The agreement imposes unprecedented legal and financial burdens upon us, and subjects us to regulatory changes.

Even though these recommendations place extensive demands upon our industry, we are willing to accept them in order to end conflicts surrounding tobacco products.

Let's look briefly at why the proposals are good for all concerned.

What's in it for the public:

• A massive and sustained assault against underage smoking.
• Industry payments of billions of dollars that can be spent on health care.
• Larger, more prominent warning labels on cigarettes.
• A multibillion-dollar anti-smoking public education program, including $500 million a year for an independently managed campaign aimed at preventing young people from smoking.
• A new $25 billion trust fund for tobacco-related medical research.
• Industry-funded smoking cessation programs for adults.
• A ban on outdoor advertising and on the use of cartoon characters or human figures in other advertising.
• A ban on cigarette vending machines.
• Regulation of nicotine and tobacco products by the U.S. Food and Drug Administration, backed by severe penalties for violations.
• Disclosure of all health-related research.
• New federal restrictions on secondhand smoke in public places.
• Individuals can still sue tobacco companies for all actual damages, and for punitive damages related to future conduct.

What's in it for the industry:

If the settlement contained no benefits for our industry, or threatened the very existence of our operations, we could not accept it. While the current proposals will impose massive financial obligations, advertising and marketing restrictions, and stringent regulations upon us, they also mean our industry will benefit in certain ways:

• Regulatory guidelines will clearly define what the industry may and may not do.
• Payments of any legal judgments against the industry are capped on the order of $5 billion each year with any excess judgments carrying over for payment the next year. The industry is required to pay even if it prevails in all litigation against it.
• Lawsuits are barred against persons other than the tobacco manufacturers, such as distributors, retailers, farmers, suppliers and stockholders.
• Because the industry will pay $60 billion to settle punitive damage claims, such claims for past conduct only are being barred: This $60 billion will be used for a wide array of public health initiatives rather than for windfall payments to individual litigants and their lawyers.
• For payments by the industry of hundreds of billions of dollars in perpetuity, the attorneys general's suits and similar suits are settled, and mass suits - such as class actions, which could exhaust the settlement judgment fund and delay payments to individual plaintiffs - are barred.

  But the industry is NOT getting "immunity":

• Notwithstanding the industry payments, individual smokers will still be able to sue tobacco companies for actual damages and to receive full compensation for any wrongful injuries to their health.
• The industry remains fully exposed to punitive damage claims related to future misconduct and to severe federal regulatory penalties.
• The industry receives no protection of any kind from criminal prosecution for any misconduct.

  As a result:

• Tobacco companies will be able to operate in a more stable environment, and continue to employ hundreds of thousands of Americans.
• Tobacco companies will continue to make valuable contributions to the U.S. economy, to provide hundreds of thousands of jobs, and to pay billions of dollars in taxes.
• Tobacco companies will operate in a strictly regulated environment, with strong compliance provisions and severe penalties for any violations. We know how crucially important this is to us and all of America.

  What happens now?

  The provisions that we have accepted in the agreement will have far-reaching effects upon our industry. Indeed, we have made concessions that give up our constitutional rights.

  We want to see the agreement become law. But not at the expense of adults who choose to use legal tobacco products, our shareholders, or the hundreds of thousands of Americans employed by the tobacco industry.

  For example, some are now calling for immediate and massive increases in excise taxes on tobacco products. These taxes are not only unfair to millions of our customers, but also will have a devastating impact on the hundreds of thousands of people who work in our industry. Moreover, simply passing new excise taxes does nothing to further the comprehensive nature of the settlement.

  All sides can find fault or favor with individual features of the settlement. But the President and Congress now have a unique opportunity to chart a new direction by passing comprehensive federal legislation on a national tobacco settlement. The whole of the settlement is much greater than the sum of its parts.

  We're ready to work to make the agreement final and to put an end to decades of fruitless conflict, where no one wins.

  To see the entire agreement and to learn more about it, visit our Web site at: www.tobaccoresolution.com.

  Philip Morris Incorporated | R.J. Reynolds Tobacco Company |
  Brown & Williamson Tobacco Corporation | Lorillard Tobacco Company

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