EXHIBIT 10.6
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MEMORANDUM OF UNDERSTANDING
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This Memorandum sets forth the terms of a binding agreement between and
among Chattem, Inc. ("Chattem"), Xxxxxx Indemnity Insurance Company ("Xxxxxx"),
Xxx Xxxxxxx America, Inc. ("KRA"), and Berkshire Hathaway Inc. ("BHP"):
1. Xxxxxx will pay up to $37,500,000.00 (the "Settlement Amount") toward
settlement of claims against Chattem by unrelated third-parties alleging
injury arising from ingestion of Chattem's Dexatrim products.
2. Xxxxxx will begin paying the Settlement Amount after Chattem or its
insurance carriers underlying Xxxxxx have paid the full underlying
insurance limits to settle these Dexatrim ingestion injury claims. The
Settlement Amount will be paid upon proof of this payment and presentation
of Chattem-approved Dexatrim claims to Xxxxxx. Chattem shall have the
exclusive right to approve such claims. The Settlement Amount will be used
solely to find settlement of Dexatrim ingestion injury claims. Xxxxxx will
pay the claims within fourteen (14) business days from presentation of the
claims.
3. If, however, establishment of a settlement account is ordered by the Court
in the underlying multidistrict litigation, Xxxxxx will fund the account to
the extent any portion of the Settlement Amount remains unpaid and is
required for funding the account. Xxxxxx must pay the Settlement Amount
when the full underlying insurance limits ($27,000,000) have been paid.
This will consist of a) $3,615,000 in previously settled claims; and b)
$23,385,000 in remaining limits, which will have been paid by Chattem or
its underlying insurance carriers into the Court-ordered account before
Xxxxxx pays the Settlement Amount. If Xxxxxx pays the Settlement Amount or
any portion thereof into a Court-ordered account, Chattem agrees to refund
to Xxxxxx the interest earned on such
funds from the day Xxxxxx funds the account until the day the funds are
disbursed from the account, provided that such interest is refunded to
Chattem from the account. Chattem will pay this interest amount to Xxxxxx
within fourteen (14) business days after the disbursement of any interest
funds from the account.
4. As a possible alternative to the settlement funding alternatives set forth
in paragraphs 2 and 3, Xxxxxx and Chattem may agree on Xxxxxx paying the
net present value of the full Settlement Amount to Chattem in a single
payment. The net present value amount would have to be agreed upon in
further negotiation.
5. In no event will Xxxxxx be required to pay any amount greater than the
Settlement Amount, and Chattem agrees to reimburse Xxxxxx for any portion
of the Settlement Amount or net present value figure that is not used to
fund settlement of Dexatrim claims against Chattem.
6. Chattem covenants not to xxx for, and fully releases Xxxxxx from, all
claims that directly or indirectly relate to Xxxxxx Commercial Excess
Liability Policy no. 9YR 001001-01 (the "Policy"), including but not
limited to the claims of Chattem for reimbursement under the Policy or for
a defense under the Policy, or that are related in any way to the handling
of Chattem's claim for coverage, or that are related in any way to
litigation brought against Chattem by Xxxxxx. Chattem makes the release on
behalf of itself, its affiliates, successors, assigns, agents, officers,
employees, and all persons or entities insured under the Policy, and the
release applies to Xxxxxx and its affiliates, successors, assigns, agents,
officers, employees, insurers and reinsurers. For the purposes of this
paragraph, BHI and KRA are not affiliates, successor, assigns, agents,
officers, employees, insurers, or reinsurers of Xxxxxx.
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7. Upon payment of the Settlement Amount, Chattem covenants not to xxx for,
and fully releases BHI and KRA from, all claims, including but not limited
to those that directly or indirectly relate to the Policy, or the handling
of Chattem's claim for coverage, or litigation brought against Chattem by
Xxxxxx. Chattem makes the release on behalf of itself, its affiliates,
successors, assigns, agents, officers, employees, and all persons or
entities insured under the Policy, and the release applies to BHI and KRA
and their respective affiliates, successors, assigns, agents, officers,
employees, insurers, and reinsurers. This paragraph is void should Chattem
be required to return the Settlement Amount (or any portion of it) to
Xxxxxx, or Xxxxxx'x receiver, liquidator or the like. The Settlement Amount
does not include the interest that may be paid by Chattem to Xxxxxx.
