-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VMXYl1IQTq+bfjU1kVwCVU40Vx2whUD/gjFQZFnN5soVKGC3+cfVI6Z5PA42PYeh sf/HyagzciDx9PiWVdDL0A== /in/edgar/work/0000005187-00-000015/0000005187-00-000015.txt : 20001115 0000005187-00-000015.hdr.sgml : 20001115 ACCESSION NUMBER: 0000005187-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HOME PRODUCTS CORP CENTRAL INDEX KEY: 0000005187 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 132526821 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01225 FILM NUMBER: 766709 BUSINESS ADDRESS: STREET 1: 5 GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940 BUSINESS PHONE: 9736605000 MAIL ADDRESS: STREET 1: 5 GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940 10-Q 1 0001.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 Commission file number 1-1225 AMERICAN HOME PRODUCTS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-2526821 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Five Giralda Farms, Madison, N.J. 07940 --------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (973) 660-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ -- The number of shares of Common Stock outstanding as of the close of business on October 31, 2000: Number of Class Shares Outstanding --------------------------------- ------------------ Common Stock, $0.33-1/3 par value 1,310,545,193 ================================================================================ AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES INDEX Page No. -------- Part I - Financial Information 2 Item 1. Financial Statements: Consolidated Condensed Balance Sheets - September 30, 2000 and December 31, 1999 3 Consolidated Condensed Statements of Operations - Three and Nine Months Ended September 30, 2000 and 1999 4 Consolidated Condensed Statements of Changes in Stockholders' Equity - Nine Months Ended September 30, 2000 and 1999 5 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999 6 Notes to Consolidated Condensed Financial Statements 7-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14-22 Item 3. Quantitative and Qualitative Disclosures about Market Risk 22 Part II - Other Information 23 Item 1. Legal Proceedings 23-25 Item 6. Exhibits and Reports on Form 8-K 26 Signature 27 Exhibit Index EX-1 1 Part I - Financial Information ------------------------------ AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES The consolidated condensed financial statements included herein have been prepared by American Home Products Corporation (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the financial statements include all adjustments necessary to present fairly the financial position of the Company as of September 30, 2000 and December 31, 1999, and the results of its operations for the three months and nine months ended September 30, 2000 and 1999, and its cash flows and changes in stockholders' equity for the nine months ended September 30, 2000 and 1999. It is suggested that these financial statements and management's discussion and analysis of financial condition and results of operations be read in conjunction with the financial statements and the notes thereto included in the Company's 1999 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000. 2 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands Except Per Share Amounts)

3 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Amounts)

4 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In Thousands Except Per Share Amounts)

5 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In Thousands)

6 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1. Discontinued Operations ----------------------- On June 30, 2000, the Company announced that it had completed the sale of the Cyanamid Agricultural Products business to BASF Aktiengesellschaft (BASF). The Cyanamid Agricultural Products business manufactures, distributes and sells crop protection and pest control products worldwide, such as herbicides, insecticides and fungicides. Under the terms of the definitive agreement dated as of March 20, 2000 and subsequently approved by the Federal Trade Commission and certain international regulatory agencies, BASF paid the Company $3,800,000,000 in cash and assumed certain debt. As a result, the Company recorded an after-tax loss on the sale of this business of $1,572,993,000 or $1.19 per share-diluted and reflected this business as a discontinued operation beginning in the 2000 first quarter. The loss on the sale included closing costs from the transaction and operating income of the discontinued business from April 1, 2000 through June 30, 2000 (the disposal date). The loss on the sale was due primarily to a difference in the basis of the net assets sold for financial reporting purposes compared to the Company's basis in such net assets for tax purposes. This difference related, for the most part, to goodwill which is not recognized for tax purposes. As a result, the transaction generated a taxable gain requiring the recording of a tax provision, in addition to a write-off of net assets in excess of the selling price. The Consolidated Condensed Financial Statements at December 31, 1999 and September 30, 1999 have been restated to reflect the Cyanamid Agricultural Products business as a discontinued operation. Operating results of discontinued operations were as follows: Nine Months (In thousands except per share amounts) Ended September 30, ------------------------- 2000 1999 ---------- ---------- Net sales $546,790 $1,290,645 ---------- ---------- Income (loss) before federal and foreign taxes 160,635 (13,603) Provision (benefit) for federal and foreign taxes 57,289 (3,211) ---------- ---------- Income (loss) from operations of discontinued agricultural products business 103,346 (10,392) Loss on disposal of agricultural products business (including federal and foreign tax charges of $855,248) (1,572,993) - ---------- ---------- Loss from discontinued operations ($1,469,647) ($10,392) =========== ========== Diluted loss per share from discontinued operations ($1.11) ($0.01) =========== ========== 7 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 2. Warner-Lambert Termination Fee ------------------------------ During the 2000 first quarter, the Company and Warner-Lambert Company terminated their merger agreement. The Company recorded income of $1,709,380,000 ($1,111,097,000 after-tax or $0.84 per share - diluted) in income from continuing operations resulting from the receipt of a $1,800,000,000 termination fee provided for under the merger agreement offset, in part, by certain related expenses. Note 3. Contingencies and Litigation Settlement --------------------------------------- The Company is involved in various legal proceedings, including product liability and environmental matters of a nature considered normal to its business. It is the Company's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. In the 1999 third quarter, the Company recorded a litigation charge of $4,750,000,000 (net of $400,000,000 of insurance) regarding the use of the antiobesity products REDUX (dexfenfluramine) or PONDIMIN (fenfluramine), to provide for expected payments to the settlement funds contemplated by the comprehensive nationwide, class action settlement, other judgments and settlements (including claims for primary pulmonary hypertension (PPH) and any opt outs from the settlement) and future legal costs. During the 2000 first nine months, payments to the comprehensive nationwide, class action settlement fund, individual settlement payments, legal fees and other items totaling $2,242,816,000 were paid and applied against the litigation accrual. At September 30, 2000, $2,389,603,000 of the litigation accrual remained. On April 13, 2000, the Company announced that it would proceed with the comprehensive, nationwide settlement to resolve litigation brought against the Company related to the diet drug matters. Of the estimated 5.8 million diet drug users, approximately 300,000 individuals have registered for the settlement and approximately 45,000 opted out during the four-month initial opt-out period ended March 30, 2000. A majority of those who registered have elected the settlement's Accelerated Implementation Option, which provides for prompt benefits and resolves the claims of those class members. An amendment to the settlement agreement, dated July 20, 2000, related to the timing of payments by the Company into the proposed settlement fund, administration of the settlement trust and opt-out credits available to the Company. On August 28, 2000, Senior District Judge Louis C. Bechtle of the United States District Court for the Eastern District of Pennsylvania approved the comprehensive nationwide, class action settlement, for which approval has been appealed to the United States Court of Appeals for the Third Circuit. A decision on that appeal is not expected until next year. The Company anticipates that additional reserves will be required related to the diet drug matters and, while it is not possible to determine at this time the extent of such additional reserves, the Company believes, based on currently available information, that the additional reserves that will be recorded shall, in the aggregate, be lower than the $4,750,000,000 recorded in the 1999 third quarter. The Company currently expects to record a portion of the additional reserve during the 2000 fourth quarter. The Company will record additional reserves when information is available to estimate the liability. 8 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS In the opinion of the Company, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings will not have a material adverse effect on the Company's financial position but could be material to the results of operations in any one accounting period. Note 4. Restructuring Program --------------------- In December 1998, the Company recorded a special charge for restructuring and related asset impairments of $343,600,000 to recognize costs of the reorganization of its worldwide supply chains and U.S. distribution systems, and the globalization of certain business units. The restructuring will result in the reduction of 4,100 positions worldwide offset, in part, by 1,000 newly created positions in the same functions at other locations. During the 2000 first nine months, the Company has continued its personnel reductions and has completed the closure of the third and final distribution center. The manufacturing plants are continuing their phase-out period. One plant was closed in the 2000 third quarter and four additional closures are expected in the 2000 fourth quarter. The costs associated with these plant closures are included in other closure/exit costs below and are anticipated to be realized after the facilities cease production and prior to disposal. As of September 30, 2000, approximately 3,100 positions had been eliminated. The activity in the restructuring accruals was as follows: Personnel Other Closure/ (In thousands) Costs Exit Costs Total - ------------------------------------------- --------- -------------- -------- Restructuring accruals at December 31, 1999 $54,753 $79,261 $134,014 Cash expenditures (30,988) (9,213) (40,201) ------- ------- -------- Restructuring accruals at September 30, 2000 $23,765 $70,048 $93,813 ======= ======= ======== Note 5. Consolidation of Certain Subsidiaries ------------------------------------- Effective January 1, 2000, the financial results of certain pharmaceutical subsidiaries in Japan and India, which were previously included on an equity basis, were consolidated in the results of the Company due to changes which gave the Company ability to exercise control over the operations of these affiliates. The consolidation of the subsidiaries resulted in higher net sales of 2% for the 2000 third quarter and first nine months; however, it had no impact on income from continuing operations in 2000. 9 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 6. Company Data by Operating Segment --------------------------------- The Company has three reportable segments: Pharmaceuticals, Consumer Health Care and Corporate. Net Sales ---------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ($ in millions) --------------------- --------------------- Operating Segment 2000 1999 2000 1999 - -------------------- -------- -------- --------- -------- Pharmaceuticals $3,030.2 $2,584.3 $8,453.8 $7,119.7 Consumer Health Care 647.1 606.7 1,753.8 1,672.6 -------- -------- --------- -------- Total $3,677.3 $3,191.0 $10,207.6 $8,792.3 ======== ======== ========= ======== Income (Loss) from Continuing Operations Before Federal and Foreign Taxes (1) ---------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ($ in millions) --------------------- -------------------- Operating Segment 2000 1999 2000 1999 - -------------------- -------- -------- -------- -------- Pharmaceuticals $871.0 $795.1 $2,184.3 $1,973.2 Consumer Health Care 195.8 178.7 416.7 405.8 -------- -------- -------- -------- 1,066.8 973.8 2,601.0 2,379.0 Corporate (2) (42.6) (4,838.9) 1,557.8 (5,090.0) -------- -------- -------- -------- Total $1,024.2 ($3,865.1) $4,158.8 ($2,711.0) ======== ======== ======== ======== (1) The third quarter results included goodwill amortization for 2000 and 1999 as follows: Pharmaceuticals - $37.9 and $39.1, and Consumer Health Care - $8.0 and $8.4, respectively. The first nine months results included goodwill amortization for 2000 and 1999 as follows: Pharmaceuticals - $116.1 and $115.9, and Consumer Health Care - $24.0 and $24.5, respectively. (2) Corporate expenses for the 2000 first nine months included income of $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses. Corporate expenses for the 1999 third quarter and first nine months included a litigation charge of $4,750.0 (net of $400.0 of insurance) in connection with litigation brought against the Company regarding the use of the antiobesity products REDUX or PONDIMIN. The charge provided for expected payments to settlement funds contemplated by the nationwide, class action settlement, other judgments and settlements (including claims for PPH and any opt outs from the settlement), and future legal costs. Corporate expenses for the 1999 first nine months included a special charge of $82.0 related to the suspension of shipments and voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine. 10 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 7. Earnings per Share ------------------ The following table sets forth the computations of basic earnings (loss) per share and diluted earnings (loss) per share: Three Months Ended Nine Months Ended September 30, September 30, --------------------------- -----------------------------

Note 8. Immunex Stock Offering ---------------------- In August 2000, the Company's majority-owned subsidiary, Immunex Corporation (Immunex) whose financial results are consolidated into the results of the Company, filed a shelf registration statement which allows Immunex to sell up to 20 million shares of newly-issued Immunex common stock in a primary offering and the Company to sell up to 40 million shares of Immunex common stock in a secondary offering. On October 19, 2000, Immunex filed a preliminary prospectus supplement with the SEC and on November 9, 2000, Immunex filed a registration statement with the SEC pursuant to rule 462(b) of the Securities Act of 1993, as amended, allowing the Company to increase the amount of 11 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS shares it will sell to 50 million shares. In addition, the Company granted the underwriters of this offering the right to purchase up to an additional 10.5 million shares of Immunex common stock that the Company owns, to cover underwriters' over-allotments. On November 10, 2000, the underwriters exercised their over-allotment option for an additional 10.5 million shares, resulting in a total sale by the Company in the public offering of 60.5 million shares. The offering is expected to close on November 15, 2000. Including the exercise of the over-allotments, anticipated net proceeds to the Company approximate $2,340,000,000. On October 31, 2000, the Company converted a $450,000,000 subordinated note into 15,544,041 newly issued shares of Immunex, increasing the Company's ownership in Immunex to approximately 55%. The net effect of the subordinated note conversion and the equity offering will reduce the Company's ownership in Immunex from approximately 55% to approximately 41%. Upon the reduction in ownership and based on amendments to the related governance agreement with Immunex which reduce the Company's control over the operations of Immunex, the Company will include the financial results of Immunex on an equity basis instead of consolidating such results. Key elements of the new business arrangements between the Company and Immunex include the future sale by the Company of its recently acquired biotech facility in Rhode Island to Immunex and the Company agreeing to supply up to $550,000,000 in financing guarantees relating to Immunex's financing of its proposed new research and technology center in Seattle, Washington. All existing licensing and marketing rights to ENBREL remain unchanged. The Company plans to use the net proceeds from the sale of its Immunex common stock for general corporate purposes. Note 9. Recently Issued Accounting Standards ------------------------------------ In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133." SFAS No. 138 was issued to address a limited number of issues causing implementation difficulties for entities that apply SFAS No. 133. SFAS Nos. 133 and 138 require that all derivatives be measured at fair value and recognized as assets or liabilities on the balance sheet. Changes in the fair value of derivatives should be recognized in either net income (loss) or other comprehensive income (loss), depending on the designated purpose of the derivative. The Company is required to and will adopt SFAS No. 133 and SFAS No. 138 in the first quarter of fiscal 2001. Based on the Company's current activities, the Company does not believe that adoption of these pronouncements will have a material impact on the Company's results of operations, cash flows or financial position. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 reemphasizes existing guidance related to revenue recognition, including criteria specified in the FASB's conceptual framework on timing of revenue recognition, and presentation and disclosure of revenue in the financial statements. SAB No. 101 must be implemented 12 AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS by the fourth quarter of fiscal years beginning after December 15, 1999. The Company will implement SAB No. 101 in the 2000 fourth quarter. The Company does not believe that the implementation of SAB No. 101 will have a material impact on the Company's results of operations, cash flows or financial position. In May 2000, the Emerging Issues Task Force (EITF) reached a consensus on EITF No. 00-14, "Accounting for Certain Sales Incentives." Existing U.S. generally accepted accounting principles do not provide specific guidance on the accounting for sales incentives that companies offer to their customers. EITF No. 00-14 addresses the recognition, measurement and income statement classification for sales incentives offered voluntarily to customers. This guidance is required to be implemented by the Company in the 2000 fourth quarter. The Company is currently in compliance with the recognition and measurement aspects of EITF No. 00-14. The Company does not believe that the income statement classification requirement will have a material impact on net sales. In October 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125." SFAS No. 140 reviews criteria for accounting securitizations, other financial asset transfers and collateral, and introduces new disclosures. The new disclosure requirements must be implemented for fiscal years ending after December 15, 2000. The other provisions of SFAS No. 140 apply prospectively to the transfer of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 carries forward most of the provisions of SFAS No. 125 without amendment. The Company does not believe that this pronouncement will have a material impact on the Company's results of operations, cash flows or financial position. Note 10. Subsequent Event ---------------- On November 6, 2000, the U.S. Food and Drug Administration (FDA) issued an advisory concerning all products that contain phenylpropanolamine (PPA) requesting that the industry voluntarily stop marketing all products that contain PPA. In direct response to this request, effective November 6, 2000, the Company ceased shipping only cough/cold products containing PPA and initiated a process to remove its PPA-containing cough/cold products from customer warehouses and retail store shelves. Also on November 6, 2000, the Company announced that it would begin to ship new formulations of DIMETAPP cough/cold products, which do not contain PPA, as early as the week of November 13, 2000. The Company had previously reformulated its ROBITUSSIN CF formula, the only product in the ROBITUSSIN line that contained PPA. The Company, which already markets a large number of non-PPA containing cough/cold products, is currently evaluating the impact that its actions resulting from the FDA advisory will have on the results of operations. In the opinion of the Company, these actions will not have a material adverse effect on its financial position or cash flows. 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 Results of Operations - --------------------- Management's discussion and analysis of results of operations for the 2000 third quarter and first nine months are presented on an as-reported basis, except for sales variation explanations which are presented on an as-reported and pro forma basis. Effective January 1, 2000, the financial results of certain pharmaceutical subsidiaries in Japan and India, which were previously included on an equity basis, were consolidated in the results of the Company. Pro forma sales results reflect the consolidation of these subsidiaries as of January 1, 1999. The consolidation of the subsidiaries had no impact on income from continuing operations in 2000. On an as-reported basis, worldwide net sales for the 2000 third quarter and first nine months were 15% and 16% higher, respectively, compared with prior year levels. On a pro forma basis, worldwide net sales increased by 13% for the 2000 third quarter and 14% for the 2000 first nine months compared with prior year levels. The increase in pro forma worldwide net sales for the 2000 third quarter and first nine months was due primarily to higher worldwide sales of pharmaceuticals and, to a lesser extent, consumer health care products. Excluding the negative impact of foreign exchange, pro forma worldwide net sales increased 15% for the 2000 third quarter and 16% for the 2000 first nine months. The following tables set forth worldwide net sales results by operating segment together with the percentage changes in "As-Reported" and "Pro Forma" worldwide net sales from the comparable periods in the prior year: Net Sales ---------------------- Three Months Ended September 30, ($ in millions) ---------------------- As-Reported Pro Forma Operating Segment 2000 1999 % Increase % Increase - -------------------- --------- -------- ----------- ---------- Pharmaceuticals $3,030.2 $2,584.3 17% 14% Consumer Health Care 647.1 606.7 7% 7% -------- -------- ----------- ---------- Total $3,677.3 $3,191.0 15% 13% ======== ======== =========== ========== Net Sales ---------------------- Nine Months Ended September 30, ($ in millions) ---------------------- As-Reported Pro Forma Operating Segment 2000 1999 % Increase % Increase - -------------------- --------- -------- ----------- ---------- Pharmaceuticals $8,453.8 $7,119.7 19% 16% Consumer Health Care 1,753.8 1,672.6 5% 5% --------- -------- ----------- ---------- Total $10,207.6 $8,792.3 16% 14% ========= ======== =========== ========== 14 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 On an as-reported basis, worldwide pharmaceutical sales increased 17% for the 2000 third quarter and 19% for the 2000 first nine months. On a pro forma basis, worldwide pharmaceutical sales increased 14% for the 2000 third quarter and 16% for the 2000 first nine months due primarily to higher sales of EFFEXOR XR (as a result of higher volume and expanded indications), PREVNAR (introduced in the 2000 first quarter and subsequently included in a government entitlement program for children), MENINGITEC (introduced in the United Kingdom in the 1999 fourth quarter), ENBREL and PROTONIX (introduced in the 2000 second quarter). Worldwide pharmaceutical sales for the 2000 first nine months also reflect higher sales of PREMARIN products offset, in part, by lower sales of LODINE (due to generic competition) and FACTOR VIII. Excluding the negative impact of foreign exchange, worldwide pharmaceutical sales increased 17% for the 2000 third quarter and 18% for the 2000 first nine months. Worldwide consumer health care sales increased 7% for the 2000 third quarter and 5% for the 2000 first nine months led by higher sales of CENTRUM products (including CENTRUM PERFORMANCE which was launched in the U.S. in the 1999 fourth quarter), CALTRATE, FLEXAGEN (introduced in the U.S. in the 2000 second quarter), ADVIL and CHAPSTICK. Worldwide consumer health care sales for the 2000 first nine months also reflect lower sales of cough/cold/allergy products and ANACIN. Excluding the negative impact of foreign exchange, worldwide consumer health care sales increased 8% for the 2000 third quarter and 6% for the 2000 first nine months. The following table sets forth, on a pro forma basis, the percentage changes in worldwide net sales by operating and geographic segment compared to the prior year, including the effect volume, price and foreign exchange had on these percentage changes: % Increase (Decrease) % Increase (Decrease) Three Months Ended September 30, 2000 Nine Months Ended September 30, 2000 -------------------------------------- --------------------------------------

15 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 Cost of goods sold, as a percentage of net sales, decreased to 24.7% for the 2000 third quarter compared to 25.3% for the 1999 third quarter and decreased slightly to 25.1% for the 2000 first nine months compared to 25.5% for the 1999 first nine months, due primarily to a favorable product mix in the pharmaceuticals segment. The lower cost of goods sold, as a percentage of net sales, for both the 2000 third quarter and first nine months were offset, in part, by increased royalty expenses, and costs associated with production and supply chain improvements at certain international sites. Selling, general and administrative expenses increased 16% for the 2000 third quarter and 17% for the 2000 first nine months. Higher selling, general and administrative expenses were due primarily to higher selling and marketing expenses, including increased headcount related to recent pharmaceutical product launches, direct-to-consumer programs, promotional costs for significant established pharmaceutical products and additional sales force for rapid growth products. Since the beginning of 2000, the financial results of certain pharmaceutical subsidiaries in Japan and India were consolidated in the results of the Company as opposed to the inclusion of their earnings on an equity basis (classified as other income, net) in prior years. The selling and promotional expenses associated with Japan and India also contributed to the higher selling, general and administrative expenses for both periods. Research and development expenses increased 16% for the 2000 third quarter and 15% for the 2000 first nine months due primarily to certain advancements and ongoing clinical trials of pharmaceuticals in several therapeutic categories. Also contributing to the increase in the 2000 first nine months were payments for existing licensing agreements. The Company had interest income, net, of $22.7 million during the 2000 third quarter compared to interest expense, net, of $59.6 million in the 1999 third quarter. Interest expense (income), net, decreased 63% for the 2000 first nine months. These fluctuations were due primarily to an increase in interest income as a result of higher cash, cash equivalents and marketable securities, as well as lower debt resulting from the pay off of the $1.0 billion of 7.70% notes on February 15, 2000 with a portion of the proceeds from the Warner-Lambert Company termination fee. In addition, on June 30, 2000, the Company used a portion of the proceeds from the sale of the Cyanamid Agricultural Products business to pay down some of the outstanding commercial paper borrowings. Weighted average debt outstanding during the 2000 and 1999 third quarter was $2,803.2 million and $5,262.7 million, respectively. Weighted average debtoutstanding during the 2000 and 1999 first nine months was $4,186.4 million and $4,704.1 million, respectively. Other income, net, decreased for the 2000 third quarter and first nine months due primarily to costs associated with a Consent Decree, payments for access to various pharmaceutical collaborations and costs related to a product discontinuation offset, in part, by insurance recoveries of environmental costs and lower Year 2000 conversion costs. In addition, during the 2000 first nine months the Company realized higher unfavorable foreign exchange. In conjunction with the Consent Decree identified above, the Company recorded a charge of $56.1 million ($36.5 million after-tax or $0.02 per share-diluted) which included payments to the U.S. Government and charges associated with actions required by 16 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 the FDA. In June 2000, the FDA performed an inspection of the Marietta, Pennsylvania and Pearl River, New York facilities and concluded that products manufactured in those facilities were not manufactured in conformity with current Good Manufacturing Practices (cGMP). The FDA documented its findings to the Company via a Form 483 written report. In October 2000, the Company announced that it had reached agreement with the FDA to enter into a Consent Decree to settle all issues involving the Marietta and Pearl River facilities. Pursuant to the Consent Decree, the Company will have a comprehensive cGMP inspection performed by expert consultants to determine compliance with cGMP. The Company continues to manufacture the products affected by the Consent Decree, as there were no provisions requiring the ceasing of manufacturing. During the 2000 first quarter, the Company and Warner-Lambert Company terminated their merger agreement. The Company recorded income of $1,709.4 million ($1,111.1 million after-tax or $0.84 per share-diluted) in income from continuing operations resulting from the receipt of a $1,800.0 million termination fee provided for under the merger agreement offset, in part, by certain related expenses. The following table sets forth worldwide income from continuing operations before federal and foreign taxes, by operating segment together with the percentage changes from the comparable periods in the prior year: Income from Continuing Operations Before Federal and Foreign Taxes (1)

(1) The third quarter results included goodwill amortization for 2000 and 1999 as follows: Pharmaceuticals - $37.9 and $39.1, and Consumer Health Care - $8.0 and $8.4, respectively. The first nine months results included goodwill amortization for 2000 and 1999 as follows: Pharmaceuticals - $116.1 and $115.9, and Consumer Health Care - $24.0 and $24.5, respectively. (2) Corporate expenses for the 2000 first nine months included income of $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses. Corporate expenses for the 1999 third quarter and first nine months included a litigation charge of $4,750.0 (net of $400.0 of insurance) in connection with litigation brought against the Company regarding the use of the antiobesity products REDUX or PONDIMIN. The charge provided for expected payments to settlement funds contemplated by the nationwide, class action settlement, other judgments and settlements (including claims for PPH and any opt outs from the settlement) and future legal costs. 17 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 Corporate expenses for the 1999 first nine months included a special charge of $82.0 related to the suspension of shipments and the voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine. Excluding the termination fee, litigation charge and ROTASHIELD special charge from 2000 and 1999 results, Corporate expenses decreased by 52% for the 2000 third quarter and 41% for the 2000 first nine months. (3) Excluding the termination fee, litigation charge and ROTASHIELD special charge from the 2000 and 1999 results, total income from continuing operations before federal and foreign taxes increased by 16% for the 2000 third quarter and 15% for the 2000 first nine months. Worldwide pharmaceutical income from continuing operations before federal and foreign taxes increased 10% for the 2000 third quarter and 11% for the 2000 first nine months due primarily to increased worldwide sales offset, in part, by higher selling, general and administrative expenses, higher research and development expenses and lower other income, net. Payments for access to various pharmaceutical collaborations, a charge for the Consent Decree previously discussed and unfavorable foreign exchange contributed to lower other income, net. Worldwide consumer health care income from continuing operations before federal and foreign taxes increased 10% for the 2000 third quarter and 3% for the 2000 first nine months due primarily to increased worldwide sales offset, in part, by higher selling, general and administrative expenses. Worldwide consumer health care income from continuing operations before federal and foreign taxes increased 10% in the 2000 third quarter compared to a 7% increase in worldwide consumer health care sales due primarily to lower marketing costs. Excluding the Warner-Lambert Company termination fee, litigation charge, and ROTASHIELD special charge from the 2000 and the 1999 results, corporate expenses decreased 52% for the 2000 third quarter and 41% for the 2000 first nine months due primarily to insurance recoveries of environmental costs and lower interest expense, offset, in part, by costs related to a product discontinuance. Excluding the effect of the Warner-Lambert Company termination fee and litigation charge from the 2000 and 1999 results, the effective tax rate of continuing operations for the 2000 third quarter decreased to 25.6% compared to 27.1% for the 1999 third quarter, and decreased to 26.1% for the 2000 first nine months from 27.5% for the 1999 first nine months. The decreases in these effective tax rates of continuing operations for the 2000 third quarter and first nine months were attributable to increased research tax credits and tax benefits from higher earnings in lower tax jurisdictions. On June 30, 2000, the Company announced that it had completed the sale of the Cyanamid Agricultural Products business to BASF. Under the terms of the definitive agreement, BASF paid the Company $3,800.0 million in cash and assumed certain debt. As a result, the Company recorded an after-tax loss on the sale of this business of $1,573.0 million or $1.19 per share-diluted and reflected this business as a discontinued operation beginning in the 2000 first quarter. The loss on the sale included closing costs from the transaction and operating income of the discontinued business from April 1, 2000 through June 30, 2000 (the disposal date). (See Note 1 to the Consolidated Condensed Financial Statements). 18 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 Income and diluted earnings per share from continuing operations for the 2000 third quarter were $762.1 million and $0.58 compared to a loss and diluted loss per share from continuing operations of $2,642.4 million and $2.02 for the 1999 third quarter, respectively. The loss and diluted loss per share from continuing operations for the 1999 third quarter included the litigation charge of $3,287.5 million and $2.51, respectively. Excluding the litigation charge from the 1999 third quarter results, both income and diluted earnings per share from continuing operations for the 2000 third quarter increased 18% compared to 1999 third quarter results. Income and diluted earnings per share from continuing operations for the 2000 first nine months were $2,920.8 million and $2.21 compared to a loss and diluted loss per share from continuing operations of $1,810.0 and $1.38 for the same period last year, respectively. Income and diluted earnings per share from continuing operations for the 2000 first nine months included income of $1,111.1 million and $0.84, respectively, resulting from the Warner-Lambert Company termination fee. The loss and diluted loss per share from continuing operations for the 1999 first nine months included the litigation charge discussed above, and a special charge of $53.0 million and $0.04, respectively, for the costs associated with the suspension of shipments and voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine. Excluding the aforementioned items from the 2000 and 1999 first nine months results, income and diluted earnings per share from continuing operations were $1,809.7 million and $1.37 for the 2000 first nine months compared to $1,530.5 million and $1.17 for the 1999 first nine months, increases of 18% and 17%, respectively. The increases in income and diluted earnings per share from continuing operations for the 2000 third quarter and first nine months were due primarily to additional worldwide sales of pharmaceuticals and to a lesser extent, consumer health care products, as well as lower interest expense, offset, in part, by higher selling, general and administrative expenses, research and development expenses, and lower other income, net. Total net income and diluted earnings per share were $762.1 million and $0.58 for the 2000 third quarter compared to total net loss and diluted loss per share of $2,873.9 million and $2.20, respectively, for the same period last year. Total net income and diluted earnings per share were $1,451.2 million and $1.10 for the 2000 first nine months compared to total net loss and diluted loss per share of $1,820.4 million and $1.39 for the same period last year, respectively. Euro Currency - ------------- On January 1, 1999, 11 of the 15 member countries of the European Union adopted the Euro as a new common legal currency. However, the legacy currencies of the member countries are scheduled to remain legal tender as sub-denominations of the Euro between January 1, 1999 and January 1, 2002 (the transition period). Critical areas impacted by the conversion to the Euro have been identified and appropriate strategies are currently being implemented to facilitate the adoption of the Euro and to facilitate business transactions during the transition period. The costs related to the Euro conversion and transition period will not have a material adverse effect on the Company's financial position or results of operations. However, the Euro conversion may have competitive implications on the Company's pricing and marketing strategies, the total impact of which is not known at this time. 19 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 Competition - ----------- The Company operates in the highly competitive pharmaceutical and consumer health care industries. The Company is not dependent on any one patent-protected product or line of products for a substantial portion of its sales or results of operations. PREMARIN, the Company's principal conjugated estrogens product manufactured from pregnant mare's urine, and related products PREMPRO and PREMPHASE (which are single tablet combinations of the conjugated estrogens in PREMARIN and the progestin medroxyprogesterone acetate), are the leaders in their categories and contribute significantly to sales and results of operations. PREMARIN'S natural composition is not subject to patent protection (although PREMPRO and PREMPHASE are subject to various patents). The principal uses of PREMARIN, PREMPRO and PREMPHASE are to manage the symptoms of menopause and to prevent osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Estrogen-containing products manufactured by other companies have been marketed for many years for the treatment of menopausal symptoms, and several of these products also have an approved indication for the prevention of osteoporosis. During the past several years, other manufacturers have introduced alternative products for the treatment and/or prevention of osteoporosis. New products containing different estrogens than those found in PREMPRO and PREMPHASE and having many of the same indications have also been introduced. Some companies have attempted to obtain approval for generic versions of PREMARIN. These products, if approved, would be routinely substitutable for PREMARIN and related products under many state laws and third-party insurance payer plans. In May 1997, the FDA announced that it would not approve certain synthetic estrogen products as generic equivalents of PREMARIN given known compositional differences between the active ingredient of these products and PREMARIN. Although the FDA has not approved any generic equivalent to PREMARIN to date, PREMARIN will continue to be subject to competition from existing and new competing estrogen and other products for its approved indications and may be subject to generic competition from either synthetic or natural conjugated estrogens products in the future. At least one other company has announced that it is in the process of developing a generic version of PREMARIN from the same natural source, and the Company currently cannot predict the timing or outcome of these or any other efforts. Liquidity, Financial Condition and Capital Resources - ---------------------------------------------------- Cash and cash equivalents increased $1,286.4 million in the 2000 first nine months to $3,179.1 million. Proceeds from the sale of the Cyanamid Agricultural Products business of $3,800.0 million, cash flows from operating activities of $1,715.7 million (which included a termination fee, net of certain related expenses, received from Warner-Lambert Company of $1,709.4 million, and payments related to the REDUX and PONDIMIN litigation of $2,242.8 million), proceeds from sales and maturities of marketable securities of $1,123.1 million and proceeds from the exercises of stock options of $302.2 million were used principally for net repayments of debt of $2,017.5 million, purchases of marketable securities of $1,543.0 million, capital expenditures of $978.7 million, dividend payments of $896.8 million and purchases of common stock for treasury of $393.1 million. 20 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 The litigation payments in the 2000 first nine months may not be indicative of payments expected in future periods. Capital expenditures included strategic investments in manufacturing and distribution facilities worldwide and expansion of the Company's research and development facilities. The Company's $1.0 billion of 7.70% notes, which matured on February 15, 2000, were classified as current at December 31, 1999. In addition, $841.6 million of outstanding commercial paper at December 31, 1999 was classified as current, representing the amount of the outstanding commercial paper borrowings in excess of the Company's $2.0 billion credit facility that supports the commercial paper program. The Company used a portion of the proceeds from the $1,800.0 million Warner-Lambert Company termination fee to pay off the $1.0 billion of 7.70% notes on February 15, 2000. On June 30, 2000, upon completing the sale of the Cyanamid Agricultural Products business, the Company received $3,800.0 million in cash from BASF. The Company used a substantial portion of the proceeds to pay down outstanding commercial paper borrowings. The balance was invested in marketable securities and used for working capital needs. At September 30, 2000, the fair value of the Company's outstanding debt was $3,532.2 million. If interest rates were to increase or decrease by one percentage point, the fair value of the long-term debt would decrease or increase by approximately $71.8 million. The Company has established programs to protect against adverse changes in exchange rates due to foreign currency volatility. At September 30, 2000, the fair value of the $997.1 million notional amount of foreign currency contracts was a net receivable of $3.2 million. The foreign currency contracts consisted of purchased foreign exchange forward contracts and put options. If the value of the U.S. dollar were to increase or decrease by 10% in relation to all hedged foreign currencies, the net receivable would increase or decrease by approximately $13.0 million. The notional amount related to the purchase of forward contracts designed to protect balance sheet exposures totaled $961.1 million. As foreign exchange rates change from period to period, the fluctuations in the fair value of the foreign exchange forward contracts are offset by fluctuations in the fair value of the underlying hedged transactions. The notional amount related to the purchase of local currency put options designed to protect future translation exposure totaled $36.0 million, all of which were considered speculative and were marked to market and recorded at fair value. Management is confident that cash flows will be adequate to repay both the principal and interest on its outstanding obligations without requiring the disposition of any significant strategic core businesses and, further, to allow the Company to continue to fund its operations, the comprehensive nationwide, class action settlement fund and individual settlement payments, pay dividends, and maintain its ongoing programs of capital expenditures which are expected and currently tracking to be significantly higher in 2000 than in recent years. Proceeds received as a result of the termination of its merger agreement with Warner-Lambert Company and the disposition of its Cyanamid Agricultural Products business enhanced the Company's financial position and cash flows. 21 Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 2000 ENBREL Supply - ------------- The market demand for ENBREL is growing and cannot be predicted with certainty. If demand for ENBREL continues to grow, it is expected that within the next year the sole source third party supplier will be unable to support growing market demand. This near term potential shortfall would continue unless and until the retrofitting of a Rhode Island facility is completed and approved, which is not expected to occur until the first half of 2002. If this facility is not completed and approved before supply constraints are encountered, future ENBREL sales could be restricted. The current plan for the longer term includes a new manufacturing facility that will be built in Ireland. Cautionary Statements for Forward Looking Information - ----------------------------------------------------- This Form 10-Q, including management's discussion and analysis set forth above, contains certain forward-looking statements, including, among other things, statements regarding the Company's results of operations, Euro currency, competition, liquidity, financial condition and capital resources, ENBREL supply, the selling of a portion of Immunex common stock and the comprehensive, nationwide settlement relating to REDUX and PONDIMIN. These forward-looking statements are based on current expectations. Certain factors which could cause the Company's actual results to differ materially from expected and historical results have been identified by the Company in its other periodic reports filed with the SEC including the Company's 1999 Annual Report on Form 10-K and Exhibit 99 to such report, which exhibit is incorporated herein by reference. Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------- The Market Risk Disclosures appear on page 21, as set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations. 22 Part II - Other Information --------------------------- Item 1. Legal Proceedings ----------------- The Company and its subsidiaries are parties to numerous lawsuits and claims arising out of the conduct of its business, including product liability and other tort claims, the most significant of which are described in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2000 and June 30, 2000. On August 28, 2000, the United States District Court for the Eastern District of Pennsylvania issued an order approving the Company's comprehensive nationwide, class action settlement with individuals who used REDUX or PONDIMIN. (In Re Diet Drugs Products Liability Litigation, MDL No. 1203; Brown, et al. v. AHPC, No. 99-20593). Several appeals have been taken from that order to the United States Court of Appeals for the Third Circuit, which is expected to hear and decide the appeals sometime during 2001. Of the estimated 5.8 million diet drug users, approximately 300,000 individuals have registered for the settlement and approximately 45,000 opted out during the four-month initial opt-out period ended March 30, 2000. A majority of those who registered have elected the settlement's Accelerated Implementation Option, which provides for prompt benefits and resolves the claims of those class members. An amendment to the settlement agreement, dated July 20, 2000, related to the timing of payments by the Company into the proposed settlement fund, administration of the settlement trust and opt-out credits available to the Company. On September 21, 2000, the United States Court of Appeals for the Third Circuit affirmed the dismissal of Oran, et al. v. Stafford, et al. (No. 97-CV-4513 (NHP), U.S.D.C., D.N.J., a securities fraud putative shareholder class action arising out of the REDUX and PONDIMIN market withdrawal and related product liability litigation. The Oran plaintiffs have petitioned the court for reconsideration. In the litigation involving DURACT, the Company's non-narcotic analgesic pain reliever that was voluntarily withdrawn from the market, one additional putative personal injury class action has been filed. Walent v. Wyeth-Ayerst Laboratories Division of American Home Products Corporation, et al., No. 00CH 12660, Circ. Ct., Cook Cty., IL, seeks the certification of a class of individuals who were allegedly exposed to and who suffered injury from DURACT. The seizure in June 2000 from the Company's distribution centers in Tennessee and Puerto Rico of a small quantity of certain of the Company's products manufactured at the Company's Marietta, Pennsylvania facility has been resolved by a Consent Decree entered into in October 2000 with the Company's Wyeth-Ayerst Laboratories division, a related subsidiary and three employees. The seizure is more fully described in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. The Consent Decree, which has been approved by the U.S. District Court for the Eastern District of Tennessee, among other things, requires the Company to make a payment 23 of $30 million to the U.S. Government. The Consent Decree does not represent an admission by the Company or the employees of any violation of the Federal Food, Drug and Cosmetic Act or its regulations. The Consent Decree allows the continued manufacture of all of the products that the Company intends to manufacture at its Marietta, Pennsylvania facility, as well as the Company's Pearl River, New York facility, subject to review by independent consultants of manufacturing records prior to distribution of individual lots. In addition, the Consent Decree requires the following: a comprehensive inspection of the Marietta and Pearl River facilities by an expert consultant, actions by the Company to address any observations made by the consultant, and verification of the Company's actions by the expert consultant followed by an FDA inspection. A putative class action was filed against the Company on October 23, 2000 on behalf of a class of California citizens who have used and paid for any product containing PPA in the preceding four years, including certain products in the ROBITUSSIN and DIMETAPP lines sold by the Company's Whitehall-Robins Healthcare division. Webster v. Whitehall-Robins Healthcare, et al. (No. BC238953, Super. Ct., Los Angeles Cty., CA.). Plaintiffs claim that PPA is associated with an increased risk of hemorrhagic stroke and that the Company's marketing and advertising of PPA-containing products was false, deceptive and misleading, in violation of the California Business & Professions Code, in not disclosing that risk. Plaintiffs seek disgorgement or restitution of any moneys acquired by means of the alleged violation, as well as attorneys' fees. The Company intends to vigorously defend this case. Duramed Pharmaceuticals, Inc., which markets a hormone replacement therapy drug called Cenestin(R), filed a complaint against the Company (Duramed Pharmaceuticals, Inc. v. Wyeth-Ayerst Laboratories, Inc., No.