EXHIBIT 10.7
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SETTLEMENT AGREEMENT
THIS AGREEMENT ("Agreement") made on this 30th day of December, 2003
by and between Chattem, Inc. ("Chattem") and its directors, officers,
shareholders, agents, employees, assigns and persons and entities acting
through, under or on behalf of any of them and any and all persons or entities
named as insureds or alleged to be an insured, and Admiral Insurance Company
("Admiral") and its directors, officers, shareholders, agents and employees and
persons and entities acting through, under or on behalf of any of them.
WHEREAS, Admiral issued Commercial Liability Policy No. A98AG05748
("1998 Policy") and Commercial Liability Policy No. A99AG07865 (the "1999
Policy"), including the Supplemental Extended Reporting Period pertaining to the
1999 Policy (the 1998 Policy, 1999 Policy and the Supplemental Extended
Reporting Period collectively are referred to as the "Policies"); and
WHEREAS,Chattem has asserted that Admiral is responsible to pay and
indemnify Chattem (the "Coverage Claim") pursuant to the Policies for certain
claims in which third-parties assert that they have suffered injury as a result
of their ingestion of Chattem's Dexatrim product ("Dexatrim Claims"); and
WHEREAS, there is a dispute between Chattem and Admiral with respect
to the nature and extent of the obligations of Admiral under the Policies to
defend and indemnify Chattem with respect to the Dexatrim Claims; and
WHERE AS, the Coverage Claim is a subject of pending litigation
involving Chattem and Admiral in an action entitled ▇▇▇▇▇▇ Indemnity Ins. Co. V.
Chattem, Inc., et al., United States District Court, Eastern District at
Tennessee at Chattanooga, TN No. 1:03-CV264 (hereinafter "Pending Litigation");
and
WHEREAS, other insurers of Chattem are parties in the Pending
Litigation and have asserted or may assert claims sounding in tort,
contribution, indemnity and/or equitable subrogation among themselves and
against Admiral with respect to the Dexatirm Claims; and
WHEREAS, the parties believe that it is in their mutual interest to
reach an amicable resolution with respect to all doubtful and disputed claims
for which there are bonafide issues in controversy, including but not limited to
the Coverage Claim and claims related to Dexatrim and the issues raised in the
Pending Litigation, without admission or adjudication of any issue of fact or
law, and to resolve all past, present or future disputes relating to any of the
obligations of Admiral to Chattem under the Policies.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, Chattem and Admiral hereby
agree as follows:
1. In full and final settlement of the Coverage Claim, Admiral will pay
Chattem $2,085,000.00 which is intended to represent (i) the total
available settlement funds for the Supplemental Extended Reporting
Period referred to above ($885,000.00) as well as (ii) the total
reserves established and maintained by Admiral in connection with the
Policies referenced above ($1,200,000.00) for the settlement and
resolution of individual claims asserted against Chattem in the
underlying tort litigation, which may include the payment of any and
all reasonable costs of defense which may be incurred by Chattem from
December 6, 2003 forward. In no event, however, shall Admiral be
liable for the payment of any attorneys fees or costs after December
5, 2003. Such payment shall be made by wire transfer of five business
days' notice from Chattem as required to fund the global settlement
and/or individual settlements of the Dexatrim claims against Chattem.
The payment shall be paid to Chattem no later than December 31, 2003
and shall be paid into dedicated accounts as follows, which are
designated for the settlement of individual claims or for funding of
the global settlement: i) $1,200,000.00 to Account #0034195173:
Admiral Insurance Settlement Account for Chattem Inc's PPA, Product
Liability Cases, Claims Reported Prior to 5/31/01; and ii) $885,000.00
to Account #0034195181: Admiral Insurance settlement Account for
Chattem, Inc's PPA Liablility Cases, Claims Reported After 5/31/01.