8. Xxxxxx agrees to dismiss with prejudice its claims in the lawsuit captioned
Xxxxxx Indemnity Ins. Co. v. Chattem, Inc., et al., Docket No. 1:03-CV-264
(E.D. Tenn.) (the "Lawsuit"). Chattem likewise agrees to dismiss with
prejudice its claims in the Lawsuit against Xxxxxx. These dismissals will
be filed by a joint instrument within five (5) days after the execution of
this agreement.
9. Chattem agrees to dismiss without prejudice its claims in the Lawsuit
against BHI, KRA and all Doe parties. These dismissals will be filed
contemporaneously with the joint instrument referenced in paragraph 8
above. Upon payment of the Settlement Amount in full, Chattem agrees to
dismiss with prejudice its claims in the Lawsuit against BHI, KRA and all
Doe parties. If the Settlement Amount is not paid and Chattem institutes
suit against BHI and KRA, BHI and KRA agree not to plead as a defense to
such action laches, waiver, estoppel, lapse of time, any statute of
limitations, any statute of repose, or
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any similar defense based on the failure to bring such action on or after
August 21, 2003. The agreement not to assert defenses under this Agreement
shall apply only to the extent such defenses are based on the passage of
time from August 21, 2003 through the date the Settlement Amount is not
paid. This paragraph is void should Chattem be required to return the
Settlement Amount (or any portion of it) to Xxxxxx, or Xxxxxx'x receiver,
liquidator or the like. The Settlement Amount does not include the interest
that may be paid by Chattem to Xxxxxx.
10. Notwithstanding any other provision herein, by executing this Memorandum
and any later final written settlement agreement, BHI and KRA do not admit
but instead deny the validity, merit, actionability, justiciability, or any
legal or factual basis whatever of any action that has been or may be
brought against them, and specifically reserve and do not waive any
defenses they have asserted or may assert, other than those encompassed by
the tolling provision above, including but not limited to lack of subject
matter jurisdiction, lack of personal jurisdiction, failure to state a
claim upon which relief may be granted, and other legal defenses, all of
which are not waived.
11. Xxxxxx covenants not to xxx Chattem's insurers or any other entity to
recover the Settlement Amount or any portion thereof.
12. The parties will promptly reach a mutually acceptable final written
agreement embodying the terms herein and other terms acceptable to the
parties.
13. Those executing this Memorandum have the authority to do so on behalf of
the parties identified below with said executors, and the various parties
enter into this Memorandum of Understanding on the express representation
of each other party that the executors of this instrument have the
authority set forth herein.
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14. This agreement will be considered executed upon the signature of the last
signer below; it may be executed by separate copies; each counterpart or
copy is valid; a copy is as valid as an original; and all signed copies
will be exchanged by fax immediately between the executors below.
XXXXX & XXXXX
DATED: 12/18/03 /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
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Xxxxxxx X. Xxxxxxxxxx, Xx., Esq.
Suite 900
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
ATTORNEYS FOR XXXXXX INDEMNITY
INSURANCE CO. AND XXX XXXXXXX
AMERICA, INC.
SPEARS, MOORE, XXXXXX &
XXXXXXXX
DATED: 12/19/03 /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxxxxxxxxxx, XX 00000
ATTORNEYS FOR BERKSHIRE
HATHAWAY INC.
XxXXXXXX & ENGLISH, LLP
DATED: 12/18/03 /s/ J. Xxxxx Xxxxxx
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J. Xxxxx Xxxxxx, Esq.
Four Gateway Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
ATTORNEYS FOR CHATTEM, INC.
NWK2: 1118177.06
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