<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): October 7, 1999
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-1225 13-2526821
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
Five Giralda Farms, Madison, New Jersey 07940
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 973-660-5000
<PAGE>
Item 5. Other Events.
On October 7, 1999, American Home Products Corporation ("AHP") announced
that it reached a comprehensive, national settlement to resolve litigation
against AHP brought by people who used REDUX (dexfenfluramine) or PONDIMIN
(fenfluramine). AHP issued a press release concerning the settlement which is
attached hereto as Exhibit 99.1 and is incorporated herein by reference. Also
attached as Exhibit 99.2 is the "Memorandum of Understanding Concerning
Settlement of Diet Drug Litigation" which details the terms of the settlement
and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
(99.1) Press Release dated October 7, 1999.
(99.2) Memorandum of Understanding Concerning Settlement of Diet Drug
Litigation
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Paul J. Jones
Vice President and Comptroller
(Duly Authorized Signatory and
Chief Accounting Officer)
Dated: October 8, 1999
<PAGE>
EXHIBIT INDEX
(99.1) Press Release dated October 7, 1999.
(99.2) Memorandum of Understanding Concerning Settlement of Diet Drug
Litigation
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
Media Contacts: Investor Contact:
Lowell Weiner Thomas Cavanagh
American Home Products American Home Products
(973) 660-5013 (973) 660-5706
Douglas Petkus
Wyeth-Ayerst Laboratories
(973) 660-5034
AMERICAN HOME PRODUCTS ANNOUNCES
DIET DRUG SETTLEMENT PLAN
Madison, N.J., October 7, 1999 -- American Home Products Corporation (NYSE: AHP)
today announced a comprehensive, national settlement to resolve litigation
against the Company brought by people who used Redux-TM- (dexfenfluramine) or
Pondimin-Registered TradeMark- (fenfluramine).
This nationwide, class action settlement is open to all Redux or Pondimin users
in the U.S., regardless of whether they have lawsuits pending. It offers a range
of benefits depending on
<PAGE>
- 2 -
a participant's particular circumstances, including:
- a refund program for the cost of the drugs;
- medical screening;
- additional medical services or cash payments; and
- substantial compensation in the event of serious heart valve problems.
Additional details are provided in the attached summary.
"This settlement provides fair and equitable terms for both diet drug claimants
and American Home Products," said John R. Stafford, Chairman, President and
Chief Executive Officer. The agreement was developed by attorneys for the
Company and by plaintiffs' attorneys involved in various federal and state
cases.
"Settling this matter was in the best interest of those who used Pondimin or
Redux as well as of the company," said Mr. Stafford. "We believe that this
agreement is a sound way to resolve the claims raised by diet drug users and
represents a prudent course for our company. It offers peace of mind to those
who used the drugs and permits the company to move beyond the uncertainty and
distractions of litigation."
- more -
<PAGE>
- 3 -
"We agreed to this settlement so that we can focus on the business of making
innovative pharmaceutical products. Today, we have in our research pipeline
products to help solve some of the world's most pressing health problems and
this settlement allows us to pursue and expand that effort," said Mr. Stafford.
"In designing the agreement with the plaintiffs' attorneys, we wanted to ensure
that the benefits are attractive to the claimants and provide a strong incentive
for participation," said Louis L. Hoynes, Jr., Senior Vice President and General
Counsel for American Home Products. "We are confident that well-informed
claimants will conclude that the range of benefits of this settlement is
preferable to lengthy and uncertain litigation. The scientific studies conducted
to date and clinical experience indicate that the health of the overwhelming
majority of people who took Redux or Pondimin has not been adversely affected.
The studies also show no increased risk of valvular heart disease among persons
who took the drugs for three months or less - more than 75% of those who took
the drugs. Yet this settlement provides a quality package of benefits for all
individuals who used the drugs and financial protection in the event a person
should develop serious heart valve disease."
- more -
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- 4 -
The settlement agreement is subject to judicial approval. A judicially-approved
notice program will provide potential participants with details regarding the
settlement procedures. This will be followed by hearings to obtain judicial
approval of the settlement.
Initial payments by American Home Products into the settlement funds are
anticipated to begin later this year. Payments will continue for approximately
16 years after final judicial approval if needed to provide settlement benefits
to members of the class. Payments to be made during the next two years are
anticipated to total $1.85 billion. In the aggregate, all payments under the
settlement cannot exceed $3.75 billion in present value. Future payments will be
made only as and if needed, and are subject to annual maximum amounts. In
addition, American Home Products will receive credits for future payments to
persons who opt out of the settlement under certain circumstances.
The Company will record a charge of $4.75 billion pretax ($3.29 billion after
tax, equal to $2.51 per share) to provide for expected payments to the
settlement funds, other judgments and settlements, and legal costs.
- more -
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- 5 -
The charge, which is net of available insurance, will be reflected in the 1999
third quarter financial results.
Redux and Pondimin were indicated for the treatment of obesity as part of a
broader weight management program, including diet and exercise. On September 15,
1997, Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home
Products, voluntarily withdrew Redux and Pondimin from the market after the FDA
presented to the Company new and preliminary information about possible heart
valve abnormalities in some patients using these products.
More recent well-controlled clinical trials -- many of which have already been
published in peer-reviewed journals and presented at major medical meetings ---
indicate that serious heart valve disease among former diet drug users is rare
and the actual prevalence of heart valve regurgitation is far lower than was
suggested at the time of the products' withdrawal. These findings are consistent
with the clinical experience of cardiologists.
A toll-free telephone number (1-800-386-2070) has been established to provide
information on the settlement.
- more -
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- 6 -
Wyeth-Ayerst Laboratories is a major research-oriented pharmaceutical company
with leading products in the areas of women's health care, cardiovascular
disease therapies, central nervous system drugs, anti-inflammatory agents,
vaccines and generic pharmaceuticals. American Home Products is one of the
world's largest research-based pharmaceutical and health care products
companies. It is a leader in the discovery, development, manufacturing and
marketing of prescription drugs and over-the-counter medications. It is also a
global leader in vaccines, biotechnology, agricultural products and animal
health care.
The statements in this press release that are not historical facts are
forward-looking statements that involve risks and uncertainties including,
without limitation, court approval of the settlement agreement, the outcome of
any appeals, and the extent to which opt out rights are exercised, and other
risks and uncertainties, including those detailed from time to time in AHP's
periodic reports, including quarterly reports on Form 10-Q and the annual report
on Form 10-K, filed with the Securities and Exchange Commission. Actual results
may differ from forward-looking statements.
# # #
<PAGE>
Exhibit 99.2
MEMORANDUM OF UNDERSTANDING
CONCERNING SETTLEMENT
OF DIET DRUG LITIGATION
Dated: OCTOBER 7, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE..........................................................................................................1
I. SETTLEMENT AMOUNTS AND PARTICIPANTS......................................................................3
1. DEFINITIONS.....................................................................................3
2. SCOPE OF THE SETTLEMENT CLASS...................................................................9
3. AHP'S PAYMENT OBLIGATIONS......................................................................11
A. ESTABLISHMENT OF SETTLEMENT TRUST.....................................................11
B. FUND A................................................................................12
C. FUND B................................................................................13
D. OTHER PROVISIONS......................................................................17
4. SECURITY ARRANGEMENTS..........................................................................18
II. CLASS MEMBER RIGHTS AND BENEFITS........................................................................21
1. SCREENING/REFUND/MEDICAL SERVICES/CASH/RESEARCH BENEFITS
PAYABLE FROM FUND A............................................................................21
A. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN
AND/OR REDUX FOR MORE THAN 60 DAYS ...................................................21
B. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN
AND/OR REDUX FOR 60 DAYS OR LESS......................................................22
C. BENEFITS FOR ALL CLASS MEMBERS........................................................23
2. COMPENSATION BENEFITS PAYABLE FROM FUND B......................................................24
A. ELIGIBLE CLASS MEMBERS................................................................24
B. BENEFITS AVAILABLE....................................................................25
C. PAYMENT PROVISIONS....................................................................27
3. OPT-OUT RIGHTS.................................................................................28
4. ACCELERATED IMPLEMENTATION OPTION..............................................................33
</TABLE>
2
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<TABLE>
<S> <C>
III. AHP RIGHTS AND BENEFITS.................................................................................35
1. CREDITS........................................................................................35
2. EFFECT ON CLAIMS...............................................................................36
3. PROTECTION OF AHP FROM CLAIMS BY NON-SETTLING DEFENDANTS.......................................37
4. PROTECTION OF AHP FROM POSSIBLE SUBROGATION CLAIMS.............................................38
5. WALKAWAY RIGHTS................................................................................38
6. LIMITATION ON FINANCIAL OBLIGATIONS ...........................................................39
IV. SETTLEMENT IMPLEMENTATION...............................................................................39
1. GENERAL........................................................................................39
2. JURISDICTION...................................................................................39
3. APPROVAL PROCESS AND NOTICE PROVISIONS.........................................................40
4. CONDITIONS.....................................................................................41
5. ADMINISTRATION OF CLAIMS.......................................................................41
6. ATTORNEYS' FEES................................................................................43
7. OTHER PROVISIONS...............................................................................45
</TABLE>
3
<PAGE>
TABLE OF EXHIBITS
EXHIBIT "A" FUND B MATRICES
A-1 - FUND B PAYMENT MATRICES
A-2 - CRITERIA FOR THE APPLICATION OF THE MATRICES
A-3 - MATRIX LEVELS OF VALVULAR HEART DISEASE
EXHIBIT "B" CREDITS
EXHIBIT "C" DEFINITION OF SETTLED CLAIMS
EXHIBIT "D" LIST OF RELEASED PARTIES
EXHIBIT "E" JUDGMENT REDUCTION FOR CLAIMS BY THIRD PARTIES
4
<PAGE>
MEMORANDUM OF UNDERSTANDING CONCERNING
SETTLEMENT OF DIET DRUG LITIGATION
PREAMBLE
American Home Products Corporation ("AHP") and the undersigned
representatives of the purported class and subclasses defined herein (the "Class
Representatives") (together, the "Parties") hereby agree to propose a nationwide
class action settlement which would resolve, on the terms set forth in this
Memorandum of Understanding ("MOU"), "Settled Claims" against AHP and other
"Released Parties" arising from the marketing, sale, distribution and use of the
diet drugs Pondimin and Redux pending in various courts, including but not
limited to claims which have been made in the actions that have been transferred
for coordinated or consolidated pretrial proceedings to the United States
District Court for the Eastern District of Pennsylvania under Docket No. MDL
1203 (the "Federal District Court"), in the ongoing trial in VADINO ET AL. V.
AHP (Docket No. MID-L-425-98), and in the numerous other state courts around the
United States. The Parties to this MOU are aware of the following certified or
conditionally certified nationwide or statewide classes involving Pondimin and
Redux: United States District Court for the Eastern District of Pennsylvania, IN
RE DIET DRUG PRODUCTS LIABILITY LITIGATION, MDL 1203 (nationwide medical
monitoring class); West Virginia (BURCH ET AL. V. AHP, Civil Action No.
97-C-204(1-11)) (statewide personal injury and medical monitoring class);
Illinois (RHYNE V. AHP, 98 CH 4099) (statewide refund and monitoring
reimbursement class); New Jersey (VADINO ET AL. V. AHP, Docket No. MID-L-425-98)
(statewide Unfair and Deceptive Acts and Practices and medical monitoring
class); New York (NEW YORK DIET DRUG LITIGATION, Index No. 700000/98) (statewide
medical monitoring class); Pennsylvania (PENNSYLVANIA DIET DRUG LITIGATION,
Master Docket No. 9709-3162 C.C.P. Phila.) (statewide medical monitoring
5
<PAGE>
class); Texas (EARTHMAN V. AHP, No. 97-10-03970 CV, Dist. Ct. Montgomery Co.
Texas) (statewide medical monitoring class); Washington (ST. JOHN V. AHP,
97-2-06368-4) (statewide medical monitoring class). The Parties are committed to
implementing this settlement in a manner that meets all legal requirements and
assures the appropriate participation of the various courts.
This MOU outlines the terms on which the Parties have agreed. These
terms will be set forth in a formal settlement agreement (such final agreement,
when executed, being referred to herein as the "Settlement Agreement"). The
terms of this MOU shall be merged with and superseded by the Settlement
Agreement. The Parties shall negotiate in good faith to prepare the Settlement
Agreement, which shall be executed within 45 days from the date of this MOU.
Prior to execution of the Settlement Agreement, however, this MOU is binding on
the Parties.
Neither this MOU nor the Settlement Agreement entered into pursuant to
this MOU shall be construed as evidence of or as an admission by AHP of any
liability or wrongdoing whatsoever or as an admission by the Class
Representatives or members of the Settlement Class as defined herein ("Class
Members") of any lack of merit in their claims.
Accordingly, AHP and the Class Representatives hereby agree, subject to
judicial approval (except as to the Accelerated Implementation Option ("AIO")
described in Section II.4 below), compliance with applicable legal requirements,
and other conditions, all as set forth below, that settlement fund(s) shall be
established, from which the benefits outlined herein will be paid to the Class
Members of the proposed settlement class and subclasses, and that the Settled
Claims against AHP and other Released Parties, as defined herein, will be
6
<PAGE>
settled, compromised and released, as outlined below:
7
<PAGE>
I. SETTLEMENT AMOUNTS AND PARTICIPANTS
1. DEFINITIONS
- "Adjusted Maximum Annual Payment Amount," or
"Adjusted MAPA," shall mean the maximum amount that
AHP shall be obligated to deposit in Fund B during
any Fiscal Year beginning with the second Fiscal Year
after the Final Judicial Approval Date through the
sixteenth Fiscal Year after the Final Judicial
Approval Date. The Pre-Adjusted MAPA for each such
year is set forth in Section I.3.C below. The
Adjusted MAPA with regard to any Fiscal Year refers
to the amount of the Pre-Adjusted MAPA for that year,
as adjusted by increases due to Unused Adjusted
MAPAs, as defined in Section I.3.C, from prior years
and accretion thereon as set forth therein, and as
adjusted by decreases due to accumulated accreted
credits applied thereto as provided herein.
- "AHP" means American Home Products Corporation, its
successors and assigns.
- "AHP Released Parties" shall mean those Released
Parties set forth in paragraphs (a) and (b) of
Exhibit "D." "Non-AHP Released Parties" shall mean
those Released Parties set forth in Exhibit "D,"
other than the AHP Released Parties.
- "Claims Administrator" shall mean a person or persons
to be appointed by the Trustees subject to approval
of the Court(s) to administer claims for benefits
pursuant to the settlement.
- "Court(s)" refers, as to any judicial action
contemplated herein, to such court or courts that the
Parties mutually agree shall be asked to take such
action, as the Parties shall set forth in the
Settlement Agreement.
- "Date 1" is the date after Final Judicial Approval,
to be agreed upon in the Settlement Agreement, by
which (i) Class Members in Subclasses 1(a) and 1(b)
must register to receive refund and/or Screening
Program benefits from Fund A, and (ii) Class Members
in Subclasses 2(a) and 2(b) must register to receive
refund benefits from Fund A.
- "Date 2" is 120 days after the end of the Screening
Period.
- "Diet Drug(s)" shall mean Fenfluramine marketed under
the brand name Pondimin and/or Dexfenfluramine
marketed under the brand name Redux.
8
<PAGE>
- "Endocardial Fibrosis" is defined as a condition (A)
diagnosed by (1) endomyocardial biopsy that
demonstrates fibrosis and cardiac catheterization
that demonstrates restrictive cardiomyopathy or (2)
autopsy that demonstrates endocardial fibrosis and
(B) other causes, including dilated cardiomyopathy,
myocardial infarction, amyloid, Loeffler's
endocarditis, endomyocardial fibrosis as defined in
Braunwald (involving one or both ventricles, located
in the inflow tracts of the ventricles, commonly
involving the cordae tendinea, with partial
obliteration of either ventricle commonly present),1
focal fibrosis secondary to valvular regurgitation,
E.G., "jet lesions," focal fibrosis secondary to
catheter instrumentation, and hypertrophic
cardiomyopathy with septal fibrosis, have been
excluded.
- "FDA Positive" is defined as mild or greater
regurgitation of the aortic valve of the heart and/or
moderate or greater regurgitation of the mitral valve
of the heart as these levels are defined in Singh2
(1999) and measured by an echocardiographic
examination performed and evaluated by qualified
medical personnel following the protocol as outlined
in Feigenbaum3 (1994) or Weyman4 (1994). The degrees
of regurgitation are determined as follows:
- Aortic Valve -- Mild or greater
regurgitation, defined as regurgitant jet
diameter in the parasternal long-axis view
(or in the apical long-axis view, if the
parasternal long-axis view is unavailable),
equal to or greater than 10% of the outflow
tract diameter (JH/LVOTH).
- Mitral Valve -- Moderate or greater
regurgitation, defined as regurgitant jet
area in any apical view equal to or greater
than 20% of the left atrial area (RJA/LAA).
- --------
1 Braunwald, E. HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W.B. Saunders Co., pp. 1433-34 (1997).
2 Singh, J.P., ET AL., "Prevalence of Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation" (The Framingham Heart Study),
AMERICAN J. CARDIOLOGY, 83: 897-902 (1999).
3 Feigenbaum, H., ECHOCARDIOGRAPHY, Williams & Wilkins, Baltimore, (5th
ed. 1994).
4 Weyman, A.E., PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY,
Philadelphia, Lea & Febiger, (1994).
9
<PAGE>
- "Final Judicial Approval" refers to the approval of
the Settlement Agreement as a whole by the Court(s)
and such approval(s) becoming final by the exhaustion
of all appeals without substantial modification of
the order or orders granting such approval(s). Final
Judicial Approval shall be deemed not to have been
obtained in the event that Trial Court Approval is
denied, and the period for appealing such denial has
expired without any such appeal having been taken.
- "Final Judicial Approval Date" shall mean the date on
which Final Judicial Approval occurs.
- "Fiscal Year" shall mean any twelve-month period
beginning on the first day of the month following the
month in which the Final Judicial Approval Date
occurs. In counting Fiscal Years, the first Fiscal
Year shall be the year which begins on the first day
of the month following the Final Judicial Approval
Date, the second Fiscal Year shall be the twelve-
month period beginning on the first day of the month
following the first anniversary of the Final Judicial
Approval Date, and so forth. This definition applies
only to the payment terms set forth herein and has no
effect on the tax or accounting year of the
Settlement Trust.
- "Initial Opt-out Period" shall mean the period to be
established by the Court(s) during which Class
Members may exercise the initial opt-out right
described in Section II.3.
- "Mild Mitral Regurgitation" refers to mitral valve
regurgitation as that level is defined in Singh5
(1999) and measured by an echocardiographic
examination performed and evaluated by qualified
medical personnel following the protocol as outlined
in Feigenbaum6 (1994) or Weyman7 (1994). That degree
of regurgitation is determined as follows: (1) either
the RJA/LAA ratio is more than 5% or the mitral
regurgitant jet height is greater than 1 cm from the
valve orifice, and (2) the RJA/LAA ratio is less than
20%.
- --------
5 Singh, J.P., ET AL., "Prevalence of Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation" (The Framingham Heart Study),
AMERICAN J. CARDIOLOGY, 83: 897-902 (1999).
