There are a number of important points that current and former distributors should be aware of:
That said, there are number of things about this settlement that I find disturbing. The most glaring deficiency is what Amway has the nerve to call "compensation." To offer to compensate affected distributors--many of whom were bilked out of hundreds or thousands of dollars--by giving them coupons which will enable them to buy Amway product at the same price they've been paying all along, is the definitive example of adding insult to injury.
Another problem is Amway's method of notifying class members. Amway has agreed to notify only those distributors who were class members during calendar year 1995, but not those who were class members from 1990 to 1995. Their only other means of notifying the rest of the class members is to place a single announcement in a single national newspaper. It seems to me that a large percentage, maybe most, of the class members will not be aware of the proposed settlement. Not being aware, they will not have the opportunity to opt out, and will therefore be giving up their legal rights without even knowing that they're doing so. Amway's limited obligations to notify class members is not mentioned in the notice distributed in the Amagram.
Another disturbing element is that class members who opt out are also giving up their right to protest the terms of the settlement. I don't know if this is a standard clause in class action settlement agreements, but I find it remarkable. Remember that there are two ways the proposed settlement can be tossed out: 1) Amway can choose to do so if more than 200 class members opt out, and 2) the judge can do so if enough class members complain that the terms of the settlement are unfair. This means that a class member who is outraged by the terms of the settlement, as many will be, will have two choices. 1) He/she can opt out of a settlement that he feels is an insult, but in doing so gives up the right to protest to the judge and perhaps convince the judge to insist on a more equitable settlement. Or, 2) he can choose not to opt out in order to preserve his right to protest, but in doing so give up his rights to pursue legal action of his own. Either shut up or lose your legal rights...some choice.
The somewhat positive part of the settlement agreement are the additions to and reinforcements of the rules regarding the sale of tools. Most of the disclaimers detailed in the full agreement have already been used for some time now, but a couple of the rules are new. Even these are minor concessions, as rules are useless they're enforced, and it's abundantly clear that many of Amway's long-standing rules have been, and continue to be, widely ignored. Distributors who produce and sell tools have already been required (probably as a result of previous lawsuits) to include disclaimers to the effect that the purchase of the tools are optional, yet we know that distributors have found ways to circumvent the intention of these disclaimers and have continued to pressure and coerce distributors into buying them. "The tools are optional, and so is success." It remains to be seen whether these additional rules and procedures will have any significant impact on the abuses that Amway has for so long known about but consistently failed to deal with in any truly effective way.
I should add that I don't fault the Hanrahans for how things turned out in this case. I believe they did the best they could with the resources available to them, and they did far more than most people have in similar circumstances. Those who were harmed by Amway are no worse off because of this settlement, and hopefully the changes to Amway's rules and procedures will reduce the number of future victims.
(This is the notice that was distributed in the Amagram) IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA John HANRAHAN, Stacy HANRAHAN, ) and Mark MENSACK, on behalf of ) themselves and all others similarly situated, ) ) Plaintiffs, ) Civil Action No. 94-CV 4615 ) Judge Jan E. DuBois v. ) ) EXECUTIVES UNLIMITED, INC., ) EXECUTIVE PLANNERS, INC., ) AMERICAN MULTIMEDIA, INC., BRITT ) MOTIVATION, INC., BRITT LEASING, ) INC., BRITT MANAGEMENT, INC., BRITT ) RESOURCES, INC., William BRITT, YAGER ) ENTERPRISES, DEXTER R. YAGER, SR. & ) FAMILY ENTERPRISES, INC., DEXTER ) YAGER SECURITIES, INC., D&B YAGER ) ENTERPRISES, INC., DEXTER YAGER ) MOTIVATION, INC., INTERNET ) SERVICES CORPORATION, ) INTERNATIONAL COMMUNICATION ) CORPORATION OF AMERICA, YAGER ) RESORT PROPERTIES, INC., ) DREAMBUILDERS REVIEW, Dexter ) YAGER, and AMWAY CORPORATION, ) ) Defendants. ) )NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION TO: ALL PERSONS IN THE UNITED STATES WHO, AT ANY TIME DURING THE PERIOD FROM JANUARY l,1990 TO AUGUST 1,1996, HAVE BEEN OR ARE AMWAY DISTRIBUTORS IN THE AMWAY LINES OF SPONSORSHIP "DOWNLINE" FROM THE AMWAY DISTRIBUTORSHIPS OF EITHER BILL BRITT OR DEXTER YAGER OR WHO PURCHASED MOTIVATIONAL MATERIALS PUBLISHED, PRODUCED, DISTRIBUTED OR SOLD BY EXECUTIVES UNLIMITED, INC., EXECUTIVE PLANNERS, INC., AMERICAN MULTIMEDIA, INC., BRITT MOTIVATION, INC., BRITT LEASING, INC., BRITT MANAGEMENT, INC., BRITT RESOURCES, INC., BILL BRITT, YAGER ENTERPRISES, DEXTER R. YAGER, SR. & FAMILY ENTERPRISES, INC., DEXTER YAGER SECURITIES, INC., D&B YAGER ENTERPRISES, INC., DEXTER YAGER MOTIVATION, INC., INTERNET SERVICES CORPORATION, INTERCONTINENTAL COMMUNICATION CORPORATION OF AMERICA (LISTED IN THE COMPLAINT AS INTERNATIONAL COMMUNICATION CORPORATION OF AMERICA), YAGER RESORT PROPERTIES, INC., DREAMBUILDERS REVIEW, AND DEXTER YAGER, BUT EXCLUDING: THE DEFENDANTS; ANY ENTITY IN WHICH THE DEFENDANTS HAVE A CONTROLLING INTEREST; AND THE OFFICERS AND DIRECTORS, AFFILIATES, LEGAL