<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2000
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________________TO__________________
COMMISSION FILE NUMBER: 1-3720
FRESENIUS MEDICAL CARE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New York 13-3461988
---------------------------------------------- ------------------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer ID No.)
95 Hayden Avenue, Lexington, MA 02420
--------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: 781-402-9000
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicated by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and 2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of the date hereof,
90,000,000 shares of common stock, par value $1.00 per share, are outstanding,
all of which are held by Fresenius Medical Care AG.
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS PAGE
Unaudited Consolidated Statements of Earnings .................. 4
Unaudited Consolidated Statements of Comprehensive Income....... 5
Unaudited Consolidated Balance Sheets........................... 6
Unaudited Consolidated Statements of Cash Flows................. 7
Notes to Unaudited Consolidated Financial Statements............ 9
ITEM2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................... 16
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK..................................................... 19
PART II: OTHER INFORMATION
ITEM 1: Legal Proceedings............................................... 20
ITEM 6: Exhibits and Reports on Form 8-K................................ 23
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
NET REVENUES
Health care services ............................... $626,077 $553,457
Medical supplies ................................... 119,038 118,683
-------- --------
745,115 672,140
-------- --------
EXPENSES
Cost of health care services ....................... 420,403 368,808
Cost of medical supplies ........................... 86,455 81,624
General and administrative expenses ................ 71,587 63,987
Provision for doubtful accounts .................... 12,379 15,058
Depreciation and amortization ...................... 54,736 53,934
Research and development ........................... 1,197 1,024
Interest expense, net, and related financing costs
including $25,164 and $20,578, of interest with
affiliates ........................................ 47,118 50,126
Interest expense on settlement of investigation,
net ............................................... 6,185 --
-------- --------
700,060 634,561
-------- --------
INCOME BEFORE INCOME TAXES ............................. 45,055 37,579
PROVISION FOR INCOME TAXES .............................. 21,961 19,952
-------- --------
NET INCOME .............................................. $ 23,094 $ 17,627
======== ========
Basic and fully dilutive earnings per share
Net Income ......................................... $ 0.26 $ 0.19
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements
4
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
------- -------
<S> <C> <C>
NET INCOME ................................... $23,094 $17,627
Other comprehensive income ..................
Foreign currency translation adjustments.. 120 (392)
------- -------
Total other comprehensive income ......... 120 (392)
------- -------
COMPREHENSIVE INCOME ........................ $23,214 $17,235
======= =======
</TABLE>
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents ............................. $ 15,941 $ 12,563
Accounts receivable, less allowances of $66,058 and
$63,012............................................... 336,928 295,235
Inventories ........................................... 177,158 183,112
Deferred income taxes ................................. 203,032 219,454
Other current assets .................................. 123,790 130,771
IDPN accounts receivable .............................. 20,756 53,962
---------- ----------
Total Current Assets ............................. 877,605 895,097
---------- ----------
Properties and equipment, net .............................. 429,267 428,793
---------- ----------
Other Assets:
Excess of cost over the fair value of net
acquired and other intangible assets, net of
accumulated amortization of $459,317 and $424,704 .. 3,261,961 3,265,491
Other assets and deferred charges ..................... 49,920 49,998
Non-current IDPN accounts receivable .................. -- 5,189
---------- ----------
Total Other Assets ............................... 3,311,881 3,320,678
---------- ----------
Total Assets ............................................... $4,618,753 $4,644,568
========== ==========
LIABILITIES AND EQUITY
- ----------------------
Current Liabilities:
Note payable settlement ............................... $ 135,147 $ --
Current portion of long-term debt and capitalized lease
oblibations ........................................ 144,479 142,110
Current portion of borrowing from affiliates .......... 670,104 372,949
Accounts payable ...................................... 131,100 133,337
Accrued settlement .................................... -- 386,815
Accrued liabilities ................................... 254,119 291,358
Net accounts payable to affiliates .................... 6,942 12,361
Accrued income taxes .................................. 20,070 12,433
---------- ----------
Total Current Liabilities ........................ 1,361,961 1,351,363
Non-current note payable settlement ........................ 51,186 --
Long-term debt ............................................. 592,088 615,065
Non-current borrowings from affiliates ..................... 788,674 788,506
Capitalized lease obligations .............................. 1,133 1,190
Deferred income taxes ...................................... 130,403 134,310
Accrued settlement ......................................... -- 85,920
Other liabilities .......................................... 48,163 46,153
---------- ----------
Total Liabilities ................................ 2,973,608 3,022,507
---------- ----------
Equity:
Preferred stock, $100 par value ......................... 7,412 7,412
Preferred stock, $.10 par value ......................... 8,906 8,906
Common stock, $1 par value; 300,000,000 shares
authorized; outstanding 90,000,000 ...................... 90,000 90,000
Paid in capital ......................................... 1,943,034 1,943,034
Retained deficit ........................................ (404,739) (427,703)
Accumulated comprehensive income ........................ 532 412
---------- ----------
Total Equity ....................................... 1,645,145 1,622,061
---------- ----------
Total Liabilities and Equity ............................... $4,618,753 $4,644,568
========== ==========
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements.