6 Feigenbaum, H., ECHOCARDIOGRAPHY, Williams & Wilkins, Baltimore, (5th
ed. 1994).
7 Weyman, A.E., PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY,
Philadelphia, Lea & Febiger, (1994).
10
<PAGE>
- Primary Pulmonary Hypertension ("PPH") is defined as either or
both of the following:
1. For a diagnosis based on symptoms and findings prior
to death:
A. (i) Mean pulmonary artery pressure by
cardiac catheterization of
GREATER THAN OR EQUAL TO 25 mm
Hg at rest or GREATER THAN OR
EQUAL TO 30 mm Hg with exercise
with a normal pulmonary artery
wedge pressure LESS THAN OR EQUAL
TO 15 mm Hg8; or
(ii) A peak systolic pulmonary artery
pressure of GREATER THAN OR EQUAL
TO 60 mm Hg measured by Doppler
Echocardiography; or
(iii) Administration of Flolan to the
patient based on a diagnosis of PPH
with cardiac catheterization not
done due to increased risk in the
face of severe right heart
dysfunction; and
B. Medical records which demonstrate that the
following conditions have been excluded by
the following results9:
(i) Echocardiogram demonstrating no
primary cardiac disease including,
but not limited to, shunts,
valvular disease (other than
tricuspid or pulmonary valvular
insufficiency as a result of PPH or
trivial, clinically insignificant
left-sided valvular regurgitation),
and congenital heart disease (other
than patent foramen ovale); and
(ii) Left ventricular dysfunction
defined as LVEF LESS THAN 40%
defined by MUGA, echocardiogram or
cardiac catheterization;
(iii) Pulmonary function tests
demonstrating the absence of
obstructive lung disease
(FEV1/FVC GREATER THAN 50% of
predicted) and the absence of
GREATER THAN mild restrictive
lung disease (total
- --------
8 Rubin, L.J., S. Rich, PRIMARY PULMONARY HYPERTENSION, Marcel Dekker,
Inc., New York (1997).
9 Braunwald, E., ESSENTIAL ATLAS OF HEART DISEASES, Current Medicine,
Philadelphia, 1997, pg. 10-9.
11
<PAGE>
lung capacity GREATER THAN 60%
of predicted at rest); and
(iv) Perfusion lung scan ruling out
pulmonary embolism; and
(v) If, but only if, the lung scan is
indeterminate or high probability,
a pulmonary angiogram or a high
resolution angio computed
tomography scan or demonstrating
absence of thromboembolic disease;
and
C. Conditions known to cause pulmonary
hypertension8,9,10 including connective
tissue disease known to be causally related
to pulmonary hypertension, toxin induced
lung disease known to be causally related to
pulmonary hypertension, portal hypertension,
significant obstructive sleep apnea,
interstitial fibrosis (such as silicosis,
asbestosis, and granulomatous disease)
defined as greater than mild patchy
interstitial lung disease and familial
causes have been ruled out by a
Board-Certified Cardiologist or
Board-Certified Pulmonologist as the cause
of the person's pulmonary hypertension.
-OR-
2. For a diagnosis made after the individual's death:
A. Autopsy demonstrating histopathologic
changes in the lung consistent with primary
pulmonary hypertension and no evidence of
congenital heart disease (other than a
patent foramen ovale) with left-to-right
shunt, such as ventricular septal defect as
documented by a Board-Certified Pathologist;
and
B. Medical records which show no evidence of
alternative causes as described above for
living persons.
The foregoing definition of PPH ("the PPH Definition") is
intended solely for the purpose of describing claims excluded
from the definition of Settled Claims. The Parties agree that
the PPH Definition includes
- --------
10 Rich, S., Editor, Executive Summary from the Symposium on Primary
Pulmonary Hypertension, Evian, France, co-sponsored by the World Health
Organization, http://www.who.int/ncd/cvd/pph-html. September 6-10,
1998.
12
<PAGE>
but is broader than the rare and serious medical condition
suffered by the individuals described in the IPPHS study.11
The subjects in that study exhibited significantly elevated
pulmonary artery pressures with an average systolic pulmonary
artery pressure of 88 mm Hg and average mean pulmonary artery
pressure of 57 mm Hg. Two-thirds of the IPPHS patients
demonstrated NYHA Class III or IV symptoms. While the IPPHS
subjects would fall within the PPH Definition, the definition
also includes persons with a milder, less serious medical
condition.
- "Preliminary Approval" shall mean the granting, by order of
the appropriate trial Court(s), of the preliminary approval(s)
of the Settlement Agreement sought by the Parties pursuant to
Section IV.3 below, and the entry of an order or orders
directing the issuance of notice to the Settlement Class.
- "Preliminary Approval Date" shall mean the date on which
Preliminary Approval occurs.
- "Released Parties" refers to those persons or entities
described in Exhibit "D."
- "Screening Period" refers to the 12-month period (or such
longer period that shall be permitted by the Court(s) for good
cause shown, but in any case not to exceed 18 months) during
which benefits shall be available under the Screening Program.
- "Screening Program" refers to the program for providing
transthoracic echocardiograms and interpretive physician visit
benefits, as set forth in Section II.1.
- "Settled Claims" refers to those claims set forth in Exhibit
"C," and shall not include any claims based upon PPH,
including claims for compensatory, punitive, exemplary or
multiple damages arising from a PPH claim.
- "Transthoracic Echocardiogram" means a non-invasive, standard
echocardiogram which includes an M-Mode and 2D echocardiogram,
and Doppler and color Doppler evaluations of all four chambers
of the heart and all four heart valves.
- --------
11 Abenhaim, L., ET AL., Appetite-Suppressant Drugs and the Risk of
Primary Pulmonary Hypertension. International Primary Pulmonary
Hypertension Study Group, NEW ENGLAND JOURNAL OF MEDICINE, 1996,
335(9): 606-616.
13
<PAGE>
- "Trial Court Approval" shall mean the granting, by order, of
the approval(s) of the Settlement Agreement by the trial
Court(s).
- "Trial Court Approval Date" shall mean the date upon which
Trial Court Approval occurs.
- "Trust" or "Settlement Trust" shall mean a trust established
to receive funds to be paid by AHP as provided in this MOU and
the Settlement Agreement.
- "Trustees" shall mean those individuals approved by the
Court(s) to administer the Settlement Trust.
2. SCOPE OF THE SETTLEMENT CLASS
- The Parties shall seek certification of a nationwide class
solely for settlement purposes (the "Settlement Class").
- The Settlement Class will consist of:
All persons in the United States, its possessions and
territories who ingested Pondimin and/or Redux ("Diet Drug
Recipients"), or their estates, administrators or other legal
representatives, heirs or beneficiaries ("Representative
Claimants"), and any other persons asserting the right to sue
AHP or any Released Party independently or derivatively by
reason of their personal relationship with a Diet Drug
Recipient, including without limitation, spouses, parents,
children, dependents, other relatives or "significant others"
("Derivative Claimants").12 The Settlement Class does not
include any individuals who, on or before September 30, 1999,
have executed releases of AHP and/or the AHP Released Parties
relating to claims arising from the use of Diet Drugs.
- There will be five subclasses as follows:
- --------
12 Claims based upon PPH, as defined in Section I.1 above, are not Settled
Claims and may be pursued by Class Members notwithstanding the
settlement. The existing rights of such Class Members to litigate PPH
claims, and the defenses of AHP to such claims shall not in any way be
altered by this settlement.
14
<PAGE>
- "Subclass 1(a)" shall consist of all Diet Drug Recipients in
the Settlement Class (1) who ingested Pondimin and/or Redux
for 60 days or less, and (2) who have not been diagnosed by a
qualified physician as FDA Positive by an echocardiogram
performed after the commencement of Diet Drug use and before
September 30, 1999, and all Representative and Derivative
Claimants in the Settlement Class whose claims are based on
their personal or legal relationship with a Diet Drug
Recipient (1) who ingested Pondimin and/or Redux for 60 days
or less, and (2) who has not been diagnosed by a qualified
physician as FDA Positive by an echocardiogram performed after
the commencement of Diet Drug use and before September 30,
1999.
- "Subclass 1(b)" shall consist of all Diet Drug Recipients in
the Settlement Class (1) who ingested Pondimin and/or Redux
for more than 60 days, and (2) who have not been diagnosed by
a qualified physician as FDA Positive by an echocardiogram
performed after the commencement of Diet Drug use and before
September 30, 1999, and all Representative and Derivative
Claimants in the Settlement Class whose claims are based on a
personal or legal relationship with a Diet Drug Recipient (1)
who ingested Pondimin and/or Redux for more than 60 days, and
(2) who has not been diagnosed by a qualified physician as FDA
Positive by an echocardiogram performed after the commencement
of Diet Drug use and before September 30, 1999.
- "Subclass 2(a)" shall consist of all Diet Drug Recipients in
the Settlement Class (1) who ingested Pondimin and/or Redux
for 60 days or less, and (2) who have been diagnosed by a
qualified physician as FDA Positive by an echocardiogram which
was performed after the commencement of Diet Drug use and
before September 30, 1999, and all Representative and
Derivative Claimants in the Settlement Class whose claims are
based on a personal or legal relationship with a Diet Drug
Recipient (1) who ingested Pondimin and/or Redux for 60 days
or less, and (2) who has been diagnosed by a qualified
physician as FDA Positive by an echocardiogram which was
performed after the commencement of Diet Drug use and before
September 30, 1999.
- "Subclass 2(b)" shall consist of all Diet Drug Recipients in
the Settlement Class (1) who ingested Pondimin and/or Redux
for more than 60 days, and (2) who have been diagnosed by a
qualified physician as FDA Positive by an echocardiogram which
was performed after the commencement of Diet Drug use and
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<PAGE>
before September 30, 1999, and all Representative and
Derivative Claimants in the Settlement Class whose claims are
based on a personal or legal relationship with a Diet Drug
Recipient (1) who ingested Pondimin and/or Redux for more than
60 days, and (2) who has been diagnosed by a qualified
physician as FDA Positive by an echocardiogram which was
performed after the commencement of Diet Drug use and before
September 30, 1999.
- "Subclass 3" (which may include persons also included in
Subclasses 1(a) and 1(b)) shall consist of all Diet Drug
Recipients in the Settlement Class who have been diagnosed by
a qualified physician, after the commencement of Diet Drug use
and by the end of the Screening Period, as having Mild Mitral
Regurgitation but who have not been diagnosed by a qualified
physician as FDA Positive by an echocardiogram performed after
the commencement of Diet Drug use and by the end of the
Screening Period, and all Representative and Derivative
Claimants in the Settlement Class whose claims are based on a
personal or legal relationship with a Diet Drug Recipient who
has been diagnosed by a qualified physician, after the
commencement of Diet Drug use and by the end of the Screening
Period, as having Mild Mitral Regurgitation but who has not
been diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug
use and by the end of the Screening Period.
3. AHP'S PAYMENT OBLIGATIONS
A. ESTABLISHMENT OF SETTLEMENT TRUST
- A Settlement Trust will be established to receive the funds to
be paid by AHP under the terms of this settlement.
- The Parties agree that the Trustees will be nominated by the
Parties and that each nomination will be subject to agreement
of the Parties and subject to approval by the Court(s),
consistent with the provisions stated in Section IV.2 below.
- The Settlement Trust will begin as a reversionary trust and
will become non-reversionary upon Final Judicial Approval. If
Final Judicial Approval is not obtained, or if the MOU or
Settlement Agreement is terminated in accordance with its
terms for any other reason, all amounts remaining in the
Settlement Trust after payment of any charges and expenses
which the MOU and/or the Settlement Agreement expressly
authorized or required to be incurred and expended prior to
the reversion date, including any
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<PAGE>
amounts expended to assist in seeking Final Judicial Approval,
shall be returned to AHP.
- AHP shall have no right to any of the funds previously
deposited, nor to any of the funds subsequently deposited into
the Settlement Trust, as of the date the Trust becomes
non-reversionary. AHP shall have no further claim to such
funds for any purpose.
B. FUND A
- AHP shall make payments into Fund A as follows:
- $50 million five business days after the Preliminary
Approval Date.
- $383 million five business days after the Trial Court
Approval Date.
- $383 million 6 months after the preceding payment of
$383 million.
- $184 million five business days after the Final
Judicial Approval Date.
- The monies held by Fund A shall be available and shall be used
to pay all benefits payable from Fund A, out-of-pocket
expenses of Plaintiffs' Counsel approved by the Court(s) for
reimbursement in relation to Fund A, and all proper
administration expenses associated with the administration of
the settlement and the Settlement Trust insofar as they relate
to Fund A.
- In addition to the foregoing, AHP shall pay $200 million five
business days after the Final Judicial Approval Date into an
escrow account under the supervision of the Court(s) for
payment in such manner and in such amounts as the Court(s) may
determine are appropriate as compensation to Plaintiffs'
Counsel relating to Fund A, as contemplated by Section IV.6
hereof. AHP shall take no position on the amount of such fees
to be awarded as attorneys' fees or the allocation thereof.
Any amount in that escrow account not awarded in attorneys'
fees shall be returned to AHP by order of the Court(s).
- When the Trustees decide that Fund A's purposes have been met,
the remaining balance, if any, in Fund A shall be transferred
to
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<PAGE>
Fund B.
- Any transfer from Fund A to Fund B will not reduce the
Adjusted MAPA for the year in which any unused portion of Fund
A is transferred, and said transfer will not reduce the
maximum obligation of AHP to make payments to Fund B.
C. FUND B
- AHP shall make payments into Fund B as follows:
- $25 million five business days after the Preliminary
Approval Date.
- $625 million five business days after the Final
Judicial Approval Date.
- The $25 million which is paid to Fund B at the
Preliminary Approval Date and the $625 million which
is paid to Fund B at the Final Judicial Approval Date
shall be available and shall be used to pay all Class
Members who qualify to receive benefits from Fund B
through the end of the first Fiscal Year beginning
after the Final Judicial Approval Date and
thereafter, all common benefit fees and costs awarded
by the Court(s) in relation to Fund B, and all proper
administrative expenses associated with the
administration of the settlement and the Settlement
Trust insofar as they relate to Fund B.
- Beginning in the second Fiscal Year after the Final
Judicial Approval Date, the Trustees may request in
writing on a quarterly basis an additional amount,
said amount being referred to herein as the "Fund B
Deposit," needed (i) to pay claims received which
qualify for payment, including claims for counsel
fees and administrative expenses, but which have not
been paid due to an insufficient cash balance in Fund
B, and/or (ii) to maintain a $50 million reserve in
Fund B for administrative expenses (the
"Administrative Reserve"). AHP shall pay the Fund B
Deposit so requested no later than 15 days after the
date on which the Trustees provide AHP with written
notice of a request for a Fund B Deposit. AHP's
obligation to make such Fund B Deposit, however,
shall at all times be subject to the Adjusted MAPA.
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<PAGE>
- The Pre-Adjusted MAPA for each Fiscal Year
shall be as set forth below:
<TABLE>
<CAPTION>
Fiscal Year Fund B
Pre-Adjusted Maximum
Annual Payment Amount
<S> <C>
2nd Fiscal Year after the Final Judicial Approval Date $182,863,500
3rd Fiscal Year after the Final Judicial Approval Date $182,863,500
4th Fiscal Year after the Final Judicial Approval Date $182,863,500
5th Fiscal Year after the Final Judicial Approval Date $182,863,500
6th Fiscal Year after the Final Judicial Approval Date $182,863,500
7th Fiscal Year after the Final Judicial Approval Date $182,863,500
8th Fiscal Year after the Final Judicial Approval Date $182,863,500
9th Fiscal Year after the Final Judicial Approval Date $182,863,500
10th Fiscal Year after the Final Judicial Approval Date $182,863,500
11th Fiscal Year after the Final Judicial Approval Date $182,863,500
12th Fiscal Year after the Final Judicial Approval Date $182,863,500
13th Fiscal Year after the Final Judicial Approval Date $182,863,500
14th Fiscal Year after the Final Judicial Approval Date $182,863,500
15th Fiscal Year after the Final Judicial Approval Date $182,863,500
16th Fiscal Year after the Final Judicial Approval Date $480,000,000
</TABLE>
- In the event that the Adjusted MAPA in any Fiscal
Year is not required to be paid in its entirety, the
difference between the Adjusted MAPA for that Fiscal
Year and the payment amounts actually made by AHP to
Fund B in that Fiscal Year (the "Unused Adjusted
MAPA") shall accrete as follows: an average shall be
taken of the Unused Adjusted MAPA at the end of each
Fiscal quarter; that average Unused Adjusted MAPA
shall accrete at 6% for that year; and the Unused
Adjusted MAPA at the end of the fourth quarter of
that Fiscal Year, plus the accretion as calculated in
accordance with the provisions set forth above, shall
be added to the Adjusted MAPA available to the
Settlement Trust in the following year. For example
and by way of explanation, assume that an Unused
Adjusted MAPA of $50 million was generated by the end
of the first quarter of the third Fiscal Year and
remains unchanged for the next two Fiscal quarters,
but is reduced to $40 million by the end of the
fourth quarter of the Fiscal year. The average
quarterly Unused Adjusted MAPA for the third Fiscal
Year would be $47.5 million. Accreting at 6%, a total
accretion of $2,850,000 would then be added to the
Unused Adjusted MAPA of $40,000,000 at the end of the
fourth quarter of that Fiscal Year, resulting in a
total of $42,850,000 of Unused Adjusted MAPA to be
added to
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<PAGE>
the Adjusted MAPA available to the Settlement Trust
in the following Fiscal Year (the fourth Fiscal
Year). Because the Pre-Adjusted MAPA for the fourth
Fiscal Year is $182,863,500, the Adjusted MAPA for
that year, assuming no other adjustments, would be
$225,713,500. If the Trustees did not require any
Fund B Deposit in the fourth Fiscal Year, the
quarterly average of the Unused Adjusted MAPA for the
fourth Fiscal Year would be $225,713,500, which would
accrete at 6%, and the accreted amount, $239,256,310,
would be added to the Pre-Adjusted MAPA for the fifth
Fiscal Year, so that the Adjusted MAPA at the
beginning of the fifth Fiscal Year will be
$422,119,810, provided there are no further
adjustments.
- The credits referred to in Section III.1 shall
accrete at 6% per year, compounded annually,
commencing at the end of the Fiscal quarter during
which each credit is generated and ending on the date
of the Adjusted MAPA which is reduced by the
application of the credit, irrespective of the actual
passage of time. The determination of the amount of
such credits generated in any Fiscal Year shall be
made at the end of each Fiscal Year after the Final
Judicial Approval Date unless an earlier
determination is necessary to carry out the intention
of the Parties. Such accreted credits shall
accumulate and shall be applied to reduce the
Adjusted MAPAs in reverse order starting with the
first day of the sixteenth Fiscal Year after the
Final Judicial Approval Date. For example and by way
of explanation, assuming a $1 million credit were
generated during the last quarter of the first Fiscal
Year after the Final Judicial Approval Date, and
assuming no other adjustments to the Adjusted MAPA,
this credit would accrete until the first day of the
sixteenth Fiscal Year after the Final Judicial
Approval Date, would have an accreted value of
$2,260,904 and would be applied at that date to
reduce the Adjusted MAPA for that year. As a further
example by way of explanation, assuming that $300
million of credits were generated during the last
quarter of the third Fiscal Year after the Final
Judicial Approval Date, and assuming no other
adjustments to the Adjusted MAPA, $238,545,295 of
those credits would accrete until the first day of
the sixteenth Fiscal Year after the Final Judicial
Approval Date, at which time those credits would have
an accreted value of $480 million and would be
applied at that date to eliminate the full amount of
the Pre- Adjusted MAPA for that year; the remaining
$61,454,705 of those third year credits would accrete
until the first day of the fifteenth Fiscal Year
after the Final Judicial Approval Date, at which time
those credits would have an accreted value of
$116,659,378 and would be
20
<PAGE>
applied at that date to reduce the Pre-Adjusted MAPA
for the fifteenth Fiscal Year by that amount; the
Pre-Adjusted MAPA for the fifteenth Fiscal Year would
therefore be $66,204,122 (namely, $182,863,500 minus
$116,659,378).