-C-1-00-735, U.S.D.C., W.D. Ohio), alleging that the Company violated the antitrust laws through the use of exclusive contracts and "disguised" exclusive contracts in the sale of PREMARIN to managed care organizations, and misled the FDA in order to exclude competition to PREMARIN, but does not allege any violation of law with respect to such alleged practices. The Company believes that its conduct was lawful and that its pricing practices do not violate antitrust laws. The Company intends to vigorously defend this case. In the brand name prescription litigation, the Company and other defendants have entered into settlement agreements, which are subject to court approval in each state, to resolve the indirect purchaser cases in New Mexico, North Dakota, South Dakota and West Virginia. The Company's payments under these settlements amounted to approximately $420,000. While the Company believes that it had no liability in these cases, the settlements were made to resolve expensive and burdensome complex litigation. The settlements state that they shall not be deemed to be an admission or evidence of any wrongdoing by the Company or the truth of any of the claims alleged. 24 The Company has also settled a case brought by Mississippi retailers (Montgomery Drug Company, et al. v. Upjohn Company, et al., No. 97-0103, Ch. Ct. Miss) that opted out of the Consolidated Class Action (In Re Brand Name Prescription Drugs Antitrust Litigation, MDL 997 N.D.Ill.). The terms of the settlement, which are not material to the Company, provide that it shall not be deemed to be an admission of or evidence of any violation of any statute or law or of any liability or wrongdoing by the Company. In the opinion of the Company, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings will not have a material adverse effect on the Company's financial position, but could be material to the results of operations in any one accounting period. 25 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- Exhibit No. Description ----------- ----------- (3.2) The Company's By-Laws, as amended to date (12) Computation of Ratio of Earnings to Fixed Charges (27.1) Financial Data Schedule - Period Ended September 30, 2000 (27.2) Restated Financial Data Schedule - Period Ended September 30, 1999 (99.1) Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended to date (99.2) Consent Decree, dated October 3, 2000 (b) Reports on Form 8-K ------------------- On July 17, 2000, the Company filed a Current Report on Form 8-K (including disclosure under Items 2 and 7) relating to the sale of the Cyanamid Agricultural Products business. 26 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 thereunto duly authorized. AMERICAN HOME PRODUCTS CORPORATION ---------------------------------- (Registrant) By /s/ Paul J. Jones ------------------------------- Paul J. Jones Vice President and Comptroller (Duly Authorized Signatory and Chief Accounting Officer) Date: November 14, 2000 27 Exhibit Index ------------- Exhibit No. Description ----------- ----------- (3.2) The Company's By-Laws, as amended to date (12) Computation of Ratio of Earnings to Fixed Charges (27.1) Financial Data Schedule - Period Ended September 30, 2000 (27.2) Restated Financial Data Schedule - Period Ended September 30, 1999 (99.1) Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended to date (99.2) Consent Decree, dated October 3, 2000 EX-1 EX-3.2 2 0002.txt - ------------------------------------------------------------------------------ ****************************************************************************** - ------------------------------------------------------------------------------ BY-LAWS OF AMERICAN HOME PRODUCTS CORPORATION AS AMENDED THROUGH JULY 20, 2000 - ------------------------------------------------------------------------------ ****************************************************************************** - ------------------------------------------------------------------------------ BY-LAWS of AMERICAN HOME PRODUCTS CORPORATION * * * * * * * * * * * * * * * * * * * * * * STOCKHOLDERS MEETINGS 1. Annual Meeting. An annual meeting of stockholders for election of directors and transaction of other business properly before the meeting shall be held on the fourth Wednesday of April in each year, or on such other date and at such time as the Board of Directors may designate. Any business properly brought before an annual meeting of stockholders may be transacted at such meeting. To be properly brought before an annual meeting, business must be (i) specified in the written notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder. For matters to be properly brought before an annual meeting by a stockholder (other than nominations for the election of directors), the stockholder must give written notice of the proposed mater, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation, not later than ninety days prior to the anniversary date of the immediately preceding annual meeting or not later than ten days after notice or public disclosure of the date of the annual meeting shall be given or made to stockholders, whichever date shall be earlier. Any such notice shall set forth as to each item of business the stockholder shall propose to bring before the meeting (i) the name and address of the stockholder proposing such item of business, (ii) a description of such item of business and the reasons for conducting it at such meeting and, in the event that such item of business shall include a proposal to amend either the Certificate of Incorporation or these by-laws, the text of the proposed amendment, (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such item of business and (iv) any material interest of the stockholder in such item of business. Only matters which shall have been properly brought before an annual meeting of stockholders in accordance with these by-laws shall be conducted at such meeting, and the presiding officer may refuse to permit any matters to be brought before such meeting which shall not have been properly brought before it in accordance with the foregoing procedure. 2. Special Meetings. Except as provided in paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting rights of holders of Preferred Stock to call meetings of such holders in certain dividend default situations, special meetings of stockholders, unless otherwise provided by law, may be called by the Chairman or Vice Chairman of the Board of Directors or the President or by the Secretary on the written request of a majority of all the directors, such request to state the purpose of the proposed meeting, which meeting shall thereupon be called by the Secretary. Business at special meetings shall be confined to the matters stated in the notice. 3. Notice. Written notice of each meeting of stockholders shall be mailed, not less than ten days prior to the meeting, to each stockholder entitled to vote at such address as appears on the stock books of the corporation. The notice shall specify the time and place of the meeting and, as to special meetings, the matter or matters to be acted upon at such meeting. 4. Place. Meetings of stockholders shall be held at the office of the corporation in Wilmington, Delaware, or at such other place, within or without the State of Delaware, as the Board of Directors may designate. 5. Quorum. Except as provided in paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting meetings of stockholders during certain dividend default situations, at which meetings holders of Preferred Stock have special voting rights, the holders of a majority of the outstanding stock having voting power, present in person or by proxy, shall constitute a quorum at all meetings of stockholders for the transaction of business unless otherwise provided by law. Except as provided in such paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation, if a quorum shall not be present at any meeting of stockholders, the stockholders entitled to vote, present in person or by proxy, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present; and at such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting originally called. 6. Voting; Proxies. At each meeting of stockholders every stockholder entitled to vote may vote in person or by proxy appointed by an instrument in writing subscribed by such stockholder or his duly appointed attorney-in-fact or in any other manner prescribed by the General Corporation Law of the State of Delaware. Except as provided in paragraphs VII (g) (i) and VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting holders of Preferred Stock voting in certain situations, each holder of Common Stock shall have one vote and each holder of Preferred Stock shall have thirty-six (36) votes on each matter submitted to a vote at a meeting of stockholders for each share of, respectively, Common and Preferred Stock having voting power, registered in his name on the stock books of the corporation. The vote for directors and, upon the demand of any stockholder, the vote upon any other matter before the meeting, shall be by ballot. Elections shall be decided by a plurality of the votes cast and other matters shall be decided by a majority of the votes cast on such matters. BOARD OF DIRECTORS 7. Powers; Number; Election; Term; Vacancies. The property and business of the corporation shall be managed by its Board of Directors, which shall be not less than eight nor more than fifteen in number as determined from time to time by the Board, except as provided in paragraph VII (g) (ii) of Article FOURTH of the Certificate of Incorporation respecting additional directors in certain dividend default situations. Directors shall be elected at the annual meeting of stockholders and each director shall continue in office until his successor shall be elected or until his earlier removal or resignation. Except as provided in paragraph VII (g) (ii) of Article FOURTH of the Certificate of Incorporation respecting additional directors in certain dividend default situations, nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States Mail, postage prepaid, to the Secretary of the corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a director of the corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Except as provided in Paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting the additional directors in certain dividend default situations, vacancies in the membership of the Board, whether or not caused by an increase in the number of directors, will be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office only until the next succeeding annual meeting of stockholders. 8. Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as the Board shall from time to time determine. 9. Special Meetings. Special Meetings of the Board may be called by direction of the Chairman, the Vice Chairman, the President or two directors on two days notice to each director specifying the time and place of meeting. 10. Quorum; Voting. At all meetings of the Board a majority of all the directors then in office, or if the number of directors is then an even number, one-half such number shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board unless otherwise provided by law, the Certificate of Incorporation or these by-laws. 11. Compensation. Directors shall be paid such fees for their services as directors and for attending meetings of the Board and committees appointed thereby as shall be determined from time to time by the Board. The Board may also provide for compensation to a director for expenses he may incur in attending such meetings. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 12. Residual Powers of Board. In addition to the powers conferred by these by-laws upon the Board, the Board may exercise all such powers of the corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these by-laws directed or required to be exercised or done by the stockholders. Nothing contained in these by-laws shall restrict the Board or any committee thereof from taking any action in any manner permitted by law, including unanimous written consent and conference communication by means of telephone or similar communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. EXECUTIVE COMMITTEE 13. Appointment. The Board may by vote of a majority of all the directors appoint three or more members to constitute an Executive Committee which shall serve at the pleasure of the Board. Vacancies in the membership of the Executive Committee shall be filled by the Board by vote of a majority of all the directors. 14. Duties and Powers. During the intervals between meetings of the Board, the Executive Committee shall perform all the duties and exercise all the powers of the Board in the management of the property and business of the corporation except such duties and powers as are by law, the Certificate of Incorporation or these by-laws directed or required to be performed or exercised specifically by the Board as such or by any proportion thereof. The Chairman of the Executive Committee shall assist the Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. He shall perform such other duties and exercise such other powers as the Board or the Chairman shall from time to time prescribe. 15. Meetings. The Executive Committee may meet at stated times without notice, or on two days notice to all by one of its members. 16. Quorum; Voting. A majority of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee. 17. Minutes. The Executive Committee shall keep regular minutes of its proceedings and report its actions to the Board when it so requests. FINANCE COMMITTEE 18. Appointment. The Board may appoint three or more directors, officers or employees of the corporation or its subsidiaries to constitute a Finance Committee which shall serve at the pleasure of the Board. Vacancies in the membership of the Finance Committee shall be filled by the Board. 19. Duties and Powers. The Finance Committee shall supervise the financial affairs, budgets and procedures of the corporation and its subsidiaries and shall fix the salaries of officers and employees of the corporation and its subsidiaries, except such thereof as may be fixed by the Board or any other committee appointed by it for such purpose. 20. Meetings. The Finance Committee may meet at stated times without notice, or on notice to all by the Chairman or Vice-Chairman of the Board, the President, an Executive Vice President or a Senior Vice President. 21. Quorum; Voting. A majority of the Finance Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee. 22 Minutes. The Finance Committee shall keep regular minutes of its proceedings and make copies thereof available to the Board at its meetings. AUDIT COMMITTEE 23. Appointment. The Board shall appoint three or more directors of the Corporation, none of whom is presently employed by the Corporation or any of its subsidiaries, to constitute an Audit Committee, which shall serve at the pleasure of the Board. Vacancies in the membership of the Audit Committee shall be filled by the Board. 24. Duties and Powers. The Audit Committee shall recommend a firm of independent public accountants to be engaged as the principal auditor for each year's annual audit on behalf of the Corporation subject to the approval of the Board of Directors and ratification by the stockholders. The Audit Committee shall discuss with the auditors the scope and results of the audit and shall report to the Board of Directors thereon. The Audit Committee shall undertake such other financial reviews as the Board deems appropriate. 25. Meetings. The Audit Committee may meet at stated times without notice, or on notice to all by the Chairman or Vice Chairman of the Board, the President, an Executive Vice President or a Senior Vice President, or by one of the members of the Audit Committee. 26. Quorum; Voting. A majority of the Audit Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee. 27. Minutes. The Audit Committee shall keep regular minutes of its proceedings and make copies thereof available to the Board at its meetings. OTHER COMMITTEES 28. Appointment. The Board may from time to time appoint further standing or special committees of directors, officers or employees of the corporation or its subsidiaries to serve at the pleasure of the Board and confer upon such committees such powers and duties as the Board may deem expedient within the limits permitted by law. 29. Organization and Operation. Unless otherwise provided in the resolutions appointing any such committee and determining its powers and duties, the committee may establish procedures for calling and conducting meetings, provided that no less than a majority of its members shall constitute a quorum for the transaction of business and the act of no less than a majority of those present at a meeting at which there is a quorum shall be the act of the committee, and the committee shall keep regular minutes of its proceedings and report its actions to the Board when it so requests. OFFICERS 30. Principal Officers. The principal officers shall be chosen annually by the Board and shall be a Chairman of the Board of Directors, a President, one or more Vice Presidents, a Secretary, a Treasurer and a Comptroller and, in the discretion of the Board, a Vice Chairman of the Board of Directors, one or more Executive Vice Presidents and one or more Senior Vice Presidents. The Chairman or Vice Chairman and President may be the same person; the Secretary and Treasurer may be the same person and Executive Vice President, Senior Vice President or Vice President may hold at the same time the office of Secretary, Treasurer or Comptroller. The Chairman and Vice Chairman, if any, and the President shall be chosen from the members of the Board; the other principal officers need not be directors. 31. Other Officers. The Board may choose such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall perform such duties and exercise such powers as are delegated to them pursuant to these by-laws or as the Board shall from time to time prescribe. 32. Salaries. The salaries of all principal officers shall be fixed by the Board. 33. Term of Office; Removal. Each officer shall hold office until his successor is chosen or until his earlier removal or resignation. The Board may remove any officer or agent provided that removal of a principal officer be by vote of a majority of all the directors. 34. Vacancies. Vacancies in any office may be filled by the Board. 35. Chairman. The Chairman of the Board of Directors shall preside at all meetings of stockholders and of the Board. He shall be ex-officio a member of all standing committees appointed by the Board, shall be the chief executive officer of the corporation, shall have all powers and perform all duties incident to such chief executive office and, subject to the direction of the Board, shall have general and active supervision of the property and business of the corporation. He shall be the officer through whom the Board delegates authority to corporate management and he shall be the medium of communication to the Board of information as to the affairs of the corporation and of all matters presented for the Board's consideration. He shall be responsible to see that all orders and resolutions of the Board are carried into effect by the proper officers. 36. Vice Chairman. The Vice Chairman of the Board of Directors shall assist the Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the Chairman, perform the duties and exercise the powers of the Chairman. He shall perform such other duties and exercise such other powers as the Board or the Chairman shall from time to time prescribe. 37. President. The President shall assist the Chairman and Vice Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the Vice Chairman, perform the duties and exercise the powers of the Vice Chairman. He shall perform such other duties and exercise such other powers as the Board, the Chairman or the Vice Chairman shall from time to time prescribe. 38. Executive Vice Presidents. Each Executive Vice President shall serve in a general executive capacity, more particularly as general assistant to the President. In the absence or disability of the President, and in the event the Chairman of the Executive Committee is absent or disabled, an Executive Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the President. Executive Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 39. Senior Vice Presidents. Each Senior Vice President shall serve in a general executive capacity, more particularly as general assistant to the President or to one or more Executive Vice Presidents. In the absence or disability of the President, and in the event the Chairman of the Executive Committee and all Executive Vice Presidents are absent or disabled, a Senior Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the President. Senior Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 40. Vice Presidents. In the absence or disability of the Executive Vice Presidents and Senior Vice Presidents, a Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the Executive Vice Presidents and Senior Vice Presidents. Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 41. Principal Financial Officer. The Board may designate an Executive Vice President, a Senior Vice President, a Vice President or the Treasurer as the Principal Financial Officer of the corporation. 42. Secretary. The Secretary shall attend all meetings of stockholders and of the Board and shall record the minutes of all proceedings of such meetings in books to be kept for that purpose, and shall perform like duties for the standing committees appointed by the Board unless the Board directs otherwise. He shall have custody of the seal of the corporation and shall affix it or cause it to be affixed to all instruments requiring it. He shall give or cause to be given the notice required of all meetings of stockholders and of the Board. He shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 43. Treasurer. The Treasurer shall have general charge of and responsibility for the corporate funds and securities. He shall deposit or cause to be deposited in the name of the corporation all moneys and other valuable effects of the corporation in such depositories as may be designated in accordance with these by-laws. He shall disburse the funds of the corporation as directed by the Board or by any other principal officer, taking proper vouchers for such disbursements. He shall advise upon all terms of credit granted by the corporation. He shall render to the Board, when the Board so requests, an accounting of all his transactions as Treasurer and of the financial condition of the corporation. He shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 44. Comptroller. The Comptroller shall have general supervision of the accounting practices of the corporation and its subsidiaries and the preparation of statements and other reports respecting financial aspects of the corporation's or its subsidiaries' operations. He shall establish, through appropriate channels, recording and reporting procedures and standards pertaining to such matters. He shall be responsible for collection of all corporation accounts. He shall perform such other duties and exercise such other powers as the Board, the Chairman, the Vice Chairman or the President shall from time to time prescribe. 45. Delegation of Officer's Duties by Board. In the absence or disability of any principal officer, or for any other reason that the Board may deem sufficient, the Board may by vote of a majority of all the directors delegate any or all of the powers or duties of such officer to any other officer. 46. Delegation of Officer's Duties by Officer. Any principal officer may delegate portions of his powers and duties to any assistant officer chosen by the Board and acting under the principal officer's supervision. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES 47. Each person (and heirs and legal representatives of such person) who serves or has served as a director, officer or employee of the corporation or of any other corporation or entity when requested by this corporation, and of which this corporation is or was a stockholder, a creditor or otherwise interested, shall be indemnified by this corporation against all liability and reasonable expense, including but not limited to counsel fees and disbursements and amounts of judgments, fines or penalties, incurred by or imposed upon him in connection with any claim, action, suit or proceeding, actual or threatened, whether civil, criminal, administrative or investigative, and appeals in which he may become involved as a party or otherwise by reason of acts or omissions in his capacity as and while a director, officer or employee of this corporation or such other corporation or entity, provided that such person is wholly successful with respect thereto and unless the Board in its absolute discretion shall determine that such person did not meet the standard of conduct required herein. The term "wholly successful" shall mean termination of any claim, action, suit or proceeding against such person without any finding of liability or guilt against him and without any settlement by payment, promise or undertaking by or for such person or the expiration of a reasonable period of time after the making of any claim or threat without action, suit or proceeding having been brought and without any settlement by payment, promise, or undertaking by or for such person. The standard of conduct required shall be that such person acted in good faith for a purpose which he reasonably believed to be in or not opposed to the best interests of the corporation, and, in addition, in any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. Should indemnification be requested hereunder in respect to any claim, action, suit or other proceeding where the person seeking indemnification has not been wholly successful, such indemnification may be made only upon the prior determination by a resolution of a majority of those members of the Board who are not involved in the claim, action, suit or other proceeding, that such person met the standards of conduct required herein, or, in the discretion of the Board, upon the prior determination by non-employee legal counsel, in written opinion, that such person has met such standards, and where a settlement is involved, that the amount thereof is reasonable. Indemnification under this by-law shall not include any amount payable by such person to the corporation or entity in satisfaction of any judgment or settlement, or any amount payable on account of profits realized by him in the purchase or sale of securities of the corporation, and shall be reduced by the amount of any other indemnification or reimbursement of such liability and expense to such person. The termination of any claim, action, suit or other proceeding, by judgment, order, settlement (whether with or without court approval) or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not of itself create a presumption that such person did not meet the standard of conduct required herein. Expenses incurred which are subject to indemnification hereunder may be advanced by the corporation prior to final disposition of the claim, action, suit or other proceeding upon receipt of an undertaking acceptable to the corporation by or on behalf of the recipient to repay such amount unless it shall ultimately be determined that he is entitled to indemnification. The right of indemnification herein provided shall be in addition to other rights to which those to be indemnified may otherwise be entitled by agreement, vote of stockholders, operation of law or otherwise, and shall be available whether or not the claim asserted against such person is based upon matters which antedate the adoption of this by-law. If any word, clause or provision of this by-law or any indemnification made hereunder shall for any reason be determined to be invalid, the provisions hereof shall not otherwise be affected thereby but shall remain in full force and effect. AUTHORITY TO ACT AND SIGN 48. Instrument Execution. Unless otherwise provided by law or by the Board, all instruments to be executed on behalf of the corporation, whether or not requiring the seal of the corporation, may be executed by the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President or any Vice President and attested by the Secretary or an Assistant Secretary. 49. Bank Accounts. Unless otherwise provided by the Board, any two of the following officers: the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President, any Vice President and the Treasurer, may from time to time (1) open and maintain in the name of the corporation, and terminate, general and special bank accounts for the funds of the corporation with such banks, trust companies or other depositories as they may designate and (2) designate, and revoke the designation of, the officers or employees of the corporation who may sign, manually or by facsimile, checks, drafts or orders on such bank accounts. Any such action, designation or revocation shall be by written instrument, signed by the officers taking the action or making or revoking the designation and filed with the bank, trust company or other depository. 50. Voting of Stock in Other Corporations. Unless otherwise directed by the Board, Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President, the Treasurer or the Secretary may, on behalf of the corporation, attend, act and vote at any meeting of stockholders of any corporation in which this corporation may hold stock and at any such meeting shall possess and may exercise all rights of this corporation incident to ownership of such stock or may give a proxy or proxies in the name of this corporation to any other person or persons who may vote such stock and exercise any and all other rights in regard to it as are here accorded to the officers mentioned. 51. Sale and Transfer of Securities. Unless otherwise directed by the Board, any two of the following officers: the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President and the Treasurer may, on behalf of the corporation, transfer, convert, endorse, sell, assign, set over and deliver, or take action appropriate to the encumbrance by the corporation of any bonds, shares of stock, warrants or other securities owned by or standing in the name of the corporation, and may execute and deliver in the name of the corporation all written instruments necessary or proper to implement the authority herein contained. STOCK 52. Stock Certificate; Uncertificated Shares. The shares of the corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. 53. Transfer. Transfer of stock shall be made on the books of the corporation only upon surrender of the certificate therefor, endorsed by the person named in the certificate or accompanied by proper written evidence of succession, assignment or authority to transfer such stock or upon receipt of proper transfer instructions from the owner of uncertificated shares. 54. Transfer Agent and Registrar. The Board may appoint one or more Transfer Agents to record transfers of shares of stock and to keep the stock certificate books, transfer books and stock ledgers of the corporation. The Board may also appoint one or more Registrars to register certificates of stock. The Board may require all certificates of stock to bear the signatures of either or both a Transfer Agent and a Registrar. Where any such certificate is manually signed by the Registrar, the signature of any Transfer Agent may be facsimile engraved or printed. 55. Record Date. The Board may fix in advance a date, not less than ten nor more than sixty days preceding the date of any ----------- meeting of stockholders or the date for the payment of any dividend or the date for the allotment of rights or the date when any change, conversion or exchange of stock shall go into effect or the date in connection with obtaining consent of stockholders or any class thereof for any purpose, as a record date for the determination of stockholders entitled to notice of and to vote at any such meeting or to receive payment of any such dividend or to receive any allotment of rights or to exercise the rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. The Board may direct that the stock books of the corporation be closed against transfers during such period. 56. Registered Stockholders. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as provided by law. 57. Lost Certificates. The Board may direct a new certificate of stock to be issued in place of any certificate theretofore issued and claimed to have been lost, stolen or destroyed, provided that any person claiming a certificate to be lost, stolen or destroyed shall make an affidavit of ownership and of the facts of such loss, theft or destruction and, if the Board so requires, shall advertise the same, and provided further that the Board may require the owner of the certificate claimed to be lost, stolen or destroyed, or his legal representative, to deliver to the corporation for itself, its officers Transfer Agents and Registrars, a bond of indemnity in such amount or unlimited in amount, upon such terms and secured by such surety as the Board may require. MISCELLANEOUS 58. Notices. Whenever under the provisions of these by-laws notice is required to be given to any person other than in his capacity as stockholder, it may be given by hand delivery, by telegram or by mail. Whenever under the provisions of these by-laws notice is required to be given to any stockholder, it may be given by mail, by depositing the same in the post office or a letter box, in a post-paid, sealed envelope, addressed to such stockholder at such address as appears on the stock books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Any person entitled to notice under any provision of these by-laws may waive such notice. 59. Fiscal Year. The fiscal year of the corporation shall begin the first day of January in each year. 60. Offices. The corporation may have an office in New York, New York, and at such other places as the business of the corporation may require. 61. Seal. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware." 62. Amendments. These by-laws may be altered or repealed and new by-laws may be adopted at any meeting of stockholders by the vote of the holders of a majority of the outstanding stock having voting power, provided the notice of such meeting includes the proposed alterations or repeal or the proposed new by-laws, or a summary thereof, or the Board by vote of a majority of all the directors. EX-12 3 0003.txt Exhibit 12 American Home Products Corporation Computation of Ratio of Earnings to Fixed Charges (3) (Thousands of dollars, except ratio amounts)

EX-27.1 4 0004.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 2000 AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS DEC-31-2000 SEP-30-2000 3,179,112 947,310 2,647,844 0 1,733,085 10,270,944 7,199,444 2,454,698 20,853,216 6,264,922 3,483,080 0 56 435,898 5,897,158 20,853,216 10,207,641 10,207,641 2,561,185 2,561,185 1,355,409 0 63,694 4,158,844 1,238,001 2,920,843 (1,469,647) 0 0 1,451,196 1.11 1.10

EX-27.2 5 0005.txt
5 THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 SEP-30-1999 2,146,347 436,958 2,559,673 0 1,621,109 8,272,414 6,312,139 2,361,595 22,976,244 6,899,912 3,609,184 0 62 435,101 5,190,088 22,976,244 8,792,253 8,792,253 2,243,243 2,243,243 1,177,252 0 170,892 (2,711,026) (901,065) (1,809,961) (10,392) 0 0 (1,820,353) (1.39) (1.39) Financial data schedule for the nine months ended September 30, 1999 was restated to reflect the Cyanamid Agricultural Products business as a discontinued operation.

EX-99.1 6 0006.txt IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA - ------------------------------------------------------ ) IN RE DIET DRUGS ) (PHENTERMINE/FENFLURAMINE/ ) DEXFENFLURAMINE) PRODUCTS ) LIABILITY LITIGATION ) MDL NO. 1203 - ------------------------------------ ) ) THIS DOCUMENT RELATES TO: ) ALL ACTIONS ) ) ) ) ) ) ) ) ) ) ) - ------------------------------------- ) - ------------------------------------- ) ) SHEILA BROWN, et al. v. AMERICAN HOME PRODUCTS )CIVIL ACTION NO. 99-20593 CORPORATION ) - ------------------------------------- ) NATIONWIDE CLASS ACTION SETTLEMENT AGREEMENT WITH AMERICAN HOME PRODUCTS CORPORATION (AS AMENDED) Dated: November 18, 1999 Amended: November 24, 1999 January 10, 2000 March 24, 2000 July 20, 2000 TABLE OF CONTENTS PREAMBLE....................................................................1 I. DEFINITIONS...........................................................2 II. SCOPE OF THE SETTLEMENT CLASS.........................................15 III. AHP'S PAYMENT OBLIGATIONS.............................................18 A. ESTABLISHMENT OF SETTLEMENT TRUST............................18 B. FUND A.......................................................19 C. FUND B.......................................................20 D. OTHER PROVISIONS..............................................23 E. SECURITY ARRANGEMENTS........................................24 IV. CLASS MEMBER RIGHTS AND BENEFITS......................................29 A. SCREENING/REFUND/MEDICAL SERVICES/CASH/RESEARCH BENEFITS PAYABLE FROM FUND A...................................29 1. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN(R)AND/OR REDUX(TM)FOR 61 OR MORE DAYS...........................29 a. SCREENING PROGRAM ...................................29 b. COST OF TRANSTHORACIC ECHOCARDIOGRAM.................29 c. ADDITIONAL MEDICAL SERVICES OR CASH..................29 d. REFUND...............................................30 2. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN(R)AND/OR REDUX(TM)FOR 60 DAYS OR LESS..........................30 a. REFUND...............................................30 b. SCREENING PROGRAM....................................30 c. ADDITIONAL MEDICAL SERVICES OR CASH..................31 3. BENEFITS FOR ALL CLASS MEMBERS............................31 a. MEDICAL RESEARCH AND EDUCATION FUND..................31 b. MEDICAL/LEGAL REGISTRY...............................32 c. ECHOCARDIOGRAM IN THE CASE OF FINANCIAL HARDSHIP.....32 d. REIMBURSEMENT FOR CERTAIN PRIVATELY-OBTAINED ECHOCARDIOGRAMS.........................32 4. TERMS OF MEDICAL SCREENING PROGRAM AND PROVISION OF ADDITIONAL MEDICAL SERVICES...............................33 5. SOURCE OF FUND A BENEFITS.................................33 B. COMPENSATION BENEFITS PAYABLE FROM FUND B......................33 1. ELIGIBLE CLASS MEMBERS...................................33 2. BENEFITS AVAILABLE........................................35 C. PAYMENT PROVISIONS............................................50 D. OPT-OUT RIGHTS................................................51 1. DERIVATIVE CLAIMANTS.....................................51 2. INITIAL OPT-OUT..........................................51 a. ELIGIBILITY..........................................51 b. METHOD OF EXERCISE...................................52 c. EFFECT OF EXERCISE...................................52 d. REVOCATION OF EXERCISE...............................52 3. INTERMEDIATE OPT-OUT.....................................52 a. ELIGIBILITY..........................................52 b. METHOD OF EXERCISE...................................53 c. EFFECT OF EXERCISE...................................53 4. BACK-END OPT-OUT.........................................55 a. ELIGIBILITY..........................................55 b. METHOD OF EXERCISE...................................55 c. EFFECT OF EXERCISE...................................56 V. ACCELERATED IMPLEMENTATION OPTION.....................................58 VI. CLAIMS ADMINISTRATION.................................................64 A. THE INTERIM ESCROW AGENT, INTERIM CLAIMS ADMINISTRATOR(S), CLAIMS ADMINISTRATOR(S) AND TRUSTEES...................64 B. NOTICE........................................................78 C. CLAIMS ADMINISTRATION AND CRITERIA FOR BENEFITS DETERMINATIONS.81 1. ECHOCARDIOGRAM CRITERIA..................................81 2. CLAIMS INFORMATION.......................................83 3. GENERAL CLAIMS PROCESSING PROCEDURES AND THE REGISTRY....88 4. ADMINISTRATION OF MATRIX COMPENSATION BENEFIT CLAIMS.....97 D. PROCEDURE FOR RECOGNITION OF CREDITS...........................106 E. AUDITS OF CLAIMS BY TRUSTEES AND/OR CLAIMS ADMINISTRATOR(S)....110 F. AHP-INITIATED AUDITS OF CLAIMS.................................114 VII. AHP RIGHTS AND BENEFITS...............................................118 A. CREDITS.........................................................118 B. EFFECT ON CLAIMS................................................120 C. PROTECTION OF AHP FROM CLAIMS BY NON-SETTLING DEFENDANTS........122 D. PROTECTION OF AHP FROM POSSIBLE SUBROGATION CLAIMS..............129 E. WALKAWAY RIGHTS.................................................129 F. LIMITATION ON FINANCIAL OBLIGATIONS.............................130 VIII. SETTLEMENT IMPLEMENTATION..........................................131 A. GENERAL.........................................................131 B. JURISDICTION....................................................131 C. APPROVAL PROCESS AND NOTICE PROVISIONS..........................132 D. CONDITIONS......................................................133 E. ATTORNEYS' FEES.................................................135 F. OTHER PROVISIONS................................................139 14 TABLE OF EXHIBITS 1. Trust Agreement 2. Fund A Legal Fee Escrow Account Agreement 3. Security Fund and Escrow Agreement 4. Articles of Incorporation and Bylaws of Medical Research and Education Fund 5. Summary Notice to Pharmacists 6. ORANGE FORM (Initial Opt-Out Notice Form) 7. ORANGE FORM #2 (Intermediate Opt-Out Notice Form) 8. ORANGE FORM #3 (Back-End Opt-Out Notice Form) 9. PINK FORM (for Election of the Accelerated Implementation Option) [as amended by Second Amendment] 10. Interim Escrow Agreement 11. Proposed Preliminary Approval Order 12. A Class Member's Guide to Settlement Benefits [as amended by Second Amendment] 13. Official Court Notice [as amended by Second Amendment] 14. Matrix Compensation Benefits Guide for Physicians, Attorneys and Class Members 15. Publication Notice [as amended by Second Amendment] 16. Plan of Media Notice [as amended by First Amendment and Second Amendment] 17. Script of Television Notice 18. Summary Notice to Physicians [as amended by First Amendment] 19. WHITE FORM (for reimbursement of Echocardiogram expenses incurred independent of the Screening Program) [as amended by Second Amendment] 20. GRAY FORM (for qualifications of Board-Certified Cardiologist and Echocardiogram results) 21. BLUE FORM (for registration of Settlement Benefits) [as amended by Second Amendment] 22. GREEN FORM (for Matrix Compensation Benefits) 23. BROWN FORM (for compassionate and humanitarian and true financial hardship Echocardiograms) [as amended by Second Amendment] 24. Notice of Appeal of Determination of Trustees and/or Claims Administrator(s) 25. RED FORM (Credits for Initial and Back-End Opt-Out) [as amended by Fourth Amendment] 26. [Exhibit deleted by Fourth Amendment] 27. Class Representative's Release and Covenant Not to Sue [as amended by Fourth Amendment] NATIONWIDE CLASS ACTION SETTLEMENT AGREEMENT WITH AMERICAN HOME PRODUCTS CORPORATION 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 Settlement Agreement, "Settled Claims" against AHP and other "Released Parties" arising from the marketing, sale, distribution and use of the diet drugs Pondimin(R)and Redux(TM), 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 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 Agreement are aware of the following certified or conditionally certified nationwide or statewide classes involving Pondimin(R)and Redux(TM)as of October 7, 1999: United States District Court for the Eastern District of Pennsylvania, Jeffers v. American Home Products Corp., C.A. No. 98-CV-20626 (E.D. Pa.) (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 class); Texas (Earthman v. AHP, No. 97-10-03970 CV, Dist. Ct. Montgomery Co. Texas) (statewide medical monitoring class); and Washington (St. John v. AHP, 97-2-06368-4) (statewide medical monitoring class). This Settlement Agreement shall not 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 Final Judicial Approval (except as to the Accelerated Implementation Option ("AIO") described in Section V below), compliance with applicable legal requirements, and other conditions, all as set forth below, that Fund A and Fund B shall be established, from which the benefits described 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 settled, compromised and released, in accordance with the following terms. I. DEFINITIONS For purposes of this Settlement Agreement the following terms (designated by initial capitalization throughout this Agreement) shall have the meanings set forth in this Section. Terms used in the singular shall be deemed to include the plural and vice versa. 1. "Adjusted Maximum Available Fund B Amount" shall mean the amount determined by adding the balance in Fund A which was transferred to Fund B pursuant to the terms of Section III.A.4. of the Settlement Agreement to the Maximum Available Fund B Amount as defined in this section. If there has been no such transfer, then the Adjusted Maximum Available Fund B Amount shall be equal to the Maximum Available Fund B Amount. The "Maximum Available Fund B Amount" shall mean the amount determined by adding $2,550,000,000 and the Fund B Accretions, and by then subtracting from the resulting sum: (i) the Fund B Initial Payment under Section III.C.2; (ii) all amounts paid or transferred to the Trustees to pay Fund B benefits pursuant to Fund B Quarterly Notices under Section III.C.3 and pursuant to Requests for Fund B AIO Payments under Section V.F; and (iii) Credits to which AHP is entitled under Section VII.A (Opt-Out Credits) and Section VII.C.1.g (Cross-Claim Credits), provided that Initial Opt-Out Credits, as defined in Section VII.A.2, shall be applied to reduce the Adjusted Maximum Available Fund B Amount only when and as provided in Section VII.A. "Fund B Accretions" are determined as follows: Beginning with the earlier of the Final Judicial Approval Date or the date on which it is determined that Final Judicial Approval will not be obtained, the Trustees shall calculate a quarterly accretion to the Maximum Available Fund B Amount which will be one and one-half percent (1 1/2%) of the Maximum Available Fund B Amount determined as of the close of each AIO Fiscal Quarter or Fiscal Quarter, whichever is applicable. Such accretions shall be added to the Maximum Available Fund B Amount as of the first day of the quarter following the quarter for which such accretion is calculated. 2 "Administrative Reserve" has the meaning provided in Section III.C.3.b. 3. [This section intentionally left blank.] 4. "AHP" means American Home Products Corporation, its successors and assigns. 5. "AHP Released Parties" shall mean the Released Parties described in Sections I.48.a and I.48.b herein. 6. "AIO Fiscal Year" shall mean the partial calendar year and each calendar year after the date on which it is finally determined that Final Judicial Approval will not be obtained or the Settlement Agreement is otherwise terminated, as follows. The first AIO Fiscal Year shall be the partial calendar year beginning on the date on which it is determined that Final Judicial Approval will not be obtained or the Settlement Agreement is otherwise terminated. The second AIO Fiscal Year shall be the calendar year beginning on the first day of the year following the year in which Final Judicial Approval is not obtained or the Settlement Agreement is otherwise terminated, and so forth. "AIO Fiscal Quarter" shall mean the partial calendar quarter and each calendar quarter after the date on which it is finally determined that Final Judicial Approval will not be obtained or the Settlement Agreement is otherwise terminated, as follows. The first AIO Fiscal Quarter shall be the partial calendar quarter beginning on the date on which it is determined that Final Judicial Approval will not be obtained or the Settlement Agreement is otherwise terminated. The second AIO Fiscal Quarter shall be the calendar quarter beginning on the first day of the calendar quarter following the quarter in which Final Judicial Approval is not obtained or the Settlement Agreement is otherwise terminated, and so forth. 7. "AIO Start Date" shall mean the date on which the Trial Court determines by oral or written decision whether or not to approve the Settlement or the date on which AHP terminates the Settlement Agreement, whichever is earlier. 8. "Business Day" shall mean any day other than Saturday, Sunday or New Year's Day, Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day, and any other day appointed as a holiday by the President or the Congress of the United States. 