REP.RESENTATIVES, HEIRS, SUCCESSORS, OR ASSIGNEES OF THE DEFENDANTS (the "Settlement Class"). YOU SHOULD READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR LEGAL RIGHTS MAY BE AFFECTED BY THE LAWSUIT DESCRIBED IN THIS NOTICE. YQU ARE HEREBY NOTIFIED that the above-captioned class action is pending in the United States District Court for the Eastern District of Pennsylvania. Plaintiffs, on behalf of themselves and all other similarly situated people, allege that certain defendants misrepresented the nature and characteristics of Amway distributorships and of motivational materials or training materials they published, produced, distributed or sold, in violation of federal statutes, l8 U.S.C. � 1961, et seq., and state common law, and fixed the prices of and allocated customers for such materials in violation of federal law, l5 U.S.C. � 1. Plaintiffs' allegations are set forth in full in their Second Amended Complaint, which is on file with the Clerk of the United States District Court for the Eastern District of Pennsylvania, U.S. Courthouse, 601 Market Street, Philadelphia PA 19I06. The defendants vigorously deny all of these allegations, deny any and all liability, and deny that any plaintiff or potential class member is entitled to any damages. Defendants have agreed to settle the claims against them to reduce the expense and inconvenience of further litigation. The Court has not ruled in favor of any plaintiff or against any defendant on any claim. The Court has preliminarily approved a proposed settlement, and directed that notice be given to the Settlement Class. A hearing will be held before the Honorable Jan E. DuBois, United States District Judge for the Eastern District of Pennsylvania, Independence Mall West, 601 Market Street, Philadelphia, PA 19106, on December 16, 1996 at 2:30 p.m. for the purpose of determining whether the proposed settlement should be approved as fair, reasonable and adequate, and in the best interests of the Settlement Class; whether this litigation should be dismissed on the merits with prejudice and without costs; and whether the application by plaintiffs' counsel for an award of attorneys' fees, costs and disbursements should be approved. The Court may adjourn the settlement hearing from time to time, without any further notice to the Settlement Class. Under the terms of the proposed settlement, upon Court approval, each member of the Settlement Class who submits the proof of claim that appears at the end of this Notice will receive a coupon redeemable for a discount of 35% off the suggested retail price for up to ten (but not more than three of any one item) of the following products: Double X; Leading Edge/Zoom (1 liter); LOC (1 liter); See Spray (1 lifer); IndustraClean; Perfume Fragrances; Home Fragrances; Deep Cleansing Shampoo; Light Conditioner; Durashine Floor Polish; Carpet & Upholstery Shampoo; D-15 Insect Repellent; Hourgard Insect Repellent; Alpha Hydroxy Serum; Oral Rinse; Foundation; Lip Color; Blush; Vinyl & Leather Cleaner; and Flash Coat. Coupons may be redeemed within 180 days of issuance by mailing them with appropriate payment to Amway. Full instructions will accompany each coupon. In addition, the defendants will make several changes to their business practices designed to keep customers informed that the purchase of motivational materials is optional and that they may be entitled to a refund for unwanted motivational items. The defendants are paying $375,000 into a cash fund, and plaintiffs' counsel intend to make application to the Court for an award of counsel fees and expenses to them and reimbursement for time and expenses incurred by certain named plaintiffs in connection with the litigation and the settlement up to the full amount of that cash fund. The application for fees and reimbursement of expenses by plaintiffs' counsel will be filed with the Court by October 15, 1996, will be available for inspection at the Office of the Clerk of the Court, and will be heard and considered by the Court before any attorneys' fees may be paid, or distributions made from the cash fund. This proposed settlement is a compromise of disputed claims and is not to be taken as an indication of liability or that damages have been, or would be, found against any defendant. The Court has not reached any conclusion regarding the merits of plaintiffs' claims, nor on the defendants' legal defenses. IF YOU WERE AN AMWAY DISTRIBUTOR DOWNLINE FROM THE DISTRIBUTORSHIP OF BILL BRITT OR DEXTER YAGER OR PURCHASED MOTIVATIONAL MATERIALS PUBLISHED, PRODUCED, DISTRIBUTED. OR SOLD BY EXECUTIVES UNLIMITED, INC., EXECUTIVE PLANNERS, INC., AMERICAN MULTIMEDIA, INC., BRITT MOTIVATION, INC., BRTTT LEASING, INC., BRITT MANAGEMENT, INC., BRITT RESOURCES, INC., BILL BRITT, YAGER ENTERPRISES, DEXTER R. YAGER, SR. & FAMILY ENTERPRISES, INC., DEXTER YAGER SECURITIES, INC., D&B YAGER ENTERPRISES, INC., DEXTER YAGER MOTIVATION, INC., INTERNET SERVICES CORPORATION, INTERCONTINENTAL COMMUNICATION CORPORATION OF AMERICA (LISTED IN THE COMPLAINT AS INTERNATIONAL COMMUNICATION CORPORATION OF AMERICA), YAGER RESORT PROPERTIES, INC., DREAMBUILDERS REVIEW, OR DEXTER YAGER AT ANY TIME FROM JANUARY 1, 1990 TO AUGUST 2, 1996, YOUR RIGHTS MAY BE AFFECTED AND YOU MAY BE ENTITLED TO SHARE IN THE SETTLEMENT. YOU HAVE SEVERAL OPTIONS: (a) If you satisfy the definition above, you are a member of the Settlement Class unless you request exclusion. If you choose to remain a member of the Settlement Class, upon approval by the Court, you will be bound by the final judgment and will release all individual claims against defendants based upon any alleged misrepresentation about the characteristics of an Amway distributorship or about motivational materials, or any alleged fixing of prices or allocation