Exhibit 10.3
MFN ESCROW AGREEMENT
This escrow agreement (the "MFN Escrow Agreement") is entered into as of
July 2, 1998 by and among Xxxxxx Xxxxxx Incorporated, X.X. Xxxxxxxx Tobacco
Company, Xxxxx & Xxxxxxxxxx Tobacco Corporation and Lorillard Tobacco Company
(collectively and severally, "Settling Defendants" and each individually a
"Settling Defendant"), the State of Mississippi and SouthTrust Bank, N.A., as
escrow agent (the "MFN Escrow Agent").
WITNESSETH:
WHEREAS, the State of Mississippi and Settling Defendants entered into a
comprehensive settlement agreement and release as of October 17, 1997 (the
"Settlement Agreement"), setting 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 In re Xxxx Xxxxx, Attorney
General, ex rel. State of Mississippi Tobacco Litig., Cause No. 94-1429 (Miss.
Ch. Ct., Xxxxxxx County) (the "Action"), in the Chancery Court of Xxxxxxx
County, Mississippi (the "Court");
WHEREAS, the State of Mississippi and Settling Defendants entered into a
Stipulation of Amendment to Settlement Agreement and for Entry of Agreed Order
(the "Stipulation of Amendment") on July 2, 1998, paragraph 17 of which provides
for Court approval of the Stipulation of Amendment;
WHEREAS, paragraph 5 of the Stipulation of Amendment provides that, on the
dates specified therein, each Settling Defendant shall severally pay to the
State of Mississippi, pro rata in proportion to its Market Share, its respective
share of the amounts indicated for each date;
WHEREAS, paragraph 17 of the Stipulation of Amendment further provides
that all payments described in the Stipulation of Amendment shall be paid into a
special escrow account (and if so paid shall remain in said escrow account)
until such time as (1) the time for appeal or to seek review of the Court's
order approving this Stipulation of Amendment has expired without the filing of
any notice of appeal or petition for review; or (2) in the event of any such
appeal or petition, the appeal or the petition has been dismissed or the Court's
order has been affirmed in all material respects by the court of last resort to
which such appeal or petition has been taken and such dismissal or affirmance
has become no longer subject to further appeal or review (the "Availability
Date"); and
WHEREAS, the parties hereto believe that at least one of the payments
described in the preceding paragraphs may be made prior to the Availability
Date:
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Appointment of MFN Escrow Agent.
Settling Defendants and the State of Mississippi hereby appoint the MFN
Escrow Agent to act as escrow agent on the terms and conditions set forth
herein, and the MFN Escrow Agent hereby accepts such appointment on such terms
and conditions.
SECTION 2. Deposit.
In the event that any payment pursuant to paragraph 5 of the Stipulation
of Amendment becomes due on a date prior to the Availability Date, each Settling
Defendant shall severally deliver to the MFN Escrow Agent in immediately
available funds such Settling Defendant's respective share of the payment in
question (the sum of such shares being the "Initial Deposit"). Upon receipt, the
MFN Escrow Agent shall deposit the Initial Deposit into a separate escrow
account established for such purpose and governed by the terms of this MFN
Escrow Agreement (the "MFN Escrow Account"). Any subsequent payment pursuant to
the Stipulation of Amendment that becomes due prior to the Availability Date
shall be delivered to the MFN Escrow Agent and added to the Initial Deposit (the
Initial Deposit and any subsequent payments deposited into the MFN Escrow
Account, including any payments of interest or other income on investment of the
MFN Escrow Amount or any portion thereof, being the "MFN Escrow Amount") and
shall be governed by the terms of this MFN Escrow Agreement. All such deliveries
of funds are subject to the right of Settling Defendants to obtain, pursuant to
section 4(a) of this MFN Escrow Agreement, prompt return of the entire MFN
Escrow Amount (less appropriate deductions for administrative fees and expenses,
including taxes and other related costs) in the event that the Stipulation of
Amendment is cancelled and terminated pursuant to paragraph 17 of the
Stipulation of Amendment. The MFN Escrow Amount shall be maintained, invested
and disbursed by the MFN Escrow Agent strictly in accordance with this MFN
Escrow Agreement.
