Lorillard Announces Deal Related to MSA Adjustments

Lorillard, Inc.

, the third largest manufacturer of cigarettes in the United States, announced today that its wholly-owned subsidiary, Lorillard Tobacco Company, along with other participating manufacturers, has agreed to a term sheet with 17 states and the District of Columbia and Puerto Rico that resolves disputes under the 1998 Master Settlement Agreement (MSA) involving payment adjustments relating to nonparticipating manufacturers. The settlement would resolve the claims for the years 2003 through 2012 and would put in place a new method for calculating this adjustment beginning in 2013. Under the terms of the agreement, Lorillard and other manufacturers will receive credits against their future MSA payments over the next five years, and the signatory states will be entitled to receive their allocable share of the amounts currently being held in escrow resulting from these disputes.  The term sheet is subject to approval by the arbitration panel presiding over the arbitration of the dispute for 2003. Lorillard expects to receive credits over the next five years of at least $198 million on its outstanding claims, with the majority of the credits occurring in April 2013 and the remainder over the following four years.