EXHIBIT 10.4
SETTLEMENT AGREEMENT AND RELEASE
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I. PARTIES
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This Settlement Agreement ("Agreement") is entered by and among:
A. The United States of America, acting through its Department of Justice
and the United States Attorney's Office for the District of Massachusetts, and
on behalf of the United States Department of Health and Human Services ("HHS")
through its office of Inspector General ("HHS-OIG") (collectively the "United
States"); and B. National Medical Care, Inc. ("NMC"), a Delaware corporation
and a wholly owned subsidiary of Fresenius Medical Care Holdings, Inc. including
its Dialysis Services Division ("DSD"); Clinical Diagnostic Systems, Inc.
("CDS"), a Florida corporation and wholly owned subsidiary of NMC; NMC
Diagnostic Services, Inc. ("DSI"), a Delaware corporation and wholly owned
subsidiary of NMC; Bio-Medical Applications Management Company, Inc. ("BMAMC");
NMC's and BMAMC's subsidiary entities that provide dialysis services ("Dialysis
Facilities") including those listed on the attached Exhibit E; and Fresenius
Medical Care Holdings, Inc. ("FMCH")(d/b/a Fresenius Medical Care North
America).
Collectively, all of the above will be referred to as "the Parties".
II. PREAMBLE
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A. WHEREAS, at all relevant times, NMC primarily was in the business of
providing dialysis and related services to patients with End-Stage Renal Disease
("ESRD") throughout the United States.
B. WHEREAS, NMC, CDS, DSI, DSD and the Dialysis Facilities submitted or
caused to be submitted ESRD claims for payment to the Medicare program, Title
XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997), which is
administered by HHS;
C. WHEREAS, the United States contends that it has certain civil claims
against NMC, CDS, DSI, DSD and the Dialysis Facilities, and against FMCH as
parent, for violations of the federal statutes and/or common law doctrines
specified in Paragraph 8 of the Terms and Conditions below, in connection with
the following conduct ("the Covered Conduct"):
1. Doppler Flow Test Clinical Study
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a. Beginning in 1991, NMC, through DSD, planned and carried out a
clinical cohort and intervention study involving color flow doppler ultrasound
examination ("Doppler Flow Tests" or "DFTs") of hemodialysis access sites of
various patients at the Dialysis Facilities. The purpose of the DFT clinical
study included determining if baseline DFTs could be a predictor of access
failure, assessing the interrelationships and effects which hematocrit and EPO
dose have on the probability of access failure given a specified DFT profile,
and determining the correlation of vascular access disease progression. The
results of this study were published in 1998 in the American Journal Of
Nephrology in an article entitled, Predicting Hemodialysis Access
Failure with Color Flow Doppler Ultrasound. The DFTs involved in this study were
performed during the period approximately July 1991 to April 1994.
b. NMC, DSI, CDS, BMAMC, and the Dialysis Facilities submitted or caused
to be submitted claims to the Medicare Program seeking reimbursement for the
technical component of the DFTs performed in the DFT clinical study. Such
claims/billings were improper because the tests were conducted for research
purposes, and/or were not otherwise reasonable and medically necessary for the
diagnosis or treatment of illness or injury or to improve the functioning of a
malformed body member for the patient(s) for whom the claim was submitted and
the service billed. In addition, NMC, DSI, CDS, DSD, and the Dialysis
Facilities caused individual physicians to submit claims to Part B of the
Medicare Program seeking reimbursement for the professional or interpretation
component of the DFTs performed in the DFT clinical study. Such claims/billing
were improper because the underlying technical components were not reimbursable.
2. Bioelectrical Impedance Analysis Test Clinical Study
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a. From approximately January 1, 1995 through June 30, 1995, NMC through
DSD, carried out Phase II of a clinical study involving bioelectrical impedance
analysis ("BIA") tests. This phase involved providing one or more BIA tests to
various patients at the Dialysis Facilities. The purpose of this BIA clinical
study was to assess if BIA test results predict mortality and to assess
correlations with other nutritional measurements.
b. NMC, DSI, CDS, BMAMC, and the Dialysis Facilities submitted or caused
to be submitted claims to the Medicare Program seeking reimbursement for the
technical component for the BIA tests performed as part of the BIA Clinical
Study. Such claims/billings were improper because the tests were conducted for
research purposes, and/or were not otherwise reasonable and medically necessary
for the diagnosis or treatment of illness or injury or to improve the
functioning of a malformed body member for the patient for whom the claim was
submitted and the service billed.
Medical Director Compensation
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The United States also contends that it has certain civil claims
against NMC for violations of the federal statutes and/or common law doctrines
enumerated in Paragraph 9 of the Terms and Conditions below, for compensation
paid or offered to physicians for serving as the medical directors of BMA
dialysis facilities, to the extent that this compensation
reflected services rendered for years through 1994, under contracts entered into
prior to December 31, 1994.