- Prior to the end of the first quarter of the
sixteenth Fiscal Year after the Final Judicial
Approval Date, the Trustees shall make a calculation
as to a Final Payment to be made by AHP to Fund B
(the "Final Payment"). The Final Payment, if any, by
AHP into Fund B, shall be the lesser of two amounts,
"X" or "Y," where:
- Amount "X" refers to the projected amount of
additional funds necessary to meet the
obligations of Fund B. To make this
projection, the Trustees shall cause an
actuarial determination to be made, based on
the experience of the Settlement Trust, as
to the amount of additional funds, if any,
which will be required to fund obligations
to Class Members who have qualified or are
likely in the future to qualify for benefits
from Fund B and associated administrative
expenses. In determining Amount "X," the
Trustees shall also take into consideration
the then cash balance in Fund B (including
the Administrative Reserve), its projected
future investment and other income, and an
estimate of required future administrative
expenses.
- Amount "Y" refers to the difference between
(i) the Adjusted MAPA computed as of the
first day of the sixteenth Fiscal Year
following the Final Judicial Approval Date,
giving due credit for all Unused Adjusted
MAPAs with 6% accretions thereon, and all
credits to which AHP is entitled under the
Settlement Agreement with 6% accretions
thereon, and (ii) any amounts paid by AHP to
Fund B during the first quarter of the
sixteenth Fiscal Year.
- After making the foregoing calculation, but prior to
payment thereof, the Trustees shall provide a report
to Class Counsel and to AHP setting forth the
Trustees' projection of the amount of additional
funds, if any, which will be necessary to meet the
obligations of Fund B, as described above. The report
shall contain all supporting information necessary to
allow Class Counsel and AHP to evaluate the accuracy
and reasonableness of the projection. Such supporting
information shall include, without limitation, the
Trustees' methodology for making the projection and
any assumptions used in making the projection. Either
AHP or Class Counsel shall have the right to seek any
21
<PAGE>
additional information reasonably requested by them,
and to contest the Trustees' projections to the
Court(s), which shall modify such projection if it is
determined to be unreasonable or lacking in
substantial support. AHP shall make the Final Payment
within 15 days after a final determination of the
amount thereof. In the event AHP seeks a stay of such
determination pending appeal and posts adequate bond,
Class Counsel shall not oppose such a stay.
- At such time as the accumulated accreted credits are
equal to or exceed the remaining payment obligations
of AHP, as calculated hereunder, the Final Payment
shall be deemed to have been made.
- If no Final Payment is required pursuant to this
provision, or if a Final Payment is made or deemed to
have been made pursuant to the foregoing provisions,
AHP shall have no further obligation to make any
payments to Fund B under the Settlement Agreement.
- The monies held by Fund B shall be available and
shall be used to pay all benefits payable from Fund
B, all common benefit fees and costs awarded by the
Court(s) in relation to Fund B, and all proper
administrative expenses associated with the
administration of the settlement and the Settlement
Trust insofar as they relate to Fund B.
D. OTHER PROVISIONS
- The Settlement Trust shall be structured and managed
to qualify as a Qualified Settlement Fund under
Section 468B of the Internal Revenue Code and related
regulations and will contain customary provisions for
such trusts including obligations of the Settlement
Trust to make tax filings and to provide to AHP
information to permit AHP to report deductions
properly for tax purposes.
- The Parties agree that all of the amounts being paid
pursuant to the terms of this MOU and the settlement
are being paid as damages (other than punitive
damages) on account of alleged physical personal
injuries or alleged physical sickness of the members
of the Settlement Class as described in Section
104(a)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Parties further agree that
the claims set forth in the definition of Settled
Claims in Exhibit "C" hereto have their origin in
such alleged physical personal injuries or physical
sickness.
22
<PAGE>
23
<PAGE>
- AHP shall have no obligation to make any payments
pursuant to the settlement except as expressly set
forth herein. AHP shall have no responsibility for
the management of the Settlement Trust or any
liability to any Class Member arising from the
handling of claims by the Trustees.
- Appropriate provisions for the termination of the
Settlement Trust will be agreed upon and set forth in
the Settlement Agreement.
4. SECURITY ARRANGEMENTS
- AHP agrees that, during the period after the Trial Court
Approval Date and until those payments to be made five
business days after the Final Judicial Approval Date have been
made, AHP shall maintain credit facilities in an amount that
will at all times exceed, by not less than $1 billion, the sum
of (a) its outstanding commercial paper borrowings, (b) the
amount of any uses (other than the payments under this
agreement) for which such credit facilities have been
committed and (c) outstanding drawings under the credit
agreement.
- Fifteen days after the Final Judicial Approval Date, AHP shall
establish and thereafter maintain a fund (the "Security Fund")
consisting of high- grade marketable commercial securities (to
be defined in the Settlement Agreement), selected by AHP,
having a principal value equal to $370 million. If the credit
rating for AHP reported by both Moody's and Standard & Poor's
is below investment grade at any time during which the
Security Fund must be maintained hereunder, AHP shall deposit
additional securities as specified above having a principal
value of an additional $180 million.
- The Security Fund shall be terminated upon AHP's making, or
being deemed to have made, the Final Payment provided for in
Section I.3.C above.
- AHP shall be entitled to withdraw from the Security Fund all
income earned thereby. However, in the event that the credit
rating of AHP reported by both Moody's and Standard & Poors is
below investment grade at any time during which the Security
Fund must be maintained hereunder, AHP shall no longer be
entitled to withdraw from the Security Fund the income earned
thereby, except that AHP shall thereafter be entitled to
withdraw, at each tax payment date, such amount thereof as
shall equal all federal, state and local taxes payable by AHP
with respect to or on account of the whole amount of the
Security Fund. AHP shall be responsible for the payment of all
federal, state and
24
<PAGE>
local taxes payable with respect to or on account of the
Security Fund.
- AHP shall grant to the Trustees a perfected security interest
in the Security Fund as collateral for AHP's obligations under
the Settlement Agreement. The assets in the Security Fund
shall at all times be owned by AHP, subject to the rights of
the Trust as a secured creditor.
- For purposes of this MOU and the Settlement Agreement, an
"Uncured Failure to Make Payment" is an event after the Final
Judicial Approval Date in which:
(1) AHP fails to make a payment to Fund B which was due
and not timely paid and failure to make payment was
due to either a financial inability to pay or a
deliberate unwillingness to pay, such determinations
having been made by order of the Court(s) after an
evidentiary hearing; and
(2) AHP fails to make that payment within thirty days
after such order becomes final after exhaustion of
all appeals, if any, or AHP fails to make that
payment thirty days after a trial court order
declaring an Uncured Failure to Make Payment and is
unable to obtain a stay of that order pending an
appeal from such order.
- At least thirty days prior to such an evidentiary hearing, AHP
and Class Counsel shall have the right to receive from the
Trustees such information as they reasonably request relating
to the Trustees' claim that such payment was due and owing, as
to which issue the Trustees shall have the burden of proof.
- In the event of an Uncured Failure to Make Payment, securities
and/or cash in the Security Fund having a principal value
equal to the entire amount of the Security Fund shall be
transferred to an escrow account under the supervision of the
Court(s), without impairing the security interest of the
Trust. The portion of the escrow account, if any, needed to
satisfy obligations of AHP under the Settlement Agreement
shall be paid to the Trust pursuant to order of the Court(s)
or on agreement of the Parties. Any unused amount of the
escrow account shall be returned to AHP at the time the Final
Payment is made or deemed to have been made. Any income earned
on the account shall remain the property of the account, and
all federal, state and local taxes payable with respect to the
escrow account shall be paid out of the account. Additional
conditions and procedures for the establishment, operation and
distribution of the escrow account shall be set forth in the
Settlement Agreement.
25
<PAGE>
- In the event of the following occurrences:
(1) The occurrence of more than one Uncured Failure to Make
Payment within a two-year period; and
(2) The depletion of the amount of the assets which AHP is
required to have on deposit in the Security Fund or in
the escrow account described above by more than fifty
per cent of the then-required amount of assets; and
(3) A determination by the Court(s) after notice and an
opportunity to be heard by all interested parties that
the remaining assets in the Security Fund or in such
escrow account are not likely to be sufficient to pay
the remaining Fund B obligations to members of the
class as of that point in time;
then in such event all Diet Drug Recipients who (i) are
diagnosed as FDA Positive or as having Mild Mitral
Regurgitation by an echocardiogram performed after the
commencement of Diet Drug use and by the end of the
Screening Period and who have registered for settlement
benefits by Date 2, or (ii) are diagnosed as having
Endocardial Fibrosis by September 30, 2005, and have
registered for settlement benefits by January 31, 2006,
together with their associated Representative and/or
Derivative Claimants, if such Class Members have not
received Matrix-Level V benefits set forth in Exhibit "A,"
will have a right to opt out of the settlement and pursue
all of their Settled Claims (except for those claims set
forth in subparagraphs (5) and (7) of Exhibit "C"), against
AHP and the other Released Parties, including claims for
punitive and multiple damages. Specific procedures
pertaining to the exercise of such an opt-out shall be set
forth in the Settlement Agreement. In the event of such an
opt-out, neither the AHP Released Parties nor the Non-AHP
Released Parties may assert any defense based on any statute
of limitations or repose, the doctrine of laches, any other
defense predicated on the failure to timely pursue the
claim, or any defense based on "splitting" a cause of
action, any defense based on any release signed pursuant to
the Settlement Agreement, and/or any other defense based on
the existence of the Settlement Agreement, except to the
extent provided herein. In any legal action commenced by a
Class Member exercising a right of opt-out under these
circumstances, the Class Member shall reduce the amount of
his or her recovery by the amount of cash, if any, that the
Class Member has received from AHP and/or the Trust under
the terms of the settlement.
- Nothing contained in this section shall be construed to be a
waiver of or a limitation on rights which the Class Members,
Class Representatives or Trustees would otherwise have under
the law in the event of a breach
26
<PAGE>
of the Settlement Agreement.
27
<PAGE>
II. CLASS MEMBER RIGHTS AND BENEFITS
1. SCREENING/REFUND/MEDICAL SERVICES/CASH/RESEARCH BENEFITS PAYABLE FROM
FUND A
A. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN AND/OR
REDUX FOR MORE THAN 60 DAYS
- SCREENING PROGRAM: Diet Drug Recipients in Subclass
1(b) will be eligible for one transthoracic
echocardiogram and an associated interpretive physician
visit. Eligible Class Members must register for this
benefit by Date 1. This Screening Program shall be
conducted for a 12-month period after Final Judicial
Approval, in accordance with the terms and conditions
set forth in the Settlement Agreement. This period may
be extended for up to an additional 6 months by the
Court(s) for good cause shown.
- Diet Drug Recipients in Subclass 1(b) who do not accept
the Accelerated Implementation Option (SEE Section II.4
below) and who, independent of the Screening Program,
obtain a transthoracic echocardiogram after the end of
the Initial Opt-out Period but before the Final
Judicial Approval Date, may recover from Fund A the
lesser of (i) the Trust's cost of providing such an
echocardiogram and associated interpretive physician
visit under the Screening Program and (ii) the actual
amount paid for the echocardiogram by the Class Member,
net of amounts paid or reimbursed by an insurance
carrier or other third-party payor, but only in the
event that the settlement receives Final Judicial
Approval. Such a payment must be claimed by Date 2.
Class Members receiving such a payment may not also
participate in the Screening Program.
- ADDITIONAL MEDICAL SERVICES OR CASH: All Diet Drug
Recipients in Subclass 2(b) and those Diet Drug
Recipients in Subclass 1(b) who have obtained an FDA
Positive diagnosis by a qualified physician after
Pondimin and/or Redux use but by the end of the
Screening Period, will be entitled to receive, at the
Class Member's election, either (i) valve-related
medical services up to $10,000 in value to be provided
by the Trust (with the services to be specified in the
Settlement Agreement) or (ii) $6,000 in cash. Such cash
payments and funds for such medical services will come
from Fund A. Eligible Class Members must register for
this benefit and make the affirmative election as to
whether they wish to receive cash or services by Date
2.
28
<PAGE>
29
<PAGE>
- REFUND: Diet Drug Recipients in Subclasses 1(b) and
2(b), or their associated Representative Claimants,
will be eligible for a refund in the fixed amount
of $30 per month of use for Pondimin and $60 per
month of use for Redux, subject to a maximum of $500
per Class Member; provided, however, that such benefits
will be made available to members of Subclasses 1(b)
and 2(b) only if, and to the extent that, Fund A
possesses sufficient assets to pay such benefits after
paying or creating a reserve for payment of all other
authorized expenses and benefits to be provided by Fund
A. Eligible Class Members must register for this
benefit by Date 1.
B. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN AND/OR REDUX FOR
60 DAYS OR LESS:
- REFUND: Diet Drug Recipients in Subclasses 1(a) and
2(a) or their associated Representative Claimants will
be eligible for a refund in the fixed amount of $30 per
month of use for Pondimin and $60 per month of use for
Redux. Eligible Class Members must register for this
refund benefit by Date 1.
- SCREENING PROGRAM:
- In general, members of Subclass 1(a) are not entitled
to screening benefits.
- If, however, during the Screening Period, a Diet Drug
Recipient in Subclass 1(a), independent of the
Screening Program, obtains an FDA Positive
transthoracic echocardiogram, he/she may recover from
Fund A the lesser of (i) the cost to the Trust of
providing such an echocardiogram and an associated
interpretive physician visit under the Screening
Program, and (ii) the actual amount paid for the
transthoracic echocardiogram and associated
interpretive physician visit by the Class Member, net
of amounts paid or reimbursed by an insurance carrier
or other third-party payor, but only in the event that
the settlement receives Final Judicial Approval.
Eligible Subclass 1(a) members must register for this
benefit by Date 2.
- In addition, the Trustees may, in their discretion in
appropriate cases for compassionate and humanitarian
reasons, provide a transthoracic echocardiogram and
associated interpretive physician visit during the
Screening Period for members of Subclass 1(a) who are
Diet Drug Recipients where the Trustees determine that
such persons are in need of such services and otherwise
30
<PAGE>
unable to obtain them or where there fare other
compelling reasons to provide such services to such
persons. Total disbursements for such services shall
not exceed $20 million. Eligible Subclass 1(a) members
must apply for such benefits by Date 1.
- ADDITIONAL MEDICAL SERVICES OR CASH. All members of
Subclass 2(a) who are Diet Drug Recipients as well as
those members of Subclass 1(a) who are Diet Drug
Recipients and who have obtained an FDA Positive
diagnosis by a qualified physician after drug use but
by the end of the Screening Period, will be entitled to
receive, at the Class Member's election, either (i)
valve-related medical services up to $5,000 in value to
be provided by the Trust (with the services to be
specified in the Settlement Agreement) or (ii) $3,000
in cash. Such cash payments and funds for such medical
services will come from Fund A. Eligible Class Members
must register for this benefit and make the affirmative
election as to whether they wish to receive cash or
services by Date 2.
C. BENEFITS FOR ALL CLASS MEMBERS
- MEDICAL RESEARCH AND EDUCATION FUND. An amount in Fund
A not to exceed $25 million may be used to finance
medical research and education related to heart
disease, in accordance with standards and procedures to
be specified in the Settlement Agreement.
The Medical Research and Education Fund will be funded
by the transfer of up to $25 million from Fund A to an
organization formed for that purpose and described in
Subsection (c) of Section 501 of the Internal Revenue
Code. The management of the Medical Research and
Education Fund will be by an independent Board of
Trustees, to be appointed by the Court(s). The Parties
agree that the Trustees will be nominated by the
Parties and that each nominee will be subject to
agreement of the Parties and subject to Court approval.
- MEDICAL/LEGAL REGISTRY. The Trustees shall apply a
portion of Fund A to establish, operate and maintain a
"Registry" to track the medical condition of Class
Members, both for purposes of processing claims for
benefits under the terms of the settlement and for
purposes of medical research and education. The
Settlement Agreement shall contain appropriate
provisions to assure that the identity of each such
Class Member shall be maintained in confidence. The
funds expended to create,
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maintain and operate this Registry shall be considered
administrative expenses of Fund A and shall not reduce
the $25 million which is available for medical
education and research. The terms and conditions under
which the Registry is to operate shall be defined in
the Settlement Agreement.
- In addition, the Trustees may, in their discretion, for
members of Subclasses 1(a) and 1(b), in cases of true
financial hardship provide a transthoracic
echocardiogram and associated interpretive physician
visit to such persons upon Trial Court Approval. Total
disbursements for such services shall not exceed $10
million.
2. COMPENSATION BENEFITS PAYABLE FROM FUND B
A. ELIGIBLE CLASS MEMBERS
- The following Class Members, and only such Class Members,
shall be entitled to the compensation benefits set forth on
the matrices in Exhibit "A" in accordance with the criteria
and definitions set forth in this MOU, Exhibit "A," and the
Settlement Agreement:
(1) Diet Drug Recipients who have been diagnosed by a
qualified physician as FDA Positive or as having Mild
Mitral Regurgitation by an echocardiogram performed
after the commencement of Diet Drug use and by the end
of the Screening Period and have registered for further
settlement benefits by Date 2;
(2) The Representative Claimants of Diet Drug Recipients
who have been diagnosed by a qualified physician as FDA
Positive or as having Mild Mitral Regurgitation by an
echocardiogram performed after the commencement of Diet
Drug use and by the end of the Screening Period, where
either the Diet Drug Recipient or the Representative
Claimant(s) for the Diet Drug Recipient has registered
for further settlement benefits by Date 2;
(3) The Derivative Claimants of Diet Drug Recipients who
have been diagnosed by a qualified physician as FDA
Positive or as having Mild Mitral Regurgitation by an
echocardiogram performed after the commencement of Diet
Drug use and by the end of the Screening Period, where
the Derivative Claimants have registered for
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settlement benefits by Date 2, to the extent that such
persons have a legally recognized claim for loss of
services, consortium, support, or the like, arising
from injury to the associated Diet Drug Recipient.
(4) Diet Drug Recipients who have been diagnosed by a
qualified physician as having Endocardial Fibrosis by
September 30, 2005 and have registered for Fund B
benefits by January 31, 2006.
(5) The Representative Claimants of Diet Drug Recipients
who have been diagnosed by a qualified physician as
having Endocardial Fibrosis by September 30, 2005,
where either the Diet Drug Recipient or the
Representative Claimant(s) of the Diet Drug Recipient
has registered for Fund B benefits by January 31, 2006.
