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               C L A S S   A C T I O N   R E P O R T E R

               Monday, October 18, 1999, Vol. 1, No. 179

                                Headlines

3COM CORP: Reports On Securities Suits In CA In SEC Filing
ALZA CORP: Gold Bennett Files Securities Suit In Ill. To Enjoin Merger
ALZA CORP: Much Shelist Files Securities Suit In Ill. To Enjoin Merger
AMIR VIRANI: Atlanta RICO Real Estate Case Ends With $18.9M Verdict
BOEING: Asian Workers Sue In Superior Court In Seattle Over Racial Bias

CENDANT CORP: Appeal By American Bankers' Stockholders Pending At NJ Ct
DIGITAL LINK: CA Super. Ct. Denies Temp. Restraining Of Tender Offer
ERXLEBEN ASSOCIATES: Receiver Of Forex Int'l Sues Erxleben Associates
FEN-PHEN: AHP Files With SEC Memorandum Of Understanding Re Settlement
FEN-PHEN: NJLJ Says Opt-Outs Likely With Cap On Damages & No Punitives

HMO: TX Harris Methodist Settles Suit Over Misrepresentations For $4.7M
HOLOCAUST VICTIMS: Research Shows US Army Stole Art Works And Valuables
MATTEL INC: Berman, DeValerio Files Securities Suit In California
MATTEL INC: Cohen, Milstein Files Securities Suit In California
MATTEL INC: Milberg Weiss Files Securities Suit In California

MATTEL INC: Weiss & Yourman Files Securities Suit In California
MICHAEL SHEAHAN: Sheriff Wants To Replace Counsel In Strip-Search Case
OMTOOL LTD: Kaplan Kilsheimer Files Securities Suit In New Hampshire
RAYTHEON COMPANY: Abbey, Gardy Files Securities Suit In MA
RAYTHEON COMPANY: Abbey, Gardy Makes Announcement On MA Securities Suit

RAYTHEON COMPANY: Berman, DeValerio Files Securities Suit In MA
RAYTHEON COMPANY: Milberg Weiss Files Securities Suit In MA
RAYTHEON COMPANY: Wolf Popper Files Securities Suit In MA
SECURITY INDEMNITY: NJ Ap Ct Oks Insurer's Verdict; Agency DCA Settles
SUMITOMO CORP: NY Ct Oks $139 Mil Settlement For Copper Futures Case

TECH SQUARED: Sued For Agreeing To Acquisition By Digital River
UPS: Shareholder Files Class Action In Delaware To Block IPO
Y2K LITIGATION: Intuit Inc Contests CA & NY Suits Over Quicken Products

                              *********

3COM CORP: Reports On Securities Suits In CA In SEC Filing
----------------------------------------------------------
The Company discloses the following lawsuits in its SEC filing  for the
quarterly period ended August 27, 1999 (Commission File No. 0-12867):

On March 24 and May 5, 1997, securities class action lawsuits, captioned
HIRSCH V. 3COM CORPORATION, ET AL., Civil Action No. CV764977 (HIRSCH),
and KRAVITZ V. 3COM CORPORATION, ET AL., Civil Action No. CV765962
(KRAVITZ), respectively, were filed against 3Com and certain of its
officers and directors in the California Superior Court, Santa Clara
County. The complaints allege violations of Sections 25400 and 25500 of
the California Corporations Code and seek unspecified damages on behalf
of a class of purchasers of 3Com common stock during the period from
September 24, 1996 through February 10, 1997. The actions are in
discovery. No trial date has been set.

On February 10, 1998, a securities class action, captioned EUREDJIAN V.
3COM CORPORATION, ET AL., Civil Action No. C-98-00508CRB (EUREDJIAN),
was filed against 3Com and several of its present and former officers
and directors in United States District Court for the Northern District
of California asserting the same class period and factual allegations as
the HIRSCH and KRAVITZ actions. The complaint alleges violations of the
federal securities laws, specifically Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and seeks unspecified damages. The
plaintiffs have filed an amended complaint. 3Com has filed an answer to
the amended complaint. No trial date has been set.

In December 1997, a securities class action, captioned REIVER V. 3COM
CORPORATION, ET AL., Civil Action No. C-97-21083JW (REIVER), was filed
in the United States District Court for the Northern District of
California. Several similar actions have been consolidated into this
action, including FLORIDA STATE BOARD OF ADMINISTRATION AND TEACHERS
RETIREMENT SYSTEM OF LOUISIANA V. 3COM CORPORATION, ET AL., Civil Action
No. C-98-1355. On August 17, 1998, the plaintiffs filed a consolidated
amended complaint which alleges violations of the federal securities
laws, specifically Sections 10(b) and 20(a) of the Securities and
Exchange Act of 1934, and which seeks unspecified damages on behalf of a
purported class of purchasers of 3Com common stock during the period
from April 23, 1997 through November 5, 1997. In July 1999, the court
dismissed the complaint and granted the plaintiffs the right to file an
amended complaint. Plaintiffs have filed an amended complaint and
defendants have filed a motion to dismiss.

In October 1998, a securities class action lawsuit, captioned ADLER V.
3COM CORPORATION, ET AL., Civil Action No. CV777368 (ADLER), was filed
against 3Com and certain of its officers and directors in the California
Superior Court, Santa Clara County, asserting the same class period and
factual allegations as the REIVER action. The complaint alleges
violations of Sections 25400 and 25500 of the California Corporations
Code and seeks unspecified damages. The action is in discovery. No trial
date has been set.

In October 1998, two shareholder derivative actions purportedly on
behalf of 3Com, captioned SHAEV V. BARKSDALE, ET AL., Civil Action No.
16721-NC, and BLUM V. BARKSDALE, ET AL., Civil Action No. 16733-NC, were
filed in Delaware Chancery Court. The complaints allege that 3Com's
directors breached their fiduciary duties to 3Com through the issuance
of and disclosures concerning director stock options. 3Com is named
solely as a nominal defendant, against whom the plaintiffs seek no
recovery. 3Com and the individual defendants have filed a motion to
dismiss these actions.

On May 11, 1999, a securities class action, captioned GAYLINN V. 3COM
CORPORATION, ET AL., Civil Action No. C-99-2185 MMC (GAYLINN), was filed
against 3Com and several of its present and former officers and
directors in United States District Court for the Northern District of
California. Several similar actions have been consolidated into the
GAYLINN action.

On September 10, 1999, the plaintiffs filed a consolidated complaint
which alleges violations of the federal securities laws, specifically
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and
seeks unspecified damages on behalf of a purported class of purchasers
of 3Com common stock during the period from September 22, 1998 through
March 2, 1999. 3Com has not responded to the complaint.


ALZA CORP: Gold Bennett Files Securities Suit In Ill. To Enjoin Merger
----------------------------------------------------------------------
Gold Bennett & Cera LLP has filed a class action complaint to recover
damages in the United States District Court for the Northern District of
Illinois on behalf of a class consisting of all persons who owned shares
of ALZA Corporation ("ALZA") (NYSE: AZA) as of August 16, 1999, the
record date for the vote on the approval of a proposed merger between
ALZA and Abbott Laboratories (NYSE: ABT). The complaint seeks to enjoin
the merger between ALZA and Abbott.

The complaint is brought to recover for violations of Section 14(a) of
the Securities Exchange Act of 1934. On or about August 19, 1999, ALZA
and Abbott disseminated a Proxy Statement/Prospectus
("Proxy/Prospectus") which contained the details of a proposed merger
between the two companies. The proposed merger was approved by ALZA's
shareholders on September 21, 1999. The Proxy/Prospectus was materially
false and misleading in that it failed to disclose that the Food and
Drug Administration ("FDA") had issued citations to Abbott regarding it
alleged non-compliance with the FDA's quality assurance regulations at
Abbott's Diagnostics Division facilities in Lake County, Illinois. The
Proxy/Prospectus also failed to disclose that Abbott had been in
discussions with the FDA concerning a proposed consent decree and that,
in the event those talks failed, the FDA would sue Abbott to stop the
manufacturing and sale of certain products for a period of time. The
failure to disclose this material adverse fact precluded members of the
class from making a fully informed decision regarding the proposed
merger.

By soliciting votes and consents through the materially false and
misleading Proxy Statement/Prospectus, defendants wrongfully sought to
consummate the merger to the detriment of plaintiff and the class. In
bringing this action, plaintiff seeks injunctive relief to prevent the
merger from being consummated or, in the alternative, to have the matter
resubmitted for a vote by the shareholders of ALZA. In the event the
merger is consummated, plaintiff will seek monetary relief to compensate
plaintiff and the class for their damages.

If you held ALZA common stock as of August 16, 1999, you may no later
than 60 days from October 7, 1999 to move the Court to serve as lead
plaintiff, if you so choose. To serve as lead plaintiff, however, you
must meet certain legal requirements. If you wish to discuss this action
or have any questions concerning this notice or your rights or
interests, please contact Steven O. Sidener or Joseph M. Barton of Gold
Bennett & Cera LLP, 595 Market Street, Suite 2300, San Francisco,
California 94105, by telephone at 800-778-1822 or 415-777-2230, by
facsimile at 415-777-5189 or by e-mail at jbarton@gbcsf.com. SOURCE Gold
Bennett & Cera LLP


ALZA CORP: Much Shelist Files Securities Suit In Ill. To Enjoin Merger
----------------------------------------------------------------------
MUCH SHELIST FREED DENENBERG AMENT & RUBENSTEIN, P.C. has filed a class
action to recover damages in the United States District Court for the
Northern District of Illinois - Eastern Division on behalf of a class
consisting of all persons who owned shares of ALZA Corporation (NYSE:
AZA) as of August 16, 1999, the record date for the vote on the approval
of a proposed merger between ALZA and Abbott Laboratories (INYSE: ABT).
The action also seeks to enjoin the merger between ALZA and Abbott.
According to Much Shelist Freed Denenberg Ament & Rubenstein, P.C., this
action is brought to recover for violations of Section 14(a) of the
Securities Exchange Act of 1934.

The complaint alleges that on or about August 19, 1999, ALZA and Abbott
disseminated a Proxy Statement/Prospectus ("Proxy/Prospectus") which
contained the details of a proposed merger between the two companies.
The proposed merger was approved by ALZA's shareholders on September 21,
1999. Pursuant to the complaint, the Proxy/Prospectus was materially
false and misleading in that it failed to disclose that the Food and
Drug Administration ("FDA") had issued citations to Abbott regarding its
alleged non-compliance with the FDA's quality assurance regulations at
Abbott's Diagnostics Division facilities in Lake County, Illinois, which
accounted for approximately 22% of Abbott's revenue.

The complaint asserts that the Proxy/Prospectus also failed to disclose
that Abbott had been in discussions with the FDA concerning a proposed
consent decree. According to the complaint, the failure to disclose
these material adverse facts precluded members of the class from making
a fully informed decision regarding the proposed merger. The complaint
asserts that by soliciting votes and consents through the allegedly
false and misleading Proxy Statement/Prospectus, defendants wrongfully
sought to consummate the merger to the detriment of plaintiff and the
class.

In bringing this action, plaintiff seeks injunctive relief to prevent
the merger from being consummated or, in the alternative, to have the
matter resubmitted for a vote by the shareholders of ALZA. In the event
the merger is consummated, plaintiffs will seek monetary relief to
compensate plaintiff and the class for their damages.

If you held ALZA common stock as of August 16, 1999, you may no later
than 60 days from October 7, 1999 move the Court to serve as lead
plaintiff, if you so choose. To serve as lead plaintiff, however, you
must meet certain legal requirements. If you wish to discuss this action
or have any questions concerning this notice or your rights or
interests, please contact Joseph D. Ament or Carol V. Gilden, of Much
Shelist Freed Denenberg Ament & Rubenstein, P.C., 200 N. LaSalle Street,
Suite 2100, Chicago, Illinois 60601, by telephone at (312) 346-3100, by
facsimile at (312) 621-1750 or by e-mail at jament@muchlaw.com or
cgilden@muchlaw.com


AMIR VIRANI: Atlanta RICO Real Estate Case Ends With $18.9M Verdict
-------------------------------------------------------------------
Fifty-one investors have won an $18.9 million case against two
developers who, a jury concluded, swindled them out of millions through
investing in six Atlanta area properties. Since the case was tried in
U.S. District Court in Atlanta under the federal Racketeer Influenced
and Corrupt Organizations Act, the $6.3 millon verdict will be trebled.
Also included: court costs and attorney fees.

The Oct. 8 verdict followed four weeks of trial, during which more than
60 witnesses testified before U.S. District Judge Thomas W. Thrash Jr.
Jose Maiz, et al. v Virani, et al. No 1:97CV-1742-TWT (N.D.Ga. Oct. 8,
1999).

Defendants were Amir Virani, a Dallas, Texas developer who heads several
homeowners' associations in south metro Atlanta, and Ignacio Santos, a
resident of Monterrey, Mexico.

The plaintiffs are from 22 families, most living in Monterrey, Mexico.

Attorneys John M. Harmon and John J. "Mike" McKetta, partners at Graves,
Dougherty, Hearon & Moody, represented the plaintiffs. King & Spalding
partner Joseph B. Haynes served as co-counsel, but did not participate
at trial.

Atlanta attorneys Jerry B. Blackstock and John W. Harbin, partners at
Powell, Goldstein, Frazer & Murphy, and Marlo O. Leach, a senior
associate at the firm, represented the defendants.

Blackstock says the case was extensively covered by a Mexican newspaper,
El Norte, primarily because the plaintiffs "are all very prominent and
well-to-do people in Monterrey." He describes the community as an area
"heavily industrialized" with "a lot of business and old money."

Although Harmon and McKetta decline comment, an outline of the
plaintiffs' case in the pretrial order alleges the following:

In 1988 and 1989 the plaintiffs and other partners contributed $16.9
million to six real estate partnerships: commercial and residential
properties in Coweta, Clayton, Fayette and Henry Counties. Virani and
Santos told the plaintiffs that $14.9 million in partnership funds would
be used as down payments on the properties, but only $5.9 million was
spent. Virani and Santos diverted $7.9 million of the partnerships'
assets to themselves.

Santos and Virani already owned much of the property that was eventually
sold to the investors for prices up to three times what Santos and
Virani had paid.

Between 1988 and 1996, the defendants took more than $4 million in
unauthorized management fees and commissions from the partnerships.
Additionally, in 1998, after the suit was filed, they secretly took $1.1
million from partnership funds to pay their defense attorneys in this
case.

The defendants sent letters and made calls from Texas to Georgia and
Texas to Mexico in their alleged scheme. The plaintiffs claimed these
acts constituted a pattern of racketeering activity, violating federal
and state RICO statutes.

Blackstock, lead counsel for the defense, says that a Mexican brokerage
House, Abaco Case de Bolsa, headed by Jorge Lankenau, asked Virani and
Santos to join the Atlanta real estate projects. Lankenau recruited the
investors, Blackstock says, but agreed that Santos and Virani would deal
only with Lankenau-not the entire group of investors.

"The plaintiffs all testified that Virani and Santos never told them
they were going to make money on the front of this," says Blackstock.
"We told them, 'Your complaint is with Lankenau, not with us.'

Blackstock says the properties include 1,100 acres of commercial
property in Coweta County, now a development containing a mall site
known as Newnan Crossing; 750 homes on 269 acres in Henry County; and a
residential development called Kings Brook in Coweta County.

"The plaintiffs contended that they did not know and were not told that
the defendants in syndicating these properties were going to make a
profit when they sold the properties to the partnerships," Blackstock
says.

"They contended they thought the defendants would simply buy the
properties for the partnerships at costs, not make anything on it and
develop them with no expenses. They contended after the investors got
all their money back, plus 12 percent they would split the remaining
profits."

Blackstock says Abaco brokers distributed brochures to the investors for
each of the six properties, which contained a spreadsheet of financial
information and projections.

"The plaintiffs had good lawyers and they did a good job of convincing
the jury that we participated in this conspiracy; our contention was we
didn't," says Blackstock. "In our view the jury was sympathetic to the
plaintiffs and pretty much gave them what they said they were cheated
out of."

Parts of the holdings still belong to the plaintiffs, he adds.
Blackstock says he and his clients have not yet decided whether they
will appeal. (Fulton County Daily Report 10-15-1999)


BOEING: Asian Workers Sue In Superior Court In Seattle Over Racial Bias
-----------------------------------------------------------------------
A group of Asian workers is suing Boeing, lodging racial discrimination
complaints similar to those of black Boeing workers who recently settled
for $15 million in a lawsuit against the aerospace company.

Nine current and former Boeing employees are seeking class-action status
and alleging that Boeing denied them promotions, laid them off unfairly
and failed to stop coworkers and supervisors from making racist remarks.

Boeing spokesman Peter Conte said the company had not seen the lawsuit,
which was filed last Wednesday in King County Superior Court in Seattle,
and could not comment specifically on it. ''A company the size of Boeing
is not immune to the improper actions of individuals,'' Conte said.
''Boeing does not tolerate discrimination or intimidation. When
allegations are substantiated, we take action.''

The plaintiffs include Pakistani, Indian, Iranian and Vietnamese
engineers and technicians. Khalil Nouri, an Afghanistan native and one
of the plaintiffs, said Asian Americans fill 25 percent of the technical
and engineering jobs at Boeing but 98 percent of the top two levels of
those jobs are filled by white employees. ''The promotions of whites are
advancing at a far faster pace ... Asians are going out the door at a
far faster pace than the whites,'' said Nouri, a former tool design
engineer.

Last month, a judge approved a $15 million settlement between Boeing and
black workers who claimed that they were passed over from promotion,
harassed and retaliated against when they complained.

As part of that settlement, Conte said, Boeing is implementing a plan to
improve promotion practices. The plan benefits all Boeing workers, he
said. (AP Online 10-15-1999)


CENDANT CORP: Appeal By American Bankers' Stockholders Pending At NJ Ct
-----------------------------------------------------------------------
The following is taken from the report by the Company for the quarterly
period ended March 31, 1999 filed with the Securities and Exchange
Commission as of date October 12, 1999:

In addition, in October 1998, an action claiming to be a class action
was filed against the Company and four of the Company's former officers
and directors by persons claiming to have purchased American Bankers'
stock between January and October 1998. The complaint claimed that the
Company made false and misleading public announcements and filings with
the SEC in connection with the Company's proposed acquisition of
American Bankers allegedly in violation of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and that the plaintiff
and the alleged class members purchased American Bankers' securities in
reliance on these public announcements and filings at inflated prices.

On April 30, 1999, the United States District Court for New Jersey found
that the class action failed to state a claim upon which relief could be
granted and, accordingly, dismissed the complaint. The plaintiff has
appealed the District Court's findings to the U.S. Court of Appeals for
the Third Circuit as such appeal is pending.


DIGITAL LINK: CA Super. Ct. Denies Temp. Restraining Of Tender Offer
--------------------------------------------------------------------
Digital Link Corporation (Nasdaq: "DLNK") and DLZ Corp. announced that
the California Superior Court has denied an application for a temporary
restraining order filed by plaintiffs in two purported class actions
challenging DLZ's tender offer for all of Digital Link's shares for $
10.30 cash. DLZ was formed by Digital Link's founder to purchase all
Digital Link shares owned by the public. Plaintiffs' application sought
to restrain DLZ from proceeding with or completing the proposed merger
of DLZ with Digital Link following the tender offer. The Court also
denied plaintiffs' application for expedited discovery. The court set a
hearing for December 2, 1999 on plaintiffs' threatened application for a
preliminary injunction. If the tender is consummated and the related
short-form merger is completed, there will be no hearing on plaintiff's
present motion for a preliminary injunction.

The tender offer is scheduled to expire at 12:00 midnight, New York City
time, on Friday October 15, 1999. The Information Agent for the Tender
Offer is MacKenzie Partners, Inc. Additional information and copies of
the tender offer documents can be obtained from Mackenzie by calling
(800) 322-2885.

Digital Link Corporation is a provider of digital network access
products for narrowband and broadband applications. Digital Link is
headquartered in Sunnyvale, California, and offers its products
worldwide.


ERXLEBEN ASSOCIATES: Receiver Of Forex Int'l Sues Erxleben Associates
---------------------------------------------------------------------
The court-appointed receiver of Austin Forex International Inc. and 11
of its former investors filed suit last Wednesday against the two law
firms, an accounting company and other business associates that worked
with Russell Erxleben's ill-fated foreign-currency trading company.

Janet Mortenson , who took control of Austin Forex in September 1998
after state regulators filed suit against the company and put it out of
business, is the lead plaintiff in a suit that seeks the approximately
$33 million Mortenson claims is owed to Austin Forex clients.

The suit claims that four lawyers with the firms of Locke Liddell & Sapp
and Sheinfeld, Maley & Kay knew of Erxleben's money-losing investments
but shirked their legal duties by knowingly withholding that information
from investors. "Locke Liddell has done nothing improper," said managing
partner Harriett Miers from her Dallas office. "We should not have been
named in the lawsuit." The other seven defendants, including officials
at accounting company PricewaterhouseCoopers and California-based
E-Forex Inc., either declined comment or could not be reached last
Wednesday.

In addition to the $33 million, the plaintiffs also seek unspecified
punitive damages. "We're going for all the punitive damages we can get,"
said Mike Shaunessy, one of the attorneys representing the plaintiffs.
"People lost their homes, their marriages, their kids' college funds --
everything."

Austin Forex had an estimated $40 million in losses when it shut its
doors for good, leaving as many as 800 investors wondering what happened
to their money. Earlier this year, a group of 11 other investors won a
$4.7 million judgement against Erxleben -- a sum he said he couldn't
pay.

Erxleben, a former University of Texas kicking star, has maintained from
the outset that he didn't fail alone and had hired some very high-priced
lawyers and accountants to keep Austin Forex inbounds. The latest suit
claims that the Erxleben's lawyers were negligent in allowing Austin
Forex to distribute misleading or altered statements about their
investments' success, according to Shaunessy.

The suit also claims PricewaterhouseCoopers performed insufficient
research before writing a memo -- one Austin Forex allegedly sent to
customers -- that discusses the legality of channeling retirement funds
into risky foreign currency trading. The suit includes no details about
the extent of PricewaterhouseCoopers' research.

"All you need to file a suit is 75 bucks for a filing fee," said Casey
Dobson of Austin's Scott Douglass & McConnico, which represents
defendant Sheinfeld Maley & Kay . "There's no evidence yet. The fact
that someone sends documents with a petition doesn't mean these claims
are factually supported."

The suit claims that both Erxleben's lawyers and executives at E-Forex
Inc. an Austin Forex partner -- knew Erxleben was selling unregistered
securities and should have reported the incident to investors and the
state securities board. It also claims that Austin Forex's advisers --
accountants and lawyers -- knew the company was losing money and
misrepresenting the losses to investors, but did nothing about it. You
may contact Heather Cocks at hcocks@statesman.com or 912-5955. (Austin
American-Statesman Oct-14-1999)


FEN-PHEN: AHP Files With SEC Memorandum Of Understanding Re Settlement
----------------------------------------------------------------------

                      MEMORANDUM OF UNDERSTANDING
              CONCERNING SETTLEMENT OF DIET DRUG LITIGATION

                               PREAMBLE

American Home Products Corporation ("AHP") and the undersigned
representatives of the purported class and subclasses defined herein
(the "Class Representatives") (together, the "Parties") hereby agree to
propose a nationwide class action settlement which would resolve, on the
terms set forth in this Memorandum of Understanding ("MOU"), "Settled
Claims" against AHP and other "Released Parties" arising from the
marketing, sale, distribution and use of the diet drugs Pondimin and
Redux pending in various courts, including but not limited to claims
which have been made in the actions that have been transferred for
coordinated or consolidated pretrial proceedings to the United States
District Court for the Eastern District of Pennsylvania under Docket No.
MDL 1203 (the "Federal District Court"), in the ongoing trial in VADINO
ET AL. V. AHP (Docket No. MID-L-425-98), and in the numerous other state
courts around the United States. The Parties to this MOU are aware of
the following certified or conditionally certified nationwide or
statewide classes involving Pondimin and Redux: United States District
Court for the Eastern District of Pennsylvania, IN RE DIET DRUG PRODUCTS
LIABILITY LITIGATION, MDL 1203 (nationwide medical monitoring class);
West Virginia (BURCH ET AL. V. AHP, Civil Action No. 97-C-204(1-11))
(statewide personal injury and medical monitoring class); Illinois
(RHYNE V. AHP, 98 CH 4099) (statewide refund and monitoring
reimbursement class); New Jersey (VADINO ET AL. V. AHP, Docket No.
MID-L-425-98) (statewide Unfair and Deceptive Acts and Practices and
medical monitoring class); New York (NEW YORK DIET DRUG LITIGATION,
Index No. 700000/98) (statewide medical monitoring class); Pennsylvania
(PENNSYLVANIA DIET DRUG LITIGATION, Master Docket No. 9709-3162 C.C.P.
Phila.) (statewide medical monitoring class);
Texas (EARTHMAN V. AHP, No. 97-10-03970 CV, Dist. Ct. Montgomery Co.
Texas) (statewide medical monitoring class); Washington (ST. JOHN V.
AHP, 97-2-06368-4) (statewide medical monitoring class).

The Parties are committed to implementing this settlement in a manner
that meets all legal requirements and assures the appropriate
participation of the various courts.