9. "Claim for Benefits" or "Claim for Settlement Benefits" or "Claim" refers to the submission of a form in which a Class Member elects the Accelerated Implementation Option (or "AIO"), or the submission of a form in which a Class Member seeks to register for any of the benefits available to Class Members pursuant to this Settlement Agreement, or the submission of a form through which a Class Member seeks Matrix Compensation Benefits pursuant to the matrices, along with all other materials including correspondence, documents and video tapes or disks of Echocardiograms submitted with such forms or in support of such a Claim. 10. "Class Counsel" shall mean those attorneys executing this Settlement Agreement on behalf of the Class Representatives, or such other attorneys as shall be approved by the Court as counsel to the Settlement Class. 11. "Claims Administrator" shall mean any person or persons to be appointed by the Trustees, subject to approval of the Court, to administer Claims for Benefits pursuant to the Settlement Agreement. 12. "Class Counsel Representative(s)" shall mean one or more individual members of the Class Counsel who are selected by the Class Counsel to represent the Class Counsel with respect to those matters specified in this Settlement Agreement. 13. "Class Representatives" shall mean Sheila Brown, Sharon Gaddie, Jose Gaddie, Vivian Naugle, Quentin Layer, Joan S. Layer, Joby Jackson-Reid and Harvey E. Reid, or such other or different persons as shall be designated by the Court as the representatives of the Settlement Class, in the action captioned Sheila Brown, et al. v. American Home Products Corporation, Civil Action No. 99-20593, pending in the United States District Court for the Eastern District of Pennsylvania. 14. "Common Benefit Attorneys" shall mean those attorneys who contributed to the creation of the Settlement Trust through work devoted to the "common benefit" of Class Members, including any attorney who reasonably believes that he or she actually conferred benefits upon the Class Members as a whole through state court litigation, subject to determination by the Court. 15. "Court" and/or "Trial Court" and/or "Federal District Court" means the United States District Court for the Eastern District of Pennsylvania presiding over MDL Docket No. 1203. 16. "Credit" has the meaning provided in Section VII.A. 17. "Cross-Claim Credit" has the meaning provided in Section VII.C.1.g. 18. "Date 1" is the date which is 210 days after Final Judicial Approval, by which (1) Class Members in Subclasses 1(a) and 1(b) must register to receive refund and/or Screening Program benefits from Fund A, and (2) Class Members in Subclasses 2(a) and 2(b) must register to receive refund benefits from Fund A. 19. "Date 2" is the date which is 120 days after the end of the Screening Period. 20. "Diet Drug(s)" shall mean Fenfluramine marketed under the brand name Pondimin(R) and/or Dexfenfluramine marketed under the brand name Redux(TM). 21. "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 Braunwald1 (involving one or both ventricles, located in the inflow tracts of the ventricles, commonly involving the chordae tendinae, with partial obliteration of either ventricle commonly present), 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. 22. "FDA Positive" is defined as follows: a. With respect to a diagnosis based on an Echocardiogram conducted between the commencement of Diet Drug use and September 30, 1999, FDA Positive is a condition in which the Cardiologist interpreting the Echocardiogram, in the ordinary course of medical treatment, has issued a written report which clearly states that the individual has mild or greater regurgitation of the aortic valve and/or moderate or greater regurgitation of the mitral valve; provided however, that this definition shall be applicable only to qualification of a Diet Drug Recipient for Fund A benefits. In order to qualify for Matrix Compensation Benefits, a Diet Drug Recipient must present evidence that he or she had an Echocardiogram prior to the end of the Screening Period that meets the requirements of Section I.22.b below. b. With respect to a diagnosis based on an Echocardiogram conducted after September 30, 1999, 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). 23. "Final Judicial Approval" refers to the approval of the Settlement Agreement as a whole by the Federal District Court and such approval becoming final by the exhaustion of all appeals, if any, without substantial modification of the order or orders granting such approval. 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. 24. "Final Judicial Approval Date" shall mean the date on which Final Judicial Approval occurs. 25. "Fiscal Year" shall mean the partial calendar year and each calendar year after the Final Judicial Approval Date as follows. The first Fiscal Year shall be the partial calendar year beginning on the Final Judicial Approval Date. The second Fiscal Year shall be the calendar year beginning on the first day of the year following the year in which the Final Judicial Approval Date occurs, and so forth. "Fiscal Quarter" shall mean the partial calendar quarter and each calendar quarter after the Final Judicial Approval Date as follows. The first Fiscal Quarter shall be the partial calendar quarter beginning on the Final Judicial Approval Date. The second Fiscal Quarter shall be the calendar quarter beginning on the first day of the calendar quarter following the quarter in which the Final Judicial Approval Date occurs, and so forth. 26. "Full Credit" has the meaning provided in Section VII.A.4. 27. "Fund A Amounts" has the meaning provided in Section III.B.1. 28. "Fund A Escrow Account" has the meaning provided in Section III.B.3. 29. "Fund B Amounts" has the meaning provided in Section III.C.1. 30. "Fund B Deposit Amount" has the meaning provided in Section III.C.3. 31. "Fund B Quarterly Notice" has the meaning provided in Section III.C.3. 32. "Initial Opt-Out Period" shall mean the period to be established by the Court during which Class Members may exercise the Initial Opt-Out right described in Section IV.D.2. 33. "Interim Claims Administrator(s)" shall mean the two persons mutually agreed upon by AHP and Class Counsel subject to approval by the Court pursuant to Section VI.A.2 to exercise all of the functions which are to be exercised by the Claims Administrator and/or the Trustees prior to approval of the Trustees. 34. "Interim Escrow Agent" shall mean the person or entity mutually agreed upon by AHP and Class Counsel subject to approval by the Court pursuant to Section VI.A.1 to receive, hold and disburse Fund A Amounts and Fund B Amounts until Court approval of the Trustees pursuant to Section VI.A.3 herein. 35. [This section intentionally left blank.] 36. "Judgment" has the meaning provided in Section VII.A.4. 37. "Matrix-Level Condition" shall mean a physiological condition with a level of severity meeting any of the criteria specified in Section IV.B.2.c. 38. "Mild Mitral Regurgitation" refers to mild 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%. 39. "Mitral Valve Prolapse" refers to a condition where (a) the echocardiogram video tape or disk includes the parasternal long axis view and (b) that echocardiographic view shows displacement of one or both mitral leaflets >2mm above the atrial-ventricular border during systole, and >5mm leaflet thickening during diastole, as determined by a Board-Certified Cardiologist.8 40. "Non-AHP Released Parties" shall mean those Released Parties other than the AHP Released Parties. 41. "Nonpayment Hearing" has the meaning provided in Section III.E.6.a. 42. "Plaintiffs' Counsel" shall mean the Class Counsel and the Common Benefits Attorneys. 43. [This section intentionally left blank.] 44. "Preliminary Approval" shall mean the Federal District Court's conditional certification of the Settlement Class and preliminary approval of this Settlement Agreement pursuant to Fed. R. Civ. P. 23(a), 23(b)(2), 23(b)(3), 23(c)(1) and 23(e) and entry of an order or orders providing for issuance of notice to the Settlement Class. 45. "Preliminary Approval Date" shall mean the date on which Preliminary Approval occurs. 46. "Primary Pulmonary Hypertension" ("PPH") is defined as either or both of the following: a. For a diagnosis based on examinations and clinical findings prior to death: (1) (a) Mean pulmonary artery pressure by cardiac catheterization of > 25 mm Hg at rest or > 30 - - mm Hg with exercise with a normal pulmonary artery wedge pressure < 15 mm Hg9; or - (b) A peak systolic pulmonary artery pressure of > 60 mm Hg at rest measured by Doppler - echocardiogram utilizing standard procedures; or (c) 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 (2) Medical records which demonstrate that the following conditions have been excluded by the following results10: (a) 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 (b) Left ventricular dysfunction defined as LVEF < 40% defined by MUGA, Echocardiogram or cardiac catheterization; and (c) Pulmonary function tests demonstrating the absence of obstructive lung disease (FEV1/FVC > 50% of predicted) and the absence of greater than mild restrictive lung disease (total lung capacity > 60% of predicted at rest); and (d) Perfusion lung scan ruling out pulmonary embolism; and (e) If, but only if, the lung scan is indeterminate or high probability, a pulmonary angiogram or a high resolution angio computed tomography scan demonstrating absence of thromboembolic disease; and (3) Conditions known to cause pulmonary hypertension11,12,13 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- b. For a diagnosis made after the individual's death: (1) 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 (2) Medical records which show no evidence of alternative causes as described above for living persons. This definition of PPH ("the PPH Definition") is intended solely for the purpose of describing claims excluded from the definition of Settled Claims and for purposes of Section VII.B.4 and 5, below. The Parties agree that the PPH Definition includes but is broader than the rare and serious medical condition suffered by the individuals described in L. Abenhaim, et al., Appetite-Suppressant Drugs and the Risk of Primary Pulmonary Hypertension, International Primary Pulmonary Hypertension Study Group, 335(9), New England Journal of Medicine, 609-16 (1996) (the "IPPHS study"). 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. 47. "Qualified Physician" shall mean a Board-Certified or Board-Eligible Cardiologist. 48. "Released Parties" shall mean: a. 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 Pondimin(R) and/or Redux(TM), 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(R)and/or Redux(TM), 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; (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; and (3) no person or entity described in this section shall be a Released Party with respect to the manufacture, sale, or distribution of any Phentermine hydrochloride or Phentermine resin pharmaceutical product. e. All physicians who prescribed, and all pharmacists and pharmacies who dispensed, Pondimin(R) and/or Redux(TM) to the extent that liability against such physicians, pharmacists or pharmacies is based on: (1) the prescription or dispensing of Pondimin(R)and/or Redux(TM)in a manner consistent with the product labeling; and/or (2) the prescription or dispensing of Pondimin(R)for any period longer than a "few weeks"; and/or (3) the prescription or dispensing of Pondimin(R)and/or Redux(TM)for concomitant use with Phentermine hydrochloride or Phentermine resin; and/or (4) a claim that the physician's or pharmacist's liability stems solely from having prescribed or dispensed Pondimin(R)and/or Redux(TM); and/or (5) 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, not consisting of the conduct described in paragraphs (1)-(5) of this Subsection I.48.e. Notwithstanding the foregoing, manufacturers, sellers, wholesalers, or distributors of any Phentermine hydrochloride or Phentermine resin pharmaceutical product are not Released Parties with respect to the manufacture, sale, or distribution of any Phentermine hydrochloride or Phentermine resin pharmaceutical product, and 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 (collectively hereinafter "Servier") and Interneuron Pharmaceuticals, Inc. (hereinafter "Interneuron") are not Released Parties. 49. "Screening Period" refers to the 12-month period (or such longer period that shall be permitted by the Court for good cause shown, but in any case not to exceed 18 months) during which benefits shall be available under the Screening Program. 50. "Screening Program" refers to the program for providing Transthoracic Echocardiograms and associated interpretive physician visit benefits, as set forth in Sections IV.A.1.a and IV.A.2.b. 51. "Security Fund" has the meaning provided for in Section III.E.2. 52. "Security Fund Escrow Account" has the meaning provided in Section III.E.8. 53. "Settled Claims" shall mean 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 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(R)and/or Redux(TM), 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: a. 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; b. compensatory damages, punitive, exemplary, statutory and other multiple damages or penalties of any kind; c. loss of wages, income, earnings, and earning capacity, medical expenses, doctor, hospital, nursing, and drug bills; d. 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; e. 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; f. wrongful death and survival actions; g. medical screening and monitoring, injunctive and declaratory relief; h. economic or business losses or disgorgement of profits arising out of personal injury; and i. prejudgment or post-judgment interest. Notwithstanding the foregoing, Settled Claims do not include claims based on PPH, including claims for compensatory, punitive, exemplary or multiple damages based on PPH; provided, however, that if a Class Member receives settlement benefits from Fund B, he/she may not bring a lawsuit based upon a claim for PPH, unless the Class Member was diagnosed with PPH before the Class Member had left-sided heart valve abnormalities (other than those which produce trivial, clinically insignificant left-sided regurgitation) or Endocardial Fibrosis. In addition, notwithstanding the foregoing, Settled Claims do not include claims arising from the exposure of unborn children, in utero, to Pondimin(R) or ReduxTM, and persons alleging exposure in utero to Pondimin(R) or ReduxTM shall not be considered Diet Drug Recipients eligible for benefits under this Agreement. 54. "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. 55. "Trial Court Approval" shall mean the granting, by order, of the approval of the Settlement Agreement by the Federal District Court. 56. "Trial Court Approval Date" shall mean the date upon which Trial Court Approval occurs. 57. "Trust" or "Settlement Trust" shall mean a trust established to receive funds to be paid by AHP as provided in this Settlement Agreement pursuant to a Trust Agreement substantially in the form appended hereto as Exhibit "1." 58. "Trustees" shall mean those individuals approved by the Court as Trustees of the Settlement Trust in accordance with Section VI.A.3 herein. II. SCOPE OF THE SETTLEMENT CLASS A. The Parties shall seek certification by the Federal District Court of a nationwide class solely for Settlement purposes (the "Settlement Class") in the case entitled Sheila Brown, et al. v. American Home Products Corporation, Civil Action No. 99-20593, pending in the United States District Court for the Eastern District of Pennsylvania. B. The Settlement Class will consist of: All persons in the United States, its possessions and territories who ingested Pondimin(R) and/or Redux(TM) ("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"). The Settlement Class does not include any individuals whose claims against AHP and/or the AHP Released Parties, arising from the use of Diet Drugs, have been resolved by judgment on the merits or by release (other than releases provided pursuant to this Settlement). C. There will be five subclasses as follows: 1.(a)"Subclass 1(a)" shall consist of all Diet Drug Recipients in the Settlement Class (1) who ingested Pondimin(R) and/or Redux(TM) for 60 days or less, and (2) who have not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and 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(R) and/or Redux(TM) for 60 days or less, and (2) who has not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and September 30, 1999. 1.(b)"Subclass 1(b)" shall consist of all Diet Drug Recipients in the Settlement Class (1) who ingested Pondimin(R) and/or Redux(TM) for 61 or more days, and (2) who have not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and 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(R) and/or Redux(TM) for 61 or more days, and (2) who has not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and September 30, 1999. 2.(a)"Subclass 2(a)" shall consist of all Diet Drug Recipients in the Settlement Class (1) who ingested Pondimin(R) and/or Redux(TM) for 60 days or less, and (2) who have been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram which was performed between the commencement of Diet Drug use and 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(R) and/or Redux(TM) for 60 days or less, and (2) who has been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram which was performed between the commencement of Diet Drug use and September 30, 1999. 2.(b)"Subclass 2(b)" shall consist of all Diet Drug Recipients in the Settlement Class (1) who ingested Pondimin(R) and/or Redux(TM) for 61 or more days, and (2) who have been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram which was performed between the commencement of Diet Drug use and 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(R) and/or Redux(TM) for 61 or more days, and (2) who has been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram which was performed between the commencement of Diet Drug use and September 30, 1999. 3. "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 as having Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period, but who have not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and 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 as having Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period, but who has not been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period. III. AHP'S PAYMENT OBLIGATIONS A. ESTABLISHMENT OF SETTLEMENT TRUST 1. A Settlement Trust shall be established to receive the Fund A Amounts and Fund B Amounts to be paid by AHP under the terms of this Settlement Agreement pursuant to the terms of a Trust Agreement substantially in the form appended to the Settlement Agreement as Exhibit "1." 2. The Parties agree that, as provided in the Trust Agreement, the Trustees of the Settlement Trust 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 consistent with the provisions stated in Section VI.A.3 herein and the Trust Agreement substantially in the form appended to the Settlement Agreement as Exhibit "1". 3. 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 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 Settlement Agreement expressly authorized or required to be incurred and expended prior to the reversion date, including any amounts expended to assist in seeking Final Judicial Approval, shall be returned to AHP, except as provided in Section V hereof relating to the administration of claims of Class Members who have accepted the Accelerated Implementation Option. 4. 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. 5. Subject to the conditions set forth in this Settlement Agreement, AHP shall be obligated to make payments as set forth in Sections III.B ("Fund A") and III.C ("Fund B") below to the Settlement Trust. Such payments shall be made by wire transfer. If any date of payment provided herein is not a Business Day, such payment shall be due and payable on the first Business Day following such date. B. FUND A 1. AHP shall make payments into Fund A as follows (such amounts collectively referred to herein as the "Fund A Amounts"): a. $50 million five Business Days after the Preliminary Approval Date. b. $383 million five Business Days after the Trial Court Approval Date. c. $383 million 180 days after the preceding payment of $383 million. d. $184 million five Business Days after the Final Judicial Approval Date. 2. The monies held by Fund A shall be available and shall be used to pay all benefits payable from Fund A, out-of-pocket and pre- settlement litigation expenses of Plaintiffs' Counsel approved by the Court for reimbursement in relation to Fund A, and all proper administrative expenses associated with the administration of the Settlement and the Settlement Trust insofar as they relate to Fund A. 3. In addition to the foregoing, within five Business Days after the Final Judicial Approval Date, AHP shall pay $200 million into an escrow account under the supervision of the Court (the "Fund A Escrow Account"). The funds in the Fund A Escrow Account shall be used to pay compensation to Plaintiffs' Counsel. In addition, the funds in the Fund A Escrow Account may be used to make incentive awards to the Class Representatives in the following State and Federal Court class actions involving Pondimin(R)and Redux(TM): United States District Court for the Eastern District of Pennsylvania, Brown v. American Home Products Corp., C.A. No. 99-20593; Jeffers v. American Home Products Corp., C.A. No. 98-CV-20626 (E.D. Pa.) (In re Diet Drug Products Liability Litigation, MDL 1203); New Jersey (Vadino et al. v. AHP, Docket No. MID-L-425-98); New York (New York Diet Drug Litigation, Index No. 700000/98); Pennsylvania (Pennsylvania Diet Drug Litigation, Master Docket No. 9709-3162 C.C.P. Phila.); Washington (St. John v. AHP, 97-2-06368-4); Illinois (Rhyne v. American Home Products, 98 CH 4099); and Texas (Earthman v. AHP, No. 97-10-03970 CV, Dist. Ct. Montgomery Co. Texas). The payment of said compensation, relating to Fund A, to Plaintiffs' Counsel and the certified State and Federal Court Class Representatives shall be in such manner and in such amounts as the Court, with advice and counsel of the State Court Judicial Advisory Committee, may determine is appropriate, as contemplated by Sections VIII.B.3 and VIII.E.1.a hereof and pursuant to a Fund A Escrow Account Agreement substantially in the form attached hereto as Exhibit "2." AHP shall take no position on the amount of such fees to be awarded as attorneys' fees or incentive awards or the allocation thereof. All Class Members shall have standing to object to or support the award of attorneys' fees and incentive awards for Class Representatives from the Fund A Escrow Account. Any amount in the Fund A Escrow Account not awarded in attorneys' fees shall be returned to AHP by order of the Court. 4. When the Trustees decide that Fund A's purposes have been met, the remaining balance, if any, in Fund A shall be transferred to Fund B. 5. Any transfer from Fund A to Fund B will not reduce the maximum obligation of AHP to make payments to Fund B. C. FUND B 1. Fund B Amounts. Fund B shall consist of (i) the Fund B Initial Payment under Section III.C.2; (ii) all Fund B Deposit Amounts paid pursuant to Fund B Quarterly Notices under Section III.C.3; (iii) all Fund B AIO Deposit Amounts paid pursuant to Requests for Fund B AIO Payments under Section V.F; and (iv) all interest and other income earned by the Trust on such amounts. 2. Fund B Initial Payment. No later than five Business Days after the Preliminary Approval Date, AHP shall pay $25 million into Fund B. 3. Additional Fund B Deposits. Beginning on the Final Judicial Approval Date, the Trustees may request in writing on a quarterly basis (each a "Fund B Quarterly Notice") an additional amount (such amount being referred to as a "Fund B Deposit Amount"): a. to pay claims received which qualify for payment from Fund B pursuant to Section IV.B., awards of counsel fees and costs under Section VIII.E.1.b., and authorized administrative expenses which have not been paid due to an insufficient cash balance in Fund B, and/or b. to maintain a $50 million reserve in Fund B for administrative expenses (the "Administrative Reserve"). AHP shall pay each Fund B Deposit Amount so requested no later than 15 days after the date on which AHP receives from the Trustees a Fund B Quarterly Notice requesting such Fund B Deposit Amount; provided, however, that AHP's obligation to pay Fund B Deposit Amounts shall at all times be limited to the Adjusted Maximum Available Fund B Amount. 4. Termination of AHP's Fund B Payment Obligations. a. AHP's obligation to make payments to Fund B shall terminate upon the earlier of: (i) the date of AHP's payment into Fund B of the amount that reduces the Adjusted Maximum Available Fund B Amount to zero; or (ii) the date of AHP's payment to Fund B of the Final Projected Amount under Section III.C.4.b. below. Such payment shall be referred to in this Agreement as the "Final Payment." b. The Final Projected Amount shall be determined as follows: (i) As of the end of the sixteenth Fiscal Year, 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 payments to Class Members who have qualified or who are likely to qualify in the future for benefits from Fund B in accordance with the provisions of Section IV.B and Section IV.C, determined without regard to any limitation on the obligation of AHP to make Fund B payments under this Agreement, and to fund the payment of associated administrative expenses. 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. (ii) No later than 30 days after the date on which the Trustees are required to make the estimate under Section III.C.4.a.(i), the Trustees shall provide a written report ("Final Projected Amount 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 in Section III.C.4.a.(i). The Final Projected Amount Report shall contain all supporting information necessary to allow Class Counsel and AHP to evaluate the accuracy and reasonableness of the estimate. Such supporting information shall include, without limitation, the Trustees' methodology for making the estimate and any assumptions used in making the estimate. AHP and/or Class Counsel shall have the right to obtain from the Trustees any additional information reasonably requested by them relating to the estimate contained in the Final Projected Amount Report. (iii)Within 30 days after the date of the Final Projected Amount Report, Class Counsel and/or AHP may appeal the Trustees' estimate to the Court, which shall modify the Trustees' estimate to the extent appropriate upon a judicial finding that the Trustees' estimate was either unreasonable or lacking in substantial support. If such an appeal is not taken or if such an appeal is taken and the Court determines not to modify the Trustees' estimate, then the Trustees' estimate, as set forth in the Final Projected Amount Report, will become the "Final Projected Amount" for purposes of this Agreement. If such an appeal of the Trustees' estimate is taken and the Court modifies the estimated amount in connection with such an appeal, then the estimated amount determined by the Court will become the "Final Projected Amount" for purposes of this Agreement. The Parties waive any right to appeal any determination of the Court with respect to the Final Projected Amount. (iv) If the Adjusted Maximum Available Fund B Amount as of the date on which the Final Projected Amount is determined exceeds the Final Projected Amount, then within five business days after the date of the determination of the Final Projected Amount in accordance with this Agreement, AHP shall pay the Final Projected Amount into Fund B and such payment shall constitute the Final Payment under this Agreement. If the Final Projected Amount exceeds the Adjusted Maximum Available Fund B Amount as of the date on which the Final Projected Amount is determined, then within five business days after the date of the determination of the Final Projected Amount in accordance with this Agreement, AHP shall pay the Adjusted Maximum Available Fund B Amount into Fund B and such payment shall constitute the Final Payment under this Agreement. In no event shall AHP's payment into Fund B exceed the Adjusted Maximum Available Fund B Amount. c. The monies held by Fund B shall be available and shall be used to pay all benefits payable from Fund B, all attorneys' fees and common benefit fees and costs awarded by the Court 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, and for the purposes described in Section III.C.4.d. d. The Trustees shall use any residual funds remaining in Fund B after the satisfaction of all Fund B obligations to Class Members to either pay for or create a reserve for payment of all administrative expenses which have been or will be incurred to wind up the administration of the Trust on behalf of the Settlement Class, including adequate provision for maintaining or disposing of the database created pursuant to Section VI.C.3.c, and shall transfer any funds remaining after satisfaction of the foregoing to the Medical Research and Education Fund created under Section IV.A.3.a. D. OTHER PROVISIONS 1. 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. 2. The Parties agree that all of the amounts being paid pursuant to the terms of this 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 Section I.53 have their origin in such alleged physical personal injuries or physical sickness. 3. Except as provided in Section V herein relating to the Accelerated Implementation Option, AHP shall have no financial obligations under this Settlement Agreement other than as explicitly set forth in this Section III (AHP's Payment Obligations). 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. E. SECURITY ARRANGEMENTS 1. During the period beginning on the first Business Day following the Trial Court Approval Date and ending on the fifth Business Day following the Final Judicial Approval Date, AHP shall maintain credit facilities in an aggregate principal amount of One Billion Dollars ($1,000,000,000) exclusively as security for its obligations under this Settlement Agreement over the sum of (1) the greater of (a) the aggregate minimum principal amount of credit facilities that would be required by Moody's Investors Service to satisfy back-up liquidity on AHP's commercial paper obligations or (b) the aggregate minimum principal amount of credit facilities that would be required by Standard & Poor's Rating Services as sufficient to satisfy back-up liquidity on AHP's commercial paper obligations, plus (2) the amount of any uses (other than the payments under this Settlement Agreement) for which such credit facilities have been committed, plus (3) outstanding drawings under such credit facilities. 2. Fifteen days after the Final Judicial Approval Date, or the first Business Day thereafter if such fifteenth day is not a Business Day, AHP shall establish and thereafter maintain a fund (the "Security Fund") consisting of cash and high-grade marketable commercial securities (which shall consist of the "Permitted Investments," defined herein) selected by AHP having a principal value equal to $370 million. If the credit rating for AHP as reported by both Moody's Investors Service and Standard & Poor's Rating Services is below investment grade at any time during which the Security Fund must be maintained hereunder, AHP shall deposit additional cash and Permitted Investments selected by AHP having an aggregate principal value of an additional $180 million. For purposes of this Section III.E, the term "Permitted Investments" shall mean any of the following: (a) readily marketable direct obligations of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the United States, maturing within 365 days of purchase (in the case of all such obligations other than direct obligations of the United States Treasury); (b) certificates of deposit or time deposits maturing within 365 days of purchase with any commercial bank that (1) has deposits insured by the Federal Deposit Insurance Corporation, (2) is organized under the laws of the United States or any state thereof, (3) has a minimum long-term rating of "A-3" (or the then equivalent) by Moody's Investors Service and a long-term rating of "A-" (or the then equivalent) by Standard & Poor's Rating Services, and (4) has combined capital and surplus of at least $10 billion; (c) commercial paper issued by any corporation organized under the laws of any state of the United States and rated at least "Prime-1" short-term (or the then equivalent grade) and "A-1" long-term (or the then equivalent grade) by Standard & Poor's Rating Services, in each case with a maturity of not more than 180 days from the date of acquisition thereof; or (d) investments, classified as current assets of AHP or any of its subsidiaries under generally accepted accounting principles, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody's Investors Service or Standard & Poor's Rating Services, and the portfolios of which are limited solely to investments of the character, quality and maturity described in clauses (a), (b) or (c) of this definition. 3. The Security Fund shall be terminated upon AHP's making the Final Payment provided for in Section III.C.4.a. 4. AHP shall be entitled to withdraw from the Security Fund all income earned thereby. However, in the event that, and so long as, the credit rating of AHP reported by both Moody's Investors Service and Standard & Poor's Rating Services is below investment grade at any time during which the Security Fund must be maintained, 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 local taxes payable with respect to or on account of the Security Fund. 5. AHP shall grant to the Trustees a perfected security interest in the Security Fund as collateral for AHP's obligations under the Settlement Agreement pursuant to the terms of a Security Fund and Escrow Agreement in the form appended hereto as Exhibit "3" hereto. 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. 6. For purposes of this Settlement Agreement, an "Uncured Failure to Make Payment" is an event in which: a. AHP fails to make a payment to Fund B which was due and not timely paid, and such 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 after an evidentiary hearing (a "Nonpayment Hearing"); and b. 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. 7. At least thirty days prior to any Nonpayment 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. 8. 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 the escrow agent of an escrow account to be maintained under the supervision of the Court (the "Security Fund Escrow Account"), without impairing the security interest of the Trust. The portion of the Security Fund Escrow Account, if any, needed to satisfy the obligations of AHP under the Settlement Agreement shall be paid to the Trust pursuant to order of the Court or on agreement of the Parties. Any unused amount of the Security Fund 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 Security Fund Escrow Account shall be paid out of the account. Additional conditions and procedures for the establishment, operation and distribution of the Security Fund Escrow Account are set forth in Exhibit "3," which is to be executed substantially in that form by the escrow agent. 9. In the event of the following occurrences: a. The occurrence of more than one Uncured Failure to Make Payment within a two-year period; and b. The depletion of the amount of the assets which AHP is required to have on deposit in the Security Fund or in the Security Fund Escrow Account described above by more than fifty percent of the then-required amount of assets; and c. A determination by the Court after notice and an opportunity to be heard by all interested parties that the remaining assets in the Security Fund or in the Security Fund Escrow Account are not likely to be sufficient to pay the remaining Fund B obligations to Class Members as of that point in time; all Diet Drug Recipients who (i) are diagnosed by a Qualified Physician as FDA Positive or as having Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and 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 Fund B benefits by January 31, 2006, together with their associated Representative and/or Derivative Claimants, 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 (e) and (g) of Section I.53 of this Agreement), against AHP and the other Released Parties, including claims for punitive and multiple damages (hereinafter the "Financial Insecurity Opt-Out Right"), provided such Class Members have not received Matrix-Level V benefits set forth in Section IV.B.2. 10. Within thirty (30) days of the date of the entry of any Order determining that the remaining assets in the Security Fund or in the Security Fund Escrow Account are not likely to be sufficient to pay the remaining Fund B obligations, as referred to in Sections III.E.6.a and III.E.9.c, above, the Trustees and/or Claims Administrator(s) shall provide written notice to all affected Class Members of the circumstances giving rise to the Financial Insecurity Opt-Out Right by first class mail, postage prepaid. Within one-hundred and twenty (120) days of the transmission of that notice, each Class Member who is eligible to exercise a Financial Insecurity Opt-Out Right may send a written notice advising the Trustees and/or Claims Administrator(s) of the Class Member's election to exercise the Financial Insecurity Opt-Out Right on a form prescribed by the Trustees and/or Claims Administrator(s). In the event of such an opt-out, the Class Member may pursue any and all claims (except for those claims set forth in subparagraphs (e) and (g) of Section I.53 of this Agreement) against AHP in the legal system, and none of the Released Parties may assert any defense to such claims 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 in Section III.E.9 of this Agreement. 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 any cash that the Class Member has received from AHP and/or the Trust under any terms of the Settlement. There shall be no deduction, offset, or reduction for any Medical Screening or Medical Services received by a Class Member. 11. Nothing contained in this Section of the Agreement 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 of the Settlement Agreement. 12. Immediately upon termination of the Security Fund under Section III.E.3 above, any remaining balance in the Security Fund, including any income earned thereon, shall be released to AHP. IV. CLASS MEMBER RIGHTS AND BENEFITS A. SCREENING/REFUND/MEDICAL SERVICES/CASH/RESEARCH BENEFITS PAYABLE FROM FUND A 1. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN(R) AND/OR REDUX(TM) FOR 61 OR MORE DAYS a. 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. This period may be extended for up to an additional 6 months by the Court for good cause shown. b. COST OF TRANSTHORACIC ECHOCARDIOGRAM: Diet Drug Recipients in Subclass 1(b) who do not elect the Accelerated Implementation Option described in Section V below and who, independent of the Screening Program, obtain an 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 direct cost of providing for a Transthoracic Echocardiogram and associated interpretive physician visit under the Screening Program and (ii) the actual amount paid by the Class Member for the Echocardiogram and associated interpretive physician visit, 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 Class Members must submit a claim for this benefit by Date 2. Class Members receiving such a payment may not also participate in the Screening Program benefits described in Section IV.A.1.a. C. ADDITIONAL MEDICAL SERVICES OR CASH: All Diet Drug Recipients in Subclass 2(b) and those Diet Drug Recipients in Subclass 1(b) who have been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and 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; 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. d. 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(R) and $60 per month of use for Redux(TM), 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. 2. BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN(R) AND/OR REDUX(TM) FOR 60 DAYS OR LESS: a. 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(R) and $60 per month of use for Redux(TM). Eligible Class Members must register for this refund benefit by Date 1. b. SCREENING PROGRAM: (1) In general, members of Subclass 1(a) are not entitled to screening benefits. (2) LIMITED REIMBURSEMENT FOR SCREENING EXAMINATIONS. If, however, during the Screening Period, a Diet Drug Recipient in Subclass 1(a), independent of the Screening Program, obtains an Echocardiogram and is diagnosed by a Qualified Physician as FDA Positive based on that Echocardiogram, he/she may recover from Fund A the lesser of (i) the direct cost to the Trust of providing a Transthoracic Echocardiogram and an associated interpretive physician visit under the Screening Program, and (ii) the actual amount paid by the Class Member for the Echocardiogram and associated interpretive physician visit, 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. (3) COMPASSIONATE AND HUMANITARIAN PROGRAM. 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 (a) such persons are in need of such services and are otherwise unable to obtain them; or (b) where there are 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. c. 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 been diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and 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 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 3. BENEFITS FOR ALL CLASS MEMBERS a. 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. 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)(3) of Section 501 of the Internal Revenue Code pursuant to Articles of Incorporation and Bylaws substantially in the form appended hereto as Exhibit "4." The management of the Medical Research and Education Fund will be by an independent Board of Directors. The Parties agree that the Directors of the Medical Research and Education Fund will be nominated by the Parties and that each nominee will be subject to agreement of the Parties and subject to Court approval b. 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 funds expended to create, 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. c. ECHOCARDIOGRAM IN THE CASE OF FINANCIAL HARDSHIP. 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 after Trial Court Approval of this Settlement. Total disbursements for such services shall not exceed $10 million. d. REIMBURSEMENT FOR CERTAIN PRIVATELY-OBTAINED ECHOCARDIOGRAMS. Diet Drug Recipients or their Representative Claimants will be eligible for reimbursement of the cost of Echocardiograms and associated interpretive visits not otherwise reimbursed under this Agreement where such procedures were performed after the commencement of Diet Drug use; provided, however, that such reimbursement benefits will be made available to Diet Drug Recipients or their Representative claimants 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, except for the refund benefits described in Section IV.A.1.d of the Settlement Agreement, which refund benefits described in Section IV.A.1.d shall be paid only after paying or creating a reserve for the payment of the reimbursement benefit described in this Section IV.A.3.d. The reimbursement to be provided hereunder shall be the lesser of (i) the direct cost to the Trust of providing a Transthoracic Echocardiogram and associated interpretive visit under the Screening Program and (ii) the actual amount paid by the Class Member for the Echocardiogram and associated interpretive visit, net of amounts paid or reimbursed by an insurance carrier or other third-party payor. Class Members seeking such reimbursement must apply for it by Date 1. 4. TERMS OF MEDICAL SCREENING PROGRAM AND PROVISION OF ADDITIONAL MEDICAL SERVICES. a. In order to supply Transthoracic Echocardiograms and associated interpretive physician visits pursuant to Sections IV.A.1.a, IV.A.1.b, IV.A.2.b.2, IV.A.2.b.3 and IV.A.3.c of this Settlement Agreement, and the additional medical services which Class Members are entitled to receive in accordance with Sections IV.A.1.c and IV.A.2.c of this Settlement Agreement, the Trustees and/or Claims Administrator(s) may enter into a contract with a network of providers of health services. b. The "additional medical services" which eligible Class Members are entitled to receive under Sections IV.A.1.c and IV.A.2.c of this Settlement Agreement shall be determined by the Trustees and may include the following services, when performed, supervised, or prescribed by a physician specializing in internal medicine, cardiology, or cardiothoracic surgery: (1) Comprehensive physical examinations; (2) Chest x-rays; (3) Electrocardiograms; (4) Standard laboratory testing; (5) Medically-appropriate Echocardiograms; (6) Medically-supervised nutritional counseling; and/or (7) Any new, accepted technology or modalities for the management of valvular heart disease. 5. SOURCE OF FUND A BENEFITS. The benefits referred to in Section IV.A.1 through and including Section IV.A.4 shall be paid only out of Fund A. B. COMPENSATION BENEFITS PAYABLE FROM FUND B 1. ELIGIBLE CLASS MEMBERS. The following Class Members, and only such Class Members, shall be entitled to the compensation benefits from Fund B ("Matrix Compensation Benefits"): a. Diet Drug Recipients who have been diagnosed by a Qualified Physician as FDA Positive or as having Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period and who have registered for further settlement benefits by Date 2; b. 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 between the commencement of Diet Drug use and 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; c. 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 between the commencement of Diet Drug use and the end of the Screening Period, where the Derivative Claimants have registered for further 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; d. 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; e. 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; f. 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. 2. BENEFITS AVAILABLE a. For purposes of providing Matrix Compensation Benefits to those Class Members eligible to receive such payments, the following four payment matrices (hereinafter the "Matrices" or "Matrix") are established: Matrix A-1 Age at diagnosis/event
Severity =or< 24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 I $123,750 $117,563 $111,685 $106,100 $100,795 $95,755 $90,967 $86,419 II $643,500 $611,325 $580,759 $551,721 $524,135 $497,928 $473,032 $449,381 III $940,500 $893,475 $848,801 $806,361 $766,043 $727,741 $691,354 $656,786 IV $1,336,50 $1,269,675 $1,206,191 $1,145,881 $1,088,587 $1,034,158 $982,450 $933,327 V $1,485,00 $1,410,750 $1,340,213 $1,273,202 $1,209,542 $1,149,065 $1,091,612 $1,037,031
Matrix A-1 (continued)
Severity 60-64 65-69 70 - 79 I $82,098 $73,888 $36,944 II $426,912 $384,221 $192,111 III $623,947 $561,552 $280,776 IV $886,661 $797,995 $398,998 V $985,180 $886,662 $443,331
Matrix A-2 Age at diagnosis/event
Severity =or< 24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70 - 79 I $1,250 $1,187 $1,128 $1,072 $1,018 $967 $919 $873 $829 $739 $500 II $6,500 $6,175 $5,866 $5,573 $5,294 $5,030 $4,778 $4,539 $4,312 $3,842 $1,921 III $9,500 $9,025 $8,574 $8,145 $7,738 $7,351 $6,983 $6,634 $6,302 $5,616 $2,808 IV $13,500 $12,825 $12,184 $11,575 $10,996 $10,446 $9,924 $9,428 $8,956 $7,980 $3,990 V $15,000 $14,250 $13,537 $12,861 $12,218 $11,607 $11,026 $10,475 $9,951 $8,867 $4,433
Matrix B-1 Age at diagnosis/event
Severity =or< 24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70 - 79 I $24,750 $23,513 $22,337 $21,221 $20,159 $19,152 $18,194 $17,284 $16,420 $14,778 $7,389 II $128,700 $122,265 $116,152 $110,344 $104,827 $99,586 $94,606 $89,876 $85,383 $76,844 $38,422 III $188,100 $178,695 $169,760 $161,272 $153,208 $145,548 $138,270 $131,357 $124,790 $112,310 $56,155 IV $267,300 $253,935 $241,238 $229,176 $217,717 $206,831 $196,489 $186,665 $177,332 $159,599 $79,800 V $297,000 $282,150 $268,043 $254,641 $241,908 $229,813 $218,322 $207,406 $197,036 $177,332 $88,666
Matrix B-2 Age at diagnosis/event
Severity =or< 24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70 - 79 I $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 II $1,300 $1,235 $1,173 $1,115 $1,059 $1,006 $956 $908 $862 $768 $500 III $1,900 $1,805 $1,715 $1,629 $1,548 $1,470 $1,397 $1,327 $1,260 $1,123 $562 IV $2,700 $2,565 $2,437 $2,315 $2,199 $2,089 $1,985 $1,885 $1,791 $1,596 $798 V $3,000 $2,850 $2,707 $2,572 $2,444 $2,321 $2,205 $2,095 $1,990 $1,773 $886
