Carolina Tobacco Company Reaches Settlement with State of Kentucky, Distributes Approximately $545,000.

Settlement resolves past questions of legal standing and solidifies Carolina Tobacco Company's ability to distribute products in the state

PORTLAND, Ore. -- Carolina Tobacco Company (CTC), a privately-held, leading manufacturer of "price-value" cigarettes sold under the brands ROGER([R]) and KINGSBORO([R]), announced today that it has reached a comprehensive settlement with the State of Kentucky as part of a national agreement that includes 45 other states and the District of Columbia. CTC will distribute more than $31 million as part of the national settlement, with Kentucky receiving approximately $545,000.

The settlement resolves a dispute over the company's status as the manufacturer of its ROGER([R]) brand from November 1999 to April 2003. During this period, ROGER([R]) brand cigarettes were produced, under CTC's direction and control, by House of Prince Riga, a Latvian company. In 2003, states questioned CTC's legal standing to submit the state certifications and make the escrow payments as required as a manufacturer under the Tobacco Master Settlement Agreement. Eventually, the dispute led to multiple lawsuits, which have been resolved with the settlement announced today.

As part of the agreement, CTC will release the approximately $545,000 from its escrow account to the State of Kentucky. In return, CTC will be recognized as the manufacturer of ROGER([R]) brand cigarettes during the disputed period. Additionally, the state has agreed not to seek any negative action against the company that would prohibit it from doing business within its boundaries due to lack of sufficient funds in CTC's escrow account to compensate for sales from 1999 to 2003.

"Our desire has always been to resolve this matter in a way that recognizes our status as a manufacturer and solidifies our status as a leading supplier of high-quality, low-price products in the State of Kentucky. The agreement we've reached accomplishes this and also provides significant financial benefits to the state," said David Redmond, president of CTC.

Redmond continued, "Our fully owned, state-of-the-art facility in Johannesburg, South Africa, will continue to supply our customers in Kentucky and across the nation. Renovated last year to double its production capacity, the operation provides us with the flexibility to continue expanding our market share and reach."

Carolina Tobacco Company is headquartered in Portland, Oregon. Established in 1999 and led by President and CEO David Redmond, CTC is a privately held, independent manufacturer of "Class A," "price-value" cigarettes. Its niche is premium brand, adult smokers in the discount tobacco market. The company has grown to become the second largest price-value manufacturer and importer in the United States. CTC is committed to corporate responsibility as a core value and promotes the sale of its products to adult smokers only.

ROGER([R]) AND KINGSBORO([R]) are registered trademarks of Carolina Tobacco Company in the United States.