SECTION 3. Investment of MFN Escrow Amount.
The MFN Escrow Agent shall invest and reinvest the MFN 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 Mississippi; (ii)
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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 MFN Escrow Amount. The MFN
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 MFN
Escrow Agent shall pay all or any part of the MFN Escrow Amount to any party as
provided herein, the MFN Escrow Agent shall also pay 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 MFN Escrow Amount.
After receipt, the MFN Escrow Agent shall deliver the MFN Escrow Amount as
set forth below:
(a) Following receipt of written notice signed by counsel for the
Settling Defendants certifying that such notice has been delivered by
counsel for the Settling Defendants to all parties hereto and stating that
the Stipulation of Amendment has not received court approval or has been
canceled, terminated or has otherwise become null and void for any reason,
the MFN Escrow Agent shall upon the expiration of ten (10) business days
following the MFN Escrow Agent's receipt of notice, and without an order
of the Court, disburse the entire MFN Escrow Amount (including any
interest thereon, as provided in Section 3) to the Settling Defendants on
the same pro rata basis as such funds were contributed to the MFN Escrow
Account.
(b) Upon receipt of written notice signed by counsel for the
Settling Defendants and counsel for the State of Mississippi stating that
the Availability Date has occurred, the MFN Escrow Agent shall proceed to
distribute the MFN Escrow Amount.
(c) For its services, the MFN Escrow Agent shall receive fees in
accordance with the MFN Escrow Agent's customary fees in similar matters.
All such fees shall constitute a direct charge against the MFN Escrow
Amount, but the MFN Escrow Agent shall not debit the MFN
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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 Mississippi, which approval shall not be
unreasonably withheld. Such approval shall be deemed given if the MFN
Escrow Agent has not received written objections from either counsel for
Settling Defendants or counsel for the State of Mississippi within 14 days
after presentment of its statement. Such fees and all expenses charged
against the MFN 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 Mississippi objects in writing to such fees,
the MFN Escrow Agent shall not debit the MFN 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 MFN Escrow Agreement shall provide the MFN
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 MFN Escrow Account
established pursuant to this MFN Escrow Agreement shall be treated as a
Qualified Settlement Fund for federal tax purposes pursuant to Treas. Reg. ss.
1.468B-1.
SECTION 6. Termination of MFN Escrow Account.
This MFN Escrow Agreement (other than the MFN Escrow Agent's right to
indemnification set forth in Section 7) shall terminate when the MFN Escrow
Agent shall have released from the MFN Escrow Account all amounts pursuant to
Section 4 hereof.
SECTION 7. MFN Escrow Agent.
(a) The MFN 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. The MFN Escrow Agent
shall be fully protected if it acts in accordance with the written advice
of its counsel. In the event the MFN Escrow Agent fails to receive the
instructions contemplated by Section 4 hereof or receives conflicting
instructions, the MFN 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.
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(b) Settling Defendants, on the same pro rata basis as the funds
constituting the MFN Escrow Amount were contributed to the MFN Escrow
Account, agree to indemnify, hold harmless and defend the MFN 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
Availability Date, except such as shall result solely and directly from
its own negligence or willful misconduct. The MFN Escrow Agent shall not
be bound in any way by any agreement or contract between Settling
Defendants and the State of Mississippi (whether or not the MFN Escrow
Agent has knowledge thereof) and the only duties and responsibilities of
the MFN Escrow Agent shall be to hold and invest the MFN Escrow Amount
received hereunder and to release such MFN Escrow Amount in accordance
with the terms of this MFN Escrow Agreement.