b. Each Matrix describes the amount which an eligible Class Member is entitled to recover based on (1) the level of severity of a Diet Drug Recipient's disease pursuant to Section IV.B.2.c below, and (2) the age at which the Diet Drug Recipient is first diagnosed as suffering from that level of disease severity. c. The levels of disease severity in a Diet Drug Recipient which qualify eligible Class Members for payment on the Matrices are as follows: (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) > 49% jet height/left ventricular outflow tract height (JH/LVOTH)14 and/or severe mitral regurgitation (MR) > 40% regurgitant jet area/left atrial area (RJA/LAA)15 16 and no complicating factors as defined below; (b) FDA Positive valvular regurgitation14 with bacterial endocarditis contracted after commencement of Pondimin(R) and/or Redux(TM) 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)18 or Severe AR (> 49% JH/LVOTH)19 with one or more of the following: i) Pulmonary hypertension secondary to severe aortic regurgitation with a peak systolic pulmonary artery pressure > 40 mm Hg measured by cardiac catheterization or with a peak systolic pulmonary artery pressure > 45 mm Hg15 measured by Doppler Echocardiography, at rest, utilizing standard procedures16,17 assuming a right atrial pressure of 10 mm Hg; ii) Abnormal left ventricular end-systolic dimension > 50 mm18 by M-mode or 2-D Echocardiography or abnormal left ventricular end-diastolic dimension > 70 mm19 as measured by M-mode or 2-D Echocardiography; iii) Ejection fraction of < 50%20; and/or (b) Moderate MR (20% - 40% RJA/LAA)21 or Severe MR (> 40% RJA/LAA)22 with one or more of the following: i) Pulmonary hypertension secondary to valvular heart disease with peak systolic pulmonary artery pressure > 40 mm Hg measured by cardiac catheterization or with a peak systolic pulmonary artery pressure > 45 mm Hg23 measured by Doppler Echocardiography, at rest, utilizing the procedures described in Section IV.B.2.c.(2)(a)(i) above; ii) Abnormal left atrial supero-inferior systolic dimension > 5.3 cm24 (apical four chamber view) or abnormal left atrial antero-posterior systolic dimension > 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;25 iii) Abnormal left ventricular end-systolic dimension > 45 mm26 by M-mode or - 2-D Echocardiogram; iv) Ejection fraction of < 60%27; - v) Arrhythmias, defined as chronic atrial fibrillation/flutter that cannot be converted to normal sinus rhythm, or atrial fibrillation/flutter requiring ongoing medical therapy, any of which are associated with left atrial enlargement; as defined above in Section IV.B.2.c.(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 Pondimin(R) and/or Redux(TM); or (b) Severe regurgitation and the presence of ACC/AHA Class I indications for surgery to repair or replace the aortic28 and/or mitral29 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) (as described in Section IV.B.2.c.(1)(b) above) or Matrix Level II and, in addition, a stroke due to bacterial endocarditis contracted after use of Pondimin(R) and/or Redux(TM) or as a consequence of chronic atrial fibrillation with left atrial enlargement as defined in Section IV.B.2.c.(2)(b)(ii) which results in a permanent condition which meets the criteria of AHA Stroke Outcome Classification30 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) (as described in Section IV.B.2.c.(1)(b) above), II or III and, in addition, a stroke due to Bacterial Endocarditis contracted after use of Pondimin(R) and/or Redux(TM) or as a consequence of chronic atrial fibrillation with left atrial enlargement as defined in Section IV.B.2.c.(2)(b)(ii) which results in a permanent condition which meets the criteria of AHA Stroke Outcome Classification31 Functional Level III, determined six months after the event; or (b) Qualification for payment at Matrix Level I.b, II, or III and, in addition, a peripheral embolus due to Bacterial Endocarditis contracted after use of Pondimin(R) and/or Redux(TM) or as a consequence of atrial fibrillation with left atrial enlargement as defined in Section IV.B.2.c.(2)(b)(ii) which results in severe permanent impairment to the kidneys, abdominal organs, or extremities, where severe permanent impairment means: i) for the kidneys, chronic severe renal failure requiring hemodialysis or continuous abdominal peritoneal dialysis for more than six months; ii) for the abdominal organs, impairment requiring intra- abdominal surgery; iii) for the extremities, impairment requiring amputation of a major limb; or (c) 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 < 30% with aortic regurgitation or a left ventricular ejection fraction < 35% with mitral regurgitation in patients who have not had surgery and meet the criteria of Section IV.B.2.c.(3)(b) above or (b) a left ventricular ejection fraction < 40% six months after valvular repair or replacement surgery in patients who have had such surgery; or (d) 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 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) Quadriplegia or paraplegia resulting from cervical spine injury during valvular heart surgery; or (e) A stroke caused by aortic and/or mitral valve surgery and the stroke has produced a permanent condition which meets the criteria of the AHA Stroke Outcome Classification32 Functional Levels II or III determined six months after the event; (f) The individual has had valvular repair or replacement surgery and suffers from post operative endocarditis, mediastinitis or sternal osteomyelitis, any 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. (g) The individual has had valvular repair or replacement surgery and requires a second surgery through the sternum within 18 months of the initial surgery due to prosthetic valve malfunction, poor fit, or complications reasonably related to the initial surgery. (5) MATRIX LEVEL V is defined as: (a) Endocardial Fibrosis (1) diagnosed by (a) endomyocardial biopsy that demonstrates fibrosis and cardiac catheterization that demonstrates restrictive cardiomyopathy or (b) autopsy that demonstrates endocardial fibrosis and (2) 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 chordae tendinea, with partial obliteration of either ventricle commonly present)33, 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) (as described in Section IV.B.2.c.(1)(b) above), III or IV above with one or more of the following: i) A severe stroke caused by aortic and/or mitral valve surgery or due to bacterial endocarditis contracted after use of Pondimin(R) and/or Redux(TM) or as a consequence of chronic atrial fibrillation with left atrial enlargement as defined in Section IV.B.2.c.(2)(b)(ii) and the severe stroke has resulted in a permanent condition which meets the criteria of AHA Stroke Outcome Classification34 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 d) Significant damage to the heart muscle, defined as: (i) a left ventricular ejection fraction < 30% with aortic regurgitation or a left ventricular ejection fraction < 35% with mitral regurgitation, in patients who have not had surgery and meet the criteria in Section IV.B.2.c.(3)(b) above or (ii) a left ventricular ejection fraction < 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 Hg35 (by cardiac catheterization) at rest following repair or replacement surgery of the aortic and/or mitral valve(s); v) Persistent non-cognitive state36 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(R) and/or Redux(TM) 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. d. The circumstances which determine whether Matrix A-1 or Matrix B-1 is applicable to a claim for Matrix compensation benefits are as follows: (1) FOR MATRIX A-1: Diet Drug Recipients who ingested Pondimin(R) and/or Redux(TM) for 61 or more days, who were diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period, whose conditions are eligible for Matrix payments but who do not have any condition or circumstance which makes Matrix B-1 applicable, or their Representative Claimants, shall be entitled to receive Matrix Compensation Benefits determined by application of Matrix A-1, provided that such Diet Drug Recipients or Representative Claimants have registered (or are deemed to have registered) for settlement benefits by Date 2. (2) FOR MATRIX B-1: Diet Drug Recipients who are eligible for Matrix Compensation Benefits and to whom one or more of the following conditions apply, or their Representative Claimants, will receive Matrix Compensation Benefits determined by application of Matrix B-1, provided that such Diet Drug Recipients or Representative Claimants have registered (or are deemed to have registered) for settlement benefits by Date 2: (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 between the commencement of Diet Drug use and the end of the Screening Period (regardless of the duration of ingestion of Pondimin(R) and/or Redux(TM)); or (b) Diet Drug Recipients who ingested Pondimin(R) and/or Redux(TM) for 60 days or less, who were diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period; or (c) Diet Drug Recipients who ingested Pondimin(R) and/or Redux(TM) for 61 or more days, who were diagnosed by a Qualified Physician as FDA Positive by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period, with any of the following conditions: i) With respect to an aortic valve claim: a) The following congenital aortic valve abnormalities: unicuspid, bicuspid or quadricuspid aortic valve, ventricular septal defect associated with aortic regurgitation; b) Aortic dissection involving the aortic root and/or aortic valve; c) Aortic sclerosis in people who are > 60 years old as of the - time they are first diagnosed as FDA Positive; d) Aortic root dilatation > 5.0 cm; e) Aortic stenosis with an aortic valve area < 1.0 square centimeter by the Continuity Equation. ii) With respect to a mitral valve claim: a) The following congenital mitral valve abnormalities: parachute valve, cleft of the mitral valve associated with atrial septal defect; b) Mitral Valve Prolapse; c) Chordae tendineae rupture or papillary muscle rupture; or acute myocardial infarction associated with acute mitral regurgitation; d) Mitral annular calcification; e) M-Mode and 2-D echocardiographic evidence of rheumatic mitral valves (doming of the anterior leaflet and/or anterior motion of the posterior leaflet and/or commissural fusion), except where a Board-Certified Pathologist has examined mitral valve tissue and determined that there was no evidence of rheumatic valve disease. iii) With respect to claims for the aortic and/or mitral valve(s): a) Heart valve surgery prior to Pondimin(R)and/or Redux(TM)use on the valve that is the basis of claim; b) Bacterial endocarditis prior to Pondimin(R)and/or Redux(TM)use; c) FDA Positive regurgitation (confirmed by Echocardiogram) prior to Pondimin(R)and/or Redux(TM)use for the valve that is the basis of claim; d) A diagnosis of Systemic Lupus Erythematosus or a diagnosis of Rheumatoid Arthritis37 and valvular abnormalities of a type associated with those conditions;38 e) Carcinoid tumor of a type associated with aortic and/or mitral valve lesions; f) History of daily use of methysergide or ergotamines for a continuous period of longer than 120 days. e. Matrix A-2 and Matrix B-2 describe the amount of compensation to which Derivative Claimants are entitled if the Diet Drug Recipient with whom they are associated has a Matrix-Level Condition, to the extent that applicable state law recognizes that they have a claim for loss of consortium, services or support. Derivative Claimants will be paid based on the Matrix-Level Condition and age of diagnosis of the Diet Drug Recipient whose alleged injury forms the basis of their claim for loss of consortium, services, or support under applicable state law. Matrix A-2 will apply if the Diet Drug Recipient, whose alleged injury forms the basis of the claim for loss of consortium, services, or support under applicable state law, meets the criteria for payment under Matrix A-1. Matrix B-2 will apply if the Diet Drug Recipient, whose alleged injury forms the basis of the claim for loss of consortium, services, or support under applicable state law, meets the criteria for payment on Matrix B-1. f. If a Diet Drug Recipient qualifies for Matrix payments due to more than one condition, the Diet Drug Recipient and/or his or her associated Representative and Derivative Claimants who have registered (or who are deemed to have registered) for settlement benefits by Date 2 shall be entitled to receive only the higher of such payments, but not both such payments. g. Matrices A-1 and B-1 set forth the maximum aggregate amount to which the Diet Drug Recipient or his or her Representative Claimants are collectively entitled to receive from Fund B. Where there is more than one Representative Claimant associated with any particular Diet Drug Recipient eligible for such Matrix Compensation Benefits, the Trustees and/or Claims Administrator(s) shall allocate this amount among all of the Representative Claimants who have made a claim for such benefits according to applicable law. Matrices A-2 and B-2 set forth the maximum aggregate amount to which all Derivative Claimants associated with any particular Diet Drug Recipient are collectively entitled to receive from Fund B. Where there is more than one Derivative Claimant associated with any particular Diet Drug Recipient eligible for such Matrix Compensation Benefits, the Trustees and/or Claims Administrator(s) shall allocate the Matrix amount, pro rata among all of the Derivative Claimants who have made a claim for such benefits, to the extent that applicable state law recognizes that they have a claim for loss of consortium, services or support. h. Diet Drug Recipients who have been diagnosed by a Qualified Physician as FDA Positive (but not also as having Mild Mitral Regurgitation) by an Echocardiogram performed between the commencement of Diet Drug use and 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. i. Diet Drug Recipients who have been diagnosed by a Qualified Physician as having Mild Mitral Regurgitation (but not also as FDA Positive) by an Echocardiogram performed between the commencement of Diet Drug use and 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. j. 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 an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period and who 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. k. Diet Drug Recipients who have been diagnosed by a Qualified Physician as having Endocardial Fibrosis by September 30, 2005, and have registered for Matrix Compensation Benefits for Endocardial Fibrosis by January 31, 2006, and their associated Representative and Derivative Claimants who have registered (or who are deemed to have registered) for these settlement benefits by January 31, 2006, shall be entitled to the Endocardial Fibrosis benefits as set forth in Sections IV.B.2.a and IV.B.2.c.(5)(a), regardless of whether or not the Diet Drug Recipient had valvular regurgitation. l. 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 1. The Matrix payment amounts set forth in Section IV.B.2.a above will be increased by two percent (2%) per year, compounded annually, beginning one year after the Final Judicial Approval Date. In the event that the Settlement does not receive Final Judicial Approval or is terminated by AHP in accordance with its terms for any other reason, then for purposes of providing benefits to each Class Member who has entered into an Individual Agreement pursuant to the Accelerated Implementation Option (described in Section V below), the Matrix payment amounts shall be increased by 2% per year, compounded annually, beginning in the second "AIO Fiscal Year" (as defined in Section I.6 and as discussed in Section V.H.3 hereof). 2. 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 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 (as described in Section IV.D.4 below). However, where a Diet Drug Recipient does qualify for payment on the Matrices 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 Compensation 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. 3. Once a Diet Drug Recipient has reached a Matrix-Level Condition 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-Level Conditions and will be paid the incremental dollar amount, if any, by which the Matrix payment for the higher Matrix-Level Condition 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 Matrix Compensation Benefits for Endocardial Fibrosis by January 31, 2006. 4. Prior to the payment of Fund B benefits to any Class Member, the Trustees and/or Claims Administrator(s) shall deduct the amount provided for in Section VIII.E.1.b for the payment of attorneys' fees. D. OPT-OUT RIGHTS 1. DERIVATIVE CLAIMANTS. 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). 2. INITIAL OPT-OUT a. ELIGIBILITY: All Class Members are eligible to exercise an Initial Opt-Out right. b. METHOD OF EXERCISE: Each Class Member wishing to opt out from this Settlement must sign and submit timely written notice to the Claims Administrator(s), with a copy to AHP, clearly manifesting the Class Member's intent to opt out of the Settlement. The Claims Administrator(s) shall then submit all Opt-Out forms to the Court. The Court shall be the official registry of Opt-Outs. This written notice shall be in the form appended hereto as Exhibit "6" or in a substantially identical written manifestation of intent. To be effective, this written notice must be signed and submitted by the expiration of the Initial Opt-Out Period. The Parties will recommend that the Court approve an Initial Opt-Out Period of 120 days from the date on which class notice commences. c. 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 the Settlement Agreement or any proceedings connected therewith 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. Lawsuits initiated by Class Members who timely and properly exercise an Initial Opt-Out shall be subject to the provisions of Section VIII.F.3. d. 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. 3. INTERMEDIATE OPT-OUT a. ELIGIBILITY: All Diet Drug Recipients (other than those who have entered into AIO Individual Agreements pursuant to the Accelerated Implementation Option) 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 between the commencement of Diet Drug use and the end of the Screening Period, and their associated Representative and/or Derivative Claimants, are eligible to exercise a right to Intermediate Opt-Out b. METHOD OF EXERCISE: Each Class Member who wants to exercise a right of Intermediate Opt-Out must do so by completing, signing, and timely submitting a written notice of the Class Member's intent to do so in the form appended hereto as Exhibit "7." This written notice must be submitted to the Court, the Trustees and/or Claims Administrator(s), and to AHP, no later than Date 2. In that form, the Class Member must clearly express his/her desire to exercise a right of Intermediate Opt-Out, certify that he/she is eligible to do so, and expressly acknowledge an understanding of the Settlement rights and benefits that will be relinquished by the exercise of the Intermediate Opt-Out right. A Class Member may not exercise an Intermediate Opt-Out right after receiving either $6,000 in cash or any portion of $10,000 in medical services in the case of members of Subclass 1(b) (pursuant to Section IV.A.1.c above), or $3,000 in cash or any portion of $5,000 in medical services in the case of members of Subclass 1(a) (pursuant to Section IV.A.2.c above). If a member of Subclass 1(a) or 1(b) is diagnosed with a Matrix-Level Condition and exercises an opt-out right after the end of the Initial Opt-Out Period, the opt-out shall be deemed a Back-End Opt-Out. c. 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 (e) and (g) of Section I.53), against the AHP Released Parties and/or the Non-AHP Released Parties, but may only assert a claim against AHP Released Parties and/or the Non-AHP Released Parties 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 between the commencement of Diet Drug use and the end of the Screening Program. If, at any time after a Class Member exercises an Intermediate Opt-Out right, the Class Member initiates a lawsuit seeking to pursue a Settled Claim against AHP or any other Released Party, the Released Party shall have the right to challenge, in such lawsuit only, whether the opt-out was timely and proper, including whether the Class Member was eligible to exercise such an opt-out right. With respect to each Class Member who timely and properly 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 timely and properly 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 in writing 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, except where such limitation is inconsistent with applicable law. A Class Member timely and properly 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 issue preclusion. Nor may a Class Member timely and properly 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. Lawsuits initiated by Class Members who timely and properly exercise an Intermediate Opt-Out shall be subject to the provisions of Section VIII.F.3. 4. BACK-END OPT-OUT a. ELIGIBILITY: (1) As to Matrix-Level claims based upon valvular regurgitation, all Diet Drug Recipients (other than those who have entered into AIO Individual Agreements pursuant to the Accelerated Implementation Option) who have been diagnosed by a Qualified Physician as FDA Positive or as having Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and the end of the Screening Period, and who reach a Matrix-Level Condition after September 30, 1999, but before the Matrix Payment Cut-Off Date, and their associated Representative and/or Derivative Claimants, may exercise a Back-End Opt-Out right, 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 had injury to one or more of their left side heart valves and a condition which would entitle them to payments on the Matrices may not exercise a Back-End Opt-Out. (2) 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, may exercise a Back-End Opt-Out. (3) Class Members who are not eligible for Matrix Compensation Benefits may not exercise the Back-End Opt-Out right provided by this Settlement. b. METHOD OF EXERCISE: Each Class Member who wishes to exercise a right of Back-End Opt-Out must complete, sign, and timely submit written notice of the Class Member's intention to do so in the form appended hereto as Exhibit "8." This written notice must be submitted to the Court, the Trustees and/or Claims Administrator(s), 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 developed a Matrix-Level Condition or by Date 2, whichever is later. In that notice, the Class Member must clearly express his or her decision to exercise a Back-End Opt-Out right, certify that he or she is eligible to do so, and acknowledge an understanding of the Settlement rights and benefits that will be relinquished by the exercise of the Back-End Opt-Out. A Class Member may not exercise a Back-End Opt-Out right after claiming any Matrix Compensation Benefits. c. 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 (e) and (g) of Section I.53), against the AHP Released Parties and/or the Non-AHP Released Parties, but may only assert a claim against the AHP Released Parties and/or the Non-AHP Released Parties as follows: (i) if such person has opted out by reason of a Matrix-Level Condition of one or more heart valves diagnosed by a Qualified Physician as FDA Positive or Mild Mitral Regurgitation by an Echocardiogram performed between the commencement of Diet Drug use and 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. If, at any time after a Class Member exercises a Back-End Opt-Out right, the Class Member initiates a lawsuit seeking to pursue a Settled Claim against AHP or any other Released Party, the Released Party shall have the right to challenge, in such lawsuit only, whether the opt-out was timely and proper, including whether the Class Member was eligible to exercise such an opt-out right. With respect to each Class Member who timely and properly 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 timely and properly 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, except where such limitation is inconsistent with applicable law. A Class Member timely and properly exercising a Back-End Opt-Out 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 issue preclusion. Nor may a Class Member timely and properly 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. Lawsuits initiated by Class Members who timely and properly exercise a Back-End Opt-Out shall be subject to the provisions of Section VIII.F.3. V. ACCELERATED IMPLEMENTATION OPTION A. All Class Members shall be offered 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. B. 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 will begin receiving benefits thereunder at such time as the Trial Court makes an oral or written ruling on the approval or non-approval of the Settlement or at such time as AHP exercises its "walkaway rights" pursuant to Section VII.E hereof. A Derivative Claimant may not elect the AIO if the Diet Drug Recipient with whom he or she is associated (or the Representative Claimant of the Diet Drug Recipient) has not elected the AIO. C. In order to elect the AIO, a Class Member must complete and sign the "PINK FORM" appended to this Settlement Agreement as Exhibit "9" and submit it to the Trustees and/or Claims Administrator(s). Any person properly executing the "PINK FORM" and delivering it to the Trustees and/or Claims Administrator(s) during the period in which AHP is offering the AIO, including any extension of the AIO offer, will have entered into an individual agreement with AHP, separate from this Settlement Agreement, under which the parties thereto shall have all the same rights, benefits and obligations to one another as the rights, benefits and obligations accorded to Class Members and to AHP under the Settlement Agreement, except as provided below. Class Members will have all the rights, benefits and obligations provided in Section IV.A, IV.B, and IV.C, except for Section IV.A.1.b herein. AHP will have all the rights, benefits and obligations provided in Section VII., except subsection E. thereof. Such executed and delivered PINK FORMS shall be referred to as "Individual Agreements." D. Such Individual Agreements shall be effective prior to the Final Judicial Approval Date and, even if AHP exercises its "walkaway right" under Section VII.E, the Individual Agreements entered into prior to the date of such exercise shall nevertheless be binding and effective. If AHP does not exercise its "walkaway right," and the Settlement Agreement with the Settlement Class does not receive Final Judicial Approval or is terminated for any other reason, such Individual Agreements shall nevertheless continue to be effective and binding. E. No person exercising an Initial Opt-Out right will be eligible to enter into an Individual Agreement, unless such Initial Opt-Out has been revoked with AHP's consent pursuant to Section IV.D.2.d hereof. 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 for by the Settlement Agreement regardless of whether or not the Settlement Agreement receives Final Judicial Approval. Notwithstanding the preceding sentence, Class Members who enter into Individual Agreements pursuant to the Accelerated Implementation Option will be eligible to exercise the Financial Insecurity Opt-Out Right described in Section III.E.9 above. In addition, such persons will agree not to object to approval of the Settlement by the Court and will agree not to appeal from Trial Court Approval. The Individual Agreements shall also provide for a Screening Period to commence on or about the AIO Start Date and to conclude 12 months after the date on which the Settlement Agreement obtains Final Judicial Approval or the date on which it is determined that the Settlement Agreement will not receive Final Judicial Approval or is otherwise terminated. Persons signing Individual Agreements pursuant to the AIO shall also agree to be bound by the provisions contained in Sections VII.C.1 through VII.C.4 herein with respect to the protection of AHP from claims by Non-Settling Defendants, notwithstanding the absence of any order enjoining and barring all Non-Settling Defendants from commencing or prosecuting any claim against AHP or any other Released Party for contribution and/or non-contractual indemnity as set forth in Section VII.C.1.a and Section VII.C.2 herein. F. After Trial Court Approval or in the event Trial Court Approval is denied and an appeal from that denial is taken in a timely manner, but prior to the Final Judicial Approval Date, the following provisions shall apply: 1. Fund A benefits for individuals accepting the AIO will be payable only out of Fund A of the Settlement Trust and AHP's obligation to make payments to Fund A for this and any other purpose shall be unchanged from that set forth in Section III.B. hereof; 2. Fund B benefits for eligible individuals accepting the AIO will be payable only out of Fund B of the Settlement Trust. Beginning on the AIO Start Date, the Trustees may request in writing on a monthly basis (each a "Request for Fund B AIO Payment") payment of an amount (such amount being referred to as a "Fund B AIO Deposit") to pay claims for Fund B benefits by eligible individuals who have accepted the AIO which have not been paid due to an insufficient cash balance in Fund B and to pay the reasonable costs of administration associated with providing such benefits. AHP shall pay the Fund B AIO Deposit amount so requested no later than 15 days after the date on which AHP receives from the Trustees a Request for Fund B AIO Payment requesting such Fund B AIO Deposit; provided however, that AHP's obligation to pay Fund B Deposits shall at all times be limited to the Adjusted Maximum Available Fund B Amount. The payment of attorneys' fees by AHP in the circumstances described by this paragraph shall be in accordance with Sections VIII.E.2., VIII.E.3. and VIII.E.4. G. 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 continue to have obligations as set forth in Sections III.B and III.C hereof to make payments to Fund A and Fund B, but AHP shall have no further obligation to make any Fund B AIO Deposits to Fund B pursuant to Section V.F above for the payment of such AIO benefits. All Individual Agreements shall be administered after Final Judicial Approval in all respects as if they were part of the Settlement, other than as set forth in Section V.E hereof; provided, however, that all persons who have entered into Individual Agreements shall be deemed to have registered for all benefits under the Settlement Agreement. Such persons will be subject to the requirements for submission of documentation and other evidence to establish their entitlement to settlement benefits, including but not limited to submission of the "GREEN FORM" in order to claim Matrix Compensation Benefits. H. If Final Judicial Approval is not obtained or if the Settlement Agreement is terminated by AHP for any reason, the following provisions shall apply with respect to the Individual Agreements which have been entered into pursuant to the AIO: 1. The Settlement Trust shall not automatically terminate, but shall remain in effect to administer the Individual Agreements, subject to Sections V.H.2, V.H.3, V.H.4 and V.H.5 hereof. 2. Notwithstanding the provisions of Section V.H.1 hereof, within five Business Days after the date on which Final Judicial Approval is not obtained or the date on which Settlement Agreement is terminated for any other reason, the Trustees shall transfer to AHP all amounts in the Settlement Trust after payment of any charges and expenses which the Settlement Agreement expressly authorized or required to be incurred and expended prior thereto, including any amounts expended to assist in seeking Final Judicial Approval, except that the Trust shall retain the sum of $50 million and any additional amount which the Trustees reasonably determine to be required to provide Fund A and Fund B benefits to individuals who have qualified for benefits pursuant to Individual Agreements but have not yet received them. Thereafter, and subject to any changes negotiated or determined by arbitration pursuant to Sections V.H.4 and V.H.5 hereof, AHP shall make payments to the Trust on a quarterly basis of amounts required by the Trust to provide Fund A and Fund B benefits to individuals who have qualified for such benefits pursuant to Individual Agreements but have not yet received them and to maintain a $50 million Administrative Reserve. Such quarterly payments shall be based upon an AIO Fiscal Year. For this purpose, AHP agrees to pay into the Settlement Trust such amount as the Trustees may request in writing on such a quarterly basis, no later than 15 days after the date on which the Trustees provide AHP with such a quarterly request, subject to Section V.H.3 below. 3. AHP's obligations to make payments pursuant to Individual Agreements, including but not limited to payments to the Trust pursuant to Section V.F and pursuant to Section V.H.2 above, shall be subject in the aggregate to the same maximum limitations on its obligations as would have been applicable to its Fund A and Fund B obligations to the Settlement Trust had the Settlement received Final Judicial Approval, subject to the following modifications: a. The payment amounts specified in Section III.B.1. hereof shall be deemed to be AHP's maximum aggregate obligation pursuant to all Individual Agreements to pay for or otherwise provide benefits or other amounts which would have been payable from Fund A had Final Judicial Approval been obtained and for the cost of administration thereof. b. In calculating the Adjusted Maximum Available Fund B Amount (i) the AIO Fiscal Year shall be used in lieu of the Fiscal Year; and (ii) no deduction shall be made for any Credits pursuant to Section VII.A or any Cross-Claim Credits pursuant to Section VII.C hereof. 4. During the 60-day period following the termination of the Settlement Agreement, AHP and the Class Counsel shall engage in good faith negotiations with respect to a mechanism to administer the Individual Agreements in a manner designed to assure that individuals electing the AIO have the same rights and benefits as the rights and benefits accorded to Class Members under this Agreement (except as provided in Section V.E hereof); to reduce the cost of administering the Individual Agreements to an amount which is reasonable in relation to the number of such agreements which have been entered into; and to assure that AHP obtains the most favorable tax treatment available under those circumstances, and to assure that AHP receives all information requested by it to permit it to take appropriate tax deductions and otherwise calculate its taxes. Such negotiations shall address, without limitation, the following matters: a. whether a different mechanism other than the Settlement Trust should be established for administering the Individual Agreements; whether such an alternative mechanism is necessary to reduce the cost of administering the Individual Agreements to an amount which is reasonable in relation to the number of such agreements which have been entered into; or whether the Settlement Trust shall be retained as the mechanism for administering the Individual Agreements, but with changes in its structure or level of expenditures; provided however that the Settlement Trust shall remain in effect, as modified in accordance with Sections V.H.2 and V.H.3 above, unless and until such changes or alternative mechanisms are agreed upon pursuant to this Section V.H.4 or are determined pursuant to Section H.5; b. whether and to what extent an alternative means for resolving disputes in the administration of the Individual Agreements, including but not limited to disputes as to whether or not AHP has failed to make any required payment, should be used in lieu of the resolution of such disputes by the Court; c. whether and to what extent changes should be made to the Security Fund structure and terms (including a reduction in the amount of collateral and the treatment of the Financial Insecurity Opt-Out Right) in light of the number of such agreements which shall have been entered into and to reflect the different circumstances then in effect; d. in the event that the Settlement Trust is retained for the purpose of administering the Individual Agreements, the amount by which the Administrative Reserve is to be reduced to reflect the reasonable administrative needs of the Trust for the purpose of administering the Individual Agreements, which shall be reasonable in relation to the number of such agreements which have been entered into. 5. In the event that Class Counsel and AHP are not able to reach agreement as to any or all of the matters described in Section V.H.4, such matters shall be resolved by binding arbitration by a panel of three arbitrators, one of whom shall be selected by AHP, one of whom shall be selected by Class Counsel and the third of whom shall be selected by the first two such arbitrators. The cost of such arbitration shall be paid by the Settlement Trust as an administrative expense. Such arbitration shall be conducted under the rules of the American Arbitration Association and shall be concluded in no more than 60 days after the end of the 60-day period referred to in Section V.H.4 above, including the rendering of a decision by the arbitrators. I. If AHP exercises its "walkaway right" under Section VII.E hereof, 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" or during any subsequent period in which AHP continues to offer the AIO, nor those Class Members' obligations to AHP thereunder. J. The Parties shall ask the Court to supervise the award of attorneys' fees relating to the Individual Agreements, as set forth in Section VIII.E hereof, whether or not the Settlement receives Final Judicial Approval. VI. CLAIMS ADMINISTRATION A. THE INTERIM ESCROW AGENT, INTERIM CLAIMS ADMINISTRATOR(S), CLAIMS ADMINISTRATOR(S) AND TRUSTEES. 1. In connection with their request for Preliminary Approval of the Settlement, AHP and the Class Counsel Representative(s) shall mutually select an Interim Escrow Agent, such selection being subject to approval by the Court. Until such time as the Court approves the appointment of Trustees, the Interim Escrow Agent shall have all of the rights and responsibilities of the Trustees under the Settlement Agreement with regard to the receipt and investment of Settlement Funds and any payments which AHP is required to make to the Trustees shall be paid to the Interim Escrow Agent. 2. In connection with their request for Preliminary Approval of the Settlement, AHP and the Class Counsel Representative(s) shall request that the Court approve the appointment of two (2) Interim Claims Administrators. The Interim Claims Administrators will be nominated by the Parties, and each nomination will be subject to agreement of the Parties and subject to approval by the Federal District Court. 3. The Trustees shall consist of seven (7) independent individuals, all of whom shall be jointly nominated by the Parties and subject to agreement of AHP and the Class Counsel Representative(s). Four (4) of the nominees shall be subject to the approval by the Judges who will participate in the State Court Judicial Advisory Committee referred to in Sections VIII.B.3-6 of this Agreement. These four Trustees shall serve for a period ending December 31, 2004. The initial Trustees shall be those persons named on the signature pages of the Trust Agreement, and the Trustees who shall serve until December 31, 2004, shall be designated as such on the signature pages of the Trust Agreement. Beginning on January 1, 2005, the Trust will be comprised of three (3) Trustees until the termination of the Trust. All nominee Trustees shall be subject to the approval of and appointment by the Federal District Court. AHP and the Class Counsel Representative(s) shall use their best efforts to assure that such Trustees will be appointed within 60 days of this Settlement Agreement. If any nominee is not approved, the Parties shall jointly nominate another nominee, who will be subject to agreement of AHP and the Class Counsel Representative(s). If any vacancy occurs among the Trustees, the successor Trustee, if any, shall be selected in accordance with Article 3.06 of the Trust Agreement, subject to approval of the Court. 4. The Interim Escrow Agent, Interim Claims Administrator(s), Trustees and Claims Administrator(s), shall have the following qualifications: a. The Interim Claims Administrator(s), Trustees and Claims Administrator(s) shall have relevant medical, financial, legal, or administrative experience. b. The following individuals and/or entities, may not be nominated, approved, or serve as the Interim Escrow Agent or any other escrow agent appointed hereunder, Interim Claims Administrator(s), Claims Administrator(s), or Trustees: i. Past or present officers, directors, agents, or employees of AHP, Interneuron or Servier, or any successor or any affiliates thereof. ii. Past or present officers, directors, agents, or employees of any manufacturer, seller, wholesaler, or distributor of any Phentermine hydrochloride or Phentermine resin pharmaceutical product. iii. Attorneys or other persons who represent or have represented or been retained to represent Interneuron, Servier, or any of the Parties to this Agreement, including but not limited to, AHP, any Diet Drug Recipients, Representative Claimants or Derivative Claimants. iv. Diet Drug Recipients, Class Members, Representative Claimants, or Derivative Claimants. v. Persons or entities related to or affiliated with any attorneys or representatives of Diet Drug Recipients, Representative Claimants, or Derivative Claimants. vi. Persons who own any securities of AHP, Interneuron, Servier, or any successor corporations or any affiliates thereof, or who have any other financial interest in AHP, Interneuron, Servier or, any successor corporations or any affiliates thereof. vii. Persons who own any securities of any manufacturer, seller, wholesaler or distributor of any Phentermine hydrochloride or Phentermine resin pharmaceutical product. Notwithstanding the foregoing, upon written request and full disclosure of any and all disqualifications under this subsection, said disclosed disqualifications may be waived in writing by the Parties to this Agreement, subject to Court approval. 5. The rights and duties of the Interim Escrow Agent shall be set forth in an escrow agreement substantially in the form appended hereto as Exhibit "10." 6. Until the effective date of the Trust, the Interim Claims Administrators shall jointly exercise all of the functions which are to be exercised by the Claims Administrator(s) and/or Trustees under the terms of this Settlement Agreement, except those functions which will be exercised by the Interim Escrow Agent. Each Interim Claims Administrator that was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit or proceeding of any kind, whether civil, administrative or arbitrative, by reason of such Interim Claims Administrator being or having been an Interim Claims Administrator, shall be indemnified by the Trust against expenses, costs and fees of attorneys, judgments, awards, costs, amounts paid in settlement, and liabilities of all kinds incurred by such Interim Claims Administrator in connection with or resulting from such action, suit, or proceeding if he or she acted in good faith and in a manner such Interim Claims Administrator reasonably believed to be in or not opposed to the best interests of the Trust and/or the Interim Escrow established pursuant to the Interim Escrow Agreement contemplated in this Section VI.A. Any indemnification under this Section VI.A.6 shall be made only upon a determination by the Court that indemnification of such Interim Claims Administrator is proper in the circumstances. Reasonable expenses, costs, and fees of attorneys incurred by or on behalf of an Interim Claims Administrator in connection with any such action, suit, or proceeding, whether civil, administrative or arbitrative, may be paid by the Trust in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such Interim Claims Administrator to repay such amount unless it shall be determined ultimately that such Interim Claims Administrator or former Interim Claims Administrator is entitled to be indemnified by the Trust. If any disbursements are required to be made for indemnification purposes pursuant to this Section VI.A.6 prior to the effective date of the Trust, and are ordered to be paid by the Court, the Interim Escrow Agent shall have the authority to make disbursements from the Interim Escrow for such purposes. Each Interim Claims Administrator may purchase and maintain reasonable amounts and types of insurance against liability asserted against or incurred by such individual in that capacity or arising from his or her status as an Interim Claims Administrator. Each Interim Claims Administrator shall have a prior lien upon the Trust and the Interim Escrow Account to secure the payment of any amounts payable to such Interim Claims Administrator pursuant to this Section VI.A.6. The Interim Claims Administrators shall not be required to post any bond or other form of surety unless otherwise ordered by the Court. 7. In addition to the duties, obligations and procedures described in this Settlement Agreement, the Interim Claim(s) Administrator(s) (if required), Claims Administrator(s) and Trustees shall hire personnel, including personnel qualified to provide expert medical advice. 8. Until the effective date of the Trust: a. Disbursements for purposes of paying claims or providing benefits under the Settlement Agreement shall be made by the Interim Escrow Agent subject to the direction of the Interim Claims Administrators; and b. Disbursements for purposes of claims administration, including the cost of providing notice to the Settlement Class, shall be made by the Interim Escrow Agent subject to the joint direction of AHP and Class Counsel. All disbursements will be subject to review and approval by the Court. 9. As promptly as possible, after the effective date of the Trust, for purposes of administering the Settlement Trust: a. Control over Fund A and Fund B shall be transferred by the Interim Escrow Agent to the Trustees and upon such transfer, the Interim Escrow Agent shall cease to have any responsibility for the future receipt, preservation, maintenance, investment, and disbursement of the Settlement funds; b. The Trustees shall have responsibility for each matter entrusted to the "Trustees and/or Claims Administrator(s)" under the terms of the Settlement Agreement. Until such time as Claims Administrator(s) are appointed and approved by the Court according to Section VI.A.9.c below, the Trustees may delegate any portion of their responsibility for claims administration to the Interim Claims Administrator(s); c. The Trustees shall have responsibility for appointing Claims Administrator(s) within 120 days of the date on which the Trustees are appointed by the Court, and the appointment of the Claims Administrator(s) shall be subject to approval of the Court. At the time of such approval, the Interim Claims Administrator(s) shall have no further duties or responsibilities under the Settlement. 10. The Trustees (and the Interim Claims Administrator(s)) and Interim Escrow Agent prior to the effective date of the Trust shall make reports to the Court, AHP, and Class Counsel as follows: a. Annual Reporting Obligations (1) On an annual (calendar year) basis, the Trustees shall cause an audit to be performed by a Certified Public Accountant upon the calendar year financial statements of each of the following (each financial statement being prepared in accordance with generally accepted accounting principles) and shall issue a report stating the result of each such audit: (a) the Settlement Trust and each Fund established thereunder; (b) the Security Fund; and (c) each escrow account then in effect hereunder (including, as to the Security Fund Escrow Account, the amounts transferred from the Security Fund upon an Uncured Failure to Make Payment). (2) On an annual basis based on the calendar year, the Trustees shall provide AHP with information sufficient to allow AHP to calculate in a timely fashion its estimated taxes and taxes in connection with payments made by AHP to the Trust, including without limitation the actual payments made by the Trust. (3) The Trustees shall provide annual reports for each Fiscal Year to be sent to AHP and to Class Counsel, reporting, among other appropriate items, the following: (i) the total amount paid out of each of Fund A and Fund B for each category of benefit payable by each such Fund for that Fiscal Year and cumulatively from the Preliminary Approval Date; (ii) the amounts incurred by the Settlement Trust in administrative expenses and for any other purpose for that Fiscal Year and cumulatively from the Preliminary Approval Date, and how such disbursements have been allocated between Fund A and Fund B; (iii)the amount of cash and other liquid assets held by the Settlement Trust at the end of that Fiscal Year; (iv) the Trustees' calculation of the Fund B amounts paid by AHP during that Fiscal Year; (v) the Trustees' calculation of the Adjusted Maximum Available Fund B Amount as of the end of the Fiscal Year and appropriate accretions thereto for that Fiscal Year; (vi) the Trustees' calculation of the Credits and Cross-Claim Credits to which AHP became entitled during that Fiscal Year; and (vii)the Trustees' calculation of the accumulated Initial Opt-Out Credits which have become final as of the end of that Fiscal Year, but which have not yet been applied to reduce the Adjusted Maximum Available Fund B Amount. (4) On an annual (calendar year) basis for each year beginning one (1) year after Final Judicial Approval, the Trustees shall issue a report stating the value of Fund B Payment Matrices payments, which are to be increased 2% per year compounded annually. (5) On an annual (calendar year) basis, the Trustees shall cause an audit to be performed by a health care consulting firm nominated and agreed to by the Parties and approved by the Court(s) to conduct an audit regarding the processing of claims and a report based on that audit shall be prepared by the health care consulting firm conducting the audit stating the results of the audit. The purpose of this audit shall be to ensure that the claims administration process is being 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 them. b. Quarterly Reporting Obligations (1) The Trustees shall cause to be prepared at the end of each of the first three quarters of each calendar year, a quarterly accounting containing unaudited financial statements of the Trust as of the end of such quarter, including without limitation, a balance sheet of the Trust, a statement of receipts and disbursements, a statement of profit and loss prepared on an accrual basis, and a supplementary schedule of investments and assets, listing both principal and income reported on, subject to normal year-end adjustments, as to fairness of presentation in accordance with generally accepted trust accounting principles consistently applied, by the Trustees or by an accountant or financial officer or agent regularly employed the Trust. (2) On a calendar quarter basis, the Trustees shall provide AHP with information sufficient to allow AHP to calculate in a timely fashion its estimated taxes and taxes in connection with payments made by AHP to the Trust, including without limitation the actual payments made by the Trust. (3) On a Fiscal Year quarterly basis, the Trustees shall provide AHP and the Class Counsel with a report with respect to each of the items required to be reported annually under Section VI.A.10.a(3) hereof. (4) The Trustees shall report, on a quarterly (calendar) basis, the following: (a) Opt-Outs. i) The number and identities of Class Members revoking an Initial Opt-Out; ii) The number and identities of Class Members exercising an Intermediate Opt-Out; and iii) The number and identities of Class Members exercising a Back-End Opt-Out. (b) Accelerated Implementation Option. i) The number and identities of Class Members electing the Accelerated Implementation Option; ii) The number and identities of Initial Opt-Outs who have revoked such opt-out and have elected the Accelerated Implementation Option; iii) All amounts paid to provide Fund A benefits to Class Members electing the Accelerated Implementation Option; and iv) All payments from Fund B to Class Members electing the Accelerated Implemented Option. (c) General Registration. i) The total number of Class Members who have registered for settlement benefits; ii) The number of Subclass 1(a) members who have registered for benefits of any kind, and have not exercised an opt-out right; and iii) The number of Subclass 1(b) members who have registered for benefits of any kind, and have not exercised an opt-out right; iv) The number of Subclass 2(a) members who have registered for benefits of any kind, and have not exercised an opt-out right; v) The number of Subclass 2(b) members who have registered for benefits of any kind, and have not exercised an opt-out right; and vi) The number of Subclass 3 members, who have registered for benefits of any kind, and have not exercised an opt-out right. (d) Refund Benefits. i) The number of Class Members who have registered for refund benefits for use of Pondimin(R)and/or Redux(TM); ii) The number of Subclass 1(a) members who have timely registered for a refund for use of Pondimin(R) and/or Redux(TM); the number of these Subclass 1(a) members who qualify for refund; and the number of these Subclass 1(a) members who do not qualify for refund; iii) The number of Subclass 2(a) members who have registered for a refund for use of Pondimin(R) and/or Redux(TM); the number of these Subclass 2(a) members who qualify for refund; and the number of these Subclass 2(a) members who do not qualify for refund; and iv) Amounts paid from Fund A for refund benefits. (e) Screening Program Benefits. i) The number of Class Members who register for Screening Program benefits; ii) The number of Subclass 1(a) members who qualify for a Transthoracic Echocardiogram and association interpretative physician visit for compassionate and/or humanitarian reasons; iii) The amounts paid from Fund A for Transthoracic Echocardiograms and associated interpretative physician visits for compassionate and/or humanitarian reasons; iv) The number of Subclass 1(b) members who have registered for Screening Program benefits; the number of these Subclass 1(b) members who qualify for Screening Program benefits; and the number of these Subclass 1(b) members who do not qualify for Screening Program benefits; and v) The number of Subclass 1(b) members who actually participate in the Screening Program. (f) Independent Echocardiogram And Associated Interpretive Physician Visit. i) The number of Subclass 1(a) members who have obtained an independent FDA Positive Echocardiogram, and have registered pursuant to Section IV.A.2.b.