This MOU outlines the terms on which the Parties have agreed. These
terms will be set forth in a formal settlement agreement (such final
agreement, when executed, being referred to herein as the "Settlement
Agreement"). The terms of this MOU shall be merged with and superseded
by the Settlement Agreement. The Parties shall negotiate in good faith
to prepare the Settlement Agreement, which shall be executed within 45
days from the date of this MOU. Prior to execution of the Settlement
Agreement, however, this MOU is binding on the Parties.

Neither this MOU nor the Settlement Agreement entered into pursuant to
this MOU shall be construed as evidence of or as an admission by AHP of
any liability or wrongdoing whatsoever or as an admission by the Class
Representatives or members of the Settlement Class as defined herein
("Class Members") of any lack of merit in their claims.

Accordingly, AHP and the Class Representatives hereby agree, subject to
judicial approval (except as to the Accelerated Implementation Option
("AIO") described below), compliance with applicable legal requirements,
and other conditions, all as set forth below, that settlement fund(s)
shall be established, from which the benefits outlined herein will be
paid to the Class Members of the proposed settlement class and
subclasses, and that the Settled Claims against AHP and other Released
Parties, as defined herein, will be settled, compromised and released,
as outlined below:

SETTLEMENT AMOUNTS AND PARTICIPANTS

DEFINITIONS

"Adjusted Maximum Annual Payment Amount," or "Adjusted MAPA," shall mean
the maximum amount that AHP shall be obligated to deposit in Fund B
during any Fiscal Year beginning with the second Fiscal Year after the
Final Judicial Approval Date through the sixteenth Fiscal Year after the
Final Judicial Approval Date. The Pre-Adjusted MAPA for each such year
is set forth below. The Adjusted MAPA with regard to any Fiscal Year
refers to the amount of the Pre-Adjusted MAPA for that year, as adjusted
by increases due to Unused Adjusted MAPAs, from prior years and
accretion thereon as set forth therein, and as adjusted by decreases due
to accumulated accreted credits applied thereto as provided herein.

"AHP" means American Home Products Corporation, its successors and
assigns.

"AHP Released Parties" shall mean those Released Parties set forth in
paragraphs (a) and (b) of Exhibit "D." "Non-AHP Released Parties" shall
mean those Released Parties set forth in Exhibit "D," other than the AHP
Released Parties.

"Claims Administrator" shall mean a person or persons to be appointed by
the Trustees subject to approval of the Court(s) to administer claims
for benefits pursuant to the settlement.

"Court(s)" refers, as to any judicial action contemplated herein, to
such court or courts that the Parties mutually agree shall be asked to
take such action, as the Parties shall set forth in the Settlement
Agreement.

"Date 1" is the date after Final Judicial Approval, to be agreed upon in
the Settlement Agreement, by which (i) Class Members in Subclasses 1(a)
and 1(b) must register to receive refund and/or Screening Program
benefits from Fund A, and (ii) Class Members in Subclasses 2(a) and 2(b)
must register to receive refund benefits from Fund A.

"Date 2" is 120 days after the end of the Screening Period.

"Diet Drug(s)" shall mean Fenfluramine marketed under the brand name
Pondimin and/or Dexfenfluramine marketed under the brand name Redux.

"Endocardial Fibrosis" is defined as a condition (A) diagnosed by (1)
endomyocardial biopsy that demonstrates fibrosis and cardiac
catheterization that demonstrates restrictive cardiomyopathy or (2)
autopsy that demonstrates endocardial fibrosis and (B) other causes,
including dilated cardiomyopathy, myocardial infarction, amyloid,
Loeffler's endocarditis, endomyocardial fibrosis as defined in Braunwald
(involving one or both ventricles, located in the inflow tracts of the
ventricles, commonly involving the cordae tendinea, with partial
obliteration of either ventricle commonly present),1 focal fibrosis
secondary to valvular regurgitation, E.G., "jet lesions," focal fibrosis
secondary to catheter instrumentation, and hypertrophic cardiomyopathy
with septal fibrosis, have been excluded.

"FDA Positive" is defined as mild or greater regurgitation of the aortic
valve of the heart and/or moderate or greater regurgitation of the
mitral valve of the heart as these levels are defined in Singh2 (1999)
and measured by an echocardiographic examination performed and evaluated
by qualified medical personnel following the protocol as outlined in
Feigenbaum3 (1994) or Weyman4 (1994). The degrees of regurgitation are
determined as follows:

Aortic Valve -- Mild or greater regurgitation, defined as regurgitant
jet diameter in the parasternal long-axis view (or in the apical
long-axis view, if the parasternal long-axis view is unavailable), equal
to or greater than 10% of the outflow tract diameter (JH/LVOTH).

Mitral Valve -- Moderate or greater regurgitation, defined as
regurgitant jet area in any apical view equal to or greater than 20% of
the left atrial area (RJA/LAA).

--------

Braunwald, E. HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W.B. Saunders Co., pp. 1433-34 (1997).

Singh, J.P., ET AL., "Prevalence of Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation" (The Framingham Heart Study),
AMERICAN J. CARDIOLOGY, 83: 897-902 (1999).

Feigenbaum, H., ECHOCARDIOGRAPHY, Williams & Wilkins, Baltimore, (5th
ed. 1994).

Weyman, A.E., PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY, Philadelphia,
Lea & Febiger, (1994).

"Final Judicial Approval" refers to the approval of the Settlement
Agreement as a whole by the Court(s) and such approval(s) becoming final
by the exhaustion of all appeals without substantial modification of the
order or orders granting such approval(s). Final Judicial Approval shall
be deemed not to have been obtained in the event that Trial Court
Approval is denied, and the period for appealing such denial has expired
without any such appeal having been taken.

"Final Judicial Approval Date" shall mean the date on which Final
Judicial Approval occurs.

"Fiscal Year" shall mean any twelve-month period beginning on the first
day of the month following the month in which the Final Judicial
Approval Date occurs. In counting Fiscal Years, the first Fiscal Year
shall be the year which begins on the first day of the month following
the Final Judicial Approval Date, the second Fiscal Year shall be the
twelve- month period beginning on the first day of the month following
the first anniversary of the Final Judicial Approval Date, and so forth.
This definition applies only to the payment terms set forth herein and
has no effect on the tax or accounting year of the Settlement Trust.

"Initial Opt-out Period" shall mean the period to be established by the
Court(s) during which Class Members may exercise the initial opt-out
right described below.

"Mild Mitral Regurgitation" refers to mitral valve regurgitation as that
level is defined in Singh5 (1999) and measured by an echocardiographic
examination performed and evaluated by qualified medical personnel
following the protocol as outlined in Feigenbaum6 (1994) or Weyman7
(1994). That degree of regurgitation is determined as follows: (1)
either the RJA/LAA ratio is more than 5% or the mitral regurgitant jet
height is greater than 1 cm from the valve orifice, and (2) the RJA/LAA
ratio is less than 20%.

--------

Singh, J.P., ET AL., "Prevalence of Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation" (The Framingham Heart Study),
AMERICAN J. CARDIOLOGY, 83: 897-902 (1999).

Feigenbaum, H., ECHOCARDIOGRAPHY, Williams & Wilkins, Baltimore, (5th
ed. 1994).

Weyman, A.E., PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY, Philadelphia,
Lea & Febiger, (1994).

Primary Pulmonary Hypertension ("PPH") is defined as either or both of
the following:

1. For a diagnosis based on symptoms and findings prior to death:

A. (i)  Mean pulmonary artery pressure by cardiac
        catheterization of GREATER THAN OR EQUAL TO 25 mm Hg
        at rest or GREATER THAN OR EQUAL TO  30 mm Hg with
        exercise with a normal pulmonary artery wedge
        pressure LESS THAN OR EQUAL TO 15 mm Hg (Rubin, L.J., S.
        Rich, PRIMARY PULMONARY HYPERTENSION, Marcel Dekker, Inc.,
        New York (1997).); or

  (ii)  A peak systolic pulmonary artery pressure of GREATER
        THAN OR EQUAL TO 60 mm Hg measured by Doppler
        Echocardiography; or

  (iii) Administration of Flolan to the patient based on a
        diagnosis of PPH with cardiac catheterization not
        done due to increased risk in the face of severe
        right heart dysfunction; and

B. Medical records which demonstrate that the following
   conditions have been excluded by the following results
   Braunwald, E., ESSENTIAL ATLAS OF HEART DISEASES, Current
   edicine, Philadelphia, 1997, pg. 10-9.):

(i) Echocardiogram demonstrating no primary cardiac disease
    including, but not limited to, shunts, valvular disease (other
    than tricuspid or pulmonary valvular insufficiency as a result of
    PPH or trivial, clinically insignificant left-sided valvular
    regurgitation), and congenital heart disease (other than patent
    foramen ovale); and

(ii) Left ventricular dysfunction defined as LVEF LESS THAN 40%
     defined by MUGA, echocardiogram or cardiac catheterization;

(iii) Pulmonary function tests demonstrating the absence of obstructive
      lung disease (FEV1/FVC GREATER THAN 50% of predicted) and the
      absence of GREATER THAN mild restrictive lung disease (total lung
      capacity GREATER THAN 60% of predicted at rest); and

(iv)  Perfusion lung scan ruling out pulmonary embolism; and

(v)   If, but only if, the lung scan is indeterminate or high
      probability, a pulmonary angiogram or a high resolution angio
      computed tomography scan or demonstrating absence of
      thromboembolic disease; and

Conditions known to cause pulmonary hypertension including connective
tissue disease known to be causally related to pulmonary hypertension,
toxin induced lung disease known to be causally related to pulmonary
hypertension, portal hypertension, significant obstructive sleep apnea,
interstitial fibrosis (such as silicosis, asbestosis, and granulomatous
disease) defined as greater than mild patchy interstitial lung disease
and familial causes have been ruled out by a Board-Certified
Cardiologist or Board-Certified Pulmonologist as the cause of the
person's pulmonary hypertension.

                                 -OR-

2. For a diagnosis made after the individual's death:

A. Autopsy demonstrating histopathologic changes in the lung
   consistent with primary pulmonary hypertension and no evidence of
   congenital heart disease (other than a patent foramen ovale) with
   left-to-right shunt, such as ventricular septal defect as
   documented by a Board-Certified Pathologist; and

B. Medical records which show no evidence of alternative causes as
   described above for living persons.

The foregoing definition of PPH ("the PPH Definition") is intended
solely for the purpose of describing claims excluded from the definition
of Settled Claims. The Parties agree that the PPH Definition includes
but is broader than the rare and serious medical condition suffered by
the individuals described in the IPPHS study.11 The subjects in that
study exhibited significantly elevated pulmonary artery pressures with
an average systolic pulmonary artery pressure of 88 mm Hg and average
mean pulmonary artery pressure of 57 mm Hg. Two-thirds of the IPPHS
patients demonstrated NYHA Class III or IV symptoms. While the IPPHS
subjects would fall within the PPH Definition, the definition also
includes persons with a milder, less serious medical condition.

"Preliminary Approval" shall mean the granting, by order of the
appropriate trial Court(s), of the preliminary approval(s) of the
Settlement Agreement sought by the Parties pursuant to the section on
approval process and notice provisions below, and the entry of an order
or orders directing the issuance of notice to the Settlement Class.

"Preliminary Approval Date" shall mean the date on which Preliminary
Approval occurs.

"Released Parties" refers to those persons or entities described in
Exhibit "D."

"Screening Period" refers to the 12-month period (or such longer period
that shall be permitted by the Court(s) for good cause shown, but in any
case not to exceed 18 months) during which benefits shall be available
under the Screening Program.

"Screening Program" refers to the program for providing transthoracic
echocardiograms and interpretive physician visit benefits, as set forth
below.

"Settled Claims" refers to those claims set forth in Exhibit "C," and
shall not include any claims based upon PPH, including claims for
compensatory, punitive, exemplary or multiple damages arising from a PPH
claim.

"Transthoracic Echocardiogram" means a non-invasive, standard
echocardiogram which includes an M-Mode and 2D echocardiogram, and
Doppler and color Doppler evaluations of all four chambers of the heart
and all four heart valves.

--------

Abenhaim, L., ET AL., Appetite-Suppressant Drugs and the Risk of Primary
Pulmonary Hypertension. International Primary Pulmonary Hypertension
Study Group, NEW ENGLAND JOURNAL OF MEDICINE, 1996, 335(9): 606-616.

"Trial Court Approval" shall mean the granting, by order, of the
approval(s) of the Settlement Agreement by the trial Court(s).

"Trial Court Approval Date" shall mean the date upon which Trial Court
Approval occurs.

"Trust" or "Settlement Trust" shall mean a trust established to receive
funds to be paid by AHP as provided in this MOU and the Settlement
Agreement.

"Trustees" shall mean those individuals approved by the Court(s) to
administer the Settlement Trust.

SCOPE OF THE SETTLEMENT CLASS

The Parties shall seek certification of a nationwide class solely for
settlement purposes (the "Settlement Class").

The Settlement Class will consist of:

All persons in the United States, its possessions and territories who
ingested Pondimin and/or Redux ("Diet Drug Recipients"), or their
estates, administrators or other legal representatives, heirs or
beneficiaries ("Representative Claimants"), and any other persons
asserting the right to sue AHP or any Released Party independently or
derivatively by reason of their personal relationship with a Diet Drug
Recipient, including without limitation, spouses, parents, children,
dependents, other relatives or "significant others" ("Derivative
Claimants").12 The Settlement Class does not include any individuals
who, on or before September 30, 1999, have executed releases of AHP
and/or the AHP Released Parties relating to claims arising from the use
of Diet Drugs.

There will be five subclasses as follows:

--------

Claims based upon PPH, as defined above, are not Settled Claims and may
be pursued by Class Members notwithstanding the settlement. The existing
rights of such Class Members to litigate PPH claims, and the defenses of
AHP to such claims shall not in any way be altered by this settlement.

"Subclass 1(a)" shall consist of all Diet Drug Recipients in the
Settlement Class (1) who ingested Pondimin and/or Redux for 60 days or
less, and (2) who have not been diagnosed by a qualified physician as
FDA Positive by an echocardiogram performed after the commencement of
Diet Drug use and before September 30, 1999, and all Representative and
Derivative Claimants in the Settlement Class whose claims are based on
their personal or legal relationship with a Diet Drug Recipient (1) who
ingested Pondimin and/or Redux for 60 days or less, and (2) who has not
been diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and
before September 30, 1999.

"Subclass 1(b)" shall consist of all Diet Drug Recipients in the
Settlement Class (1) who ingested Pondimin and/or Redux for more than 60
days, and (2) who have not been diagnosed by a qualified physician as
FDA Positive by an echocardiogram performed after the commencement of
Diet Drug use and before September 30, 1999, and all Representative and
Derivative Claimants in the Settlement Class whose claims are based on a
personal or legal relationship with a Diet Drug Recipient (1) who
ingested Pondimin and/or Redux for more than 60 days, and who has not
been diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and
before September 30, 1999.

"Subclass 2(a)" shall consist of all Diet Drug Recipients in the
Settlement Class (1) who ingested Pondimin and/or Redux for 60 days or
less, and (2) who have been diagnosed by a qualified physician as FDA
Positive by an echocardiogram which was performed after the commencement
of Diet Drug use and before September 30, 1999, and all Representative
and Derivative Claimants in the Settlement Class whose claims are based
on a personal or legal relationship with a Diet Drug Recipient (1) who
ingested Pondimin and/or Redux for 60 days or less, and (2) who has been
diagnosed by a qualified physician as FDA Positive by an echocardiogram
which was performed after the commencement of Diet Drug use and before
September 30, 1999.

"Subclass 2(b)" shall consist of all Diet Drug Recipients in the
Settlement Class (1) who ingested Pondimin and/or Redux for more than 60
days, and (2) who have been diagnosed by a qualified physician as FDA
Positive by an echocardiogram which was performed after the commencement
of Diet Drug use and before September 30, 1999, and all Representative
and Derivative Claimants in the Settlement Class whose claims are based
on a personal or legal relationship with a Diet Drug Recipient (1) who
ingested Pondimin and/or Redux for more than 60 days, and (2) who has
been diagnosed by a qualified physician as FDA Positive by an
echocardiogram which was performed after the commencement of Diet Drug
use and before September 30, 1999.

"Subclass 3" (which may include persons also included in Subclasses 1(a)
and 1(b)) shall consist of all Diet Drug Recipients in the Settlement
Class who have been diagnosed by a qualified physician, after the
commencement of Diet Drug use and by the end of the Screening Period, as
having Mild Mitral Regurgitation but who have not been diagnosed by a
qualified physician as FDA Positive by an echocardiogram performed after
the commencement of Diet Drug use and by the end of the Screening
Period, and all Representative and Derivative Claimants in the
Settlement Class whose claims are based on a personal or legal
relationship with a Diet Drug Recipient who has been diagnosed by a
qualified physician, after the commencement of Diet Drug use and by the
end of the Screening Period, as having Mild Mitral Regurgitation but who
has not been diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Period.

AHP'S PAYMENT OBLIGATIONS

ESTABLISHMENT OF SETTLEMENT TRUST

A Settlement Trust will be established to receive the funds to be paid
by AHP under the terms of this settlement.

The Parties agree that the Trustees will be nominated by the Parties and
that each nomination will be subject to agreement of the Parties and
subject to approval by the Court(s), consistent with the provisions
stated below.

The Settlement Trust will begin as a reversionary trust and will become
non-reversionary upon Final Judicial Approval. If Final Judicial
Approval is not obtained, or if the MOU or Settlement Agreement is
terminated in accordance with its terms for any other reason, all
amounts remaining in the Settlement Trust after payment of any charges
and expenses which the MOU and/or the Settlement Agreement expressly
authorized or required to be incurred and expended prior to the
reversion date, including any amounts expended to assist in seeking
Final Judicial Approval, shall be returned to AHP.

AHP shall have no right to any of the funds previously deposited, nor to
any of the funds subsequently deposited into the Settlement Trust, as of
the date the Trust becomes non-reversionary. AHP shall have no further
claim to such funds for any purpose.

FUND A

AHP shall make payments into Fund A as follows:

$50 million five business days after the Preliminary Approval Date.

$383 million five business days after the Trial Court Approval Date.

$383 million 6 months after the preceding payment of $383 million.

$184 million five business days after the Final Judicial Approval Date.

The monies held by Fund A shall be available and shall be used to pay
all benefits payable from Fund A, out-of-pocket expenses of Plaintiffs'
Counsel approved by the Court(s) for reimbursement in relation to Fund
A, and all proper administration expenses associated with the
administration of the settlement and the Settlement Trust insofar as
they relate to Fund A.

In addition to the foregoing, AHP shall pay $200 million five business
days after the Final Judicial Approval Date into an escrow account under
the supervision of the Court(s) for payment in such manner and in such
amounts as the Court(s) may determine are appropriate as compensation to
Plaintiffs' Counsel relating to Fund A, as contemplated below. AHP shall
take no position on the amount of such fees to be awarded as attorneys'
fees or the allocation thereof. Any amount in that escrow account not
awarded in attorneys' fees shall be returned to AHP by order of the
Court(s).

When the Trustees decide that Fund A's purposes have been met, the
remaining balance, if any, in Fund A shall be transferred to Fund B.

Any transfer from Fund A to Fund B will not reduce the Adjusted MAPA for
the year in which any unused portion of Fund A is transferred, and said
transfer will not reduce the maximum obligation of AHP to make payments
to Fund B.

FUND B

AHP shall make payments into Fund B as follows:

$25 million five business days after the Preliminary Approval Date.

$625 million five business days after the Final Judicial Approval Date.

The $25 million which is paid to Fund B at the Preliminary Approval Date
and the $625 million which is paid to Fund B at the Final Judicial
Approval Date shall be available and shall be used to pay all Class
Members who qualify to receive benefits from Fund B through the end of
the first Fiscal Year beginning after the Final Judicial Approval Date
and thereafter, all common benefit fees and costs awarded by the
Court(s) in relation to Fund B, and all proper administrative expenses
associated with the administration of the settlement and the Settlement
Trust insofar as they relate to Fund B.

Beginning in the second Fiscal Year after the Final Judicial Approval
Date, the Trustees may request in writing on a quarterly basis an
additional amount, said amount being referred to herein as the "Fund B
Deposit," needed (i) to pay claims received which qualify for payment,
including claims for counsel fees and administrative expenses, but which
have not been paid due to an insufficient cash balance in Fund B, and/or
(ii) to maintain a $50 million reserve in Fund B for administrative
expenses (the "Administrative Reserve"). AHP shall pay the Fund B
Deposit so requested no later than 15 days after the date on which the
Trustees provide AHP with written notice of a request for a Fund B
Deposit. AHP's obligation to make such Fund B Deposit, however, shall at
all times be subject to the Adjusted MAPA.

The Pre-Adjusted MAPA for each Fiscal Year shall be as set forth below:

Fiscal Year         Fund B Pre-Adjusted
Maximum Annual
Payment Amount
                                                               
2nd  Fiscal Year after the Final Judicial Approval Date    $182,863,500
3rd  Fiscal Year after the Final Judicial Approval Date    $182,863,500
4th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
5th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
6th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
7th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
8th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
9th  Fiscal Year after the Final Judicial Approval Date    $182,863,500
10th Fiscal Year after the Final Judicial Approval Date    $182,863,500
11th Fiscal Year after the Final Judicial Approval Date    $182,863,500
12th Fiscal Year after the Final Judicial Approval Date    $182,863,500
13th Fiscal Year after the Final Judicial Approval Date    $182,863,500
14th Fiscal Year after the Final Judicial Approval Date    $182,863,500
15th Fiscal Year after the Final Judicial Approval Date    $182,863,500
16th Fiscal Year after the Final Judicial Approval Date    $480,000,000

In the event that the Adjusted MAPA in any Fiscal Year is not required
to be paid in its entirety, the difference between the Adjusted MAPA for
that Fiscal Year and the payment amounts actually made by AHP to Fund B
in that Fiscal Year (the "Unused Adjusted MAPA") shall accrete as
follows: an average shall be taken of the Unused Adjusted MAPA at the
end of each Fiscal quarter; that average Unused Adjusted MAPA shall
accrete at 6% for that year; and the Unused Adjusted MAPA at the end of
the fourth quarter of that Fiscal Year, plus the accretion as calculated
in accordance with the provisions set forth above, shall be added to the
Adjusted MAPA available to the Settlement Trust in the following year.
For example and by way of explanation, assume that an Unused Adjusted
MAPA of $50 million was generated by the end of the first quarter of the
third Fiscal Year and remains unchanged for the next two Fiscal
quarters, but is reduced to $40 million by the end of the fourth quarter
of the Fiscal year. The average quarterly Unused Adjusted MAPA for the
third Fiscal Year would be $47.5 million. Accreting at 6%, a total
accretion of $2,850,000 would then be added to the Unused Adjusted MAPA
of $40,000,000 at the end of the fourth quarter of that Fiscal Year,
resulting in a total of $42,850,000 of Unused Adjusted MAPA to be added
to the Adjusted MAPA available to the Settlement Trust in the following
Fiscal Year (the fourth Fiscal Year). Because the Pre-Adjusted MAPA for
the fourth Fiscal Year is $182,863,500, the Adjusted MAPA for that year,
assuming no other adjustments, would be $225,713,500. If the Trustees
did not require any Fund B Deposit in the fourth Fiscal Year, the
quarterly average of the Unused Adjusted MAPA for the fourth Fiscal Year
would be $225,713,500, which would accrete at 6%, and the accreted
amount, $239,256,310, would be added to the Pre-Adjusted MAPA for the
fifth Fiscal Year, so that the Adjusted MAPA at the beginning of the
fifth Fiscal Year will be $422,119,810, provided there are no further
adjustments.

The credits shall accrete at 6% per year, compounded annually,
commencing at the end of the Fiscal quarter during which each credit is
generated and ending on the date of the Adjusted MAPA which is reduced
by the application of the credit, irrespective of the actual passage of
time. The determination of the amount of such credits generated in any
Fiscal Year shall be made at the end of each Fiscal Year after the Final
Judicial Approval Date unless an earlier determination is necessary to
carry out the intention of the Parties. Such accreted credits shall
accumulate and shall be applied to reduce the Adjusted MAPAs in reverse
order starting with the first day of the sixteenth Fiscal Year after the
Final Judicial Approval Date. For example and by way of explanation,
assuming a $1 million credit were generated during the last quarter of
the first Fiscal Year after the Final Judicial Approval Date, and
assuming no other adjustments to the Adjusted MAPA, this credit would
accrete until the first day of the sixteenth Fiscal Year after the Final
Judicial Approval Date, would have an accreted value of $2,260,904 and
would be applied at that date to reduce the Adjusted MAPA for that year.
As a further example by way of explanation, assuming that $300 million
of credits were generated during the last quarter of the third Fiscal
Year after the Final Judicial Approval Date, and assuming no other
adjustments to the Adjusted MAPA, $238,545,295 of those credits would
accrete until the first day of the sixteenth Fiscal Year after the Final
Judicial Approval Date, at which time those credits would have an
accreted value of $480 million and would be applied at that date to
eliminate the full amount of the Pre- Adjusted MAPA for that year; the
remaining $61,454,705 of those third year credits would accrete until
the first day of the fifteenth Fiscal Year after the Final Judicial
Approval Date, at which time those credits would have an accreted value
of $116,659,378 and would be applied at that date to reduce the
Pre-Adjusted MAPA for the fifteenth Fiscal Year by that amount; the
Pre-Adjusted MAPA for the fifteenth Fiscal Year would therefore be
$66,204,122 (namely, $182,863,500 minus $116,659,378).