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
--------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income ............................................. $ 23,094 $ 17,627
Adjustments to reconcile net income to net cash from
Operating activities:
Depreciation and amortization ..................... 54,736 53,934
Provision for doubtful accounts ................... 12,379 15,058
Deferred income taxes ............................. 12,515 4,914
(Gain) loss on disposal of properties and equipment (137) 187
Changes in operating assets and liabilities, net of effects
of acquisitions and foreign exchange:
Increase in accounts receivable .................. (61,101) (20,869)
Decrease (increase) in inventories ................ 6,432 (6,388)
Decrease (increase) in other current assets ....... 8,958 (10,001)
Decrease in IDPN accounts receivable .............. 38,395 --
(Increase) decrease in other assets and deferred
charges ......................................... 76 (4,991)
(Decrease) increase in accounts payable ........... (2,238) 6,331
Increase in accrued income taxes .................. 7,637 14,341
Decrease in accrued liabilities ................... (37,238) (9,025)
Increase in other long-term liabilities ........... 2,010 8,481
Net changes due to/from affiliates ................ (5,419) (25)
Other, net ........................................ 1,078 2,758
--------- --------
Net cash provided by operating activities .............. 61,177 72,332
--------- --------
Cash Flows from Investing Activities:
Capital expenditures .............................. (20,261) (17,457)
Payments for acquisitions, net of cash acquired ... (35,545) (4,926)
--------- --------
Net cash used in investing activities .................. (55,806) (22,383)
--------- --------
Cash Flows from Financing Activities:
Payments on settlement ............................ (286,402) --
Net increase (decrease) in borrowings from
affiliates ...................................... 297,323 (11,912)
Cash dividends paid ............................... (130) (130)
Proceeds from issuance of debt .................... -- 37
Proceeds from receivable financing facility ....... 7,800 3,500
Payments on debt and capitalized leases ........... (20,665) (33,181)
Other, net ........................................ -- (94)
--------- --------
Net cash used in financing activities ................... (2,074) (41,780)
--------- --------
Effects of changes in foreign exchange rates ................ 81 (289)
--------- --------
Change in cash and cash equivalents ......................... 3,378 7,880
Cash and cash equivalents at beginning of period ............ 12,563 6,579
--------- --------
Cash and cash equivalents at end of period .................. $ 15,941 $ 14,459
========= ========
</TABLE>
See accompanying Notes to Unaudited, Consolidated Financial Statements
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
------- -------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net .......................... $53,947 $51,773
Income taxes paid, net ................. 2,241 924
Details for Acquisitions:
Assets acquired ............................. 35,545 4,926
Liabilities assumed ......................... -- --
------- -------
Net cash paid for acquisitions .............. $35,545 $ 4,926
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. THE COMPANY
Fresenius Medical Care Holdings, Inc., a New York corporation ("the
Company") is a subsidiary of Fresenius Medical Care AG, a German corporation
("FMC" or "Fresenius Medical Care"). The Company conducts its operations through
five principal subsidiaries, National Medical Care, Inc., a Delaware corporation
("NMC"); Fresenius USA Marketing Inc., and Fresenius USA Manufacturing Inc.,
Delaware corporations and Fresenius USA Inc., a Massachusetts corporation
(collectively, "Fresenius USA" or "FUSA") and SRC Holding Company, Inc., a
Delaware corporation ("SRC").
