Tobacco Documents Online

S~ By: B-20-~ ~I0:44A~4 : ARMOt.D & ~ WDC~ 502 568 7287i# 2 FOr I~ed~ ~leag@ CO~tac~: Gsorge Sard/Anna Cordasco/Paul Cam/nlti Sard Verblnnsn & Co 212/687o8080 BROOKE AGREES TO S~T~LE TOBACCQ L~TIGATION WI~ 5 STATES MIAMI. FL, MARCH IS, 1996 -- Brooke Groop Ltd. (NYSE: BGL) ~nnounced today that in has enacted ~n~o a settlement of t~baoco litigation with uhs A~toznQys General of five s~a~es. Brooke h~d previousl~ entered into a set~lemen~ of ~h~ Cas~a~o class action which, subject to federal cour~ approval, releases Brooke and its Liggett Group ~obacco s~bs~dlaryfr~all~ur~ntand future addlc~ion-based claims bye na~icnwlde class ~f smokers. The se~lemen~ w~h the A~oz~eys Gener~l releases B~oke amd Di~e~ ~rom =ii ~Obac~O- relat~dM~dicaid rei~bursemenz ~lalms b~ the s~tos Of FloTid~, ~oulslana. Massachusetts, Misslssi~p~ ~md wes~ Vlr~inla. The five states and ~h~ CaBt~o ~lain~ff~ hav~ a~reed ~ha~ ~hey will noc s~ek ~o ~njcin uhe spinoff of Nabisco (NYS~ N~ to R~R Nabisco (NYSE: ~N) shareholders if Brooke's nominees ~re ~lected ~o the RJR ~abisc~ ~oard of Directors. BrOoke is proposing directors ~o replace the existing RJR Nabisco B~a~d a~ ~he Annual Meeting on A~il ~, 1996. "Thi~ comp~ehenslv~ settlemen~ ~S ~c~ news for both Brooke and ~JR Nabisco shareholders, and it i~ als0 in ~he l~ng-~erm financial interests of ~he entire ~o~acco ~ndus~ry," said B~nett S. Le~w~ chai~manand ~h~ef executive ~fi~e~ of Brooke ~roup. "A n~w economic model f~r ~he industry based on responsible Ooe~i~tence ins~ea~ ~f s~O~h~d ~ ~o~f~o~atlon ~a~ s~st~all~ ~nc~e~e s~ock valuations over ~Ime as ~he ~&r~ b~gins ~o rsalize ~ha~ ab~o~ually low cash flow ~l~iples no l~nger make a~y s~nse. A~ the s~,e ~i~, RJR sha~shol~ers have & clear ch~cs. ~f ~hey vo~e for our dlrec~ors they will get an immedla~e spinoff Of Nabls~o wi~h no i~j~ctio~ r~sk, a $2 per shaTe tobacco dividend. ~on Fulf~d revitalizing ~he ~ohaeco businsss, and i~rove~ co.~pora~e g~vernance. They will also ~e~ first option ~o benefi~ fr~mo~ £~vorable se~lemen~ .- which wo~id cos~ RJR ~abisco o~i~ a li~le ~ore ~h~n a penny a pa~ -- o~ ~elms se~ by Dale Hanson and ~he 0~h~r in~epsnden~ ~irector8. If they don'~ vo~e for us, ~h~y will get ~uslness as ~sual f~ ~hs sxis~in~ ~J~ N~biseo B~srd." 68Z7246S8

BY~ 2 Under g~e agreement, the statms w~ld share an initial $5 million ($I million up ~ront and the balance c~ver 10 years) , as well as a pawcentage of -Liggec~.s pret~ income each ~e~r from ~he second ~hrou~h ~hm 25th year: This annual percentage would ~an~e from 2-1/2% to 711/2% of Ligsett's pretax income, depending on ~he n%u~bez o~ addition%el states jolnlng £hls a~reement. Settlement funds xeceived by the Attorneys General will be ~sed ~0 reimburse the states~ ~mcking-related healthoare Costs. %qlile nelther consen~In~ to FDA Jurlsdlctlon nor waiving thei~ ~:~sjehti~ns thereto, Brooke and LigSe~ hav~ also a~reed to phase in C~m~pli~nce with certain proposed interim ~DA re~u/at~ons rm~ardin~ smoking by children and adolescents, incl~ding a proh~bltion on the ~se of car~0on chara0ters im tobacco advertising and limitations ~n the u~e of prc~0~ional materials and distrlhut~on of sample packages where minors a~m p~ese~t. Brook~ a~d Lisget~ hav~ ~he right ~o te~ina~e ghe sen£1ement with respect to an~ state pa~t~cipatln~ in the s~ttlem~ if ~y of the ~emalnln~ defendants in ~he ~i~a~ion succeed on the m~rlte. Brooke a~d Liggett may also ~e~inate the s~tlemen~ if they conclude ~ha~ ~O0 few additional states ~ve joined. As pioneers ~f the settlement, Brooke ~nd I,~ett are also entikle~ to certain benefits not available to th~ oth%r defenders that could reduce ~he payment oblisa~icns of B~ooke and Lisse~t (and ~nM future affiliatsl to the plaintiffs ~n certain circumstances. "This sa~le~en~ gives Brooke th% hes~ Of both worlds," said LeBow. "We have capped ~r potential liabili~y On favorable terms while retaln~ng ~he right to benefit from any legal vlctor~es by the remalnin~ defendants. In add/~ion, as the market bosom,s more ~amiliar with ~he a~reemen~ it will becom~ clea~ that Li~ge~ has not wm~ved any legal privil~s." T~e se~lem~nt would also a~ply in the event of a merge~ or o~her business c~ination between Liggett o= Brooke and any of r/3e ~her defendants in the lawsuits, except any en~ity with a market s~re grea~er than 30~. The co~blning defendant would receive the same settle~nen~ bonelike enjoyed by B=o0ke and Liggett. Th~ five states would share an initial $i~5 million and other s~ates joining the settlement wo~Id share a~other $~5 million. The states woul~ also share ~ percentage o~ ~he pretax i~cc~ne of th~ CO~bi~ed t~b~cco compa~%~es fro~ Ehe second through the ~th year. The p~rcen~age wil~ range fr~ 2-1/2% to 7-I/2% cf pretax ~ncome depsndlng on how many other s~s~es Join the set,lament, but the amou~t will no~ be less than $30 million a year. The initial f£~e s~ates will share 2-I/2% of p=e-~ income a~d ~h~ othe~ s~a~es will sh~e the ~ex~ 5% accordln~ ~ a fu~mula based on their M~icald populations. The flv8 states will also share $3.~S million ($i.2S m£11ion a year f~r three years) ~o monitor point-of-sale adver~islng by all companies close CO schools. M~ ~ 'g6 18:~4 2~9~25999 PRGE.8~ 6S27246Z9

; " B02 r:.4~8 7287;#:4 SENT BY: 8-20-~6 :I0:45AM : ARNOLD & PORTER WDC," 3 Brooke Group ~trols Liggett Group', tobacco and rea~ estate opmra~ions in the for~.~ Soviet union a~d has a substantial equity interest in NUW Valley CorpcraKion. 6S2724660