of customers for motivational materials. Objections to the proposed settlement, and the objector's intention to appear at the settlement hearing, must be filed on or before November 15, 1996. If you choose to remain a member of the Settlement Class and wish to receive a coupon, you must submit the proof of claim that appears at the end of this notice, postmarked by January 15, 1997, to: Hanrahan v. Executives Unlimited, Inc. Litigation P.O. Box 510 Ada, Michigan 49355-0510 If you submit a proper proof of claim, the coupon will be sent to you within 90 days after the Court approves the settlement. (b) If you do not wish to be a member of the Settlement Class, you must request exclusion by submitting a letter or postcard postmarked no later than November 15, 1996, to P.O. Box 510, Ada, Michigan 49355-0510. You must include the name of the case (Hanrahan v. Executives Unlimited, Inc., Civil Action No. 94-CV-4615), and also provide your name, address, telephone number, the date you first became an Amway distributor, your ADA number, if available, and the name of your sponsor. If you send a timely request for exclusion: (i) you will be excluded from the Settlement Class and will not participate in the settlement or be eligible to receive a coupon; (ii) you will not be permitted to appear at the hearing or object to the Settlement Class and the settlement; and (iii) you will not be precluded from otherwise pursuing any individual claim against defendants. NO REQUEST FOR EXCLUSION WILL BE CONSIDERED VALID UNLESS ALL OF THE INFORMATION DESCRIBED ABOVE IS INCLUDED. Defendants have the right to withdraw from the settlement depending upon the number of opt-outs. If you do not request exclusion and provide the information required, your interests will be represented by the plaintiffs through counsel for the Settlement Class: Kohn, Swift & Graf, P.C., l101 Market Street, Suite 2400, Philadelphia PA 19107, and Conrad, O'Brien, Gellman & Rohn, P.C., 1515 Market Street, l6th Floor, Philadelphia PA 19102. If you wish, you may enter an appearance through counsel of your choice. If you remain in the Settlement Class, and you do not retain your own counsel, you will not be responsible for the payment of any legal costs or attorneys' fees during this litigation. This Notice summarizes the proposed settlement, which is detailed in a proposed Settlement Agreement filed with the Court. A copy of the Settlement Agreement may be inspected at the Office of the Clerk of the United States District Court for the Eastern District of Pennsylvania during regular business hours. If you would like a copy of this Notice, you may request it by writing to the address listed in paragraph 3(b) above.PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE By: Order of the United States District Court For The Eastern District of Pennsylvania Honorable Jan E. DuBois
(This is the full text of the proposed settlement agreement) IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA John HANRAHAN, Stacy HANRAHAN, ) and Mark MENSACK, on behalf of ) themselves and all others similarly situated, ) ) Plaintiffs, ) Civil Action No. 94-CV 4615 ) Judge Jan E. DuBois v. ) ) EXECUTIVES UNLIMITED, INC., ) EXECUTIVE PLANNERS, INC., ) AMERICAN MULTIMEDIA, INC., BRITT ) MOTIVATION, INC., BRITT LEASING, ) INC., BRITT MANAGEMENT, INC., BRITT ) RESOURCES, INC., William BRITT, YAGER ) ENTERPRISES, DEXTER R. YAGER, SR. & ) FAMILY ENTERPRISES, INC., DEXTER ) YAGER SECURITIES, INC., D&B YAGER ) ENTERPRISES, INC., DEXTER YAGER ) MOTIVATION, INC., INTERNET ) SERVICES CORPORATION, ) INTERNATIONAL COMMUNICATION ) CORPORATION OF AMERICA, YAGER ) RESORT PROPERTIES, INC., ) DREAMBUILDERS REVIEW, Dexter ) YAGER, and AMWAY CORPORATION, ) ) Defendants. ) )SETTLEMENT AGREEMENT WHEREAS, plaintiffs in this civil class action have alleged that defendants Executives Unlimited, Inc., Executive Planners, Inc., American Multimedia, Inc., Britt Motivation, Inc., Britt Leasing, Inc., Britt Management, Inc., Britt Resources, Inc., Bill Britt (collectively, the "Britt defendants"), and Yager Enterprises, Dexter R. Yager, Sr. & Family Enterprises, Inc., Dexter Yager Securities, Inc., D&B Yager Enterprises, Inc., Dexter Yager Motivation, Inc., Internet Services Corporation, Intercontinental Communication Corporation of America (listed in the complaint as International Communication Corporation of America), Yager Resort Properties, Inc., Dreambuilders Review, and Dexter Yager (collectively, the "Yager defendants") violated the Sherman Act, 15 U.S.C. � 1, the Racketeer Influenced and Corrupt Organizations Act ("RICO"),18 U.S.C. �� 1962(c) and (d), and common law fraud and negligent misrepresentation, and defendant Amway Corporation ("Amway") participated in the alleged Sherman Act violation and aided and abetted the alleged RICO violations; and WHEREAS, the Britt Defendants, the Yager Defendants and Amway (hereinafter the "defendants") have vigorously denied each and every one of these allegations and any liability whatsoever; and WHEREAS, the class plaintiffs and their attorneys have conducted an investigation into the facts and issues raised by their allegations and have concluded that settlement with the defendants on the terms set forth in this Settlement agreement is in the best interests of class plaintiffs and the Settlement Class (as defined below); and WHEREAS, defendants have agreed to enter info this Settlement Agreement solely in order to reduce further expense and inconvenience and remove the distraction of burdensome and protracted litigation; NOW, THEREFORE, in consideration of the covenants and agreements set forth in this Settlement Agreement, it is agreed by and among the undersigned that the claims made by the class plaintiffs and the Settlement Class against all defendants shall be settled and compromised, subject to approval of the Court as required by Rule 23(e) of the Federal Rules of Civil Procedure, on the following terms and conditions: l. The undersigned attorneys represent that they are fully authorized to enter into the terms and conditions of, and to execute, this Settlement Agreement. 