(6) The Derivative Claimants of Diet Drug Recipients who
have been diagnosed by a qualified physician as having
Endocardial Fibrosis by September 30, 2005, where the
Derivative Claimants have registered for Fund B
benefits by January 31, 2006, to the extent that such
persons have a legally recognized claim for loss of
services, consortium, support, or the like, arising
from injury to the associated Diet Drug Recipient.
B. BENEFITS AVAILABLE
- If a Diet Drug Recipient qualifies for matrix payments
due to more than one condition, such Class Member shall
be entitled to receive only the higher of such
payments, but not both such payments.
- Matrices A-1 and B-1 in Exhibit "A" set forth the
maximum aggregate amount to which the Diet Drug
Recipient or his or her Representative Claimants are
collectively entitled. Where there is more than one
Representative Claimant associated with any particular
Diet Drug Recipient eligible for such matrix benefits,
the Trustees and/or Claims Administrator shall allocate
this amount among all of the Representative Claimants.
Matrices A-2 and B-2 in Exhibit "A" set forth the
maximum aggregate amount to which all Derivative
Claimants associated with any particular Diet Drug
Recipient are collectively entitled. Where there is
more than one Derivative Claimant associated with any
particular Diet Drug Recipient eligible for such matrix
benefits, the Trustees and/or Claims Administrator
shall allocate the matrix amount among all of the
Derivative Claimants.
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- Diet Drug Recipients who have been diagnosed by a
qualified physician as FDA Positive (but not also as
having Mild Mitral Regurgitation) by the end of the
Screening Period and have registered for settlement
benefits by Date 2, and their associated Representative
and Derivative Claimants who have registered (or who
are deemed to have registered) for settlement benefits
by Date 2, shall be eligible for matrix payments for
Matrix-Level conditions resulting from the valve or
valves for which there was an FDA Positive diagnosis by
a qualified physician by the end of the Screening
Period, subject to the above provision that if he/she
qualifies for more than one benefit, he/she shall be
entitled to the higher benefit, but not both.
- Diet Drug Recipients who have been diagnosed by a
qualified physician as having Mild Mitral Regurgitation
(but not also as FDA Positive) by the end of the
Screening Period and have registered for settlement
benefits by Date 2, and their associated Representative
and Derivative Claimants who have registered (or who
are deemed to have registered) for settlement benefits
by Date 2, shall be eligible for matrix payments only
for claims based upon the mitral valve, subject to the
above provision that if he/she qualifies for more than
one benefit, he/she shall be entitled to the higher
benefit, but not both.
- Diet Drug Recipients who have been diagnosed by a
qualified physician both as FDA Positive (due to mild
or greater aortic regurgitation) and as having Mild
Mitral Regurgitation by the end of the Screening Period
and have registered for settlement benefits by Date 2,
and their associated Representative and Derivative
Claimants who have registered (or who are deemed to
have registered) for settlement benefits by Date 2,
shall be eligible for matrix payments based upon either
the aortic or the mitral valve.
- Diet Drug Recipients who have been diagnosed by a
qualified physician as having Endocardial Fibrosis by
September 30, 2005, and have registered for Fund B
benefits by January 31, 2006, and their associated
Representative and Derivative Claimants who have
registered (or who are deemed to have registered) for
settlement benefits by January 31, 2006, shall be
entitled to the Endocardial Fibrosis benefits set forth
in the matrices in Exhibit "A," regardless of whether
or not the Diet Drug Recipient had valvular
regurgitation.
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- A Representative Claimant is "deemed" to have
registered for settlement benefits either when the
Representative Claimant registers for benefits or, if
applicable, as of the date when the Diet Drug Recipient
to which the claim relates has registered for
settlement benefits.
C. PAYMENT PROVISIONS
- The matrix payment amounts set forth in Exhibit "A"
will be increased by 2% per year, compounded annually,
beginning one year after the Final Judicial Approval
Date.
- A "Matrix Payment Cut-off Date" is established for
purposes of this settlement. The Matrix Payment Cut-off
Date shall be a date which is 14 years from the Final
Judicial Approval Date or December 31, 2015, whichever
is earlier. Those Class Members who fail to qualify for
payment on the matrices in Exhibit "A" by the Matrix
Payment Cut-off Date shall have no further right to
claim benefits under Fund B or to exercise a back-end
opt-out (discussed in Section II.3 below). However,
where a Diet Drug Recipient does qualify for payment on
the matrices in Exhibit "A" by the Matrix Payment
Cut-off Date, the Diet Drug Recipient and/or the
associated Representative and Derivative Claimants may
continue to receive higher amounts of matrix benefits,
if any, if the condition of the Diet Drug Recipient
which qualified such person for such payment progresses
to a more severe condition after the Matrix Payment
Cut-Off Date.
- Once a Diet Drug Recipient has reached a matrix-level
of severity before the Matrix Payment Cut-off Date, the
Diet Drug Recipient and any associated Representative
and/or Derivative Claimants can step up to higher
matrix levels and will be paid the incremental dollar
amount, if any, by which the higher severity level
matrix payment exceeds the matrix payment previously
received. Notwithstanding the foregoing, Class Members
who seek benefits for Endocardial Fibrosis must qualify
for payment on the matrices for that condition by
September 30, 2005 and register (or be deemed to have
registered) for benefits by January 31, 2006.
- To receive matrix benefits, the Class Member must
provide the Trustees or Claims Administrator with
appropriate documentation of the condition of the Diet
Drug Recipient that forms the basis for the claim,
including among other things, appropriate medical
records, a declaration under penalty of perjury from
the Diet Drug Recipient that, to the best of his/her
knowledge, such condition was not present prior to
usage of Pondimin and/or
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Redux; and a declaration on penalty of perjury from a
Board-certified Cardiologist or Cardiothoracic Surgeon
setting forth an opinion to a reasonable degree of
medical certainty that (i) the Diet Drug Recipient has
the condition which qualifies the Class Member for a
particular matrix payment, including, where applicable,
that the causation requirements applicable to
conditions (b)(v) and (c) of Matrix-Level V, as defined
in Exhibit "A" at A-3, either are or are not present;
(ii) to the best of such physician's knowledge, such
condition was not present prior to usage of Pondimin
and/or Redux; and (iii) all the conditions set forth in
Exhibit "A" at A-2 which determine whether Matrix A-1
or B-1 is applicable, either are present or are not
present.
- If the Class Member seeking a matrix payment is unable
to obtain the documentation described above through the
exercise of reasonable efforts, the Trustees and/or
Claims Administrator shall have the right to consider
other supporting documentation (as shall be further
specified in the Settlement Agreement) to establish the
Class Member's condition, subject to review by the
Court(s) pursuant to procedures to be set forth in the
Settlement Agreement. If this evidence establishes the
Class Member's condition, the Class Member shall be
entitled to receive the appropriate matrix benefits.
3. OPT-OUT RIGHTS
- As to all opt-outs, where there is both a Diet Drug
Recipient or a Representative Claimant and one or more
Derivative Claimants, the Diet Drug Recipient's or the
Representative Claimant's exercise or failure to
exercise an opt-out right shall be binding on the
associated Derivative Claimant(s).
- INITIAL OPT-OUT:
- ELIGIBLE: All Class Members.
- METHOD OF EXERCISE: Each Class Member
wishing to opt out from this settlement must
sign and submit timely written notice to the
Court(s), to the Trustees and/or Claims
Administrator and to AHP, by the expiration
of the Initial Opt-out Period. The Parties
will recommend that the Court(s) approve an
Initial Opt-out Period of 90 days from the
date on which class notice commences.
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- EFFECT OF EXERCISE: Any Class Member who
timely and properly exercises an initial
opt-out right may initiate, continue with,
or otherwise prosecute any legal claim
against AHP and the Released Parties without
any limitation, impediment or defense
arising from the terms of the Settlement
Agreement and subject to all defenses and
rights which AHP and the Released Parties
would otherwise have in the absence of the
Settlement Agreement. AHP agrees that it
will not use this MOU or this settlement to
cause delay to any Class Member who timely
and properly exercises his/her initial
opt-out right and initiates, continues with,
or otherwise prosecutes a claim against AHP.
- REVOCATION OF EXERCISE: Any Class Member may
revoke an election to exercise a right of
initial opt-out and thereby receive the
benefits of the settlement, provided that
the revocation takes place with the written
consent of AHP, which shall not be
unreasonably withheld.
- INTERMEDIATE OPT-OUT
- ELIGIBLE: All Diet Drug Recipients who are
not members of Subclasses 2(a), 2(b) or 3,
and who have been diagnosed by a qualified
physician as FDA Positive by an
echocardiogram performed after the
commencement of Diet Drug use and by the end
of the Screening Period, and their
associated Representative and/or Derivative
Claimants.
- METHOD OF EXERCISE: Each Class Member
wishing to exercise a right of intermediate
opt-out must do so by submitting timely
written notice of the Class Member's desire
to exercise such right to the Court(s), to
the Trustees and/or Claims Administrator and
to AHP, not later than Date 2. A Class
Member who wishes to exercise an
intermediate opt-out right must sign a
document acknowledging an understanding of
the settlement rights and benefits that will
be relinquished by exercise of the
intermediate opt-out right. A Class Member
may not exercise an intermediate opt-out
right after making election to receive
either $6,000 in cash or $10,000 in medical
services in the case of members of Subclass
1(b), pursuant to Section II.1.A above, or
$3,000 in cash or $5,000 in medical benefits
in the case of members of the Subclass 1(a),
pursuant to Section II.1.B above.
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- EFFECT OF EXERCISE: The intermediate opt-out
is subject to the following provisions. A
Class Member who timely and properly
exercises an intermediate opt-out right may
pursue all of his or her Settled Claims
(except for those claims set forth in
subparagraphs (5) and (7) of Exhibit "C"),
against the AHP Released Parties and/or the
Non-AHP Released Parties, but may only
assert a claim therein based on the heart
valve of the relevant Diet Drug Recipient
which was diagnosed by a qualified physician
as FDA Positive by an echocardiogram
performed after the commencement of Diet
Drug use and by the end of the Screening
Program. With respect to each Class Member
who exercises the intermediate opt- out
right and who initiates a lawsuit against
any of the Released Parties within one year
from the date on which the intermediate
opt-out right is exercised, the AHP Released
Parties shall not assert any defense based
on any statute of limitations or repose, the
doctrine of laches, any other defense
predicated on the failure to timely pursue
the claim, any defense based on "splitting"
a cause of action, any defense based on any
release signed pursuant to the Settlement
Agreement, and/or any other defense based on
the existence of the Settlement Agreement,
except to the extent provided herein. A
Class Member exercising an intermediate opt-
out right may not seek punitive, exemplary,
or any multiple damages against the AHP
Released Parties or the Non-AHP Released
Parties; provided, however, as consideration
for being a Non-AHP Released Party and for
receiving the benefit of this waiver of
punitive, exemplary, and multiple damages,
the Non- AHP Released Party must agree not
to assert any defense based on any statute
of limitations or repose, the doctrine of
laches, or any other defense predicated on
the failure to timely pursue the claim, any
defense based on "splitting" a cause of
action, any defense based on any release
signed pursuant to the Settlement Agreement,
and/or any other defense based on the
existence of the Settlement Agreement,
except to the extent provided herein; and
provided further that if the Non-AHP
Released Party so agrees, then the Class
Member may not recover more than the total
amount of compensatory damages he or she is
entitled to from all persons or entities in
connection with any claimed injury arising
from his/her use of Diet Drugs. A Class
Member exercising an intermediate opt-out
right may not use any previous verdicts or
judgments against the AHP Released Parties,
or factual findings necessary to such
verdicts or judgments, for purposes of
establishing claims or facts in order to
obtain a verdict or judgment against the AHP
Released Parties under the doctrines of res
judicata, collateral estoppel or other
doctrines of claim or
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issue preclusion. Nor may a Class Member
exercising an intermediate opt-out right
seek to introduce into evidence against the
AHP Released Parties, for any purpose, such
a verdict, judgment, or factual finding.
- SUPPLEMENTAL NOTICE: The Trustees shall give
Class Members a supplemental advance notice
of Date 2 which shall explain, among other
things, the importance of that date.
- BACK-END OPT-OUT
- ELIGIBLE: As to Matrix-Level claims based
upon valvular regurgitation, all Diet Drug
Recipients who have been diagnosed by a
qualified physician as FDA Positive or as
having Mild Mitral Regurgitation by an
echocardiogram performed after the
commencement of Diet Drug use and by the end
of the Screening Period, and who reach a
matrix-level of severity after September 30,
1999 but before the Matrix Payment Cut-off
Date, and their associated Representative
and/or Derivative Claimants, provided that
the Class Member has registered or is deemed
to have registered for settlement benefits
by Date 2. Class Members who knew prior to
September 30, 1999, that they have injury to
one or more of their heart valves and a
condition which would entitle them to
payments on the matrices in Exhibit "A," may
not exercise a back-end opt-out.
As to Matrix-Level claims based upon
Endocardial Fibrosis, all Diet Drug
Recipients who have not received the
diagnosis of Endocardial Fibrosis from a
qualified physician by September 30, 1999,
and who have subsequently been diagnosed by
a qualified physician as having Endocardial
Fibrosis by September 30, 2005, and their
associated Representative and/or Derivative
Claimants.
Class Members who are not eligible for
Matrix-Level benefits may not exercise the
back-end opt-out right provided by this
settlement.
- METHOD OF EXERCISE: The back-end opt-out
must be exercised by timely written notice
to the Court(s), to the Trustees and/or
Claims Administrator and to AHP, within 120
days after the date on which the Class
Member first knows or should have known in
the exercise of reasonable diligence that
the relevant Diet Drug Recipient has
developed a condition which qualifies for
payment on the matrices appended hereto as
Exhibit "A." A Class Member who wishes to
exercise a back-end opt-out right must sign
a document acknowledging an understanding of
the
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settlement rights and benefits that will be
relinquished by exercise of the back-end
opt-out. A Class Member may not exercise a
back-end opt-out right after claiming any
matrix payment.
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- EFFECT OF EXERCISE: The back-end opt-out is
subject to the following provisions. A Class
Member who timely and properly exercises a
back-end opt-out may pursue all of his or
her Settled Claims (except for those claims
set forth in subparagraphs (5) and (7) of
Exhibit "C"), against the AHP Released
Parties and/or the Non-AHP Released Parties,
but may only assert a claim therein as
follows: (i) if such person has opted out by
reason of a matrix- level of severity of a
condition of one or more heart valves
diagnosed by a qualified physician as FDA
Positive or Mild Mitral Regurgitation by an
echocardiogram performed after the
commencement of Diet Drug use and by the end
of the Screening Period, such lawsuit may
only assert a claim based on that heart
valve or valves and condition; and (ii) if
such person has opted out by reason of
Endocardial Fibrosis, such lawsuit may only
assert a claim based on Endocardial
Fibrosis. With respect to each Class Member
who exercises the back-end opt-out right and
who initiates a lawsuit against any of the
Released Parties within one year from the
date on which the back-end opt-out right is
exercised, the AHP Released Parties shall
not assert any defense based on any statute
of limitations or repose, the doctrine of
laches, any other defense predicated on the
failure to timely pursue the claim, any
defense based on "splitting" a cause of
action, any defense based on any release
signed pursuant to the Settlement Agreement,
and/or any other defense based on the
existence of the Settlement Agreement,
except to the extent provided herein. A
Class Member exercising a back-end opt-out
may not seek punitive, exemplary, or any
multiple damages against the AHP Released
Parties or the Non- AHP Released Parties;
provided, however, as consideration for
being a Non-AHP Released Party and for
receiving the benefit of this waiver of
punitive, exemplary, and multiple damages,
the Non-AHP Released Party must agree not to
assert any defense based on any statute of
limitations or repose, the doctrine of
laches, or any other defense predicated on
the failure to timely pursue the claim, any
defense based on "splitting" a cause of
action, any defense based on any release
signed pursuant to the Settlement Agreement,
and/or any other defense based on the
existence of the Settlement Agreement,
except to the extent provided herein; and
provided further that if the Non-AHP
Released Party so agrees, then the Class
Member may not recover more than the total
amount of compensatory damages he or she is
entitled to from all persons or entities in
connection with any claimed injury arising
from his/her use of Diet Drugs. A Class
Member exercising a back-end opt-out may not
use any previous verdicts or judgments
against the AHP Released Parties,
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or factual findings necessary to such
verdicts or judgments, for purposes of
establishing claims or facts in order to
obtain a verdict or judgment against the AHP
Released Parties under the doctrines of res
judicata, collateral estoppel or other
doctrines of claim or issue preclusion. Nor
may a Class Member exercising a back-end
opt- out right seek to introduce into
evidence against the AHP Released Parties,
for any purpose, such a verdict, judgment,
or factual finding.
4. ACCELERATED IMPLEMENTATION OPTION
- All Class Members shall be offered, through
the class notice (and may be offered through
other means), the option of obtaining
settlement benefits prior to the Final
Judicial Approval Date (the "Accelerated
Implementation Option" or "AIO") subject to
the conditions defined below and those that
will be set forth more fully in the
Settlement Agreement.
- Any Class Member may elect the AIO at any
time from the Preliminary Approval Date
until the Final Judicial Approval Date or,
unless AHP elects to extend the offer date
thereafter, the date on which it is
determined that the Settlement Agreement
will not receive Final Judicial Approval.
Persons electing the AIO may begin receiving
benefits thereunder at such time as the
trial Court(s) rule on the approval or non-
approval of the settlement.
- Each person electing the AIO will enter into
an individual agreement with AHP (the
"Individual Agreements"), separate from
AHP's agreement with the Settlement Class.
Such Individual Agreements shall be
effective prior to the Final Judicial
Approval Date and, if the Settlement
Agreement with the Settlement Class does not
receive Final Judicial Approval or is
terminated for any reason, such Individual
Agreements shall nevertheless continue to be
effective and binding.
- The Individual Agreements shall provide that
the parties thereto shall have all the same
rights and obligations to one another as the
benefits and rights accorded to Class
Members and to AHP under the Settlement
Agreement, except as provided below. Class
Members will have all the rights and
benefits provided in Sections II.1 and II.2,
and AHP will have all the rights and
benefits provided in Section III, except
subsection 5 thereof. The Parties hereto
will agree upon, and set forth in the
Settlement Agreement, provisions
establishing dates of implementation
applicable to such Individual Agreements.
- No persons exercising an initial opt-out
will be eligible to enter into an
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Individual Agreement, unless such initial
opt-out has been revoked with AHP's consent
pursuant to Section II.3. Persons signing
Individual Agreements will, by entering into
such Individual Agreements, knowingly and
affirmatively waive all intermediate and
back-end opt-out rights otherwise provided
by the Settlement Agreement. In addition,
such persons will agree not to object to
approval of the settlement by the Court(s)
and will agree not to appeal from Trial
Court Approval thereof.
- Prior to the Final Judicial Approval Date,
Fund A benefits for individuals accepting
this AIO will be paid out of Fund A; Fund B
benefits for eligible individuals accepting
the AIO will be paid out of Fund B, and AHP
shall deposit in Fund B any additional
amounts needed to pay such Fund B benefits
for individuals accepting the AIO.