Prior to the end of the first quarter of the sixteenth Fiscal Year after
the Final Judicial Approval Date, the Trustees shall make a calculation
as to a Final Payment to be made by AHP to Fund B (the "Final Payment").
The Final Payment, if any, by AHP into Fund B, shall be the lesser of
two amounts, "X" or "Y," where:

Amount "X" refers to the projected amount of additional funds necessary
to meet the obligations of Fund B. To make this projection, the Trustees
shall cause an actuarial determination to be made, based on the
experience of the Settlement Trust, as to the amount of additional
funds, if any, which will be required to fund obligations to Class
Members who have qualified or are likely in the future to qualify for
benefits from Fund B and associated administrative expenses. In
determining Amount "X," the Trustees shall also take into consideration
the then cash balance in Fund B (including the Administrative Reserve),
its projected future investment and other income, and an estimate of
required future administrative expenses.

Amount "Y" refers to the difference between the Adjusted MAPA computed
as of the first day of the sixteenth Fiscal Year following the Final
Judicial Approval Date, giving due credit for all Unused Adjusted MAPAs
with 6% accretions thereon, and all credits to which AHP is entitled
under the Settlement Agreement with 6% accretions thereon, and (ii) any
amounts paid by AHP to Fund B during the first quarter of the sixteenth
Fiscal Year.

After making the foregoing calculation, but prior to payment thereof,
the Trustees shall provide a report to Class Counsel and to AHP setting
forth the Trustees' projection of the amount of additional funds, if
any, which will be necessary to meet the obligations of Fund B, as
described above. The report shall contain all supporting information
necessary to allow Class Counsel and AHP to evaluate the accuracy and
reasonableness of the projection. Such supporting information shall
include, without limitation, the Trustees' methodology for making the
projection and any assumptions used in making the projection. Either AHP
or Class Counsel shall have the right to seek any additional information
reasonably requested by them, and to contest the Trustees' projections
to the Court(s), which shall modify such projection if it is determined
to be unreasonable or lacking in substantial support. AHP shall make the
Final Payment within 15 days after a final determination of the amount
thereof. In the event AHP seeks a stay of such determination pending
appeal and posts adequate bond, Class Counsel shall not oppose such a
stay.

At such time as the accumulated accreted credits are equal to or exceed
the remaining payment obligations of AHP, as calculated hereunder, the
Final Payment shall be deemed to have been made.

If no Final Payment is required pursuant to this provision, or if a
Final Payment is made or deemed to have been made pursuant to the
foregoing provisions, AHP shall have no further obligation to make any
payments to Fund B under the Settlement Agreement.

The monies held by Fund B shall be available and shall be used to pay
all benefits payable from Fund B, all common benefit fees and costs
awarded by the Court(s) in relation to Fund B, and all proper
administrative expenses associated with the administration of the
settlement and the Settlement Trust insofar as they relate to Fund B.

OTHER PROVISIONS

The Settlement Trust shall be structured and managed to qualify as a
Qualified Settlement Fund under Section 468B of the Internal Revenue
Code and related regulations and will contain customary provisions for
such trusts including obligations of the Settlement Trust to make tax
filings and to provide to AHP information to permit AHP to report
deductions properly for tax purposes.

The Parties agree that all of the amounts being paid pursuant to the
terms of this MOU and the settlement are being paid as damages (other
than punitive damages) on account of alleged physical personal injuries
or alleged physical sickness of the members of the Settlement Class as
described in Section 104(a)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Parties further agree that the claims set
forth in the definition of Settled Claims in Exhibit "C" hereto have
their origin in such alleged physical personal injuries or physical
sickness.

AHP shall have no obligation to make any payments pursuant to the
settlement except as expressly set forth herein. AHP shall have no
responsibility for the management of the Settlement Trust or any
liability to any Class Member arising from the handling of claims by the
Trustees.

Appropriate provisions for the termination of the Settlement Trust will
be agreed upon and set forth in the Settlement Agreement.

SECURITY ARRANGEMENTS

AHP agrees that, during the period after the Trial Court Approval Date
and until those payments to be made five business days after the Final
Judicial Approval Date have been made, AHP shall maintain credit
facilities in an amount that will at all times exceed, by not less than
$1 billion, the sum of (a) its outstanding commercial paper borrowings,
(b) the amount of any uses (other than the payments under this
agreement) for which such credit facilities have been committed and (c)
outstanding drawings under the credit agreement.

Fifteen days after the Final Judicial Approval Date, AHP shall establish
and thereafter maintain a fund (the "Security Fund") consisting of high-
grade marketable commercial securities (to be defined in the Settlement
Agreement), selected by AHP, having a principal value equal to $370
million. If the credit rating for AHP reported by both Moody's and
Standard & Poor's is below investment grade at any time during which the
Security Fund must be maintained hereunder, AHP shall deposit additional
securities as specified above having a principal value of an additional
$180 million.

The Security Fund shall be terminated upon AHP's making, or being deemed
to have made, the Final Payment.

AHP shall be entitled to withdraw from the Security Fund all income
earned thereby. However, in the event that the credit rating of AHP
reported by both Moody's and Standard & Poors is below investment grade
at any time during which the Security Fund must be maintained hereunder,
AHP shall no longer be entitled to withdraw from the Security Fund the
income earned thereby, except that AHP shall thereafter be entitled to
withdraw, at each tax payment date, such amount thereof as shall equal
all federal, state and local taxes payable by AHP with respect to or on
account of the whole amount of the Security Fund. AHP shall be
responsible for the payment of all federal, state and local taxes
payable with respect to or on account of the Security Fund.

AHP shall grant to the Trustees a perfected security interest in the
Security Fund as collateral for AHP's obligations under the Settlement
Agreement. The assets in the Security Fund shall at all times be owned
by AHP, subject to the rights of the Trust as a secured creditor.

For purposes of this MOU and the Settlement Agreement, an "Uncured
Failure to Make Payment" is an event after the Final Judicial Approval
Date in which:

AHP fails to make a payment to Fund B which was due and not timely paid
and failure to make payment was due to either a financial inability to
pay or a deliberate unwillingness to pay, such determinations having
been made by order of the Court(s) after an evidentiary hearing; and

AHP fails to make that payment within thirty days after such order
becomes final after exhaustion of all appeals, if any, or AHP fails to
make that payment thirty days after a trial court order declaring an
Uncured Failure to Make Payment and is unable to obtain a stay of that
order pending an appeal from such order.

At least thirty days prior to such an evidentiary hearing, AHP and Class
Counsel shall have the right to receive from the Trustees such
information as they reasonably request relating to the Trustees' claim
that such payment was due and owing, as to which issue the Trustees
shall have the burden of proof.

In the event of an Uncured Failure to Make Payment, securities and/or
cash in the Security Fund having a principal value equal to the entire
amount of the Security Fund shall be transferred to an escrow account
under the supervision of the Court(s), without impairing the security
interest of the Trust. The portion of the escrow account, if any, needed
to satisfy obligations of AHP under the Settlement Agreement shall be
paid to the Trust pursuant to order of the Court(s) or on agreement of
the Parties. Any unused amount of the escrow account shall be returned
to AHP at the time the Final Payment is made or deemed to have been
made. Any income earned on the account shall remain the property of the
account, and all federal, state and local taxes payable with respect to
the escrow account shall be paid out of the account. Additional
conditions and procedures for the establishment, operation and
distribution of the escrow account shall be set forth in the Settlement
Agreement.

In the event of the following occurrences:

The occurrence of more than one Uncured Failure to Make Payment within a
two-year period; and

The depletion of the amount of the assets which AHP is required to have
on deposit in the Security Fund or in the escrow account described above
by more than fifty per cent of the then-required amount of assets; and

A determination by the Court(s) after notice and an opportunity to be
heard by all interested parties that the remaining assets in the
Security Fund or in such escrow account are not likely to be sufficient
to pay the remaining Fund B obligations to members of the class as of
that point in time;

then in such event all Diet Drug Recipients who (i) are diagnosed as FDA
Positive or as having Mild Mitral Regurgitation by an echocardiogram
performed after the commencement of Diet Drug use and by the end of the
Screening Period and who have registered for settlement benefits by Date
2, or (ii) are diagnosed as having Endocardial Fibrosis by September 30,
2005, and have registered for settlement benefits by January 31, 2006,
together with their associated Representative and/or Derivative
Claimants, if such Class Members have not received Matrix-Level V
benefits set forth in Exhibit "A," will have a right to opt out of the
settlement and pursue all of their Settled Claims (except for those
claims set forth in subparagraphs (5) and (7) of Exhibit "C"), against
AHP and the other Released Parties, including claims for punitive and
multiple damages. Specific procedures pertaining to the exercise of such
an opt-out shall be set forth in the Settlement Agreement. In the event
of such an opt-out, neither the AHP Released Parties nor the Non-AHP
Released Parties may assert any defense based on any statute of
limitations or repose, the doctrine of laches, any other defense
predicated on the failure to timely pursue the claim, or any defense
based on "splitting" a cause of action, any defense based on any release
signed pursuant to the Settlement Agreement, and/or any other defense
based on the existence of the Settlement Agreement, except to the extent
provided herein. In any legal action commenced by a Class Member
exercising a right of opt-out under these circumstances, the Class
Member shall reduce the amount of his or her recovery by the amount of
cash, if any, that the Class Member has received from AHP and/or the
Trust under the terms of the settlement.

Nothing contained in this section shall be construed to be a waiver of
or a limitation on rights which the Class Members, Class Representatives
or Trustees would otherwise have under the law in the event of a breach
of the Settlement Agreement.

CLASS MEMBER RIGHTS AND BENEFITS

SCREENING/REFUND/MEDICAL SERVICES/CASH/RESEARCH BENEFITS PAYABLE FROM
FUND A

BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN AND/OR REDUX FOR MORE
THAN 60 DAYS

SCREENING PROGRAM: Diet Drug Recipients in Subclass 1(b) will be
eligible for one transthoracic echocardiogram and an associated
interpretive physician visit. Eligible Class Members must register for
this benefit by Date 1. This Screening Program shall be conducted for a
12-month period after Final Judicial Approval, in accordance with the
terms and conditions set forth in the Settlement Agreement. This period
may be extended for up to an additional 6 months by the Court(s) for
good cause shown.

Diet Drug Recipients in Subclass 1(b) who do not accept the Accelerated
Implementation Option and who, independent of the Screening Program,
obtain a transthoracic echocardiogram after the end of the Initial
Opt-out Period but before the Final Judicial Approval Date, may recover
from Fund A the lesser of (i) the Trust's cost of providing such an
echocardiogram and associated interpretive physician visit under the
Screening Program and (ii) the actual amount paid for the echocardiogram
by the Class Member, net of amounts paid or reimbursed by an insurance
carrier or other third-party payor, but only in the event that the
settlement receives Final Judicial Approval. Such a payment must be
claimed by Date 2. Class Members receiving such a payment may not also
participate in the Screening Program.

ADDITIONAL MEDICAL SERVICES OR CASH: All Diet Drug Recipients in
Subclass 2(b) and those Diet Drug Recipients in Subclass 1(b) who have
obtained an FDA Positive diagnosis by a qualified physician after
Pondimin and/or Redux use but by the end of the Screening Period, will
be entitled to receive, at the Class Member's election, either (i)
valve-related medical services up to $10,000 in value to be provided by
the Trust (with the services to be specified in the Settlement
Agreement) or (ii) $6,000 in cash. Such cash payments and funds for such
medical services will come from Fund A. Eligible Class Members must
register for this benefit and make the affirmative election as to
whether they wish to receive cash or services by Date 2.

REFUND: Diet Drug Recipients in Subclasses 1(b) and 2(b), or their
associated Representative Claimants, will be eligible for a refund in
the fixed amount of $30 per month of use for Pondimin and $60 per month
of use for Redux, subject to a maximum of $500 per Class Member;
provided, however, that such benefits will be made available to members
of Subclasses 1(b) and 2(b) only if, and to the extent that, Fund A
possesses sufficient assets to pay such benefits after paying or
creating a reserve for payment of all other authorized expenses and
benefits to be provided by Fund Eligible Class Members must register for
this benefit by Date 1.

BENEFITS FOR CLASS MEMBERS WHO INGESTED PONDIMIN AND/OR REDUX FOR 60
DAYS OR LESS:

REFUND: Diet Drug Recipients in Subclasses 1(a) and 2(a) or their
associated Representative Claimants will be eligible for a refund in the
fixed amount of $30 per month of use for Pondimin and $60 per month of
use for Redux. Eligible Class Members must register for this refund
benefit by Date 1.

SCREENING PROGRAM:

In general, members of Subclass 1(a) are not entitled to screening
benefits.

If, however, during the Screening Period, a Diet Drug Recipient in
Subclass 1(a), independent of the Screening Program, obtains an FDA
Positive transthoracic echocardiogram, he/she may recover from Fund A
the lesser of (i) the cost to the Trust of providing such an
echocardiogram and an associated interpretive physician visit under the
Screening Program, and (ii) the actual amount paid for the transthoracic
echocardiogram and associated interpretive physician visit by the Class
Member, net of amounts paid or reimbursed by an insurance carrier or
other third-party payor, but only in the event that the settlement
receives Final Judicial Approval. Eligible Subclass 1(a) members must
register for this benefit by Date 2.

In addition, the Trustees may, in their discretion in appropriate cases
for compassionate and humanitarian reasons, provide a transthoracic
echocardiogram and associated interpretive physician visit during the
Screening Period for members of Subclass 1(a) who are Diet Drug
Recipients where the Trustees determine that such persons are in need of
such services and otherwise

unable to obtain them or where there fare other compelling reasons to
provide such services to such persons. Total disbursements for such
services shall not exceed $20 million. Eligible Subclass 1(a) members
must apply for such benefits by Date 1.

ADDITIONAL MEDICAL SERVICES OR CASH. All members of Subclass 2(a) who
are Diet Drug Recipients as well as those members of Subclass 1(a) who
are Diet Drug Recipients and who have obtained an FDA Positive diagnosis
by a qualified physician after drug use but by the end of the Screening
Period, will be entitled to receive, at the Class Member's election,
either (i) valve-related medical services up to $5,000 in value to be
provided by the Trust (with the services to be specified in the
Settlement Agreement) or (ii) $3,000 in cash. Such cash payments and
funds for such medical services will come from Fund A. Eligible Class
Members must register for this benefit and make the affirmative election
as to whether they wish to receive cash or services by Date 2.

BENEFITS FOR ALL CLASS MEMBERS

MEDICAL RESEARCH AND EDUCATION FUND. An amount in Fund A not to exceed
$25 million may be used to finance medical research and education
related to heart disease, in accordance with standards and procedures to
be specified in the Settlement Agreement.

The  Medical Research and Education Fund will be funded by the transfer
of up to $25 million from Fund A to an organization formed for that
purpose and described in Subsection (c) of Section 501 of the Internal
Revenue Code. The management of the Medical Research and Education Fund
will be by an independent Board of Trustees, to be appointed by the
Court(s). The Parties agree that the Trustees will be nominated by the
Parties and that each nominee will be subject to agreement of the
Parties and subject to Court approval.

MEDICAL/LEGAL REGISTRY. The Trustees shall apply a portion of Fund A to
establish, operate and maintain a "Registry" to track the medical
condition of Class Members, both for purposes of processing claims for
benefits under the terms of the settlement and for purposes of medical
research and education. The Settlement Agreement shall contain
appropriate provisions to assure that the identity of each such Class
Member shall be maintained in confidence. The funds expended to create,
maintain and operate this Registry shall be considered administrative
expenses of Fund A and shall not reduce the $25 million which is
available for medical education and research. The terms and conditions
under which the Registry is to operate shall be defined in the
Settlement Agreement.

In addition, the Trustees may, in their discretion, for members of
Subclasses 1(a) and 1(b), in cases of true financial hardship provide a
transthoracic echocardiogram and associated interpretive physician visit
to such persons upon Trial Court Approval. Total disbursements for such
services shall not exceed $10 million.

COMPENSATION BENEFITS PAYABLE FROM FUND B ELIGIBLE CLASS MEMBERS

The following Class Members, and only such Class Members, shall be
entitled to the compensation benefits set forth on the matrices in
Exhibit "A" in accordance with the criteria and definitions set forth in
this MOU, Exhibit "A," and the Settlement Agreement:

Diet Drug Recipients who have been diagnosed by a qualified physician as
FDA Positive or as having Mild Mitral Regurgitation by an echocardiogram
performed after the commencement of Diet Drug use and by the end of the
Screening Period and have registered for further settlement benefits by
Date 2;

The Representative Claimants of Diet Drug Recipients who have been
diagnosed by a qualified physician as FDA Positive or as having Mild
Mitral Regurgitation by an echocardiogram performed after the
commencement of Diet Drug use and by the end of the Screening Period,
where either the Diet Drug Recipient or the Representative Claimant(s)
for the Diet Drug Recipient has registered for further settlement
benefits by Date 2;

The Derivative Claimants of Diet Drug Recipients who have been diagnosed
by a qualified physician as FDA Positive or as having Mild Mitral
Regurgitation by an echocardiogram performed after the commencement of
Diet Drug use and by the end of the Screening Period, where the
Derivative Claimants have registered for 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.

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.

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.

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.

BENEFITS AVAILABLE

If a Diet Drug Recipient qualifies for matrix payments due to more than
one condition, such Class Member shall be entitled to receive only the
higher of such payments, but not both such payments.

Matrices A-1 and B-1 in Exhibit "A" set forth the maximum aggregate
amount to which the Diet Drug Recipient or his or her Representative
Claimants are collectively entitled. Where there is more than one
Representative Claimant associated with any particular Diet Drug
Recipient eligible for such matrix benefits, the Trustees and/or Claims
Administrator shall allocate this amount among all of the Representative
Claimants. Matrices A-2 and B-2 in Exhibit "A" set forth the maximum
aggregate amount to which all Derivative Claimants associated with any
particular Diet Drug Recipient are collectively entitled. Where there is
more than one Derivative Claimant associated with any particular Diet
Drug Recipient eligible for such matrix benefits, the Trustees and/or
Claims Administrator shall allocate the matrix amount among all of the
Derivative Claimants.

Diet Drug Recipients who have been diagnosed by a qualified physician as
FDA Positive (but not also as having Mild Mitral Regurgitation) by the
end of the Screening Period and have registered for settlement benefits
by Date 2, and their associated Representative and Derivative Claimants
who have registered (or who are deemed to have registered) for
settlement benefits by Date 2, shall be eligible for matrix payments for
Matrix-Level conditions resulting from the valve or valves for which
there was an FDA Positive diagnosis by a qualified physician by the end
of the Screening Period, subject to the above provision that if he/she
qualifies for more than one benefit, he/she shall be entitled to the
higher benefit, but not both.

Diet Drug Recipients who have been diagnosed by a qualified physician as
having Mild Mitral Regurgitation (but not also as FDA Positive) by the
end of the Screening Period and have registered for settlement benefits
by Date 2, and their associated Representative and Derivative Claimants
who have registered (or who are deemed to have registered) for
settlement benefits by Date 2, shall be eligible for matrix payments
only for claims based upon the mitral valve, subject to the above
provision that if he/she qualifies for more than one benefit, he/she
shall be entitled to the higher benefit, but not both.

Diet Drug Recipients who have been diagnosed by a qualified physician
both as FDA Positive (due to mild or greater aortic regurgitation) and
as having Mild Mitral Regurgitation by the end of the Screening Period
and have registered for settlement benefits by Date 2, and their
associated Representative and Derivative Claimants who have registered
(or who are deemed to have registered) for settlement benefits by Date
2, shall be eligible for matrix payments based upon either the aortic or
the mitral valve.

Diet Drug Recipients who have been diagnosed by a qualified physician as
having Endocardial Fibrosis by September 30, 2005, and have registered
for Fund B benefits by January 31, 2006, and their associated
Representative and Derivative Claimants who have registered (or who are
deemed to have registered) for settlement benefits by January 31, 2006,
shall be entitled to the Endocardial Fibrosis benefits set forth in the
matrices in Exhibit "A," regardless of whether or not the Diet Drug
Recipient had valvular regurgitation.

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.

PAYMENT PROVISIONS

The matrix payment amounts set forth in Exhibit "A" will be increased by
2% per year, compounded annually, beginning one year after the Final
Judicial Approval Date.

A "Matrix Payment Cut-off Date" is established for purposes of this
settlement. The Matrix Payment Cut-off Date shall be a date which is 14
years from the Final Judicial Approval Date or December 31, 2015,
whichever is earlier. Those Class Members who fail to qualify for
payment on the matrices in Exhibit "A" by the Matrix Payment Cut-off
Date shall have no further right to claim benefits under Fund B or to
exercise a back-end opt-out. However, where a Diet Drug Recipient does
qualify for payment on the matrices in Exhibit "A" by the Matrix Payment
Cut-off Date, the Diet Drug Recipient and/or the associated
Representative and Derivative Claimants may continue to receive higher
amounts of matrix benefits, if any, if the condition of the Diet Drug
Recipient which qualified such person for such payment progresses to a
more severe condition after the Matrix Payment Cut-Off Date.

Once a Diet Drug Recipient has reached a matrix-level of severity before
the Matrix Payment Cut-off Date, the Diet Drug Recipient and any
associated Representative and/or Derivative Claimants can step up to
higher matrix levels and will be paid the incremental dollar amount, if
any, by which the higher severity level matrix payment exceeds the
matrix payment previously received. Notwithstanding the foregoing, Class
Members who seek benefits for Endocardial Fibrosis must qualify for
payment on the matrices for that condition by September 30, 2005 and
register (or be deemed to have registered) for benefits by January 31,
2006.

To receive matrix benefits, the Class Member must provide the Trustees
or Claims Administrator with appropriate documentation of the condition
of the Diet Drug Recipient that forms the basis for the claim, including
among other things, appropriate medical records, a declaration under
penalty of perjury from the Diet Drug Recipient that, to the best of
his/her knowledge, such condition was not present prior to usage of
Pondimin and/or

Redux; and a declaration on penalty of perjury from a Board-certified
Cardiologist or Cardiothoracic Surgeon setting forth an opinion to a
reasonable degree of medical certainty that (i) the Diet Drug Recipient
has the condition which qualifies the Class Member for a particular
matrix payment, including, where applicable, that the causation
requirements applicable to conditions (b)(v) and (c) of Matrix-Level V,
as defined in Exhibit "A" at A-3, either are or are not present; to the
best of such physician's knowledge, such condition was not present prior
to usage of Pondimin and/or Redux; and (iii) all the conditions set
forth in Exhibit "A" at A-2 which determine whether Matrix A-1 or B-1 is
applicable, either are present or are not present.

If the Class Member seeking a matrix payment is unable to obtain the
documentation described above through the exercise of reasonable
efforts, the Trustees and/or Claims Administrator shall have the right
to consider other supporting documentation (as shall be further
specified in the Settlement Agreement) to establish the Class Member's
condition, subject to review by the Court(s) pursuant to procedures to
be set forth in the Settlement Agreement. If this evidence establishes
the Class Member's condition, the Class Member shall be entitled to
receive the appropriate matrix benefits.

OPT-OUT RIGHTS As to all opt-outs, where there is both a Diet Drug
Recipient or a Representative Claimant and one or more Derivative
Claimants, the Diet Drug Recipient's or the Representative Claimant's
exercise or failure to exercise an opt-out right shall be binding on the
associated Derivative Claimant(s).

INITIAL OPT-OUT:

ELIGIBLE: All Class Members.

METHOD OF EXERCISE: Each Class Member wishing to opt out from this
settlement must sign and submit timely written notice to the Court(s),
to the Trustees and/or Claims Administrator and to AHP, by the
expiration of the Initial Opt-out Period. The Parties will recommend
that the Court(s) approve an Initial Opt-out Period of 90 days from the
date on which class notice commences. EFFECT OF EXERCISE: Any Class
Member who timely and properly exercises an initial opt-out right may
initiate, continue with, or otherwise prosecute any legal claim against
AHP and the Released Parties without any limitation, impediment or
defense arising from the terms of the Settlement Agreement and subject
to all defenses and rights which AHP and the Released Parties would
otherwise have in the absence of the Settlement Agreement. AHP agrees
that it will not use this MOU or this settlement to cause delay to any
Class Member who timely and properly exercises his/her initial opt-out
right and initiates, continues with, or otherwise prosecutes a claim
against AHP.

REVOCATION OF EXERCISE: Any Class Member may revoke an election to
exercise a right of initial opt-out and thereby receive the benefits of
the settlement, provided that the revocation takes place with the
written consent of AHP, which shall not be unreasonably withheld.

INTERMEDIATE OPT-OUT

ELIGIBLE: All Diet Drug Recipients who are not members of Subclasses
2(a), 2(b) or 3, and who have been diagnosed by a qualified physician as
FDA Positive by an echocardiogram performed after the commencement of
Diet Drug use and by the end of the Screening Period, and their
associated Representative and/or Derivative Claimants.

METHOD OF EXERCISE: Each Class Member wishing to exercise a right of
intermediate opt-out must do so by submitting timely written notice of
the Class Member's desire to exercise such right to the Court(s), to the
Trustees and/or Claims Administrator and to AHP, not later than Date 2.
A Class Member who wishes to exercise an intermediate opt-out right must
sign a document acknowledging an understanding of the settlement rights
and benefits that will be relinquished by exercise of the intermediate
opt-out right. A Class Member may not exercise an intermediate opt-out
right after making election to receive either $6,000 in cash or $10,000
in medical services in the case of members of Subclass 1(b), or $3,000
in cash or $5,000 in medical benefits in the case of members of the
Subclass 1(a).