2. This Settlement Agreement is entered into by defendants, the class plaintiffs, and the Settlement Class to compromise and settle this litigation and any and all claims, demands, causes of action, obligations, liabilities, and damages of any kind, including costs, expenses and attorneys' fees, arising out of or having connection in any way whatsoever with any act, omission, cause, matter or allegation that is in whole or in part the subject of or asserted in the Complaint, the Amended Complaint, and/or the Second Amended Complaint (the "Complaints") filed in this action, as well as any and all claims, demands, causes of action, obligations, liabilities, and damages of any kind, including costs, expenses and attorneys' fees, whether known or unknown, that could have been asserted against any of the defendants arising out of or having connection in any way whatsoever with any of the facts alleged in the Complaints. 3. As used in this Settlement Agreement, the term "motivational materials" includes audio tapes or cassettes, videotapes or cassettes, books, magazines, pamphlets, training materials or other written or recorded materials, and rallies, seminars or functions designed primarily for use by Amway distributors. 4. For purposes of accomplishing this Settlement Agreement only, the parties agree that this action shall proceed as a class action under Rule 23(b)(3) of the Federal Rules of Civil Procedure on behalf of a Settlement Class to be represented by the plaintiffs in this action. The Settlement Class is defined as: All persons in the United States who, at any time during the period from January 1, l990 to August l, 1996, have been or are Amway distributors in the Amway lines of sponsorship "downline" from the Amway distributorships of either Bill Britt or Dexter Yager or who purchased motivational materials published, produced, distributed or sold by Executives Unlimited, Inc., Executive Planners, Inc., American Multimedia, Inc., Britt Motivation, Inc., Britt Leasing, Inc., Britt Management, Inc., Britt Resources, Inc., Bill Britt, Yager Enterprises, Dexter R. Yager, Sr. & Family Enterprises, Inc., Dexter Yager Securities, Inc., D&B Yager Enterprises, Inc., Dexter Yager Motivation, Inc., Internet Services Corporation, Intercontinental Communication Corporation of America (listed in the complaint as International Communication Corporation of America), Yager Resort Properties, Inc., Dreambuilders Review, or Dexter Yager; but such class excludes: the defendants; any entity in which the defendants have a controlling interest; and the officers and directors, affiliates, legal representatives, heirs, successors, or assignees of the defendants. However, the Settlement Class does not include any individuals who properly exclude themselves in accordance with Fed. R. Civ. P. 23 and in the manner prescribed by the Court in this case. The undersigned agree and promise, on behalf of themselves and their respective clients in this action, that each will cooperate in the prompt submission of this Settlement Agreement to the Court, will recommend acceptance of the Settlement Agreement by the Court, will take all steps that may be requested by the Court with regard to this Agreement, and will otherwise use their best efforts to effectuate this Agreement and to obtain the prompt entry of a final judgment of dismissal with prejudice in this action as to defendants. The undersigned further agree to cooperate in determining the final form, contents, timing and method of notice to be given to members of the Settlement Class of the terms of this Settlement Agreement. An agreed-upon draft of such notice is attached. 6. Subject to the terms of this Settlement Agreement and in full, complete and final settlement of the claims asserted or assertable in this action by the class plaintiffs and the members of the Settlement Class who have not timely excluded themselves from the Settlement Class, including, but not limited to, claims for damages, interest thereon, attorneys' fees, expenses and costs, the parties agree as set forth in paragraphs 7 through 12. 7. Compensation to members of the Settlement Class. a. Defendants will mail to each member of the Settlement Class who submits a properly executed Proof of Claim, as specified below, one coupon redeemable for a discount on a selection of the following Amway products: Double X; Leading Edge; Zoom (1 liter); LOC (1 liter); See Spray (1 liter); Industra Clean; Perfume Fragrances; Home Fragrances; Deep Cleansing Shampoo; Light Conditioner; Durashine Floor Polish; Carpet & Upholstery Shampoo; L-15 Insect Repellent; Hourgard Insect Repellent; Alpha Hydroxy Serum; Oral Rinse; Foundation; Lip Color; Blush; Vinyl & Leather Cleaner; and Flash Coat. b. Coupon may be used to purchase up to ten of the products listed in paragraph 7.a., but no more than three units of any one product, directly from Amway at a discount of 35% off the suggested retail price in Amway's current price list for U.S. distributors in effect on the date the Settlement Agreement is finally approved by the Court. Coupon holders may use the coupons by sending an order form to Amway selecting ten items (or fewer, at the buyer's option) and remitting to Amway, by check or money order, the suggested retail price minus 35%, plus shipping and handling at half of Amway's normal rate, i.e., 2.00 per order or 2% of the amount of the order, whichever is greater. c. Coupons are freely transferable, but only one coupon can be redeemed per customer and only one coupon can be used per order. d. Coupons expire not less than 180 days from the date mailed to each claimant. The expiration date will be clearly indicated on each coupon. 