- In the event of Final Judicial Approval,
all benefits due under the AIO shall be paid
from Fund A or Fund B, as applicable, and
AHP shall have no further obligation to make
payments to Fund B for the payment of such
AIO benefits, except as set forth in Section
I.3.C above. In that event, AHP will receive
a credit for the payment, prior to Final
Judicial Approval, of such Fund B benefits
pursuant to the preceding provision. That
credit will be applied against the earliest
payment(s) to Fund B required to be made by
AHP. All Individual Agreements shall be
administered after Final Judicial Approval
in all respects as if they were part of the
settlement, other than the fact that parties
to such Individual Agreements shall have no
intermediate or back-end opt-out rights.
- In the Settlement Agreement, the Parties
shall provide for appropriate security for
the payment of benefits due under the AIO in
the event that the settlement does not
receive Final Judicial Approval in lieu of
those set forth in Section I.4 above.
- In the event that the settlement does not
receive Final Judicial Approval or that the
Settlement Agreement is terminated, AHP
shall be obligated to pay AIO benefits
directly to persons who accepted the AIO.
AHP's obligations to make such payments
shall be subject to the same limitation on
AHP's maximum obligations as would have been
applicable to its Fund A and Fund B
obligations had the Settlement Agreement
received Final Judicial Approval.
- If the settlement fails to receive Final
Judicial Approval for any reason, an
agreed-upon share of the non-individual
components of Fund A (including medical
research, and costs of administration) will
be provided by AHP, through a mechanism to
be agreed upon, for the benefit of persons
accepting the AIO, in accordance with terms
and conditions to be specified in the
Settlement Agreement, provided that
administrative costs will be incurred only
to the extent reasonable in light of the
number of Individual Agreements in effect
and the extent of
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administration required therefor.
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- If AHP exercises its "walkaway" right under
Section III.5 of this MOU, the Individual
Agreements previously entered into shall
nevertheless be binding and effective on AHP
and the other parties thereto. The exercise
of the walkaway right by AHP will not affect
its obligations to those Class Members who
have accepted the AIO prior to AHP's
exercise of its walkaway right.
- The Parties shall ask the Court(s) to
supervise the award of attorneys' fees
relating to the Individual Agreements, as
set forth in Section IV.6 below, whether or
not the settlement receives Final Judicial
Approval.
III. AHP RIGHTS AND BENEFITS
1. CREDITS
- For initial, intermediate, and/or back-end
opt-outs, AHP shall receive credits against
its Fund B obligations in the event that
these individuals subsequently receive
payments from AHP pursuant to judgments or
settlements. The material terms of the
credits are outlined in Exhibit "B" and
shall be set forth in full in the Settlement
Agreement.
- In order to qualify for the credits set
forth in Exhibit "B," AHP must provide the
Trustees or Claims Administrator with
appropriate documentation of the condition
of the Diet Drug Recipient for which a
payment was made and for which credit is
claimed, including, among other things,
appropriate medical records and a
declaration on penalty of perjury from a
Board-certified Cardiologist or
Cardiothoracic Surgeon setting forth an
opinion to a reasonable degree of certainty
that (i) the Diet Drug Recipient has the
condition which would otherwise qualify a
Class Member for a particular matrix
payment, including, where applicable, that
the causation requirements applicable to
conditions (b)(v) and (c) of Matrix-Level V,
as defined in Exhibit "A" at A-3, either are
or are not present; (ii) to the best of such
physician's knowledge, such condition was
not present prior to usage of Pondimin
and/or Redux; and (iii) all the conditions
set forth in Exhibit "A" at A-2 which
determine whether Matrix A-1 or B-1 are
applicable, either are present or are not
present.
- If AHP is unable to obtain the documentation
described above in the exercise of
reasonable diligence, the Trustees and/or
Claims Administrator shall have the right to
consider other supporting documentation (as
shall be further specified in the Settlement
Agreement) to establish the Class Member's
condition, subject to review by the Court(s)
pursuant to procedures to be set forth in
the Settlement Agreement. If this evidence
establishes the Class Member's condition,
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AHP shall be entitled to the claimed credit.
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2. EFFECT ON CLAIMS
- Upon Final Judicial Approval, the Settlement
Agreement and any order(s) approving the
Settlement will release all Settled Claims
on behalf of all Class Members against AHP
and other Released Parties, except those
claims asserted by Class Members upon a
timely and proper exercise of any applicable
opt-out right granted by the settlement. In
addition, each Class Member who accepts
benefits pursuant to this settlement shall
execute an individual release of all his/her
Settled Claims against AHP and other
Released Parties. This individual release
will be ineffective, null and void as to
those claims which, under the terms of this
settlement, may be asserted by the Class
Member upon a timely and proper exercise of
any applicable opt-out right granted by the
settlement.
- Settled Claims are those described in
Exhibit "C" hereto. Settled Claims do not
include claims based on PPH.
- For purposes of any statute of limitations
or similar time bar, the AHP Released
Parties shall not assert that a Class Member
actually had PPH unless and until the
condition of the Class Member meets the
definition of PPH set forth in this MOU and
in the Settlement Agreement.
- In the event that a Class Member initiates a
claim based on PPH, the AHP Released Parties
shall not assert a defense based on
"splitting" of claims, causes of action
and/or parties by virtue of the fact that
the Class Member is included in the
Settlement, but the claim based on PPH is
not a Settled Claim.
- The Settlement Agreement shall set forth the
form(s) of release necessary to effectuate
this settlement and effectively to provide
AHP all the relief contemplated hereby. Such
release shall contain, INTER ALIA, a
covenant not to sue AHP or other Released
Parties on any Settled Claim.
- The Released Parties are those described in
Exhibit "D" hereto.
- Complaints asserting all Settled Claims on
behalf of the Settlement Class will be
dismissed with prejudice upon Trial Court
Approval. Such dismissals would be vacated
in the event that the settlement does not
receive Final Judicial Approval.
- After Date 2, the following persons shall
have no further right to any benefits under
the settlement and shall have no right to
pursue any Settled Claims against AHP or any
Released Party, except to the extent such
person timely and properly exercises, or has
exercised, an initial,
48
<PAGE>
intermediate or back-end opt-out:
(1) with respect to all Settled Claims
other than those based on
Endocardial Fibrosis, any Class
Member asserting a claim based on a
Diet Drug Recipient who: (a) has
not been diagnosed by a qualified
physician as FDA Positive nor as
having Mild Mitral Regurgitation by
an echocardiogram performed after
the commencement of Diet Drug use
and by the end of the Screening
Period, or (b) has been diagnosed
by a qualified physician as FDA
Positive or as having Mild Mitral
Regurgitation by an echocardiogram
performed after the commencement of
Diet Drug use and by the end of the
Screening Period, but the Class
Member has not registered or been
deemed to have registered for
settlement benefits by Date 2.
(2) with respect to Settled Claims
based on Endocardial Fibrosis, any
Class Member asserting a claim
based on a Diet Drug Recipient who:
(a) has not been diagnosed by a
qualified physician as having
Endocardial Fibrosis by September
30, 2005, or (b) has been diagnosed
by a qualified physician as having
Endocardial Fibrosis by September
30, 2005, but the Class Member has
not registered or been deemed to
have registered for settlement
benefits by January 31, 2006.
3. PROTECTION OF AHP FROM CLAIMS BY NON-SETTLING DEFENDANTS
- "Non-Settling Defendants" (as defined in
Exhibit "E") in any present or future
litigation involving Pondimin and/or Redux
shall be enjoined and barred from commencing
or prosecuting any claim against AHP or any
other Released Party, including claims for
contribution and/or non- contractual
indemnity, to the extent consistent with the
terms of Exhibit "E."
- All such claims pending against AHP or any
other Released Party in any court shall be
dismissed with prejudice upon Trial Court
Approval. Such dismissals would be vacated
in the event that the settlement does not
receive Final Judicial Approval.
- The Settlement Agreement shall contain
protection for Non-Settling Defendants as
provided in Exhibit "E" hereto, which shall
be set forth in full in the Settlement
Agreement.
49
<PAGE>
4. PROTECTION OF AHP FROM POSSIBLE SUBROGATION CLAIMS
- To the extent that any person has rights of
subrogation by virtue of a payment or
payments made to or for the benefit of any
specific Class Member who has not properly
and timely exercised a right of opt-out,
such rights of subrogation may be asserted
with respect to the Trustees' obligation to
make payments to that Class Member from Fund
B but shall not be asserted directly against
AHP and/or the Released Parties except to
the extent required by applicable Federal or
State law. AHP will promptly notify the
Trustees and/or Claims Administrator and the
affected Class Member of the assertion of
such a subrogation claim against AHP. The
Court(s) shall enter a bar order to preclude
the assertion of such subrogation claims
against AHP and/or the Released Parties,
except to the extent that it would be
impermissible to bar such claims under
provisions of applicable law.
- The Trustees and/or Claims Administrator
shall provide notice of subrogation claims
received by the Trustees to affected Class
Members and afford them an opportunity to
contest, otherwise object to or compromise
any such claims. In making distribution of
any amounts to which Class Members are
entitled from Fund B, the Trustees shall
recognize and pay subrogation claims from
the amount otherwise payable to such Class
Member, but only to the extent that the
subrogation claim is recognized by
applicable law. Unless the law clearly sets
forth different principles, the Trustees
shall not recognize a subrogation claim
unless: (1) it is affirmatively brought to
their attention prior to distribution of
Funds to a Class Member; (2) it is based on
a positive provision of law or a valid
enforceable contract; (3) the putative
subrogee clearly establishes that the
subrogee actually made a payment or payments
to or for the benefit of the Class Member
which is of a type that the putative
subrogee would be entitled to recover
against AHP and/or the Released Parties, and
then (4) only to the extent of the actual
payment made less an equitable debit for
attorneys' fees, and any other allowable or
appropriate charges against the putative
subrogee.
5. WALKAWAY RIGHTS
- AHP shall have the option to terminate and
withdraw from the Settlement Agreement, in
its sole discretion, based upon the number
of persons who have timely and properly
elected during the Initial Opt-Out Period to
be excluded from the Settlement Class. If
AHP elects to exercise this walkaway right,
it shall do so within 60 days of the close
of the Initial Opt-out Period.
50
<PAGE>
- The exercise of this walkaway right by AHP
will not affect its obligation to provide
the benefits to those Class Members who have
accepted the Accelerated Implementation
Option prior to AHP's exercise of its
walkaway right.
6. LIMITATION ON FINANCIAL OBLIGATIONS
- The maximum amount that AHP shall be
obligated to pay under this MOU and under
the Settlement Agreement shall be AHP's
obligation to make the payments to Fund A
and the associated escrow agent as specified
in Section I.3.B and AHP's obligation to
make payments to Fund B in accordance with
Section I.3.C. These limitations shall also
apply to AHP's obligations under Individual
Agreements entered into pursuant to the
Accelerated Implementation Option.
IV. SETTLEMENT IMPLEMENTATION
1. GENERAL
- In order to become effective, the settlement
must receive Final Judicial Approval, except
as to the Accelerated Implementation Option
and as otherwise expressly provided herein.
- The Parties recommend that the Court(s)
establish an Advisory Committee of Class
Counsel, which would consist of counsel
actively involved in State and Federal Diet
Drug Litigation. The purpose of the Advisory
Committee of Class Counsel would be to
advise the Trustees concerning the proper
operation and implementation of the
Settlement Agreement.
- The Parties recommend that, as part of the
process of administering the settlement, the
Court(s) shall appoint one or more
individuals to provide information to Class
Members and their counsel concerning the
terms and implementation of the Settlement
Agreement, subject to such guidelines as the
Court(s) shall set forth. The sums expended
for the activities of such persons shall be
considered administrative expenses of the
Trust which will be paid by Fund A as
incurred, even if prior to Final Judicial
Approval.
2. JURISDICTION
- Beginning with the execution of this MOU,
the Parties shall confer with the Federal
Court and the State Courts which, as of the
date of this MOU, have issued orders
certifying or conditionally certifying
statewide class actions involving Pondimin
and/or Redux and recommend that such Courts
confer with one another in an effort to
establish a jurisdictional and
administrative mechanism or mechanisms to
effectuate this
51
<PAGE>
<PAGE>
settlement.
- A trust shall be established and maintained to
receive and administer Fund A and Fund B. During the
period of time that the benefits of the Screening
Program are being provided to Class Members, the
majority of the Trustees or Administrators shall be
appointed and/or approved by the state courts which
have certified statewide medical monitoring classes
as of the date of this MOU.
3. APPROVAL PROCESS AND NOTICE PROVISIONS
- Promptly after executing this MOU, the Parties shall
jointly move the New Jersey Court for a stay of
further proceedings in VADINO.
- Within 45 days after executing this MOU, the Parties
shall use their best efforts and negotiate in good
faith to prepare and execute a Settlement Agreement
which shall set forth in full all terms and
conditions of this settlement.
- Within 10 days after executing the Settlement
Agreement, the Parties shall jointly move the
Court(s) for conditional certification of the
Settlement Class, Preliminary Approval of the
settlement, authorization to disseminate the class
notice and the designation of an Initial Opt-out
Period to terminate 90 days after the date on which
class notice commences in accordance with applicable
orders granting Preliminary Approval of the
settlement.
- The proposed form of the notice and proposed methods
of distribution shall be mutually agreed upon by the
Parties and jointly proposed to the Court(s). Fund A
will pay 50% and Fund B will pay 50% of the total
costs of printing, publishing and otherwise
disseminating the notice. In the event that the
settlement does not receive Final Judicial Approval,
the costs of printing, publishing or otherwise
disseminating notice shall be borne by AHP, and none
of the Funds will therefore have any obligation to
return or refund such costs to AHP.
- The additional procedures for effectuating and
obtaining Final Judicial Approval of the settlement
will be set forth in detail in the Settlement
Agreement.
- The Parties shall cooperate in all of these filings
and proceedings and in any related appeals.
- AHP shall retain its right to contest class
certification for litigation purposes.
52
<PAGE>
4. CONDITIONS
- AHP's obligations under the MOU and the Settlement
Agreement, other than its obligations to Class
Members who accept its AIO, will be subject to
conditions to be specified in the Settlement
Agreement, including:
- Final Judicial Approval of the Settlement
Agreement.
- The Parties' agreement as to the Court(s) to
which the settlement shall be submitted for
approval, the aspects of the settlement to
be submitted to each such court, the
Court(s) to be requested to take each of the
judicial actions contemplated herein, and
the Court(s) which are to supervise
subsequent implementation of the settlement.
- Entry of the stays described in Section IV.3
above.
- Entry of an order of the Court(s) barring
subrogation claims against AHP and barring
third-party claims for contribution and
indemnity against AHP and the Released
Parties, in accordance with Section III.3
and III.4 and Exhibit "E" hereto,
respectively.
- Filing and dismissal with prejudice of the
Class Representatives' complaint(s)
asserting all Settled Claims on behalf of
the Settlement Class and exhaustion of all
appeals therefrom.
- Prior approval of the MOU and the Settlement
Agreement by AHP's Board of Directors, and
by the Plaintiffs' Management Committee in
MDL 1203.
- Entry of such other orders as are needed to
effectuate the terms of the settlement.
- The Parties may waive any of the foregoing
conditions, but may otherwise terminate this MOU
and/or the Settlement Agreement if these conditions
are not satisfied in any respect.
5. ADMINISTRATION OF CLAIMS
- Provisions will be agreed upon and set forth in the
Settlement Agreement which assure to the reasonable
satisfaction of AHP and the Class Representatives
that the settlement benefits and rights shall be
administered in a manner which reasonably ensures
that Class Members who claim benefits are actually
entitled to receive them and that payments are not
made to Class Members who are not entitled to receive
53
<PAGE>
them. Accordingly, the Settlement Agreement
(including attachments thereto) will set forth
provisions including, but not limited to:
- Qualifications for persons administering
echocardiograms or other diagnostic
procedures.
- Qualifications for health care professionals
who interpret the echocardiograms or other
diagnostic procedures.
- Protocols to be followed in the
administration of these diagnostic
procedures.
- Information to be obtained from registering
Class Members and claimants (including
verification of drug use and medical
condition).
- Qualifications of Trustees and Claims
Administrator.
- Ability of Trustees to obtain expert medical
advice or other analyses in connection with
claims for benefits, if appropriate and
necessary.
- Penalties of perjury for false claims.
- AHP's right to obtain, at its expense, an
independent transthoracic echocardiogram of
any Class Member or any party to an
Individual Agreement seeking any benefits,
pursuant to the Settlement Agreement or
pursuant to such Individual Agreement.
- Review and auditing procedures, including by
the Parties, for all elements of the claims
process (including but not limited to
registration, echocardiogram, diagnostic
reports and claim forms, claims evaluation
and claims determination process).
- Periodic reporting of claims receipt,
processing, classification, payment, and
auditing.
- Resolution of any factual or other disputes
which arise in administration of claims.
- Supervision of the implementation of the
settlement by the Court(s).
54
<PAGE>
6. ATTORNEYS' FEES
- In the event that the settlement receives Final
Judicial Approval, the Court(s) shall award counsel
fees and litigation expenses from the settlement
funds to those attorneys who contributed to the
creation of the settlement fund through work devoted
to the "common benefit" of Class Members, including
any attorney who believes that he or she conferred
benefits upon the class through state court
litigation ("Common Benefit Attorneys") in accordance
with applicable principles of law and subject to the
following provisions.
- AHP agrees to pay Class Counsel and Common
Benefit Attorneys an attorney's fee in an
amount of up to $200,000,000 for the
services related to Fund A, subject to
approval of the appropriate Court(s). To the
extent that such fees are awarded by the
Court(s), they shall be paid by the escrow
agent from the escrow account into which AHP
is required to deposit said amounts for that
purpose, as set forth above in Section
I.3.B.
- For purposes of awarding attorneys' fees
from Fund B, AHP agrees that attorneys' fees
should be awarded and paid as a percentage
of or otherwise based on the net present
value, as of the Final Judicial Approval
Date, of the maximum amounts which AHP may
be legally obligated to pay to Fund B for
the benefit of the class, regardless of the
amount of claims actually paid at any given
point in time, pursuant to the principle
expressed in the case law, SEE BOEING V. VAN
GEMERT, 444 U.S. 472 (1980). The Parties
stipulate that for purposes of calculating
payment of attorneys' fees only, the net
present value, as of the Final Judicial
Approval Date, of the maximum amounts which
AHP may be legally obligated to pay to Fund
B for the benefit of the class is
$2,550,000,000. The Parties further agree
that the attorneys' fees payable from Fund B
to counsel for the Settlement Class ("Class
Counsel") and Common Benefit Attorneys from
Fund B shall not exceed $229 million, which
is 9% of the $2,550,000,000 dollar amount,
and that the actual amount of attorneys'
fees shall be as determined by the Court(s).
Attorneys representing individual Class
Members who receive a matrix payment from
Fund B shall be entitled to receive an
attorneys' fee in that percentage of the
amount due to the Class Member which is
determined by subtracting 9% from the
percentage amount of the contingent fee to
which the attorney is entitled under any
valid written contingent fee agreement with
the Class Member. Attorneys may also recover
reimbursement of reasonable out-of-pocket
costs out of matrix payments from Fund B, to
the extent authorized in the document
evidencing the attorney's retention and the
attorney's fee agreement with the Class
Member. It is expected that the Trustees
will not honor contingent fee agreements
with private counsel which were
55
<PAGE>
entered into in violation of applicable law.