D. WHEREAS, the United States also contends that it has certain
administrative claims against CDS, DSI, NMC, DSD, the Dialysis Facilities, and
against FMCH, as parent, under the provisions for permissive exclusion from the
Medicare, Medicaid and other federal health care programs, 42 U.S.C. (S) 1320a-
7(b), and the provisions for civil monetary penalties, 42 U.S.C. (S) 1320a-7a,
for the Covered Conduct.
E. WHEREAS, NMC, CDS, DSI, DSD, the Dialysis Facilities, and FMCH
specifically deny and affirmatively contest the contentions of the United States
as set forth in Preamble Paragraph C, above, and specifically deny any
wrongdoing in connection with those claims; and further contend that their
practices described in the Covered Conduct, were appropriate and lawful and did
not result in any violations of federal law, state law, or common law doctrines,
and do not give rise to any civil or administrative cause of action; and
F. WHEREAS, in order to avoid the delay, uncertainty, inconvenience and
expense of protracted litigation of these claims, the Parties reach a full and
final compromise of claims that the United States has against NMC, CDS, DSI, DSD
and the Dialysis Facilities and FMCH as parent, for the Covered Conduct,
pursuant to the Terms and Conditions set forth below.
III. TERMS AND CONDITIONS
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NOW, THEREFORE, in reliance on the representations contained herein and in
consideration of the mutual promises, covenants,
and obligations in this Agreement, and for good and valuable consideration,
receipt of which is hereby acknowledged, the Parties agree as follows:
1. NMC and FMCH, collectively, shall pay to the United States the sum of
two million eight hundred thirty five thousand thirty two dollars ($2,835,032)
("the Settlement Amount"), and this sum shall constitute a debt immediately due
and owing to the United States on the "First Payment Date", which is the later
of the dates on which (a) the four civil Settlement Agreements are fully
executed by the Parties, (b) all notices of dismissal described in the civil
Settlement Agreements are docketed by the Court, or (c) the Court accepts
LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC Homecare, Inc.'s guilty
pleas and imposes the sentences set forth in their respective Plea Agreements.
NMC and FMCH, collectively, shall pay the Settlement Amount to the United States
according to the schedule, terms and instructions contained in the Promissory
Note executed contemporaneously with this Agreement, attached as Exhibit A, and
incorporated herein by reference.
2. As an express condition of the Settlement Agreement, to secure NMC's
and FMCH's payment obligations under Paragraph 1 of this Agreement (and the
other civil Settlement Agreements and criminal Plea Agreements being executed at
the same time), NMC and FMCH shall:
(a) procure from the Bank of Nova Scotia and deliver or cause to be
delivered to the United States Attorney's Office for the District of
Massachusetts, on or before January 19, 2000, an
amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96
issued to the United States of America on September 27, 1996 (the "Letter of
Credit") to increase the amount of the Letter of Credit to $189,634,446.00. Such
amendment shall be in the form attached as Exhibit B. Within 10 days of receipt
by the U.S. Attorney's Office of written confirmation from the transferring bank
that a quarterly payment or prepayment of such quarterly payments, has been made
to the United States, the United States shall provide written permission to the
Bank of Nova Scotia to reduce the amount available for drawing under Letter of
Credit No. S020/43695/96 by the amount of the principal payment received. In the
event that the entire outstanding payment obligation secured by the Letter of
Credit is prepaid, then the United States shall provide written permission to
reduce the amount available for drawing to zero. The United States shall return
this Letter of Credit for cancellation when all obligations are paid in full or
it is determined, by the United States, or pursuant to a final and non-
appealable order of a court of competent jurisdiction, that NMC and FMCH have
fulfilled all payment obligations pursuant to this Agreement.
(b) On January 19, 2000, NMC and FMCH shall establish an escrow
account in an initial amount of $236,401,919.00 to be held by an independent
third party agreeable to the United States, and NMC and FMCH shall increase the
escrow amount each day in an amount of $48,546.00 (through accrued interest
and/or deposits), beginning on January 20, 2000 and continuing through April 15,
2000, when NMC and FMCH shall increase the escrow
amount by an additional amount each day of $7,271.00 (through accrued interest
and/or deposits), for each quarterly payment due before the first payment is due
on the First Payment Date. On the First Payment Date, all funds in the escrow
account shall be paid to the United States to satisfy the payment obligation in
Paragraph 1. The terms and conditions of this escrow account shall in no way
limit NMC's and FMCH's payment obligations to the United States secured by the
Letter of Credit.
3. NMC and FMCH are in default of this Agreement on
the date of occurrence of any of the following events ("Events of Default"):
a. NMC's and FMCH's failure to procure, deliver or maintain the
Letter of Credit;
b. Failure by NMC's and FMCH's failure to pay any amount provided
for in the Promissory Note attached as Exhibit A within 2 days of when such
payment is due and payable;
c. If prior to making the full payment of the amount due under the
Promissory Note or Paragraph 1 above,(i) NMC and/or FMCH commences any case,
proceeding, or other action (A) under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have any order for
relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or
insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for NMC and/or FMCH or for all or any substantial part of NMC's
and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH
any such case, proceeding or other action referred to in clause (i) which
results in the entry of an order for relief and any such order remains
undismissed, or undischarged or unbonded for a period of thirty (30) days; or
(iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth above in this sub-Paragraph 3.c.;
d. NMC's and FMCH's failure to establish, maintain or
make the required payments to the escrow account described in Paragraph 2b.
