereto. 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 State Escrow Agreement shall not be deemed to be or
construed as a waiver of any other breach, whether prior, subsequent or
contemporaneous, of this State Escrow Agreement.
g. Counterparts; Effectiveness. This State Escrow Agreement may
be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This State Escrow Agreement shall become
effective when each party hereto shall have signed a counterpart
hereof. Delivery by facsimile of a signed agreement shall be deemed
delivery for purposes of acknowledging acceptance hereof; however, an
original executed Agreement must promptly thereafter be delivered to
each party.
h. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction and
interpretation hereof.
IN WITNESS WHEREOF, the parties have executed this State Escrow
Agreement as of the day and year first hereinabove written.
STATE OF MINNESOTA
By:
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Name: Xxxxxx X. Xxxxxxxx III
Title: Attorney General
XXXXXX XXXXXX INCORPORATED
By:
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Name: Xxxxx X. Xxxxxx
Title: Counsel
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X.X. XXXXXXXX TOBACCO COMPANY
By:
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Name: D. Xxxxx Xxxx
Title: Counsel
XXXXX & XXXXXXXXXX TOBACCO CORPORATION
By:
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Name: Xxxxxxx X. Xxxxxx
Title: Counsel
LORILLARD TOBACCO COMPANY
By:
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Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President &
General Counsel
[NAME OF BANK],
as Escrow Agent
By:
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Name: [NAME]
Title: [TITLE]
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