- In the event that the settlement does not receive
Final Judicial Approval, AHP shall make a payment for
attorneys' fees for Fund A benefits paid or provided
under the AIO to an account to be established as
shall be set forth in the Settlement Agreement and
supervised by the Court(s). The first such payment
shall be in the amount of 20% of the dollar value of
all Fund A benefits paid or provided to individuals
under the AIO as of the date of such fee payment. At
quarterly intervals thereafter, AHP shall pay into
the account an amount equal to 20% of the dollar
value of all Fund A benefits paid or provided to
individuals under the AIO during the preceding
quarter. Any amounts paid into this account which are
not awarded in attorneys' fees shall be returned to
AHP by order of the Court(s). Any attorney, including
any attorney who believes that he or she conferred
benefits upon individuals electing the AIO through
state court litigation, may apply to the Court(s) for
a portion of the amount deposited in such account and
shall be entitled to payment of such common benefit
fees in accordance with applicable provisions of law.
Those accepting the AIO must expressly agree to this
provision regarding fees as a condition to exercising
the option.
- Prior to the time that the settlement receives Final
Judicial Approval or in the event that the settlement
does not receive Final Judicial Approval, AHP shall
deduct from any Fund B benefits paid to those
accepting the AIO an amount equal to 9% of the
aggregate amount being paid and shall deposit such
amounts in the account to be established as shall be
set forth in the Settlement Agreement and supervised
by the Court(s). Any attorney, including any attorney
who believes that he or she conferred benefits upon
individuals electing the AIO through state court
litigation, may apply to the Court(s) for a portion
of the amount deposited in such account and shall be
entitled to payment of such common benefit fees and
costs in accordance with applicable provisions of
law. Attorneys representing individual Class Members
who receive Fund B benefits under the AIO shall be
entitled to receive from such Class Members, and not
from the account supervised by the Court(s),
attorneys' fees in that percentage of the amount due
to the Class Member which is determined by
subtracting 9% from the percentage amount of the
contingent fee to which the attorney is otherwise
entitled under any valid written contingent fee
arrangement with the Class Member. Those accepting
the AIO must expressly agree to this provision
regarding fees as a condition to exercising the
option.
- In the event that the settlement receives Final
Judicial Approval, no additional attorneys' fees or
litigation expenses shall be paid for benefits
conferred on those individuals who accepted the AIO .
56
<PAGE>
7. OTHER PROVISIONS
- This MOU and the Settlement Agreement shall be
binding on the successors and assigns of the Parties.
- None of the Parties to the settlement, including AHP,
the Released Parties, or any Class Member, shall
offer the terms of this MOU or the Settlement
Agreement into evidence or otherwise rely on the
terms of this settlement in any judicial proceeding,
except insofar as it is necessary to enforce the
terms of the settlement or insofar as it is
appropriate under the terms of Section IV.3 above or
as otherwise contemplated hereby.
- As soon as practicable after the execution of the
MOU, the Parties shall take all steps which are
reasonably necessary to enable the Trust promptly to
provide Fund A benefits upon Final Judicial Approval
to all Class Members not exercising initial opt-out
rights. This includes reasonable and necessary steps
to establish the Settlement Trust, to establish a
mechanism to operate the Settlement Trust and
administer claims, to solicit, receive and process
claims from Class Members which will be necessary to
provide benefits to Class Members, to establish a
mechanism to provide medical screening, services and
cash to members of the class, to communicate with
Class Members and like activities. These expenses
shall not exceed $25 million. In the event that the
settlement is not approved, AHP will not be entitled
to a refund of any of the money spent for these
purposes.
- The Parties shall address in the Settlement Agreement
how disputes between the Parties and/or between Class
Members and the Trust shall be resolved.
- No provision of this MOU or any Exhibit thereto is
intended to create any third-party beneficiary to
this MOU.
- Upon execution of this MOU, AHP and Class Counsel
shall jointly establish a toll-free telephone number
and web site for persons requesting additional
information regarding the settlement. This number
shall be used to record the names and addresses of
such individuals and other information, so that
individual notice concerning the settlement may be
provided to them. These names and addresses shall be
kept strictly confidential and shall not be disclosed
to any person or used for any purpose other than for
issuance of settlement notice upon prior order of the
Court(s). AHP shall pay all costs relating to the
toll-free telephone line. In the event that the
settlement receives Final Judicial Approval, all
expenditures made by AHP in relation to the toll-free
57
<PAGE>
telephone line shall be considered administrative
expenses of Fund A, and AHP shall receive a credit in
the amount of all such expenditures in calculating
its next payment to Fund A.
IN WITNESS WHEREOF, the Parties have duly executed this Memorandum of
Understanding Concerning Settlement of Diet Drug Litigation on this 7th day of
October, 1999.
AMERICAN HOME PRODUCTS CORPORATION
BY:
----------------------------------
LOUIS HOYNES, GENERAL COUNSEL
CLASS COUNSEL
- ---------------------------------
ARNOLD LEVIN, ESQUIRE
LEVIN, FISHBEIN, SEDRAN & BERMAN
510 WALNUT STREET, SUITE 500
PHILADELPHIA, PA 19106
215-592-1500
- ---------------------------------
MICHAEL D. FISHBEIN, ESQUIRE
LEVIN, FISHBEIN, SEDRAN & BERMAN
510 WALNUT STREET, SUITE 500
PHILADELPHIA, PA 19106
215-592-1500
- ---------------------------------
STANLEY CHESLEY, ESQUIRE
WAITE, SCHNEIDER, BAYLESS & CHESLEY
1513 CENTRAL TRUST TOWER
FOURTH & VINE STREETS
CINCINNATI, OH 45202
513-621-0267
- ---------------------------------
JOHN J. CUMMINGS, ESQUIRE
CUMMINGS, CUMMINGS & DUDENHEFER
416 GRAVIER STREET
NEW ORLEANS, LA 70130
1-504-586-0000
FOR THE
PLAINTIFFS' MANAGEMENT COMMITTEE
- ---------------------------------
GENE LOCKS, ESQUIRE
GREITZER & LOCKS
1500 WALNUT STREET, 20TH FLOOR
PHILADELPHIA, PA 19102
800-828-3489
- ---------------------------------
SOL H. WEISS, ESQUIRE
ANAPOL, SCHWARTZ, WEISS, COHAN,
FELDMAN & SMALLEY, P.C.
1900 DELANCEY PLACE
PHILADELPHIA, PA 19103
215-735-2098
- ---------------------------------
CHRISTOPHER PLACITELLA, ESQUIRE
WILENTZ, GOLDMAN & SPITZER
90 WOODBRIDGE CENTER DRIVE
SUITE 900, BOX 10
58
<PAGE>
WOODBRIDGE, NJ 07095-0958
732-636-8000
FOR SUBCLASS 1(a):
- ---------------------------------
DIANNE NAST, ESQUIRE
RODA & NAST
801 ESTELLE DRIVE
LANCASTER, PA 17601
717-892-3000
FOR SUBCLASS 1(b):
- ---------------------------------
RICHARD LEWIS, ESQUIRE
COHEN, MILSTEIN, HAUSFELD & TOLL
1100 NEW YORK AVENUE, N.W.
SUITE 500, WEST TOWER
WASHINGTON, DC 20005-3934
202-408-4600
FOR SUBCLASS 2(a):
- ---------------------------------
MARK W. TANNER, ESQUIRE
FELDMAN, SHEPHERD & WOHLGELERNTER
1845 WALNUT STREET, 25TH FLOOR
PHILADELPHIA, PA 19103
215-567-8300
FOR SUBCLASS 2(b):
- ---------------------------------
R. ERIC KENNEDY, ESQUIRE
WEISMAN, GOLDBERG, WEISMAN & KAUFMAN
1600 MIDLAND BUILDING
101 PROSPECT AVENUE WEST
CLEVELAND, OH 44115
216-781-1111
FOR SUBCLASS 3:
- ---------------------------------
RICHARD WAYNE, ESQUIRE
STRAUSS & TROY
THE FEDERAL RESERVE BUILDING
150 EAST 4TH
CINCINNATI, OH 45202-4018
513-621-2120
59
<PAGE>
FUND B PAYMENT MATRICES
This Exhibit contains (1) the matrices that are used to determine the amount of
matrix benefits under Fund B, (2) criteria for the application of the matrices,
and (3) definitions of the levels of severity contained on the matrices.
EXHIBIT "A" TO MOU PAGE 1 OF 1 ORIGINAL 4 OF 4
<PAGE>
FUND B PAYMENT MATRICES
Matrix A-1* AGE AT DIAGNOSIS/EVENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Severity LESS THAN OR EQUAL TO 24 25-29 30-34 35-39 40-44 45-49
- ------------------------------------------------------------------------------------------------------------------------------------
I $ 123,750 $ 117,563 $ 111,685 $ 106,100 $ 100,795 $ 95,755
II $ 643,500 $ 611,325 $ 580,759 $ 551,721 $ 524,135 $ 497,928
III $ 940,500 $ 893,475 $ 848,801 $ 806,361 $ 766,043 $ 727,741
IV $ 1,336,500 $ 1,269,675 $ 1,206,191 $ 1,145,881 $ 1,088,587 $ 1,034,158
V $ 1,485,000 $ 1,410,750 $ 1,340,213 $ 1,273,202 $ 1,209,542 $ 1,149,065
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Severity 50-54 55-59 60-64 65-69 70 - 79
- ---------------------------------------------------------------------------------------------------
I $ 90,967 $ 86,419 $ 82,098 $ 73,888 $ 36,944
II $ 473,032 $ 449,381 $ 426,912 $ 384,221 $ 192,111
III $ 691,354 $ 656,786 $ 623,947 $ 561,552 $ 280,776
IV $ 982,450 $ 933,327 $ 886,661 $ 797,995 $ 398,998
V $ 1,091,612 $ 1,037,031 $ 985,180 $ 886,662 $ 443,331
-------------------------------------------------------------------------------------------
</TABLE>
MATRIX A-2* AGE AT DIAGNOSIS/EVENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Severity LESS THAN OR EQUAL TO 24 25-29 30-34 35-39 40-44 45-49
- ---------------------------------------------------------------------------------------------------------------------------------
I $ 1,250 $ 1,187 $ 1,128 $ 1,072 $ 1,018 $ 967
II $ 6,500 $ 6,175 $ 5,866 $ 5,573 $ 5,294 $ 5,030
III $ 9,500 $ 9,025 $ 8,574 $ 8,145 $ 7,738 $ 7,351
IV $ 13,500 $ 12,825 $ 12,184 $ 11,575 $ 10,996 $ 10,446
V $ 15,000 $ 14,250 $ 13,537 $ 12,861 $ 12,218 $ 11,607
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Severity 50-54 55-59 60-64 65-69 70 - 79
- --------------------------------------------------------------------------------------------------
I $ 919 $ 873 $ 829 $ 739 $ 500
II $ 4,778 $ 4,539 $ 4,312 $ 3,842 $ 1,921
III $ 6,983 $ 6,634 $ 6,302 $ 5,616 $ 2,808
IV $ 9,924 $ 9,428 $ 8,956 $ 7,980 $ 3,990
V $ 11,026 $ 10,475 $ 9,951 $ 8,867 $ 4,433
------------------------------------------------------------------------------------------
</TABLE>
MATRIX B-1* AGE AT DIAGNOSIS/EVENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Severity LESS THAN OR EQUAL TO 24 25-29 30-34 35-39 40-44 45-49
- ------------------------------------------------------------------------------------------------------------------------------------
I $ 24,750 $ 23,513 $ 22,337 $ 21,221 $ 20,159 $ 19,152
II $ 128,700 $ 122,265 $ 116,152 $ 110,344 $ 104,827 $ 99,586
III $ 188,100 $ 178,695 $ 169,760 $ 161,272 $ 153,208 $ 145,548
IV $ 267,300 $ 253,935 $ 241,238 $ 229,176 $ 217,717 $ 206,831
V $ 297,000 $ 282,150 $ 268,043 $ 254,641 $ 241,908 $ 229,813
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Severity 50-54 55-59 60-64 65-69 70 - 79
- -----------------------------------------------------------------------------------------------------
I $ 18,194 $ 17,284 $ 16,420 $ 14,778 $ 7,389
II $ 94,606 $ 89,876 $ 85,383 $ 76,844 $ 38,422
III $ 138,270 $ 131,357 $ 124,790 $ 112,310 $ 56,155
IV $ 196,489 $ 186,665 $ 177,332 $ 159,599 $ 79,800
V $ 218,322 $ 207,406 $ 197,036 $ 177,332 $ 88,666
---------------------------------------------------------------------------------------------
</TABLE>
MATRIX B-2* AGE AT DIAGNOSIS/EVENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Severity LESS THAN OR EQUAL TO 24 25-29 30-34 35-39 40-44 45-49
- ----------------------------------------------------------------------------------------------------------------------------------
I $ 500 $ 500 $ 500 $ 500 $ 500 $ 500
II $ 1,300 $ 1,235 $ 1,173 $ 1,115 $ 1,059 $ 1,006
III $ 1,900 $ 1,805 $ 1,715 $ 1,629 $ 1,548 $ 1,470
IV $ 2,700 $ 2,565 $ 2,437 $ 2,315 $ 2,199 $ 2,089
V $ 3,000 $ 2,850 $ 2,707 $ 2,572 $ 2,444 $ 2,321
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Severity 50-54 55-59 60-64 65-69 70 - 79
- -----------------------------------------------------------------------------------------------------
I $ 500 $ 500 $ 500 $ 500 $ 500
II $ 956 $ 908 $ 862 $ 768 $ 500
III $ 1,397 $ 1,327 $ 1,260 $ 1,123 $ 562
IV $ 1,985 $ 1,885 $ 1,791 $ 1,596 $ 798
V $ 2,205 $ 2,095 $ 1,990 $ 1,773 $ 886
---------------------------------------------------------------------------------------------
</TABLE>
* Matrix payments will be increased 2% per year compounded annually
beginning one year after the Final Judicial Approval Date.
A-1 TO MOU PAGE 1 OF 1
<PAGE>
A-2. CRITERIA FOR THE APPLICATION OF THE MATRICES
The following criteria will be applied to assign Settlement Class Members to the
matrices set forth in Section A-1 of this Exhibit:
(1) Matrix A-1:
Diet Drug Recipients who ingested Pondimin and/or Redux for more than
60 days, who were diagnosed by a qualified physician as FDA Positive by
an echocardiogram performed after the commencement of Diet Drug use and
by the end of the Screening Program, whose conditions are eligible for
matrix payments and who do not have any condition or circumstance which
makes Matrix B-1 applicable, together with their associated
Representative Claimants, provided that such persons have registered or
have been deemed to have registered for settlement benefits by Date 2.
The amounts specified in Matrix A-1 set forth the maximum aggregate
amount to which the Diet Drug Recipient or his or her Representative
Claimants are collectively entitled. Where there is more than one
Representative Claimant associated with any particular Diet Drug
Recipient eligible for such matrix benefits, the Trustees and/or Claims
Administrator shall allocate this amount among all of the
Representative Claimants.
(2) Matrix A-2:
Derivative Claimants of Diet Drug Recipients who are eligible for
Matrix A-1 payments, to the extent that applicable state law recognizes
that they have a claim for loss of consortium, services or support.
A Derivative Claimant entitled to Matrix A-2 payments will be paid at
the same Matrix Level as the Diet Drug Recipient whose ingestion of
Pondimin and/or Redux forms the basis of the claim for loss of
consortium, services or support under applicable state law.
The amounts specified on Matrix A-2 are the maximum aggregate amounts
payable to all Derivative Claimants. Therefore, where there is more
than one Derivative Claimant, the amount of the Matrix A-2 payments to
which the Derivative Claimants are entitled shall be apportioned by the
Trustees and/or Claims Administrator among all Derivative Claimants who
are entitled to such payment.
(3) Matrix B-1:
Diet Drug Recipients eligible for matrix payments to whom one or more
of the following conditions apply, or their Representative Claimants:
A-2 TO MOU PAGE 1 OF 4
<PAGE>
(a) For claims as to the mitral valve, Diet Drug
Recipients who were diagnosed by a qualified
physician as having Mild Mitral
Regurgitation by an echocardiogram performed
after the commencement of Diet Drug use and
by the end of the Screening Period
(regardless of the duration of ingestion of
Pondimin and/or Redux) and their associated
Representative Claimants, provided that such
persons have registered or have been deemed
to have registered for settlement benefits
by Date 2.
(b) Diet Drug Recipients who ingested Pondimin
and/or Redux for 60 days or less, who were
diagnosed by a qualified physician as FDA
Positive by an echocardiogram performed
after the commencement of Diet Drug use and
by the end of the Screening Period and their
associated Representative Claimants,
provided that such persons have registered
or have been deemed to have registered for
settlement benefits by Date 2.
(c) Diet Drug Recipients who ingested Pondimin
and/or Redux for more than 60 days, who were
diagnosed by a qualified physician as FDA
Positive by an echocardiogram performed
after the commencement of Diet Drug use and
by the end of the Screening Period and their
associated Representative Claimants,
provided that such persons have registered
or have been deemed to have registered for
settlement benefits by Date 2.
With respect to an aortic valve claim:
(i) The following congenital aortic valve
abnormalities: unicuspid, bicuspid or
quadricuspid valves, ventricular septal
defect associated with aortic regurgitation;
(ii) Aortic dissection involving the aortic root
and/or aortic valve;
(iii) Aortic sclerosis in people who are GREATER
THAN 60 years
old as of the time they are
first diagnosed as FDA Positive;
(iv) Aortic root dilatation GREATER THAN 5.0 cm;
(v) Aortic stenosis with an aortic valve area
LESS THAN 1.0 square centimeter by the
Continuity Equation.
A-2 TO MOU PAGE 2 OF 4
<PAGE>
With respect to a mitral valve claim:
(vi) The following congenital mitral valve
abnormalities: parachute valve, cleft of the
mitral valve associated with atrial septal
defect;
(vii) Mitral valve prolapse as determined by
echocardiogram;
(viii) Chordae tendinae rupture or papillary muscle
rupture; or acute myocardial infarction
associated with acute mitral regurgitation;
(ix) Mitral annular calcification;
(x) M-Mode and 2-D echo evidence of rheumatic
mitral valves (doming of the anterior
leaflet and/or anterior motion of the
posterior leaflet and/or commissural
fusion).
With respect to claims for the aortic and/or mitral valve(s):
(xi) Heart valve surgery prior to Pondimin and/or
Redux use on the valve that is the basis of
claim;
(xii) Bacterial endocarditis prior to Pondimin and
/or Redux use;
(xiii) FDA Positive regurgitation (confirmed by
echocardiogram) prior to Pondimin and/or
Redux use for the valve that is the basis of
claim;
(xiv) Systemic Lupus Erythematosus or Rheumatoid
Arthritis;
(xv) Carcinoid tumor of a type associated with
aortic and/or mitral valve lesions;
(xvi) History of daily use of methysergide or
ergotamines for a continuous period of
longer than 120 days.
