EXHIBIT 10.5
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SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") made on this 26th
day of April, 2004, by and between Chattem, Inc. ("Chattem") and its directors,
officers, shareholders, agents and employees and assigns and persons and
entities acting through or under any of them, and any and all persons or
entities named as insureds or alleged to be an insured, and General Star
Indemnity Company and its directors, officers, shareholders, agents and
employees and persons and entities acting through or under any of them ("General
Star") (General Star and Chattem are hereinafter sometimes referred to
collectively as the "Parties");
WHEREAS, General Star issued liability insurance policy No. IUG-358416B
to Chattem (the "Policy"); and
WHEREAS, Chattem has asserted that General Star is responsible to pay
and indemnify Chattem pursuant to the Policy (the "Coverage Claim") for certain
claims in which third-parties assert that they have suffered injury as a result
of their ingestion of Chattem's Dexatrim product ("Dexatrim Claims"); and
WHEREAS, there is a dispute between Chattem and General Star with
respect to the obligations of General Star under the Policy, if any, to defend
and indemnify Chattem with respect to the Dexatrim Claims; and
WHEREAS, the Coverage Claim was made the subject of litigation
involving Chattem and General Star in an action entitled Xxxxxx Indemnity
Insurance Company v. Chattem, Inc., et al., pending in the United States
District Court, Eastern District of Tennessee at Chattanooga, No. 1:03-CV264
(hereinafter "Coverage Litigation"); and
WHEREAS, other insurers named as parties in the Coverage Litigation.
have asserted or may assert claims for contribution and/or related relief among
themselves and against General Star with respect to the Dexatrim Claims; and
WHEREAS, the Parties believe that it is in their mutual interest to
reach an amicable resolution with respect to all c1aims, including but not
limited to the Coverage Claim and claims related to Dexatrim and the issues
raised in the Coverage Litigation, without admission or adjudication of any
issue of fact or law, and to resolve all past, present or future disputes
relating to the obligations of Genera1 Star to Chattem under the Policy;
NOW, THEREFORE. in consideration of the mutual promises contained
herein and other good and valuable consideration Chattem and General Star hereby
agree as follows:
1. In full and final settlement of the Coverage Claim that Chattem has or
may have, now or in the future, as well as all claims known or
unknown, against General Star under the Policy, General Star will pay,
on behalf of Chattem, twenty-two million, five hundred thousand
dollars ($22,500,000), which payment is intended to, and shall,
exhaust completely the Policy Aggregate limit of Insurance. Said
payment shall be made as requited to fund the CLASS ACTION SETTLEMENT
AGREEMENT between Chattem, Inc., and Class Counsel On Behalf Of Class
Representatives In Re Phenylpropanolamine (PPA) Products Liability
Litigation, Case No. 2:01-md-1407 (MDL No. 1407), dated as of April
13, 2004, and attached hereto as Exhibit A (the "Class Settlement").
2. The payment described in Paragraph 1 shall be made by wire transfer on
or before noon on May 3, 2004, provided that Preliminary Approval, as
defined in the Class Settlement, has been obtained by Chattem.
3. The payment described in Paragraph 1 shall be made into the Initial
Settlement Trust (the "Trust') created pursuant to the April 13, 2004
Order Directing Chattem To Fund An Initial Settlement Trust issued by
the Honorable Xxxxxxx Xxxxxx Xxxxxxxxx, as described more ful1y
in the INITIAL SETTLEMENT TRUST AGREEMENT Among Chattem. Inc., As
Settlor and AMSOUTH BANK, As Trustee, dated April 12, 2004, and
attached hereto as Exhibit B (the "Trust Agreement").
3A. In the event that Chattem shall exercise its option to terminate and
withdraw from the Class Settlement, as set forth at Section 8.1 of the
Class Settlement, it shall provide notice of such exercise to General
Star within five business days from such exercise, and in no event
later than November 15, 2004. In the event of such termination and
withdrawal, Chattem shall not take any action inconsistent with the
treatment of the Trust as a "Qualified Settlement Fund" within the
meaning of Section 468B of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulation promulgated thereunder. Chattem
shall provide to General Star, on or prior to December 1, 2004,
written confirmation of the satisfaction of the provisions of this
Paragraph 3A, or in the alternative. confirmation that Chattem has not
exercised its right to terminate and withdraw from the Class
Settlement, and is no longer entitled to do so under Section 8.1
thereof, such time having expired.
4. Regardless of whether Chattem exercises its right to terminate and
withdraw from the Class Settlement pursuant to Section 8.1 thereof, it
is agreed and understood that General Star's obligation under the
Policy, if any, to defend Chattem against any claim or suit, is fully
and finally extinguished upon General Star's making of the payment
described in Paragraph 1 above. Notwithstanding Paragraph 1 above,
Chattem will pay General Star two million, two hundred forty-nine
thousand, six hundred thirty-nine dollars and seventy cents
($2,249,639.70), which is intended to, and shall, reimburse General
Star for its past defense costs incurred and paid in connection with
Dexatrim Claims. Such payment shall be made by wire transfer on or
prior to five business days subsequent to notice given by General
Star, but not earlier than the date upon which General Star makes its
payment as described in Paragraph 1 above.