8. Acts and Practices Provisions: a. Beginning 60 days after the date this Settlement Agreement receives final approval from the Court, the Britt defendants and the Yager defendants will label all motivational tapes and motivational publications, intended primarily for sale to Amway distributors that any of the Britt Defendants or Yager Defendants thereafter manufactures or produces, or causes to be manufactured or produced, with a notice (on the packaging or by printing on the product, at defendants' option) advising the customer: (1) That the purchase of the motivational item is optional and that the customer has the right to cancel or discontinue any future purchases of motivational items; and (2) That the motivational item is subject to a refund policy. b. Amway will maintain a Business Support Material Rule (the "BSM rule") requiring any distributor who chooses to sell motivational tapes, books or other materials to maintain a commercially reasonable buyback policy for those motivational materials for at least 90 days following purchase. Any distributor who directly purchases motivational tapes or publications from another distributor who does not comply with this rule is entitled to invoke Amway's Conciliation and Enforcement procedures, as discussed in the Amway Business Compendium. Amway will notify all current distributors of their rights under this BSM rule. c. Beginning 60 days after the date this Settlement Agreement receives final approval from the Court, the Britt defendants and Yager defendants will agree to include in any future contract for the sale of motivational materials a term requiring their customers to abide by the BSM rule as set forth in the preceding paragraph and stating the terms of the applicable refund policy. d. Beginning 60 days after the date this Settlement Agreement receives final approval from the Court, and once a year thereafter, Amway will publish a notice reminding distributors of their rights under the BSM rule, including their right to a refund on unwanted motivational tapes of publications and their right to invoke Awmay's Conciliation and Enforcement procedures. The notice will be published in Amagram magazine or, at Amway's sole option, distributed in any other manner directed to the address shown in Amway's records for each distributor of record at the time the notice is sent. 9. Dispute Resolution Procedures. a. Amway will maintain a dispute resolution mechanism, such as the present Conciliation and Enforcement Procedures, to resolve disputes concerning any alleged violations of the BSM rule set forth in paragraph 8 above. The dispute resolution mechanism will have the following features: (1) Any distributor may invoke the mechanism. (2) Disputes will be heard by a panel of Amway distributors designated by the Amway Distributors' Association Board ("ADAB"), the trade association of Amway distributors, or any successor of ADAB. (3) Dispute resolution panel members will be disinterested and impartial. (4) The dispute resolution panel will hold a hearing at which each party may submit whatever information it desires by individual testimony or documentary evidence. There will be no formal rules of evidence, but the panel may limit the length of discussion or the volume of irrelevant material. (5) The panel's primary goal will be to mediate or conciliate each dispute. However, if the parties do not agree following panel mediation, the panel will issue a written decision and a recommendation for resolving the dispute. (6) The dispute resolution procedures will provide for an intermediate appeal of any panel decision to the ADAB. (7) If the dispute is not otherwise resolved, the final recommendations of the panel and/or the ADAB are provided to Amway, which will make an independent determination and may conduct an independent investigation of the facts. Amway will issue a final decision adopting, reversing, or modifying the recommended resolution. Amway's decision in all cases will be final, conclusive and binding on all participants in the dispute resolution procedure. b. Amway will make available the sales and customer service personnel in its Distributor Relations and Customer Service departments, as appropriate, to respond to telephone inquiries from any distributors with questions about or disputes involving the Amway rules applicable to motivational materials. Those personnel will provide information about the relevant rules and will, to the extent practicable, use their best efforts to facilitate an informal resolution of any dispute involving the Amway rules. Amway will annually notify all distributors of the telephone numbers of the Distributor Relations and Customer Service departments. l0. Rules And Procedures To Prevent Undue Pressure To Purchase Motivational Materials. a. Amway will maintain a rule requiring sellers of motivational materials to notify their customers, at least once a year, that purchase of motivational materials is voluntary, by including in the packaging of tapes or in the text of publications the following message: "We have a continuing interest in you and your Amway business. This special message is to help you evaluate expenses which relate to Business Support Materials available to you. Your expenditures on these items should be reasonable compared to your business volume and profits. You should review your business expenses and decide whether you wish to continue purchasing future Business Support Materials. The use of Business Support Materials in