Debt Policy at Ust Inc

200-069 Debt Policy at UST Inc.

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expanded outlets and/or markets for new products, executed selected per can discounts, used special commemorative lids and repositioned certain Skoal products.11

Litigation and Legislative Environment

Litigation and legislation are everyday occurrences in the tobacco industry. Smokeless tobacco manufacturers have historically faced less exposure to health related lawsuits than cigarette manufacturers. For example, UST had seven pending health related lawsuits (excluding the state Medicaid cases) at the end of 1998, compared to cases numbering in the hundreds filed against cigarette companies.12 The lower exposure to health-related lawsuits is largely due to the fact that scientific evidence linking smokeless tobacco to cancer is less conclusive than studies researching cigarettes tie to cancer, and snuff producers face no potential “second hand” smoke litigation.

In 1998, the tobacco industry experienced a number of developments in the legal and political arena, most of which were viewed positively by the industry. In June, Congressional efforts to pass broad-based tobacco legislation unfavorable to the industry collapsed. In July, a U.S. District court judge issued a ruling to “vacate” major portions of a 1993 EPA report classifying environmental tobacco smoke as a known human carcinogen.13 In August, a federal appeals court ruled that “the FDA lacks jurisdiction to regulate tobacco products, and all of the FDA's regulations of tobacco products are invalid”. Additionally, cigarette manufacturers won dismissal of several class-action lawsuits filed on behalf of smokers and labor union health care funds. 14

Furthermore, in a landmark event for the tobacco industry, the industry agreed in November to settle state Medicaid lawsuits with a $206 billion settlement and a ban on advertising and promotions that appeal to youths. The settlement was negotiated among the four major cigarette manufacturers and