§ 1399-pp. Requirements. Any tobacco product manufacturer selling
cigarettes to consumers within the state (whether directly or through a
distributor, retailer or similar intermediary or intermediaries) after
the effective date of this article shall do one of the following:

1. become a participating manufacturer (as that term is defined in
section II(jj) of the master settlement agreement) and generally perform
its financial obligations under the master settlement agreement; or

2. (a) place into a qualified escrow fund by April fifteenth of the
year following the year in question the following amounts (as such
amounts are adjusted for inflation):

(i) 1999: $.0094241 per unit sold after the effective date of this
section;

(ii) 2000: $.0104712 per unit sold;

(iii) for each of 2001 and 2002: $.0136125 per unit sold;

(iv) for each of 2003 through 2006: $.0167539 per unit sold;

(v) for each of 2007 and each year thereafter: $.0188482 per unit
sold.

(b) a tobacco product manufacturer that places funds into escrow
pursuant to paragraph (a) shall receive the interest or other
appreciation on such funds as earned. Such funds themselves shall be
released from escrow only under the following circumstances:

(i) to pay a judgment or settlement on any released claim brought
against such tobacco product manufacturer by the state or any releasing
party located or residing in the state. Funds shall be released from
escrow under this subparagraph: (A) in the order in which they were
placed into escrow and (B) only to the extent and at the time necessary
to make payments required under such judgment or settlement;

(ii) to the extent that a tobacco product manufacturer establishes
that the amount it was required to place into escrow on account of units
sold in the state in a particular year was greater than the master
settlement agreement payments, as determined pursuant to section IX(i)
of the master settlement agreement including after final determination
of all adjustments, that such manufacturer would have been required to
make on account of such units sold had it been a participating
manufacturer, the excess shall be released from escrow and revert back
to such tobacco product manufacturer; or

(iii) to the extent not released from escrow under subparagraph (i) or
(ii) of this paragraph, funds shall be released from escrow and revert
back to such tobacco product manufacturer twenty-five years after the
date on which they were placed into escrow.

(c) Each tobacco product manufacturer that elects to place funds into
escrow pursuant to this subdivision shall annually certify to the
attorney general that it is in compliance with this subdivision. The
attorney general may bring a civil action on behalf of the state against
any tobacco product manufacturer that fails to place into escrow the
funds required under this subdivision. Any tobacco product manufacturer
that fails in any year to place into escrow the funds required under
this subdivision shall:

(i) be required within fifteen days to place such funds into escrow as
shall bring it into compliance with this subdivision. The court, upon a
finding of a violation of this subdivision, may impose a civil penalty
to be paid to the general fund of the state in an amount not to exceed
five percent of the amount improperly withheld from escrow per day of
the violation and in a total amount not to exceed one hundred percent of
the original amount improperly withheld from escrow;

(ii) in the case of a knowing violation, be required within fifteen
days to place such funds into escrow as shall bring it into compliance
with this subdivision. The court, upon a finding of a knowing violation
of this subdivision, may impose a civil penalty to be paid to the
general fund of the state in an amount not to exceed fifteen percent of
the amount improperly withheld from escrow per day of the violation and
in a total amount not to exceed three hundred percent of the original
amount improperly withheld from escrow; and

(iii) in the case of a second knowing violation, be prohibited from
selling cigarettes to consumers within the state (whether directly or
through a distributor, retailer or similar intermediary) for a period
not to exceed two years.

Each failure to make an annual deposit required under this subdivision
shall constitute a separate violation, and the tobacco product
manufacturer shall be required to pay the state's costs and attorney's
fees incurred during a successful prosecution under this subdivision.