1. If payments due under Paragraph 1 are received late, but within the
two-day grace period provided in Paragraph 5.b. of the Promissory
Note, interest incurred during such grace period will be assessed at
two times the daily amount in effect on the date the payment was due.
5. NMC and FMCH shall provide the United States written notice
of an Event of Default within two (2) business days of such event by
overnight mail, or facsimile followed by overnight delivery, to the
United States Attorney's Office, District of Massachusetts, One
Courthouse Way, Suite 9200, Boston, MA 02210, Attention: Suzanne E.
Durrell, Assistant U.S. Attorney (or to the attention of such other
person as may be designated in writing by the United States Attorney's
Office).
6. Immediately upon the occurrence of an Event of Default,
without further notice or presentment and demand by the United States:
a. The Settlement Amount plus accrued interest through the
end of the applicable quarter as set forth in Paragraph 1 of the
Promissory Note (minus any payments to date of principle and accrued
interest) shall become immediately due and payable ("Settlement
Default Amount"). Interest shall be calculated on the Settlement
Default Amount at the Prime Rate as published in the Wall Street
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Journal on the Effective Date of this Agreement plus 5% from the date
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of the Event of Default.
b. In addition, NMC and FMCH will pay the United States
all reasonable costs of collection and enforcement of this Agreement,
including attorney's fees and expenses, plus interest described in
Paragraph 6.a. above. The Settlement Default Amount, plus interest,
described in Paragraph 6.a. above, together with the costs of
collection and enforcement described in this sub-paragraph, will be
referred to as the "Default Obligation".
7. Upon the occurrence of an Event of Default, the United
States may exercise, at its sole option, one or more of the following
rights:
a. The United States may draw the full amount available
for drawing under the Letter of Credit and retain all proceeds
thereof.
b. The United States may enforce the terms of the
Guarantee Agreement between the United States of America, Fresenius
Medical Care GMBH, a German corporation and the predecessor of
Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation,
and National Medical Care, Inc., dated July 31, 1996, attached as
Exhibit C.
c. The United States retains any and all other rights and
remedies it has or may have under law and equity.
d. No failure or delay on the part of the United
States to exercise any right or remedy shall operate as a waiver of
the United States' rights. No single or partial exercise by the
United States of any right or remedy shall operate as a waiver of the
United States' rights.
8. In an Event of Default under Paragraph 3.c. above
(Commencement of Bankruptcy or Reorganization Proceeding): a.
NMC and FMCH agree not to contest or oppose any motion filed by the
United States seeking relief from or modification of the automatic
stay of 11 U.S.C. (S) 362(a); not to seek relief under 11 U.S.C. (S)
105 to enjoin or restrain the United States from recovering monies
owed by NMC and FMCH arising out of this Agreement or the attached
Promissory Note, or from recovering monies through presentment against
the
Letter of Credit. NMC and FMCH recognize that this express waiver
is in consideration for the settlement of claims by the United States
described in Paragraph C above, under the terms and conditions
contained in this Settlement Agreement.
b. By expressly waiving the automatic stay provision, NMC
and FMCH agree not to oppose or interfere with any motion made in
federal court (including bankruptcy courts) by the United States to
suspend payments to NMC and DSD from the Title XVIII (Medicare), Title
XIX (Medicaid) programs, and other federal health care programs;
c. This Agreement shall be voidable at the sole
option of the United States;
d. If any term(s) of this Agreement are set aside for any
reason, including as a result of a preference action brought pursuant
to 11 U.S.C. (S) 547, the United States, at its sole option and in its
discretion, may rescind all terms of this Agreement and seek recovery
of the full amount of claims and allegations identified herein and in
the Civil Actions, or, in the alternative, enforce the remaining terms
of this Agreement. In the event of rescission of this Agreement, all
Parties reserve all rights, claims, and defenses that are available
under law and equity as of the Effective Date of this Agreement; and
e. In addition to the rights enumerated in Paragraph 8.a.
through 8.d. above, the United States and all other Parties shall
retain all rights and claims they have or may have under law and
equity.