(2) to obtain the lesser of (i) the Trust's direct cost of providing such an Echocardiogram and an associated interpretive physician visit under the Screening Program, and (ii) the actual amount paid by the Class Member for the Echocardiogam and associated interpretive physician visit, less amounts paid or reimbursed by an insurance carrier or other third-party payor; and the amounts paid from Fund A therefor. ii) The number of Diet Drug Recipients or Representative Claimants who have applied pursuant to Section IV.A.3.d to obtain the lesser of (i) the Trust's direct cost of providing such an Echocardiogram and an associated interpretive physician visit under the Screening Program, and (ii) the actual amount paid by the Class Member for the Echocardiogram and associated interpretive physician visit, less amounts paid or reimbursed by an insurance carrier or other third-party payor; and the amounts paid from Fund A therefor. iii) The number of Subclass 1(b) members who have registered pursuant to Section IV.A.1.b to obtain the lesser of (i) the Trust's direct cost of providing such an Echocardiogram and an associated interpretive physician visit under the Screening Program, and (ii) the actual amount paid by the Class Member for the Echocardiogram and associated interpretive physician visit, less amounts paid or reimbursed by an insurance carrier or other third-party payor; and the amounts paid from Fund A therefor. (g) Valve-Related Medical Services or $6,000 In Cash From Fund A. The number of Subclass 1(b) and 2(b) members who have registered and have obtained an FDA Positive diagnosis by the end of the Screening Period and have elected to receive either (i) valve-related medical services up to $10,000 in value to be provided by the Trust; or (ii) $6,000 in cash from Fund A; the number electing each; and the amount paid in cash from Fund A for such. (h) Valve-Related Medical Services or $3,000 In Cash From Fund A. The number of Subclass 1(a) and 2(a) members who have registered and have obtained an FDA Positive diagnosis by the end of the Screening Period and have elected to receive either (i) valve-related medical service up to $5,000 in value to be provided by the Trust; or (ii) $3,000 in cash from Fund A; the number electing each; and the amounts paid in cash from Fund A for such. (i) Credits To AHP Pursuant To Judgment Or Settlement Of Claims. All credits to AHP against its Fund B obligations stemming from payments by AHP, pursuant to judgment or settlement, of the claims of Initial, Intermediate and/or Back-End Opt-Outs. (j) Subrogation Claims. i) All subrogation claims asserted against the Trust; identification of subrogation claims approved for payment; identification of subrogation claims not approved for payment; and amounts to be paid from Fund B in resolution of such. ii) All subrogation claims asserted against AHP and/or Released Parties. (k) Accelerated Implementation Option (AIO); Attorneys' Fees And Costs. All amounts deposited for individual attorneys' fees and costs pursuant to the authorized deduction from Fund B benefits paid to claimants accepting the AIO; the applications for payment of individual attorneys' fees and costs from such; and the payments for attorneys' fees and costs being made from such monies. (l) Matrix Level Claims. i) The number of Matrix Level I claims; the number of Matrix Level I claims approved; the number of Matrix I claims rejected; and the total amount of Matrix I claims paid; ii) The number of Matrix Level II claims; the number of Matrix Level II claims approved; the number of Matrix II claims rejected; and the total amount of Matrix II claims paid; iii) The number of Matrix Level III claims; the number of Matrix Level III claims approved; the number of Matrix III claims rejected; and the total amount of Matrix III claims paid; iv) The number of Matrix Level IV claims; the number of Matrix Level IV claims approved; the number of Matrix IV claims rejected; and the total amount of Matrix IV claims paid; and v) the number of Matrix Level V claims; the number of Matrix Level V claims approved; the number of Matrix V claims rejected; and the total amount of Matrix V claims paid. (m) Assignment Of Indemnity Rights. The indemnity rights of AHP against Class Members assigned by AHP to the Trustees for which AHP receives a credit against its Fund B obligations, including the amount thereof. c. Periodic Reporting Obligations. (1) The Trustees and/or Claims Administrator(s) shall report within five (5) Business Days all AHP payments into the Settlement Trust, including but not limited to: (a) All AHP payments deposited into Fund A; (b) All AHP payments deposited into Fund B; and (c) All requests for additional cash deposits into Fund B and payments deposited in accordance with each request. (2) The Trustees and/or Claims Administrator(s) shall report within five (5) Business Days an Uncured Failure To Make Payment by AHP. (3) At the conclusion of the Initial Opt-Out Period, the Trustees and/or Claims Administrator(s) shall report within fifteen (15) Business Days the number and identities of Class Members exercising an Initial Opt-Out. 11. The Trustees shall have the duty to administer and resolve all Claims according to the terms of this Agreement, while minimizing the costs of administration of the Trust associated with the processing and resolution of Claims and the operations of the Trust. B. NOTICE. 1. Within ten (10) days of the execution of this Settlement Agreement, the parties shall apply to the Court for an Order in the form appended hereto as Exhibit "11": a. Granting Preliminary Approval of the Settlement; b. Approving the appointment of Interim Claims Administrator(s) and an Interim Escrow Agent pursuant to Section VI.A.2 and Section VI. A.1; c. Approving a written notification to the Settlement Class which shall contain A Class Member's Guide to Settlement Benefits (Exhibit "12"), an Official Court Notice Package (Exhibit "13"), and a Matrix Compensation Benefits Guide for Physicians, Attorneys and Class Member (Exhibit "14"); d. Approving a summary publication notice to the Settlement Class in the form appended hereto as Exhibit "15"; e. Approving the establishment of and maintenance of a "1-800" telephone number and website to receive requests from Class Members for written notice; f. Directing written notice to all those Class Members whose names and addresses are known or presently knowable to the Parties as a result of: (1) The filing of legal claims by Class Members against AHP; (2) The creation and maintenance of a database of Class Members who registered to receive benefits pursuant to a proposed limited fund Class Action Settlement with Interneuron Pharmaceuticals, Inc. in Sharyn Wish v. Interneuron Pharmaceuticals, Inc., Civil Action No. 98-CV-20594 (E.D. Pa.); (3) The establishment and operation of the "1-800-386-2070" telephone number and www.settlementdietdrugs.com website incident to the publication of the Memorandum of Understanding which was executed among the Parties on October 7, 1999; (4) Any database within the possession, custody, or control of AHP which reflects the names and addresses of Class Members; (5) Any database which is readily obtainable from any pharmacy chain which reflects the names and addresses of Class Members; g. Directing that the person or entity who will mail the individual notices shall have access to the names and addresses of individuals who requested the mailing of individual notices to them by contacting "1-800-386-2070" and www.settlementdietdrugs.com; h Directing that all names and addresses of Class Members collected for the purpose of providing notice shall be kept strictly confidential and shall not be disclosed to any person or used for any purpose other than for issuance of notice to Class Members upon prior order of the Court; i. Authorizing Publication Notice in the form appended hereto as Exhibit "15" in accordance with the Plan of Media Notice appended hereto as Exhibit "16"; j. Authorizing television notice in accordance with the Script of Television Notice appended hereto as Exhibit "17," and in accordance with the Plan of Media Notice appended hereto as Exhibit "16"; k. Authorizing the distribution of Summary Notice to Physicians in the form appended hereto as Exhibit "18," to physicians for display to their patients; and l. Authorizing the distribution of Summary Notice to Pharmacists in the form appended hereto as Exhibit "5," to pharmacists for display to their customers. 2. The Claims Administrator(s) and/or the Interim Claims Administrator(s) shall maintain a list of the names and addresses of each person to whom written notice was transmitted in accordance with any order entered by the Court pursuant to the preceding paragraph of this Settlement Agreement (hereinafter "the Notice List"). These names and addresses shall be kept strictly confidential and shall be used only by appropriate persons for administrative purposes of the Trust, except on prior order of the Court. 3. Within forty-five (45) days after Final Judicial Approval, the Trustees and/or Claims Administrator(s) shall transmit a written notice to all individuals whose names and addresses are contained in the Notice List advising all recipients of the notice that the Settlement has received Final Judicial Approval, advising all Class Members of the day on which Date 1 falls, advising the recipients of the notice that Class Members in Subclasses 1(a) and 1(b) must Register to receive Refund and/or Screening Program benefits from Fund A by Date 1 and that Class Members in Subclasses 2(a) and 2(b) must register to receive Refund Benefits from Fund A by Date 1, advising all recipients of the notice of the period of time in which Date 2 may fall, and advising all recipients of the notice that if they wish to receive Matrix Compensation Benefits in the future they must be registered as having Mild Mitral Regurgitation or an FDA Positive level of valvular regurgitation by Date 2. This notice shall also contain information concerning the rights of certain Class Members to exercise Intermediate and Back-End Opt-Outs. It shall contain the BLUE FORM, GREEN FORM and Intermediate and Back-End Opt-Out forms as described below, which will allow Class Members the opportunity to register for settlement benefits or exercise Intermediate or Back-End Opt-Out rights. In addition, it will advise members of Subclass 1(a) of their right to obtain payment of the net cost of any FDA Positive Echocardiogram which they may have had during the Screening Period but independent of the Screening Program pursuant to the terms and conditions of Sections IV.A.2.b(2) and shall provide Class Members with the WHITE FORM appended hereto as Exhibit "19" in order to make a claim for such benefits. It will also advise members of Subclass 1(b) of their right to obtain payment of the net cost of a Transthoracic Echocardiogram obtained independent of the Screening Program performed after the end of the Initial Opt-Out Period but before the Final Judicial Approval Date, pursuant to the terms and conditions of Section IV.A.1.b and shall provide Class Members with the WHITE FORM appended hereto as Exhibit "19" in order to make a claim for such benefits. It will also advise Diet Drug Recipients who had an Echocardiogram and associated interpretive visit after the commencement of Diet Drug use, or their Representative Claimants, of their right to seek reimbursement of the net cost of the Echocardiogram and associated interpretive visit, pursuant to and subject to the limitations of, the terms and conditions of Section IV.A.3.d, and shall provide Class Members with the WHITE FORM appended to the Settlement Agreement as Exhibit "19" in order to make a claim for such benefits. The Parties shall prepare this class notice for Court approval. The notice shall reflect the fact that the Settlement Agreement has been approved, that there are no further rights to object to the Settlement, and that there is no longer any Initial Opt-Out right in effect. 4. Three (3) months prior to Date 2, the Trustees and/or Claims Administrator(s) shall transmit a written notice to all individuals whose names and addresses are contained in the Notice List advising all recipients of the notice of the day on which Date 2 falls and advising all recipients of the notice, that if they wish to receive Matrix Compensation Benefits in the future they must be registered as having Mild Mitral Regurgitation or an FDA Positive level of valvular regurgitation by Date 2. This notice shall also contain information concerning the rights of certain Class Members to exercise Intermediate and Back-End Opt-Outs. It shall contain the BLUE FORM, the GREEN FORM and Intermediate and Back-End Opt-Out forms, as described below, which will allow Class Members the opportunity to register for settlement benefits or exercise Intermediate or Back-End Opt-Out rights. In addition, it will advise members of Subclass 1(a) of their right to obtain payment of the net cost of any FDA Positive Echocardiogram which they may have had during the Screening Period but independent of the Screening Program pursuant to the terms and conditions of Section IV.A.2.b(2) and shall provide Class Members with the WHITE FORM appended hereto as Exhibit "19" in order to make a claim for such benefits. It will also advise members of Subclass 1(b) of their right to obtain a limited refund of the net cost of any Transthoracic Echocardiogram obtained independent of the Screening Program after the end of the Initial Opt-Out Period but before the Final Judicial Approval Date, pursuant to the terms and conditions of Section IV.A.1.b and shall provide Class Members with the WHITE FORM appended hereto as Exhibit "19" in order to make a claim for such benefits. The Parties shall prepare this class notice for court approval. The notice shall reflect the fact that the Settlement has been approved, that there are no further rights to object to the Settlement, and that there is no longer any Initial Opt-Out right in effect, and that the time to register for the Screening Program has been completed. C. CLAIMS ADMINISTRATION AND CRITERIA FOR BENEFITS DETERMINATIONS. 1. ECHOCARDIOGRAM CRITERIA. a. Where a Diet Drug Recipient has had an Echocardiogram between the commencement of Diet Drug use and September 30, 1999, the results of that Echocardiogram as contained in the written report issued by a Qualified Physician shall be used by the Trustees/Claims Administrator(s) to determine the level of mitral and/or aortic valvular regurgitation for that Diet Drug Recipient as of the date of the Echocardiogram for purposes of Fund A benefits determinations under the Settlement Agreement, except (i) where the report of the Echocardiogram does not clearly state the level of valvular regurgitation for the mitral and/or aortic valves or (ii) where in an audit conducted pursuant to Section VI.E, it is determined that the conclusions of the written report are not supported by the videotape or disk of the Echocardiogram or a Board-Certified Cardiothoracic Surgeon. Such an Echocardiogram shall not be used to qualify a Diet Drug Recipient for Matrix Compensation Benefits unless, upon re-reading, it is determined (i) that prior to the end of the Screening Period, the Diet Drug Recipient met the definition for "FDA Positive" set forth in Section I.22.b and (ii) the Echocardiogram met the criteria set forth in Section VI.C.1.b below. Such a determination may be made by the Trustees and/or Claims Administrator(s) upon submission of a GRAY FORM (appended hereto as Exhibit "20") which has been completed by a Board-Certified Cardiologist. b. Each Echocardiogram performed after September 30, 1999, which is used to determine whether the condition of a Diet Drug Recipient qualifies a Class Member for Fund A or Fund B (Matrix) settlement benefits, shall be one which was: (1) conducted in accordance with the standards and criteria as outlined in Feigenbaum (1994)39 or Weyman (1994);40 (2) evaluated following the grading system of valvular regurgitation defined in Singh (1999);41 (3) conducted by a Diagnostic Cardiac Sonographer who is able to produce and evaluate ultrasound images and related data used by physicians to render a medical diagnosis; and (4) conducted under the supervision of, and read and interpreted by, a Board-Certified Cardiologist or Board-Certified Cardiothoracic Surgeon with level 2 training in echocardiography as specified in the Recommendations of the American Society of Echocardiography Committee on Physician Training in Echocardiography.42 c. A Diet Drug Recipient who demonstrates to the Trustees and/or Claims Administrator(s) that he or she had an Echocardiogram conducted between September 30, 1999 and the date of commencement of Class Notice which a Qualified Physician reported as showing that he or she had FDA Positive regurgitation shall not be disqualified from receiving settlement benefits if the Echocardiogram does not meet all of the requirements of Section VI.C.1.b above. d. A claimant who qualifies for a particular Matrix payment, by virtue of a properly interpreted Echocardiogram showing the required levels of regurgitation and/or complicating factors, after exposure to fenfluramine and/or dexfenfluramine, shall not be disqualified from receiving that Matrix payment in the event that a subsequent Echocardiogram shows that the required levels of regurgitation and/or complicating factors are no longer present. 2. CLAIMS INFORMATION. a. Each Claim for Benefits under the Settlement Agreement shall be made on one of two forms signed and submitted to the Trustees and/or Claims Administrator(s), as follows: (1) The "PINK FORM" appended to the Settlement Agreement as Exhibit "9" shall be used by Class Members who want to elect the AIO; and (2) The "BLUE FORM" appended to the Settlement Agreement as Exhibit "21" shall be used by all other Class Members who wish to make a claim for the benefits available under the Settlement Agreement. b. Submission of a PINK FORM or BLUE FORM that has not been fully completed shall be sufficient to "register" the Class Member for benefits, provided, however, that the missing information must be submitted in order for the Class Member to receive any benefits under this Settlement Agreement. c. In addition, each person who wants to make a claim for Matrix Compensation Benefits under Section IV.B of the Settlement Agreement or pursuant to the AIO must complete and submit to the Trustees and/or Claims Administrator(s) the "GREEN FORM" which is appended to this Settlement Agreement as Exhibit "22." d. In order to complete the submission of a Claim and to qualify for any benefits under the Settlement Agreement, each Class Member must submit documentary proof to the Trustees and/or Claims Administrator(s) of the period of time for which the Diet Drugs Pondimin(R) and/or Redux(TM) were prescribed and dispensed to the Diet Drug Recipient who is the subject of the Claim. This proof must include one of the following: (1) If the diet drug was dispensed by a pharmacy, the identity of each pharmacy that dispensed Diet Drugs to the Diet Drug Recipient, including its name, address, and telephone number, and a copy of the prescription dispensing record(s) from each pharmacy, which should include the medication name, quantity, frequency, dosage and number of refills prescribed, prescribing physician's name, assigned prescription number, original fill date and each subsequent refill date; or, (2) If the diet drug was dispensed directly by a physician or weight loss clinic, or the pharmacy record(s) is unobtainable, the identity of each prescribing physician, including the prescribing physician's name, address, and telephone number and a copy of the medical record(s) prescribing or dispensing the diet drug(s). The medical record(s) must include records which identify the Diet Drug Recipient, the Diet Drug name, the date(s) prescribed, the dosage, and duration the drug was prescribed or dispensed; (3) If the pharmacy records and medical records are unobtainable, an affidavit under penalty of perjury from the prescribing physician or dispensing pharmacy identifying the Diet Drug Recipient, the drug(s) prescribed or dispensed, the date(s), quantity, frequency, dosage and number of prescriptions or refills of the Diet Drug(s). e. In order to complete the submission of a Claim and qualify for Fund A benefits under the Settlement Agreement, where a Class Member relies on a result of an Echocardiogram to establish that a Diet Drug Recipient had FDA Positive levels of regurgitation by the end of the Screening Period and where that Echocardiogram took place between the commencement of Diet Drug use and September 30, 1999, the Class Member must provide the Trustees and/or Claims Administrator(s) with a copy of the report of the results of the Echocardiogram and the videotape or disk of the Echocardiogram. In order to complete the submission of a Claim and qualify for Matrix Compensation Benefits under the Settlement Agreement, where a Class Member relies on a result of an Echocardiogram to establish that a Diet Drug Recipient had FDA Positive levels of regurgitation or Mild Mitral Regurgitation by the end of the Screening Period and where that Echocardiogram took place between the commencement of Diet Drug use and September 30, 1999, the Class Member must provide the Trustees and/or Claims Administrator(s) with a copy of the report of the results of the Echocardiogram and the videotape or disk of the Echocardiogram and a certification from a Qualified Physician on the GRAY FORM which is appended to the Settlement Agreement as Exhibit "20" or a certification regarding the results of the Echocardiogram on the GREEN FORM which is appended to the Settlement Agreement as Exhibit "22.". If the Class Member does not have custody of such videotape or disk, the Class Member must submit an executed authorization which will allow the Trustees and/or Claims Administrator(s) to obtain a videotape or disk of the Echocardiogram from the physician or health care provider who has custody of such videotape or disk as a condition to considering the Class Member's Claims for Benefits. If the videotape or disk is no longer in existence, the Class Member must supply an affidavit under penalty of perjury from the person who last had custody of the videotape or disk stating that the videotape or disk is no longer in existence and describing the circumstances under which it came to be misplaced or destroyed. f. In order to complete the submission of a Claim and qualify for benefits under the Settlement Agreement, where a Class Member relies on the results of an Echocardiogram to establish that a Diet Drug Recipient had FDA Positive regurgitation levels of regurgitation or Mild Mitral Regurgitation by the end of the Screening Period and where that Echocardiogram took place after September 30, 1999, and where that Echocardiogram took place outside of the Screening Program, the Class Member must report the results of the Echocardiogram to the Trustees and/or Claims Administrator(s) in the form of a certification from a Board-Certified Cardiologist on the GRAY FORM which is appended to the Settlement Agreement as Exhibit "20," or a certification regarding the results of the Echocardiogram on the GREEN FORM which is appended to the Settlement Agreement as Exhibit "22," and provide the Trustees and/or Claims Administrator(s) with a copy of the videotape or disk which reflects the results of the Echocardiogram. If the Class Member does not have custody of such videotape or disk, the Class Member must submit an executed authorization which will allow the Trustees and/or Claims Administrator(s) to obtain a videotape or disk of the Echocardiogram from the physician or health care provider who has custody of such videotape or disk as a condition to considering the Class Member's Claim for Benefits. If the videotape or disk is no longer in existence, the Class Member must supply an affidavit under penalty of perjury from the person who last had custody of the videotape or disk stating that the videotape or disk is no longer in existence and describing the circumstances under which it came to be misplaced or destroyed. g. Each Cardiologist who is responsible for performing Echocardiograms pursuant to the Screening Program provisions of the Settlement Agreement shall report the results of those Echocardiograms to the Trustees and/or Claims Administrator(s) on the "GRAY FORM" which is appended to the Settlement Agreement as Exhibit "20" and shall supply a copy of the videotape or disk of the results of the Echocardiogram to the Claims Administrator(s) and/or Trustees. If a Class Member submits to the Trustees and/or Claims Administrators a GREEN FORM with the Doctor's Evaluation Form in Part II of such Form (or the equivalent section of the GREEN FORM in any subsequent printing of such forms) properly completed and signed by a Board-Certified Cardiologist or Cardiothoracic Surgeon, that Class Member and Board-Certified Cardiologist or Cardiothoracic Surgeon are not required to submit a GRAY FORM to report on the same Echocardiogram referenced in such GREEN FORM. If, however, a Cardiologist submits a GRAY FORM reporting on an Echocardiogram performed on a Class Member, in order to seek Matrix Compensation Benefits, such Class Member must submit a complete GREEN FORM, including the Doctor's Evaluation Form in Part II (or its equivalent in any subsequent printings) completed and signed by a Board-Certified Cardiologist or Cardiothoracic Surgeon. h. In order to complete the submission of a claim and qualify for benefits under the Settlement Agreement, each Class Member who submits a claim as a Representative Claimant must supply the Trustees and/or Claims Administrator(s) with written proof that such person has legal authority to act in a representative capacity. i. In order to complete submission of a Claim for reimbursement of the actual amount paid for an Echocardiogram by a Class Member pursuant to Sections IV.A.1.b, IV.A.2.b.(2), or IV.A.3.d above, a Class Member must submit the following documents: (1) A copy of the report of the Echocardiogram; (2) A copy of the bill or invoice reflecting the charges for the Echocardiogram; and (3) A copy of the cancelled check or other documentary evidence of the amount actually paid by the Class Member for the Echocardiogram. j. In order to complete the submission of a Claim by a Class Member who has ingested Pondimin(R) and/or Redux(TM) for 60 days or less to receive an Echocardiogram and interpretive physician visit for compassionate and humanitarian reasons pursuant to the provisions of Section IV.A.2.b(3), the Class Member must submit documentary proof supporting the Claim that there are compassionate and humanitarian reasons which would justify the Trustees and/or Claims Administrator(s) to exercise their discretion to provide the Diet Drug Recipient with the benefit of a Transthoracic Echocardiogram and associated interpretive physician visit. k. In order to complete the submission of a claim and qualify to receive an Echocardiogram after Trial Court Approval but prior to Final Judicial Approval by reason of "true financial hardship" pursuant to Section IV.A.3.c of the Settlement Agreement, a Diet Drug Recipient must provide the Trustees and/or Claims Administrator(s) with documentary proof of the Diet Drug Recipient's financial situation including a copy of the Diet Drug Recipient's most recent federal income tax return or other documentary proof of the Diet Drug Recipient's income where the Diet Drug Recipient submits a sworn declaration, under oath, that he or she has not filed such tax returns. 3. GENERAL CLAIMS PROCESSING PROCEDURES AND THE REGISTRY. a. Within thirty (30) days of the date on which the Trustees and/or Claims Administrator(s) receive a Claim for Benefits from a Class Member, the Claims Administrator(s) shall: (1) assign a unique identifying number to the Claim; (2) review the Claim which has been submitted, together with supporting documentation, and determine whether the Claim is complete or requires a submission of additional information to make it complete; (3) confirm that any required physician certification submitted in support of a claim for Matrix Compensation Benefits was submitted by a physician who actually is a Board-Certified Cardiologist, Cardiothoracic Surgeon, Pathologist, Neurologist or Neurosurgeon; and (4) inform the Class Member, in writing, of the unique identifying number assigned to the Class Member's Claim and the information which the Class Member must submit to the Trustees and/or Claims Administrator(s), if any, in order for the claim to be completed and ready for processing. During the first full twelve (12) calendar months following the AIO Start Date, the Trustees and/or Claims Administrator(s) shall take these actions within sixty (60) days of the date on which they receive a Claim for Benefits from a Class Member, rather than the thirty-day period stated above. b. With respect to each Claim submitted by a Class Member as part of the claims administration process, the Trustees and/or Claims Administrator(s) shall afford each Class Member at least three (3) separate opportunities to supply any missing or omitted information and documentation which are necessary to support a Claim for Benefits under the Settlement Agreement. c. All information submitted by Class Members to the Trustees and/or Claims Administrator(s) shall be recorded in a computerized database suitable for use with standard medical research software such as SAS and for all purposes of claims administration. This database, throughout the duration of its use, shall be kept in a form that can be accessed and read, which may in the future involve, as evolving technology warrants, placing the information in a more modern database. d. The database created pursuant to the preceding paragraph shall be maintained as a "Registry" for purposes of administering the Settlement and for purposes of medical education and research. After taking appropriate steps to maintain the confidentiality of Class Members, the Trustees and/or Claims Administrator(s) shall make the database, or any portion thereof, available to qualified scientists, physicians, and other researchers subject to the following conditions: (1) First, the Trustees and/or Claims Administrator(s) shall make the deidentified43 database available only to such persons who: (a) provide the Trustees and/or Claims Administrator(s) with written proof of their training, qualifications, and experience to conduct medical or scientific research; (b) provide a research protocol setting forth the purposes for which they seek access to the Registry/database, their research methodology, source of funding, a description of how the proposed research will benefit the Settlement Class and any other information that may be requested by the Trustees and/or Claims Administrator(s); (c) undertake, in writing, to use the information which they receive from the Registry/database solely for medical, scientific, and educational purposes and not to disclose confidential information concerning any Class Member in the event that they should inadvertently come into possession of such confidential information through their access to the database; (d) undertake, in writing, to provide, upon completion of the research, the Trustees and/or Claims Administrator(s), the Court, AHP, and Class Counsel with a copy of any published or unpublished abstract, article, or report which is based, in whole or in part, on the information contained in the Registry/ database; and (e) undertake, in writing, not to testify at any time on behalf of any party in any lawsuit relating to the use of Pondimin(R)and/or Redux(TM). (2) Second, the Trustees and/or Claims Administrator(s) shall make the deidentified database, or any portion thereof, available to qualified scientists, physicians, and other researchers only when, considering the training, qualifications and experience of such persons and the purposes for which they seek access to the Registry/database, the Trustees and/or Claims Administrator(s) form a reasoned opinion that disclosure of database information to any given scientist, physician, or other researcher will be beneficial to the Settlement Class. e. Copies of all videotapes and disks of Echocardiograms submitted by or on behalf of Diet Drug Recipients to the Trustees and/or Claims Administrator(s) shall be preserved and maintained. Copies of these videotapes and disks shall be available to qualified scientists, physicians, and other researchers subject to the conditions stated in Section VI.C.3.d above, and subject to the following additional conditions: (1) In making copies of videotapes and disks to be provided to qualified scientists, physicians and other researchers for purposes of medical and scientific research, the Trustees and/or Claims Administrator(s) shall redact all information identifying the Diet Drug Recipient who was the subject of the Echocardiogram; and (2) The Trustees and/or Claims Administrator(s) shall require that the scientists, physicians, and/or other researchers requesting a copy of the videotapes pay all costs reasonably incurred by the Trustees and/or Claims Administrator(s) in making copies of the videotapes and in redacting patient identifying information from the videotapes as a condition to receiving copies thereof. f. In making arrangements for the disclosure of information contained in the Medical Registry/database, the Trustees and/or Claims Administrator(s) shall assure that an alpha-numeric designation is used for each claimant and that the name, address, telephone number, social security number, e-mail address, and other personal identifying information pertaining to the Diet Drug Recipient and/or Class Member is not disclosed. g. PROCESSING CLAIMS FOR SCREENING PROGRAM BENEFITS FOR SUBCLASS 1(B) MEMBERS: (1) Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 1(b), the Trustees and/or Claims Administrator(s) shall certify that the Diet Drug Recipient is eligible for a Transthoracic Echocardiogram and associated interpretive physician visit in the Screening Program pursuant to Section IV.A.1.a. or Section IV.A.3.c of this Settlement Agreement and shall furnish to the Diet Drug Recipient the appropriate documentation and information to receive such benefits and will provide those benefits in accordance with the timetable set forth in Section VI.C.3.m, below. (2) Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 1(b) and which requests payment of the net cost of an Echocardiogram pursuant to Section IV.A.1.b, the Trustees and/or Claims Administrator(s) shall determine whether the Diet Drug Recipient is entitled to such payment, and if so, the amount of such payment. The Trustees and/or Claims Administrator(s) shall provide such payments in accordance with the timetable set forth in Section VI.C.3.m, below. If the Trustees and/or Claims Administrator(s) deny such a claim, they shall send the Diet Drug Recipient written notification of that decision and the reasons therefor within this forty-five (45) day period. h. PROCESSING CLAIMS FOR SCREENING PROGRAM BENEFITS FOR SUBCLASS 1(A) MEMBERS: (1) Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 1(a) and requests a Transthoracic Echocardiogram and associated interpretive physician visit pursuant to Section IV.A.2.b or Section IV.A.3.c of the Settlement Agreement, the Trustees and/or Claims Administrator(s) shall promptly transmit to each such person the BROWN FORM, appended to the Settlement Agreement as Exhibit "23." The BROWN FORM explains the circumstances under which such Diet Drug Recipients may receive a Transthoracic Echocardiogram and associated interpretive physician visit and allows them to make a request for that benefit by completing, signing and submitting the form, together with supporting documentation, to the Trustees and/or Claims Administrator(s). Within forty-five (45) days after receiving a completed BROWN FORM, the Trustees and/or Claims Administrator(s) shall make a determination concerning whether the Diet Drug Recipient will receive a Transthoracic Echocardiogram and associated interpretive physician visit and will either reject the request for such benefits or shall furnish to the Diet Drug Recipient the appropriate documentation and information to receive such benefits and will provide those benefits in accordance with the timetable set forth in Section VI.C.3.m, below. (2) Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 1(a) and which requests payment of the net cost of an Echocardiogram pursuant to Section IV.A.2.b.(2)., the Trustees and/or Claims Administrator(s) shall determine whether the Diet Drug Recipient is entitled to such payment, and if so, the amount of such payment. The Trustees and/or Claims Administrator(s) shall provide such payments in accordance with the timetable set forth in Section VI.C.3.m, below. If the Trustee(s) and/or Claims Administrator(s) deny such a claim, they shall send the Diet Drug Recipient written notification of that decision and the reasons therefor within this forty-five (45) day period. i. PROCESSING CLAIMS FOR ADDITIONAL MEDICAL SERVICES OR CASH FOR SUBCLASS 1(B) AND 2(B) MEMBERS: Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 2(b), or is a member of Subclass 1(b) and obtained an FDA Positive diagnosis by a Qualified Physician after Pondimin(R) and/or Redux(TM) use but by the end of the Screening Period, the Trustees and/or Claims Administrator(s) shall, in accordance with the Diet Drug Recipient's election, certify that the Diet Drug Recipient is entitled to either $6,000 in cash or $10,000 in valve-related medical services and shall either make payment to the Diet Drug Recipient or furnish to the Diet Drug Recipient the appropriate documentation and information to receive such valve-related services and will provide those benefits in accordance with the timetable set forth in Section VI.C.3.m, below. j. PROCESSING CLAIMS FOR ADDITIONAL MEDICAL SERVICES OR CASH FOR SUBCLASS 1(A) AND 2(A) MEMBERS: Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator(s) receive a completed Claim which adequately documents that a Diet Drug Recipient is a member of Subclass 2(a), or is a member of Subclass 1(a) and obtained an FDA Positive diagnosis by a Qualified Physician after Pondimin(R) and/or Redux(TM) use but by the end of the Screening Period, the Trustees and/or Claims Administrator(s) shall in accordance with the Diet Drug Recipient's election certify that the Diet Drug Recipient is entitled to $3,000 in cash or $5,000 in valve-related medical services and shall either make payment to the Diet Drug Recipient or furnish to the Diet Drug Recipient the appropriate documentation and information to receive such valve-related services and will provide those benefits in accordance with the timetable set forth in Section VI.C.3.m, below. k. PROCESSING CLAIMS FOR REFUNDS FOR SUBCLASS 1(A) AND 2(A) MEMBERS: Within forty-five (45) days of the date on which the Trustees and/or Claims Administrator receive a completed Claim which adequately documents that the Diet Drug Recipient is a member of Subclass 1(a) or 2(a) and which adequately documents the duration of his or her Diet Drug use for which a refund is sought, the Trustees and/or Claims Administrator(s) shall certify the amount of the refund to which that Diet Drug Recipient or the Representative Claimant for that Diet Drug Recipient is entitled and shall make payment to the Diet Recipient or Representative Claimant in accordance with the timetable set forth in Section VI.C.3.m, below. l. PROCESSING CLAIMS FOR REFUNDS FOR SUBCLASS 1(B) AND 2(B) MEMBERS: Within ninety (90) days after Date 2, the Trustees and/or Claims Administrator(s) shall determine, pursuant to Section IV.A.1.d, the amount, if any, of the refunds to which Diet Drug Recipients who are members of Subclasses 1(b) or 2(b) or the Representative Claimants for those Diet Drug Recipients are entitled. Within 45 days of such time, the Trustees and/or Claims Administrator shall pay all Diet Drug Recipients or Representative Claimants who have adequately documented membership in Subclasses 1(b) or 2(b), the refund amounts to which they are entitled, if any. In the event that it is determined that the Settlement Agreement will not receive Final Judicial Approval or in the event that the Settlement Agreement is terminated for any reason, the Trustees and/or Claims Administrator(s) shall determine within 90 days after the conclusion of the period for providing Echocardiograms and associated physician visits to Diet Drug Recipients who have elected the AIO whether there are sufficient assets to make refund payments to Subclass 1(b) or 2(b) members who have entered into Individual Agreements pursuant to the AIO. Within 45 days of making such determination, the Trustees and/or Claims Administrator(s) shall pay to all Diet Drug Recipients or Representative Claimants who have adequately documented membership in Subclass 1(b) or 2(b) and have entered into Individual Agreements pursuant to the AIO, the amounts to which they are entitled, if any. m. The timetable for the benefits described in Sections VI.C.3. g-k above shall be as follows: (1) For Class Members who have elected the AIO, such benefits cannot be provided until after the AIO Start Date; (2) For Class Members who qualify for benefits under Section IV.A.3.c, such benefits cannot be provided until after the Trial Court Approval Date; (3) For all other Class Members, such benefits cannot be provided until after the Final Judicial Approval Date. During the first full twelve (12) calendar months following the AIO Start Date, the time periods for the actions required within forty-five (45) days in Sections VI.C.3.g (1) and (2), Sections VI.C.3.h (1) and (2), Section VI.C.3.i, Section VI.C.3.j, Section VI.C.3.k, and Section VI.C.3.l, are extended to sixty (60) days. n. PROCESSING CLAIMS FOR REIMBURSEMENT FOR CERTAIN PRIVATELY-OBTAINED ECHOCARDIOGRAMS Within ninety (90) days after Date 2, the Trustees and/or Claims Administrator(s) shall determine whether a Diet Drug Recipient or Representative Claimant who has submitted a claim requesting reimbursement pursuant to Section IV.A.3.d is entitled to such reimbursement and, if so, the amount of reimbursement. Within 45 days of such time, the Trustees and/or Claims Administrators shall pay all such Class Members the reimbursement amounts to which they are entitled, if any, subject to the limitation of Section IV.A.3.d that said reimbursement benefits will be paid 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, except for the refund benefits described in Section IV.A.1.d hereof, which shall be subordinate to this reimbursement benefit. In the event that it is determined that the Settlement Agreement will not receive Final Judicial Approval or in the event that the Settlement Agreement is terminated for any reason, the Trustees and/or Claims Administrator(s) shall determine within 90 days after the conclusion of the period for providing Echocardiograms and associated physician visits to Diet Drug Recipients who have elected the AIO whether there are sufficient assets to make reimbursement payments pursuant to Section IV.A.3.d to Class Members who have entered into Individual Agreements pursuant to the AIO. Within 45 days of making such determination, the Trustees and/or Claims Administrator(s) shall pay to all such Class Members who have entered into Individual Agreements pursuant to the AIO, the reimbursement amounts to which they are entitled, if any. 4. ADMINISTRATION OF MATRIX COMPENSATION BENEFIT CLAIMS. a. To receive Matrix benefits, the Class Member must provide the Trustees and/or Claims Administrator(s) with appropriate documentation of the condition of the Diet Drug Recipient that forms the basis for the claim. As set forth in the "GREEN FORM," attached as Exhibit "22", such documentation shall include: (1) all hospital reports of the admitting history and physical examination of the Diet Drug Recipient, operative reports, pathology reports, Echocardiogram reports, cardiac catheterization reports, and discharge summaries which relate to the condition of the Diet Drug Recipient that forms the basis of the Claim; (2) a copy of the videotape or disk of the Echocardiogram results which, in whole or in part, forms the basis for the Claim for Matrix Compensation Benefits; (3) 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(R) and/or Redux(TM); (4) a declaration under penalty of perjury from a Board-Certified Cardiologist or Cardiothoracic Surgeon setting forth an opinion to a reasonable degree of medical certainty that (a) 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 Section IV.B.2.c.(5) either are or are not present; (b) to the best of such physician's knowledge after reasonable inquiry, such condition which qualifies the Class Member for a particular Matrix payment was not present prior to usage of Pondimin(R) and/or Redux(TM); and (c) all the conditions set forth in Section IV.B.2.d. which determine whether Matrix A-1 or B-1 is applicable, either are present or are not present; (5) a declaration under penalty of perjury from a Board-Certified Cardiologist, Cardiothoracic Surgeon, Neurologist or Neurosurgeon with regard to the functional outcome which the patient has had six months after a stroke, if applicable; (6) a declaration under penalty of perjury from a Board-Certified Cardiologist, Cardiothoracic Surgeon or Pathologist regarding the existence of the pathological criteria for Endocardial Fibrosis defined in Section I.21, if applicable; (7) any other documentation which the Trustees and/or Claims Administrator(s) are otherwise authorized to request under this Settlement Agreement; and (8) for an Echocardiogram that took place outside of the Screening Program, and if not previously submitted in a GREEN FORM, a certification from a Qualified Physician on the GRAY FORM which is appended to the Settlement Agreement as Exhibit "20" that the Diet Drug Recipient met the criteria for having FDA Positive regurgitation as defined in Section I.22 or Mild Mitral Regurgitation as defined in Section I.38 prior to the end of the Screening Period. The records and information described in (1) through (8), inclusive, together with, if applicable, the information described in Section VI.C.4.b below, are referred to as the "Medical Information." Subject to the provisions of Section VI.C.4.b, a Claim for Matrix Compensation Benefits shall not be considered completed within the meaning of Section VI.C.2 and Section VI.C.4 and ready for determination until the Trustees and/or Claims Administrator(s) have received, either from the Class Member or the healthcare provider or applicable records custodian, all Medical Information and a properly and fully completed GREEN FORM (and GRAY FORM, if applicable) relating to such Claim. b. 