EFFECT OF EXERCISE: The intermediate opt-out is subject to the following
provisions. A Class Member who timely and properly exercises an
intermediate opt-out right may pursue all of his or her Settled Claims
(except for those claims set forth in subparagraphs (5) and (7) of
Exhibit "C"), against the AHP Released Parties and/or the Non-AHP
Released Parties, but may only assert a claim therein based on the heart
valve of the relevant Diet Drug Recipient which was diagnosed by a
qualified physician as FDA Positive by an echocardiogram performed after
the commencement of Diet Drug use and by the end of the Screening
Program. With respect to each Class Member who exercises the
intermediate opt- out right and who initiates a lawsuit against any of
the Released Parties within one year from the date on which the
intermediate opt-out right is exercised, the AHP Released Parties shall
not assert any defense based on any statute of limitations or repose,
the doctrine of laches, any other defense predicated on the failure to
timely pursue the claim, any defense based on "splitting" a cause of
action, any defense based on any release signed pursuant to the
Settlement Agreement, and/or any other defense based on the existence of
the Settlement Agreement, except to the extent provided herein. A Class
Member exercising an intermediate opt- out right may not seek punitive,
exemplary, or any multiple damages against the AHP Released Parties or
the Non-AHP Released Parties; provided, however, as consideration for
being a Non-AHP Released Party and for receiving the benefit of this
waiver of punitive, exemplary, and multiple damages, the Non- AHP
Released Party must agree not to assert any defense based on any statute
of limitations or repose, the doctrine of laches, or any other defense
predicated on the failure to timely pursue the claim, any defense based
on "splitting" a cause of action, any defense based on any release
signed pursuant to the Settlement Agreement, and/or any other defense
based on the existence of the Settlement Agreement, except to the extent
provided herein; and provided further that if the Non-AHP Released Party
so agrees, then the Class Member may not recover more than the total
amount of compensatory damages he or she is entitled to from all persons
or entities in connection with any claimed injury arising from his/her
use of Diet Drugs. A Class Member exercising an intermediate opt-out
right may not use any previous verdicts or judgments against the AHP
Released Parties, or factual findings necessary to such verdicts or
judgments, for purposes of establishing claims or facts in order to
obtain a verdict or judgment against the AHP Released Parties under the
doctrines of res judicata, collateral estoppel or other doctrines of
claim or issue preclusion. Nor may a Class Member exercising an
intermediate opt-out right seek to introduce into evidence against the
AHP Released Parties, for any purpose, such a verdict, judgment, or
factual finding. SUPPLEMENTAL NOTICE: The Trustees shall give Class
Members a supplemental advance notice of Date 2 which shall explain,
among other things, the importance of that date.

BACK-END OPT-OUT

ELIGIBLE: As to Matrix-Level claims based upon valvular regurgitation,
all Diet Drug Recipients who have been diagnosed by a qualified
physician as FDA Positive or as having Mild Mitral Regurgitation by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Period, and who reach a matrix-level of
severity after September 30, 1999 but before the Matrix Payment Cut-off
Date, and their associated Representative and/or Derivative Claimants,
provided that the Class Member has registered or is deemed to have
registered for settlement benefits by Date 2. Class Members who knew
prior to September 30, 1999, that they have injury to one or more of
their heart valves and a condition which would entitle them to payments
on the matrices in Exhibit "A," may not exercise a back-end opt-out.

As to Matrix-Level claims based upon Endocardial Fibrosis, all Diet Drug
Recipients who have not received the diagnosis of Endocardial Fibrosis
from a qualified physician by September 30, 1999, and who have
subsequently been diagnosed by a qualified physician as having
Endocardial Fibrosis by September 30, 2005, and their associated
Representative and/or Derivative Claimants.

Class Members who are not eligible for Matrix-Level benefits may not
exercise the back-end opt-out right provided by this settlement.

METHOD OF EXERCISE: The back-end opt-out must be exercised by timely
written notice to the Court(s), to the Trustees and/or Claims
Administrator and to AHP, within 120 days after the date on which the
Class Member first knows or should have known in the exercise of
reasonable diligence that the relevant Diet Drug Recipient has developed
a condition which qualifies for payment on the matrices appended hereto
as Exhibit "A." A Class Member who wishes to exercise a back-end opt-out
right must sign a document acknowledging an understanding of the
settlement rights and benefits that will be relinquished by exercise of
the back-end opt-out. A Class Member may not exercise a back-end opt-out
right after claiming any matrix payment.

EFFECT OF EXERCISE: The back-end opt-out is subject to the following
provisions. A Class Member who timely and properly exercises a back-end
opt-out may pursue all of his or her Settled Claims (except for those
claims set forth in subparagraphs (5) and (7) of Exhibit "C"), against
the AHP Released Parties and/or the Non-AHP Released Parties, but may
only assert a claim therein as follows: (i) if such person has opted out
by reason of a matrix- level of severity of a condition of one or more
heart valves diagnosed by a qualified physician as FDA Positive or Mild
Mitral Regurgitation by an echocardiogram performed after the
commencement of Diet Drug use and by the end of the Screening Period,
such lawsuit may only assert a claim based on that heart valve or valves
and condition; and (ii) if such person has opted out by reason of
Endocardial Fibrosis, such lawsuit may only assert a claim based on
Endocardial Fibrosis. With respect to each Class Member who exercises
the back-end opt-out right and who initiates a lawsuit against any of
the Released Parties within one year from the date on which the back-end
opt-out right is exercised, the AHP Released Parties shall not assert
any defense based on any statute of limitations or repose, the doctrine
of laches, any other defense predicated on the failure to timely pursue
the claim, any defense based on "splitting" a cause of action, any
defense based on any release signed pursuant to the Settlement
Agreement, and/or any other defense based on the existence of the
Settlement Agreement, except to the extent provided herein. A Class
Member exercising a back-end opt-out may not seek punitive, exemplary,
or any multiple damages against the AHP Released Parties or the Non- AHP
Released Parties; provided, however, as consideration for being a
Non-AHP Released Party and for receiving the benefit of this waiver of
punitive, exemplary, and multiple damages, the Non-AHP Released Party
must agree not to assert any defense based on any statute of limitations
or repose, the doctrine of laches, or any other defense predicated on
the failure to timely pursue the claim, any defense based on "splitting"
a cause of action, any defense based on any release signed pursuant to
the Settlement Agreement, and/or any other defense based on the
existence of the Settlement Agreement, except to the extent provided
herein; and provided further that if the Non-AHP Released Party so
agrees, then the Class Member may not recover more than the total amount
of compensatory damages he or she is entitled to from all persons or
entities in connection with any claimed injury arising from his/her use
of Diet Drugs. A Class Member exercising a back-end opt-out may not use
any previous verdicts or judgments against the AHP Released Parties, or
factual findings necessary to such verdicts or judgments, for purposes
of establishing claims or facts in order to obtain a verdict or judgment
against the AHP Released Parties under the doctrines of res judicata,
collateral estoppel or other doctrines of claim or issue preclusion. Nor
may a Class Member exercising a back-end opt- out right seek to
introduce into evidence against the AHP Released Parties, for any
purpose, such a verdict, judgment, or factual finding.

ACCELERATED IMPLEMENTATION OPTION

All Class Members shall be offered, through the class notice (and may be
offered through other means), the option of obtaining settlement
benefits prior to the Final Judicial Approval Date (the "Accelerated
Implementation Option" or "AIO") subject to the conditions defined below
and those that will be set forth more fully in the Settlement Agreement.

Any Class Member may elect the AIO at any time from the Preliminary
Approval Date until the Final Judicial Approval Date or, unless AHP
elects to extend the offer date thereafter, the date on which it is
determined that the Settlement Agreement will not receive Final Judicial
Approval. Persons electing the AIO may begin receiving benefits
thereunder at such time as the trial Court(s) rule on the approval or
non- approval of the settlement.

Each person electing the AIO will enter into an individual agreement
with AHP (the "Individual Agreements"), separate from AHP's agreement
with the Settlement Class. Such Individual Agreements shall be effective
prior to the Final Judicial Approval Date and, if the Settlement
Agreement with the Settlement Class does not receive Final Judicial
Approval or is terminated for any reason, such Individual Agreements
shall nevertheless continue to be effective and binding.

The Individual Agreements shall provide that the parties thereto shall
have all the same rights and obligations to one another as the benefits
and rights accorded to Class Members and to AHP under the Settlement
Agreement, except as provided below. Class Members will have all the
rights and benefits provided in [relevant sections], and AHP will have
all the rights and benefits provided in [the section on AHP Rights and
Benefits], except the subsection on [Walkaway Rights] thereof. The
Parties hereto will agree upon, and set forth in the Settlement
Agreement, provisions establishing dates of implementation applicable to
such Individual Agreements.

No persons exercising an initial opt-out will be eligible to enter into
an Individual Agreement, unless such initial opt-out has been revoked
with AHP's consent pursuant to [the relevant section in this Memorandum
of Understanding]. Persons signing Individual Agreements will, by
entering into such Individual Agreements, knowingly and affirmatively
waive all intermediate and back-end opt-out rights otherwise provided by
the Settlement Agreement. In addition, such persons will agree not to
object to approval of the settlement by the Court(s) and will agree not
to appeal from Trial Court Approval thereof.

Prior to the Final Judicial Approval Date, Fund A benefits for
individuals accepting this AIO will be paid out of Fund A; Fund B
benefits for eligible individuals accepting the AIO will be paid out of
Fund B, and AHP shall deposit in Fund B any additional amounts needed to
pay such Fund B benefits for individuals accepting the AIO.

In the event of Final Judicial Approval, all benefits due under the AIO
shall be paid from Fund A or Fund B, as applicable, and AHP shall have
no further obligation to make payments to Fund B for the payment of such
AIO benefits, except as set forth above. In that event, AHP will receive
a credit for the payment, prior to Final Judicial Approval, of such Fund
B benefits pursuant to the preceding provision. That credit will be
applied against the earliest payment(s) to Fund B required to be made by
AHP. All Individual Agreements shall be administered after Final
Judicial Approval in all respects as if they were part of the
settlement, other than the fact that parties to such Individual
Agreements shall have no intermediate or back-end opt-out rights.

In the Settlement Agreement, the Parties shall provide for appropriate
security for the payment of benefits due under the AIO in the event that
the settlement does not receive Final Judicial Approval in lieu of those
set forth above.

In the event that the settlement does not receive Final Judicial
Approval or that the Settlement Agreement is terminated, AHP shall be
obligated to pay AIO benefits directly to persons who accepted the AIO.
AHP's obligations to make such payments shall be subject to the same
limitation on AHP's maximum obligations as would have been applicable to
its Fund A and Fund B obligations had the Settlement Agreement received
Final Judicial Approval.

If the settlement fails to receive Final Judicial Approval for any
reason, an agreed-upon share of the non-individual components of Fund A
(including medical research, and costs of administration) will be
provided by AHP, through a mechanism to be agreed upon, for the benefit
of persons accepting the AIO, in accordance with terms and conditions to
be specified in the Settlement Agreement, provided that administrative
costs will be incurred only to the extent reasonable in light of the
number of Individual Agreements in effect and the extent of
administration required therefor.

If AHP exercises its "walkaway" right under [the relevant section] of
this MOU, the Individual Agreements previously entered into shall
nevertheless be binding and effective on AHP and the other parties
thereto. The exercise of the walkaway right by AHP will not affect its
obligations to those Class Members who have accepted the AIO prior to
AHP's exercise of its walkaway right.

The Parties shall ask the Court(s) to supervise the award of attorneys'
fees relating to the Individual Agreements, as set forth below, whether
or not the settlement receives Final Judicial Approval.

AHP RIGHTS AND BENEFITS

CREDITS

For initial, intermediate, and/or back-end opt-outs, AHP shall receive
credits against its Fund B obligations in the event that these
individuals subsequently receive payments from AHP pursuant to judgments
or settlements. The material terms of the credits are outlined in
Exhibit "B" and shall be set forth in full in the Settlement Agreement.

In order to qualify for the credits set forth in Exhibit "B," AHP must
provide the Trustees or Claims Administrator with appropriate
documentation of the condition of the Diet Drug Recipient for which a
payment was made and for which credit is claimed, including, among other
things, appropriate medical records and a declaration on penalty of
perjury from a Board-certified Cardiologist or Cardiothoracic Surgeon
setting forth an opinion to a reasonable degree of certainty that (i)
the Diet Drug Recipient has the condition which would otherwise qualify
a Class Member for a particular matrix payment, including, where
applicable, that the causation requirements applicable to conditions
(b)(v) and (c) of Matrix-Level V, as defined in Exhibit "A" at A-3,
either are or are not present; (ii) to the best of such physician's
knowledge, such condition was not present prior to usage of Pondimin
and/or Redux; and (iii) all the conditions set forth in Exhibit "A" at
A-2 which determine whether Matrix A-1 or B-1 are applicable, either are
present or are not present.

If AHP is unable to obtain the documentation described above in the
exercise of reasonable diligence, the Trustees and/or Claims
Administrator shall have the right to consider other supporting
documentation (as shall be further specified in the Settlement
Agreement) to establish the Class Member's condition, subject to review
by the Court(s) pursuant to procedures to be set forth in the Settlement
Agreement. If this evidence establishes the Class Member's condition,
AHP shall be entitled to the claimed credit.

EFFECT ON CLAIMS

Upon Final Judicial Approval, the Settlement Agreement and any order(s)
approving the Settlement will release all Settled Claims on behalf of
all Class Members against AHP and other Released Parties, except those
claims asserted by Class Members upon a timely and proper exercise of
any applicable opt-out right granted by the settlement. In addition,
each Class Member who accepts benefits pursuant to this settlement shall
execute an individual release of all his/her Settled Claims against AHP
and other Released Parties. This individual release will be ineffective,
null and void as to those claims which, under the terms of this
settlement, may be asserted by the Class Member upon a timely and proper
exercise of any applicable opt-out right granted by the settlement.

Settled Claims are those described in Exhibit "C" hereto. Settled Claims
do not include claims based on PPH.

For purposes of any statute of limitations or similar time bar, the AHP
Released Parties shall not assert that a Class Member actually had PPH
unless and until the condition of the Class Member meets the definition
of PPH set forth in this MOU and in the Settlement Agreement.

In the event that a Class Member initiates a claim based on PPH, the AHP
Released Parties shall not assert a defense based on "splitting" of
claims, causes of action and/or parties by virtue of the fact that the
Class Member is included in the Settlement, but the claim based on PPH
is not a Settled Claim.

The Settlement Agreement shall set forth the form(s) of release
necessary to effectuate this settlement and effectively to provide AHP
all the relief contemplated hereby. Such release shall contain, INTER
ALIA, a covenant not to sue AHP or other Released Parties on any Settled
Claim.

The Released Parties are those described in Exhibit "D" hereto.

Complaints asserting all Settled Claims on behalf of the Settlement
Class will be dismissed with prejudice upon Trial Court Approval. Such
dismissals would be vacated in the event that the settlement does not
receive Final Judicial Approval.

After Date 2, the following persons shall have no further right to any
benefits under the settlement and shall have no right to pursue any
Settled Claims against AHP or any Released Party, except to the extent
such person timely and properly exercises, or has exercised, an initial,
intermediate or back-end opt-out:

with respect to all Settled Claims other than those based on Endocardial
Fibrosis, any Class Member asserting a claim based on a Diet Drug
Recipient who: (a) has not been diagnosed by a qualified physician as
FDA Positive nor as having Mild Mitral Regurgitation by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Period, or (b) has been diagnosed by a
qualified physician as FDA Positive or as having Mild Mitral
Regurgitation by an echocardiogram performed after the commencement of
Diet Drug use and by the end of the Screening Period, but the Class
Member has not registered or been deemed to have registered for
settlement benefits by Date 2.

with respect to Settled Claims based on Endocardial Fibrosis, any Class
Member asserting a claim based on a Diet Drug Recipient who: 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.

PROTECTION OF AHP FROM CLAIMS BY NON-SETTLING DEFENDANTS

"Non-Settling Defendants" (as defined in Exhibit "E") in any present or
future litigation involving Pondimin and/or Redux shall be enjoined and
barred from commencing or prosecuting any claim against AHP or any other
Released Party, including claims for contribution and/or non-
contractual indemnity, to the extent consistent with the terms of
Exhibit "E."

All such claims pending against AHP or any other Released Party in any
court shall be dismissed with prejudice upon Trial Court Approval. Such
dismissals would be vacated in the event that the settlement does not
receive Final Judicial Approval.

The Settlement Agreement shall contain protection for Non-Settling
Defendants as provided in Exhibit "E" hereto, which shall be set forth
in full in the Settlement Agreement.

PROTECTION OF AHP FROM POSSIBLE SUBROGATION CLAIMS

To the extent that any person has rights of subrogation by virtue of a
payment or payments made to or for the benefit of any specific Class
Member who has not properly and timely exercised a right of opt-out,
such rights of subrogation may be asserted with respect to the Trustees'
obligation to make payments to that Class Member from Fund B but shall
not be asserted directly against AHP and/or the Released Parties except
to the extent required by applicable Federal or State law. AHP will
promptly notify the Trustees and/or Claims Administrator and the
affected Class Member of the assertion of such a subrogation claim
against AHP. The Court(s) shall enter a bar order to preclude the
assertion of such subrogation claims against AHP and/or the Released
Parties, except to the extent that it would be impermissible to bar such
claims under provisions of applicable law.

The Trustees and/or Claims Administrator shall provide notice of
subrogation claims received by the Trustees to affected Class Members
and afford them an opportunity to contest, otherwise object to or
compromise any such claims. In making distribution of any amounts to
which Class Members are entitled from Fund B, the Trustees shall
recognize and pay subrogation claims from the amount otherwise payable
to such Class Member, but only to the extent that the subrogation claim
is recognized by applicable law. Unless the law clearly sets forth
different principles, the Trustees shall not recognize a subrogation
claim unless: (1) it is affirmatively brought to their attention prior
to distribution of Funds to a Class Member; (2) it is based on a
positive provision of law or a valid enforceable contract; (3) the
putative subrogee clearly establishes that the subrogee actually made a
payment or payments to or for the benefit of the Class Member which is
of a type that the putative subrogee would be entitled to recover
against AHP and/or the Released Parties, and then (4) only to the extent
of the actual payment made less an equitable debit for attorneys' fees,
and any other allowable or appropriate charges against the putative
subrogee.

WALKAWAY RIGHTS AHP shall have the option to terminate and withdraw from
the Settlement Agreement, in its sole discretion, based upon the number
of persons who have timely and properly elected during the Initial
Opt-Out Period to be excluded from the Settlement Class. If AHP elects
to exercise this walkaway right, it shall do so within 60 days of the
close of the Initial Opt-out Period.

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.

LIMITATION ON FINANCIAL OBLIGATIONS

The maximum amount that AHP shall be obligated to pay under this MOU and
under the Settlement Agreement shall be AHP's obligation to make the
payments to Fund A and the associated escrow agent and AHP's obligation
to make payments to Fund B [as specified in the relevant sections in the
MOU]. These limitations shall also apply to AHP's obligations under
Individual Agreements entered into pursuant to the Accelerated
Implementation Option.

SETTLEMENT IMPLEMENTATION

GENERAL

In order to become effective, the settlement must receive Final Judicial
Approval, except as to the Accelerated Implementation Option and as
otherwise expressly provided herein.

The Parties recommend that the Court(s) establish an Advisory Committee
of Class Counsel, which would consist of counsel actively involved in
State and Federal Diet Drug Litigation. The purpose of the Advisory
Committee of Class Counsel would be to advise the Trustees concerning
the proper operation and implementation of the Settlement Agreement.

The Parties recommend that, as part of the process of administering the
settlement, the Court(s) shall appoint one or more individuals to
provide information to Class Members and their counsel concerning the
terms and implementation of the Settlement Agreement, subject to such
guidelines as the Court(s) shall set forth. The sums expended for the
activities of such persons shall be considered administrative expenses
of the Trust which will be paid by Fund A as incurred, even if prior to
Final Judicial Approval.

JURISDICTION

Beginning with the execution of this MOU, the Parties shall confer with
the Federal Court and the State Courts which, as of the date of this
MOU, have issued orders certifying or conditionally certifying statewide
class actions involving Pondimin and/or Redux and recommend that such
Courts confer with one another in an effort to establish a
jurisdictional and administrative mechanism or mechanisms to effectuate
this settlement.

A trust shall be established and maintained to receive and administer
Fund A and Fund B. During the period of time that the benefits of the
Screening Program are being provided to Class Members, the majority of
the Trustees or Administrators shall be appointed and/or approved by the
state courts which have certified statewide medical monitoring classes
as of the date of this MOU.

APPROVAL PROCESS AND NOTICE PROVISIONS

Promptly after executing this MOU, the Parties shall jointly move the
New Jersey Court for a stay of further proceedings in VADINO.

Within 45 days after executing this MOU, the Parties shall use their
best efforts and negotiate in good faith to prepare and execute a
Settlement Agreement which shall set forth in full all terms and
conditions of this settlement.

Within 10 days after executing the Settlement Agreement, the Parties
shall jointly move the Court(s) for conditional certification of the
Settlement Class, Preliminary Approval of the settlement, authorization
to disseminate the class notice and the designation of an Initial
Opt-out Period to terminate 90 days after the date on which class notice
commences in accordance with applicable orders granting Preliminary
Approval of the settlement.

The proposed form of the notice and proposed methods of distribution
shall be mutually agreed upon by the Parties and jointly proposed to the
Court(s). Fund A will pay 50% and Fund B will pay 50% of the total costs
of printing, publishing and otherwise disseminating the notice. In the
event that the settlement does not receive Final Judicial Approval, the
costs of printing, publishing or otherwise disseminating notice shall be
borne by AHP, and none of the Funds will therefore have any obligation
to return or refund such costs to AHP.

The additional procedures for effectuating and obtaining Final Judicial
Approval of the settlement will be set forth in detail in the Settlement
Agreement.

The Parties shall cooperate in all of these filings and proceedings and
in any related appeals.

AHP shall retain its right to contest class certification for litigation
purposes.

CONDITIONS

AHP's obligations under the MOU and the Settlement Agreement, other than
its obligations to Class Members who accept its AIO, will be subject to
conditions to be specified in the Settlement Agreement, including:

Final Judicial Approval of the Settlement Agreement.

The Parties' agreement as to the Court(s) to which the settlement shall
be submitted for approval, the aspects of the settlement to be submitted
to each such court, the Court(s) to be requested to take each of the
judicial actions contemplated herein, and the Court(s) which are to
supervise subsequent implementation of the settlement.

Entry of the stays described above.

Entry of an order of the Court(s) barring subrogation claims against AHP
and barring third-party claims for contribution and indemnity against
AHP and the Released Parties, in accordance with [relevant sections] and
Exhibit "E" hereto, respectively.

Filing and dismissal with prejudice of the Class Representatives'
complaint(s) asserting all Settled Claims on behalf of the Settlement
Class and exhaustion of all appeals therefrom.

Prior approval of the MOU and the Settlement Agreement by AHP's Board of
Directors, and by the Plaintiffs' Management Committee in MDL 1203.

Entry of such other orders as are needed to effectuate the terms of the
settlement.

The Parties may waive any of the foregoing conditions, but may otherwise
terminate this MOU and/or the Settlement Agreement if these conditions
are not satisfied in any respect.

ADMINISTRATION OF CLAIMS Provisions will be agreed upon and set forth in
the Settlement Agreement which assure to the reasonable satisfaction of
AHP and the Class Representatives that the settlement benefits and
rights shall be administered in a manner which reasonably ensures that
Class Members who claim benefits are actually entitled to receive them
and that payments are not made to Class Members who are not entitled to
receive them. Accordingly, the Settlement Agreement (including
attachments thereto) will set forth provisions including, but not
limited to:

Qualifications for persons administering echocardiograms or other
diagnostic procedures.

Qualifications for health care professionals who interpret the
echocardiograms or other diagnostic procedures.

Protocols to be followed in the administration of these diagnostic
procedures.

Information to be obtained from registering Class Members and claimants
(including verification of drug use and medical condition).

Qualifications of Trustees and Claims Administrator.

Ability of Trustees to obtain expert medical advice or other analyses in
connection with claims for benefits, if appropriate and necessary.

Penalties of perjury for false claims.

AHP's right to obtain, at its expense, an independent transthoracic
echocardiogram of any Class Member or any party to an Individual
Agreement seeking any benefits, pursuant to the Settlement Agreement or
pursuant to such Individual Agreement.

Review and auditing procedures, including by the Parties, for all
elements of the claims process (including but not limited to
registration, echocardiogram, diagnostic reports and claim forms, claims
evaluation and claims determination process).

Periodic reporting of claims receipt, processing, classification,
payment, and auditing.

Resolution of any factual or other disputes which arise in
administration of claims.

Supervision of the implementation of the settlement by the Court(s).

ATTORNEYS' FEES

In the event that the settlement receives Final Judicial Approval, the
Court(s) shall award counsel fees and litigation expenses from the
settlement funds to those attorneys who contributed to the creation of
the settlement fund through work devoted to the "common benefit" of
Class Members, including any attorney who believes that he or she
conferred benefits upon the class through state court litigation
("Common Benefit Attorneys") in accordance with applicable principles of
law and subject to the following provisions.

