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                                                                    EXHIBIT 10.1


                      STATE OF NEVADA SETTLEMENT AGREEMENT

                  This SETTLEMENT AGREEMENT is entered into this 15th day of
September, 1997 by and among the State of Nevada and Brooke Group Ltd., a
Delaware corporation ("Brooke Group"), Liggett & Myers Inc., a Delaware
corporation ("Myers"), and Liggett Group, Inc., a Delaware corporation (which,
with Myers, is hereinafter referred to as "Liggett").

                                    RECITALS

                  WHEREAS,

                  A. The State of Nevada, by and through its Attorney General
(the "Attorney General"), has brought a civil action (the "Action") against,
among others, the American Tobacco Company, Inc., BAT Industries, Plc, British
American Tobacco Company, R.J. Reynolds Tobacco Company, Brown & Williamson
Tobacco Corporation, Philip Morris, Inc., Liggett & Myers, Inc., Lorillard
Tobacco Company, Inc., and United States Tobacco Company and their various
parent and related companies ("Defendants"), asserting claims for, among other
things, expenses allegedly arising from tobacco-related matters and injunctive
relief concerning sales of cigarettes to minors.

                  B. Because of the importance of the agreements and
undertakings by Liggett and Brooke Group herein to the goals of the State of
Nevada, including the prosecution of the Action against non-settling defendants,
the State of Nevada has agreed to extend financial settlement terms to Liggett
and Brooke Group which will not be offered to any other Defendant, all as set
forth in this Settlement Agreement.







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                  C. On March 20, 1997, seventeen States, by and through their
Attorneys General, and Liggett and Brooke Group entered into a settlement (the
"Attorneys General Settlement") of the actions brought by such States, pursuant
to which Liggett agreed to make certain payments, comply with certain proposed
regulations restricting the marketing and sale of cigarettes to minors and to
offer certain significant cooperation in connection with the prosecution of
their respective actions against the other Defendants; all in accordance with
the terms of the Attorneys General Settlement, a copy of which is annexed hereto
as Appendix A.

                  D. The State of Nevada and Liggett and Brooke Group wish to
provide in this Settlement Agreement for the State of Nevada to become a
Subsequent Settling State under the Attorneys General Settlement, all in
accordance with the terms of this Settlement Agreement.

                  E. The State of Nevada acknowledges and agrees that this
Settlement Agreement, including the cooperation provisions thereof, are
important to the prosecution of its Action against non-settling Defendants.

                  F. The State of Nevada and Liggett and Brooke Group recognize
and support the public interest in preventing smoking by, and preventing the
promotion of smoking to, children and adolescents.


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                  G. Liggett and Brooke Group have denied, and continue to deny
any wrongdoing or any legal liability of any kind in all of the above-mentioned
actions.

                  H. The State of Nevada recognizes and acknowledges that the
cooperation being provided for in this Settlement Agreement would be valuable to
the prosecution of claims against the tobacco industry. Further, the State of
Nevada acknowledges that the change in warning labels provided for in this
Settlement Agreement is a step towards properly informing consumers more fully
of the truth about cigarettes and the consequences of smoking, as is the
statement by Liggett also provided for herein.

                  NOW, THEREFORE, in consideration of the foregoing and of the
promises and covenants set forth in this Agreement, the undersigned Attorney
General, on behalf of the State of Nevada, and Liggett and Brooke Group hereby
stipulate and agree that any and all smoking-related claims, including the
Action, of the State of Nevada shall be settled as against Liggett and Brooke
Group all on the terms contained herein, as follows:






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1.       Definitions.

                  Capitalized terms used herein shall have the meanings assigned
to them in Section 1 of the Attorneys General Settlement, except as set forth
below or defined elsewhere in this Agreement:

                  "Action" means the action entitled State of Nevada v. Philip
Morris Inc., et al., Nev. Dist., 2nd Jud. Dist. (Washoe Cty., Nevada).

                  "Agreement" means this Settlement Agreement.

                  "Attorney General Actions" means those actions settled
pursuant to the Attorneys General Settlement or any similar action commenced by
or on behalf of a State against the Defendants.

                  "Attorneys General Settlement" means the settlement agreement
entered into on March 20, 1997 by seventeen Settling States and Settling
Defendants, a copy of which is annexed hereto as Exhibit A.

                  "Parties" means the State of Nevada and Brooke Group and
Liggett.

                  "Settling States" means the States listed in Appendix A to the
Attorneys General Settlement and Subsequent Settling States.

2.       Settlement Purposes Only.

                  Section 2 of the Attorneys General Settlement is incorporated
herein by reference.


