(a) Any tobacco product manufacturer selling cigarettes to consumers within the state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, after July 30, 1999, shall do one (1) 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 15 of the year following the year in question the following amounts, as the amounts are adjusted for inflation:

(i) 1999: $.0094241 per unit sold after July 30, 1999;

(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; and

(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 subdivision (a)(2)(A) of this section shall receive the interest or other appreciation on the funds as earned. The 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 the tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this subdivision (a)(2)(B)(i):

(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 the 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 under section IX(i) of the Master Settlement Agreement including after final determination of all adjustments, that the manufacturer would have been required to make on account of the units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to the tobacco product manufacturer; or

(iii) To the extent not released from escrow under subdivisions (a)(2)(B)(i) or (a)(2)(B)(ii) of this section, funds shall be released from escrow and revert back to the tobacco product manufacturer twenty-five (25) years after the date on which they were placed into escrow.

(C) Each tobacco product manufacturer who elects to place funds into escrow pursuant to subdivision (a)(2) of this section shall annually certify to the Attorney General that the tobacco product manufacturer is in compliance with subdivision (a)(2) of this section. 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 section. Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section shall:

(i) Be required within fifteen (15) days to place the funds into escrow as shall bring the tobacco product manufacturer into compliance with this section. The court, upon a finding of a violation of subdivision (a)(2) of this section, may impose a civil penalty to be paid into the General Revenue Fund Account of the State Apportionment Fund in an amount not to exceed five percent (5%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent (100%) of the original amount improperly withheld from escrow;

(ii) In the case of a knowing violation, be required within fifteen (15) days to place the funds into escrow as shall bring the tobacco product manufacturer into compliance with this section. The court, upon a finding of a knowing violation of subdivision (a)(2) of this section, may impose a civil penalty to be paid into the General Revenue Fund Account of the Apportionment Fund in an amount not to exceed fifteen percent (15%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent (300%) 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 (2) years.

(b) Each failure to make an annual deposit required under this section shall constitute a separate violation.