The amounts specified in Matrix B-1 set forth the maximum aggregate
amount to which the Diet Drug Recipient or his or her Representative
Claimants are collectively entitled. Where there is more than one
Representative Claimant associated with any particular Diet Drug
Recipient eligible for such matrix benefits, the Trustees and/or Claims
Administrator shall allocate this amount among all of the
Representative Claimants.
A-2 TO MOU PAGE 3 OF 4
<PAGE>
(4) Matrix B-2:
Derivative Claimants of Diet Drug Recipients who are eligible for
Matrix B-1 payments, to the extent that applicable state law recognizes
that these Derivative Claimants have a claim for loss of consortium,
services or support.
A Derivative Claimant entitled to Matrix B-2 payments will be paid at
the same Matrix Level as the Diet Drug Recipients whose ingestion of
Pondimin and/or Redux forms the basis of the claim for loss of
consortium, services or support under applicable state law.
The amounts specified on Matrix B-2 are the maximum aggregate amounts
payable to all Derivative Claimants. Therefore, where there is more
than one Derivative Claimant, the amount of the Matrix B-2 payments to
which Derivative Claimants are entitled shall be apportioned by the
Trustees and/or Claims Administrator among all Derivative Claimants who
are entitled to such payment.
A-2 TO MOU PAGE 4 OF 4
<PAGE>
A-3. MATRIX LEVELS OF VALVULAR HEART DISEASE
The following provisions define the levels of valvular heart disease occurring
after Pondimin and/or Redux use on the payment matrices set forth in Section A-1
of this Exhibit:
1. MATRIX LEVEL I is severe left sided valvular heart disease without
complicating factors, and is defined as one of the following:
a. Severe aortic regurgitation (AR) GREATER THAN 50% jet
height/left ventricular outflow tract height (JH/LVOTH)1
and/or severe mitral regurgitation (MR) GREATER THAN 40%
regurgitant jet area/left atrial area (RJA/LAA) (1, 2) and
no complicating factors as defined below;
b. FDA Positive valvular regurgitation(3) with bacterial
endocarditis contracted post- Pondimin and/or Redux use.
2. MATRIX LEVEL II is left sided valvular heart disease with complicating
factors, and is defined as:
a. Moderate AR (25% - 49% JH/LVOTH)(1) or Severe AR (GREATER THAN
50% JH/LVOTH)1 with one or more of the following:
i. Pulmonary hypertension secondary to severe aortic
regurgitation with a peak systolic pulmonary artery
pressure GREATER THAN 40 mm Hg measured by cardiac
catheterization or with a peak systolic pulmonary
artery pressure GREATER THAN 45 mm Hg(4) measured by
Doppler echocardiography utilizing standard
procedures(5,6) assuming a right atrial pressure of
10 mm Hg;
ii. Abnormal left ventricular end-systolic dimension
GREATER THAN 50 mm(7) by M-mode or 2-D
echocardiography or abnormal left ventricular
end-diastolic dimension GREATER THAN 70 mm(7) as
measured by M-mode or 2-D echocardiography;
iii. Ejection fraction of LESS THAN 50%7; and/or
b. Moderate MR (20% - 40% RJA/LAA)(1) or Severe MR (GREATER THAN
40% RJA/LAA)(1) with one or more of the following:
i. Pulmonary hypertension secondary to valvular heart
disease with peak systolic pulmonary artery pressure
GREATER THAN 40 mmHg measured by cardiac
catheterization or with a peak systolic pulmonary
artery pressure GREATER THAN 45 mm Hg(4) measured by
Doppler echocardiography utilizing the procedures
described in section 2.a.i;
A-3 TO MOU PAGE 1 OF 6
<PAGE>
ii. Abnormal left atrial supero-inferior systolic
dimension GREATER THAN 5.3 cm(8) (apical four chamber
view) or abnormal left atrial antero-posterior
systolic dimension GREATER THAN 4.0 cm (parasternal
long axis view) measured by 2-D directed M-mode or
2-D echocardiography with normal sinus rhythm using
sites of measurement recommended by the American
Society of Echocardiography(9);
iii. Abnormal left ventricular end-systolic dimension
GREATER THAN 45 mm(10) by M-mode or 2-D
echocardiogram;
iv. Ejection fraction of LESS THAN OR EQUAL TO 60%(10);
v. Arrhythmias, defined as chronic atrial
fibrillation/flutter that cannot be converted to
normal sinus rhythm, or atrial fibrillation/flutter
requiring ongoing medical therapy, either of which
are associated with left atrial enlargement; as
defined in section 2.b.ii.
3. MATRIX LEVEL III is left sided valvular heart disease requiring surgery
or conditions of equal severity, and is defined as:
a. Surgery to repair or replace the aortic and/or mitral valve(s)
following the use of Redux and/or Pondimin; or
b. Severe regurgitation and the presence of ACC/AHA Class I
indications for surgery to repair or replace the aortic(7)
and/or mitral(10) valve(s) and a statement from the attending
Board Certified Cardiothoracic surgeon or Board Certified
Cardiologist supported by medical records regarding the
recommendations made to the patient concerning valvular
surgery, with the reason why the surgery is not being
performed; or
c. Qualification for payment at Matrix Level I(b) or II and, in
addition, a stroke due to bacterial endocarditis contracted
after use of Pondimin and/or Redux or as a consequence of
chronic atrial fibrillation with left atrial enlargement as
defined in section 2.b.ii which results in a permanent
condition which meets the criteria of AHA Stroke Outcome
Classification11 Functional Level II, determined six months
after the event.
4. MATRIX LEVEL IV is defined as follows:
a. Qualification for payment at Matrix Level I(b), II or III and,
in addition, a stroke due to bacterial endocarditis contracted
after use of Pondimin and/or Redux or as a consequence of
chronic atrial fibrillation with left atrial enlargement as
defined
A-3 TO MOU PAGE 2 OF 6
<PAGE>
in section 2.b.ii which results in a permanent condition which
meets the criteria of AHA Stroke Outcome Classification(11)
Functional Level III, determined six months after the event;
or
b. The individual has the following:
i. Qualification for payment at Matrix Level III; and
ii. New York Heart Association Functional Class I or
Class II symptoms as documented by the attending
Board Certified Cardiothoracic surgeon or Board
Certified Cardiologist; and
iii. Valvular repair and replacement surgery or
ineligibility for surgery due to medical reasons as
documented by the attending Board Certified
Cardiothoracic surgeon or Board Certified
Cardiologist; and
iv. Significant damage to the heart muscle, defined as:
(a) a left ventricular ejection fraction LESS THAN
30% with aortic regurgitation or a left ventricular
ejection fraction LESS THAN 35% with mitral
regurgitation in patients who have not had surgery
and meet the criteria of section 3.b or (b) a left
ventricular ejection fraction LESS THAN 40% six
months after valvular repair or replacement surgery
in patients who have had such surgery; or
c. The individual has had valvular repair or replacement surgery
and has one or more of the following complications which occur
either during surgery, within 30 days after surgery, or during
the same hospital stay as the surgery:
i. Renal failure, defined as chronic, severe renal
failure requiring regular hemodialysis or Continuous
Abdominal Peritoneal Dialysis (CAPD) for greater than
six months following aortic and/or mitral valve
replacement surgery;
ii. Peripheral embolus following surgery resulting in
severe permanent impairment to the kidneys, abdominal
organs, or extremities;
iii. Stroke which produces a permanent condition which
meets the criteria of the AHA Stroke Outcome
Classification(11) Functional Levels II or III
determined six months after the event;
iv. Quadriplegia or paraplegia resulting from cervical
spine injury during valvular heart surgery; or
A-3 TO MOU PAGE 3 OF 6
<PAGE>
d. The individual has had valvular repair or replacement surgery
and suffers from post operative endocarditis, mediastinitis or
sternal osteomyelitis, either of which requires reopening the
median sternotomy for treatment, or a post-operative serious
infection defined as HIV or Hepatitis C within six months of
surgery as a result of blood transfusion associated with the
heart valve surgery.
5. MATRIX LEVEL V is defined as:
a. Endocardial fibrosis (A) diagnosed by (1) endomyocardial
biopsy that demonstrates fibrosis and cardiac catheterization
that demonstrates restrictive cardiomyopathy or (2) autopsy
that demonstrates endocardial fibrosis and (B) other causes
including dilated cardiomyopathy, myocardial infarction,
amyloid, Loeffler's endocarditis, endomyocardial fibrosis as
defined in Braunwald (involving one or both ventricles,
located in the inflow tracts of the ventricles, commonly
involving the cordae tendinea, with partial obliteration of
either ventricle commonly present)(12), focal fibrosis
secondary to valvular regurgitation, e.g., "jet lesions",
focal fibrosis secondary to catheter instrumentation, and
hypertrophic cardiomyopathy with septal fibrosis have been
excluded; or
b. Left sided valvular heart disease with severe complications,
defined as Matrix Levels I(b), III or IV above with one or
more of the following:
i. A severe stroke following aortic and/or mitral valve
surgery, due to bacterial endocarditis contracted
after use of Pondimin and/or Redux or as a
consequence of chronic atrial fibrillation with left
atrial enlargement as defined in section 2.b.ii and
the severe stroke has resulted in a permanent
condition which meets the criteria of AHA Stroke
Outcome Classification(13) Functional Levels IV or V,
determined six months after the event;
ii. The individual has the following:
(a) Qualification for payment at Matrix Levels
III or IV; and
(b) New York Heart Association Functional Class
III or Class IV symptoms as documented by
the attending Board Certified Cardiothoracic
surgeon or Board Certified Cardiologist; and
(c) Valvular repair or replacement surgery or
ineligibility for surgery due to medical
reasons as documented by the attending Board
Certified Cardiothoracic surgeon or Board
Certified Cardiologist; and
A-3 TO MOU PAGE 4 OF 6
<PAGE>
A-3 TO MOU PAGE 5 OF 6
<PAGE>
(d) Significant damage to the heart muscle,
defined as: (i) a left ventricular ejection
fraction LESS THAN 30% with aortic
regurgitation or a left ventricular ejection
fraction LESS THAN 35% with mitral
regurgitation, in patients who have not had
surgery and meet the criteria of section 3.b
or (ii) a left ventricular ejection fraction
LESS THAN 40% six months after valvular
repair or replacement surgery in patients
who have had such surgery; or
iii. Heart transplant;
iv. Irreversible pulmonary hypertension (PH) secondary to
valvular heart disease defined as peak-systolic
pulmonary artery pressure >50 mm Hg(4) (by cardiac
catheterization) following repair or replacement
surgery of the aortic and/or mitral valve(s);
v. Persistent non-cognitive state(13) caused by a
complication of valvular heart disease (e.g., cardiac
arrest) or valvular repair/replacement surgery
supported by a statement from the attending Board
Certified Cardiothoracic surgeon or Board Certified
Cardiologist, supported by medical records; or
c. Death resulting from a condition caused by valvular heart
disease or valvular repair/replacement surgery which occurred
post-Pondimin and/or Redux use supported by a statement from
the attending Board Certified Cardiothoracic surgeon or Board
Certified Cardiologist, supported by medical records; or
d. The individual otherwise qualifies for payment at Matrix Level
II, III, or IV and suffers from ventricular fibrillation or
sustained ventricular tachycardia which results in hemodynamic
compromise.
A-3 TO MOU PAGE 6 OF 6
<PAGE>
REFERENCES
1. Singh JP, ET AL., Prevalence and Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation (The Framingham Heart Study),
AMERICAN J CARDIOLOGY; 83:897-902 (1999).
2. Helmcke, F., Nanda, N. C., Hsiung, M. C., Soto, B., Adey, C. K., Goyal,
R. G., Gatewood, R.P., Jr., "Color Doppler Assessment of Mitral
Regurgitation with Orthogonal Planes," CIRCULATION, 75(1):175-183
(1987).
3. Centers for Disease Control and Prevention. Cardiac Valvulopathy
Associated with Exposure to Fenfluramine or Dexfenfluramine: US
Department of Health and Human Services Interim Public Health
Recommendations, November, 1997. MMWR MORB MORTAL WKLY REP.
46:1061-1066 (1997).
4. Braunwald, E., HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W.B. Saunders Co., pp. 796-98 (1997).
5. Feigenbaum, J. ECHOCARDIOGRAPHY, Baltimore, Williams&Wikins, pp. 201-02
(5th ed. 1994).
6. Chan, K-L., ET AL., Comparison of Three Doppler Ultrasound Methods in
the Prediction of Pulmonary Artery Disease, J. AM. COLL. CARDIOL.,
9:549-554 (1987).
7. Bonow RO, Carabello B, de Leon Jr A, Edmunds Jr LH, Fedderly BJ, Freed
MD, ET AL., Guidelines for the Management of Patients With Valvular
Heart Disease: A Report of the American College of Cardiology/American
Heart Association Task Force on Practice Guidelines (Committee on
Management of Patients With Valvular Heart Disease), J AM COLL.
CARDIOL., 32:1510-14 (1998).
8. Weyman, A. E. PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY,
Philadelphia, Lea & Febiger. pp. 1290-1292 (1994).
9. Henry, W.L. ET. AL., Report of the American Society of Echocardiography
Committee on Nomenclature and Standards in Two-dimensional
Echocardiography, CIRCULATION, 62:212-21 (1980).
10. Bonow RO, Carabello B, de Leon Jr A, Edmunds Jr LH, Fedderly BJ, Freed
MD, ET AL. Guidelines for the Management of Patients With Valvular
Heart Disease: A Report of the American College of Cardiology/American
Heart Association Task Force on Practice Guidelines (Committee on
Management of Patients With Valvular Heart Disease). J AM COLL.
CARDIOL., 32:1533-35 (1998).
11. The American Heart Association Stroke Outcome Classification approved
by the American Heart Association Science Advisory and Coordinating
Committee, p. 1275 (Dec. 1997).
12. Braunwald, E. HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W. B. Saunders Co., pp. 1433-34 (1997).
13. Adelman, G., ENCYCLOPEDIA OF NEUROSCIENCE, Birkhauser; Boston, MA, p.
268 (1987).
A-3 TO MOU PAGE 7 OF 6
<PAGE>
CREDITS
<TABLE>
<CAPTION>
INDIVIDUALS WHO OPT-OUT INDIVIDUALS WHO OPT-OUT WITH AN
WITH A MATRIX-LEVEL CONDITION FDA POSITIVE, BUT NOT MATRIX-
AT THE TIME OF OPT-OUT LEVEL, CONDITION
OPT-OUTS JUDGMENTS* PRE-JUDGMENT JUDGMENTS* PRE-JUDGMENT
SETTLEMENTS SETTLEMENTS
<S> <C> <C> <C> <C>
INITIAL Full credit** Full credit** No credit No credit
INTERMEDIATE N/A N/A Partial credit Opportunity to
subject to an seek court
aggregate cap*** approval of
partial credit
subject to an
aggregate cap***
BACK-END Full credit** Full credit** N/A N/A
</TABLE>
* Includes post-judgment settlements
** "Full credit" is defined as a credit in the amount of the lesser of (i)
the amount of payment to the individual (by judgment or settlement) or
(ii) the matrix payment for which an individual would qualify (as
determined by age and level of severity either at the time of opt-out
or at the time of payment of judgment or settlement, whichever is
higher) less Class Counsel fees (up to 9% of that amount).
*** The cap on intermediate opt-out, non-matrix-level credits is $300
million, but the amount of that cap shall accrete at an annual rate of
6%, compounded annually, commencing on the Final Judicial Approval
Date. In the event of a judgment or settlement after judgment, such
intermediate opt-out credits shall be an amount which is the lesser of
(i) the amount of payment to the individual or (ii) the amount of the
matrix payment for a person at Level III payment and at the age of the
individual at the time of payment, less Class Counsel fees (up to 9% of
such amounts). In the case of prejudgment settlements with individuals
who have exercised the intermediate opt-out where the Court has
approved credit for the settlement, such credit shall be an amount
which is the lesser of (i) the amount of the payment to the individual
or (ii) 75% of the amount of the matrix payment for a person at Level
III and at the age of the individual at the time of payment, less Class
Counsel fees (up to 9% of such amounts).
EXHIBIT "B" TO MOU PAGE 1 OF 1
<PAGE>
<PAGE>
DEFINITION OF SETTLED CLAIMS
"Settled Claims" shall be defined for purposes of the MOU and the
Settlement Agreement as:
Any and all claims, including assigned claims, whether known or
unknown, asserted or unasserted, regardless of the legal theory, existing now or
arising in the future by any or all members of the Settlement Class against AHP
and/or any Released Parties arising out of or relating to the purchase, use,
manufacture, sale, dispensing, distribution, promotion, marketing, clinical
investigation, administration, regulatory approval, prescription, ingestion, and
labeling of Pondimin and/or Redux, alone or in combination with any other
substance, including, without limitation, any other drug, dietary supplement,
herb, or botanical. These "Settled Claims" include, without limitation and by
way of example, all claims for damages or remedies of whatever kind or
character, known or unknown, that are now recognized by law or that may be
created or recognized in the future by statute, regulation, judicial decision,
or in any other manner, for:
(1) personal injury and/or bodily injury, damage, death,
fear of disease or injury, mental or physical pain or
suffering, emotional or mental harm, or loss of
enjoyment of life;
(2) compensatory damages, punitive, exemplary, statutory
and other multiple damages or penalties of any kind;
(3) loss of wages, income, earnings, and earning
capacity, medical expenses, doctor, hospital,
nursing, and drug bills;
(4) loss of support, services, consortium, companionship,
society or affection, or damage to familial
relations, by spouses, parents, children, other
relatives or "significant others" of Settlement Class
Members;
(5) consumer fraud, refunds, unfair business practices,
deceptive trade practices, Unfair and Deceptive Acts
and Practices ("UDAP"), and other similar claims
whether arising under statute, regulation, or
judicial decision;
(6) wrongful death and survival actions;
(7) medical screening and monitoring, injunctive and
declaratory relief;
(8) economic or business losses or disgorgement of
profits arising out of personal injury; and
(9) prejudgment or post-judgment interest.
EXHIBIT "C" TO MOU PAGE 1 OF 3
<PAGE>
Notwithstanding the foregoing, Settled Claims do not include claims based on
Primary Pulmonary Hypertension ("PPH"), including claims based on PPH for
compensatory, punitive, exemplary or multiple damages.
For purposes of this MOU, the Settlement Agreement and this Exhibit
"C," PPH shall mean either or both of the following:
I. For a diagnosis based on symptoms and findings prior to death:
A. (i) Mean pulmonary artery pressure by cardiac
catheterization of GREATER THAN OR EQUAL TO 25 mm Hg
at rest or GREATER THAN OR EQUAL TO 30 mm Hg with
exercise with a normal pulmonary artery wedge
pressure LESS THAN OR EQUAL TO 15 mm Hg(1); or
(ii) A peak systolic pulmonary artery pressure of GREATER
THAN OR EQUAL TO 60 mm Hg measured by Doppler
Echocardiography; or
(iii) Administration of Flolan to the patient based on a
diagnosis of PPH with cardiac catheterization not
done due to increased risk in the face of severe
right heart dysfunction; and
B. Medical records which demonstrate that the following
conditions have been excluded by the following results(2):
(i) Echocardiogram demonstrating no primary cardiac
disease including, but not limited to, shunts,
valvular disease (other than tricuspid or pulmonary
valvular insufficiency as a result of PPH or trivial,
clinically insignificant left-sided valvular
regurgitation), and congenital heart disease (other
than patent foramen ovale); and
(ii) Left ventricular dysfunction defined as LVEF LESS
THAN 40% defined by MUGA, echocardiogram or cardiac
catheterization;
(iii) Pulmonary function tests demonstrating the absence of
obstructive lung disease (FEV1/FVC GREATER THAN 50%
of predicted) and the absence of greater than mild
restrictive lung disease (total lung capacity GREATER
THAN 60% of predicted at rest); and
(iv) Perfusion lung scan ruling out pulmonary embolism;
and
- --------
(1) Rubin, L.J., S. Rich, PRIMARY PULMONARY HYPERTENSION, Marcel Dekker,
Inc., New York (1997).