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3.       Parties.

                  3.1. Section 3.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  3.2. Section 3.2 of the Attorneys General Settlement is
incorporated herein by reference.

4.       Public Statement; Cooperation; Advertising Limitations.

         Section 4 of the Attorneys General Settlement is incorporated herein by
reference, except as modified below.

                  4.1 Promptly after execution of this Settlement Agreement,
Liggett shall, by and through its Director, Bennett S. LeBow, issue in the State
of Nevada a public statement substantially in the following form and substance:

                  I am, and have been for a number of years, a Director of
Liggett Group Inc., a manufacturer of cigarettes. Cigarettes were identified as
a cause of lung cancer and other diseases as early as 1950. I, personally, am
not a scientist. But, like all of you, I am aware of the many reports concerning
the ill-effects of cigarette smoking. We at Liggett know and acknowledge that,
as the Surgeon General and respected medical researchers have found, cigarette
smoking causes health problems, including lung cancer, heart and vascular
disease and emphysema. We at Liggett also know and acknowledge that, as the
Surgeon General, the Food and Drug Administration and respected medical
researchers have found, nicotine is addictive.


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                  Liggett will continue to engage in the legal activity of
selling cigarettes to adults, but will endeavor to ensure that these adult
smokers are aware of the health risks and addictive nature of smoking. As part
of our efforts, we will do the following:

                  1. In accordance with a court-approved settlement, Liggett
         will set up a fund to compensate equitably those who claim to have been
         injured by our products.

                  2. Liggett will add a prominent warning to each of our
         packages of cigarettes and all of our cigarette advertising stating
         that "Smoking is Addictive".

                  3. Liggett supports and will not challenge Food and Drug
         Administration regulations concerning the sale and distribution of
         nicotine-containing cigarettes and smokeless tobacco products to
         children and adolescents. Accordingly, Liggett has agreed to comply
         with many of these regulations even before they apply to the tobacco
         industry generally.

                  4. Liggett has instructed its advertising and marketing people
         to scrupulously avoid any and all advertising or marketing which would
         appeal to children or adolescents. Liggett acknowledges that the
         tobacco industry markets to "youth," which means those under 18 years
         of age, and not just those 18-24 years of age. Liggett condemns this
         practice and will not market to children. Liggett agrees that if it
         sees industry advertisements which in its


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         view are aimed at children, it will bring this to the attention of the
         Attorney General of the State of Nevada.

                  5. In accordance with our settlement agreements, Liggett
         agrees to fully cooperate with the State of Nevada in connection with
         contemplated lawsuits against the other tobacco companies. To that end,
         Liggett will make available to the State of Nevada all relevant
         documents and information, including documents subject to Liggett's own
         attorney-client privileges and work product protections, and will
         assist the State of Nevada in obtaining prompt court adjudication of
         the rest of the industry's joint privilege claims.

         4.2 Section 4.2 of the Attorneys General Settlement is incorporated
herein by reference.

                  4.3.1. Upon execution of this Agreement, each Settling
Defendant shall:

                           (1) cooperate with the Attorney General of the State
                  of Nevada in that such Settling Defendant will take no steps
                  to impede or frustrate civil investigations into, or civil
                  prosecutions of, any of the Non-settling Tobacco Companies, so
                  as to secure the just, speedy and inexpensive determination of
                  all such smoking-related claims against said non-settling
                  persons and entities;




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                           (2) cooperate in and facilitate reasonable non-party
                  discovery from Settling Defendants in connection with the
                  Action;

                           (3) actively assist the Attorney General of the State
                  of Nevada in identifying and locating any and all persons
                  known to such Settling Defendant to have documents or
                  information that is discoverable in such proceedings, to
                  actively assist said counsel in interviewing and obtaining
                  documents and information from all such persons, and to
                  encourage such person to cooperate with the Attorney General;
                  and shall actively assist the Attorney General in interpreting
                  documents relating to Attorney General Actions against
                  Non-settling Tobacco Companies; and

                           (4) insofar as such Settling Defendant has or obtains
                  any material information concerning any fraudulent or illegal
                  conduct on the part of any parties, including Non-settling
                  Tobacco Companies, their agents, or their co-defendants
                  designed to frustrate or defeat the claims of the State of
                  Nevada against such parties, companies, agents or
                  co-defendants, or which have the effect of unlawfully
                  suppressing evidence relevant to smoking claims, disclose such
                  information to the appropriate judicial and regulatory
                  agencies.



