Section 2. Any tobacco product manufacturer selling cigarettes to consumers within the commonwealth, whether directly or through a distributor, retailer or similar intermediary or intermediaries, shall do one of the following:

(a) 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

(b) (1) place into a qualified escrow fund by April 15 of the year following the year in question the following amounts as such amounts are adjusted for inflation:

(i) 2000: $.0104712 per unit sold;

(ii) for each of 2001 and 2002: $.0136125 per unit sold;

(iii) for each of 2003 through 2006: $.0167539 per unit sold;

(iv) for each of 2007 and each year thereafter: $.0188482 per unit sold.

(2) a tobacco product manufacturer that places funds into escrow pursuant to subclause (1) shall receive the interest or other appreciation on such funds as earned. Such 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 such tobacco product manufacturer by the commonwealth or any releasing party located or residing in the commonwealth. Funds shall be released from escrow under this subclause (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 such 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 commonwealth in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to section IX(i) of said agreement after final determination of all adjustments, that such manufacturer would have been required to make on account of such 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 paragraphs (i) or (ii) of subclause (2) of clause (b), funds shall be released from escrow and revert back to such tobacco product manufacturer 25 years after the date on which they were placed into escrow.

(3) Each tobacco product manufacturer that elects to place funds into escrow pursuant to this section shall annually certify to the attorney general that it is in compliance with this section. The attorney general may bring a civil action on behalf of the commonwealth against any tobacco product manufacturer that fails to place into escrow the funds required under this section.

(4) Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section shall:

(i) be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a violation of this section, may impose a civil penalty to be paid to the general fund of the commonwealth in an amount not to exceed 5 per cent of the amount improperly withheld from escrow per day of the violation, and in a total amount not to exceed 100 per cent of the original amount improperly withheld from escrow;

(ii) in the case of a knowing violation, be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a knowing violation of this section, may impose a civil penalty to be paid to the general fund of the commonwealth in an amount not to exceed 15 per cent of the amount improperly withheld from escrow per day of the violation, and in a total amount not to exceed 300 per cent 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 commonwealth, whether directly or through a distributor, retailer or similar intermediary, for a period not to exceed two years.

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