5. Chattem does hereby covenant not to xxx General Star and forever fully
and completely releases General Star from any liability under the
Policy for any and all, claims, demands, rights, causes of action or
liabilities arising out of any past, present or future claims which it
has or may have, now or in the future, known or unknown, for damages
and costs of any kind, including punitive or other legal, statutory or
equitable relief, or for costs and expenses arising from or related
to any and all claims, whether past, present or future. It is
expressly agreed and understood by and between the parties hereto that
this release is not limited to those claims actually known and/or
suspected to exist at the time the release is given, including,
without limitation, as set forth in the provisions of Section 1542 of
the Civil Code of the State of California, which provides that "[a]
general release does not extend to claims which the creditor does not
know or suspect exist in his favor at the time of executing the
release, which if known by him must have material1y affected his
settlement with the debtor." It is further expressly agreed and
understood by and between the parties hereto that should any future
obligations on the part of General Star arise out of or be alleged to
arise out of any Dexatrim Claim, Chattem win not assert that those
obligations must be met by General Star, since the release provided in
this Agreement is full, complete and final.
6. Chattem will defend, hold harmless and indemnify General Star against
any claims made by Xxxxxx Indemnity Insurance Company, Interstate Fire
& Casualty Company, and any Dexatrim claimant or government lienholder
that al1eged or alleges that General Star improperly settled Chattem's
claim against General Star, or that the Policy's Aggregate Limit of
Insurance is not exhausted. Should a claim be made against General
Star for any obligation recited in this paragraph General Star agrees
to so notify Chattem, and further agrees to cooperate in the defense
of such claim, including making its underwriters and claims handlers,
and all non-privileged parts of its claim and underwriting files,
available to Chattem. General Star acknowledges that Chattem has the
right to compromise and settle such claim(s) as Chattem deems
appropriate, at Chattem's sole cost and expense.
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7. General Star is responsible for all fees, costs and expenses it has
incurred, or may in the future incur, in connection with the Coverage
Litigation except as are inconsistent with paragraph 6.
8. General Star agrees to cooperate with Chattem in its defense of the
Coverage litigation including making its underwriters and claim
handlers, and all non-privileged parts of its claim and underwriting
files, available to Chattem.
9. General Star covenants not to xxx Chattem's insurers or any other
entity to recover the payment set forth in Paragraph 1 above. General
Star will dismiss its claims, if any, against any other insurance
company that is or was a party to the Coverage Litigation.
10. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, as well as their successors, assigns, representatives,
present and future direct or indirect parent companies, subsidiaries,
affiliates, divisions, joint venturers, and, collectively, all of
their past, present and future directors, officers, employees, agents,
attorneys, shareholders, underwriters and insurers, and others
entitled to make claim on behalf of the Parties hereto. Nothing in
this Agreement is intended nor shall be construed to confer any
benefit whatsoever on any persons other than the Parties. By entering
into this Agreement, Chattem expressly does not release, compromise or
waive its claims against any other insurance companies that issued its
policies of insurance and reserves its rights to pursue any claim for
coverage against other insurance companies.
11. This Agreement does not constitute an admission by General Star of an
obligation to defend or indemnify Chattem with respect to any Policy
or any claim.
12. This Agreement shall not be admissible in any legal proceeding except
to enforce its terms.
13. Each of the parties has participated in the drafting of this Agreement
after consulting with counsel. Therefore, the language of this
Agreement shall not presumptively be construed in favor or against
either party.
14. This Agreement represents the entire understanding between the parties
and, without limitation, the Parties expressly agree that any previous
communications, correspondence, or previous agreements are not to be
employed to construe this Agreement. Any other provisions of this
Agreement to the contrary notwithstanding, this Agreement can only be
modified by writing signed by both parties and this provision cannot
be orally waived.
15. Chattem and General Star respectively warrant and represent that they
are authorized to enter into this Agreement on their own behalf and on
behalf of their respective shareholders, directors, officers,
employees, and agents, assigns and all persons or entities acting
through or under any of them, and that they respectively have the
authority to bind such persons and entities to the terms of this
Agreement Chattem and General Star also represent and warrant that the
persons whose signatures are affixed hereto are authorized to sign
this Agreement on behalf of their respective corporations and have the
legal authority to bind their respective corporations hereto.
16. This Agreement will be construed in accordance with the law of the
state of Tennessee, with out regard to conflicts of law principles.
17. If any terms or provisions of this Agreement, other than the
provisions of Paragraphs 1-9, or the application of any term or
provision of this Agreement to any person or circumstance, other than
the provisions of Paragraphs 1-9 shall, to any extent be invalid or
unenforceable the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be
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affected thereby and each such provision of this Agreement shall be
valid and be enforceable to the fullest extent permitted by the law.
18. Any notice, request, instruction or other documents to be given by any
Party to any other Party shall be in writing and delivered personally
or sent by Federal Express, or by facsimile, or by e-mail (which such
facsimile or e-mail notice shall be deemed effective as of the time of
receipt of confirmation by the sending party) as follows, or as
otherwise instructed by a notice delivered to the other Party pursuant
to this subsection:
If to Chattem:
Xxxxxx & Xxxxxx PLLC
Suite 1000 Volunteer Building
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxx, Esq.
X. Xxxxx Xxxxxxxx, Esq.
Facsimile (000) 000-0000
XxXxxxxx & English
Four Gateway Center
000 Xxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile (000) 000-0000
Email: xxxxxx@xxxxxxxx.xxx
If to General Star:
The Coverage Law Firm PLLC
Suite 1150
1629 K Street, N.W.
Washington D.C. 20006-1676
Attention: B. Xxxxxx Xxxxxxxx
Facsimile: (000) 000.0000
Email: xxxxxxxxxxxxxxx@xxxxxxxxxxxxxxxxxx.xxx
19. This Agreement shall be executed in two (2) duplicate originals, with
Chattem to retain one (1) original and General Star to retain one (1)
original.
IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, affix their signatures hereto
CHATTEM, INCORPORATED
By:__________________________________
Its:_________________________________
GENERAL STAR INDEMNITY COMPANY
By:__________________________________
Its:_________________________________
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