9. Subject to the exceptions and limitations in Paragraph 10
below, in consideration of the obligations of NMC and FMCH set forth
in this Agreement, conditioned upon payment in full of the Settlement
Amount, subject to Paragraph 23 (concerning bankruptcy proceedings
commenced within 91 days of any payment under this Agreement), the
United States, on behalf of itself, and its officers, agents,
agencies, and departments, will release and will be deemed to have
released FMCH, BMAMC, NMC, DSI, CDS, the Dialysis Facilities and their
parents, and the affiliates and subsidiaries listed on the attached
Exhibit D (collectively, the parties described in Preamble Paragraph B
and the corporate entities listed on Exhibit D constitute the NMC
Companies within the meaning of this Agreement), and the current
directors, officers, employees, and agents of the NMC Companies who
were not employed by or in any way affiliated with DSD, NMC, or NMC's
parents, subsidiaries, divisions, or affiliates at any time prior to
September 30, 1996, from any civil or administrative monetary claim
(including recoupment claims) that the United States
has or may have under the False Claims Act, 31 U.S.C. (S)(S) 3729-
3733; the Program Fraud Civil Remedies Act, 31 U.S.C. (S)(S) 3801-
3812; the Civil Monetary Penalties Law, 42 U.S.C. (S) 1320a-7a; or
common law claims for fraud, payment by mistake of fact, breach of
contract or unjust enrichment for the conduct described in Preamble
Paragraph C above with respect to Medicare.
10. Notwithstanding any term of this Agreement, the United
States specifically does not release the NMC Companies, or any
individual from any and all of the following: (a) any potential
criminal, civil or administrative claims arising under Title 26, U.S.
Code (Internal Revenue Code); (b) any criminal liability; (c) any
potential liability to the United States (or any agencies thereof) for
any conduct other than that identified in Preamble Paragraph C above;
(d) any entities not specifically included on
the list of NMC entities set forth in Exhibit D; (e) any claims based
upon such obligations as are created by this Agreement; (f) except as
explicitly stated in this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs; (g)
any express or implied warranty claims or other claims for defective
or deficient products and services provided by DSD, DSI, CDS, or the
Dialysis Facilities including quality of testing or product claims;
(h) any claims for personal injury or property damage or for other
consequential damages arising from the conduct described in Paragraph
C above; (i) any claims based upon failure to deliver items or
services; (j) any civil or administrative claims against any
individual who was an officer, director, trustee, agent, employee, or
was in any way affiliated with CDS, DSI, DSD, NMC, or NMC's parents,
subsidiaries, divisions, or affiliates at any time prior to September
30, 1996; or (k) any civil or administrative claims against any
individual, including current directors, officers, employees and
agents who receives written notification that he or she is a target of
the criminal investigation, who is criminally indicted or convicted of
an offense, or who enters a criminal plea related to the conduct
alleged in Preamble Paragraph C above.
11. FMCH, on behalf of itself and its parents, affiliates,
subsidiaries, and divisions, including but
not limited to NMC, has entered into a Corporate Integrity Agreement
with HHS-OIG, which is incorporated by reference into this Agreement.
FMCH will immediately upon execution of this Agreement implement its
obligations under the Corporate Integrity Agreement.
12. In consideration of the obligations of NMC and FMCH set
forth in this Agreement, conditioned upon payment in full of the
Settlement Amount, subject to Paragraph 23 below (concerning
bankruptcy proceedings commenced within 91 days of any payment under
this Agreement), and conditioned upon FMCH's entering into the
Corporate Integrity Agreement, the OIG-HHS agrees to release and
refrain from instituting, directing, or maintaining any administrative
claim or any action seeking exclusion from the Medicare, Medicaid or
other Federal health care programs (as defined in 42 U.S.C. (S) 1320a-
7b(f)) against the NMC Companies and the current directors, officers,
employees, and agents of the NMC Companies who were not employed by or
in any way affiliated with CDS, DSI, DSD, the Dialysis Facilities,
NMC, or any of NMC's parents, subsidiaries, divisions, or affiliates
at any time prior to September 30, 1996, under 42 U.S.C. (S) 1320a-7a
(Civil Monetary Penalties Law) or 42 U.S.C. (S) 1320a-7(b) (permissive
exclusion) for the conduct described in Preamble Paragraph C, except
as reserved in Paragraph 10 above and as
reserved in this Paragraph. The OIG-HHS expressly reserves all rights
to comply with any statutory obligations to exclude the NMC Companies
from the Medicare, Medicaid, or other Federal health care programs
under 42 U.S.C. (S) 1320a-7(a)(mandatory exclusion). Nothing in this
Paragraph precludes the OIG-HHS from taking action against entities or
individuals for conduct and practices for which civil claims have been
reserved in Paragraph 10 above.
13. The NMC Companies waive and will not assert any defenses
these entities may have to any criminal prosecution or administrative
action relating to the conduct described in Preamble Paragraph C,
which defenses may be based in whole or in part on a contention that,
under the Double Jeopardy Clause of the Fifth Amendment of the
Constitution or Excessive Fines Clause of the Eighth Amendment of the
Constitution, this Settlement Agreement bars a remedy sought in such
criminal prosecution or administrative action. The NMC Companies
further agree that nothing in this Agreement is punitive in purpose or
effect.