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 including but not limited to declarations of other Qualified Physician(s) under penalty of perjury setting forth opinion(s) to a reasonable degree of medical certainty to support the claim that the Class Member's condition entitles him or her to a Matrix payment, subject to review by the Court as set forth in Section VIII.D. If this evidence establishes the Class Member's condition to the satisfaction of the Trustees and/or Claims Administrator(s), the Class Member shall be entitled to receive the appropriate Matrix Compensation Benefits. c. Upon receiving a claim for Matrix Compensation Benefits, the Trustees and/or Claims Administrator(s) shall obtain the following information from the Class Member: (1) A copy of any fee agreement between the Class Member and the attorney representing that Class Member which shall be submitted and maintained in confidence; (2) A verified statement of the out-of-pocket costs incurred by the Class Member's individual attorney, which shall be submitted and maintained in confidence; (3) A written representation by the Class Member or the Class Member's attorney, made subject to penalties of perjury, as to whether or not a subrogation lien or claim has been asserted with respect to the Class Member's right to receive benefits under the Settlement and, if so, the name of the subrogee; and (4) If the Class Member is a Representative Claimant, such court approvals or authorizations as may be necessary to authorize that person to consummate a Settlement in a representative capacity. Until the submission of all of the information referred to in Section VI.C.2, a Claim for Matrix Compensation Benefits shall not be considered "completed" and ready for determination. d. Subject to the audit provisions of this Settlement Agreement, Section VI.E and Section VI.F, the Trustees and/or Claims Administrator(s) shall make Matrix Benefits Determinations based upon the Medical Information provided to them by an appropriate Board-Certified physician on or with a properly and fully completed GREEN FORM. In making Matrix Benefits Determinations, if the Trustees and/or Claims Administrator(s) determine any inconsistency in the information provided in a Claim Form, the Trustees and/or Claims Administrator(s) shall review the Medical Information relating to such Claim to determine if the Medical Information resolves such inconsistency. e. No earlier than thirty (30) days after AHP receives access to the documents provided to AHP by the Trustees and/or Claims Administrator(s) pursuant to Section VI.F.1, and no later than sixty (60) days after receiving a completed Claim for Matrix Compensation Benefits, the Trustees and/or Claims Administrator(s) shall make a tentative determination: (1) As to whether the Class Member(s) is entitled to compensation under the Matrices, and if so, the amount of compensation to which the individual is entitled, including an apportionment among Derivative and Representative Claimants to the extent necessary; (2) The amount of counsel fees to which the attorney representing the Class Member is entitled, making the appropriate deduction of 9% to account for the fees paid to Class Counsel as required by Section VIII.E.1.b or Section VIII.E.3 of this Agreement, whichever is applicable; (3) The amount of reasonable out-of-pocket expenditures which should be reimbursed to the individual attorney representing the Class Member; (4) The amount to which any subrogee is entitled in accordance with the provisions of Section VII.D.2 hereof; and (5) The net amount to which the Class Member is entitled after making appropriate deductions for counsel fees, reimbursement of litigation expenses, and payment of all appropriate subrogation liens. f. Immediately upon making the determination required by the preceding paragraph, the Trustees and/or Claims Administrator(s) shall notify the Class Members; the attorneys for the Class Members, if any; and the subrogrees if any, of the determination and provide them with a period of thirty (30) days in which to contest the tentative determination by the Trustees and/or Claims Administrator(s), and to provide additional information concerning the level of Matrix Compensation Benefits which should be paid as well as the distribution and apportionment of those benefits. At the same time as this notice, the Trustees and/or Claims Administrators shall also notify AHP of the determination required by the preceding paragraph. g. Within sixty (60) days of receiving any explanatory or supporting information pursuant to the preceding paragraph or within ninety (90) days of receiving a completed Claim for Matrix Compensation Benefits, whichever is later, the Trustees and/or Claims Administrator(s) shall make a final determination: (1) As to whether the Class Member is entitled to compensation under the Matrices, and, if so, the amount of compensation to which the Class Member is entitled, including an apportionment among Derivative and Representative Claimants to the extent necessary; (2) The amount of counsel fees to which the attorney representing the Class Member is entitled, making the appropriate deduction of 9% to account for the fees paid to Class Counsel as required by Section VIII.E.3 or Section VIII.E.1.b of this Agreement, whichever is applicable; (3) The amount of reasonable out-of-pocket expenditures which should be reimbursed to the individual attorney representing the Class Member; (4) The amount to which any subrogee is entitled in accordance with the provisions in Section VII.D hereof; and (5) The net amount to which the Class Member is entitled after making appropriate deductions for counsel fees, reimbursement of litigation expenses, and payment of all appropriate subrogation liens. At the same time as notice is given to the affected Class Member(s), attorney(s), and/or subrogees of the final determination under Section VI.C.4.g, the Trustees and/or Claims Administrators shall also notify AHP of such final determination. During the first full twelve (12) calendar months following the AIO Start Date, the Trustees and/or Claims Administrator(s) shall make this final determination within sixty (60) days of receiving any explanatory or supporting information pursuant to Section VI.C.4.f above or within 105 days of receiving a completed Claim for Matrix Compensation Benefits, whichever is later, rather than the sixty and ninety day periods stated above. h. Within fifteen (15) days of receiving notice of the Trustees/Claims Administrators' final determination, the affected Class Member(s), attorney(s), and/or subrogee(s) may appeal the determination by filing a Notice of Appeal in the form appended hereto as Exhibit "24" with the Trial Court and serving a copy on the Trustees and/or Claims Administrator(s). i. In the event of such an appeal, the Court shall refer the matter to Arbitration by a single Arbitrator appointed by the Court from a panel of arbitrators appointed by the Court for that purpose. With respect to an appeal by a Class Member relating to the determination of the gross amount of Matrix Compensation Benefits to which the Class Member is entitled, the Arbitrator shall determine whether the Trustees and/or Claims Administrator(s) have properly applied the criteria set forth in the Settlement Agreement to the information submitted by the Class Member in support of the claim and shall enter a report and award which either affirms the decision of the Trustees and/or Claims Administrator(s) or directs a different payment than that which was determined by the Trustees and/or Claims Administrator(s). With respect to an appeal relating to the distribution of counsel fees and costs, the Arbitrator shall determine the amount of the attorneys fees to which the attorney is entitled under the provisions of the applicable state law after deducting 9% as required by Section VIII.E.1.b of this Agreement and the extent to which the attorney should receive reimbursement for out-of-pocket costs from the Class Member's recovery under applicable state law. In the case of an appeal relating to a subrogation issue, the Arbitrator shall determine the amount to which the subrogee is entitled to under applicable law to consistent with the provisions of Section VII.D.2 of this Agreement. The costs of such Arbitration, including the fees of the Arbitrator, shall be taxed by the Arbitrator in favor of the party who substantially prevails in the Arbitration if the Arbitrator finds that the appeal was taken or maintained in violation of the standards set forth in Fed.R.Civ.P.11(b). Otherwise, the costs of such Arbitration shall be paid by the Trust. Any party may appeal from the report and award of the Arbitrator to the Court. j. If there is no appeal initiating an Arbitration process, then the decision of the Trustees and/or Claims Administrator(s) with respect to the gross amount to be paid on account of a Claim for Matrix Compensation Benefits shall be final, unless there is a documented change in the physical condition of the Diet Drug Recipient after submission of the claim which justifies consideration for a greater level of Matrix Compensation Benefits than previously applied for or justifies consideration for payment at the same level as previously applied for by reason of a different physical condition than that which was the subject of the prior Claim for Benefits by the Class Member. k. If there is no appeal initiating an Arbitration process, then the decision of the Trustees and/or Claims Administrator(s) with respect to the distribution of any portion of any amount paid on account of a Claim for Matrix Compensation Benefits to any attorney or subrogee shall be final. l. If an appeal initiating arbitration is taken, the decision of the Arbitrator or, if an appeal from the report and award of the Arbitrator is taken, the decision of the Court shall be final and binding with respect to: (a) The gross amount to be paid on account of a Claim for Matrix Compensation Benefits unless there is a documented change in the physical condition of the Diet Drug Recipient after the submission of the claim which justifies consideration for a greater level of Matrix Compensation Benefits than that previously applied for or for payment at the same level as previously applied for by reason of a different physical condition than that which was the subject of the prior Claim for Benefits by the Class Member; and (b) the distribution of any portion of the gross amount to be paid for Matrix Compensation Benefits to any attorney or subrogee for attorneys' fees, reimbursement of litigation expenses, or subrogation claims. m. Within forty-five (45) days after the end of each calendar quarter or AIO Fiscal Quarter, whichever is applicable, after the AIO Start Date and prior to Final Judicial Approval, the Trustees and/or Claims Administrator(s) shall pay the Matrix Compensation Benefit claims of all Class Members who: (1) have completed Claims for Matrix Compensation Benefits during the period prior to the commencement of the above-referenced calendar quarter or AIO Fiscal Quarter, whichever is applicable, which have not been previously paid; and (2) have executed Individual Agreements pursuant to the AIO; and (3) whose rights to Matrix Compensation Benefits have become final during the above-referenced calendar quarter or AIO Fiscal Quarter, whichever is applicable under this Section and are not then the subject of an audit under the terms of the Settlement Agreement. In distributing the amount due with respect to a claim for Matrix Compensation Benefits, the Trustees and/or Settlement Administrator(s) shall pay all sums due to the individual attorney for the Class Member for payment of counsel fees and reimbursement of litigation expenses, and all sums due to any subrogee as determined by the above procedures. The net amount remaining after deducting such payments from the gross amount of the Matrix Compensation Benefits to which a Class Member is determined to be entitled, shall be distributed to the Class Member. n. Upon Final Judicial Approval, the preceding paragraph will cease to be effective and the following schedule will apply to the payment of all claims for Matrix Compensation Benefits. Within 45 days after the close of each Fiscal Quarter, the Trustees and/or Claims Administrator(s) shall pay all Claims for the Matrix Compensation Benefits of all Class Members who: (1) have completed Claims for Matrix Compensation Benefits during the period prior to the commencement of the above- referenced 45-day time period which have not been previously paid; and (2) whose rights to Matrix Compensation Benefits have become final during the above-referenced Fiscal Quarter under Section VI.C.5, and are not then the subject of an audit under the terms of the Settlement Agreement. In distributing the amount due with respect to a claim for Matrix Compensation Benefits, the Trustees and/or Settlement Administrator(s) shall pay all sums due to the individual attorney for the Class Member for payment of counsel fees and reimbursement of litigation expenses, and all sums due to any subrogee as determined by the above procedures. The net amount remaining after deducting such payments from the gross amount of the Matrix Compensation Benefits to which a Class Member is determined to be entitled, shall be distributed to the Class Member. o. The payment obligations in paragraphs (m) and (n) above are subject to the provisions of Section III.C. 5. Beginning on the Preliminary Approval Date, the Trustees and/or Claims Administrators shall take the steps reasonably necessary to receive and process Claims for Benefits according to the terms of this Agreement, but the time periods provided in Section VI.C for the processing of Claims by Class Members and for any actions by the Trustees and/or Claims Administrator(s) relating to such Claims shall not apply to any Claim until the later of September 30, 2000, or the AIO Start Date. Further, such time periods shall not apply to the Claims of Class Members who have submitted BLUE FORMS until the earlier of the Final Judicial Approval Date or February 1, 2001; provided, however, that the Trustees and/or Claims Administrator(s) shall have the authority to process the Claims of Class Members who have submitted BLUE FORMS before such time if warranted to achieve cost savings in the processing of Claims. At any time, the Court may extend any time period in Section VI.C for good cause shown upon application by the Parties, Trustees, Claims Administrator(s), and/or Interim Claims Administrators, after notice to AHP and Class Counsel. D. PROCEDURE FOR RECOGNITION OF CREDITS. 1. AHP shall receive Credits in accordance with Section VII.A of this Settlement Agreement pursuant to the following procedure: a. With respect to each Class Member who has opted out of the Settlement and who has received a payment from AHP for which AHP seeks a Credit under Section VII.A (a "Request for Credit"), AHP shall supply the Trustees and/or Claims Administrator(s) with the following documents and information: (1) a copy of the form through which the Class Member(s) exercised an Opt-Out right; (2) a copy of the report of the Echocardiogram, if any, showing the degree of mitral and/or aortic valvular regurgitation in the Diet Drug Recipient whose condition is at issue prior to September 30, 1999 and/or as of the close of the Screening Period; (3) a copy of the check(s) evidencing payment or other evidence of payment to the Class Member(s) for which AHP seeks credit; (4) a copy of the release(s) executed by the Class Member(s) in favor of AHP; (5) a "RED FORM" for an Initial or Back-End Opt-Out which is appended to this Settlement Agreement as Exhibit "25" completed and signed subject to penalties of perjury by a knowledgeable representative of AHP and a Board-Certified Cardiologist or Board-Certified Cardiothoracic Surgeon; (6) all hospital reports of the admitting history and physical examination of the Diet Drug Recipient, medical histories, operative reports, pathology reports, Echocardiogram reports, cardiac catheterization reports and discharge summaries which relate to the condition of the Diet Drug Recipient that forms the basis of the Request for Credit; (7) a copy of the videotape or disk of the Echocardiogram results which, in whole or in part, form the basis for the Request for Credit; (8) a declaration under penalty of perjury from a Board-Certified Cardiologist or Cardiothoracic Surgeon, regardless of whether that Cardiologist was originally retained by AHP, the plaintiff or neither, setting forth an opinion to a reasonable degree of medical certainty that (1) 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, either are or are not present; (2) to the best of such physician's knowledge after reasonable inquiry, such condition which would otherwise qualify the Class Member for a particular Matrix payment was not present prior to usage of Pondimin(R) and/or Redux(TM); and (3) all the conditions which determine whether Matrix A-1 or B-1 are applicable, either are present or are not present; (9) a declaration under penalty of perjury from a Board-Certified Cardiologist, Cardiothoracic Surgeon, Neurologist or Neurosurgeon with regard to the functional outcome which the patient has had six months after a stroke, if applicable; (10) a declaration under penalty of perjury from a Board-Certified Cardiologist, Cardiothoracic Surgeon, or Pathologist regarding the existence of the pathological criteria for Endocardial Fibrosis defined in Section I.21 if applicable; and, (11) any other documentation which the Trustees and/or Claims Administrators(s) are otherwise authorized to request under this Settlement Agreement. The records and information described in (1) through (11), inclusive, and/or the information described in Section VI.D.1.b. below are referred to as the "Credit Information." Subject to the provisions of Section VI.D.1.b, a Request for Credit shall not be considered completed within the meaning of Section VI.D.1.c. and ready for determination until the Trustees and/or Claims Administrator(s) have received all Credit Information and a properly and fully completed RED FORM relating to such Request for Credit. b. If AHP is unable to obtain the documentation described above through the exercise of reasonable efforts, the Trustees and/or Claims Administrator(s) shall have the right to consider other supporting documentation including but not limited to declaration(s) of other Qualified Physician(s) under penalty of perjury setting forth opinion(s) to a reasonable degree of medical certainty to support the claim that the Class Members' condition would have otherwise entitled him or her to a Matrix payment for which AHP would be entitled to a Credit, subject to review by the Court as set forth in Section VI.D.1.g. If this evidence establishes the Class Member's condition to the satisfaction of the Trustees and/or Claims Administrator(s), AHP shall be entitled to receive the appropriate credit. c. Within forty-five (45) days of receiving a completed Request for Credit from AHP, the Trustees and/or Claims Administrator(s) shall make a preliminary determination as to whether AHP is entitled to a Credit, and, if so, the amount of the Credit to which AHP is entitled, and shall advise AHP and Class Counsel, in writing, of this determination. d. AHP and Class Counsel shall have forty-five (45) days from the date of receiving such a preliminary determination to submit additional information concerning the question of whether and to what extent a Credit should be given to AHP. e. Within sixty (60) days of receiving any additional information which is submitted pursuant to the preceding paragraph or within ninety (90) days of receiving a completed Request for Credit from AHP, whichever is later, the Trustees and/or Claims Administrators shall make a final determination as to whether AHP is entitled to a Credit and, if so, the amount of Credit to which AHP is entitled, and shall advise AHP and Class Counsel in writing of this determination. f. Within fifteen (15) days of receiving notice of the Trustees' determination, AHP may appeal the determination by filing a notice of the appeal in the form appended hereto as Exhibit "24" with the Trial Court and serving a copy on Class Counsel, and the Trustees and/or Claims Administrator(s). g. In the event of such an appeal, the Court shall refer the matter to Arbitration by a single Arbitrator appointed by the Court for that purpose. The Arbitrator shall determine whether the Trustees have properly applied the criteria set forth in the Settlement Agreement to the information supplied by AHP in support of the Request for Credit and shall enter a report and award, which either affirms the decision of the Trustees, directs a different Credit than that which was determined by the Trustees, or directs that no Credit shall be given to AHP. If the Arbitrator affirms the decision of the Trustees or awards a lower Credit than had been awarded by the Trustees and finds that the appeal was taken or maintained by AHP in violation of the standards set forth in Fed.R.Civ.P. 11(b), the cost of this Arbitration shall be borne by AHP. Otherwise, the costs of such Arbitration shall be paid by the Trust. Any party may appeal from the report and award of the Arbitrator to the Court. h. If there is no appeal initiating an Arbitration process, then the decision of the Trustees with respect to a claim for a Credit shall be final. If an appeal initiating Arbitration is taken, the decision of the Arbitrator or, if an appeal from the report and award of the Arbitrator is taken, the decision of the Court, shall be final and binding. 2. Beginning on the Preliminary Approval Date, the Trustees and/or Claims Administrators shall take the steps reasonably necessary to receive and process Requests for Credits according to the terms of this Agreement, but the time periods provided in Section VI.D for the processing of Requests for Credits by AHP and for any actions by AHP and the Trustees and/or Claims Administrators(s) relating to such Requests for Credits shall not apply until the later of September 30, 2000, or the AIO Start Date. At any time, the Court may extend any time period in Section VI.D for good cause shown upon application by the Parties, Trustees, Claims Administrator(s), and/or Interim Claims Administrators, after notice to AHP and Class Counsel. E. AUDITS OF CLAIMS BY TRUSTEES AND/OR CLAIMS ADMINISTRATOR(S) 1. After the AIO Start Date, on a quarterly basis the Trustees and/or Claims Administrator(s) shall audit five percent (5%) of the total Claims for Matrix Compensation Benefits completed (within the meaning of Section VI.C.2 and Section VI.C.4) by Class Members during the prior quarter, and ten percent (10%) of the total Requests for Credits made by AHP during the prior quarter. Claims for Matrix Compensation Benefits and Requests for Credits shall be selected for audit pursuant to this Section of the Settlement Agreement as follows: a. The Trustees and/or Claims Administrator(s) shall retain one or more Board-Certified Cardiologists, who have successfully completed level three training in echocardiography, for purposes of reviewing claims for Matrix Compensation Benefits made by Class Members and Requests for Credits made by AHP (hereinafter "the Reviewing Cardiologist"). The Reviewing Cardiologist shall review a total of ten percent (10%) of the total Claims for Matrix Compensation Benefits completed (within the meaning of Section VI.C.2 and Section VI.C.4) by Class Members during the prior quarter, and ten percent (10%) of the total Requests for Credits made by AHP during the prior quarter. This review shall consist of a comparison between the Medical Information and the information on the GREEN FORM submitted by a Class Member (in the case of a Claim for Matrix Compensation Benefits) or a comparison between the Credit Information and the information on the RED FORM submitted by AHP (in the case of a Request for Credit) for purposes of determining whether there is a material discrepancy between the Medical or Credit Information submitted in connection with a Claim or Request for Credit and the information on the GREEN FORM submitted by a Class Member or the RED FORM submitted by AHP. In the event that the Reviewing Cardiologist determines that there is such a material discrepancy, then the Claim or Request for Credit shall be referred for audit pursuant to this section of the Settlement Agreement. b. In addition to the procedure provided in Section VI.E.1.a, the Trustees and/or Claims Administrator(s) shall select additional Claims for Matrix Compensation Benefits by Class Members and Requests for Credits by AHP during the prior quarter for audit pursuant to an audit plan which shall take into account, among other things: (1) The fact that certain Class Members are represented by attorneys who represent what the Trustees and/or Claims Administrator(s) determine to be a disproportionate number of Class Members; (2) The fact that certain Class Members or AHP rely on the certifications of doctors who have provided certifications for what the Trustees and/or Claims Administrator(s) determine to be a disproportionate number of Class Members or Requests for Credits; and (3) The need to incorporate random sampling into the Audit Plan; provided however, that under this Section VI.E.1.b and Section VI.E.1.a combined the Trustees shall not audit more than five percent (5%) of the total Claims for Matrix Compensation Benefits completed by Class Members during the prior quarter and ten percent (10%) of the total Request for Credits made by AHP during the prior quarter, subject to the provisions of Section VI.F. 2. A Claim may not be paid and a Credit may not be allowed while that Claim or Credit is subject of an audit or a request for an audit. If a Claim of a Diet Drug Recipient or Representative Claimant is subject to audit or a request for audit, then the Claims of all Derivative Claimant(s) based on that Claim shall also be subject to the audit or audit request, but shall not be considered as part of the percentage of Claims to be audited by the Trustees and/or Claims Administrator(s) in that quarter. 3. With respect to Claims which are selected for audit, the Trustees and/or Claims Administrator(s) may require that the Class Member(s) provide them with the following information as a condition to consideration of the Claim: a. Identification of all general practitioners, family physicians, primary care providers, internists or sub-specialists in internal medicine, surgeons or sub-specialists in surgery, and obstetricians or gynecologists who, at any time during the 10-year period prior to the filing of the Claim subject to audit, rendered any medical care to and/or were consulted by the Diet Drug Recipient whose Claim forms the basis of the Claim subject to audit; b. Fully completed and executed authorizations which will allow the Trustees and/or Claims Administrator(s) to obtain copies of the Class Member's medical records; and c. Such other relevant documents or information within the Class Member's custody, possession, or control as may reasonably be requested by the Trustees and/or Claims Administrator(s). If the Class Member unreasonably fails or refuses to provide any material documents or information after being afforded an adequate opportunity to do so, the Class Member's Claim shall be denied. 4. With respect to requests for Credit which are selected for audit, the Trustees and/or Claims Administrator(s) may require that AHP provide them with the following information as a condition to consideration of a Request for Credit: a. All medical records relating to the Diet Drug Recipient whose condition is the subject of the Request for Credit, which are in the custody, possession, or control of AHP and its counsel; b. All depositions, interrogatories, fact sheets, and like documents relating to the condition and circumstances of the Diet Drug Recipient whose condition is the subject of the Request for Credit, which are in the custody, possession or control of AHP and its counsel; c. Such other relevant documents or information within AHP's or its counsel's custody, possession or control as may reasonably be requested by the Trustees and/or Claims Administrator(s). 5. If AHP unreasonably fails or refuses to provide any material documents or information after being afforded an opportunity to do so, its Request for Credit shall be denied. 6. In conducting an audit of those Claims and Requests for Credit selected for audit, the Trustees and/or Claims Administrator(s) shall follow the following procedure: All Accelerated Implementation Option acceptance form(s) ("PINK FORM"), registration form(s) ("BLUE FORM"), videotapes or disks of Echocardiograms, medical reports, and other information submitted by AHP in support of a Request for Credit or by a Class Member in support of a Claim, together with a copy of the claimant's medical records, and Echocardiogram videotapes or disks obtained by the Trustees/Claims Administrator(s) shall be forwarded to a highly- qualified, independent, Board-Certified Cardiologist (hereinafter referred to as the "Auditing Cardiologist") selected by the Trustees/Claims Administrator(s). After thoroughly reviewing these materials, the Auditing Cardiologist shall make a determination as to whether or not there was a reasonable medical basis for the representations made by any physician in support of the Claim or Request for Credit. 7. If the Auditing Cardiologist makes the determination that there was a reasonable medical basis to support the Class Member's Claim or AHP's Request for Credit and if there is no substantial evidence that the Class Member or AHP intentionally made a material misrepresentation of fact in connection with a Claim or a Request for Credit, then the Claim or Credit shall be allowed. If, on the other hand, the Auditing Cardiologist makes the determination that there was no reasonable medical basis to support any of the material representations made by any physician in support of the Class Member's Claim or AHP's Request for Credit, or if the Trustees and/or Claims Administrator(s) determine that the Class Member or AHP intentionally made a material misrepresentation of fact, the Trustees and/or Claims Administrator(s) shall not pay the Claim or allow the Credit and shall apply to the Court for an order to show cause why the Claim should be paid or the Credit should be allowed, and for an order to show cause as to why other Claims or Credits involving the same attorney and/or physician should not be subject to an audit. 8. If the Court determines that there was no reasonable medical basis to support a material representation made by a physician in support of a Claim or Request for Credit or that the Class Member or AHP intentionally made a material misrepresentation of fact in connection with Claim or Request for Credit, after the entry of a show cause order and a hearing pursuant to the preceding paragraph, the Court may grant such relief as may be appropriate, including any of the following: a. an order disallowing the Claim or Credit; b. an order directing an additional audit of other Claims or credits involving the same attorneys and/or physicians who were involved in the Claim or Request for Credit which was the subject of the show cause order; c. an order directing such other additional audits as may be appropriate in light of the Court's findings; d. an order imposing penalties including the payment of the Trustees' and/or Claims Administrators' costs and attorneys' fees to the extent permitted by law; and/or e. an order making a referral of the matter to the United States Attorney or other appropriate law enforcement officials for possible criminal prosecution if there is probable cause to believe that the Claim was submitted fraudulently. For good cause shown, including without limitation the results of audits conducted on any one or more Claims, groups of Claims, and/or requests for Credits made by AHP, the Court at any time, upon its own motion after notice to AHP and Class Counsel, or upon motion by any party and after such notice and hearing as the Court may direct, may order the Trustees and/or Claims Administrators to perform such additional audits and/or adopt such additional claims administration procedures as the Court deems appropriate. F. AHP-INITIATED AUDITS OF CLAIMS 1. AHP may have access to all Claim Forms for Fund A or Fund B benefits submitted to the Trustees and/or Claims Administrator(s) and to all medical records, videotapes or disks of Echocardiograms, forms submitted by Class Members, pharmacy records and all other documents submitted by Class Members in support of their Claims, upon reasonable request to the Trustees. Access to such documents shall be provided to AHP by the Trustees and/or Claim Administrator(s) no later than five (5) days after a Claim is completed (within the meaning of Section VI.C.2 and Section VI.C.4). 2. AHP shall have no right to participate in the claims determination process for a particular Class Member as described in Section VI.C above; provided, however, that AHP shall have the right to submit particular Claims or groups of Claims to the Trustees and/or Claims Administrator(s) for audit, up to a total per quarter of 10% of the total Claims for Matrix Compensation Benefits and 10% of the total claims for Fund A Benefits completed by Class Members during the prior quarter. Along with such submissions, AHP shall identify to or provide the Trustees and/or Claims Administrator(s) information or documentation in its possession that it believes establishes either that there was no reasonable medical basis to support the Class Member's Claim or that the Class Member made a material misrepresentation of fact in connection with a Claim. 3. The Trustees and/or Claims Administrator(s) shall audit all Claims properly submitted by AHP for audit under Section VI.F.2 above in a particular quarter. Such Claims shall be in addition to and different from the 5% of Claims audited by the Trustees and/or Claims Administrators per quarter pursuant to Section VI.E.1. Should any of the Claims submitted for audit by AHP include those selected by the Trustees and/or Claims Administrators for audit in the same quarter, then the Trustees and/or Claims Administrators shall select other Claims for audit to ensure their audit of 5% of Claims per quarter as required by Section VI.E.1 in addition to the Claims submitted by AHP for audit. 4. If Class Counsel or AHP has a good faith belief that an Auditing Cardiologist employed by the Trustees has failed to perform his/her duties in accordance with accepted standards of medical practice, they may apply to the Court for appropriate relief, including an order disqualifying the Auditing Cardiololgist from any further participation in any audits and requiring a re-audit of those Claims or Requests for Credit for which the Auditing Cardiologist made a determination. 5. In connection with any audit initiated by AHP under Section VI.F.2, AHP shall have the right to obtain, at its expense, an independent Transthoracic Echocardiogram of a Diet Drug Recipient who has made a claim for Matrix Benefits under the following circumstances: a. where AHP presents evidence to the Trustees and/or Claims Administrator(s) that the center or physician from which the Echocardiogram was obtained has a disproportionate number of FDA Positive or Matrix-Level Claims; or b. where AHP submits a certification from a Board-Certified Cardiologist under penalty of perjury that the report of the Echocardiogram and/or the videotape or disk deviate materially from accepted standards of practice in the fields of Cardiology or Echocardiography; or c. where AHP submits to the Trustees and/or Claims Administrator(s) evidence that the Class Member or any physician making representations in support of a Class Member's Claim made material misrepresentations of fact; or d. where AHP submits a certification from a Board-Certified Cardiologist under penalty of perjury that the videotape or disk of the Echocardiogram cannot properly be read for any reason, including, but not limited to, poor quality, or improper setting. 6. Independent AHP Echocardiograms conducted pursuant to Section VI.F.5 above, shall be subject to the following conditions: a. the affected Class Member will be afforded at least ninety (90) days within which to schedule the Echocardiogram at a time convenient to the Class Member; b. the Echocardiogram shall take place not more than twenty-five (25) miles from the Class Member's place of residence unless AHP provides transportation, but, in no event, more than 100 miles; c. AHP shall pay for the Echocardiogram; d. Echocardiogram shall be conducted pursuant to the procedures set forth in Section I.54. e. a report of the Echocardiogram together with a copy of the videotape and/or disk of the Echocardiogram results shall be submitted to the Trustees and/or Claims Administrator(s) and to the Diet Drug Recipient who was the subject of the Echocardiogram. If the results of the report of the Independent AHP Echocardiogram obtained by AHP pursuant to this paragraph differ materially and significantly from the results or report of the Echocardiogram submitted by the Class Member in support of the Class Member's Claim for Benefits, then the Trustees and/or Claims Administrator(s) may in their discretion take the results into consideration in connection with their audit. VII. AHP RIGHTS AND BENEFITS A. CREDITS 1. If a Class Member timely and properly exercises an Initial or Back-End Opt-Out right pursuant to Section IV.D.2 or Section IV.D.4 hereof, asserts a claim and obtains any payment from AHP as a result of such claim (whether pursuant to a pre-Judgment or post-Judgment settlement of such claim or pursuant to a judgment on such claim), AHP shall receive Credits against its Fund B obligations to the extent set forth in this Section VII.A ("Credits"). 2. With respect to an Initial Opt-Out, if (a) a Diet Drug Recipient (or his or her Representative Claimants) timely and properly opts out of this Settlement as an Initial Opt-Out during the Initial Opt-Out Period and the Diet Drug Recipient has a Matrix-Level Condition at the time of such Initial Opt-Out or payment by AHP, and/or (b) a Derivative Claimant of such Diet Drug Recipient is deemed to have opted out of this Settlement pursuant to Section IV.D.2, then AHP shall receive a Full Credit with respect to any amounts paid by AHP to such Diet Drug Recipient (or his or her Representative Claimants) and/or to the Derivative Claimant ("Initial Opt-Out Credits"), regardless of whether such payments were made pursuant to a Judgment or pre-Judgment or post-Judgment settlement, subject to the following: a. Initial Opt-Out Credits shall not exceed the sum of $300,000,000, in the aggregate. b. Initial Opt-Out Credits shall be applied to reduce the Adjusted Maximum Available Fund B Amount upon the later of: (i) the date that is five calendar years after the Final Judicial Approval Date; or (ii) the date on which the determination of the Initial Opt-Out Credit becomes final under Section VI.D.1. c. Even though the application of Initial Opt-Out Credits to reduce the Adjusted Maximum Available Fund B Amount is deferred pursuant to Section VII.A.2.b above, there shall be no accretions on Initial Opt-Out Credits (or any other Credits due AHP) under this Agreement. 3. With respect to a Back-End Opt-Out, if (a) a Diet Drug Recipient (or his or her Representative Claimants) timely and properly exercises a Back-End Opt-Out under this Agreement, and the Diet Drug Recipient has a Matrix-Level Condition at the time of the exercise of such Back-End Opt-Out, and/or (b) a Derivative Claimant of such Diet Drug Recipient is deemed to have opted out of this Agreement pursuant to Section IV.D.4 or otherwise, then AHP shall receive a Full Credit ("Back-End Opt-Out Credit") with respect to any amounts paid by AHP to such Diet Drug Recipient (or his or her Representative Claimants) and/or to the Derivative Claimant, regardless of whether such payments were made pursuant to a Judgment or pre-Judgment or post-Judgment settlement. Back-End Opt-Out Credits shall be applied to reduce the Adjusted Maximum Available Fund B Amount as of the date on which the determination of the Back-End Opt-Out Credit becomes final under Section VI.D.1. 4. For purposes of this Section VII.A: "Judgment" shall mean any decision by a court of law or any other authorized tribunal. "Full Credit" shall mean a Credit in the amount of the lesser of: (a) the amount of payment to the Diet Drug Recipient (or his or her Representative Claimant) and/or Derivative Claimant; or (b) the Matrix payment for which such Diet Drug Recipient (or his or her representative Claimant) and/or Derivative Claimant would have qualified (as determined at the time such individual opted out of this Agreement or at the time of payment of such amount, whichever is higher), less Common Benefit Attorney's fees (such fees not to exceed nine percent (9%) of such Matrix payment). "Back-End Opt-Out" includes any Class Member who has exercised or purported to exercise any opt-out right under the terms of this Agreement where: (i) the opt-out right was exercised after the end of the Initial Opt-Out Period; (ii) the relevant Diet Drug Recipient was first diagnosed with a Matrix-Level Condition after September 30, 1999, and before the Matrix Payment Cut-Off Date; and (iii) the Class Member meets the eligibility criteria for a Back-End Opt-Out under Section IV.D.4.a of this Agreement, regardless of the manner in which the Class Member characterized the opt-out. 5. In order to qualify for any of these Credits, AHP must provide the Trustees and/or Claims Administrator(s) with the appropriate Credit Information described in Section VI.D.1.a above. B. EFFECT ON CLAIMS 1. Effective upon Final Judicial Approval, every Settled Claim of each Class Member against AHP or any other Released Party shall be conclusively compromised, settled and released, and each such Class Member shall be barred from initiating, asserting or prosecuting any Settled Claim against AHP or any other Released Party, except to the extent permitted by this Settlement Agreement for any Class Member who has timely and properly exercised any applicable opt-out right. 2. To confirm the provisions set forth in Section VII.B.1, above, within five days after Final Judicial Approval, the Class Representatives, individually and on behalf of the Settlement Class and all of the Subclasses, shall deliver to AHP a fully executed Release and Covenant Not to Sue in the form attached as Exhibit "27" . 3. Each Class Member shall be required to execute an individual Release and Covenant Not to Sue as part of the forms required to be submitted by Class Members in order to seek to participate in the benefits of the Settlement. Such individual releases shall become ineffective, null and void in the event that the Settlement fails to obtain Final Judicial Approval or in the event that AHP terminates this Agreement for any reason, other than as to persons entering into AIO Individual Agreements. Such individual releases shall furthermore be ineffective, null and void as to all Settled Claims except those set forth in I.53(e) and (g) above, with respect to any Class Member who timely and properly exercises any applicable opt-out right granted by this Agreement subsequent to the execution of the releases. 4. 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 Section I.46. 5. 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. 6. The forms of release necessary to effectuate this Settlement and the Accelerated Implementation Option set forth in Section V are set forth in the PINK FORM (for Class Members accepting the AIO) and the BLUE FORM (for all other Class Members) appended hereto as Exhibits "9" and "21" respectively. 7. The amended complaint in Sheila Brown, et al. v. American Home Products Corporation, Civil Action No. 99-20593 (E.D. Pa.), and all Settled Claims which were or could have been asserted, including claims for punitive damages, on behalf of the Settlement Class or any subclass against AHP and/or any Released Parties shall be dismissed with prejudice upon Trial Court Approval. Such dismissal will be vacated in the event that the Settlement does not receive Final Judicial Approval. 8. 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 persons timely and properly exercise, or have exercised, an Initial, Intermediate, Back-End or Financial Insecurity Opt-Out: a. with respect to all Settled Claims against AHP or any Released Party 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 between the commencement of Diet Drug use and 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 between the commencement of Diet Drug use and 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. b. with respect to Settled Claims against AHP or any Released Party 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. C. PROTECTION OF AHP FROM CLAIMS BY NON-SETTLING DEFENDANTS 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 Settlement Agreement. 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. The Parties shall seek an order from the Court, which shall be a condition to AHP's obligations under this Agreement as set forth in Section VIII.D hereof, enjoining and barring all Non-Settling Defendants from commencing or prosecuting any claim against AHP or any other Released Party for contribution and/or non-contractual indemnity, arising out of a claim against such Non-Settling Defendant on behalf of any Class Member asserting Settled Claims in any present or future litigation, other than any Class Member who has timely and properly exercised an Initial, Intermediate or Back-End Opt-Out right provided by this Agreement and subject to the provisions of Section VII.C.2 below. b. 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 timely and properly 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. c. 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. d. 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. e. To avoid inconvenience and expense to AHP, the other 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 and Class Counsel acting on behalf of 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 and Class Counsel acting on behalf of 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' 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. f. 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. In this regard, AHP shall have the right to recover indemnity obligations from any unpaid Matrix payments that may be due to the Class Member. g. 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 or the prior paragraph (either directly or through recovery of payments for Matrix-Level Conditions otherwise due the Class Member) within 90 days after AHP makes any such payment, AHP may, at any time thereafter, assign its indemnity rights against the Class Member to the Trustees and, in such event, shall receive a credit against its Fund B obligations in the amount of the unsatisfied portion of the indemnity (a "Cross-Claim Credit"). Cross-Claim Credits shall be applied to reduce the Adjusted Maximum Available Fund B Amount as of the date on which the determination of the Cross-Claim Credit becomes final. 2. To protect further 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 VII.C.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 for relief from the bar order. b. The Non-Settling Defendant's application to the Court 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 to the Court shall be served on Class Counsel and on counsel for AHP. d. The Court 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 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. 3. For purposes of this Section VII.C of the Settlement Agreement: a. "Non-Settling Defendant" shall mean any person or entity that is not AHP or a Released Party as defined herein, against whom or which a Settled Claim has been or is hereafter made, asserted or commenced. 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. b. "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. c. "Settlement Class Member" shall mean any member of the Settlement Class who has not timely and properly exercised an Initial Opt-Out right, an Intermediate Opt-Out right, a Back-End Opt-Out right, or a Financial Insecurity Opt-Out right pursuant to the terms of this Agreement. Upon the timely and proper exercise of any such opt-out rights, the provisions of this Section VII.C shall become ineffective in connection with any action brought by each Class Member who has timely and properly exercised any such right of opt-out. 4. To implement the bar order provided for in this Section VII.C, all claims pending against AHP or any other Released Party in any court which are prohibited by such bar order shall be dismissed with prejudice upon Trial Court Approval. Such dismissals will be vacated in the event that the Settlement does not receive Final Judicial Approval. 5. In the event any Class Member who has received a payment for a Matrix-Level Condition under this Agreement subsequently obtains a judgment or award against a Non-Settling Defendant, other than a physician, and the Non-Settling Defendant successfully asserts a contractual indemnity claim against AHP and/or a Released Party, then, to the extent not already required by Sections VII.C.1-4 above, the Class Member shall reduce the judgment or award against the Non-Settling Defendant by the percentage of fault, liability or other liability-producing conduct attributable to AHP and/or a Released Party. In the event a Class Member who has not received a payment for a Matrix-Level Condition under this Agreement subsequently obtains a judgment or award against a Non-Settling Defendant, other than a physician, and the Non-Settling Defendant successfully asserts a contractual indemnity claim against AHP and/or a Released Party, then, to the extent not already required by Sections VII.C.1-4 above, the Class Member shall reduce the judgment or award against the Non-Settling Defendant by the percentage of fault, liability or other liability-producing conduct attributable to AHP and/or a Released Party or, in the alternative, shall waive any claim to additional benefits under this Agreement, including payments for a Matrix-Level Condition. D. PROTECTION OF AHP FROM POSSIBLE SUBROGATION CLAIMS 1. 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(s), and the affected Class Member of the assertion of such a subrogation claim against AHP. The Parties shall move the Court, upon granting Trial Court Approval, to 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. 2. The Trustees and/or Claims Administrator(s) 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. E. WALKAWAY RIGHTS 1. 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 by giving written notice to the Court and to Class Counsel within 30 days of the close of the Initial Opt-Out Period. AHP shall seek to reach its decision with respect to exercise of its "walkaway right" 2. 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" or during any subsequent period in which AHP continues to offer the AIO. F. LIMITATION ON FINANCIAL OBLIGATIONS 1. The maximum amount that AHP shall be obligated to pay under this Settlement Agreement shall be AHP's obligation to make the payments to Fund A and the Escrow Agent as specified in Section III.B and AHP's obligation to make payments to Fund B in accordance with Section III.C. These limitations shall also apply to AHP's obligations under Individual Agreements entered into pursuant to the Accelerated Implementation Option. VIII. SETTLEMENT IMPLEMENTATION A. GENERAL 1. 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. 2. The Parties recommend that the Court 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. B. JURISDICTION 1. The United States District Court for the Eastern District of Pennsylvania will have original and exclusive jurisdiction over all provisions of this Agreement, including the creation and operation of the Settlement Trust and the award of attorneys' fees and reimbursement of litigation expenses, subject to appropriate participation by State Courts in the manner set forth herein. The Parties agree and intend that the Court retain such exclusive jurisdiction for all such purposes: (i) during the pendency of any appeal taken from Trial Court Approval or the denial of Trial Court Approval; and (ii) if Final Judicial Approval is not obtained, subject to Section V.H of this Agreement. 2. In order to become effective as to Class Members who do not exercise the Accelerated Implementation Option, the Settlement contemplated by this Settlement Agreement must receive Final Judicial Approval within the federal judicial system. 3. A State Court Judicial Advisory Committee will be established within 15 days of Preliminary Approval and will consist of the judges from the State Courts which, as of October 7, 1999, had issued any order certifying state-wide class actions in relation to the effects of Pondimin(R) and/or Redux(TM). 4. The State Court Judicial Advisory Committee shall provide advice and counsel to the Federal District Court on all matters pertinent to the Settlement, including approval of the Settlement, which affect Class Members residing in the States of each committee member. In addition, prior to making any award of counsel fees and reimbursement of litigation expenses, the Federal District Court shall consult with and give substantial deference to the views of the State Court Judicial Advisory Committee concerning the actual contribution which was made to the overall resolution of the litigation by the attorneys with whom the members of the committee are familiar. 5. The costs incurred by members of the State Court Judicial Advisory Committee in fulfillment of their obligations, such as expenses for travel, shall be reimbursed as administrative expenses of the Settlement Trust. 