AHP agrees to pay Class Counsel and Common Benefit Attorneys an
attorney's fee in an amount of up to $200,000,000 for the services
related to Fund A, subject to approval of the appropriate Court(s). To
the extent that such fees are awarded by the Court(s), they shall be
paid by the escrow agent from the escrow account into which AHP is
required to deposit said amounts for that purpose, as set forth above.

For purposes of awarding attorneys' fees from Fund B, AHP agrees that
attorneys' fees should be awarded and paid as a percentage of or
otherwise based on the net present value, as of the Final Judicial
Approval Date, of the maximum amounts which AHP may be legally obligated
to pay to Fund B for the benefit of the class, regardless of the amount
of claims actually paid at any given point in time, pursuant to the
principle expressed in the case law, SEE BOEING V. VAN GEMERT, 444 U.S.
472 (1980). The Parties stipulate that for purposes of calculating
payment of attorneys' fees only, the net present value, as of the Final
Judicial Approval Date, of the maximum amounts which AHP may be legally
obligated to pay to Fund B for the benefit of the class is
$2,550,000,000. The Parties further agree that the attorneys' fees
payable from Fund B to counsel for the Settlement Class ("Class
Counsel") and Common Benefit Attorneys from Fund B shall not exceed $229
million, which is 9% of the $2,550,000,000 dollar amount, and that the
actual amount of attorneys' fees shall be as determined by the Court(s).
Attorneys representing individual Class Members who receive a matrix
payment from Fund B shall be entitled to receive an attorneys' fee in
that percentage of the amount due to the Class Member which is
determined by subtracting 9% from the percentage amount of the
contingent fee to which the attorney is entitled under any valid written
contingent fee agreement with the Class Member. Attorneys may also
recover reimbursement of reasonable out-of-pocket costs out of matrix
payments from Fund B, to the extent authorized in the document
evidencing the attorney's retention and the attorney's fee agreement
with the Class Member. It is expected that the Trustees will not honor
contingent fee agreements with private counsel which were entered into
in violation of applicable law.

In the event that the settlement does not receive Final Judicial
Approval, AHP shall make a payment for attorneys' fees for Fund A
benefits paid or provided under the AIO to an account to be established
as shall be set forth in the Settlement Agreement and supervised by the
Court(s). The first such payment shall be in the amount of 20% of the
dollar value of all Fund A benefits paid or provided to individuals
under the AIO as of the date of such fee payment. At quarterly intervals
thereafter, AHP shall pay into the account an amount equal to 20% of the
dollar value of all Fund A benefits paid or provided to individuals
under the AIO during the preceding quarter. Any amounts paid into this
account which are not awarded in attorneys' fees shall be returned to
AHP by order of the Court(s). Any attorney, including any attorney who
believes that he or she conferred benefits upon individuals electing the
AIO through state court litigation, may apply to the Court(s) for a
portion of the amount deposited in such account and shall be entitled to
payment of such common benefit fees in accordance with applicable
provisions of law. Those accepting the AIO must expressly agree to this
provision regarding fees as a condition to exercising the option.

Prior to the time that the settlement receives Final Judicial Approval
or in the event that the settlement does not receive Final Judicial
Approval, AHP shall deduct from any Fund B benefits paid to those
accepting the AIO an amount equal to 9% of the aggregate amount being
paid and shall deposit such amounts in the account to be established as
shall be set forth in the Settlement Agreement and supervised by the
Court(s). Any attorney, including any attorney who believes that he or
she conferred benefits upon individuals electing the AIO through state
court litigation, may apply to the Court(s) for a portion of the amount
deposited in such account and shall be entitled to payment of such
common benefit fees and costs in accordance with applicable provisions
of law. Attorneys representing individual Class Members who receive Fund
B benefits under the AIO shall be entitled to receive from such Class
Members, and not from the account supervised by the Court(s), attorneys'
fees in that percentage of the amount due to the Class Member which is
determined by subtracting 9% from the percentage amount of the
contingent fee to which the attorney is otherwise entitled under any
valid written contingent fee arrangement with the Class Member. Those
accepting the AIO must expressly agree to this provision regarding fees
as a condition to exercising the option.

In the event that the settlement receives Final Judicial Approval, no
additional attorneys' fees or litigation expenses shall be paid for
benefits conferred on those individuals who accepted the AIO .

OTHER PROVISIONS

This MOU and the Settlement Agreement shall be binding on the successors
and assigns of the Parties.

None of the Parties to the settlement, including AHP, the Released
Parties, or any Class Member, shall offer the terms of this MOU or the
Settlement Agreement into evidence or otherwise rely on the terms of
this settlement in any judicial proceeding, except insofar as it is
necessary to enforce the terms of the settlement or insofar as it is
appropriate under the terms above or as otherwise contemplated hereby.

As soon as practicable after the execution of the MOU, the Parties shall
take all steps which are reasonably necessary to enable the Trust
promptly to provide Fund A benefits upon Final Judicial Approval to all
Class Members not exercising initial opt-out rights. This includes
reasonable and necessary steps to establish the Settlement Trust, to
establish a mechanism to operate the Settlement Trust and administer
claims, to solicit, receive and process claims from Class Members which
will be necessary to provide benefits to Class Members, to establish a
mechanism to provide medical screening, services and cash to members of
the class, to communicate with Class Members and like activities. These
expenses shall not exceed $25 million. In the event that the settlement
is not approved, AHP will not be entitled to a refund of any of the
money spent for these purposes.

The Parties shall address in the Settlement Agreement how disputes
between the Parties and/or between Class Members and the Trust shall be
resolved.

No provision of this MOU or any Exhibit thereto is intended to create
any third-party beneficiary to this MOU.

Upon execution of this MOU, AHP and Class Counsel shall jointly
establish a toll-free telephone number and web site for persons
requesting additional information regarding the settlement. This number
shall be used to record the names and addresses of such individuals and
other information, so that individual notice concerning the settlement
may be provided to them. These names and addresses shall be kept
strictly confidential and shall not be disclosed to any person or used
for any purpose other than for issuance of settlement notice upon prior
order of the Court(s). AHP shall pay all costs relating to the toll-free
telephone line. In the event that the settlement receives Final Judicial
Approval, all expenditures made by AHP in relation to the toll-free
telephone line shall be considered administrative expenses of Fund A,
and AHP shall receive a credit in the amount of all such expenditures in
calculating its next payment to Fund A.

IN WITNESS WHEREOF, the Parties have duly executed this Memorandum of
Understanding Concerning Settlement of Diet Drug Litigation on this 7th
day of October, 1999.

AMERICAN HOME PRODUCTS CORPORATION



BY: ------------------------------
LOUIS HOYNES, GENERAL COUNSEL


                                CLASS COUNSEL


---------------------------------
ARNOLD LEVIN, ESQUIRE
LEVIN, FISHBEIN, SEDRAN & BERMAN
510 WALNUT STREET,
SUITE 500 PHILADELPHIA,
PA  19106
215-592-1500



---------------------------------
MICHAEL D. FISHBEIN, ESQUIRE
LEVIN, FISHBEIN, SEDRAN & BERMAN
510 WALNUT STREET,
SUITE 500 PHILADELPHIA,
PA  19106
215-592-1500



---------------------------------
STANLEY CHESLEY, ESQUIRE
WAITE, SCHNEIDER, BAYLESS & CHESLEY
1513 CENTRAL TRUST TOWER
FOURTH & VINE STREETS
CINCINNATI, OH  45202
513-621-0267



---------------------------------
JOHN J. CUMMINGS, ESQUIRE
CUMMINGS, CUMMINGS & DUDENHEFER
416 GRAVIER STREET
NEW ORLEANS, LA  70130
1-504-586-0000


FOR THE PLAINTIFFS' MANAGEMENT COMMITTEE



---------------------------------
GENE LOCKS, ESQUIRE
GREITZER & LOCKS
1500 WALNUT STREET,
20TH FLOOR PHILADELPHIA,
PA  19102
800-828-3489



---------------------------------
SOL H. WEISS, ESQUIRE
ANAPOL, SCHWARTZ, WEISS, COHAN,
        FELDMAN & SMALLEY, P.C.
1900 DELANCEY PLACE PHILADELPHIA,
PA  19103
215-735-2098



---------------------------------
CHRISTOPHER PLACITELLA, ESQUIRE
WILENTZ, GOLDMAN & SPITZER
90 WOODBRIDGE CENTER DRIVE
SUITE 900, BOX 10
WOODBRIDGE, NJ  07095-0958
732-636-8000



FOR SUBCLASS 1(a):



---------------------------------
DIANNE NAST, ESQUIRE
RODA & NAST
801 ESTELLE DRIVE LANCASTER,
PA  17601
717-892-3000



FOR SUBCLASS 1(b):



---------------------------------
RICHARD LEWIS, ESQUIRE
COHEN, MILSTEIN, HAUSFELD & TOLL
1100 NEW YORK AVENUE, N.W.
SUITE 500, WEST TOWER
WASHINGTON, DC 20005-3934
202-408-4600


FOR SUBCLASS 2(a):



---------------------------------
MARK W. TANNER, ESQUIRE
FELDMAN, SHEPHERD & WOHLGELERNTER
1845 WALNUT STREET,
25TH FLOOR PHILADELPHIA,
PA 19103
215-567-8300


FOR SUBCLASS 2(b):



---------------------------------
R. ERIC KENNEDY, ESQUIRE
WEISMAN, GOLDBERG, WEISMAN & KAUFMAN
1600 MIDLAND BUILDING
101 PROSPECT AVENUE WEST CLEVELAND,
OH  44115
216-781-1111


FOR SUBCLASS 3:



---------------------------------
RICHARD WAYNE, ESQUIRE
STRAUSS & TROY
THE FEDERAL RESERVE BUILDING
150 EAST 4TH CINCINNATI,
OH  45202-4018
513-621-2120


FUND B PAYMENT MATRICES

This Exhibit contains (1) the matrices that are used to determine the
amount of matrix benefits under Fund B, (2) criteria for the application
of the matrices, and (3) definitions of the levels of severity contained
on the matrices.


EXHIBIT "A" TO MOU

FUND B PAYMENT MATRICES

Matrix A-1*                 AGE AT DIAGNOSIS/EVENT

Severity LESS THAN 25-29      30-34      35-39     40-44    45-49
         OR EQUAL
         To 24
-----------------------------------------------------------------------
I        $123,750  $117,563  $111,685  $106,100  $100,795   $95,755
II       $643,500  $611,325  $580,759  $551,721  $524,135   $497,928
III      $940,500  $893,475  $848,801  $806,361  $766,043   $727,741
IV       $1,336,500$1,269,675$1,206,191$1,145,881$1,088,587 $1,034,158
V        $1,485,000$1,410,750$1,340,213$1,273,202$1,209,542 $1,149,065


Severity 50-54     55-59      60-64      65-69      70-79
-----------------------------------------------------------------------
I        $90,967   $86,419    $82,098    $73,888    $36,944
II       $473,032  $449,381   $426,912   $384,221   $192,111
III      $691,354  $656,786   $623,947   $561,552   $280,776
IV       $982,450  $933,327   $886,661   $797,995   $398,998
V        $1,091,612$1,037,031 $985,180   $886,662   $443,331


MATRIX A-2*                                    AGE AT DIAGNOSIS/EVENT

Severity LESS THAN 25-29      30-34      35-39     40-44    45-49
         OR EQUAL
         To 24
-----------------------------------------------------------------------
I        $1,250    $1,187     $1,128     $1,072    $1,018      $967
II       $6,500    $6,175     $5,866     $5,573    $5,294      $5,030
III      $9,500    $9,025     $8,574     $8,145    $7,738      $7,351
IV       $13,500   $12,825    $12,184    $11,575   $10,996     $10,446
V        $15,000   $14,250    $13,537    $12,861   $12,218     $11,607


Severity 50-54     55-59      60-64      65-69      70-79
----------------------------------------------------------------------
I        $919      $873       $829       $739       $500
II       $4,778    $4,539     $4,312     $3,842     $1,921
III      $6,983    $6,634     $6,302     $5,616     $2,808
IV       $9,924    $9,428     $8,956     $7,980     $ 3,990
V        $11,026   $10,475    $9,951     $8,867     $ 4,433


MATRIX B-1*                                AGE AT DIAGNOSIS/EVENT

Severity LESS THAN 25-29      30-34      35-39     40-44    45-49
         OR EQUAL
         To 24
----------------------------------------------------------------------
I        $24,750   $23,513    $22,337   $21,221     $20,159    $19,152
II       $128,700  $122,265   $116,152  $110,344    $104,827   $99,586
III      $188,100  $178,695   $169,760  $161,272    $153,208   $145,548
IV       $267,300  $253,935   $241,238  $229,176    $217,717   $206,831
V        $297,000  $282,150   $268,043  $254,641    $241,908   $229,813


Severity 50-54     55-59      60-64      65-69      70-79
----------------------------------------------------------------------
I        $18,194   $17,284    $16,420    $14,778    $7,389
II       $94,606   $89,876    $85,383    $76,844    $38,422
III      $138,270  $131,357   $124,790   $112,310   $56,155
IV       $196,489  $186,665   $177,332   $159,599   $79,800
V        $218,322  $207,406   $197,036   $177,332   $88,666


MATRIX B-2*                                    AGE AT DIAGNOSIS/EVENT

Severity LESS THAN 25-29      30-34      35-39     40-44    45-49
         OR EQUAL
         To 24
-----------------------------------------------------------------------
I        $500      $500       $500      $500       $500        $500
II       $1,300    $1,235     $1,173    $1,115     $1,059      $1,006
III      $1,900    $1,805     $1,715    $1,629     $1,548      $1,470
IV       $2,700    $2,565     $2,437    $2,315     $2,199      $2,089
V        $3,000    $2,850     $2,707    $2,572     $2,444      $2,321


Severity 50-54     55-59      60-64      65-69      70-79
----------------------------------------------------------------------
I        $500      $500       $500       $500      $500
II       $956      $908       $862       $768      $500
III      $1,397    $1,327     $1,260     $1,123    $562
IV       $1,985    $1,885     $1,791     $1,596    $798
V        $2,205    $2,095     $1,990     $1,773    $886

Matrix payments will be increased 2% per year compounded annually
beginning one year after the Final Judicial Approval Date.

A-1 TO MOU

A-2. CRITERIA FOR THE APPLICATION OF THE MATRICES

The following criteria will be applied to assign Settlement Class
Members to the matrices set forth in this Exhibit:

Matrix A-1:

Diet Drug Recipients who ingested Pondimin and/or Redux for more than 60
days, who were diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Program, whose conditions are eligible for
matrix payments and who do not have any condition or circumstance which
makes Matrix B-1 applicable, together with their associated
Representative Claimants, provided that such persons have registered or
have been deemed to have registered for settlement benefits by Date 2.

The amounts specified in Matrix A-1 set forth the maximum aggregate
amount to which the Diet Drug Recipient or his or her Representative
Claimants are collectively entitled. Where there is more than one
Representative Claimant associated with any particular Diet Drug
Recipient eligible for such matrix benefits, the Trustees and/or Claims
Administrator shall allocate this amount among all of the Representative
Claimants.

Matrix A-2:

Derivative Claimants of Diet Drug Recipients who are eligible for Matrix
A-1 payments, to the extent that applicable state law recognizes that
they have a claim for loss of consortium, services or support.

A Derivative Claimant entitled to Matrix A-2 payments will be paid at
the same Matrix Level as the Diet Drug Recipient whose ingestion of
Pondimin and/or Redux forms the basis of the claim for loss of
consortium, services or support under applicable state law.

The amounts specified on Matrix A-2 are the maximum aggregate amounts
payable to all Derivative Claimants. Therefore, where there is more than
one Derivative Claimant, the amount of the Matrix A-2 payments to which
the Derivative Claimants are entitled shall be apportioned by the
Trustees and/or Claims Administrator among all Derivative Claimants who
are entitled to such payment.

Matrix B-1:

Diet Drug Recipients eligible for matrix payments to whom one or more of
the following conditions apply, or their Representative Claimants:

A-2 TO MOU

For claims as to the mitral valve, Diet Drug Recipients who were
diagnosed by a qualified physician as having Mild Mitral Regurgitation
by an echocardiogram performed after the commencement of Diet Drug use
and by the end of the Screening Period (regardless of the duration of
ingestion of Pondimin and/or Redux) and their associated Representative
Claimants, provided that such persons have registered or have been
deemed to have registered for settlement benefits by Date 2.

Diet Drug Recipients who ingested Pondimin and/or Redux for 60 days or
less, who were diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Period and their associated Representative
Claimants, provided that such persons have registered or have been
deemed to have registered for settlement benefits by Date 2.

Diet Drug Recipients who ingested Pondimin and/or Redux for more than 60
days, who were diagnosed by a qualified physician as FDA Positive by an
echocardiogram performed after the commencement of Diet Drug use and by
the end of the Screening Period and their associated Representative
Claimants, provided that such persons have registered or have been
deemed to have registered for settlement benefits by Date 2.

With respect to an aortic valve claim:

The following congenital aortic valve abnormalities: unicuspid, bicuspid
or quadricuspid valves, ventricular septal defect associated with aortic
regurgitation;

Aortic dissection involving the aortic root and/or aortic valve;

Aortic sclerosis in people who are GREATER THAN 60 years old as of the
time they are first diagnosed as FDA Positive;

Aortic root dilatation GREATER THAN 5.0 cm;

Aortic stenosis with an aortic valve area LESS THAN 1.0 square
centimeter by the Continuity Equation.

With respect to a mitral valve claim:

The following congenital mitral valve abnormalities: parachute valve,
cleft of the mitral valve associated with atrial septal defect;

Mitral valve prolapse as determined by echocardiogram;

Chordae tendinae rupture or papillary muscle rupture; or acute
myocardial infarction associated with acute mitral regurgitation;

Mitral annular calcification;

M-Mode and 2-D echo evidence of rheumatic mitral valves (doming of the
anterior leaflet and/or anterior motion of the posterior leaflet and/or
commissural fusion).

With respect to claims for the aortic and/or mitral valve(s):

Heart valve surgery prior to Pondimin and/or Redux use on the valve that
is the basis of claim;

Bacterial endocarditis prior to Pondimin and /or Redux use;

FDA Positive regurgitation (confirmed by echocardiogram) prior to
Pondimin and/or Redux use for the valve that is the basis of claim;

Systemic Lupus Erythematosus or Rheumatoid Arthritis;

Carcinoid tumor of a type associated with aortic and/or mitral valve
lesions;

History of daily use of methysergide or ergotamines for a continuous
period of longer than 120 days.

The amounts specified in Matrix B-1 set forth the maximum aggregate
amount to which the Diet Drug Recipient or his or her Representative
Claimants are collectively entitled. Where there is more than one
Representative Claimant associated with any particular Diet Drug
Recipient eligible for such matrix benefits, the Trustees and/or Claims
Administrator shall allocate this amount among all of the Representative
Claimants.

Matrix B-2:

Derivative Claimants of Diet Drug Recipients who are eligible for Matrix
B-1 payments, to the extent that applicable state law recognizes that
these Derivative Claimants have a claim for loss of consortium, services
or support.

A Derivative Claimant entitled to Matrix B-2 payments will be paid at
the same Matrix Level as the Diet Drug Recipients whose ingestion of
Pondimin and/or Redux forms the basis of the claim for loss of
consortium, services or support under applicable state law.

The amounts specified on Matrix B-2 are the maximum aggregate amounts
payable to all Derivative Claimants. Therefore, where there is more than
one Derivative Claimant, the amount of the Matrix B-2 payments to which
Derivative Claimants are entitled shall be apportioned by the Trustees
and/or Claims Administrator among all Derivative Claimants who are
entitled to such payment.

A-3. MATRIX LEVELS OF VALVULAR HEART DISEASE

The following provisions define the levels of valvular heart disease
occurring after Pondimin and/or Redux use on the payment matrices set
forth in this Exhibit:

MATRIX LEVEL I is severe left sided valvular heart disease without
complicating factors, and is defined as one of the following:

Severe aortic regurgitation (AR) GREATER THAN 50% jet height/left
ventricular outflow tract height (JH/LVOTH)1 and/or severe mitral
regurgitation (MR) GREATER THAN 40% regurgitant jet area/left atrial
area (RJA/LAA) (1, 2) and no complicating factors as defined below;

FDA Positive valvular regurgitation(3) with bacterial endocarditis
contracted post- Pondimin and/or Redux use.

MATRIX LEVEL II is left sided valvular heart disease with complicating
factors, and is defined as:

Moderate AR (25% - 49% JH/LVOTH)(1) or Severe AR (GREATER THAN 50%
JH/LVOTH)1 with one or more of the following:

Pulmonary hypertension secondary to severe aortic regurgitation with a
peak systolic pulmonary artery pressure GREATER THAN 40 mm Hg measured
by cardiac catheterization or with a peak systolic pulmonary artery
pressure GREATER THAN 45 mm Hg(4) measured by Doppler echocardiography
utilizing standard procedures(5,6) assuming a right atrial pressure of
10 mm Hg;

Abnormal left ventricular end-systolic dimension GREATER THAN 50 mm(7)
by M-mode or 2-D echocardiography or abnormal left ventricular
end-diastolic dimension GREATER THAN 70 mm(7) as measured by M-mode or
2-D echocardiography;

Ejection fraction of LESS THAN 50%7; and/or

Moderate MR (20% - 40% RJA/LAA)(1) or Severe MR (GREATER THAN 40%
RJA/LAA)(1) with one or more of the following:

Pulmonary hypertension secondary to valvular heart disease with peak
systolic pulmonary artery pressure GREATER THAN 40 mmHg measured by
cardiac catheterization or with a peak systolic pulmonary artery
pressure GREATER THAN 45 mm Hg(4) measured by Doppler echocardiography
utilizing the procedures described;

Abnormal left atrial supero-inferior systolic dimension GREATER THAN 5.3
cm(8) (apical four chamber view) or abnormal left atrial
antero-posterior systolic dimension GREATER THAN 4.0 cm (parasternal
long axis view) measured by 2-D directed M-mode or 2-D echocardiography
with normal sinus rhythm using sites of measurement recommended by the
American Society of Echocardiography(9);

Abnormal left ventricular end-systolic dimension GREATER THAN 45 mm(10)
by M-mode or 2-D echocardiogram;

Ejection fraction of LESS THAN OR EQUAL TO 60%(10);

Arrhythmias, defined as chronic atrial fibrillation/flutter that cannot
be converted to normal sinus rhythm, or atrial fibrillation/flutter
requiring ongoing medical therapy, either of which are associated with
left atrial enlargement; as defined in [the MOU].

MATRIX LEVEL III is left sided valvular heart disease requiring surgery
or conditions of equal severity, and is defined as:

Surgery to repair or replace the aortic and/or mitral valve(s) following
the use of Redux and/or Pondimin; or

Severe regurgitation and the presence of ACC/AHA Class I indications for
surgery to repair or replace the aortic(7) and/or mitral(10) valve(s)
and a statement from the attending Board Certified Cardiothoracic
surgeon or Board Certified Cardiologist supported by medical records
regarding the recommendations made to the patient concerning valvular
surgery, with the reason why the surgery is not being performed; or

Qualification for payment at Matrix Level I(b) or II and, in addition, a
stroke due to bacterial endocarditis contracted after use of Pondimin
and/or Redux or as a consequence of chronic atrial fibrillation with
left atrial enlargement as defined in [the MOU] which results in a
permanent condition which meets the criteria of AHA Stroke Outcome
Classification11 Functional Level II, determined six months after the
event.

MATRIX LEVEL IV is defined as follows:

Qualification for payment at Matrix Level I(b), II or III and, in
addition, a stroke due to bacterial endocarditis contracted after use of
Pondimin and/or Redux or as a consequence of chronic atrial fibrillation
with left atrial enlargement as defined [in the MOU] which results in a
permanent condition which meets the criteria of AHA Stroke Outcome
Classification(11) Functional Level III, determined six months after the
event; or

The individual has the following:

Qualification for payment at Matrix Level III; and

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

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

Significant damage to the heart muscle, defined as: a left ventricular
ejection fraction LESS THAN 30% with aortic regurgitation or a left
ventricular ejection fraction LESS THAN 35% with mitral regurgitation in
patients who have not had surgery and meet the criteria of [the relevant
section] or (b) a left ventricular ejection fraction LESS THAN 40% six
months after valvular repair or replacement surgery in patients who have
had such surgery; or

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:

Renal failure, defined as chronic, severe renal failure requiring
regular hemodialysis or Continuous Abdominal Peritoneal Dialysis (CAPD)
for greater than six months following aortic and/or mitral valve
replacement surgery;

Peripheral embolus following surgery resulting in severe permanent
impairment to the kidneys, abdominal organs, or extremities;

Stroke which produces a permanent condition which meets the criteria of
the AHA Stroke Outcome Classification(11) Functional Levels II or III
determined six months after the event;

Quadriplegia or paraplegia resulting from cervical spine injury during
valvular heart surgery; or

The individual has had valvular repair or replacement surgery and
suffers from post operative endocarditis, mediastinitis or sternal
osteomyelitis, either of which requires reopening the median sternotomy
for treatment, or a post-operative serious infection defined as HIV or
Hepatitis C within six months of surgery as a result of blood
transfusion associated with the heart valve surgery.