14. The NMC Companies covenant to cooperate fully and
truthfully with the United States' civil investigation of individuals
and entities not specifically released in this Agreement. Upon
reasonable notice, the NMC Companies will make reasonable efforts to
facilitate
access to, and encourage the cooperation of, its directors, officers,
and employees for interviews and testimony, consistent with the rights
and privileges of such individuals, and will furnish to the United
States, upon reasonable request, all non-privileged documents and
records in its possession, custody or control.
15. On the effective date of this Agreement, the NMC Companies
release and will be deemed to have released the United States, its
agencies, employees, servants, and agents from any claims (including
attorneys fees, costs, and expenses of every kind and however
denominated) which the NMC Companies have or may have against the
United States, its agencies, employees, servants, and agents, related
to or arising from the United States' civil, criminal and
administrative investigation and prosecution of DSD, DSI, CDS, the
Dialysis Facilities, NMC and FMCH involving the conduct specified in
Paragraph C of the Preamble.
16. The Settlement Amount that NMC and FMCH must pay pursuant to
Paragraph 1 of this Agreement will not be decreased as a result of the
denial of claims for payment now being withheld from payment by any
Medicare carrier or intermediary, Railroad Retirement Medicare
carrier, TRICARE, Federal Employees Health Benefits Program ("FEHBP"),
or Veteran's Administration
("VA"), or any Medicaid payor, related to the conduct described in
Preamble Paragraph C; and the NMC Companies agree not to resubmit to
any Medicare carrier or intermediary, Railroad Retirement Medicare
carrier, TRICARE, FEHBP, VA, or any Medicaid payor any previously
denied claims related to the conduct described in Preamble Paragraph
C, and agree not to appeal any such denials of claims.
17. The NMC Companies agree that all costs (as defined in the
Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles
XVIII and XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395-
1395ddd (1997) and 1396-1396v(1997), and the regulations promulgated
thereunder) incurred by or on behalf of the NMC Companies, and their
divisions, subsidiaries and affiliates, and their present and former
officers, directors, employees, shareholders and agents in connection
with: (a) the matters covered by this Agreement; (b) the Government's
audits, administrative, civil and criminal investigation and
prosecution of CDS, DSI, DSD, the Dialysis Facilities, NMC, and FMCH;
(c) these corporate entities' investigation, defense, and corrective
actions undertaken in response to the Government's administrative,
civil and criminal investigations, and in connection with the matters
covered by this Agreement, and including the obligations undertaken
pursuant to the Corporate
Integrity Agreement (including attorney's fees); (d) the negotiation
and performance of this Agreement, and the Corporate Integrity
Agreement; and (e) the payments made to the United States provided for
in this Agreement, are unallowable costs on Government contracts and
under Medicare, Railroad Retirement Medicare, Medicaid, TRICARE,
FEHBP, and the VA programs (hereafter, "unallowable costs"). These
unallowable costs will be separately estimated and accounted for by
the NMC Companies and these entities will not charge such unallowable
costs directly or indirectly to any contracts with the United States
or any Medicaid program, or seek payment for such unallowable costs
through any cost report, cost statement, information statement or
payment request submitted by the NMC Companies or any of their
divisions, subsidiaries or affiliates to the Medicare, Railroad
Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs.
The NMC Companies further agree that within 270 days of the
effective date of this Agreement these entities will identify to
applicable Medicare, Railroad Retirement Medicare, and TRICARE fiscal
intermediaries, carriers and/or contractors, and Medicaid, VA and
FEHBP fiscal agents, any unallowable costs (as defined above) included
in payments previously sought from the United States, or any Medicaid
Program, including, but not limited to, payments sought in any cost
reports, cost
statements, information reports, or payment requests already submitted
by the NMC Companies or any of their subsidiaries, affiliates, or
divisions and will request, and agree, that such cost reports, cost
statements, information reports or payment requests, even if already
settled, be adjusted to account for the effect of the inclusion of the
unallowable costs. The NMC Companies agree that the United States will
be entitled to recoup from the NMC Companies any overpayment as a
result of the inclusion of such unallowable costs on previously-
submitted cost reports, information reports, cost statements or
requests for payment. Any payments due after the adjustments have been
made shall be paid to the United States pursuant to the direction of
the Department of Justice, and/or the affected agencies. The United
States reserves its rights to disagree with any calculations submitted
by the NMC Companies, or any of their subsidiaries, affiliates or
divisions, on the effect of inclusion of unallowable costs (as defined
above) on the NMC Companies or any of their subsidiaries, affiliates
or divisions' cost reports, cost statements or information reports.
Nothing in this Agreement shall constitute a waiver of the rights of
the United States to examine or reexamine the unallowable costs
described above.
18. This Agreement is intended to be for the benefit of the
Parties only, and by this instrument the
Parties do not release any claims against any other person or entity
except as specifically identified in Paragraphs 9 and 11, above.