2. Chattem does hereby forever fully and completely covenant not to ▇▇▇
for, and fully and completely releases Admiral from any and all claims
and /or liability under the Policies for any and all claims, demands,
rights, causes of action or liabilities under the Policies for any and
all claims, demands, rights, causes of action or liabilities arising
out of any past, present or future claim which it has or may have, now
or in the future, known or unknown, for damages and costs of any kind,
including punitive or other legal, statutory, common law,
extra-contractual, and/or equitable relief, or for costs and expenses
arising from or related to any and all claims whether past, present or
future and which directly or indirectly relate to the Policies,
including any and all claims of Chattem for reimbursement under the
Policies and/or for a defense and/or the payment of reasonable
attorneys fees and defense costs under the Policies or in anyway
related to the handling of and/or negotiation of Chattem's claim
against Admiral.
3. Chattem will DEFEND AND INDEMNIFY Admiral against any and all suits
and/or claims which have been made or which could be made in the
future by General Star Indemnity Company, ▇▇▇▇▇▇ Indemnity Insurance
Company and/or Interstate Fire & Casualty Company that allege that
Admiral improperly negotiated and/or settled Chattem's claims, if any,
against Admiral. Further, Chattem, will DEFEND AND INDEMNIFY Admiral
against any and all claims and/or suits by any person or entity
claiming by, through, under or on behalf of any of the reference
Admiral Policies, and further with respect to any claims attempting to
oblige Admiral
for the future payment of attorneys fees and/or reasonable costs of
defense in any manner inconsistent with this Agreement.
This indemnity provision does not apply 1) any claims asserted in
connection with the 1998 Policy, and 2) direct actions brought by or
on behalf of individual claimants in the Dexatrim tort litigation.
Should a claim be made against Admiral for any obligation recited in
this paragraph 3, Admiral agrees to so notify Chattem. Admiral
acknowledges that Chattem has the right to compromise and settle such
claim(s) as Chattem deems appropriate, at Chattem's sole cost and
expense.
4. Admiral is responsible for all fees, costs and expenses it has
incurred on its behalf only or may in the future incur on its behalf
only, in connection with the litigation captioned ▇▇▇▇▇▇ Indemnity
Ins. Co. v.Chattem, Inc., et al/., Docket No. 1:03-CV-264 (E.D. Tenn),
Including the claims potentially to be asserted by Interstate Fire &
Casualty Company.
5. Notwithstanding the agreements contained within paragraph 4 above,
Admiral agrees to reasonably cooperate, at its own expense, with
Chattem and its attorneys in its defense of the claim referenced in
paragraph 4 above, including reasonably making its underwriters and
claims representatives available for interviews and/or depositions,
and providing to Chattem the non-privileged portions of its claims and
underwriting files pertaining to the Policies, including any and all
materials concerning phenylpropanolamine. Chattem acknowledges and
agrees that all of Admiral's obligations and/or duties with respect to
defense or indemnification of claims against Chattem are as of
December 5, 2003 and by the payment of the settlement funds referenced
above legally concluded and ended, however, Admiral reserves the
right, at its sole discretion and cost, to participate and cooperate
with Chattem and Chattem's attorneys in the evaluation and settlement
of the individual claims brought against Chattem. Chattem agrees and
covenants that the settlement funds referenced above shall be used
solely to negotiate and settle individual tort claims against Chattem
in connection with the underlying Dexatrim litigation pending against
it.
6. Admiral covenants not to ▇▇▇ Chattem, Chattem's insurers or any other
entity to recover the payment set forth in paragraph 1 above, or any
other costs or expenses incurred by Admiral in connection with the
Dexatrim claims against Chattem.
7. Admiral is responsible for the payment of all reasonable costs of
defense incurred by or on behalf of Chattem for Dexatrim claims
covered under the Policies up through and including December 5, 2003.
Admiral will reasonably cooperate with Chattem's Dexatrim litigation
defense counsel
(▇▇▇▇▇▇ & ▇▇▇▇▇▇) to effectuate the efficient conclusion of Admiral's
defense obligations and to timely and efficiently support any
substitution of counsel. Chattem acknowledges that the advancement of
the monies referenced above toward the settlement of the underlying
Dexatrim tort claims pending against it terminates any further or
continuing obligation for Admiral in connection with the payment of
reasonable attorneys fees and costs of defense, and Chattem
acknowledges its responsibility for the payment of its attorneys fees
and costs of defense beginning December 6, 2003.