connection with your Amway business is voluntary and should always be in compliance with the Amway Rules of Conduct." The Britt defendants and Yager defendants agree to continue to comply with this notice rule and provide their customers with this notice. b. Amway will maintain in the BSM rule described in paragraph 8 a requirement that any distributor who chooses to sell motivational materials on a "standing order" basis must adhere to the following principles and procedures: (1) All "standing order" customers have the right to cancel or change their order at any time. (2) At least twice a year, preferably in September and March, the seller will provide to each "standing order" customer a card with the following language conspicuously printed: "We have a continuing interest in you and your Amway business. This special message is to help you evaluate expenses which relate to Business Support Materials available to you. Your expenditures on these items should be reasonable compared to your business volume and profits. You should review your business expenses and decide whether you wish to continue purchasing Business Support Materials. The use of Business Support Materials in connection with your Amway business is voluntary and must always be in compliance with the Amway Rules of Conduct. If you wish to discontinue receiving future [tapes, books, etc.), please return this postcard by [ ]. IF WE DO NOT RECEIVE THIS POSTCARD BY [ ], YOU WILL CONTINUE TO RECEIVE FUTURE ISSUES OF [TAPES, BOOKS, ETC.)." To the extent that the Britt defendants and Yager defendants sell motivational materials on "standing order," they agree to continue to comply with this notice rule and provide their customers with this notice. c. Amway will maintain in the BSM rule described in paragraph 8 a provision prohibiting distributors who choose to sell motivational materials from saying, suggesting, or implying that the use of any such materials will guarantee success as an Amway distributor or that Amway requires the use of any such materials. This provision in the BSM rule will require motivational materials to contain the following legend: "While the techniques and approaches suggested in this [tape, book, etc.] have worked for others, no one can guarantee that these techniques and approaches will work for you. We hope, however, that the ideas presented here will assist you in developing a strong and profitable business. These materials have been published independently of Amway Corporation and have not been reviewed by Amway Corporation." The BSM rule will also require this same message to be included in the audio portion of any audio-taped motivational materials. The Britt and Yager defendants agree to continue to abide by this provision and to include the required information in motivational materials they publish. d. Beginning 60 days after the date this Settlement Agreement receives final approval from the Court, Amway will include in the basic distributor agreement a statement reciting that Amway does not discriminate on the basis of race, religion, gender or creed. In addition, Amway will periodically send all distributors the following reminder of the right to choose and the right to differ: "Respect for the individual is critical to a successful Amway business. From the beginning, Amway has prided itself on being an equal opportunity business. It's an opportunity open to people from all walks of life -- people with varying religious convictions, political affiliations, nationalities, ethnic backgrounds and racial origins. Amway distributors come together as business associates, agreeing on the principles of free enterprise. They work together to achieve financial independence by following the Amway Sales and Marketing Plan and observing the Code of Ethics and Rules of Conduct. On all other issues not specifically affecting the operation of their Amway business, Amway distributors have the right to hold differing viewpoints, without their differences jeopardizing their status as Amway distributors or their business relationships. The notice may, at Amway's sole option, continue in substance as follows: If the business platform becomes a pulpit for preaching religious doctrines, political causes or other issues of such an intensely personal nature, people with differing beliefs who attend what they expect to be a business meeting are turned away or turned off from Amway. In essence, they are discouraged from participating in a business opportunity. Amway has been a great success because it is not restrictive. Because it is accessible to everyone. Because it can be tailored to meet the needs of the individual. The right to choose and the right to differ. Personal choice and personal freedom. Isn't that really what Amway is all about?" The notice referred to in this subparagraph (d) will be published at least once per year in Amagram magazine or, at Amway's sole option, in any other manner directed to the address shown in Amway's records for each distributor of record at the time the notice is sent. e. Amway's rules provide, and will continue to provide, that a prospect need only obtain the official Business Kit to become a distributor -- no other purchase of any kind may be required. f. Amway represents that it currently provides Direct Distributors with extensive and appropriate training. Amway will continue to train Direct Distributors and will periodically provide every Direct Distributor with a document reiterating key principles, such as the right to choose and the right to differ, and the rules relating to the sale of motivational materials, specifically including the BSM Rule referred to in paragraph 8 above. 