19. The NMC Companies agree that they will not seek payment for
any of the health care billings covered by this Agreement from any
health care beneficiaries or their parents, sponsors, estates, heirs,
successors or assigns. The NMC Companies waive any causes of action
against these beneficiaries or their parents, sponsors, estates,
heirs, successors, or assigns based upon the claims for payment
covered by this Agreement.
20. Nothing in this Agreement constitutes an agreement by the
United States concerning the characterization of the amounts paid
hereunder for purposes of any proceeding under Title 26 of the
Internal Revenue Code.
21. Except as provided in Paragraph 6, each party to this
Agreement will bear its own legal and other costs incurred in
connection with this matter, including by way of example only, all
costs incurred in the investigation and defense of this matter, the
preparation and performance of this Agreement, and all corrective
actions taken in response to the investigation and resolution of this
matter.
22. NMC and FMCH expressly warrant that they have reviewed their
financial condition and that they
currently are solvent on a consolidated basis within the meaning of 11
U.S.C. Section 547(b)(3), and expect to remain solvent on a
consolidated basis following payment to the United States hereunder.
Further, the Parties expressly warrant that, in evaluating whether to
execute this Agreement, the Parties (a) have intended that the mutual
promises, covenants and obligations set forth herein constitute a
contemporaneous exchange for new value given to NMC and FMCH within
the meaning of 11 U.S.C. Section 547(c)(1), and (b) have concluded
that these mutual promises, covenants, and obligations do, in fact,
constitute such a contemporaneous exchange.
23. In the event NMC or FMCH commences, or a third party
commences, within 91 days of any payment under of this Agreement, any
case, proceeding, or other action (i) under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have any order for relief of NMC and/or FMCH's debts, or seeking to
adjudicate NMC and/or FMCH as bankrupt or insolvent, or (ii) seeking
appointment of a receiver, trustee, custodian or other similar
official for NMC and/or FMCH or for all or any substantial part of NMC
and/or FMCH's assets, NMC and FMCH agree as follows:
a. NMC and FMCH's obligations under this Agreement may
not be avoided pursuant to 11 U.S.C.
Section 547, and NMC and FMCH will not argue or otherwise take the
position in any such case, proceeding or action that: (i) NMC and/or
FMCH's obligations under this Agreement may be avoided under 11 U.S.C.
Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis
at the time this Agreement was entered into, or became insolvent on a
consolidated basis as a result of the payment made to the United
States hereunder; or (iii) the mutual promises, covenants and
obligations set forth in this Agreement do not constitute a
contemporaneous exchange for new value given to NMC and/or FMCH.
b. In the event that NMC and/or FMCH's obligations
hereunder are avoided pursuant to 11 U.S.C. Section 547, the United
States, at its sole option, may rescind the releases in this
Agreement, and bring any civil and/or administrative claim, action or
proceeding against NMC, CDS, DSI, DSD, the Dialysis Facilities, and
the NMC Companies and/or FMCH for the claims that would otherwise be
covered by the releases provided in Paragraphs 9 and 11 above. If the
United States chooses to do so, CDS, DSI, DSD, the Dialysis
Facilities, NMC and FMCH agree that (i) any such claims, actions or
proceedings brought by the United States (including any proceedings to
exclude any of the NMC Companies from participation in Medicare,
Medicaid, or other federal health care programs) are not subject
to an "automatic stay" pursuant to 11 U.S.C. Section 362(a) as a
result of the action, case or proceeding described in the first clause
of this Paragraph, and that CDS, DSI, DSD, the Dialysis Facilities,
NMC and FMCH will not argue or otherwise contend that the United
States' claims, actions or proceedings are subject to an automatic
stay; (ii) that CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH
will not plead, argue or otherwise raise any defenses under the
theories of statute of limitations, laches, estoppel or similar
theories, to any such civil or administrative claims, actions or
proceeding which are brought by the United States within 90 calendar
days of written notification to NMC and FMCH that the releases herein
have been rescinded pursuant to this Paragraph, and (iii) the United
States has a valid claim against CDS, DSI, DSD, the Dialysis
Facilities, NMC and FMCH in the amount of the Default Obligation and
the United States may pursue its claims in any case, action, or
proceeding.
c. CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH
acknowledge that their agreements in this Paragraph are provided in
exchange for valuable consideration provided in this Agreement.
24. CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH
represent that this Agreement is freely and
voluntarily entered into without any degree of duress or compulsion
whatsoever.
25. This Agreement is governed by the laws of the United
States. The Parties agree that the exclusive jurisdiction and venue
for any disputes arising between and among the Parties under this
Agreement will be the United States District Court for the District of
Massachusetts, except that disputes arising under the Corporate
Integrity Agreement shall be resolved exclusively upon the dispute
resolution provisions set forth in the Corporate Integrity Agreement.
26. The undersigned CDS, DSI, DSD, the Dialysis Facilities, NMC
and FMCH signatories represent and warrant that they are authorized by
their respective Board of Directors to execute this Agreement. The
undersigned United States signatories represent that they are signing
this Agreement in their respective official capacities and that they
are authorized to execute this Agreement.