8. Chattem makes this Settlement Agreement and Release on behalf of
itself and all persons or entities insured under the Policies and/or
claiming by, under or through Chattem, and the release will apply to
Admiral and its agents, attorneys, employees, insurers, and
reinsurers.
9. This Agreement will be construed pursuant to Tennessee law, without
regard to Tennessee conflicts of law principles.
10. This Agreement shall be binding upon and inure to the benefit of the
parties hereto. Nothing in this Agreement is intended nor shall it be
construed to confer any benefit whatsoever on any persons other than
the parties. By entering into this Agreement, Chattem expressly does
not release, compromise or waive its claims against any other
insurance companies that issued its policies of insurance and reserves
its rights to pursue any claim for coverage against other insurance
companies.
11. This Agreement does not constitute an admission by Admiral of an
obligation to defend or indemnify Chattem with respect to any Policies
or any claim.
12. This Agreement shall not be admissible in any legal proceeding except
to enforce its terms.
13. Each of the parties has participated in the drafting of this Agreement
after consulting with counsel. Therefore, the language of this
Agreement shall not presumptively be construed in favor or against
either party.
14. This Agreement represents the entire understanding between the parties
and, without limitation, the parties expressly agree that any previous
communications, correspondence, or agreements are not to be employed
to construe this Agreement. Any other provisions of this Agreement to
the contrary notwithstanding, this Agreement can only be modified by a
writing signed by both parties and this provision cannot be orally
waived.
15. Chattem and Admiral respectively warrant and represent that they are
authorized to enter into this Agreement on their own behalf and on
behalf of their respective shareholders, directors, officers,
employees, and agents, assigns and all persons or entities acting
through or under any of them and that
they respectively have the authority to bind such persons and entities
to the terms of this Agreement. Chattem and Admiral also represent and
warrant that the persons whose signatures are affixed hereto are
authorized to sign this Agreement on behalf of their respective
corporations and have the legal authority to bind their respective
corporations hereto.
16. If any terms or provisions of this Agreement other than the provisions
of paragraphs 1-7 or the application of any term or provision other
than the provisions of paragraphs 1-7 of this Agreement to any person
or circumstances, shall, to any extent be invalid or unenforceable,
the remainder of this Agreement, or the application of such term of
provision to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereby, and
each such provision of this Agreement shall be valid and be
enforceable to the fullest extent permitted by the law.
17. This Agreement shall be executed in two (2) duplicate originals, with
Chattem to retain one (1) original and Admiral to retain one (1)
original.
IN WITHNESS WHEREOF, the parties, by their duly authorized
representatives, affix their signatures hereto.
Chattem, Incorporated
BY:
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▇▇▇▇ ▇▇▇▇▇▇ II
President
THE STATE OF TENNESSEE
COUNTY OF ▇▇▇▇▇▇▇▇
BEFORE ME, the undersigned authority, on this day personally
appeared ▇▇▇▇ ▇▇▇▇▇▇, II known to me to be the person whose
name is subscribed to the foregoing instrument, and
acknowledge to me that he signed the same for the purposes
and consideration therein expressed.
GIVEN under my hand and seal of office, this the 29th day of
December, 2003
Notary public in and for the state of Tennessee
My commission, expires
February 7, 2006
ADMIRAL INSURANCE COMPANY
BY:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior Vice President,
Admiral Insurance Company
THE STATE OF NEW JERSEY
COUNTY OF CAMDEN
BEFORE ME, the undersigned authority, on this day personally
appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ known to me to be the person
whose name is subscribed to the foregoing instrument, and
acknowledge to me that he signed the same for the purposes
and consideration therein expressed.
GIVEN under my hand and seal of office, this the 23rd day of
December, 2003
Notary public in and for the state of New Jersey
My commission, expires
February 5,2007
