(b) Cigarette smoking also presents serious financial concerns for the State.
Under certain health care programs, the State may have a legal obligation to provide
medical assistance to eligible persons for health conditions associated with cigarette
smoking, and those persons may have a legal entitlement to receive the medical
assistance.

(c) Under these programs, the State pays millions of dollars each year to
provide medical assistance for these persons for health conditions associated with
cigarette smoking.

(d) It is the policy of the State that financial burdens imposed on the State by
cigarette smoking be borne by tobacco product manufacturers rather than by the
State to the extent that such manufacturers either determine to enter, into a
settlement with the State or are found culpable by the courts.

(e) On November 23, 1998, leading United States tobacco product
manufacturers entered into a settlement agreement, entitled the "Master Settlement
Agreement", with the State. The Master Settlement Agreement obligates these
manufacturers, in return for a release of past, present, and certain future claims
against them as described in the Agreement, to pay substantial sums to the State
(tied in part to their volume of sales); to fund a national foundation devoted to the
interests of public health; and to make substantial changes in their advertising and
marketing practices and corporate culture, with the intention of reducing underage
smoking.

(f) (1) It would be contrary to the policy of the State if tobacco product
manufacturers who determine not to enter into such a settlement could use a
resulting cost advantage to derive large, short-term profits in the years before
liability may arise without ensuring that the State will have an eventual source of
recovery from them if they are proven to have acted culpably.

(2) It is thus in the interest of the State to require that such tobacco
product manufacturers to establish a reserve fund to guarantee a source of
compensation in order to prevent them from deriving large, short-term profits and
then becoming judgment-proof before liability may arise.

2. Definitions.

(a) As used in this Act, the following words have the meanings indicated.

(b) "Adjusted for inflation" means increased in accordance with the formula
for inflation adjustment set forth in Exhibit C to the Master Settlement Agreement.

(c) (1) "Affiliate" means a person who directly or indirectly owns or controls,
is owned or controlled by, or is under common ownership or control with, another
person.

(2) For the purposes of paragraph (1) of this subsection:

(i) "owns", "is owned", and "ownership" mean ownership of an
equity interest, or the equivalent of an equity ownership thereof, of 10 percent or
more; and