27. Except for the representations in Paragraph 21 (regarding
solvency), and Paragraph 23 (concerning bankruptcy proceedings
commenced within 91 days of any payments under this Agreement), the
Parties agree that nothing in this Agreement constitutes an admission
by any person or entity with respect to any issue of law or fact.
28. This Agreement is effective on the date of signature of the
last signatory to the Agreement (the "Effective Date").
29. This Agreement shall be binding on all successors,
transferees, heirs and assigns.
30. This Agreement, together with Exhibits A through E, and
the Corporate Integrity Agreement, constitute the complete agreement
among the Parties with regard to the conduct described in Preamble
Paragraph C. This Agreement may not be amended except by written
consent of the Parties, except that only FMCH and OIG-HHS must agree
in writing to modification of the Corporate Integrity Agreement.
31. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute
one and the same Agreement.
THE UNITED STATES OF AMERICA
----------------------------
By: /s/ Suzanne E. Durrell Dated: January 18, 2000
-------------------------- ----------------
SUZANNE E. DURRELL
Assistant U.S. Attorney
District of Massachusetts
By: /s/ Patricia M. Connolly Dated: January 18, 2000
-------------------------- ----------------
PATRICIA M. CONNOLLY
Special Assistant U.S. Attorney
District of Massachusetts
By: /s/ Maya Guerra Dated: January 18, 2000
-------------------------- ----------------
MAYA GUERRA
Trial Attorney
Civil Division
U.S. Department of Justice
By: /s/ Lewis Morris Dated: 1/18/00
-------------------------- ------------------
LEWIS MORRIS
Assistant Inspector General
Office of Inspector General
U.S. Department of Health and
Human Services
CLINICAL DIAGNOSTIC SYSTEMS, INC.,
NMC DIAGNOSTIC SERVICES, INC.,
Bio-Medical Applications Management Company, Inc.
NATIONAL MEDICAL CARE, INC.
FRESENIUS MEDICAL CARE HOLDINGS, INC.
By: /s/ Ben J. Lipps Dated: 1/18/00
------------------------ --------------------
Ben J. Lipps
President
Clinical Diagnostic Systems, Inc.
By: /s/ Ben J. Lipps Dated: 1/18/00
------------------------ --------------------
Ben J. Lipps
President
NMC Diagnostic Services, Inc.
By: /s/ Ben J. Lipps Dated: 1/18/00
------------------------ --------------------
Ben J. Lipps
President
Bio-Medical Applications Management Company, Inc.
By: /s/ Ben J. Lipps Dated: 1/18/00
------------------------ --------------------
Ben J. Lipps
President
National Medical Care, Inc.
By: /s/ Ben J. Lipps Dated: 1/18/00
------------------------ --------------------
Ben J. Lipps
President
Fresenius Medical Care Holdings, Inc.
Acknowledged:
-------------
By: /s/ Jonathan E. Chiel Dated: January 18, 2000
-------------------------- -------------------
JONATHAN CHIEL
Counsel to Clinical Diagnostic
Systems, Inc., NMC BMA Management Co.,
NMC Diagnostic Services, Inc.
National Medical Care, Inc.
Fresenius Medical Care Holdings, Inc.
By: /s/ Alan E. Reider Dated: 1/18/00
-------------------------- -------------------
ALAN E. REIDER
Counsel to Clinical Diagnostic
Systems, Inc., NMC Diagnostic
Services, Inc., NMC BMA Management Co.,
National Medical Care, Inc.
Fresenius Medical Care Holdings, Inc.
EXHIBIT A
(Promissory Note)
The Promissory Note dated January 19, 2000 from National Medical Care, Inc. and
Fresenius Medical Care Holdings, Inc. payable to the order of the United States
is incorporated by reference to Exhibit A of Exhibit 10.2 to this Current Report
on Form 8-K.
EXHIBIT B
(Amendment to Irrevocable Nontransferable Letter of Credit)
The Amendment to Irrevocable Nontransferable Letter of Credit dated January 19,
2000 issued by the Bank of Nova Scotia, Atlanta Agency to the United States is
incorporated by reference to Exhibit B of Exhibit 10.2 to this Current Report
on Form 8-K.
EXHIBIT C
(Guarantee)
The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care
GmbH, the predecessor of Fresenius Medical Care AG, National Medical Care, Inc.,
W.R. Grace & Co. and the United States of America, is incorporated by reference
to the Company's Registration Statement on Form S-4 (Registration No. 333-09497)
dated August 2, 1996 and the exhibits thereto.
EXHIBIT D
(List of Fresenius Affiliated Entities)
The List of Fresenius Affiliated Entities is incorporated by reference to
Exhibit D of Exhibit 10.2 to this Current Report on Form 8-K.