(2) Braunwald, E., ESSENTIAL ATLAS OF HEART DISEASES, Current Medicine,
Philadelphia, 1997, pg. 10-9.
EXHIBIT "C" TO MOU PAGE 2 OF 3
<PAGE>
(v) If, but only if, the lung scan is indeterminate or
high probability, a pulmonary angiogram or a high
resolution angio computed tomography scan or
demonstrating absence of thromboembolic disease; and
C. Conditions known to cause pulmonary hypertension(1), (2), (3)
including connective tissue disease known to be causally
related to pulmonary hypertension, toxin induced lung disease
known to be causally related to pulmonary hypertension, portal
hypertension, significant obstructive sleep apnea,
interstitial fibrosis (such as silicosis, asbestosis, and
granulomatous disease) defined as greater than mild patchy
interstitial lung disease and familial causes have been ruled
out by a Board- Certified Cardiologist or Board-Certified
Pulmonologist as the cause of the person's pulmonary
hypertension.
-OR-
II. For a diagnosis made after the individual's death:
A. Autopsy demonstrating histopathologic changes in the lung
consistent with primary pulmonary hypertension and no evidence
of congenital heart disease (other than a patent foramen
ovale) with left-to-right shunt, such as ventricular septal
defect as documented by a Board-Certified Pathologist; and
B. Medical records which show no evidence of alternative causes
as described above for living persons.
The foregoing definition of PPH ("the PPH Definition") is intended
solely for the purpose of describing claims excluded from the definition of
Settled Claims. The Parties agree that the PPH Definition includes but is
broader than the rare and serious medical condition suffered by the individuals
described in the IPPHS study.(4) The subjects in that study exhibited
significantly elevated pulmonary artery pressures with an average systolic
pulmonary artery pressure of 88 mm Hg and average mean pulmonary artery pressure
of 57 mm Hg. Two-thirds of the IPPHS patients demonstrated NYHA Class III or IV
symptoms. While the IPPHS subjects would fall within the PPH Definition, the
definition also includes persons with a milder, less serious medical condition.
- --------
(3) Rich, S., Editor, Executive Summary from the Symposium on Primary
Pulmonary Hypertension, Evian, France, co-sponsored by the World Health
Organization, http://www.who.int/ncd/cvd/pph-html. September 6-10,
1998.
(4) Abenhaim, L., ET AL., Appetite-Suppressant Drugs and the Risk of
Primary Pulmonary Hypertension. International Primary Pulmonary
Hypertension Study Group, NEW ENGLAND JOURNAL OF MEDICINE, 1996,
335(9): 606-616.
EXHIBIT "C" TO MOU PAGE 3 OF 3
<PAGE>
LIST OF RELEASED PARTIES
The Settlement Agreement will provide that the Released Parties shall
be deemed to include:
(a) American Home Products Corporation ("AHP") and each of its
subsidiaries, affiliates, and divisions, including, but not
limited to, Wyeth-Ayerst Laboratories Division, Wyeth-Ayerst
Laboratories Co., Wyeth-Ayerst Pharmaceuticals Inc., and
American Cyanamid Corporation, along with each of their
respective current and former officers, directors, employees,
attorneys, agents, and insurers.
(b) Any and all predecessors, successors, and/or shareholders of
AHP and each of its subsidiaries, affiliates, and divisions;
provided, however, that any such person or entity shall be
considered a Released Party only to the extent that such
person or entity is sued in its capacity as a predecessor,
successor, and/or shareholder of AHP or its subsidiaries,
affiliates, and divisions.
(c) Any and all suppliers of materials, components, and services
used in the manufacture of Redux and/or Pondimin, including
the labeling and packaging thereof, along with each such
person's or entity's predecessors, successors, parents,
subsidiaries, affiliates, and divisions, and each of their
respective current and former shareholders, officers,
directors, employees, attorneys, agents, and insurers;
provided, however, that no person or entity described in this
subsection shall be a Released Party with respect to any
claims based upon his, her or its own independent negligence
or culpable conduct.
(d) All distributors of Pondimin and/or Redux, including wholesale
distributors, private label distributors, retail distributors,
hospitals and clinics, and their respective predecessors,
successors, parents, subsidiaries, affiliates, and divisions,
and their respective current and former shareholders,
officers, directors, employees, attorneys, agents, and
insurers; provided that (1) such persons and entities
described in this section shall be a Released Party only as to
claims as to which such persons would have a statutory or
common-law right of indemnity against AHP and (2) no person or
entity described in this section shall be a Released Party to
the extent that any claim is based upon his, her or its own
independent negligence or culpable conduct, including, without
limitation, negligence or professional malpractice asserted
against hospitals, clinics, and diet centers.
(e) All physicians who prescribed, and all pharmacists and
pharmacies who dispensed, Pondimin and/or Redux to the extent
that liability against such physicians, pharmacists or
pharmacies is based on:
(i) the prescription or dispensing of Pondimin and/or
Redux in a manner consistent with the product
labeling; and/or
EXHIBIT "D" TO MOU PAGE 1 OF 2
<PAGE>
(ii) the prescription or dispensing of Pondimin for any
period longer than a "few weeks"; and/or
(iii) the prescription or dispensing of Pondimin and/or
Redux for concomitant use with Phentermine
hydrochloride or Phentermine resin; and/or
(iv) a claim that the physician's or pharmacist's
liability stems solely from having prescribed or
dispensed Pondimin and/or Redux; and/or
(v) a claim that the physician's or pharmacist's
liability stems solely from the prescription or
dispensing of a defective or unreasonably dangerous
product.
Physicians, pharmacists and pharmacies are not Released
Parties with respect to any claims based on their independent
negligence or culpable conduct.
Notwithstanding the foregoing, Les Laboratoires Servier S.A. and all of
its affiliates and subsidiaries, including, without limitation, Servier S.A.S.,
Oril, Orsem, Servier Amerique, Science Union et Cie, Institut de Recherches
Internationales Servier, Servier Research, Interneuron Pharmaceuticals, Inc.,
and any manufacturer, seller, wholesaler, or distributor of any Phentermine
hydrochloride or Phentermine resin pharmaceutical product are not Released
Parties.
EXHIBIT "D" TO MOU PAGE 2 OF 2
<PAGE>
JUDGMENT REDUCTION FOR CLAIMS BY THIRD PARTIES
The Settlement Agreement will contain the following provisions:
1. It is the intent of this Settlement Agreement that no
Settlement Class Member shall recover, directly or indirectly,
any sums for Settled Claims from AHP or any Released Party
other than those received under the Settlement Agreement and
that AHP shall make no payments to any third party defined
herein as a Non-Settling Defendant for any amounts arising out
of a Settled Claim brought by a class member against such
Non-Settling Defendant, except to the extent that Class
Members timely and properly exercise an initial, intermediate,
or back-end opt-out right provided by the MOU. It is the
further intent of this Settlement Agreement that Settlement
Class Members agree to reduce any judgments against
Non-Settling Defendants to the extent necessary, under
applicable law, to relieve AHP and the Released Parties of
liability for contribution or non-contractual indemnity to any
Non-Settling Defendant. In particular:
(a) Nothing in this Agreement is intended to adversely
affect any Non-Settling Defendant's right, if any, to
set-off or judgment reduction under any state
contribution among tortfeasors act or other
applicable law. Non-Settling Defendants will be
entitled, at a minimum, to whatever set-off or
judgment reduction is afforded them by operation of
applicable law. Settlement Class Members who do not
exercise initial, intermediate or back-end opt- out
rights agree that all defendants are joint
tortfeasors in cases in which Settlement Class
Members have joined Non-Settling Defendants, AHP,
and/or the Released Parties or in any other case in
which a Settled Claim is asserted.
(b) The Parties recognize that, under the law of some
states, claims for contribution or non-contractual
indemnity against a settling defendant survive a
settlement unless the settlement provides set-off or
judgment reduction rights that go beyond those that
would otherwise exist by operation of applicable law.
In those cases, the Parties intend that Non- Settling
Defendants shall be entitled to the additional
set-off or judgment reduction necessary under
applicable law to extinguish Non-Settling Defendants'
claims, if any, for contribution or non-contractual
indemnity against AHP and the Released Parties
arising from Settled Claims only. Settlement Class
Members, however, reserve their right to contend
that, due to the nature of the theories of liability
alleged or presented against the Non-Settling
Defendants (I.E., conspiracy or concert of action),
Non- Settling Defendants have no right to
contribution or non-contractual indemnity from AHP or
the Released Parties as a matter of law even though
they are joint tortfeasors.
EXHIBIT "E" TO MOU PAGE 1 OF 5
<PAGE>
(c) In the event that any claim that a Non-Settling
Defendant would have for contribution or
non-contractual indemnity against AHP or the Released
Parties in the absence of this Settlement Agreement
with respect to a Settled Claim would not be
extinguished under applicable law by the set- off or
judgment reduction to which the Non-Settling
Defendant would be entitled by operation of law, any
Settlement Class Member who recovers a judgment
against any Non-Settling Defendant with respect to a
Settled Claim for which AHP and/or any Released Party
would be liable by a claim for contribution or
non-contractual indemnity but for the provisions of
this Settlement Agreement, shall reduce his judgment
against the Non- Settling Defendant by the amount,
percentage, or share of such judgment necessary,
under applicable law, to relieve AHP and the Released
Parties of liability for contribution or
non-contractual indemnity. By way of example, under a
statute modeled on the 1939 version of the Uniform
Contribution Among Tortfeasors Act, Settlement Class
Members would reduce their judgments against
Non-Settling Defendants in the situation described in
this Section to the extent of the pro rata shares (as
determined under applicable law) of AHP and any
relevant Released Party. In the absence of a statute,
Settlement Class Members would reduce their judgments
against Non-Settling Defendants in the situation
described in this Section by the amount, percentage,
or share of such judgment that would lawfully be
attributable to AHP and/or the Released Party or
Parties but for the provisions of this Settlement
Agreement.
(d) To avoid inconvenience and expense to AHP, the
Released Parties, and the Settlement Class Members,
and to eliminate the objection that certain states'
law requires that AHP and the Released Parties remain
as parties in a lawsuit to facilitate the
adjudication of Non-Settling Defendants' set-off or
judgment reduction rights with respect to a Settled
Claim, the releases provided under this Settlement
Agreement shall incorporate, to the extent required
by applicable law, what is known in Pennsylvania as a
"GRIFFIN release" and/or what is known in Wisconsin
and elsewhere as a "PIERRINGER release." By this
provision, Settlement Class Members agree that the
lack of a judicial determination that the settling
defendant is a joint tortfeasor does not preclude
Non-Settling Defendants from obtaining set-off or
judgment reduction rights they would otherwise have
under applicable law in the absence of this
Agreement. SEE GRIFFIN V. UNITED STATES, 500 F.2d
1059 (3d Cir. 1974); PIERRINGER V. HOGER, 124 N.W.2d
106 (Wis. 1963). By this provision, Settlement Class
Members further agree to waive any rights that they
might have against Non-Settling Defendants, the
assertion of which would, under applicable law, allow
Non-Settling Defendants to add or retain AHP and/or
the Released Parties as defendants in actions brought
by Settlement Class Members against Non-Settling
Defendants with respect to Settled Claims for the
purpose of adjudicating Non-Settling Defendants'
EXHIBIT "E" TO MOU PAGE 2 OF 5
<PAGE>
rights, if any, to set-off or judgment reduction.
This provision is intended to obviate the necessity
and expense of having AHP and the Released Parties
added or remain as parties on the record and obliged
to participate in a trial merely for the purpose of
determining if in fact they were tortfeasors so as to
entitle other tortfeasors to a reduction of any
verdict. This provision, however, in no way
constitutes an admission of liability by AHP and the
Released Parties or an admission by Settlement Class
Members that any Non-Settling Defendant is entitled
to contribution or non-contractual indemnity from AHP
or a Released Party.
(e) The Parties intend that this Settlement Agreement
result in the termination or bar of all claims for
contribution and/or non-contractual indemnity against
AHP and the Released Parties with respect to Settled
Claims. To the extent that the Parties' intent is not
fully realized, and a Non-Settling Defendant obtains
a judgment for contribution or non-contractual
indemnity against AHP and/or a Released Party with
respect to Settled Claims, Settlement Class Members
agree to reduce their judgments against Non-Settling
Defendants by the amount, percentage, or share of
such judgment necessary to satisfy any such judgment
or non-contractual indemnity for the benefit of AHP
and/or the Released Party. If, despite the provisions
of this section, AHP or any Released Party incurs any
judgments due to a claim for contribution or
non-contractual indemnification arising out of a
claim brought by a Settlement Class Member against a
Non-Settling Defendant, such Settlement Class Member
shall indemnify AHP and the Released Parties for such
amount, provided that AHP and the Released Parties
shall have made all reasonable efforts to avoid
liability for contribution and/or non-contractual
indemnity to Non- Settling Defendants under the
Settlement Agreement.
(f) If, despite the provisions of this section, AHP or
any Released Party makes a payment of any judgment
due to a claim for contribution and/or non-
contractual indemnity arising out of a Claim brought
by a Settlement Class Member against a Non-Settling
Defendant with respect to a Settled Claim, such
Settlement Class Member shall indemnify AHP and the
Released Parties for such amount, and AHP shall make
reasonable efforts to reduce such indemnity
obligations to judgment in the underlying litigation
involving the Non-Settling Defendant. To the extent
that, for any reason, a Settlement Class Member has
failed to satisfy an indemnity obligation arising
under this paragraph within 90 days after AHP makes
any such payment, AHP shall assign its indemnity
rights against the Class Member to the Trustees and
receive a credit against its Fund B obligations in
the amount of the unsatisfied portion of the
indemnity. The credit shall accrete with a 6% factor,
compounded annually, commencing in the year it is
generated. Accreted
EXHIBIT "E" TO MOU PAGE 3 OF 5
<PAGE>
credits shall accumulate and shall be applied in the
same manner as credits are applied pursuant to
Section III.1 of the MOU.
2. To further protect the Non-Settling Defendants' interests, the
Parties have agreed that the bar order shall incorporate the
following provisions:
(a) If, despite the provisions of Section 1, (i)
applicable law precludes a Non- Settling Defendant
from obtaining a set-off or judgment reduction to
which a Non-Settling Defendant would otherwise be
entitled under applicable law in an individual case
brought by a Settlement Class Member with respect to
a Settled Claim without naming AHP or a Released
Party as a party in the lawsuit and (ii) the
Non-Settling Defendant and the Settlement Class
Member cannot reach agreement on this issue
sufficient to eliminate the Non-Settling Defendant's
alleged need to name AHP or a Released Party in the
lawsuit, the Non-Settling Defendant may apply to the
Court(s) for relief from the bar order.
(b) The Non-Settling Defendant's application to the
Court(s) shall set forth with specificity (i) the
facts and law that would give rise to a claim for
contribution and/or non-contractual indemnity but for
the provisions of this Settlement Agreement; (ii) the
efforts that the Non-Settling Defendant has made to
reach an accommodation with the Settlement Class
Member with respect to the need to name AHP or a
Released Party as a defendant in the case; and (iii)
the factual and legal bases for the Non-Settling
Defendant's claim that, under the particular facts of
the case and the particular provisions of applicable
law, the Non-Settling Defendant must be permitted to
name AHP or a Released Party in the case despite the
bar order.
(c) A copy of the Non-Settling Defendant's application(s)
to the Court(s) shall be served on the PMC and
counsel for AHP.
(d) The Court(s) shall modify the bar order to permit a
Non-Settling Defendant to name AHP or a Released
Party in a particular case brought against a
Non-Settling Defendant by a Settlement Class Member
with respect to a Settled Claim, only where doing so
is essential to protect set-off or judgment reduction
rights to which the Non-Settling Defendant would be
entitled under applicable law but for the provisions
of this Settlement Agreement. Any order modifying the
bar order will contain provisions that protect the
interests of AHP and the Released Parties in finality
under this Settlement Agreement, including, among
other things, provisions affirming that the
Settlement Class Member has agreed (i) to forego any
direct or indirect recovery from AHP or the Released
Parties of sums over and above those received under
this Settlement Agreement and (ii) to give up any
portion of any judgment
EXHIBIT "E" TO MOU PAGE 4 OF 5
<PAGE>
obtained against a Non-Settling Defendant that is
attributed to AHP or any Released Party with respect
to a Settled Claim.
(e) Applications made by Non-Settling Defendants for
modification of the bar order will be subject to the
provisions of Fed.R.Civ.P. 11 and/or the state law
equivalent.
3. "Non-Settling Defendant" shall mean any person or entity that
is not AHP or a Released Party as defined herein, against whom
or which any claim, suit, action or other proceeding has been
or is hereafter made, asserted or commenced alleging injury or
damage as a result of a Settled Claim. A physician or other
Released Party may be a Non-Settling Defendant as to any claim
with respect to which he, she, or it is not a Released Party.
The term Non-Settling Defendant is not limited to persons or
entities who are sued in an action in which AHP or another
Released Party is also a party.
4. "Non-Contractual Indemnity" or "Non-Contractual
Indemnification" means a right of indemnity based upon the
relationship between or conduct of the parties. These terms
include, and the protections provided AHP and the Released
Parties herein apply to, a contractual obligation of
indemnification voluntarily assumed by AHP to the extent AHP
would have been liable to such claimant for indemnity in the
absence of such contractual indemnification.
5. "Settlement Class Member" referred to in this Exhibit "E"
shall mean any member of the Settlement Class who has not
timely exercised an initial opt-out right, an intermediate
opt-out right, or a back end opt-out right pursuant to the
terms of the Settlement Agreement. Upon the exercise of any
such opt-out rights, the provisions of this Exhibit shall
become ineffective in connection with any action brought by
each class member who has exercised any right of opt-out.
6. A Settled Claim is defined as set forth in Exhibit "C" to the
MOU.
7. The Settlement Agreement shall contain other specific terms
and provisions to implement, with respect to specific third
parties, the Parties' intention that no Settlement Class
Member shall recover, directly or indirectly, any sums for
Settled Claims from AHP or any Released Party other than
amounts received under this Settlement Agreement, and that AHP
shall make no payments to such third parties for any amounts
arising out of a Settled Claim brought against such third
parties by any Class Member, except to the extent that a Class
Member timely and properly exercises an initial, intermediate
or back-end opt-out right provided by the MOU.
EXHIBIT "E" TO MOU PAGE 5 OF 5
<PAGE>