6. During the period of time from the date on which the Trust is established until December 31, 2004, the majority of the Trustees or Administrators shall be approved by the State Court Judicial Advisory Committee. C. APPROVAL PROCESS AND NOTICE PROVISIONS 1. Within 10 days after executing this Agreement, the Parties shall jointly move the Court, by filing a motion for the entry of an order granting Preliminary Approval, in the form attached as Exhibit "11". Such Order shall preliminarily and conditionally appoint the Plaintiffs in Sheila Brown, et al. v. American Home Products Corporation as the Class Representatives of the Settlement Class and of each of Subclasses 1(a), 1(b), 2(a), 2(b) and 3; preliminarily and conditionally appoint counsel for such plaintiffs as Class Counsel for the Settlement Class; preliminarily and conditionally certify the Settlement Class, for Settlement purposes only; grant Preliminary Approval of this Agreement; approve the appointment of the Interim Escrow Agent and Interim Claims Administrator(s); authorize the dissemination of the Settlement notice in accordance with Section VI.B. hereof; designate the Initial Opt-Out Period to terminate 90 days after the date on which publication and/or mailing of the Settlement notice commences in accordance with the Order granting Preliminary Approval; schedule the date for filing objections to the Settlement; and schedule a formal fairness hearing to review comments concerning this Agreement, to consider its fairness, reasonableness and adequacy under Fed. R. Civ. P. 23(e) and to determine whether an Order should be entered granting Trial Court Approval. 2. 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 the Settlement Trust will therefore have no obligation to return or refund such costs to AHP. 3. AHP shall retain its right to contest class certification for litigation purposes. 4. The Parties shall cooperate and assist in all of the filings and proceedings relating to the obtaining of Preliminary Approval as well as Trial Court Approval and in any further filings and proceedings necessary to obtain Final Judicial Approval of the Settlement, and in any related appeals. 5. Upon Final Judicial Approval, the Class Counsel and all Class Members shall cooperate with AHP and any other Released Party to cause the dismissal, with prejudice and without costs, of any action against AHP or any Released Party asserting a Settled Claim brought by or on behalf of any Class Member who has not timely and properly exercised an Initial Opt-Out right, including but not limited to class actions, whether or not certified as such, which are pending in any state, federal or territorial court. Upon Trial Court Approval, the Class Counsel and all such Class Members shall cooperate with AHP and any other Released Party to cause further proceedings in all such settled actions in which the Class Members did not timely and properly opt out to be stayed pending Final Judicial Approval. D. CONDITIONS 1. AHP's obligations under this Agreement, other than its obligations to Class Members who accept the AIO during the period in which it is available for acceptance, will be subject to the following conditions: a. Trial Court Approval of the Settlement, which approval order or orders shall: (1) Confirm the certification of the Settlement Class and the creation of Subclasses 1(a), 1(b), 2(a), 2(b), and (3), under Fed. R. Civ. P. 23(a), 23(b)(2), 23(b)(3), 23(c)(1) and 23(e), for Settlement purposes only; (2) Confirm the appointment of the plaintiffs in Sheila Brown, et al. v. American Home Products Corporation as the representatives of the Settlement Class and of each of Subclasses 1(a), 1(b), 2(a), 2(b) and 3; (3) Approve this Agreement in its entirety pursuant to Fed. R. Civ. P. 23(e) as fair, reasonable, adequate, and non-collusive; (4) Dismiss with prejudice and without costs the Amended Complaint in Sheila Brown, et al. v. American Home Products Corporation, as well as all other claims or actions asserting Settled Claims against AHP pending before the Court, with the condition that such complaints may be reinstated in the event that Final Judicial Approval is not obtained; (5) Bar and enjoin all Class Members who have not timely and properly exercised an Initial Intermediate, Back-End, or Financial Insecurity Opt-Out right from asserting and/or continuing to prosecute against AHP or any other Released Party any and all Settled Claims which the Class Member had, has, or may have in the future in any federal, state or territorial court; (6) Bar and enjoin the commencement and/or prosecution of any claim for contribution and/or non-contractual indemnity, pursuant to Section VII.C hereof and subject to the provisions of Section VII.C.2, in any federal, state or territorial court against AHP or any other Released Party by any Non-Settling Defendant arising from or relating to any Settled Claim asserted by any Class Member; (7) Bar and enjoin the commencement and/or prosecution of any claim or action against AHP in any federal, state or territorial court based on rights of subrogation by virtue of a payment or payments made to or for the benefit of a Class Member arising out of or in relation to any Settled Claims, except to the extent that it would be impermissible to bar such claims under provisions of applicable law; (8) Reserve the Court's continuing and exclusive jurisdiction over the Parties, including AHP and the Class Members, to administer, supervise, interpret, and enforce this Agreement in accordance with its terms and to supervise the operation of the Settlement Trust; and (9) Enter such other orders as are needed to effectuate the terms of the Settlement; b. Final Judicial Approval of this Agreement. 2. AHP may at its election terminate this Settlement Agreement if the Final Judicial Approval does not meet all the conditions set forth in Section VIII.D.1.a above. E. ATTORNEYS' FEES 1. In the event that the Settlement receives Final Judicial Approval, the Court shall award counsel fees and litigation expenses from the Settlement funds to those attorneys who actually contributed to the creation of the Settlement funds through work devoted to the "common benefit" of Class Members, including any attorney who actually conferred benefits upon the class through State Court litigation ("Common Benefit Attorneys") and may award Class Action Representative Incentive Fees to the certified State and Federal Court Class Representatives in accordance with applicable principles of law and subject to the following provisions. a. As provided in this Section, AHP agrees to pay to Class Counsel, Common Benefit Attorneys and the certified State and Federal Class Action Representatives fees in an aggregate amount of up to $200,000,000, together with any accrued interest thereon from the date of deposit into the Fund A Escrow Account, for the services related to Fund A, subject to approval by the Court. To the extent that such fees are awarded by the Court, 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 III.B.3 (Fund A Escrow Account) b. Attorneys' fees relating to Fund B shall be paid from Fund 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 Settlement 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, only for purposes of calculating payment of attorneys' fees, 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. An amount shall be deducted from each payment made to a Class Member from Fund B in an amount equal to 9% of the total Matrix payment due the Class Member before any deductions. Individual Class Members who are represented by attorneys entitled to a contingent fee under any valid written contingent fee agreement with such Class Member shall be subject to a further reduction for attorneys' fees due to their attorney. The amount to be paid to the Class Member's attorney shall be the total attorneys' fee due under the terms of the contingency fee arrangement less 9% of the total Matrix payment due to the Class Member before any deductions. Fund B payments to any such individually-represented Class Members shall also be reduced by the amount of reasonable out-of-pocket costs of such Class Member's attorney to the extent authorized in the document evidencing such attorney's retention and the individual attorneys' agreement with the Class Member and to the extent permitted or allowed by applicable law in which the agreement was entered. It is expected that the Trustees will not honor contingent fee agreements with private counsel which were entered into in violation of applicable law. In the event that the Trial Court has not entered any order with respect to the payment of attorneys' fees from Fund B by the end of the first Fiscal Quarter, then within five business days after the end of the first Fiscal Quarter, AHP shall establish and thereafter maintain an interest-bearing escrow account (the "Fund B Attorneys' Fees Account") in the amount of $229 million, for payment of the maximum attorneys' fees payable under this section. The establishment and funding of such Fund B Attorneys' Fees Account shall reduce the Adjusted Maximum Available Fund B Amount as of that time in the same fashion as a Fund B Deposit Amount. All income earned by the Fund B Attorneys' Fees Account shall remain in and be added to the Fund B Attorneys' Fees Account, except that any taxes payable on such income shall be paid out of such income. The amount in the Fund B Attorneys' Fees Account shall be available to be distributed as attorneys' fees as directed by the Trial Court or by a court with appellate jurisdiction over such ruling. Any portion of the total balance in the Fund B Attorneys' Fees Account not finally awarded as attorneys' fees shall be paid to AHP within five business days after the order regarding such fees becomes final and the Adjusted Maximum Available Fund B Amount shall be increased as of the date of such payment by the total amount paid to AHP. c. If the Court awards less than 9% of the present value amount stated above as payment for the attorneys' fees of Class Counsel and Common Benefit Attorneys from Fund B, the Court shall direct that appropriate adjustments be made in the distribution of Fund B amounts to Class Members and their individual attorneys, including, if necessary, additional payments to Class Members and individual attorneys who received Fund B distributions prior to the Court's decision concerning the award of counsel fees to Class Counsel and Common Benefit Attorneys. 2. In the event that the Settlement does not receive Final Judicial Approval or is terminated by AHP for any reason, AHP shall make a payment for attorneys' fees for Fund A benefits paid or provided under the AIO to an account to be established, subject to the supervision of the Court. 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. Any attorney who reasonably believes that he or she actually conferred benefits upon individuals electing the AIO through State Court litigation, may apply to the Court for a portion of the amount deposited in such account and may receive 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. This paragraph shall not be construed to require AHP to make any payment for attorneys' fees for Fund A benefits prior to Final Judicial Approval unless this Agreement is terminated prior to that date. 3. Prior to the time that the Settlement receives Final Judicial Approval or in the event that the Settlement does not receive Final Judicial Approval or is terminated by AHP for any reason, AHP shall deduct from any Fund B benefits paid to those accepting the AIO an amount equal to 9% of the total Matrix payment due to the Class Member before any deductions and shall deposit such amounts in the account to be established pursuant to Section VIII.E.2 above. At such time as the Settlement fails to receive Final Judicial Approval or is terminated by AHP for any reason, any attorney who reasonably believes that he or she actually conferred benefits upon individuals electing the AIO through State Court litigation, may apply to the Court for a portion of the amount deposited in such account and may receive payment of such common benefit fees and costs in accordance with applicable provisions of law. Individual Class Members who are represented by attorneys entitled to a contingent fee under any valid written contingent fee agreement with such Class Member shall be subject to a further reduction for attorneys' fees due to their attorney. The amount to be paid to the Class Member's attorney shall be the total attorneys' fee due under the terms of the contingency fee arrangement less 9% of the total Matrix payment due to the Class Member before any deductions. Payment of Fund B benefits to any such individually-represented Class Member shall also be reduced by the amount of reasonable out-of-pocket costs of such Class Member's attorney to the extent authorized in the document evidencing such attorney's retention and individual attorney's agreement with the Class Member and to the extent permitted or allowed by law. Those accepting the AIO must expressly agree to this provision regarding fees as a condition to exercising the option. If the Court awards less than 9% of the amount stated above as payment for the attorneys' fees of Class Counsel and Common Benefit Attorneys from the amount paid to individuals accepting the AIO, the Court shall direct that appropriate adjustments be made in the distribution of these fund amounts to individuals accepting the AIO and their individual attorneys, including, if necessary, additional payments to individuals who accepted the AIO and their individual attorneys who received payment prior to the Court's decision concerning the award of counsel fees to Class Counsel and Common Benefit Attorneys. 4. 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. 5. The Parties shall recommend that the Court enter an Order precluding a Class Member's individual attorney from recovering a fee in connection with the recovery of the $3,000 cash benefit provided by Section IV.A.2.c or the $6,000 cash benefit provided by Section IV.A.1.c, which is greater than 20% of such amounts. This 20% fee for a Class Member's individual attorney shall not be affected by fees paid to Class Counsel or Common Benefit Attorneys, pursuant to the Court's order. F. OTHER PROVISIONS 1. Any information provided by or regarding a Class Member or otherwise obtained pursuant to this Agreement shall be kept confidential and shall not be disclosed except to appropriate persons to the extent necessary to process Claims or provide benefits under this Agreement or as otherwise expressly provided in this Agreement. All Class Members shall be deemed to have consented to the disclosure of this information for these purposes. 2. This Settlement Agreement shall be binding on the successors and assigns of the Parties. 3. The Parties to the Settlement, including AHP, the Released Parties, or any Class Member, shall not seek to introduce and/or offer the terms of the Settlement Agreement, any statement, transaction or proceeding in connection with the negotiation, execution or implementation of this Settlement Agreement, any statements in the notice documents appended to this Settlement Agreement, stipulations, agreements, or admissions made or entered into in connection with the fairness hearing or any finding of fact or conclusion of law made by the Trial Court, 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. If a Class Member who has timely and properly exercised an Opt-Out right seeks to introduce and/or offer any of the matters described herein in any proceeding, the restrictions of this Section shall not be applicable to AHP and the Released Parties with respect to that Class Member. 4. Neither this Agreement nor any exhibit, document or instrument delivered hereunder nor any of the statements in the notice documents appended to this Settlement Agreement or in connection herewith, nor any statement, transaction or proceeding in connection with the negotiation, execution or implementation of this Agreement, is intended to be or shall be construed as or deemed to be evidence of an admission or concession by AHP or the Released Parties of any liability or wrongdoing or of the truth of any allegations asserted by any plaintiff against it or them, or as an admission by the Class Representatives or members of the Settlement Class of any lack of merit in their claims, and no such statement, transaction or proceeding shall be admissible in evidence for any such purpose except for purposes of obtaining approval of this Settlement Agreement in this or any other proceeding. 5. The headings of the sections and paragraphs of this Agreement are included for convenience only and shall not be deemed to constitute part of this Agreement or to affect its construction. 6. As soon as practicable after the execution of the Settlement Agreement, the Parties shall take all steps which are reasonably necessary to enable the Trustees and/or Claims Administrator(s) 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 $45 million, or such higher amount as may be requested in writing by the Interim Claims Administrators and/or Trustees, agreed upon by the Parties, and approved by the Court. 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. 7. Any notice, request, instruction or other document to be given by AHP to Class Counsel or Class Counsel to AHP shall be in writing and delivered personally or sent by Federal Express or facsimile as follows, or as otherwise instructed by a notice delivered to the other Party pursuant to this subsection: a. If to AHP: Louis L. Hoynes, Jr., Esquire Senior Vice President and General Counsel American Home Products Corporation 5 Giralda Farms Madison, NJ 07940-0874 b. If to the Class Representatives or Class Counsel: Arnold Levin, Esquire Levin, Fishbein, Sedran & Berman 510 Walnut Street Suite 500 Philadelphia, PA 19106 Gene Locks, Esquire Greitzer & Locks 1500 Walnut Street 20th Floor Philadelphia, PA 19102 8. Any form or other documentation required to be submitted under this Agreement shall be deemed timely if postmarked on or before the date by which it is required to be submitted under this Settlement Agreement. Subject to other provisions for eligibility, a properly completed and executed AIO Individual Agreement or Opt-Out Form will be effective on the date it is postmarked. 9. No provision of this Settlement Agreement or any Exhibit thereto is intended to create any third-party beneficiary to this Settlement Agreement. 10. Upon execution of the Memorandum of Understanding dated October 7, 1999 ("MOU"), AHP and Class Counsel jointly established a toll-free telephone number and website for persons requesting additional information regarding the Settlement. This number and website has been and shall continue to 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 pursuant to Section VI.B.1.f(3). AHP shall pay all costs relating to the toll-free telephone line and website. In the event that the settlement receives Final Judicial Approval, all expenditures made by AHP in relation to the toll-free telephone line and website 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. 11. This Agreement contains the entire Agreement between the Parties with respect to the subject matter hereof and supersedes and cancels all previous Agreements, negotiations, and commitments in writings between the Parties hereto with respect to the subject matter hereof, including without limitation the MOU. This Agreement may not be changed or modified in any manner unless in writing and signed by a duly authorized officer of AHP and by a duly authorized representative of the Class Representatives. IN WITNESS WHEREOF, the Parties have duly executed this Nationwide Class Action Settlement Agreement between American Home Products Corporation and the Class Representatives, by their respective counsel as set forth below, on this _____ day of November, 1999. AMERICAN HOME PRODUCTS CORPORATION BY:__________________________________ LOUIS L. HOYNES, JR., ESQUIRE GENERAL COUNSEL CLASS COUNSEL - --------------------------------- --------------------------------- ARNOLD LEVIN, ESQUIRE GENE LOCKS, ESQUIRE LEVIN, FISHBEIN, SEDRAN & BERMAN GREITZER & LOCKS 510 WALNUT STREET, SUITE 500 1500 WALNUT STREET, 20TH FLOOR PHILADELPHIA, PA 19106 PHILADELPHIA, PA 19102 215-592-1500 800-828-3489 - --------------------------------- --------------------------------- MICHAEL D. FISHBEIN, ESQUIRE SOL H. WEISS, ESQUIRE LEVIN, FISHBEIN, SEDRAN & BERMAN ANAPOL, SCHWARTZ, WEISS, COHAN, 510 WALNUT STREET, SUITE 500 FELDMAN & SMALLEY, P.C. PHILADELPHIA, PA 19106 1900 DELANCEY PLACE 215-592-1500 PHILADELPHIA, PA 19103 215-735-2098 - --------------------------------- --------------------------------- STANLEY CHESLEY, ESQUIRE CHARLES R. PARKER, ESQUIRE WAITE, SCHNEIDER, BAYLESS & CHESLEY HILL & PARKER 1513 CENTRAL TRUST TOWER 5300 MEMORIAL, SUITE 700 FOURTH & VINE STREETS HOUTON, TX 77007-8292 CINCINNATI, OH 45202 713-868-5581 513-621-0267 - --------------------------------- JOHN J. CUMMINGS, ESQUIRE CUMMINGS, CUMMINGS & DUDENHEFER 416 GRAVIER STREET NEW ORLEANS, LA 70130 504-586-0000 FOR THE PLAINTIFFS' MANAGEMENT COMMITTEE 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 1 Heart Disease: A Textbook of Cardiovascular Medicine 1433-34 (Eugene Braunwald ed., 5th ed. 1997) [hereinafter "Braunwald I"]. 2 J. P. Singh, et al., Prevalence of Clinical Determinants of Mitral, Tricuspid and Aortic Regurgitation (The Framingham Heart Study), 83 Am. J. Cardiology 897, 898 (1999) [hereinafter "Singh"]. 3 Harvey Feigenbaum, Echocardiography 68-133 (5th ed. 1994) [hereinafter "Feigenbaum"]. 4 Arthur E. Weyman, Principles and Practice of Echocardiography 75-97 (2d ed. 1994) [hereinafter "Weyman"]. 5 Singh, supra note 2. 6 Feigenbaum, supra note 3. 7 Weyman, supra note 4. 8 See Lisa A. Freed, et al., Prevalence and Clinical Outcomes of Mitral Valve Prolapse, 341 New Eng. J. Med. 1, 2 (1999) [hereinafter "Freed"]. 9 See, L. J. Rubin & S. Rich, 99 Primary Pulmonary Hypertension (1997) [hereinafter "Rubin & Rich"]. 10 See Eugene Braunwald, Essential Atlas of Heart Diseases, Current Med. For Atty's 10-9 (1997) [hereinafter "Braunwald II"]. 11 See, Rubin & Rich, supra note 9. 12 See Braunwald I, supra note 1 at 796-798. 13 Stuart Rich, Executive Summary from the Symposium on Primary Pulmonary Hypertension, Evian, France, co-sponsored by the World Health Organization, September 6-10, 1998, http://www.who.int/ncd/cvd/pph.html. 14 See Centers for Disease Control and Prevention, U.S. Dep't of Health and Human Services, Cardiac Valvulopathy Associated with Exposure to Fenfluramine or Dexfenfluramine: US Department of Health and Human Services Interim Public Health Recommendations, 46 Morbidity & Mortality Weekly Rep. 1061, 1061-1066 (1997). 15 See Braunwald I, supra note 1 at 796-98. 16 See Feigenbaum, supra note 3 at 201-03. 17 See Kwan-Leung Chan, et al., Comparison of Three Doppler Ultrasound Methods in the Prediction of Pulmonary Artery Disease, 9 J. Am. C. Cardiology 549, 550 (1987) [hereinafter "Chan"]. 18 See Robert O. Bonow, 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), 32 J. Am. C. Cardiology 1486, 1511 (1998) [hereinafter "Bonow"]. 19 See id. 20 See id. at 1512 21 See Singh, supra note 2. 22 See id. 23 See Braunwald I, supra note 1 at 796-98. 24 See Weyman, supra note 4 at 1290-92. 25 See Walter L. Henry, et al., Report of the American Society of Echocardiography Committee on Nomenclature and Standards in Two-dimensional Echocardiography, 62 Circulation 212, 212-13 (1980) [hereinafter "Henry"]. 26 See Bonow, supra note 23 at 1533-35. 27 See id. 28 See id. at 1510. 29 See id. at 1533-35. 30 See Margaret Kelley-Hayes, et al., The American Heart Association Stroke Outcome Classification, 29 Stroke 1274, 1275 (1998). It should be noted that this classification was approved by the American Heart Association Science Advisory and Coordinating Committee [hereinafter "Kelley-Hayes"]. 31 See id. 32 See id. 33 See Braunwald I, supra note 1 at 1433-34. 34 See Kelley-Hayes, supra note 35. 35 See Braunwald I, supra note 1 at 796-98. 36 See Encyclopedia of Neuroscience 268 (George Adelman ed., 1987). 37 See Harrison's Principles of Internal Medicine 1878, 1885 (14th ed. 1998). 38 See C. Otto, The Practice of Clinical Echocardiography 589-93 (1997) [hereinafter "Otto"]. 39 See Feigenbaum, supra note 3. 40 See Weyman, supra note 4. 41 See Singh, supra note 2. 42 See A.S. Pearlman et al., Guidelines for Optimal Physician Training in Echocardiography: Recommendations of the American Society of Echocardiography Committee on Physician Training in Echocardiography, 60 Am J. Cardiol 158-163 (1987). 43 As set forth in Section VI.C.3.f. below, "deidentified" shall mean redaction of all patient identifying information, including but not limited to patient name, address , telephone number, e-mail address, social security number and other personal identifiying information. EX-99.2 7 0007.txt IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE KNOXVILLE DIVISION UNITED STATES OF AMERICA, ) ) Plaintiff, ) No. 3:00-CV-359 ) v. ) ) VARIOUS ARTICLES OF DRUG ) IDENTIFIED IN ATTACHMENT A, ) which are located on the premises of ) Wyeth-Ayerst Laboratories, 98 Excellence) Way, Vonore, Tennessee, ) ) Defendants-in-rem, ) ) and ) ) WYETH-AYERST LABORATORIES ) DIVISION OF AMERICAN HOME ) PRODUCTS CORPORATION and ) WYETH-AYERST PHARMACEUTICALS, ) INC., corporations, and BERNARD J. ) POUSSOT, JOHN V. BUCCERI, and ) ROY J. STURGEON, PH.D., individuals, ) ) Defendants. ) - ------------------------------------ ) CONSENT DECREE OF CONDEMNATION AND PERMANENT INJUNCTION WHEREAS, plaintiff United States of America ("Plaintiff" or the "United States"), on behalf of the United States Food and Drug Administration ("FDA" or the "Agency"), has filed a verified complaint for forfeiture in this Court bearing the docket number 3:00-CV-359 (the "Tennessee action") against the articles of drug described in Attachment A of the complaint, and has filed a verified complaint for forfeiture in the United States District Court for the District of Puerto Rico bearing the docket number 00-1779(JP) (the "Puerto Rico action") against the articles of drug described in Attachment A of that complaint, both of which allege that the drugs described in the respective actions are adulterated within the meaning of the Federal Food, Drug, and Cosmetic Act (the "FD&C Act"), 21 U.S.C. ss. 35l(a)(2)(B), while such drugs are held for sale after shipment in interstate commerce, or after shipment of one or more of their components in interstate commerce, in that the methods used in, and the facilities and controls used for, their manufacture, processing, packing, and holding did not conform to and were not operated and administered in conformity with current good manufacturing practice ("CGMP") to assure that such drugs meet the safety requirements of the FD&C Act and have the identity and strength, and meet the quality and purity characteristics, which they purport and are represented to possess; and WHEREAS, the United States Marshal for this District and the United States Marshal for the District of Puerto Rico have seized the articles of drug (collectively, the "Seized Articles") pursuant to warrants of arrest in rem issued by this Court and by the United States District Court for the District of Puerto Rico; and WHEREAS, Wyeth-Ayerst Laboratories Division of American Home Products Corporation and Wyeth-Ayerst Laboratories Puerto Rico, Inc. (hereafter, collectively "Claimants") affirm that they are the sole owners of the Seized Articles in this action and the Puerto Rico action, respectively, and agree to hold the United States harmless should any party or parties hereafter file or seek to file a claim to intervene in this action or the Puerto Rico action, or seek to defend or obtain any part of the Seized Articles; and WHEREAS, Claimants have intervened and filed claims to the Seized Articles in each action and Wyeth-Ayerst Laboratories Division of American Home Products Corporation has filed an Answer in the Tennessee action denying the allegations in the complaint in that action; and WHEREAS, Claimants and the United States have agreed to transfer the Puerto Rico action to this Court and consolidate that action with this action; and WHEREAS, Wyeth-Ayerst Laboratories Division of American Home Products Corporation and Wyeth-Ayerst Pharmaceuticals, Inc. (hereafter, collectively "Wyeth") operate and manage facilities located at Wasp and Biddle Streets, Marietta, Pennsylvania (hereafter, "the Marietta facility") and 401 North Middletown Road, Pearl River, New York (hereafter, "the Pearl River facility"); and WHEREAS, Wyeth does not intend to manufacture at the Marietta facility any currently approved products other than FluShield(R) (Influenza Virus Vaccine), Antivenin (Crotalidae) Polyvalent, Antivenin (Micrurus fulvius), Dryvax(R) (Smallpox Vaccine), and Wydase(R) (hyaluronidase); and WHEREAS, Wyeth-Ayerst Laboratories Division of American Home Products Corporation, Wyeth-Ayerst Pharmaceuticals, Inc., Wyeth-Ayerst Laboratories Puerto Rico, Inc., Bernard J. Poussot, President, Wyeth-Ayerst Pharmaceuticals, Inc.; John V. Bucceri, Senior Vice-President, Global Supply Chain, Wyeth-Ayerst Pharmaceuticals, Inc.; and Roy J. Sturgeon, Ph.D., Senior Vice-President, Global Quality Assurance and Quality Control, Wyeth-Ayerst Pharmaceuticals, Inc., have appeared, have waived the filing of an amended complaint seeking injunctive relief, and, without admitting the allegations in this action and the Puerto Rico action, and although denying any liability arising out of or related in any way to this matter, and before any testimony has been taken, have consented to the entry of this Consent Decree; THEREFORE, IT IS ORDERED, ADJUDGED, AND DECREED that: I. JURISDICTION 1. This Court has subject matter jurisdiction over this action and personal jurisdiction over all parties pursuant to 28 U.S.C.ss. 1345 and 21 U.S.C.ss.ss. 332 and 334. Venue is proper in this District under 28 U.S.C.ss.ss. 1391(b) and 1395. 2. Both the complaint for forfeiture in the Tennessee action and the complaint for forfeiture in the Puerto Rico action state a claim for relief under the FD&C Act. II. THE SEIZED ARTICLES 3. The Seized Articles are hereby condemned and forfeited to the United States pursuant to 21 U.S.C.ss. 334(a). 4. The United States shall recover from Claimants all court costs, fees, and storage and other proper expenses, and such further costs for which Claimants are liable pursuant to 21 U.S.C. ss. 334(e) with respect to the Seized Articles. Claimants shall pay these costs within ten (10) days of receiving notice from FDA of such costs. 5. Within twenty (20) days of the entry of this Consent Decree, Claimants shall execute and file with the Clerk of this Court a good and sufficient penal bond with surety in the amount of $156,500.00. The penal bond shall be in a form acceptable to the Clerk of this Court and payable to the United States of America, and conditioned on Claimants' abiding by and performing all of the terms and conditions of this Consent Decree and of such further orders and decrees as may be entered in this proceeding relating to the Seized Articles. 6. After the filing of the penal bond with this Court and within thirty (30) days after the date of entry of this Decree, Claimants shall give written notice to the District Director of the Philadelphia District Office that Claimants, at their own expense, are prepared to destroy the Seized Articles pursuant to 21 U.S.C. ss. 334(d) under FDA supervision. Claimants' notification shall specify the time frames for completing the proposed destruction. 7. Upon receipt of the notice under paragraph 6, FDA will notify the United States Marshal for this District and the United States Marshal for the District of Puerto Rico to return the Seized Articles to Claimants' custody for the sole purpose of destroying the Seized Articles. Claimants shall, at all times until the Seized Articles have been destroyed, retain intact each lot of Seized Articles for examination or inspection by FDA, in a place made known to and subject to approval by FDA, and shall maintain the records or other proof necessary to establish the identity of the Seized Articles to the satisfaction of FDA. In addition, Claimants shall, within the time frames specified in their notification under paragraph 6 and at their own expense, complete the process of destroying the Seized Articles under the supervision of FDA, to the extent that FDA deems such supervision to be necessary, and of the United States Marshal Service. Claimants shall reimburse the United States for the costs of supervising the destruction of the Seized Articles within ten (10) days of receiving an invoice(s) for such costs. 8. The United States Attorney for this District, on being advised by FDA that the articles have been destroyed and that Claimants have paid the costs of supervising such destruction pursuant to paragraph 7, shall transmit such information to the Clerk of this Court, whereupon the penal bond(s) given in this proceeding by Claimants shall be canceled and discharged. 9. If Claimants fail to abide by and perform all the terms and conditions of this Consent Decree or of such further order or decree as may be entered in this proceeding concerning the Seized Articles, or of the penal bond, then the penal bond shall, on motion of the Plaintiff in this proceeding, be forfeited in its entirety and judgment be entered in favor of Plaintiff. III. INJUNCTIVE PROVISIONS THE MARIETTA FACILITY 10. Except as provided in paragraph 14, Wyeth-Ayerst Laboratories Division of American Home Products Corporation, Wyeth-Ayerst Pharmaceuticals, Inc., Bernard J. Poussot, John V. Bucceri, and Roy J. Sturgeon, Ph.D., the Managing Director of the Marietta facility (hereafter, subject to paragraph 45, collectively "Defendants"), each and all of Wyeth's officers, agents, employees, representatives, successors, assigns, and attorneys, and those persons in active concert or participation with any of the Defendants who receive actual notice of this Decree by personal service or otherwise, are permanently restrained and enjoined from manufacturing, processing, packing, labeling, holding, and distributing any drug or biological product at the Marietta facility, other than FluShield(R) (Influenza Virus Vaccine), Antivenin (Crotalidae) Polyvalent, Antivenin (Micrurus fulvius), Wydase(R) (hyaluronidase), Dryvax(R) (Smallpox Vaccine), and any associated diluents or agents covered by the approved applications for those products, unless and until FDA so authorizes Defendants in writing. 11.A. Within ten (10) days after the date of entry of this Decree, Wyeth shall select and retain one or more expert consultant(s) who are qualified as set forth in paragraph 36 (hereafter, collectively "the expert consultant") to inspect the Marietta facility. B. Within fourteen (14) days after the date of entry of this Decree, Wyeth shall cause the expert consultant to commence a comprehensive inspection of the Marietta facility to ensure that the methods, facilities, and controls used for manufacturing, processing, packing, holding, and distributing drug and biological products comply with the FD&C Act, the Public Health Service Act ("PHS Act"), CGMP, and applicable regulations relating to the safety, identity, strength, quality, and purity of drugs and biological products (hereafter, "applicable laws and regulations"). (However, this inspection is not required to address validation of those manufacturing processes that are specifically addressed in paragraph 25.) The inspection shall be completed no later than one hundred fifty (150) days after the date of entry of this Decree. In preparation for this inspection, the expert consultant shall review all Forms FDA 483 issued to Wyeth regarding the Marietta facility since October 1998 and Wyeth's responses thereto. The expert consultant's inspection shall include, at a minimum, the following: (1) An evaluation of whether Wyeth has established a comprehensive written quality assurance ("QA") and quality control ("QC") program ("QA/QC program") that is adequate to ensure continuous compliance with applicable laws and regulations. The expert consultant shall determine whether the QA/QC program, at a minimum: a. Addresses all facets of compliance monitoring and trend analyses; records management systems for those records that relate to in-process, bulk, and finished product safety, identity, strength, quality, and purity; and internal audit procedures; b. Includes procedures to ensure that Wyeth thoroughly investigates product deviations subject to 21 C.F.R. ss. 600.14, reports of complaints regarding the use of Wyeth's products, and any unexplained discrepancy or the failure of a batch of drug or biological product or its components to meet any of the product's or component's specifications, including the extension of such investigation to other batches of the same drug or biological product and other drug or biological products that may have been associated with the specific failure or discrepancy; c. Includes written standard operating procedures ("SOPs") specifying the responsibilities and procedures applicable to QA or QC personnel and establishes mechanisms to ensure that such written SOPs are followed; d. Includes written SOPs necessary to ensure that all facets of compliance monitoring are reviewed and controlled by QA personnel; and e. Includes written SOPs to ensure that (i) Wyeth's division-level QA personnel are notified of deviations and/or problems that could affect the safety, identity, strength, quality, and purity of drugs and biological products, including, but not limited to, those deviations and/or problems that the expert consultant identifies pursuant to paragraphs 15, 19, and 22 of this Decree; (ii) Wyeth's QA personnel participate in or monitor the implementation and verification of corrective actions to prevent future occurrences of such deviations and/or problems; and (iii) there are systems to ensure that such written SOPs are followed. (2) An evaluation of the adequacy of Wyeth's system of written production and process controls. The expert consultant shall, at a minimum, determine whether these production and process controls: a. Include production and process controls necessary to ensure compliance with applicable laws and regulations; b. Include written procedures to evaluate, implement, and control changes to any and all systems, processes, equipment, and tests, including, but not limited to, sterilization processes, lyophilization processes, container and closure cleaning and preparation processes, critical in-process specifications and controls, and release tests and criteria; c. Include adequate, written specifications for controls, tests, and organoleptic examinations to monitor the performance of those manufacturing processes that may affect the characteristics of in-process material, bulk, and finished drugs and biological products; d. Are adequate to ensure that production and process control procedures and protocols are continuously followed; that production and process control functions are accurately and completely documented at the time of performance; that deviations from procedures, protocols, and established production and process controls are justified and documented; and that any failure to meet established acceptance criteria (as defined in 21 C.F.R. ss. 210.3(20)) or process specifications is thoroughly investigated and documented; and e. Include a system for reporting to the appropriate QA/QC unit instances in which: production and process control procedures and protocols are not followed; deviations from procedures, protocols, and established production and process controls occur; and there are failures to meet established criteria or process specifications. (3) An assessment of whether Wyeth has implemented a scientifically sound and appropriate system of laboratory controls that, at a minimum, includes specifications, standards, sampling plans, and test procedures necessary to ensure that components, drug product containers, closures (including container closure integrity), in-process materials, labeling, and drug and biological products are in compliance with applicable laws and regulations. As part of this assessment, the expert consultant shall determine whether Wyeth's system of laboratory controls adequately provides for: a. Investigations and appropriate scientific analyses of laboratory tests that result in out-of-specification results; b. Justification of the specific basis for invalidation of test results, and plans for retesting of products or samples when indicated; c. Analyses of trends in laboratory failures and maintenance of records showing investigations of such trends; and d. Statistical quality control criteria and appropriate acceptance and rejection levels. (4) An evaluation of whether Wyeth has implemented an effective buildings and facility control system that describes in sufficient detail cleaning and maintenance schedules, methods, equipment, and materials. The expert consultant shall determine whether the system ensures, at minimum: that the materials and procedures used to clean and disinfect rooms and equipment in aseptic processing areas are effective to remove microorganisms, particularly those that are typically isolated in the aseptic processing environment; that materials are used in accordance with written procedures; and that written procedures are continuously followed and documented. (5) An assessment of whether Wyeth has implemented a records management system that is adequate to maintain all records relating to the manufacture, processing, packing, holding, and distribution from or to the facility or other disposition of drug and biological products that are required to be maintained by applicable laws and regulations, SOPs, and/or this Decree. The expert consultant shall determine whether the records management system, at a minimum: a. Ensures documentation of each significant step, recorded completely, accurately, and concurrently with the performance of the step, in the manufacture, processing, packing, holding, and distribution from or to the facility of drug and biological products, including the identity of the person(s) performing such steps and the dates on which each step was taken; b. Includes procedures to ensure documentation of all investigations and any steps taken to: (i) correct failures of drug and biological products to meet specifications, (ii) prevent future recurrence of failures of drug and biological products to meet specifications, (iii) investigate other batches of drug and biological products that may have been affected by the same or similar failures, and (iv) evaluate out-of-specification test results; c. Includes complete data derived from all tests necessary to assure compliance with established specifications and standards, including organoleptic examinations and assays; and d. Includes a mechanism to ensure that such procedures are followed. (6) An evaluation of whether the equipment used in the manufacture, processing, packing, and holding of drug and biological products is of appropriate design for each of its intended uses. The evaluation shall include, but not be limited to, equipment used to process drug and biological product containers and closures. The expert consultant shall, at a minimum, determine whether controls exist to ensure that: a. Such equipment is operating within specifications so as not to alter the safety, identity, strength, quality, or purity of the drug and biological products; b. Such equipment is cleaned, is maintained, and, where applicable, performs processes adequately to prevent product contamination, e.g., microorganisms, pyrogens, or other contaminants, that would alter the safety, identity, strength, quality, or purity of drug and biological products beyond the official or other established requirements; c. Such equipment produces drug and biological product containers and closures such that the resulting container closure system provides adequate protection against foreseeable external factors that can cause deterioration or contamination of the drug and biological products; and d. Water systems used for rinsing, cleaning, manufacturing, and storage are adequately designed, validated, maintained, and routinely tested for compliance with all applicable specifications. (7) An assessment of whether the processes and systems used to manufacture the finished drug products and finished biological products that are being manufactured at the facility after the date of entry of the Decree have been adequately validated. As part of this assessment, for each such validation study that was completed on or before the date of entry of this Decree, the expert consultant shall: (i) determine whether the validation protocol clearly stated how the validation study was conducted, including test parameters, product characteristics, production equipment, and decision points on what constituted acceptable test results; (ii) evaluate whether the protocol was adhered to during its execution (and if not, what deviations occurred and what effects the deviations had on the results of the study), and (iii) review the results of the study. (Validation studies that have not been initiated or that have been initiated but not completed are addressed separately in paragraph 26.) C. Within twenty (20) days of completing the inspection, the expert consultant shall prepare a detailed written report of his/her inspection, which addresses, at a minimum, each of the matters described in paragraph 11.B.(1)-(7) and whether the aforementioned Form FDA 483 observations have been corrected, and submit that report concurrently to the President and Senior Vice-President, Regulatory Affairs and Compliance of Wyeth-Ayerst Pharmaceuticals, Inc. and to FDA. D. Within forty-five (45) days of receipt of the expert consultant's inspection report, Wyeth shall submit a written report to FDA that details the specific actions Defendants will take and a timetable to address the expert consultant's observations. The timetable shall be subject to FDA approval. Defendants shall ensure the implementation of the actions detailed in the report. E. As the actions detailed in the report described in subparagraph D are completed, Wyeth shall notify the expert consultant. The expert consultant shall promptly inspect and verify whether those actions have been completed in a manner that complies with applicable laws and regulations, to the expert consultant's satisfaction (hereafter, "to the expert consultant's satisfaction") and in accordance with the timetable approved by FDA. If the expert consultant determines that an action has not been completed to the expert consultant's satisfaction, he/she promptly will so notify Wyeth. Beginning twenty (20) days after the submission of the plan and timetable to FDA under subparagraph D and thereafter on the first day of each month, the expert consultant shall submit to FDA a table that succinctly summarizes his/her findings regarding whether the actions have been completed to the expert consultant's satisfaction and in accordance with the timetable approved by FDA. FDA may, in its discretion and without prior notice, periodically inspect the Marietta facility and undertake such additional examinations, reviews, and analyses (as provided in paragraphs 32 and 33) to verify whether the actions reported to have been completed have in fact been completed in a satisfactory manner. In the event that FDA determines that an action that has been reported to be completed is inadequate, FDA will notify Defendants in writing, and Defendants shall take appropriate action in accordance with a timetable that is subject to approval by FDA. F. When the expert consultant determines that all of the actions identified in the timetable approved by FDA pursuant to subparagraph D have been completed to the expert consultant's satisfaction, the expert consultant shall provide Defendants with a written certification that all of the actions have been completed and that the Marietta facility, based on the inspection conducted under paragraph 11.B. and on the satisfactory completion of the actions identified under paragraph 11.D., is in conformity with applicable laws and regulations and this Decree. Once the certification has been issued, Wyeth shall promptly submit the expert consultant's certification to FDA. G. Within forty-five (45) days of receipt of the certification, FDA may, in its discretion and without prior notice, commence an inspection of the Marietta facility and undertake such additional examinations, reviews, and analyses (as provided in paragraphs 32 and 33) as the Agency deems appropriate to determine whether the Marietta facility is in conformity with applicable laws and regulations (with the exception of the validation of those manufacturing processes that are specifically addressed in paragraph 25) and this Decree. If FDA determines that the Marietta facility is not operating in conformity with applicable laws and regulations, FDA will notify Defendants of the deficiencies it observed and take such other action, if any, as the Agency deems appropriate (e.g., issuing an order pursuant to paragraph 29 or a notice under 21 C.F.R. ss. 601.5(b)). H. Within thirty (30) days of receiving the notification from FDA under subparagraph G, Wyeth shall submit to FDA a plan of actions Defendants propose to take and a timetable for correcting the deficiencies. The timetable shall be subject to FDA approval. Defendants shall promptly correct all deficiencies noted by FDA in accordance with the FDA-approved timetable, and cause the expert consultant to reinspect and either (i) certify that the deficiencies have been corrected to assure that the manufacturing facility is in conformity with applicable laws and regulations, or (ii) notify Defendants that the one or more deficiencies remain uncorrected. If one or more deficiencies have not been corrected, Defendants and the expert consultant shall follow the procedures in paragraph 37 until the expert consultant issues the certification. Wyeth shall then submit the certification to FDA. Within forty-five (45) days of FDA's receipt of the certification, FDA may reinspect as it deems necessary. I. FDA's Philadelphia District Office will, as described below in subparagraphs (1) and (2), notify Defendants in writing that the manufacturing, processing, packing, holding, and distribution of drugs and biological products at the Marietta facility appear to be in conformity with applicable laws and regulations (with the exception of the validation of those manufacturing processes that are specifically addressed in paragraph 25) and the portions of this Decree relating to the Marietta facility. (1) If FDA conducts an inspection (or re-inspection) pursuant to subparagraphs G and/or H and finds that the manufacturing, processing, packing, holding, and distribution of drugs and biological products at the Marietta facility appear to be in conformity with applicable laws and regulations and the portions of this Decree relating to the Marietta facility, this notice will be issued within sixty (60) days after completion of such inspection. (2) If FDA elects not to conduct an inspection pursuant to subparagraph G or a reinspection pursuant to subparagraph H, this notice will be issued within forty-five (45) days after receipt of the expert consultant's certification under subparagraph F. 12. In the event that Defendants fail, as determined either by the expert consultant or FDA, to satisfactorily complete one or more actions in the timetable approved by FDA pursuant to paragraph 11.D., Wyeth shall pay to the United States Treasury as liquidated damages the sum of $15,000 per action, per business day, until the action is fully implemented and completed to FDA's satisfaction. 