MATRIX LEVEL V is defined as:

Endocardial fibrosis (A) diagnosed by (1) endomyocardial biopsy that
demonstrates fibrosis and cardiac catheterization that demonstrates
restrictive cardiomyopathy or (2) autopsy that demonstrates endocardial
fibrosis and (B) other causes including dilated cardiomyopathy,
myocardial infarction, amyloid, Loeffler's endocarditis, endomyocardial
fibrosis as defined in Braunwald (involving one or both ventricles,
located in the inflow tracts of the ventricles, commonly involving the
cordae tendinea, with partial obliteration of either ventricle commonly
present)(12), focal fibrosis secondary to valvular regurgitation, e.g.,
"jet lesions", focal fibrosis secondary to catheter instrumentation, and
hypertrophic cardiomyopathy with septal fibrosis have been excluded; or

Left sided valvular heart disease with severe complications, defined as
Matrix Levels I(b), III or IV above with one or more of the following:

A severe stroke following aortic and/or mitral valve surgery, due to
bacterial endocarditis contracted after use of Pondimin and/or Redux or
as a consequence of chronic atrial fibrillation with left atrial
enlargement as defined in [the MOU] and the severe stroke has resulted
in a permanent condition which meets the criteria of AHA Stroke Outcome
Classification(13) Functional Levels IV or V, determined six months
after the event;

The individual has the following:

Qualification for payment at Matrix Levels III or IV; and

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

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

Significant damage to the heart muscle, defined as: (i) a left
ventricular ejection fraction LESS THAN 30% with aortic regurgitation or
a left ventricular ejection fraction LESS THAN 35% with mitral
regurgitation, in patients who have not had surgery and meet the
criteria of [the relevant section] or (ii) a left ventricular ejection
fraction LESS THAN 40% six months after valvular repair or replacement
surgery in patients who have had such surgery; or

Heart transplant;

Irreversible pulmonary hypertension (PH) secondary to valvular heart
disease defined as peak-systolic pulmonary artery pressure >50 mm Hg(4)
(by cardiac catheterization) following repair or replacement surgery of
the aortic and/or mitral valve(s);

Persistent non-cognitive state(13) caused by a complication of valvular
heart disease (e.g., cardiac arrest) or valvular repair/replacement
surgery supported by a statement from the attending Board Certified
Cardiothoracic surgeon or Board Certified Cardiologist, supported by
medical records; or

Death resulting from a condition caused by valvular heart disease or
valvular repair/replacement surgery which occurred post-Pondimin and/or
Redux use supported by a statement from the attending Board Certified
Cardiothoracic surgeon or Board Certified Cardiologist, supported by
medical records; or

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.

REFERENCES

Singh JP, ET AL., Prevalence and Clinical Determinants of Mitral,
Tricuspid and Aortic Regurgitation (The Framingham Heart Study),
AMERICAN J CARDIOLOGY; 83:897-902 (1999).

Helmcke, F., Nanda, N. C., Hsiung, M. C., Soto, B., Adey, C. K., Goyal,
R. G., Gatewood, R.P., Jr., "Color Doppler Assessment of Mitral
Regurgitation with Orthogonal Planes," CIRCULATION, 75(1):175-183
(1987).

Centers for Disease Control and Prevention. Cardiac Valvulopathy
Associated with Exposure to Fenfluramine or Dexfenfluramine: US
Department of Health and Human Services Interim Public Health
Recommendations, November, 1997. MMWR MORB MORTAL WKLY REP. 46:1061-1066
(1997).

Braunwald, E., HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W.B. Saunders Co., pp. 796-98 (1997).

Feigenbaum, J. ECHOCARDIOGRAPHY, Baltimore, Williams&Wikins, pp. 201-02
(5th ed. 1994).

Chan, K-L., ET AL., Comparison of Three Doppler Ultrasound Methods in
the Prediction of Pulmonary Artery Disease, J. AM. COLL. CARDIOL.,
9:549-554 (1987).

Bonow RO, Carabello B, de Leon Jr A, Edmunds Jr LH, Fedderly BJ, Freed
MD, ET AL., Guidelines for the Management of Patients With Valvular
Heart Disease: A Report of the American College of Cardiology/American
Heart Association Task Force on Practice Guidelines (Committee on
Management of Patients With Valvular Heart Disease), J AM COLL.
CARDIOL., 32:1510-14 (1998).

Weyman, A. E. PRINCIPLES AND PRACTICE OF ECHOCARDIOGRAPHY, Philadelphia,
Lea & Febiger. pp. 1290-1292 (1994).

Henry, W.L. ET. AL., Report of the American Society of Echocardiography
Committee on Nomenclature and Standards in Two-dimensional
Echocardiography, CIRCULATION, 62:212-21 (1980).

Bonow RO, Carabello B, de Leon Jr A, Edmunds Jr LH, Fedderly BJ, Freed
MD, ET AL. Guidelines for the Management of Patients With Valvular Heart
Disease: A Report of the American College of Cardiology/American Heart
Association Task Force on Practice Guidelines (Committee on Management
of Patients With Valvular Heart Disease). J AM COLL. CARDIOL.,
32:1533-35 (1998).

The American Heart Association Stroke Outcome Classification approved by
the American Heart Association Science Advisory and Coordinating
Committee, p. 1275 (Dec. 1997).

Braunwald, E. HEART DISEASE. A TEXTBOOK OF CARDIOVASCULAR MEDICINE,
Philadelphia, W. B. Saunders Co., pp. 1433-34 (1997).

Adelman, G., ENCYCLOPEDIA OF NEUROSCIENCE, Birkhauser; Boston, MA, p.
268 (1987).

CREDITS

                                    INDIVIDUALS WHO OPT-OUT

INDIVIDUALS WHO OPT-OUT WITH AN    WITH A MATRIX-LEVEL CONDITION

FDA POSITIVE, BUT NOT MATRIX-
                                   AT THE TIME OF OPT-OUT LEVEL,
CONDITION

OPT-OUTS
JUDGMENTS*       PRE-JUDGMENT         JUDGMENTS*          PRE-JUDGMENT
SETTLEMENTS      SETTLEMENTS

INITIAL
Full credit**    Full credit**        No credit        No credit

INTERMEDIATE
N/A              N/A                  Partial credit   Opportunity

                                                       to subject to

                                                       an
seek court
                                                       aggregate ***
approval of

partial credit                                         subject to an

                                                       aggregate cap***
BACK-END

Full credit**  Full credit**         N/A                N/A

*    Includes post-judgment settlements

**       "Full credit" is defined as a credit in the amount of the
lesser of (i) the amount of payment to the individual (by judgment or
settlement) or the matrix payment for which an individual would qualify
(as determined by age and level of severity either at the time of
opt-out or at the time of payment of judgment or settlement, whichever
is higher) less Class Counsel fees (up to 9% of that amount).

***      The cap on intermediate opt-out, non-matrix-level credits is
$300 million, but the amount of that cap shall accrete at an annual rate
of 6%, compounded annually, commencing on the Final Judicial Approval
Date. In the event of a judgment or settlement after judgment, such
intermediate opt-out credits shall be an amount which is the lesser of
the amount of payment to the individual or (ii) the amount of the matrix
payment for a person at Level III payment and at the age of the
individual at the time of payment, less Class Counsel fees (up to 9% of
such amounts). In the case of prejudgment settlements with individuals
who have exercised the intermediate opt-out where the Court has approved
credit for the settlement, such credit shall be an amount which is the
lesser of (i) the amount of the payment to the individual or (ii) 75% of
the amount of the matrix payment for a person at Level III and at the
age of the individual at the time of payment, less Class Counsel fees
(up to 9% of such amounts).

EXHIBIT "B" TO MOU

DEFINITION OF SETTLED CLAIMS

"Settled Claims" shall be defined for purposes of the MOU and the
Settlement Agreement as:

Any and all claims, including assigned claims, whether known or unknown,
asserted or unasserted, regardless of the legal theory, existing now or
arising in the future by any or all members of the Settlement Class
against AHP and/or any Released Parties arising out of or relating to
the purchase, use, manufacture, sale, dispensing, distribution,
promotion, marketing, clinical investigation, administration, regulatory
approval, prescription, ingestion, and labeling of Pondimin and/or
Redux, alone or in combination with any other substance, including,
without limitation, any other drug, dietary supplement, herb, or
botanical. These "Settled Claims" include, without limitation and by way
of example, all claims for damages or remedies of whatever kind or
character, known or unknown, that are now recognized by law or that may
be created or recognized in the future by statute, regulation, judicial
decision, or in any other manner, for:

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;

compensatory damages, punitive, exemplary, statutory and other multiple
damages or penalties of any kind;

loss of wages, income, earnings, and earning capacity, medical expenses,
doctor, hospital, nursing, and drug bills;

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;

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;

wrongful death and survival actions;

medical screening and monitoring, injunctive and declaratory relief;

economic or business losses or disgorgement of profits arising out of
personal injury; and

prejudgment or post-judgment interest.

EXHIBIT "C" TO MOU

Notwithstanding the foregoing, Settled Claims do not include claims
based on Primary Pulmonary Hypertension ("PPH"), including claims based
on PPH for compensatory, punitive, exemplary or multiple damages.

For purposes of this MOU, the Settlement Agreement and this Exhibit "C,"
PPH shall mean either or both of the following:

I. For a diagnosis based on symptoms and findings prior to death:

A. (i) Mean pulmonary artery pressure by cardiac catheterization
       of GREATER THAN OR EQUAL TO 25 mm Hg at rest or GREATER
       THAN OR EQUAL TO 30 mm Hg with exercise with a normal
       pulmonary artery wedge pressure LESS THAN OR EQUAL TO 15 mm
       Hg(1); or

   (ii) A peak systolic pulmonary artery pressure of GREATER THAN
        OR EQUAL TO 60 mm Hg measured by Doppler Echocardiography;
        or

   (iii) Administration of Flolan to the patient based on a
         diagnosis of PPH with cardiac catheterization not done due
         to increased risk in the face of severe right heart
         dysfunction; and

B. Medical records which demonstrate that the following conditions
   have been excluded by the following results(2):

   (i) Echocardiogram demonstrating no primary cardiac disease
       including, but not limited to, shunts, valvular disease
       (other than tricuspid or pulmonary valvular insufficiency
       as a result of PPH or trivial, clinically insignificant
       left-sided valvular regurgitation), and congenital heart
       disease (other than patent foramen ovale); and

   (ii)Left ventricular dysfunction defined as LVEF LESS THAN 40%
       defined by MUGA, echocardiogram or cardiac catheterization;

   (iii)Pulmonary function tests demonstrating the absence of
        obstructive lung disease (FEV1/FVC GREATER THAN 50% of
        predicted) and the absence of greater than mild restrictive
        lung disease (total lung capacity GREATER THAN 60% of
        predicted at rest); and

   (iv) Perfusion lung scan ruling out pulmonary embolism; and

--------

(1) Rubin, L.J., S. Rich, PRIMARY PULMONARY HYPERTENSION, Marcel
    Dekker, Inc., New York (1997).

(2) Braunwald, E., ESSENTIAL ATLAS OF HEART DISEASES, Current
    Medicine, Philadelphia, 1997, pg. 10-9.

EXHIBIT "C" TO MOU

(v) If, but only if, the lung scan is indeterminate or high
    probability, a pulmonary angiogram or a high resolution angio
    computed tomography scan or demonstrating absence of
    thromboembolic disease; and

C. Conditions known to cause pulmonary hypertension(1), (2), (3)
   including connective tissue disease known to be causally related
   to pulmonary hypertension, toxin induced lung disease known to be
   causally related to pulmonary hypertension, portal hypertension,
   significant obstructive sleep apnea, interstitial fibrosis (such
   as silicosis, asbestosis, and granulomatous disease) defined as
   greater than mild patchy interstitial lung disease and familial
   causes have been ruled out by a Board- Certified Cardiologist or
   Board-Certified Pulmonologist as the cause of the person's
   pulmonary hypertension.

                                -OR-

II. For a diagnosis made after the individual's death:

A. Autopsy demonstrating histopathologic changes in the lung
   consistent with primary pulmonary hypertension and no evidence of
   congenital heart disease (other than a patent foramen ovale) with
   left-to-right shunt, such as ventricular septal defect as
   documented by a Board-Certified Pathologist; and

B. Medical records which show no evidence of alternative  causes as
   described above for living persons.

   The foregoing definition of PPH ("the PPH Definition") is intended
solely for the purpose of describing claims excluded from the definition
of Settled Claims. The Parties agree that the PPH Definition includes
but is broader than the rare and serious medical condition suffered by
the individuals described in the IPPHS study.(4) The subjects in that
study exhibited significantly elevated pulmonary artery pressures with
an average systolic pulmonary artery pressure of 88 mm Hg and average
mean pulmonary artery pressure of 57 mm Hg. Two-thirds of the IPPHS
patients demonstrated NYHA Class III or IV symptoms. While the IPPHS
subjects would fall within the PPH Definition, the definition also
includes persons with a milder, less serious medical condition. --------

  (3) Rich, S., Editor, Executive Summary from the Symposium on Primary
      Pulmonary Hypertension, Evian, France, co-sponsored by the World
      Health Organization, http://www.who.int/ncd/cvd/pph-html.
      September 6-10, 1998.

  (4) Abenhaim, L., ET AL., Appetite-Suppressant Drugs and the Risk of
      Primary Pulmonary Hypertension. International Primary Pulmonary
      Hypertension Study Group, NEW ENGLAND JOURNAL OF MEDICINE, 1996,
      335(9): 606-616.

EXHIBIT "C" TO MOU

LIST OF RELEASED PARTIES

The Settlement Agreement will provide that the Released Parties shall be
deemed to include:

American Home Products Corporation ("AHP") and each of its subsidiaries,
affiliates, and divisions, including, but not limited to, Wyeth-Ayerst
Laboratories Division, Wyeth-Ayerst Laboratories Co., Wyeth-Ayerst
Pharmaceuticals Inc., and American Cyanamid Corporation, along with each
of their respective current and former officers, directors, employees,
attorneys, agents, and insurers.

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.

Any and all suppliers of materials, components, and services used in the
manufacture of Redux and/or Pondimin, including the labeling and
packaging thereof, along with each such person's or entity's
predecessors, successors, parents, subsidiaries, affiliates, and
divisions, and each of their respective current and former shareholders,
officers, directors, employees, attorneys, agents, and insurers;
provided, however, that no person or entity described in this subsection
shall be a Released Party with respect to any claims based upon his, her
or its own independent negligence or culpable conduct.

All distributors of Pondimin and/or Redux, including wholesale
distributors, private label distributors, retail distributors, hospitals
and clinics, and their respective predecessors, successors, parents,
subsidiaries, affiliates, and divisions, and their respective current
and former shareholders, officers, directors, employees, attorneys,
agents, and insurers; provided that (1) such persons and entities
described in this section shall be a Released Party only as to claims as
to which such persons would have a statutory or common-law right of
indemnity against AHP and (2) no person or entity described in this
section shall be a Released Party to the extent that any claim is based
upon his, her or its own independent negligence or culpable conduct,
including, without limitation, negligence or professional malpractice
asserted against hospitals, clinics, and diet centers.

All physicians who prescribed, and all pharmacists and pharmacies who
dispensed, Pondimin and/or Redux to the extent that liability against
such physicians, pharmacists or pharmacies is based on:

the prescription or dispensing of Pondimin and/or Redux in a manner
consistent with the product labeling; and/or

EXHIBIT "D" TO MOU

the prescription or dispensing of Pondimin for any period longer than a
"few weeks"; and/or

the prescription or dispensing of Pondimin and/or Redux for concomitant
use with Phentermine hydrochloride or Phentermine resin; and/or

a claim that the physician's or pharmacist's liability stems solely from
having prescribed or dispensed Pondimin and/or Redux; and/or

a claim that the physician's or pharmacist's liability stems solely from
the prescription or dispensing of a defective or unreasonably dangerous
product.

Physicians, pharmacists and pharmacies are not Released Parties with
respect to any claims based on their independent negligence or culpable
conduct.

Notwithstanding the foregoing, Les Laboratoires Servier S.A. and all of
its affiliates and subsidiaries, including, without limitation, Servier
S.A.S., Oril, Orsem, Servier Amerique, Science Union et Cie, Institut de
Recherches Internationales Servier, Servier Research, Interneuron
Pharmaceuticals, Inc., and any manufacturer, seller, wholesaler, or
distributor of any Phentermine hydrochloride or Phentermine resin
pharmaceutical product are not Released Parties.

JUDGMENT REDUCTION FOR CLAIMS BY THIRD PARTIES

The Settlement Agreement will contain the following provisions:

It is the intent of this Settlement Agreement that no Settlement Class
Member shall recover, directly or indirectly, any sums for Settled
Claims from AHP or any Released Party other than those received under
the Settlement Agreement and that AHP shall make no payments to any
third party defined herein as a Non-Settling Defendant for any amounts
arising out of a Settled Claim brought by a class member against such
Non-Settling Defendant, except to the extent that Class Members timely
and properly exercise an initial, intermediate, or back-end opt-out
right provided by the MOU. It is the further intent of this Settlement
Agreement that Settlement Class Members agree to reduce any judgments
against Non-Settling Defendants to the extent necessary, under
applicable law, to relieve AHP and the Released Parties of liability for
contribution or non-contractual indemnity to any Non-Settling Defendant.
In particular:

Nothing in this Agreement is intended to adversely affect any
Non-Settling Defendant's right, if any, to set-off or judgment reduction
under any state contribution among tortfeasors act or other applicable
law. Non-Settling Defendants will be entitled, at a minimum, to whatever
set-off or judgment reduction is afforded them by operation of
applicable law. Settlement Class Members who do not exercise initial,
intermediate or back-end opt- out rights agree that all defendants are
joint tortfeasors in cases in which Settlement Class Members have joined
Non-Settling Defendants, AHP, and/or the Released Parties or in any
other case in which a Settled Claim is asserted.

The Parties recognize that, under the law of some states, claims for
contribution or non-contractual indemnity against a settling defendant
survive a settlement unless the settlement provides set-off or judgment
reduction rights that go beyond those that would otherwise exist by
operation of applicable law. In those cases, the Parties intend that
Non- Settling Defendants shall be entitled to the additional set-off or
judgment reduction necessary under applicable law to extinguish
Non-Settling Defendants' claims, if any, for contribution or
non-contractual indemnity against AHP and the Released Parties arising
from Settled Claims only. Settlement Class Members, however, reserve
their right to contend that, due to the nature of the theories of
liability alleged or presented against the Non-Settling Defendants
(I.E., conspiracy or concert of action), Non- Settling Defendants have
no right to contribution or non-contractual indemnity from AHP or the
Released Parties as a matter of law even though they are joint
tortfeasors.

EXHIBIT "E" TO MOU

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.

To avoid inconvenience and expense to AHP, the Released Parties, and the
Settlement Class Members, and to eliminate the objection that certain
states' law requires that AHP and the Released Parties remain as parties
in a lawsuit to facilitate the adjudication of Non-Settling Defendants'
set-off or judgment reduction rights with respect to a Settled Claim,
the releases provided under this Settlement Agreement shall incorporate,
to the extent required by applicable law, what is known in Pennsylvania
as a "GRIFFIN release" and/or what is known in Wisconsin and elsewhere
as a "PIERRINGER release." By this provision, Settlement Class Members
agree that the lack of a judicial determination that the settling
defendant is a joint tortfeasor does not preclude Non-Settling
Defendants from obtaining set-off or judgment reduction rights they
would otherwise have under applicable law in the absence of this
Agreement. SEE GRIFFIN V. UNITED STATES, 500 F.2d 1059 (3d Cir. 1974);
PIERRINGER V. HOGER, 124 N.W.2d 106 (Wis. 1963). By this provision,
Settlement Class Members further agree to waive any rights that they
might have against Non-Settling Defendants, the assertion of which
would, under applicable law, allow Non-Settling Defendants to add or
retain AHP and/or the Released Parties as defendants in actions brought
by Settlement Class Members against Non-Settling Defendants with respect
to Settled Claims for the purpose of adjudicating Non-Settling
Defendants' 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.

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.

If, despite the provisions of this section, AHP or any Released Party
makes a payment of any judgment due to a claim for contribution and/or
non- contractual indemnity arising out of a Claim brought by a
Settlement Class Member against a Non-Settling Defendant with respect to
a Settled Claim, such Settlement Class Member shall indemnify AHP and
the Released Parties for such amount, and AHP shall make reasonable
efforts to reduce such indemnity obligations to judgment in the
underlying litigation involving the Non-Settling Defendant. To the
extent that, for any reason, a Settlement Class Member has failed to
satisfy an indemnity obligation arising under this paragraph within 90
days after AHP makes any such payment, AHP shall assign its indemnity
rights against the Class Member to the Trustees and receive a credit
against its Fund B obligations in the amount of the unsatisfied portion
of the indemnity. The credit shall accrete with a 6% factor, compounded
annually, commencing in the year it is generated. Accreted credits shall
accumulate and shall be applied in the same manner as credits are
applied pursuant to [the relevant section] of the MOU.

To further protect the Non-Settling Defendants' interests, the Parties
have agreed that the bar order shall incorporate the following
provisions:

If, despite the provisions [in the MOU], (i) applicable law precludes a
Non- Settling Defendant from obtaining a set-off or judgment reduction
to which a Non-Settling Defendant would otherwise be entitled under
applicable law in an individual case brought by a Settlement Class
Member with respect to a Settled Claim without naming AHP or a Released
Party as a party in the lawsuit and (ii) the Non-Settling Defendant and
the Settlement Class Member cannot reach agreement on this issue
sufficient to eliminate the Non-Settling Defendant's alleged need to
name AHP or a Released Party in the lawsuit, the Non-Settling Defendant
may apply to the Court(s) for relief from the bar order.

The Non-Settling Defendant's application to the Court(s) shall set forth
with specificity (i) the facts and law that would give rise to a claim
for contribution and/or non-contractual indemnity but for the provisions
of this Settlement Agreement; (ii) the efforts that the Non-Settling
Defendant has made to reach an accommodation with the Settlement Class
Member with respect to the need to name AHP or a Released Party as a
defendant in the case; and (iii) the factual and legal bases for the
Non-Settling Defendant's claim that, under the particular facts of the
case and the particular provisions of applicable law, the Non-Settling
Defendant must be permitted to name AHP or a Released Party in the case
despite the bar order.

A copy of the Non-Settling Defendant's application(s) to the Court(s)
shall be served on the PMC and counsel for AHP.

The Court(s) shall modify the bar order to permit a Non-Settling
Defendant to name AHP or a Released Party in a particular case brought
against a Non-Settling Defendant by a Settlement Class Member with
respect to a Settled Claim, only where doing so is essential to protect
set-off or judgment reduction rights to which the Non-Settling Defendant
would be entitled under applicable law but for the provisions of this
Settlement Agreement. Any order modifying the bar order will contain
provisions that protect the interests of AHP and the Released Parties in
finality under this Settlement Agreement, including, among other things,
provisions affirming that the Settlement Class Member has agreed (i) to
forego any direct or indirect recovery from AHP or the Released Parties
of sums over and above those received under this Settlement Agreement
and (ii) to give up any portion of any judgment
against a Non-Settling Defendant that is attributed to AHP or any
Released Party with respect to a Settled Claim.

Applications made by Non-Settling Defendants for modification of the bar
order will be subject to the provisions of Fed.R.Civ.P. 11 and/or the
state law equivalent.

"Non-Settling Defendant" shall mean any person or entity that is not AHP
or a Released Party as defined herein, against whom or which any claim,
suit, action or other proceeding has been or is hereafter made, asserted
or commenced alleging injury or damage as a result of a Settled Claim. A
physician or other Released Party may be a Non-Settling Defendant as to
any claim with respect to which he, she, or it is not a Released Party.
The term Non-Settling Defendant is not limited to persons or entities
who are sued in an action in which AHP or another Released Party is also
a party.

"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.

"Settlement Class Member" referred to in this Exhibit "E" shall mean any
member of the Settlement Class who has not timely exercised an initial
opt-out right, an intermediate opt-out right, or a back end opt-out
right pursuant to the terms of the Settlement Agreement. Upon the
exercise of any such opt-out rights, the provisions of this Exhibit
shall become ineffective in connection with any action brought by each
class member who has exercised any right of opt-out.

A Settled Claim is defined as set forth in Exhibit "C" to the MOU.

The Settlement Agreement shall contain other specific terms and
provisions to implement, with respect to specific third parties, the
Parties' intention that no Settlement Class Member shall recover,
directly or indirectly, any sums for Settled Claims from AHP or any
Released Party other than amounts received under this Settlement
Agreement, and that AHP shall make no payments to such third parties for
any amounts arising out of a Settled Claim brought against such third
parties by any Class Member, except to the extent that a Class Member
timely and properly exercises an initial, intermediate or back-end
opt-out right provided by the MOU.


FEN-PHEN: NJLJ Says Opt-Outs Likely With Cap On Damages & No Punitives
----------------------------------------------------------------------
(158 N.J.L.J. 97)

A $4.85 billion structured settlement signed Thursday in the multicourt
fen-phen litigation could dispose of claims of 5.8 million former users
of the diet pill nationwide, but plaintiffs' lawyers say there are
aspects of the pact that might cause many to opt out.

And if enough people opt out, the defendants can pull out.

The settlement, which still requires federal and state court approval,
places a $1.485 million cap on individual claims, and it prevents
claimants from seeking punitive damages. Attorneys who filed some of the
4,100 suits against the Madison-based drug manufacturer say these
restrictions will reduce the agreement's appeal.