EXHIBIT E
FACILITIES IN BIA STUDY
LOCATION CORPORATE NAME FACILITY
1629 BIO-MEDICAL APPLICATIONS OF MA.,INC. WALTHAM
1110 BIO-MEDICAL APPLICATIONS OF MA.,INC. BOSTON - TKC
1109 BIO-MEDICAL APPLICATIONS OF MA.,INC. FRAMINGHAM
1654 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. SMITHFIELD
1656 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. ROANOKE RAPIDS
1688 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. CLINTON
1498 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. ROCKY MOUNT
1653 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. RALEIGH
1358 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. KINSTON
1652 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PARKVIEW
1087 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. HARRISBURG
1380 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. NW PHILADELPHIA
1176 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. GREENSBURG
1175 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PITTSBURGH
1122 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SW PENN
1726 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. MOUNT PLEASANT
1683 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. UNIONTOWN
1209 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. HAZELTON
1123 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. POTTSVILLE
1395 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. FAIRMOUNT
FACILITIES IN DFT COHORT STUDY
LOCATION CORPORATE NAME FACILITY NAME
1605 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. ADRIAN
1273 BIO-MEDICAL APPLICATIONS OF OHIO, INC. AKRON
1481 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. ANDERSON
1253 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. ANN ARBOR
1181 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. ANNAPOLIS
1277 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. ARLINGTON
1178 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. BUTLER
1356 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. CAMP SPRINGS
1112 BIO-MEDICAL APPLICATIONS OF MA.,INC. CAPE COD
1272 BIO-MEDICAL APPLICATIONS OF OHIO, INC. CENTRAL OHIO \ COLUMBUS
1639 BIO-MEDICAL APPLICATIONS OF OHIO, INC. CENTRAL OHIO EAST
1389 BIO-MEDICAL APPLICATIONS OF MA.,INC. CHICOPEE
1224 BIO-MEDICAL APPLICATIONS OF FLORIDA, INC. DELTONA
1265 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. DETROIT
1119 BIO-MEDICAL APPLICATIONS OF DC, INC. DUPONT CIRCLE
1441 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. EASTERN VIRGINIA
1682 BIO-MEDICAL APPLICATIONS OF WEST VIRGINIA, INC. ELKINS
1667 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. FLINT
1433 BIO-MEDICAL APPLICATIONS OF OHIO, INC. GRANT PARK
1176 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. GREENSBURG
1300 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. INDIANAPOLIS
1298 BIO-MEDICAL APPLICATIONS OF JERSEY CITY, INC. JERSEY CITY
1418 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. KITTANNING
1625 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LA PLATA
1108 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. LATROBE
1354 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LAUREL
FACILITIES IN DFT COHORT STUDY
LOCATION CORPORATE NAME FACILITY NAME
1355 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LEONARDTOWN
1263 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. LIVONIA
1250 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. LOUISVILLE
1487 BIO-MEDICAL APPLICATIONS OF MANCHESTER, INC. MANCHESTER
1262 BIO-MEDICAL APPLICATIONS OF OHIO, INC. MANSFIELD
1362 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. MARION COUNTY
1606 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. MON VALLEY
1680 BIO-MEDICAL APPLICATIONS OF WEST VIRGINIA, INC. MORGANTOWN
1417 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. NEW CASTLE
1450 BIO-MEDICAL APPLICATIONS OF NEW HAMPSHIRE, INC. NEW HAMPSHIRE
1361 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NEW RIVER VALLEY
1397 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NORTH ROANOKE
1466 BIO-MEDICAL APPLICATIONS OF NORTHEAST DC, INC. NORTHEAST D.C.
1132 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NORTHERN VIRGINIA AT ALEXANDRIA
1663 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. OWOSSO
1175 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PITTSBURGH
1170 BIO-MEDICAL APPLICATIONS OF RHODE ISLAND, INC. PROVIDENCE
1106 BIO-MEDICAL APPLICATIONS OF NEW YORK, INC. QUEENS
1601 ROCKWOOD DIALYSIS CENTER, INC. RICHMOND
1133 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. ROANOKE
1340 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. SMYTH COUNTY
1480 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. SOMERSET
1324 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SOUTH HILLS
1635 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. SOUTH LOUISVILLE
1377 BIO-MEDICAL APPLICATIONS OF SOUTH QUEENS, INC. SOUTH QUEENS
1633 BIO-MEDICAL APPLICATIONS OF OHIO, INC. SOUTH SUMMIT
1434 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. SOUTHERN INDIANA
FACILITIES IN DFT COHORT STUDY
LOCATION CORPORATE NAME FACILITY NAME
1122 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SOUTHWESTERN PENN.
1111 BIO-MEDICAL APPLICATIONS OF MA., INC. SPRINGFIELD
1488 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. STERLING
1195 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. SUFFOLK
1604 TAPPAHANNOCK DIALYSIS CENTER, INC. TAPPAHANNOCK
1386 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. THREE RIVERS
1602 WEST END DIALYSIS CENTER, INC. WEST END
1490 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. WEST LOUISVILLE
1307 BIO-MEDICAL APPLICATIONS OF WOONSOCKET, INC. WOONSOCKET