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                  4.3.2. Subject to, and promptly after, the entry of a
Protective Order or a Stipulation Regarding Liggett Documents by the court in
which the Action is pending, each Settling Defendant shall:

                           (1) promptly provide all documents and information
                  that are relevant to the subject matter of the Action or which
                  are likely to lead to admissible evidence in connection with
                  claims asserted in the Action, subject to the provisions of
                  Section 4.3.2(2) hereof;

                           (2) waive any and all applicable attorney-client
                  privileges and work product protections with respect to such
                  documents and information. Such waiver shall not extend to (a)
                  documents and information not relevant to the subject matter
                  of the Action or not likely to lead to admissible evidence in
                  connection with such an action or (b) documents subject to a
                  joint defense or other privilege or protection which Settling
                  Defendants cannot legally waive unilaterally, except that the
                  waiver by the Settling Defendant shall apply, to the extent
                  permitted by law, to its own joint defenses or other
                  privileges. To the extent that a Settling Defendant has a good
                  faith belief, or one or more Non-settling Tobacco Companies
                  claims, that documents to be provided pursuant to Section
                  4.3.2(1) hereof may be subject to a joint defense or other
                  privilege (or a



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                  claim of such privilege) of one or more of the Non-settling
                  Tobacco Companies, such documents shall be deposited under
                  seal for in camera inspection by the court in which the Action
                  is pending, together with a statement to such court that such
                  Settling Defendant has concerns as to whether some or all of
                  such documents should be protected from discovery, and the
                  Parties agree to request that such court shall retain
                  jurisdiction to resolve that issue. Liggett will participate
                  in proceedings, including by way of court appearances or
                  declarations, concerning issues of whether such documents are
                  discoverable;

                           (3) offer their employees, and any and all other
                  individuals over whom they have control, and help locate
                  former employees, to provide witness interviews of such
                  employees and to testify, in depositions and at trial; it
                  being understood and agreed that Liggett will waive and hereby
                  does waive any and all applicable confidentiality agreements
                  to the extent such confidentiality agreements would restrict
                  testimony under this Agreement, if any, to which such
                  witnesses may be subject; and

                           (4) demand from its past or current national legal
                  counsel all documents and information obtained by them in the
                  course of representation of any Settling Defendant which in
                  any way relates to the cooperation 



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                  required in paragraphs 4.3.1(1) - 4.3.2(3) above, which should
                  be provided to the Settling States as provided under this
                  paragraph.

                           4.3.3. Section 4.3.3 of the Attorneys General
Settlement is incorporated herein by reference.

                           4.3.4. Section 4.3.4 of the Attorneys General
Settlement is incorporated herein by reference.

                  4.4. Section 4.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  4.5. Section 4.5 of the Attorneys General Settlement and
subparts 4.5.1, 4.5.2, 4.5.3, and 4.5.4 thereof are incorporated herein by
reference.

                  4.6. Section 4.6 of the Attorneys General Settlement is
incorporated herein by reference.

                  4.7. Section 4.7 of the Attorneys General Settlement is
incorporated herein by reference.

                  4.8. Section 4.8 of the Attorneys General Settlement is
incorporated herein by reference.

                  4.9. Section 4.9 of the Attorneys General Settlement is
incorporated herein by reference.






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5.       Global Settlement.

                  5.1. Section 5.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  5.2. Section 5.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  5.3. Subject to and in accordance with applicable law, in the
event of a Global Settlement which does not impose financial terms, financial
obligations or financial conditions as to Brooke Group and Liggett which are
more onerous on, or less favorable to, Brooke Group and Liggett than those of
this Settlement Agreement (at least to the extent Liggett's Market Share does
not exceed 3%; such Market Share limitation being included solely for purposes
of this Section 5.3), and pursuant to which Brooke Group and Liggett receive a
limitation of liability for smoking-related claims, and any other benefits
conferred thereunder, at least to the same extent as received by the
Non-settling Tobacco Companies, Liggett agrees to abide by the provisions of
such Global Settlement that pertain to the pricing of Cigarettes.

6.       Settlement Fund.

                  6.1. Section 6.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.2. Section 6.2 of the Attorneys General Settlement is
incorporated herein by reference.




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                  6.3.  Section 6.3 of the Attorneys General Settlement and
subparts 6.3.1 and 6.3.2 thereof are incorporated herein by reference.

                  6.4.  Section 6.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.5.  Section 6.5 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.6.  Section 6.6 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.7.  Section 6.7 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.8.  Section 6.8 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.9.  Section 6.9 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.10. Section 6.10 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.11. Section 6.11 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.12. Section 6.12 of the Attorneys General Settlement is
incorporated herein by reference.

                  6.13. Section 6.13 of the Attorneys General Settlement is
incorporated herein by reference.



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7.       Release.