(c) The MFN 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 MFN Escrow Agent, selected by the
Settling Defendants and agreeable to the State of Mississippi, shall have
been appointed and shall have accepted such appointment in writing. If an
instrument of acceptance by a successor MFN Escrow Agent shall not have
been delivered to the MFN Escrow Agent within 30 days after the giving of
such notice of resignation, the resigning MFN Escrow Agent may, at the
expense of the Settling Defendants and the State of Mississippi (to be
shared equally between the State of Mississippi and the Settling
Defendants), petition the Court for the appointment of a successor MFN
Escrow Agent.
(d) Upon the Availability Date having occurred, provided that
Settling Defendants have performed all of their obligations required to be
performed prior to the Availability 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
Availability Date.
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.
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State of Mississippi:
Xxx. Xxxxxxx X. Xxxxx
Attorney General's Xxxxxx
000 Xxxx Xxxxxx
Xxxx Xxxxxx Xxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
With copies to:
Xxxxxxx X. Xxxxxxx
Scruggs, Millette, Bozeman & Dent, P.A.
P.O. Drawer 1425
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
and:
Xxxxxx X. Xxxx, Esq.
Ness, Motley, Loadholt, Xxxxxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
and:
Xxxxx X. XxXxxxxxx
000 Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Settling Defendants:
For Xxxxxx Xxxxxx Incorporated:
Xxxxxx X. Xxxxxxxxxx
Xxxxxx Xxxxxx Incorporated
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
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With a copy to:
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:
Xxxxxxx X. Xxxxx
X.X. Xxxxxxxx Tobacco Company
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxx
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
For Xxxxx & Xxxxxxxxxx Tobacco Corporation:
Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxxxxx Tobacco Corporation
200 Xxxxx & Xxxxxxxxxx Tower
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
F. Xxxxxxx Xxxxx
Xxxxx & Xxxxxxxxxx Tobacco Corporation
200 Xxxxx & Xxxxxxxxxx Tower
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
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For Lorillard Tobacco Company:
Xxxxxx X. Xxxxxxx
Lorillard Tobacco Company
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
MFN Escrow Agent:
SouthTrust Bank, N.A.
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Wire Transfer Instructions:
ABA #: 000000000
Account #: 62-780173
Account Name: Mississippi MFN Escrow Account
(b) Successors and Assigns. The provisions of this MFN 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 MFN Escrow Agreement shall be construed in
accordance with and governed by the laws of the State of Mississippi,
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 MFN Escrow Agreement, and the
parties hereto agree not to commence any such suit, action or proceeding
except in such 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 such Court that any such suit,
action or proceeding has been brought in an inconvenient forum.
(e) Definitions. Terms used herein that are defined in the
Settlement Agreement or the Stipulation of Amendment are, unless otherwise
defined herein, used in this MFN Escrow Agreement as defined
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in the Settlement Agreement or the Stipulation of Amendment, as
appropriate.
(f) Amendments. This MFN 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 MFN Escrow Agreement shall not be deemed to be or construed
as a waiver of any other breach, whether prior, subsequent or
contemporaneous, of this MFN Escrow Agreement.
(g) Counterparts; Effectiveness. This MFN 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 MFN 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 signature
page must promptly thereafter be appended to this MFN Escrow Agreement,
and an original executed agreement shall promptly thereafter be delivered
to each party hereto.
(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 MFN Escrow Agreement as
of the day and year first hereinabove written.
STATE OF MISSISSIPPI
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
Attorney General
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XXXXXX XXXXXX INCORPORATED
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
Counsel
X.X. XXXXXXXX TOBACCO COMPANY
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
Counsel
XXXXX & XXXXXXXXXX TOBACCO
CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
Counsel
LORILLARD TOBACCO COMPANY
By: /s/ Xxxxxx X. Xxxxxxx by MGK
---------------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President & General Counsel
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SOUTHTRUST BANK, N.A.
as MFN Escrow Agent
By: /s/ Xxxxxx X. Xxxxxx, III
-------------------------------
Name: Xxxxxx X. Xxxxxx, III
Title: President & CEO
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