"This might not be the best deal for our individual clients," says Beth
Ladagga, a partner with Charleston, S.C.'s Ness, Motley, Loadholt,
Richardson and Paul. She is representing fen-phen plaintiffs in six
states, including New Jersey. If
plaintiffs think they can get a better deal through litigation, they
will take that route, Ladagga says.

The agreement, if approved, would end a trial that began in mid-August
in Middlesex County involving asymptomatic plaintiffs who were seeking
medical monitoring. Anticipating the settlement, Superior Court Judge
Marina Corodemus dismissed the jury in the case on Monday in Vadino v.
American Home Products, MID-L-425- 98MT.

A total of 94,400 New Jersey residents took the drug. The settlement
does not specify amounts to be paid in each state.

The settlement provides health care to users who developed heart and
lung problems from taking the American Home Products drugs, Pondimin
(fenfluramine) and Redux (dexfenfluramine). They would receive payments
of between $36,944 to $1.485 million depending on their age and the
severity of their injuries.

The settlement permits medical monitoring and refunds to the 5.8 million
people, regardless of whether they are symptomatic, who took the drug
before it was pulled off the market in 1997.

The lawyers who worked on the settlement will have the right to apply
for fees of about $420 million, to be disbursed from two funds. The
first fund, worth $200 million, will pay attorneys who filed suits
alleging injuries. The second fund, worth $220 million, will pay
attorneys representing plaintiffs seeking
medical monitoring.

Christopher Placitella, a partner with Woodbridge's Wilentz, Goldman &
Spitzer who helped craft the settlement, says that many users will not
be satisfied with it and will go to court. "This is not the end of the
road," Placitella says, adding that the plan takes that into account.
For example, those injured by the drug would be permitted to opt out of
the settlement and pursue their own legal remedies. "Anyone that wants
to proceed, whether in federal or state court, can proceed. This
settlement does not limit their ability to do that," he says.

Arnold Levin, a partner with Philadelphia's Levin Fishbein Sedran &
Berman and one of the settlement's eight chief negotiators, adds that
claimants can pursue their own suits years later if their conditions
worsen and they find the settlement is inadequate. In such cases, Levin
says, American Home Products has
agreed not to assert a statute of limitations defense.

Doug Petkus, a spokesman for American Home Products, says "the
settlement provides quality benefits to all individuals that used these
diet drugs as well as financial protection in the event a user develops
a serious heart valve disease." If enough people opt out of the
settlement, American Home Products reserves the right to terminate it,
he adds.

American Home Products' attorneys in the Middlesex County case -- Marc
Farley, a partner with Gibbons, Del Deo, Dolan, Griffinger & Vecchione
of Newark, and Peter Bleakley, a partner with Arnold & Porter of
Washington, D.C. -- did not return telephone calls seeking comment.

American Home Products faces as many as 6,500 suits from 11,350
plaintiffs in all 50 states. Class-action suits have been certified in
eight states and by the U.S. District Court in Philadelphia.

According to the settlement, the fund would pay for echocardiograms, to
test for heart and lung problems, for symptomatic users who took the
drug for more than 60 days. If ymptoms are discovered, the fund would
pay for a second
echocardiogram.

Placitella says a third of the 94,400 New Jersey residents who took the
drug would be eligible for the free tests. People who took the drug for
fewer than 60 days would pay or the tests at their own expense. If
symptoms are discovered, the cost of the tests would be reimbursed by
the fund. And all users  o took Redux or Pondimin are eligible for
refunds for the costs of the prescription.

The actual payout by American Home Products is $3.75 billion
over 16 years. It begins with a $25 million expenditure five days
after the settlement receives preliminary approval, followed by a
$625 million payment after final approval is granted. Payments of
$182 million will made each year for the next 14 years, and a
balloon payment of $480 million will be made in 2015.

A separate fund will be set up to handle medical monitoring claims. An
initial payment of $50 million will be made to the fund after
preliminary approval, two later payments of $383 million and a final
payment of $184 million. American Home Products also agreed to pay $25
million for medical research and education on heart valve diseases.

Attorneys familiar with mass tort litigation say the settlement is a
smart business move for American Home Products. Since the first fen-phen
verdict was reached in Texas in August, for $23 million, the price of
American Home Products' stock plummeted from a high of 70 in July to 38
after the award. With the announcement of the settlement Thursday, the
stock climbed four points to 49.

New Jersey attorneys who filed state suits will send fee applications to
Corodemus. She has called a conference for plaintiffs' attorneys in the
New Jersey fen-phen cases on Oct. 22 to discuss the settlement.

Attorneys who filed federal suits will send their applications to U.S.
District Judge Louis Bechtle in Philadelphia, before whom all federal
cases have been consolidated. (New Jersey Law Journal 10-11-1999)


HMO: TX Harris Methodist Settles Suit Over Misrepresentations For $4.7M
-----------------------------------------------------------------------
Harris Methodist Health Plan, one of the largest health plans in
northern Texas, has settled a class-action suit for $4.7 million. The
suit accused the health maintenance organization of failing to disclose
prescription limits imposed on doctors and budgets on length of
hospitalization stay and imposing rules regarding physician referral.

The class-action suit involves 250,000 to 300,000 members. Plaintiffs'
attorney George Parker Young of the Fort Worth, Texas, said he believed
this was the first suit in the United States where a financial
settlement was given to uninjured subscribers because of health
maintenance organization misrepresentation of financial incentives. "We
hope this lawsuit serves as a deterrent to other HMOs concerning
offering incentives," said Young.

This class-action lawsuit is part of a wave buffeting the HMO industry.
Humana Inc. was hit with a class-action lawsuit alleging that the 6.1-
million-member plan failed to disclose financial incentives given to
doctors. A national class-action lawsuit was recently filed on behalf of
Aetna Inc.'s 18 million HMO subscribers on charges that include
financial incentives and limiting physician referrals. This isn't the
first lawsuit Young has brought against Harris Methodist, which has
314,000 subscribers.

The HMO settled a potential class action suit in September 1998
concerning physician compensation. It was initially named in a suit
brought against six Texas HMOs over financial disclosure, but was
dismissed from the suit when company officials agreed to disclose to its
members financial incentives. Arguments for that suit concerning five
HMOs were heard before the 5th U.S. Circuit Court of Appeals in New
Orleans earlier this month. The opinion will be announced this winter.

Harris Methodist posted a $17 million second-quarter net loss that it
attributed to increases in medical and pharmaceutical expenses combined
with being locked into long-term employer contracts. It has been put up
for sale be its parent company, Texas Health Resources, which owns a
number of nonprofit hospitals in Texas. A deal with the parent company
of Blue Cross & Blue Shield of Texas and Illinois, Health Care Service
Corp., was nixed in June. Most recently, Harris Methodist said it is
negotiating with a "short list" of potential buyers., including
PacifiCare Health Systems Inc., according to the Fort Worth
Star-Telegram. Harris Methodist has a qualified HMO A.M. Best Rating of
B-q.


HOLOCAUST VICTIMS: Research Shows US Army Stole Art Works And Valuables
-----------------------------------------------------------------------
US army units plundered works of art and valuables from a train laden
with the possessions of Holocaust victims, according to fresh research
into US wartime records.  Some of the stolen art was used to decorate
the offices of US generals and may still be in the hands of the army, it
emerged yesterday. Researchers for the presidential commission on
Holocaust assets in the US said further investigations - including
interviews with army veterans - were needed to find out where the looted
valuables are.

The revelations represent the first findings in a White House effort to
trace the US record on Holocaust-era assets, after its own earlier
research into the wartime record of European countries such as
Switzerland.

Two US government reports into Nazi gold gave a substantial boost to the
long-running campaign for compensation for Holocaust victims. In
particular the Washington reports helped lead to last year's $ 1.25bn
(L750m) settlement between three Swiss banks and class action lawyers
representing Holocaust victims.

Art has become the subject of some of the most controversial
compensation claims in the last two years. The research released centres
on US troops who seized a train in Werfen, Austria, in May 1945. The
train was loaded with more than 1,100 paintings, as well as substantial
amounts of gold jewellery, cash and domestic valuables which Nazi forces
looted from Hungarian Jews. Little historical research has been
published to date on the so-called gold train, although rumours
surrounding the train's contents have circulated for several years.

Under international law and US wartime policy, the army was obliged to
return the art to Hungary. Instead, US forces under Gen Mark Clark
claimed they could not identify the national origin or ownership of the
loot. According to the new research, much of the loot was simply seized
by the US "at the highest level. "Less valuable objects from the gold
train, such as watches, cameras and modest jewellery were sold through
the Army Exchange stores," they said. "Property in the military
government warehouse was also subject to theft. A notable example was
the disappearance of a suitcase filled with gold dust."

American forces later transferred more than 1,000 paintings to the
Austrian - rather than Hungarian - government. Austrian officials say "a
portion" of the art has been returned.

UK military bases are currently being searched for Holocaust loot
following an investigation by researchers in the UK. (Financial Times
(London) 10-15-1999)


MATTEL INC: Berman, DeValerio Files Securities Suit In California
-----------------------------------------------------------------
Berman, DeValerio & Pease LLP a law firm specializing in representing
shareholders in class action lawsuits, issues the following press
release:

Mattel, Inc. (NYSE: MAT) ("Mattel" or the "Company") was charged with
misleading investors in a securities class action with respect to the
financial condition and business prospects of the Company. The case was
filed as a class action in the United States District Court for the
Central District of California on behalf of all persons and entities who
purchased or otherwise acquired the common stock of Mattel during the
period February 1, 1999 through and including October 1, 1999.

The action charges that Mattel and certain of its officers violated the
securities laws and regulations of the United States by issuing a series
of false and misleading statements concerning the Company's finances
during the Class Period. In particular, the Complaint charges that
Mattel failed to disclose that The Learning Company, which Mattel had
acquired in a stock for stock transaction, was experiencing serious
problems, including the return of large quantities of goods, bad debts
which had to be written off and a failed licensing agreement. As a
result, Mattel announced that The Learning Company would incur a $50
million to $100 million loss rather than the large profit expected for
the third quarter of 1999. As a result of these revelations, Mattel's
stock collapsed, falling to $11-7/8 on 10/4/98 on huge volume of 29.96
million shares. The Complaint also alleges heavy selling of Mattel stock
during the Class Period by insiders.

If you purchased Mattel common stock during the period of February 1,
1999 through October 1, 1999, and suffered a loss on your investment,
you may wish to contact the lawyers at Berman DeValerio to discuss your
rights and interests. In addition, under the federal securities laws you
may, but not later than sixty days from October 7, 1999, move the court
to serve as lead plaintiff of the Class, if you so choose. To serve as
lead plaintiff, however, you must meet certain legal requirements.
Contact Norman Berman, Esq. Alicia Duff, Esq. Berman, DeValerio & Pease
LLP One Liberty Square, Boston, MA 02109 E-Mail: bdplaw@bermanesq.com or
visit website at http://www.bermanesq.com


MATTEL INC: Cohen, Milstein Files Securities Suit In California
---------------------------------------------------------------
The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has filed a
class action lawsuit in the United States District Court for the Central
District of California on behalf of purchasers of securities of Mattel,
Inc. (NYSE:MAT) during the period between February 1, 1999 through
October 1, 1999 and who were damaged thereby.

The complaint charges that Mattel, The Learning Company, Inc., and
certain of their officers and directors during the relevant time period
violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, by, among other things, misrepresenting and failing to disclose
material information concerning Mattel's acquisition of The Learning
Company. The complaint alleges that throughout the Class Period, Mattel
and its officers and directors falsely represented that The Learning
Company was an excellent strategic fit with Mattel's business and that
its acquisition would be immediately accretive to Mattel's 1999 and 2000
results. Based on these representations, the price of Mattel, Inc.
common stock rose to a Class Period high of $ 30-5/16 per share during
the critical acquisition pricing period between April, 1999 and May,
1999. Then, just a few months after The Learning Company acquisition
closed, Mattel disclosed that The Learning Company had experienced
millions of dollars in product returns and bad debt write-offs and that
The Learning Company would incur a $ 50 to $ 100 million loss rather
than the large profit forecast for third quarter 1999.

Cohen, Milstein, Hausfeld & Toll, P.L.L.C. is plaintiff's counsel in
this action. If you are a member of the Class who purchased Mattel
securities between February 1, 1999 and October 1, 1999, you may move
the Court, not later than sixty days from October 7, 1999, to serve as
lead plaintiff for the Class. In order to serve as lead plaintiff, you
must meet certain legal standards. If you have any questions about this
Notice or the action, or with regard to your rights, please contact the
following attorneys: Steven J. Toll or Tamara J. Driscoll at
888/240-1238 or 206/521-0080, 999 Third Avenue, Seattle, Washington
98104.
CONTACT: Milstein, Hausfeld & Toll, P.L.L.C. Steven J. Toll,
888/240-1238 stoll@cmht.com Tamara J. Driscoll, 888/240-1238
tdriscoll@cmht.com Fax, 206/521-0166 TICKERS: NYSE:MAT


MATTEL INC: Milberg Weiss Files Securities Suit In California
-------------------------------------------------------------
Milberg Weiss (http://www.milberg.com)announces that a class action has
been commenced in the United States District Court for the Central
District of California against Mattel Inc. ("Mattel") (NYSE:MAT) and
certain of its officers and directors with violations of the Securities
Exchange Act of 1934.

If you purchased Mattel publicly traded securities between February 1,
1999 and October 1, 1999, you must move the Court no later than 60 days
from October 7, 1999. If you wish to discuss this action or have any
questions concerning this notice or your rights or interests, please
contact plaintiffs' counsel, William Lerach or Darren Robbins of Milberg
Weiss at 800/449-4900 or via e-mail at wsl@mwbhl.com TICKERS: NYSE:MAT


MATTEL INC: Weiss & Yourman Files Securities Suit In California
---------------------------------------------------------------
Weiss & Yourman announced that a class action lawsuit has been filed
against Mattel, Inc.:

A class action lawsuit against Mattel, Inc. (NYSE:MAT) and certain
individuals associated with the Company was commenced in the United
States District Court for the District of Central California on behalf
of purchasers of Mattel shares. If you purchased Mattel shares between
October 22, 1998 and October 1, 1999, please read this notice.

The complaint charges Mattel and certain of its executive officers with
violations of the Securities Exchange Act of 1934 and the Securities Act
of 1933. The complaint alleges that defendants issued a series of
materially false and misleading statements regarding the Company's
financial condition and results of operations. These false and
misleading statements caused the price of Mattel's stock to be
artificially inflated.

Plaintiff is represented by Weiss & Yourman. If you purchased Mattel
securities during the period of October 22, 1998 and October 1, 1999,
you may move the court no later than December 6, 1999, to serve as a
lead plaintiff of the class. In order to serve as a lead plaintiff, you
must meet certain legal requirements. You do not need to seek
appointment as a lead plaintiff in order to share in any recovery. If
you wish to receive an investor package or if you wish to discuss this
action, or have any questions concerning this notice or your rights or
interests with respect to this matter, or if you have any information
you wish to provide to us, please contact: LOS ANGELES: Ronald T. Theda,
(800) 437-7918 or (310) 208-2800 or via Internet electronic mail at
wyinfo@wyca.com or by writing Weiss & Yourman, 10940 Wilshire Blvd.,
24th Floor, Los Angeles, CA 90024. TICKERS: NYSE:MAT


MICHAEL SHEAHAN: Sheriff Wants To Replace Counsel In Strip-Search Case
-----------------------------------------------------------------------
Cook County Sheriff Michael F. Sheahan's ongoing battle with the state's
attorney office is back in court, with the sheriff pushing for the
appointment of special counsel to handle a 1996 class-action lawsuit.
Attorneys for Sheahan and Cook County State's Attorney Richard A. Devine
appeared before a judge on the sheriff's emergency petition to appoint a
special state's attorney to represent it in the federal class action
filed on behalf of women who were strip-searched. That case is Kenya
Gary, et al. v. Michael Sheahan, etc., No. 96 C 7249.

Cook County Circuit Judge Stephen A. Schiller said during a brief
hearing that the matter was not an emergency, and he gave the sheriff's
office five days to file another pleading outlining specifics of the
alleged inadequate representation. The state's attorney's office will
then respond, and the matter was set for a Nov. 4 hearing.

James J. Ryan, an attorney for Sheahan, told Schiller that the matter is
an emergency because the state's attorney's office was not effectively
representing or communicating with the Sheahan's office in the class
action. Ryan added that sheriff's officials were not informed by the
state's attorney's office of recent rulings and pleadings relating to
summary judgment and attorney fees that U.S District Judge David H. Coar
has made in the Gary case.

Patrick T. Driscoll Jr., chief of the state's attorney's office Civil
Actions Bureau, said in a statement that he has full confidence in the
assistant state's attorneys handling the Gary case. The sheriff has had
and will continue to have excellent representation," Driscoll added. We
don't believe that there's any conflict of interest that will preclude
us from continuing to represent the sheriff's office. Therefore, the
sheriff's petition for appointment of a special state's attorney is
unwarranted."

During the hearing, Assistant State's Attorney Gerald E. Nora told
Schiller that he sent a status report in the Gary case to the sheriff's
office. Frankly I'm at a loss to explain the emergency," he added.
Schiller noted that the state's attorney's office has represented
Sheahan's office in the case since 1996. Schiller added that the
petition was not an emergency and said he would allow Sheahan's office
to file additional pleadings. You're going to have to be more specific,"
Schiller told Ryan.

Ryan said he plans to file an amended petition that will detail the
state's attorney's shortfalls in the Gary case. Those details are
expected to be related to Coar's Sept. 13 ruling, which expanded the
size of the class.

Sheriff's officials only learned of a summary judgment ruling and a
motion for rule to show cause for failure to pay the plaintiffs'
attorney fees on Sept. 20 when they were contacted by reporters, said
sheriff's spokesman Bill Cunningham.

Coar has entered summary judgment in favor of the class of approximately
12,000 women who were strip-searched after judges ordered their release
from custody, plaintiffs' attorney Thomas G. Morrissey said. Coar has
not yet ruled on the amount of damages the class members will receive,
he added.

The rule to show cause motion became moot after the county in late
September paid $ 434,178 in attorney fees and $ 64,778 in costs to
Morrissey and his co-counsel, Robert H. Farley Jr., according to
Morrissey.

Ryan said outside Schiller's courtroom that 10 assistant state's
attorneys have represented the sheriff's office in the case at various
times. There's just no sense of strategy or direction in this case,"
Ryan charged. The state's attorney's office has practiced reactionary
lawyering, rather than aggressively representing Sheahan's office," Ryan
said.

In a statement issued after the hearing, Nora said he will reply to the
sheriff's office petition once the document is filed. I am constrained
by our profession's standards of conduct from making further comment at
this time," the statement added.

The state's attorney's office typically represents county officials in
court, but outside lawyers are hired when conflicts of interest arise.
Sheahan's office filed a petition seeking the appointment of Tyrone C.
Fahner, a Mayer, Brown & Platt partner, as a special state's attorney
for the Gary case.

Two weeks ago, sheriff's officials asked Devine's office to voluntarily
step down as counsel, but the office declined, Cunningham said. Sheahan
has repeatedly expressed his dissatisfaction to Devine about the
representation in the Gary case during the past several years,
Cunningham said. We hoped the state's attorney's office would
voluntarily step aside," Cunningham added. They decided not to so we
followed the next logical step, which was to file the petition." The
case is In re Petition for Appointment of a Special State's Attorney,
No. 99 CH 14279.

In January, the plaintiffs voluntarily dismissed their claim against
Sheahan individually. Sheahan was represented by William R. Quinlan and
his firm, Quinlan & Crisham Ltd., who were paid a total of $ 809,811 in
fees and expenses covering 18 months, according to Quinlan's office.
(Chicago Daily Law Bulletin 10-14-1999)


OMTOOL LTD: Kaplan Kilsheimer Files Securities Suit In New Hampshire
--------------------------------------------------------------------
The following is an announcement by the law firm of Kaplan Kilsheimer &
Fox LLP:

Kaplan, Kilsheimer & Fox LLP has filed a Class Action lawsuit against
Omtool, Ltd. ("Omtool") (NASDAQ: OMTL) and certain of its officers and
directors in the United States District Court for the District of New
Hampshire. The suit is brought on behalf of all persons or entities who
purchased or otherwise acquired the common stock of Omtool between
August 8, 1997 and October 6, 1998, inclusive.

The Complaint charges Omtool and certain of its top officers and
directors with violations of the securities laws and regulations of the
United States. The complaint alleges that the defendants knowingly or
recklessly misled investors. During the Class Period, defendants caused
or permitted Omtool to issue and sell, by means of a public offering, 4
million shares (including over-allotments) of Omtool common stock at a
price of $ 9 per share throughout the Class Period, which allowed the
Company to report materially inflated revenue and earnings. After the
IPO, Omtool's stock traded as high as $ 14-3/4 per share. The Class
Period ends on October 6, 1998, the day the Company stunned the
financial community by announcing that its financial results for the
quarter ended September 30, 1998 would be poor and the stock declined to
$ 1.6875 per share on the day following the disclosure. Defendants'
false and misleading statements artificially inflated the price of
Omtool common stock during the Class Period.

Plaintiff is represented by Kaplan, Kilsheimer & Fox LLP. If you are a
member of the Class, you may move the Court, no later than 60 days from
today to serve as a lead plaintiff for the Class. In order to serve as a
lead plaintiff, you must meet certain legal requirements. Contact Robert
N. Kaplan, Esq. Adrienne L. Valencia, Esq. Donald R. Hall, Esq. Kaplan,
Kilsheimer & Fox LLP (800) 290-1952 (212) 687-1980 E-mail address:
mail@kkf-law.com Fax: (212) 687-7714 805 Third Avenue - 22nd Floor New
York, NY 10022 or Richard B. Drubel, Esq. Kimberly Schultz, Esq. Boies &
Schiller 26 South Main Street Hanover, NH 03755 (603) 643-9091 Fax:
(603) 643-9009 TICKERS: NASDAQ:OMTL


RAYTHEON COMPANY: Abbey, Gardy Files Securities Suit In MA
----------------------------------------------------------
The following statement was issued today by the law firm of Abbey, Gardy
& Squitieri, LLP:

A Class Action has been commenced in the United States District Court
for the District of Massachusetts on behalf of all persons who purchased
Raytheon Company (NYSE: RTN/A and RJN/B) common stock during the period
September 16, 1999 through and including October 14, 1999.

In addition, an action has been commenced on behalf of investors who
purchased Raytheon common stock between January 28, 1999 and October 12,
1999. The Complaint charges Raytheon and certain of its officers with
violating the federal securities laws.

The plaintiff claims that defendants misrepresented and concealed
material facts concerning the Company's operations and misled investors
about the size of its restructuring charge, cost overruns and delays in
certain defense contracts as well as its statements about expected 1999
financial results.

Excluded from the Class are the defendants and members of their
immediate families, any entity in which a defendant has a controlling
interest and the heirs of any such excluded party. Plaintiff is
represented by the law firm of Abbey, Gardy & Squitieri, LLP. If you are
a member of the class described above, you may, not later December 13,
1999, move the court to serve as lead plaintiff of the Class, if you so
choose. If you wish to discuss this action or have any questions
concerning this notice or your rights or interest, please CONTACT:
Mark C. Gardy, Esq. Stephen J. Fearon, Jr., Esq. James S. Notis, Esq.
Abbey, Gardy & Squitieri, LLP 212 East 39th Street New York, New York
10016 TELEPHONE: 800-889-3701 or 212-889-3700 FAX: 212-684-5191 E-MAIL:
sfearon@a-g-s.com or jnotis@a-g-s.com


RAYTHEON COMPANY: Abbey, Gardy Makes Announcement On MA Securities Suit
-----------------------------------------------------------------------
The following is an announcement October 15 by Abbey, Gardy & Squitieri,
LLP:

In NYTH144, Abbey, Gardy & Squitieri, LLP Announces Securities Suit
Filed Against Raytheon Company, moved yesterday, Oct. 14, we are advised
by the company that the ticker symbols in the second paragraph, third
line, should read: "NYSE: RTN/A and RTN/B," rather than "NYSE: RTN/A and
RJN/B," as originally stated. The complete revised text follows.

The following statement was issued today by the law firm of Abbey, Gardy
& Squitieri, LLP:

A Class Action has been commenced in the United States District Court
for the District of Massachusetts on behalf of all persons who purchased
Raytheon Company ("Raytheon") (NYSE: RTN/A and RTN/B) common stock
during the period September 16, 1999 through and including October 14,
1999. In addition, an action has been commenced on behalf of investors
who purchased Raytheon common stock between January 28, 1999 and October
12, 1999.

The Complaint charges Raytheon and certain of its officers with
violating the federal securities laws. The plaintiff claims that
defendants misrepresented and concealed material facts concerning the
Company's operations and misled investors about the size of its
restructuring charge, cost overruns and delays in certain defense
contracts as well as its statements about expected 1999 financial
results.