                  7.1. Section 7.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  7.2. Section 7.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  7.3. Section 7.3 of the Attorneys General Settlement is
incorporated herein by reference.

                  7.4. Section 7.4 of the Attorneys General Settlement is
incorporated herein by reference.

8.       Exclusive Remedy; Dismissal of Action;
         Jurisdiction of Court.

                  8.1. Section 8.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  8.2. Section 8.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  8.3. Section 8.3 of the Attorneys General Settlement is
incorporated herein by reference.

9.       Term.

         Section 9 of the Attorneys General Settlement is incorporated herein by
reference, except as modified below.

                  9.1. Section 9.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  9.2. Section 9.2 of the Attorneys General Settlement is
incorporated herein by reference.



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                  9.3. Section 9.3 of the Attorneys General Settlement is
incorporated herein by reference.

                  9.4. Section 9.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  9.5. Section 9.5 of the Attorneys General Settlement is
incorporated herein by reference.

                  9.6. Section 9.6 of the Attorneys General Settlement is
incorporated herein by reference.

                  9.7. The duration of this Agreement shall be co-extensive with
the duration of the Attorneys General Settlement. The exercise of any right
under the Attorneys General Settlement to terminate the Attorneys General
Settlement with respect to the State of Nevada shall also be a termination of
this Agreement.

10.      Continuing Enforceability.

         Section 10 of the Attorneys General Settlement is incorporated herein
by reference.

11.      Entry of Good Faith Bar Order on Contribution and Indemnity Claims.

                  11.1. Section 11.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  11.2. Section 11.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  11.3. Section 11.3 of the Attorneys General Settlement is
incorporated herein by reference.



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                  11.4. Section 11.4 of the Attorneys General Settlement is
incorporated herein by reference.

12.      Tax Status of Settlement Fund.

                  12.1. Section 12.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  12.2. Section 12.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  12.3. Section 12.3 of the Attorneys General Settlement is
incorporated herein by reference.

13.      Effect of Default of Settling Defendant.

         Section 13 of the Attorneys General Settlement is incorporated herein
by reference.

14.      Representations and Warranties.

                  14.1. Section 14.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  14.2. Section 14.2 of the Attorneys General Settlement is
incorporated herein by reference.

15.      Arbitration.

         Section 15 of the Attorneys General Settlement is incorporated
herein by reference.

16.      Most Favored Nation.

                  16.1. Section 16.1 of the Attorneys General Settlement is
incorporated herein by reference.



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                  16.1.1. Section 16.1.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.1.2. Section 16.1.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.1.3. Section 16.1.3 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.1.4. Section 16.1.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.1.5. Section 16.1.5 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.1.6. Section 16.1.6 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.2.   Section 16.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  16.3.   Section 16.3 of the Attorneys General Settlement is
incorporated herein by reference.

17.      Future Affiliate.

                  17.1.   Section 17.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.2.   Section 17.2 of the Attorneys General Settlement and
subparts (a) and (b) thereof are incorporated herein by reference.

                  17.3.   Section 17.3 of the Attorneys General Settlement is
incorporated herein by reference.


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                  17.4. Section 17.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.5. Section 17.5 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.6. Section 17.6 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.7. Section 17.7 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.8. Section 17.8 of the Attorneys General Settlement is
incorporated herein by reference.

                  17.9. Section 17.9 of the Attorneys General Settlement is
incorporated herein by reference.

18.      Miscellaneous.

                  18.1. Section 18.1 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.2. Section 18.2 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.3. Section 18.3 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.4. Section 18.4 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.5. Section 18.5 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.6.  Section 18.6 of the Attorneys General Settlement is
incorporated herein by reference.

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                  18.7.  Section 18.7 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.8.  Section 18.8 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.9.  Section 18.9 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.10. Section 18.10 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.11. Section 18.11 of the Attorneys General Settlement is
incorporated herein by reference.

                  18.12. Section 18.12 of the Attorneys General Settlement is
incorporated herein by reference.

                  IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the day and date first written above.


BROOKE GROUP LTD.                       STATE OF Nevada

By  /s/ Bennett S. LeBow                By /s/ Frankie Sue Del Papa
  -------------------------------         --------------------------------------
         Bennett S. LeBow                  Frankie Sue Del Papa
                                           Attorney General

Date: 9/15/97                           Date: 9/17/97
     ----------------------------            -----------------------------------

LIGGETT GROUP, INC.

By /s/ Bennett S. LeBow
  -------------------------------
         Bennett S. LeBow

Date:  9/15/97
     ----------------------------



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