11. Proof of Claim. a. To qualify for a coupon, Settlement Class members must submit a Proof of Claim to Hanrahan v. Executives Unlimited, Inc. Litigation, P.O. Box 510 Ada Michigan 49355-0510. A Proof of Claim form is incorporated in the proposed form of Notice, which is attached to and incorporated in this Agreement. A Proof of Claim must consist of a written statement, made under penalty of perjury, setting forth the reasons why the claimant is a member of the Settlement Class, i.e. that the claimant is or was an Amway distributor downline from the Amway distributorship of Bill Britt or Dexter Yager and/or that, while an active distributor, the claimant purchased one or more motivational tapes, books, or other publications published, produced, distributed or sold by the Britt defendants or Yager defendants, or attended one or more motivational meetings, functions, or rallies organized by the Britt defendants or Yager defendants. b. Defendants will mail a coupon to each eligible claimant who submits a properly executed proof of claim. c. Only one claim may be submitted per distributorship. 12. Cash Fund. a. In addition to the coupons described above, defendants will contribute the sum of $375,000 as a Cash Fund, from which any award by the Court of attorneys' fees, costs or other expenses will be paid. b. Defendants will make this sum payable to Amway Litigation Custody Fund at the PNC Bank,1500 Market Street, Philadelphia, Pennsylvania 19102, Account Number 350011005166, within 30 days following the Court's entry of a final order approving the Settlement Class and this Settlement Agreement. 13. Administration. a. Defendants will mail, at their expense, a single notice (either a bulk postcard or notice in a magazine or other publication, at defendants' option) to the last known address of each member of the Settlement Class who is currently an Amway distributor or was a distributor during calendar year 1995. The notice will inform recipients of the terms of this Settlement Agreement and instruct them on how to submit a Proof of Claim or, if they choose, to opt out of this class Settlement Agreement. A Proof of Claim form will be incorporated into the notice. An agreed form of notice is attached to and incorporated in this Settlement Agreement. Defendants' obligation to pay costs of notice by mail is limited to this single mailing and to any costs associated with providing copies of the notice to class members making such a request. Defendants will also publish, at their expense, a similar notice one time in a national newspaper, such as USA Today. Defendants' obligation to publish notice is limited to this single publication. b. Defendants will, at their expense, process incoming Proofs of Claim, print and mail the coupons to all eligible claimants, and fulfill all orders for merchandise using the coupons, subject to the reduced shipping and handling charges referred to above. c. Defendants, through counsel, will provide periodic reports to counsel for the Settlement Class on the administration of the settlement. d. Plaintiffs' counsel may petition the Court for an award of fees and out-of-pocket costs from the Cash Fund. e. Defendants' obligation to pay for the cost of administering this Settlement Agreement is limited to the costs identified in paragraphs 12 and 13. 14. As soon as practicable after the execution of this Settlement Agreement, the undersigned counsel shall file it with the Court, together with a proposed order requesting that the court: a. Preliminarily approve this Settlement Agreement and direct appropriate notice to be given to the plaintiffs and members of the Settlement Class, in a form acceptable to the parties, summarizing the terms of this Settlement Agreement; b. Direct a hearing to be held to determine the reasonableness, adequacy, and fairness of this Settlement Agreement, including whether it should be approved by the Court; c. Provide that any person who objects to the approval of this Settlement Agreement or to the final judgment to be entered in this litigation may appear at the hearing and show cause why this proposed Settlement Agreement should not be approved as fair, reasonable, and adequate and why a final judgment should not be entered; and d. Reserve jurisdiction over the effectuation of this Settlement Agreement for all purposes, including resolving any disputes that may arise. 15. If the Court declines to enter an order approving the form and content of notice to be provided to the Settlement Class and preliminarily approving this Settlement Agreement, then this Settlement Agreement is void in its entirety and the parties shall have no obligation to undertake any of the conduct provided for in this Settlement Agreement. 16. Defendants may elect to terminate this Settlement Agreement if more than two hundred (200) class members exclude themselves by the date fixed by the Court pursuant to Fed. R. Civ. P. 23. Defendants' option to terminate the Settlement Agreement shall be exercised, if at all, within thirty {30) days following the date fixed by the Court for members of the Settlement Class to exclude themselves. Defendants' election to terminate the Settlement Agreement shall be by written notice served upon Harold E. Kohn and James J. Rohn, by certified mail or telecopy, with a copy filed with the Court. No hearing on approval of this Settlement Agreement shall be held before the deadline for defendants' exercise of their option to terminate the Settlement Agreement, unless defendants otherwise agree in writing. In the event defendants exercise this option, then this Settlement Agreement is void in its entirety and the parties shall have no obligation to undertake any of the conduct provided for in this Settlement Agreement. 