Excluded from the Class are the defendants and members of their
immediate families, any entity in which a defendant has a controlling
interest and the heirs of any such excluded party. Plaintiff is
represented by the law firm of Abbey, Gardy & Squitieri, LLP. If you are
a member of the class described above, you may, not later December 13,
1999, move the court to serve as lead plaintiff of the Class, if you so
choose. If you wish to discuss this action or have any questions
concerning this notice or your rights or interest, please CONTACT:
Mark C. Gardy, Esq. Stephen J. Fearon, Jr., Esq. James S. Notis, Esq.
Abbey, Gardy & Squitieri, LLP 212 East 39th Street New York, New York
10016 TELEPHONE: 800-889-3701 or 212-889-3700 FAX: 212-684-5191 E-MAIL:
sfearon@a-g-s.com or jnotis@a-g-s.com


RAYTHEON COMPANY: Berman, DeValerio Files Securities Suit In MA
---------------------------------------------------------------
Berman, DeValerio & Pease LLP B issues the following press release:

Raytheon Company (NYSE: RTN/A or RTN/B) was sued by a shareholder
charging that the defense giant misled investors during the period
September 16, 1999 through October 11, 1999 about the size of its
planned restructuring charge, cost overruns and delays in certain
defense contracts and expected 1999 EPS estimates. The lawsuit, which
seeks class action status, is brought in the United States District
Court for the District of Massachusetts (99-Civ- 12142-PBS) for
violations of sections 10(b) and 20(a) of the Securities Exchange Act of
1934. The action is brought on behalf of all investors who purchased the
common stock of Raytheon, series A or B, during the period September 16,
1999 through October 14, 1999.

"The action charges that Raytheon concealed from investors that its 1999
third quarter charge would be materially higher than originally
disclosed and that Raytheon was experiencing problems in its defense
business" said Jeffrey C. Block, one of the partners at Berman,
DeValerio & Pease LLP which is representing the plaintiffs.

If you purchased Raytheon class A or B common stock during the period
September 16, 1999 through October 14, 1999 and suffered a loss on your
investment, you may wish to contact the lawyers at Berman, DeValerio &
Pease LLP to discuss your rights and interests. In addition, under the
federal securities laws you may, but not later than sixty days from
October 14, 1999 move the court to serve as lead plaintiff of the Class,
if you so choose. To serve as lead plaintiff, however, you must meet
certain legal requirements. You may contact the attorneys at Berman,
DeValerio & Pease LLP to discuss your rights regarding the appointment
of lead plaintiff.

Contact Patrick Egan, Esq. Jeffrey C. Block, Esq. Berman, DeValerio &
Pease LLP One Liberty Square, Boston, MA 02109 E-Mail:
bdplaw@bermanesq.com (800) 516-9926
or visit website at http://www.bermanesq.com


RAYTHEON COMPANY: Milberg Weiss Files Securities Suit In MA
-----------------------------------------------------------
The Following is an Announcement by the Law Firm of Milberg Weiss
Bershad Hynes & Lerach LLP:

Notice is hereby given that a class action lawsuit was filed on October
14, 1999, in the United States District Court for the District of
Massachusetts, on behalf of all persons who purchased or otherwise
acquired the Class A (NYSE: RTNa) or Class B (NYSE: RTNb) common stock
(collectively the "common stock") of Raytheon Company, between January
28, 1999, and October 12, 1999, inclusive.

The complaint charges Raytheon and certain of its officers and directors
with violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 as well as Rule 10b-5 promulgated thereunder. The complaint
alleges that defendants issued a series of materially false and
misleading statements regarding trends in the Company's business and
failed to disclose the problems it was experiencing concerning the
integration of its acquisitions. As a result of these materially false
and misleading statements and omissions, plaintiff alleges that the
price of Raytheon common stock was artificially inflated during the
Class Period.

If you are a member of the class described above you may, not later than
sixty days from October 14, 1999, move the Court to serve as lead
plaintiff of the class, if you so choose. In order to serve as lead
plaintiff, however, you must meet certain legal requirements.

If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact, at Milberg Weiss Bershad Hynes & Lerach ("Milberg Weiss"),
Steven G. Schulman or Samuel H. Rudman at One Pennsylvania Plaza, 49th
Floor, New York, New York 10119-0165, by telephone 1-800-320-5081 or via
e-mail: endfraud@mwbhlny.com or visit our website at www.milberg.com
TICKERS: NYSE:RTNa NYSE:RTNb


RAYTHEON COMPANY: Wolf Popper Files Securities Suit In MA
---------------------------------------------------------
Pursuant to Section 21D (a) (3) (A) (i) of the Securities Exchange Act
of 1934, Wolf Popper LLP hereby gives notice that a class action lawsuit
has been filed against Raytheon Company (NYSE: RTN/A; RTN/B) in the
United States District Court for the District of Massachusetts. The
lawsuit was filed on all behalf of persons who purchased Raytheon
securities from September 16, 1999 through October 11, 1999.

The Complaint charges that defendants violated the U.S. securities laws
by issuing materially false and misleading statements and by omitting to
disclose material facts required to be disclosed, in order to make the
statements issued by the Company on September 16, 1999 not materially
false and misleading. On September 16, 1999, defendants represented to
the investing public that Raytheon expected to take a pretax $350 to
$450 million restructuring charge in the third quarter "related to
further cost reduction opportunities," but led the market to believe
that its fundamental business was operating well and that Raytheon was
not experiencing contract performance problems. This was not the case.
Indeed, as a result of a meeting the Company had with the Pentagon on
September 11, 1999, defendants knew that they were experiencing problems
with its programs. On October 12, 1999, Raytheon announced, among other
things, that it would be taking a $668 million third quarter charge --
with $320 million of the charge relating to write-offs due to problems
the Company purportedly had not been experiencing with its programs. The
effects of the Company's statement regarding the third quarter were
staggering, as the Company's news triggered its biggest stock drop in at
least two decades. Raytheon's Class A shares fell $19-1/2, or
approximately 46 percent, from $42 to $22-1/2. Additionally, Raytheon's
Class B shares plunged from $43 on October 11, 1999, to close at $24-1/4
on October 12, 1999, a drop of $18-3/4, or 44 percent, erasing almost
$4.5 billion in market value.

Any member of the proposed class who desires to be appointed lead
plaintiff in this action must file a motion with the Court no later than
sixty (60) days after October 14, 1999. Class members must meet certain
legal requirements to serve as a lead plaintiff. If you have questions
or information regarding this action, or if you are interested in
serving as a lead plaintiff in this action, you may call or write: Paul
O. Paradis, Esq. or Michael A. Schwartz, Esq. WOLF POPPER LLP 845 Third
Avenue New York, NY 10022-6689 Phone: 212-451-9676 212-451-9668 Toll
Free: 1-877-370-7703 Facsimile: 212-486-2093 E-Mail:
pparadis@wolfpopper.com, mschwart@wolfpopper.com Web site:
http://www.wolfpopper.com


SECURITY INDEMNITY: NJ Ap Ct Oks Insurer's Verdict; Agency DCA Settles
----------------------------------------------------------------------
Benevenga et al v. Security Indemnity Insurance Co., A-690-98T2;
Appellate Division; opinion by Levy, J.A.D.; decided and approved for
publication October 6, 1999. Before Judges Kleiner, Levy and Carchman.
On appeal from the Law Division, Monmouth County. *Sat below: Judge
Feldman.* DDS No. 23-2-1470; (158 N.J.L.J. 153)

Here, where plaintiffs sued their insurer to recover for damages to
their restaurant, and sued the agency through which they had
obtained their insurance, for negligence in failing to obtain the
appropriate type of insurance, the insurer is not entitled to a
setoff against the jury verdict rendered against it for the amount
of the pretrial settlement reached between plaintiffs and the
agency, since the settlement was unrelated to the damages
plaintiffs sustained for an insured event -- plaintiffs' claims
against the agency arose out of damages unrelated to any loss
insured by the insurer and arose only if the insurer were found not
liable under the policy; further, plaintiffs did not have any duty
to mitigate against defendant's payout since the agency was not a
co-insurer for weather damage and plaintiffs' settlement with the
agency was not a payment from a third party for damages they
sustained as a result of the storm.

The trial judge did not abuse his discretion in awarding prejudgment
interest since, in a dispute such as this involving the applicability of
an exclusion, the equities favor the claimant; further, in the absence
of unusual circumstances, there was no abuse of discretion in his
determination that the rate of return earned by the State Cash
Management Fund contemplated by Rule 4:42-11(a)(ii) is the standard to
be applied in determining the rate of interest.

Plaintiffs Gino Benevenga, Al Major and Boietes, Inc. purchased a
waterfront restaurant in Union Beach for $250,000. It was built partly
on land and partly on pilings. During a severe wind and rain storm, the
back part of the restaurant and its supporting pilings collapsed, and
the business was totally destroyed. Plaintiffs had purchased a special
multi-peril insurance policy from defendant, Security Indemnity
Insurance Company, insuring the building for $150,000, business personal
property for $50,000 and loss of business income up to $24,000. The
policy was obtained through defendant Dining Car Agency (DCA), and
although it specifically excluded any damage caused by water, "driven by
wind or not," DCA did not procure a separate flood insurance policy for
plaintiffs.

Plaintiffs sued Security to compel payment for its losses under the
policy and sued DCA for negligence in failing to obtain the appropriate
type of coverage. Prior to trial, DCA settled for $175,000. The jury
found Security liable for $279,000. The trial judge molded the verdict
to conform to the limits of the policy, yielding a total award of
$224,000. Defendants' motion to setoff the amount of the settlement with
DCA was denied. Prejudgment interest was awarded, calculated at the
rates set forth in R. 4:42-11(b).

Held: Security claims that it is entitled to a pro tanto credit of
$175,000 against the $224,000 verdict to prevent a double recovery. Its
claim is that the $175,000 constitutes "other coverage" for which the
policy requires a deduction, and is considered mitigation of damages
inuring to its benefit. These arguments are rejected because the
settlement was unrelated to the damages sustained by plaintiffs for an
insured event.

Plaintiff sued DCA for "failure to properly advise," acting "contrary to
the provisions of applicable statues concerning the conduct of insurance
agents and brokers," "failure ... to obtain proper insurance," and
violations of the Consumer Fraud Act. All of plaintiffs' claims against
DCA arose out of damages unrelated to
any loss insured by Security, and would be incurred only if Security
were found not liable under the policy.

Security relies on Riccio v. Prudential Prop. & Cas. Ins. Co.,108 N.J.
493 (1987), and Childs v. New Jersey Mfrs. Ins. Co., 108 N.J. 506
(1987), but those cases are factually inapplicable. Here there is no
joint tortfeasor and there is no apportionment of liability between two
insureds. A jury found that the damage was the result of wind and thus
was not excluded, making Security liable under the policy. The claims
for which plaintiffs settled with DCA were not for the same damages or
the same cause. They are based on alleged negligence, breach of
contractual obligation and fraud in the procurement of an insurance
policy.

For the same reasons, plaintiff did not interfere with Security's rights
of subrogation by reaching a settlement with DCA. The right to
subrogation is a derivative one and inures "only the rights of the
insured against the tortfeasor subject to defenses of the wrongdoer
against the insured." State Farm Mutual Auto. Ins.

Co. v. Licensed Beverage Ins. Exchange, 146 N.J. 1, 8 (1996). Here,
any right given by plaintiffs to DCA was either unconnected to
Security's right of subrogation or existed only in the event that
Security was not liable.

Finally, Security argues that plaintiffs had a duty to mitigate against
its payout. This argument is specious because the settlement was not a
payment from a third party for damages sustained as a result of the
storm. DCA was not a co-insurer for weather damage to plaintiffs'
business. Plaintiffs sued DCA for breach of contract, negligence and
fraud, none of which formed the basis for their claim against Security.

Security also argues that the trial judge committed reversible error by
excluding from evidence the DCA settlement, a conversation between
plaintiffs and their insurance agent, and a videotape of the storm.

N.J.R.E. 403 allows a judge, in his discretion, to exclude otherwise
admissible evidence under specified circumstances. These decisions are
reviewed under the abuse-of-discretion standard.

Security argues that the settlement should have been permitted as
rebutting plaintiffs' testimony that wind damage destroyed their
business. This evidence was excluded because it had little or no
probative value and a high potential for prejudice. This was not an
abuse of discretion.

Security claims the settlement impeaches plaintiffs' testimony. To the
contrary, there is nothing unusual about a plaintiff maintaining
multiple, and even mutually exclusive, theories. In this particular
case, the complaint against DCA states that plaintiffs believed the
damage to their business was caused by wind. It is that complaint from
which the settlement was reached. The settlement lacked any probative
value.

Security next argues that the court improperly excluded a taped
conversation between plaintiffs and their insurance agent where
plaintiffs allegedly claim the damage was caused by a flood.

The judge did not make such a ruling. He said that he had to review
the transcript or recording of the conversation before he could rule,
but Security never offered the evidence thereafter.

Finally, Security argues that the court erred by excluding a videotape
of the storm. However, the tape did not depict the part of the storm
affecting the bay in Union Beach. Accordingly, it was excluded because
its probative value was substantially outweighed by it potential for
prejudice. Since the storm caused both wind and water damage and because
the video was not specific to the site of plaintiffs' business, that
ruling was not an abuse of discretion.

Plaintiffs cross-appeal the amount of the prejudgment interest award.
Initially, Security incorrectly argued that the trial judge should not
have granted prejudgment interest. Prejudgment interest in non-tort
actions is not a matter of right but one based on equitable principles.
Where a coverage dispute involves the applicability of an exclusion,
rather than the amount of a claim, the equities favor the claimant in
the award of prejudgment interest.

The amount of the award was calculated using the rate of return of the
State of New Jersey Cash Management Fund, as used in tort actions
pursuant to R. 4:42-11. Each party cites Tobin v. Jersey Shore Bank, 189
N.J. Super. 411 (App. Div. 1983), which explored various formulae to
determine the rate of prejudgment interest to be paid by a bank that had
wrongfully converted funds from a trust account. It considered the rate
the creditor would have had to pay to borrow the amount in question, the
rate the bank actually received while it wrongfully possessed the funds,
and the rate the creditor could have earned if the money had not been
converted.

A.M. Best maintains a service that reports the rate of return by
insurance companies on their investments and on their overall
profitability. Plaintiffs maintain they were entitled to the same
rate of return that Security earned on its funds, but calculated as
the after-tax rate of return on its investments and underwriting.
Security urges a rate in accord with its statutory limit of
investing in only the safest investments. Thus, it contends that
the yield on invested assets as reported by A.M. Best should be
used.

If the equities of the matter were unusual, a trial judge might look to
sources like A.M. Best for guidance in setting the appropriate rate. But
lacking unusual circumstances, the rate of return earned by the State
Treasurer contemplated by R. 4:42-11(a)(ii) is the standard to which
trial judges should adhere.

Judge Feldman did just that and his determination does not amount to an
abuse of discretion. Affirmed.

For defendants-appellants/cross-respondents Security Indemnity
Insurance Company and Specialty Insurance Agency, Inc. -- Douglas
M. Calhoun (Calhoun & Tice). For plaintiffs-respondents/cross-appellants
-- Michael F. Chazkel (Chazkel & Associates; Chazkel and Thomas A.
Chaseman on the brief). (New Jersey Law Journal 10-11-1999)


SUMITOMO CORP: NY Ct Oks $139 Mil Settlement For Copper Futures Case
--------------------------------------------------------------------
Hailing what he termed the largest-ever class-action settlement in the
modern history of American commodities trading, a Manhattan federal
judge last week approved a $ 139 million accord between traders and
defendants, who allegedly conspired to corner the market in copper and
manipulate the price of contracts in copper futures.

Judge Milton Pollack of the Southern District of New York granted
certification to a class defined as all persons trading in copper
futures or options from June 1993 to June 1996, and said that the
settlement was in the best interest of all parties to the suit and the
court. In In re Sumitomo Copper Litigation, Master File No. 96 Civ. 4584
(MP), Judge Pollack wrote, "These record-breaking settlements are all
the more remarkable in light of (a) the notoriously high risk nature of
prosecuting commodity manipulation cases generally, (b) the widespread
skepticism with which the financial community initially greeted
plaintiffs' claims, (c) the substantial additional risks and
difficulties which extensive early discovery revealed to be present in
this case ... and (d) the relatively very small amount of trading on the
Comex copper market ..."

The $ 139 million figure is the result of principle and interest on an
agreed-upon settlement fund in excess of $ 134 million, paid by
defendants: Sumitomo Corp. in the amount of $ 99 million; the broker
Merrill Lynch & Co., $ 18.1 million; Global Minerals and Metals Corp.
and two of its officers, $ 16.5 million; and Morgan Stanley & Co., $ 1
million.

The lawsuit stemmed from an alleged manipulation of contract prices for
contract futures carried out by key employees of Sumitomo and its
American affiliate, allegedly aided by the brokers Merrill Lynch, Global
Minerals and to a lesser extent, Morgan Stanley. Through Sumitomo's
control of a critical amount of copper on the Comex market, and using
accounts created by the defendant brokers, the conspirators were
allegedly able to artificially inflate the price of futures contracts
and options when it was to their advantage.

The court said that the settlement was achieved through arm's-length
negotiations among the major parties, creating a presumption that it is
fair to all sides. Moreover, wrapping up the case now was justified by
the complexity and likely expense and duration of the litigation, Judge
Pollack said. Pollack said that if the settlement were not approved, it
was likely that non-inside copper traders would not be able to recover
any of their losses. Even if they obtained a verdict at trial, he went
on, recovery would be tied up for many years through the appeal process.

Lead counsel for the class members was the Manhattan firm of Lovell &
Stewart. Sumitomo was represented by Paul Weiss Rifkind Wharton &
Garrison, Merrill Lynch by Rogers & Wells, Global Minerals by Cadwalader
Wickersham & Taft, the Global Minerals officers by Loeb & Loeb, and
Morgan Stanley by Katten Muchin & Zavis of Chicago. This article
previously appeared in New York Law Journal. (The Legal Intelligencer
10-11-999)


TECH SQUARED: Sued For Agreeing To Acquisition By Digital River
---------------------------------------------------------------
Tech Squared Inc. (OTC Bulletin Board: TSQD) announced on October 15
that the company has been served with a lawsuit in connection with Tech
Squared's recent agreement with Digital River, Inc. The agreement
provides for the acquisition of the assets of Tech Squared by Digital
River in a tax-free reorganization as part of a plan of liquidation and
dissolution of Tech Squared. The suit, which names as defendants each of
Tech Squared's directors and a former director, seeks unspecified
damages and seeks class action status. The named plaintiff in the suit
has also indicated that he intends to ask the court to issue a temporary
injunction preventing Tech Squared from proceeding with the transaction.
A hearing is scheduled for later this month. Tech Squared is unable to
predict the outcome of such hearing or lawsuit.

In mid-July, Tech Squared reached an agreement with Digital River, Inc.,
under which Tech Squared would transfer 3,000,000 shares of Digital
River common stock to Digital River, together with $1.2 million cash, in
exchange for 2,650,000 newly-issued, registered shares of Digital River
common stock. On the same day, Tech Squared announced that it had
completed a cashless exercise of its option, granted in 1995, to
purchase 3,000,000 shares of Digital River common stock from Joel A.
Ronning, Tech Squared's largest shareholder, at an aggregate exercise
price of 93 cents. The transaction with Digital River is contingent upon
approval by Tech Squared's shareholders and upon Tech Squared's
disposing of its operating businesses. Tech Squared announced in early
August that it had entered into a non-binding letter of intent to sell
its operating businesses.

The transaction with Digital River is structured to be a tax-free
reorganization, both to Tech Squared and to its shareholders. On Oct.
14, 1999, the company filed an amended form of preliminary proxy
statement with the Securities and Exchange Commission. Such proxy
statement will be used in seeking shareholder approval of the
dissolution of Tech Squared pursuant to its plan of liquidation and
dissolution. The preliminary proxy statement describes the proposed plan
of liquidation, the agreement with Digital River, and the lawsuit in
more detail.

Chuck Reese, president and chief executive officer of Tech Squared
stated: "The cost of defending this lawsuit, which will be significant
even if we obtain dismissal, is a cost that will be paid by each and
every one of the shareholders of Tech Squared. Assuming that we obtain
dismissal and that our shareholders approve the plan of liquidation and
dissolution, the distribution to our shareholders will be reduced,
dollar-for-dollar, by the cost of defending this lawsuit. If we are not
able to obtain dismissal of this lawsuit, the transaction with Digital
River will be at risk. Another transaction may not be found which would
result in the same after-tax value to Tech Squared's shareholders In
short, we believe that the lawsuit is without merit and creates a
significant risk that the value to be received by our shareholders may
be significantly reduced. We intend to contest the lawsuit to the
fullest extent possible."

If the court issues a temporary injunction as requested by the named
plaintiff, Tech Squared may be prevented, at least temporarily, from
proceeding with the transaction. Under some circumstances, if Tech
Squared's ability to proceed with the transaction is delayed, Digital
River may be able to terminate the agreement.

Tech Squared, based in Minneapolis, is a national marketer and
distributor of mid- to high-end microcomputer hardware, software and
peripherals primarily to businesses in the desktop publishing, graphic
arts and pre-press industries, as well as an emerging customer base of
Internet and intranet site developers. Tech Squared has entered into a
non-binding letter of intent with Virtual Technology Corporation to
dispose of substantially all of its operating businesses, but no
definitive agreement has been reached.


UPS: Shareholder Files Class Action In Delaware To Block IPO
------------------------------------------------------------
United Parcel Service of America Inc. said last Friday one of its
shareholders filed a lawsuit seeking to block its planned $3 billion
initial public offering.

The complaint, which asks for class action status, was filed against the
package delivery company and its board by Linda Starkman, the
shareholder, on Sept. 28 in Delaware Chancery Court, according to UPS.

It claims the offering violates UPS' certificate of incorporation and
the directors of the company "breached their fiduciary duties" in
approving and recommending the IPO, according to documents filed with
securities regulators.

The document did not disclose how many shares Starkman held or her
relation to the company.

On Oct. 18, the Delaware court will hear arguments on a motion for a
preliminary injunction to halt the proposed transaction, according to
UPS' quarterly earnings statement filed with the Securities and Exchange
Commission Friday, in which the suit was revealed.

"We believe that this action has no merit and we are defending it
vigorously," UPS said in the quarterly report.

The company also said in the filing it did not expect the action to have
any impact on UPS' financial condition, results of operations or
liquidity.

UPS plans to go public in early November and hopes to raise an estimated
$3 billion. (From Reuters in Washington by way of Newshound)


Y2K LITIGATION: Intuit Inc Contests CA & NY Suits Over Quicken Products
-----------------------------------------------------------------------
Intuit is currently a defendant in the following two consolidated class
action lawsuits alleging that certain of its Quicken products have
on-line banking functions that are not Year 2000 compliant:

In re Intuit Inc. Year 2000 California Litigation (consolidated in Santa
Clara County, California Superior Court from Alan Issokson v. Intuit
Inc. (filed April 29, 1998 in the Santa Clara County, California
Superior Court); Joseph Rubin v. Intuit Inc. (filed May 27, 1998 in the
Santa Clara County, California Superior Court); Donald Colbourn v.
Intuit Inc. (filed June 4, 1998 in the San Mateo County, California
Superior Court)); and

In re Intuit Inc. Year 2000 Litigation (consolidated in the New York
Supreme Court, New York County from Rocco Chilelli v. Intuit Inc. (filed
May 13, 1998 in the New York Supreme Court, Nassau County); Glenn
Faegenburg v. Intuit Inc. (filed May 27, 1998 in the New York Supreme
Court, New York County); and Jerald M. Stein v. Intuit Inc. (filed June
23, 1998 in the New York Supreme Court, New York County)).

The lawsuits are substantively similar. The lawsuits assert breach of
implied warranty claims, violations of federal and/or state consumer
protection laws, and violations of various state business practices
laws. The plaintiffs seek compensatory damages, disgorgement of profits,
and (in some cases) attorneys' fees.

On June 23, 1998, Intuit filed a demurrer in the Issokson complaint. In
August 1998, the motion was granted but the plaintiff was provided an
opportunity to amend the complaint to allege injury. Issokson, Rubin and
Colbourn filed a consolidated amended complaint on October 9, 1998.
Intuit filed a demurrer to the amended complaint on November 9, 1998.
The court sustained Intuit's demurrer on January 27, 1999, dismissing
the contract and fraud claims with prejudice and granting a leave to
amend on plaintiffs' injunction and unfair business practices claim.

On February 26, 1999, Issokson, Rubin and Colbourn filed a Second
Amended Complaint alleging that Intuit has engaged in unfair business
practices and seeking injunctive and equitable relief. Intuit filed
demurrers to the Second Amended Complaint's only remaining claims and
class allegations, which were sustained with leave to amend by the court
on May 7, 1999.

The plaintiffs filed a Third Amended Complaint and Intuit filed a
demurrer in response to it, seeking dismissal of the complaint. The
company believes it has good and valid defenses to the claims asserted,
and intends to vigorously defend against the lawsuit.

The company has also filed motions to dismiss in the New York actions
and on December 1, 1998, the court granted the motion to dismiss all the
New York actions with prejudice. Plaintiffs have filed a Notice of
Appeal.

Intuit also understands that, sometime in the past year, a suit was
filed in the Contra Costa County, California Superior Court by an
individual consumer against various retailers, including Circuit City
Stores, CompUSA, Fry's Electronics, Office Depot, The Good Guys and
others, alleging that these retailers have sold software and hardware
products which are not Year 2000 compliant, including at least one
product published by Intuit. One of the defendants in this action, Fry's
Electronics, filed a cross-complaint against various software publishers
and hardware manufacturers, including Intuit, asserting a claim for
indemnity in the main action. In September 1999, Fry's Electronics
reached a settlement with the plaintiffs. The cross-complaint is still
pending. The response to the cross-complaint is due on October 11, 1999.



                               *********


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