ADDENDUM TO INITIAL STATES SETTLEMENT AGREEMENT

This ADDENDUM TO INITIAL STATES SETTLEMENT AGREEMENT isentered into this ____ day of March, 1997 by and among the State of WestVirginia, State of Florida, State of Mississippi, Commonwealth of Massachusetts,and State of Louisiana (collectively, "Initial States") and BrookeGroup Ltd., a Delaware corporation ("Brooke Group), Liggett &Myers, Inc., a Delaware corporation ("Myers), and Liggett Group, Inc.,a Delaware corporation (which with Myers, is hereinafter referred to as"Liggett).

WHEREAS,

A. On March 15, 1996, the State of West Virginia, theState of Florida, the State of Mississippi, the Commonwealth of Massachusetts,and the State of Louisiana, and Liggett and Brooke Group entered into asettlement (the "Initial Settlement") of the Actions broughtby the foregoing States, pursuant to which Liggett agreed to make certainpayments, comply with certain proposed regulations restriction the marketingand sale of cigarettes to minors and to offer certain cooperation in connectionwith the prosecution of such Actions against other Defendants, all in accordancewith the terms of the Initial Settlement, a copy of which is annexed heretoas Appendix A.

B. On March 20th, 1997, eighteen States andLiggett and Brooke Group entered into a settlement (the "New Settlement")of the Actions brought by such eighteen states, pursuant to which Liggettagreed, among other things, to extend additional cooperation in connectionwith the prosecution of Attorneys General Actions against other Defendantsthan Liggett agreed to in the Initial Settlement and such other Statesagreed to exercise best efforts to ensure that the financial terms of anyGlobal Settlement, legislative or otherwise, are no more onerous on, orless favorable to Brooke Group and Liggett than those set forth in theNew Agreement, a copy of which is annexed hereto ass Appendix B.

C. The Initial Settling States and Liggett and BrookeGroup wish to expand upon the Initial Settlement, through this Addendumto Settlement Agreement to provide for additional cooperation by the SettlingDefendants with the Initial Settling States, and to provide Settling Defendantswith assurances that the Initial Settling States will seek to ensure thatany Global Settlement provide for financial terms for Liggett that reflectappropriate recognition of Liggett═s cooperative efforts.

NOW THEREFORE, in consideration of the foregoing and ofthe promises set forth in this Addendum to Settlement Agreement, the undersignedAttorneys General, on their own behalf and on behalf of their respectiveStates, and Liggett and Brooke Group hereby stipulate and agree that theInitial Settlement shall be changed and amended as follows:

1. With respect to each of the Initial Settling Statesdefined in the Agreement of March 15, 1996 and March 1997 Brooke Groupand Liggett, upon execution of this Amendment to the March 15, 1996 Agreement,shall cooperate in and facilitate reasonable third party discovery fromBrooke Group and Liggett in connection with any Attorney Generals Action,provided that such information disclosed or provided by Brooke Group and/orLiggett is not disclosed to any third parties except as required by law,including non-settling Attorneys General.

2. The March 15, 1996 Agreement shall be deemed amendedto expressly include the following provisions from the March 1997 AttorneysGeneral Settlement Agreement.

§4.1

§4.2

§4.3.1, §4.3.2, §4.3.3, §4.3.4

§4.5 to the extent this provision increases the requiredcompliance with FDA Rules.

§4.8

§5

3. The following sections shall be deleted from the March15, 1996 Agreement or Amended as set forth below:

§4.1 is deleted

§4.4 is replaced by §4.7 of the March 1997 agreement.

§4.5 is amended by supplementing it with §4.8of the March 1997 agreement to the extent the provision of §4.8 ofthe March 1997 agreement require greater compliance with FDA Rules.

4. Section 4 of the March 15, 1996 agreement shall inall other respects remain in full force and effect.

5. Section 5.7 is to be deleted from the March 1996 Agreement.

6. Section 8.2 of the 1996 agreement shall be amendedto substitute the words "Non-Settling Tobacco Companies" forthe current word "Defendants".

7. Section 16.12 of the 1996 Agreement will be retainedfor the continuing jurisdiction of the court over documents produced underthis Agreement as amended.

IN WITNESS WHEREOF, the Parties have executed this Agreementas of the day and date first written above.

STATE OF MISSISSIPPI
By Mike Moore
Attorney General

STATE OF LOUISIANA
By Richard P. Ieyoub
Attorney General

STATE OF WEST VIRGINIA
By Darrell V. McGraw
Attorney general

BROOKE GROUP LTD.
By Bennett S. LeBow

STATE OF FLORIDA
By Robert Butterworth
Attorney General

LIGGETT GROUP, INC.
By Bennett S. LeBow


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