17. Upon the Court's final approval of this Settlement Agreement as reasonable, fair, and adequate, the undersigned will jointly file a motion for an order to enter an immediate and final judgment pursuant to Fed. R. Civ. P. 54(b) dismissing this action against defendants on the merits with prejudice. 18. Plaintiffs, on behalf of themselves and on behalf of the Settlement Class they represent, herewith release and discharge the defendants, for good and valuable consideration, and with the intent to be legally bound, from any and all claims, demands, causes of action, obligations, liabilities, and damages of any kind, including costs, expenses and attorneys' fees, arising out of or having any connection whatsoever with any act, omission, cause, matter or allegation that is in whole or in part the subject of or asserted in the Complaints, as well as any and all claims, demands, causes of action, obligations, liabilities, and damages of an kind, whether known or unknown, including costs, expenses, and attorneys' fees, that could have been asserted against defendants in the Complaints. l9. The foregoing release and discharge applies to all losses and damages of any kind, even if those losses and damages are not now known or anticipated, and even if those losses or damages are different or greater than is now expected. 20. The Settlement Class acknowledges, through its representatives, that the Settlement Class members may hereafter discover material facts in addition to or different from those which the Settlement Class now believes to be true with respect to the subject matter of the foregoing release and discharge. The Settlement Class understands that there may be future events, circumstances, or occurrences materially different from those the Settlement Class believes are likely to occur, but the Settlement Class nevertheless agrees that the applicability and effect of the foregoing release and discharge shall not be limited or impaired in any way notwithstanding any such facts, events, circumstances, or occurrences. 21. The Settlement Class acknowledges, through its representatives, that the Settlement Class is relying on its own judgment, belief and knowledge in entering into this settlement agreement, and that the foregoing release and discharge is made without relying on any statement or representation by any of the defendants, other than those contained in this Settlement Agreement. 22. The Settlement Class representatives, on behalf of themselves and all other members of the Settlement Class, hereby covenant not to pursue any claim or liability, or voluntarily assist any person or entity in pursuing any claim or liability, against any of the defendants that in any way arises out of or has any connection whatsoever with any act, omission, cause, matter or allegation that is in whole or in part the subject of or asserted in the Complaints or which could have been asserted against the defendants in the Complaints. 23. Defendants' obligations under paragraphs 8, 9, and 10 of this Settlement Agreement shall cease five years after the date this Settlement Agreement receives final approval from the Court. The sunset of such provisions does not preclude class members from subsequently bringing an independent action if otherwise allowed by applicable law. 24. The parties may execute this Settlement Agreement in counterparts, and the execution of the counterparts shall have the same effect as if all parties have signed the same instrument. 25. This Settlement Agreement constitutes the entire agreement among the parties pertaining to the settlement of this action and supersedes all prior and contemporaneous undertakings of the parties in connection herewith. IN WITNESS THEREOF, the parties have caused this Settlement Agreement to be executed by their duly authorized representatives and agents on this l2th day of August,1996. Harold E. Kohn Patrick W. Kittredge (I.D. No. 03556) KOHN, SWIFT & GRAF, P.C. Gary M. Marek (I.D. No. 45230) 1101 Market Street, Suite 2400 KITTREDGE, DONLEY, ELSON Philadelphia, PA 19107 FULLEM & EMBICK 421 Chestnut Street Philadelphia, PA 19106 (215) 829-9900 James J. Rohrn Karen M. Scheller Counsel for the Britt Defendants CONRAD, O'BRIEN, GELLMAN & and Defendant Amway Corporation ROHN, P.C. 1515 Market Street, l6th Floor Philadelphia, PA 19l02-1916 Alan M. Wiseman Counsel for Plaintiffs John and Stacy John C. Peirce Hanrahan and Mark Mensack Joseph A. Ostoyich HOWREY & SIMON l299 Pennsylvania Ave., N.W. Washington, D.C. 20004-2402 (202) 783-0800 Sharon D. Grider Michael A. Mohr AMWAY CORPORATION Ada, MI 49355-OOOl (616) 787-5797 Counsel for Defendant Amway Corporation William M. Janssen David J. Cynamon (I.D. No. 48002) Alvin Dunn SAUL, EWING, REMICK & SAUL SHAW, PIZTMAN, POTTS & 3800 Centre Square West TROWBRIDGE Philadelphia, PA 19102 2300 N Street, N. W. (215) 972-1967 Washington, D.C. 20037 (202) 663-8000 William J. Abraham 24 North High Street Robert D. Paul Columbus, Ohio 43215 WHITE & CASE (614) 221-5474 1747 Pennsylvania Avenue, N.W. Washington, D.C. 20006-4604 (202) 626-3614 William R. Culp, Jr. Burton J. Haynes CULP, ELLIOTT, MARSH & BODZIN, HAYNES & GOLUB CARPENTER 1156 l5th Street, N.W. The Carillon Washington, D.C. 20005 227 West Trade Street, Suite 1500 (202) 785-8887 Charlotte, NC 28202 (704) 372-6322 Counsel for Dexter Yager, D&B Yager J. William Blue Enterprises, Inc., Yager Enterprises, NORTHEN, BLUE, ROOKS, THIBAUT, Dexter R. Yager, Sr. & Family Enterprises, ANDERSEN & WOODS Inc., Dexter Yager Securities, Inc., Dexter P.O. Box 2208 Yager Motivation, Inc., Internet Chapel Hill, NC 27515 Services Corporation, Intercontinental (919) 968-444l Communication Corporation of America (listed in the complaint as International Counsel for the Britt Defendants Communication Cozporation of America), Yager Resort Properties, Inc., and Dreambuilders Review Dated: August 12, 1996