13. No later than January 15, 2001, Wyeth shall submit to FDA a written report on the status of the actions undertaken at the Marietta facility to respond to the Form FDA 483 issued for that facility on February 17, 2000, including the Building 20 Restart Protocol (Wyeth Protocol Number 00075P). FDA may, at its discretion and without prior notice, inspect the Marietta facility as the Agency deems appropriate to verify the progress made, and the actions completed, as described in the report. In the event that FDA determines that an action has not been completed or is not progressing as described in the report, FDA will notify Defendants, who shall cause Wyeth to take appropriate actions and submit a revised status report to FDA within thirty (30) days. 14. The injunctive provisions of paragraph 10 do not apply to the following activities at the Marietta facility: A. Manufacturing, processing, packing, holding, or distributing investigational drugs, biologicals, and medical devices for the sole purpose of conducting clinical trials under investigational new drug applications or investigational device exemptions, provided that Defendants comply with applicable laws and regulations relating to the manufacture and distribution of investigational products; B. Manufacturing, processing, packing, and holding quantities of products that are necessary for the purpose of preparing or supporting a new drug application or a biologics license application, but such products may not be distributed without prior written authorization from FDA; C. Manufacturing, processing, packing, labeling, holding, and exporting any drug or biological product in compliance with 21 U.S.C.ss.ss. 381(e) or 382, 21 C.F.R.ss. 312.110, or 42 U.S.C.ss. 262(h), as appropriate; and D. Manufacturing, processing, packing, holding, or distributing products for the purpose of conducting nonclinical laboratory studies or other research and testing that does not involve exposure of human research subjects. 15.A. With respect to approved finished drug products and finished biological products manufactured at the Marietta facility between the date of entry of this Decree and the issuance of the notice under paragraph 11.I., the expert consultant shall, prior to the distribution of each batch, review the in-process, bulk, and finished product batch production records for that batch and prepare and deliver a report to Wyeth's Senior Vice-President, Regulatory Affairs and Compliance. The written report shall include, but not be limited to, a line list of deviations from written procedures found in the batch production records; an evaluation of whether any atypical environmental conditions were present at the time of batch manufacture; an assessment of whether an adequate investigation was conducted with respect to the deviations, including an explanation of corrective actions with respect to the deviations; an evaluation of whether such investigations were conducted in a timely manner; an assessment of whether any deviations may have adversely affected the safety, identity, strength, quality, and purity of the batch; a review of glass vials acceptance examinations to determine whether lots not meeting acceptance criteria were used in production; a review of records to determine whether adequate investigations were conducted into defects and/or process deviations that could affect container-closure integrity; a report of deviations and/or problems that QA failed to note or address during the QA review of batch production records for release of products; and, if appropriate, a certification that all deviations observed by the expert consultant have been resolved to his/her satisfaction. Upon a review of the expert consultant's report and a recommendation by a Wyeth Vice-President of Quality Assurance, Wyeth's Senior Vice-President, Regulatory Affairs and Compliance shall determine whether the batch should be released for distribution. If Wyeth's Senior Vice-President, Regulatory Affairs and Compliance is unavailable, a Wyeth Vice-President of Quality Assurance shall determine whether the batch should be released. B. Wyeth's Senior Vice-President, Regulatory Affairs and Compliance shall, on a monthly basis, update the President of Wyeth-Ayerst Pharmaceuticals, Inc. on the results of the batch record review under subparagraph A. 16.A. In recognition of the government's right to seek equitable disgorgement in an injunction under the FD&C Act, but without admitting the government's right to obtain such relief, Wyeth agrees to pay the United States Treasury, within fifteen (15) days after entry of this Decree, thirty million dollars ($30,000,000.00). B. In addition, if one or more actions described in paragraph 11.D. remain incomplete as of the date that the last action is scheduled to be completed in the timetable approved by FDA pursuant to paragraph 11.D., then Wyeth shall pay to the United States Treasury 18.5% of the net sales generated by the sale of those products that i) are manufactured and distributed from the Marietta facility after that date and ii) may be affected by the action(s) that remain incomplete. Payments under this paragraph shall continue until the date that all of the actions have been completed to FDA's satisfaction. In the event that payments become due under this subparagraph, then, as of the timetable date for the last action, no further payments shall be required under paragraph 12, provided that Wyeth promptly makes the payments required by this subparagraph. C. The parties acknowledge that the payment(s) made under this paragraph are not a fine, penalty, forfeiture or payment in lieu thereof. 17. Within five (5) business days after the date of entry of this Decree and for a period of no less than twelve (12) months after the date of entry of this Decree, Wyeth shall assign an individual from or reporting directly to Wyeth's division-level QA/QC department, who is qualified by education, training, and experience to perform the functions described in this paragraph, to work on-site in the Marietta facility. This individual shall have full-time responsibility for monitoring whether employees in the Marietta facility are performing their functions and the facility is operating in accordance with applicable Wyeth SOPs relating to manufacturing, processing, packing, holding, and distributing drug and biological products, including, but not limited to, quality assurance and quality control functions. Each month this individual shall report his/her findings directly and concurrently to the Senior Vice-President, Regulatory Affairs and Compliance, the Senior Vice-President, Global Supply Chain, and the Senior Vice-President, Global Quality Assurance and Quality Control (all three of Wyeth-Ayerst Pharmaceuticals, Inc.), the Director of QA/QC of the Marietta facility, and the Managing Director of the Marietta facility. The employees identified in the previous sentence shall ensure that any adverse findings included in the report are promptly and appropriately addressed. 18. Within forty-five (45) days after the date of entry of this Decree, Wyeth shall submit to FDA an inventory and plan for retention or disposition of all in-process, bulk, and finished products that were manufactured at the Marietta facility before the date of entry of this Decree and that are within Wyeth's possession, custody, and control as of the date of entry of this Decree. Wyeth shall also propose a schedule of dates by which the plan will be completed. Wyeth's plan and schedule shall be subject to FDA's written approval. This paragraph does not apply to the Seized Articles, FluShield(R) (Influenza Virus Vaccine), Antivenin (Crotalidae) Polyvalent, Antivenin (Micrurus fulvius), Wydase(R) (hyaluronidase), and Dryvax(R) (Smallpox Vaccine), or to their intermediates or associated diluents or agents covered by approved applications for these products. 19.A. Within one hundred fifty (150) days after the date of entry of this decree, the expert consultant shall complete a record review for all approved, finished drug and biological products (other than the Antivenin (Crotalidae) Polyvalent) that were manufactured, in whole or in part, at the Marietta facility before the date of entry of this Decree and that will remain within expiration date at the conclusion of the one hundred fifty (150) day period, and have been distributed but not withdrawn or recalled from the market. The records to be reviewed shall include batch production records, protocols, studies, and reports, including, but not limited to, General Technical Reports, Product Stability/Retained Product Reports, and Service Request Records that contain or reference information that potentially adversely affects the quality of the drug and/or biological products. The expert consultant shall review these records and shall prepare and deliver a report concurrently to the President and Senior Vice-President, Regulatory Affairs and Compliance of Wyeth-Ayerst Pharmaceuticals, Inc., and FDA's Philadelphia District Office. The written report shall include, at a minimum: (1) a line list of deviations from written procedures found in the records; (2) an assessment of the following: whether an adequate investigation was conducted with respect to the deviations, including an explanation of corrective actions with respect to the deviations; whether such investigation was conducted in a timely manner; whether required records, including in-process monitoring records, are being retained as required by Wyeth's SOPs; (3) a review of glass vial acceptance examinations to determine whether lots not meeting acceptance criteria were used in production; (4) a review of records to determine whether adequate investigations were conducted into any defects and/or process deviations that could affect of container-closure integrity; and (5) a report of deviations and/or problems that QA failed to note or address during the QA review of batch production records for release of product. If the expert consultant identifies any batches for which the deviations, in the judgment of the expert consultant, may adversely affect the safety, identity, strength, quality, and purity of the of the product, then he/she shall immediately notify Wyeth in writing. B. Within twenty (20) days of receiving the report described in the third sentence of paragraph 19.A., Wyeth's Senior Vice-President, Regulatory Affairs and Compliance shall prepare and submit to FDA's Philadelphia District Office a plan and a proposed timetable detailing actions that Wyeth intends to take with respect to those batches the quality of which the expert consultant has determined may have been adversely affected. Wyeth's Senior Vice-President, Regulatory Affairs and Compliance shall also send a copy of the plan and timetable to the President of Wyeth-Ayerst Pharmaceuticals, Inc. The plan and timetable are subject to FDA approval. Nothing in this paragraph modifies Wyeth's obligations under 21 C.F.R. ss.ss. 314.81 and 600.14. THE PEARL RIVER FACILITY 20.A. Within ten (10) days of the date of entry of this Decree, Wyeth shall retain an expert consultant to inspect the Pearl River facility. B. Within twenty (20) days after the date of entry of this Decree, Wyeth shall cause the expert consultant to commence a comprehensive inspection of the Pearl River facility to ensure that the methods, facilities, and controls used for manufacturing, processing, packing, holding, and distributing drug and biological products comply with applicable laws and regulations. (However, this inspection is not required to address validation of those manufacturing processes that are specifically addressed in paragraph 25.) The inspection shall be completed no later than one hundred fifty (150) days after the date of entry of this Decree. In preparation for this inspection, the expert consultant shall review all Forms FDA 483 issued to Wyeth regarding the Pearl River facility since January 1997, and Wyeth's actions taken in response thereto. The expert consultant's inspection shall include, at a minimum, a review of the areas described in paragraph 11.B.(1)-(7). C. Within twenty (20) days of the completion of the inspection, the expert consultant shall prepare a detailed written report of his/her inspection, which addresses each of the matters described in paragraph 11.B.(1)-(7) and whether the aforementioned Form FDA 483 observations have been corrected, and submit the inspection report concurrently to the President and Senior Vice-President, Regulatory Affairs and Compliance of Wyeth-Ayerst Pharmaceuticals, Inc. and FDA. D. Within forty-five (45) days of receipt of the expert consultant's report on the inspection of the Pearl River facility, Wyeth shall submit a written report to FDA that details the specific actions Defendants will take and a timetable to address the expert consultant's observations. The timetable shall be subject to FDA approval. Defendants shall ensure the implementation of the actions detailed in the report. E. As the actions detailed in the report described in subparagraph D are completed, Wyeth shall notify the expert consultant. The expert consultant shall promptly inspect and verify whether those actions have been completed to the expert consultant's satisfaction and in accordance with the timetable approved by FDA. If the expert consultant determines that an action has not been completed to the expert consultant's satisfaction, he/she promptly will so notify Wyeth. Beginning twenty (20) days after the submission of the plan and timetable to FDA under subparagraph D and thereafter on the first day of each month, the expert consultant shall submit to FDA a table that succinctly summarizes his/her findings regarding whether the actions have been completed to the expert consultant's satisfaction and in accordance with the timetable approved by FDA. FDA may, in its discretion and without prior notice, periodically inspect the Pearl River facility and undertake such additional examinations, reviews, and analyses (as provided in paragraphs 32 and 33) to verify whether the actions reported to have been completed have in fact been completed in a satisfactory manner. In the event that FDA determines that an action that has been reported to be completed is inadequate, FDA will notify Defendants in writing, and Defendants shall take appropriate action in accordance with a timetable that is subject to approval by FDA. F. When the expert consultant determines that all of the actions identified in the timetable approved by FDA pursuant to subparagraph D have been completed to the expert consultant's satisfaction, the expert consultant shall provide Defendants with a written certification that all of the actions have been completed and that the Pearl River facility, based on the inspection conducted under paragraph 20.B. and on the satisfactory completion of the actions identified under paragraph 20.D., is in conformity with applicable laws and regulations and this Decree. Once the certification has been issued, Wyeth shall promptly submit the expert consultant's certification to FDA. G. Within forty-five (45) days of receipt of the certification, FDA may, in its discretion and without prior notice, commence an inspection of the Pearl River facility and undertake such additional examinations, reviews, and analyses (as provided in paragraphs 32 and 33) as the Agency deems appropriate to determine whether the Pearl River facility is in conformity with applicable laws and regulations (with the exception of the validation of those manufacturing processes that are specifically addressed in paragraph 25) and this Decree. If FDA determines that the Pearl River facility is not operating in conformity with applicable laws and regulations, FDA will notify Defendants of the deficiencies it observed and take such other action, if any, as the Agency deems appropriate (e.g., issuing an order pursuant to paragraph 29 or a notice under 21 C.F.R. ss. 601.5(b)). H. Within thirty (30) days of receiving the notification from FDA under subparagraph G, Wyeth shall submit to FDA a plan of actions Defendants propose to take and a timetable for correcting the deficiencies. The timetable shall be subject to FDA approval. Defendants shall promptly correct all deficiencies noted by FDA in accordance with the FDA-approved timetable, and cause the expert consultant to reinspect and either (i) certify that the deficiencies have been corrected to assure that the manufacturing facility is in conformity with applicable laws and regulations, or (ii) notify Defendants that the one or more deficiencies remain uncorrected. If one or more deficiencies have not been corrected, Defendants and the expert consultant shall follow the procedures in paragraph 37 until the expert consultant issues the certification. Wyeth shall then submit the certification to FDA. Within forty-five (45) days of FDA's receipt of the certification, FDA may reinspect as it deems necessary. I. FDA's New York District Office will, as described in subparagraphs (1) and (2) below, notify Defendants in writing that the manufacturing, processing, packing, holding, and distribution of drugs and biological products at the Pearl River facility appear to be in conformity with applicable laws and regulations (with the exception of the validation of those manufacturing processes that are specifically addressed in paragraph 25) and the portions of this Decree relating to the Pearl River facility. (1) If FDA conducts an inspection (or re-inspection) pursuant to subparagraphs G and/or H and finds that the manufacturing, processing, packing, holding, and distribution of drugs and biological products at the Pearl River facility appear to be in conformity with applicable laws and regulations and the portions of this Decree relating to the Pearl River facility, this notice will be issued within sixty (60) days after completion of such inspection. (2) If FDA elects not to conduct an inspection pursuant to subparagraph G or a reinspection pursuant to subparagraph H, this notice will be issued within forty-five (45) days after receipt of the expert consultant's certification under subparagraph F. J. Wyeth may choose to satisfy the requirements of paragraph 20 on separate schedules for those Pearl River facilities in which biological products and non-biological drug products, respectively, are manufactured, processed, packed, and held. If Wyeth so chooses, FDA will act on the expert consultant's separate certifications in accordance with the time frames in subparagraphs G, H, and I. 21. In the event that Defendants fail, as determined either by the expert consultant or FDA, to satisfactorily complete one or more actions in the timetable approved by FDA pursuant to paragraph 20.D, Wyeth shall pay to the United States Treasury as liquidated damages the sum of $15,000 per action, per business day, until the action is fully implemented and completed to FDA's satisfaction. 22.A. Within fifteen (15) days of the date of entry of this Decree, Wyeth shall submit to FDA a proposed statistical sampling plan that will be used for selecting batches of approved finished biological products produced at the Pearl River facility for batch record review prior to release, as described in subparagraph B. The statistical sampling plan shall be prepared by the expert consultant and shall describe the method of selection and the number of batch production records to be reviewed. The statistical sampling plan shall be subject to FDA approval. If FDA notifies Wyeth that it does not approve the statistical sampling plan as submitted by Wyeth, Wyeth shall submit a revised statistical sampling plan within five (5) business days of receipt of FDA's notice. B. With respect to approved finished biological products that are manufactured at the Pearl River facility between the date on which Wyeth receives written notice of FDA's approval of the statistical sampling plan and the date on which Defendants receive the notification in paragraph 20.I., the expert consultant shall review a sample of finished product production records selected pursuant to the approved statistical sampling plan and shall prepare and deliver a report for each batch included in the sample to Wyeth's Senior Vice President, Regulatory Affairs and Compliance and to the Director of QA/QC of the Pearl River facility. The scope of the records to be reviewed and the contents of the expert consultant's report shall be the same as described in paragraph 15. After reviewing the expert consultant's report for a particular batch, the Director of QA/QC of the Pearl River facility shall determine whether the batch should be released for distribution. MANAGEMENT CONTROLS 23.A. Wyeth shall retain an expert consultant to prepare a detailed written report on management controls at the Marietta and Pearl River facilities. The report shall be delivered to the President of Wyeth-Ayerst Pharmaceuticals, Inc. within one hundred twenty (120) days after the date of entry of this Decree. This written report shall, at a minimum: (1) Describe Wyeth's current organizational structure and the specific responsibilities of each Wyeth department, division-level and site-level, that is involved in manufacturing of drugs or biological products at the Marietta and Pearl River facilities; (2) Assess the role and personnel resources of Wyeth's QA/QC units, division-level and site-level, including the units' current role in detecting and/or correcting all deficiencies and noncompliance with Wyeth's SOPs at the Marietta and Pearl River facilities; and (3) Evaluate whether personnel responsible for directing and conducting the manufacture and quality control of drugs and biological products at the Marietta and Pearl River facilities are adequate in number and qualifications (education, training, and experience, or a combination thereof) to ensure compliance with applicable laws and regulations and this Decree. B. The President of Wyeth-Ayerst Pharmaceuticals, Inc. shall, within thirty (30) days of receipt of the expert consultant's report under subparagraph A, submit to FDA a copy of the report together with a description of the actions Wyeth proposes to take in response to the report and a timetable for completing those actions. The timetable is subject to approval by FDA. WYETH QA/QC REVIEW 24.A. Wyeth shall retain an expert consultant to undertake a division-wide assessment of Wyeth's QA/QC program(s). For each of the various facilities at which Wyeth manufactures, processes, packs, and holds drugs and/or biological products for distribution in interstate commerce, as defined in 21 U.S.C. ss. 321(b), the expert consultant, within one hundred eighty (180) days after the date of entry of this Decree, shall: (i) assess the adequacy of Wyeth's proposed QA/QC policies; (ii) determine whether Wyeth has a plan to prepare and implement division-level QA/QC policies and to translate them into written SOPs; (iii) evaluate Wyeth's progress in implementing that plan; (iv) audit an appropriate sample of failure investigations at each of the facilities, including assessments of whether such investigations include analysis of other batches of the same product, other products that may have been affected, and similar previous occurrences, to assess whether the failure investigations are adequate in scope, depth, and timeliness; and (v) report to Defendants in writing on items (i)-(iv). The expert consultant's report shall include a statement of the methodology used to determine the appropriate sample size and selection for item (iv). B. Within sixty (60) days of receipt of the expert consultant's report(s), Wyeth shall submit a copy of the report(s) and a description of actions Defendants propose to take in response to the report(s) and a timetable for completing those actions to the Director, Office of Compliance and Biologics Quality ("OCBQ"), Center for Biologics Evaluation and Research ("CBER"); the Director, Office of Compliance, Center for Drugs Evaluation and Research ("CDER"); and to the Director of each FDA District Office in which Wyeth manufactures drug or biological products. The timetable shall be subject to FDA approval by the Director, OCBQ, CBER, and the Director, Office of Compliance, CDER. VALIDATION 25. Within sixty (60) days after the date of entry of this Decree, Wyeth, working with the expert consultant, shall submit to FDA a proposed validation plan for accomplishing validation of Wyeth's bulk manufacturing processes used to manufacture finished drugs and biological products at the Marietta and Pearl River facilities. The validation plan submitted for each facility shall: (a) identify the specific manufacturing processes that remain to be validated and the products affected by such processes, with the exception of protocols for biological products already submitted to FDA, and (b) include a proposed validation schedule for each facility, which shall be subject to FDA approval. Wyeth then shall execute and complete validation studies in accordance with the FDA-approved validation schedule. Within forty-five (45) days of receipt of an inspection report under paragraph 11.C. or 20.C., Wyeth may propose an amended validation plan and schedule for the applicable facility, together with a justification for the proposed amendments. The proposed amendments to the plan and schedule are subject to FDA approval. 26. Until notified otherwise by FDA, Wyeth shall retain an expert consultant to review on an on-going basis all validation protocols for validation studies at the Marietta and Pearl River facilities that have not been initiated as of the date of entry of this Decree and those that have been initiated but not completed, including, but not limited to, those studies included in the validation schedule in paragraph 25. A. For each validation study that has not been initiated or that has been initiated but not completed on or before the date of entry of this Decree, the expert consultant shall determine whether the validation protocol clearly states how the validation study is to be conducted, including test parameters, product characteristics, production equipment, and decision points on what constitutes acceptable test results. If the expert consultant finds the protocol to be inadequate, Wyeth shall revise the protocol. B. Within thirty (30) days of the completion of each validation study, the expert consultant shall evaluate whether the protocol was adhered to during its execution (and if not, what deviations occurred and what effects the deviations had on the results of the study), and review the results of the study. Depending on the results of the expert consultant's evaluation, the expert consultant shall either i) provide Wyeth with a certification that an adequate validation has been completed, or ii) if the expert consultant finds any deficiencies, submit a written report of findings to Wyeth. Wyeth shall investigate the deficiencies and revalidate as the expert consultant deems necessary. C. Once the expert consultant has determined that an adequate validation has been completed, he/she shall issue a certification, including the date on which the validation was completed, and Wyeth shall submit the expert consultant's certification to FDA. D. After receiving the expert consultant's certification(s), FDA may request a copy of any completed validation package(s) (data and summary report), including the expert consultant's evaluation of the protocol and the study results, for review and Wyeth shall submit the requested package(s) to FDA within seven (7) days of such request. If FDA finds deficiencies in the validation package, FDA shall so notify Wyeth, and Wyeth shall revalidate (or take other corrective action) as FDA deems necessary in accordance with a schedule approved by FDA. 27. In the event that Wyeth fails, as determined by either the expert consultant or FDA, to prepare an adequate validation or revalidation protocol (as appropriate) and to properly execute and complete the validation or revalidation study in accordance with the schedules approved by FDA pursuant to paragraphs 25 and 26, Wyeth shall pay to the United States Treasury as liquidated damages the sum of $15,000 for each validation and revalidation study that is not completed, per business day, until the study is completed. YEARLY INSPECTIONS BY THE EXPERT CONSULTANT 28.A. Wyeth shall retain an expert consultant to inspect the Marietta and Pearl River facilities, in accordance with the schedule set forth in this paragraph, to ensure that the methods, facilities, and controls used for manufacturing, processing, packing, holding, and distributing drugs and biological products comply with applicable laws and regulations and this Decree. As part of these inspections, the expert consultant shall assess the steps that have been taken to ensure that the QA/QC programs in place at the Marietta and Pearl River facilities comply with applicable laws and regulations and this Decree, including those matters set forth in paragraph 11.B. of this Decree. This assessment shall address the QA/QC failures, if any, that are described in the reports prepared pursuant to paragraphs 15, 19, and 22 of this Decree. The expert consultant shall prepare reports of these inspections outlining his/her inspectional findings and the state of compliance with applicable laws and regulations and shall submit these reports to Defendants no later than twenty (20) days after the date the inspection is completed. Within forty-five (45) days of receiving a copy of the expert consultant's inspection report, Wyeth shall submit to FDA a copy of that report, together with a description of the actions Wyeth proposes to take in response to the report, and a timetable for completing those actions. The proposed timetable shall be subject to FDA approval. B. The inspections required in this paragraph shall commence at the Marietta facility within one (1) year after issuance of the notification described in paragraph 11.I., and at the Pearl River facility within one (1) year after the issuance of the notification described in paragraph 20.I., and the inspections shall thereafter be conducted at each facility no less frequently than once a year for a period of three (3) years from those dates, for a total of four (4) inspections at each facility. IV. GENERAL PROVISIONS 29.A. If at any time after this Decree has been entered, FDA determines that, with respect to the Marietta and/or Pearl River facilities, Defendants have failed to comply fully with or have violated the FD&C Act, the PHS Act, applicable regulations, Wyeth's biological products licenses, new drug applications, or any provision of this Decree; or that any report, plan, SOP, or validation data prepared or submitted by Defendants pursuant to this Decree, or any measure implemented by Defendants to comply with this Decree, is inadequate to comply with the FD&C Act, the PHS Act, applicable regulations, Wyeth's SOPs, or the provisions of this Decree, FDA may, as and when it deems necessary, order Defendants in writing to take appropriate corrective actions, including but not limited to, ordering that Defendants immediately take one or more of the following actions with respect to the Marietta and/or Pearl River facilities or products manufactured, processed, packed, labeled, or held in, or distributed from, those facilities: (1) Revise, modify, or expand any report(s) or plan(s) prepared pursuant to this Decree; (2) Submit additional reports or information to FDA; (3) Submit any supplement to an existing drug or biological product application to FDA; (4) Cease manufacturing, processing, packing, holding, and/or distributing drugs and/or biological products; (5) Recall drugs and/or biological products in accordance with procedures identified by FDA; or (6) Take any other corrective action(s) as FDA, in its discretion, deems necessary to bring Defendants and Wyeth's drugs and/or biological products into compliance with the FD&C Act, PHS Act, applicable regulations, and this Decree. Any order issued pursuant to this paragraph shall issue from the Philadelphia District Director or the New York District Director, as appropriate, in accordance with FDA's internal procedures, and shall specify the deficiencies or violations giving rise to the order. B. Unless a different time frame is specified by FDA in its order, within ten (10) business days after receiving an order pursuant to subparagraph A, Defendants shall notify FDA in writing either that (1) Defendants are undertaking or have undertaken corrective action, in which event Defendants also shall describe the specific action taken or to be taken and the schedule for completing the action; or (2) Defendants do not agree with FDA's order. If Defendants notify FDA that they do not agree with FDA's order, Defendants shall explain in writing the basis for their disagreement; in so doing, Defendants also may propose specific alternative actions and specific time frames for achieving FDA's objectives. C. If Defendants notify FDA that they do not agree with FDA's order, FDA will review Defendants' notification and thereafter, in writing, affirm, modify, or withdraw its order, as the Agency deems appropriate. D. If FDA affirms or modifies its order, Defendants shall, upon receipt of FDA's order, immediately implement the order (as modified, if applicable), and, if they so choose, bring the matter before this Court on an expedited basis. Defendants shall continue to diligently implement FDA's order, unless the Court issues an order to the contrary. Any matter brought before this Court shall be based exclusively on the record before FDA at the time the order in dispute was issued pursuant to subparagraph C. No discovery shall be taken by either party. 30. After FDA issues the notifications pursuant to paragraphs 11.I. and 20.I., Wyeth-Ayerst Laboratories Division of American Home Products Corporation, Wyeth-Ayerst Pharmaceuticals, Inc., Bernard Poussot, John Bucceri, and Roy Sturgeon, Ph.D., the Managing Director of the Marietta facility, and each and all of Wyeth-Ayerst Laboratories Division of American Home Products Corporation's and Wyeth-Ayerst Pharmaceuticals, Inc.'s officers, agents, employees, representatives, successors, assigns, and attorneys, and those persons in active concert or participation with any of the Defendants who receive actual notice of this Decree by personal service or otherwise, shall be permanently enjoined under 21 U.S.C. ss. 332(a) from directly or indirectly causing to be introduced or delivered into interstate commerce any drug or biological product that is adulterated within the meaning of 21 U.S.C. ss. 351(a)(2)(B), or from causing the adulteration of any drug or biological product while such drug or biological product is held for sale after shipment of one or more of its components in interstate commerce. 31.A. All communications required to be sent to FDA under this Decree shall be prominently marked "Decree Correspondence." Unless otherwise specified herein, all reports shall be sent to the Director, Office of Compliance and Biologics Quality, HFM-600, Center for Biologics Evaluation and Research, 1401 Rockville Pike, Suite 200 N, Rockville, MD 20852-1448 and to the Director, Office of Compliance, HFD-300, Center for Drugs Evaluation and Research, MPN1, 7520 Standish Place, Rockville, MD, 20855-2737. Those communications that pertain in whole or in part to the Marietta facility also shall be sent concurrently to the Director, Philadelphia District Office, HFR-CE100, FDA, 900 U.S. Customhouse, 2nd and Chestnut Streets, Philadelphia, PA 19106. Those communications that pertain in whole or in part to the Pearl River facility shall be sent concurrently to the Director, New York District Office, HFR-NE100, 300 Pearl Street, Suite 100, Buffalo, NY 14202. B. All notifications and other communications required to be sent to Wyeth under this Decree shall be marked "Decree Correspondence" and shall be sent by U.S. mail and, if practicable, by facsimile or electronic mail, to the Director of the Consent Decree Compliance Task Force at 555 East Lancaster Avenue, St. Davids, PA 19087. All notifications and other communications required to be sent to Defendants under this Decree shall be marked "Decree Correspondence" and shall be sent to Wyeth, and to Bernard Poussot, P.O. Box 8299, Philadelphia, PA 19101 or 555 East Lancaster Avenue, St. Davids, PA 19087, John V. Bucceri, P.O. Box 8299, Philadelphia, PA 19101 or 555 East Lancaster Avenue, St. Davids, PA 19087, and Roy J. Sturgeon, Ph.D., 240 Radnor Chester Road, St. Davids, PA 19087. 32. Wyeth shall reimburse FDA for the costs of all FDA inspections, examinations, analytical work, and review work that FDA deems necessary to evaluate Defendants' compliance with any part of this Decree with respect to drug and/or biological products manufactured at the Marietta and Pearl River facilities at the standard rates prevailing at the time the activities are accomplished. As of the date that this Decree is signed by the parties, these rates are: $59.90 per hour and fraction thereof per representative for inspection work, $71.79 per hour or fraction thereof per representative for analytical or review work, $0.325 per mile for travel expenses by automobile, government rate or the equivalent for travel by air, and the published government per diem rate or the equivalent for the areas in which the inspections are performed per day per representative for subsistence expenses, where necessary. FDA shall submit a reasonably detailed bill of costs to Wyeth at the address specified in paragraph 31.B. In the event that the standard rates applicable to FDA supervision of court-ordered compliance are modified, these rates shall be increased or decreased without further order of the Court. 33. Defendants shall, as and when FDA deems necessary to ensure compliance with this Decree, and without prior notice or regard to inspection dates specified elsewhere in this Decree, permit duly authorized FDA representatives to make inspections of the Marietta and Pearl River facilities, including all drugs and biological products and equipment therein, finished and unfinished materials, containers, labeling, records (including, but not limited to, all computer hardware and software, computer printouts, raw data and laboratory data generated in connection with the expert consultant's reports identified above), files, papers, SOPs, and processes and controls; to take photographs; to collect samples of any drugs and biological products; and to copy any of the foregoing records. FDA will provide Wyeth with a receipt for any samples taken pursuant to 21 U.S.C. ss. 374(c) and with copies of any photographs made. The costs of all such inspections, record reviews, and sample analyses shall be borne by Wyeth at the rates specified above in paragraph 32. The inspections described in this Decree shall be permitted upon presentation of a copy of this Decree and appropriate credentials. The inspection authority described in this paragraph shall be separate and apart from, and in addition to, statutory authority to make inspections under the FD&C Act and the PHS Act. 34.A. Within fifteen (15) days after the date of entry of this Decree, Wyeth shall deliver copies of this Decree to each of its officers, and to those employees and all other persons who are in active concert or participation with Wyeth's CGMP-related operations in the manufacture of drugs and biological products at either of the Marietta or Pearl River facilities. Also, within ten (10) days after the date of entry of this Decree, Wyeth shall prominently post a copy of this Decree in the employee common areas in the Marietta and Pearl River facilities so that it is accessible to all employees who are involved in such CGMP-related operations. Wyeth shall ensure that the Decree remains posted in the employee common areas for a period of no less than twenty-four (24) months. If any person begins employment at the Marietta or Pearl River facilities in areas involving compliance with CGMP at a time subsequent to the periods described above, Wyeth shall, within ten (10) days of the commencement of such employment, deliver a copy of this Decree to such person. B. Within thirty (30) days after the date of entry of this Decree, Wyeth shall provide to the District Director, Philadelphia District Office, an affidavit stating the fact and manner of its compliance with this paragraph, identifying the names and positions of all persons receiving copies of the Decree pursuant to the first sentence of subparagraph A. Thereafter, within ten (10) days of receiving a request from FDA for any information or documentation that FDA deems necessary to evaluate compliance with this paragraph, Wyeth shall provide such information or documentation to FDA. 35.A. Wyeth shall notify FDA in writing at least fifteen (15) days before any of the following events, if the event may affect Defendants' obligations arising out of the Decree: (1) reorganization, bankruptcy, dissolution, or assignment or sale resulting in the emergence of a successor; (2) the creation or dissolution of subsidiaries; or (3) any other change of the corporate structure or function of Wyeth. B. Wyeth shall serve a copy of this Decree on any prospective purchaser or assignee at least fifteen (15) days prior to such an assignment or change in ownership. Wyeth shall furnish FDA with an affidavit of compliance with this paragraph sworn to by the President of Wyeth-Ayerst Pharmaceuticals, Inc. no later than ten (10) days prior to such assignment or change in ownership. 36. All expert consultants required to be retained pursuant to this Decree shall be qualified by education, training, and experience to perform the functions for which they are retained (e.g., to inspect sterile and aseptic manufacturing processes, to conduct investigations, to design appropriate procedures, controls, and SOPs, and to prepare reports) and shall otherwise be knowledgeable in CGMP. In addition, all such expert consultants shall be retained at Wyeth's expense and shall be without personal or financial ties (other than consulting agreements between the parties or indirect ownership of American Home Products Corporation stock, e.g., through diversified mutual funds or pension plans) to Defendants or their immediate families. 37. Whenever this Decree requires an expert consultant to certify to a matter, and the expert consultant determines that he/she is unable to make that certification, he/she will so notify Wyeth and state the reasons therefor in writing. After Wyeth has addressed those reasons, the expert consultant shall determine whether he/she may make the certification. This process shall continue until the certification is made. 38. All destruction of drugs or biological products pursuant to this Decree shall be conducted in a manner that complies with the requirements of the National Environmental Policy Act of 1969. 39. All decisions conferred upon FDA in this Decree shall be vested in the discretion of FDA, and, in the event of a decision adverse to any of the Defendants, shall include a written explanation of FDA's reasons. Defendants shall abide by the decisions of FDA, and FDA's decisions shall be final. FDA's decisions under this Decree shall be reviewed by this Court under the arbitrary and capricious standard set forth in 5 U.S.C. ss. 706(2)(A). 40. Wyeth may at any time petition FDA to extend any time frame or revise any schedule provided for in this Decree, and FDA may, in the exercise of its discretion, grant such an extension without seeking leave of court. However, any such petitions shall not become effective or stay the impositions of any payments under this Decree unless granted by FDA in writing. 41. FDA will either approve or disapprove any timetable or schedule submitted to the Agency pursuant to paragraphs 11, 18-20, 23-26, and 28 of this Decree within twenty (20) days of FDA's receipt of the proposed timetable or schedule. FDA may, if it so chooses, approve a timetable or schedule in part and disapprove it in part. If a timetable or schedule is disapproved in whole or in part, FDA will include a written explanation of its reasons. Within seven (7) business days of receipt of FDA's disapproval (in whole or in part) of a timetable or schedule, Wyeth may offer a modification of or justification for the proposal. Within seven (7) business days of receipt of Wyeth's modification or justification, FDA will notify Wyeth in writing of the Agency's final decision on the timetable or schedule. 42.A. For purposes of paragraphs 12, 21, and 27, if Wyeth submits the expert consultant's certification that (1) a deficiency has been corrected or that a validation or revalidation study has been completed, as applicable, and (2) such correction or validation or revalidation study was completed on or before the date in the timetable for that activity approved by FDA, it shall be assumed that the activity was completed by the timetable date, unless and until FDA notifies Wyeth to the contrary under subparagraph B of this paragraph. If the completion date stated by the expert consultant is after the date on which the activity was scheduled to be completed in the timetable for that activity approved by FDA, payment shall be due for each business day that the activity was not completed, commencing on the first business day after the date on which the activity was to be completed according to the timetable approved by FDA and ending on (and including) the actual completion date. B. If after an inspection or review of information FDA notifies Defendants in writing that one or more activities were not satisfactorily completed by the timetable dates described in paragraphs 11.D., 20.D., 25, and 26, payment shall be due for each activity (i.e., correction or validation or revalidation study) for each business day commencing on the first business day after Defendants receive the notice and ending on (and including) the completion date re-certified to by the expert consultant. C. Duplicate payments under paragraphs 12 and 27 or under paragraphs 21 and 27 shall not be imposed for the identical validation study. D. The total payments under paragraphs 12, 21, and 27 shall not exceed five million dollars ($5,000,000.00). 43. Wyeth shall notify FDA in writing within three (3) business days of any decision to suspend manufacturing for a period of more than fourteen (14) days outside of the usual production schedule or a decision to discontinue manufacturing of any drug or biological product at the Marietta or Pearl River facilities. 44. Defendants' obligations under this Decree do not modify or absolve Defendants from any obligation to comply with the FD&C Act, PHS Act, or any other federal statute or regulation. Nothing in this Decree shall affect FDA's authority to suspend or revoke Wyeth's biologicals licenses pursuant to 21 C.F.R. ss.ss. 601.5 and 601.6 or to withdraw Wyeth's new drug applications or abbreviated new drug applications pursuant to 21 C.F.R. ss. 314.150. 45. The use of "Defendants" collectively in this Decree to include the Managing Director of the Marietta facility recognizes that the Managing Director of the Marietta facility is used in this Decree to refer to the individual holding that position and that such individual may change from time to time. For purposes of paragraphs 20, 21, and 24 and for reports prepared pursuant to paragraph 28 regarding the Pearl River facility, the term "Defendants" does not apply to the Managing Director of the Marietta facility. 46. The obligations under this Decree of each individual named herein shall apply only to the extent of his authority, responsibilities, and conduct within a division or subsidiary of American Home Products Corporation. If, and for so long as, an individual Defendant or an employee of Wyeth ceases to be employed by or act on behalf of any division or subsidiary of American Home Products Corporation, then that Defendant or employee shall not be subject to the terms of this Decree except as to such individual's act(s) or failure(s) to act under this Decree prior to the time such individual ceased to be employed by or to act on behalf of any division or subsidiary of American Home Products Corporation. 47. If Defendants petition the Court for relief from this Decree and, at the time of the petition, in FDA's judgment, Defendants have maintained at the Marietta and Pearl River facilities a state of continuous compliance with applicable laws and regulations, Wyeth's SOPs, and this Decree for the preceding sixty (60) months, Plaintiff will not oppose such petition. 48. This Court shall retain jurisdiction over this action and the parties hereto for the purpose of enforcing and modifying this Decree and for the purpose of granting such additional relief as may be necessary and appropriate. If any Defendant violates this Decree and is found in civil or criminal contempt thereof, that Defendant shall, in addition to other remedies, reimburse the United States for its attorney's fees, investigational expenses, and court costs relating to contempt proceedings related to that Defendant. Dated this 3 day of Oct., 2000. /s/ James H. Jarvis II - --------------------------------------- UNITED STATES DISTRICT JUDGE We hereby consent to the entry of the foregoing: FOR DEFENDANTS: FOR PLAINTIFF: _________________________ David W. Ogden, Assistant Bernard J. Poussot, individually Attorney General and on behalf of Wyeth-Ayerst Civil Division Laboratories Division of U.S. Department of Justice American Home Products Corporation Wyeth-Ayerst Pharmaceuticals, Inc., and Wyeth-Ayerst Laboratories Puerto Rico, Inc. Gerald C. Kell Senior Trial Counsel Office of Consumer Litigation Richard Cooper Civil Division Williams & Connolly LLP U.S. Department of Justice 725 12th Street, N.W. P.O. Box 386 Washington, D.C. 20005 Washington, D.C. 20044 (202) 434-5466 (202) 514-1586 Counsel for Bernard J. Poussot Carl K. Kirkpatrick as an individual United States Attorney - ------------------------- ---------------------------- John V. Bucceri Cynthia F. Davidson Assistant United States Attorney 800 Market Street _________________________ Suite 211 Roy J. Sturgeon, Ph.D. Knoxville, TN 37902 (865) 545-4167 _________________________ Of Counsel: Bruce N. Kuhlik Covington & Burling Margaret Jane Porter 1201 Pennsylvania Avenue, N.W. Chief Counsel P.O. Box 7566 Washington, D.C. 20044-7566 Paige Harrison Taylor (202) 662-6000 Associate Chief Counsel 5600 Fishers Lane, Rm. 7-77 Counsel for John V. Bucceri Rockville, MD 20857 and Roy J. Sturgeon, Ph.D. (301) 827-1161 - ------------------------- William W. Vodra Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004-1206 (202) 942-5088 Attorney for Wyeth-Ayerst Laboratories Division of American Home Products Corporation, Wyeth-Ayerst Pharmaceuticals, Inc., and Wyeth-Ayerst Laboratories Puerto Rico, Inc. ~~-----END PRIVACY-ENHANCED MESSAGE-----~~