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, NMC, FUSA, and SRC and those
financial statements where the Company controls professional corporations in
accordance with Emerging Issues Task Force Issue 97-2.
The Company is primarily engaged in (i) providing kidney dialysis
services, clinical laboratory testing and renal diagnostic services, and (ii)
manufacturing and distributing products and equipment for dialysis treatment.
BASIS OF PRESENTATION
BASIS OF CONSOLIDATION
The consolidated financial statements in this report at March 31, 2000
and 1999 and for the three month interim periods then ended are unaudited and
should be read in conjunction with the consolidated financial statements in the
Company's 1999 report on Form 10-K. Such interim financial statements reflect
all adjustments that, in the opinion of management, are necessary for a fair
presentation of the results of the interim periods presented. Certain amounts in
the prior periods' consolidated financial statements have been reclassified to
conform to the current periods' basis of presentation.
The results of operations for the three month period ended March 31,
2000 are not necessarily indicative of the results of operations for the fiscal
year ending December 31, 2000.
All intercompany transactions and balances have been eliminated in
consolidation.
NOTE 2. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
Inventories:
Raw materials ......................................... $ 38,748 $ 41,045
Manufactured goods in process ......................... 11,429 8,748
Manufactured and purchased inventory available for sale 90,422 90,748
-------- --------
140,599 140,541
Health care supplies .................................. 36,559 42,571
-------- --------
Total .............................................. $177,158 $183,112
======== ========
</TABLE>
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NOTE 3. DEBT
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
Notes payable and Long-term debt to outside parties consists of:
NMC Credit Facility ............................................ $720,300 $738,150
Note payable settlement ........................................ 186,333 --
Third-party debt, primarily bank borrowings at
various interest with various maturities
15,529 17,454
-------- --------
922,162 755,604
Less amounts classified as current ............................. 278,888 140,539
-------- --------
$643,274 $615,065
======== ========
</TABLE>
Non current borrowings from affiliates consists of:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
Fresenius Medical Care AG non-current borrowings
primarily at interest rates approximating 7.06 - 7.75% $ 54,160 $ 42,949
Fresenius AG non-current borrowing at interest rates
approximating 6.86 - 7.06% ........................... 270,700 330,000
Fresenius Medical Care Trust Finance S.a.r.l. at interest
rates of 8.43% and 9.25% .............................. 786,524 786,524
Franconia Acquisition, LLC at interest rates approximating
6.19% to 6.21% ........................................ 344,185 --
Other ..................................................... 3,209 1,982
---------- ----------
1,458,778 1,161,455
Less amounts classified as current ........................ 670,104 372,949
---------- ----------
Total ..................................................... $ 788,674 788,506
========== ==========
</TABLE>
Franconia Acquisition, LLC is a wholly owned subsidiary of Fresenius
Medical Care AG. In March 2000, the Company entered into demand notes payable to
Franconia Acquisition, LLC totaling $344.2 million at interest rates
approximating 6.19% to 6.21%.
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NOTE 4. SPECIAL CHARGE FOR SETTLEMENT OF INVESTIGATION AND RELATED COSTS
Since 1995, NMC and certain subsidiaries had been the subject of an
investigation (the "OIG Investigation") by the Office of Inspector General
("OIG") of the United States Department of Health and Human Services, the United
States Attorney for the District of Massachusetts (the "U.S. Attorney's Office")
and other authorities concerning possible violations of federal laws, including
the anti-kickback statute and the False Claims Act.
On January 18, 2000, the Company, NMC and certain affiliated companies
executed definitive agreements (the "Settlement Agreements") with the United
States Government (the "Government") to settle (i) the matters covered in the
OIG Investigation and (ii) NMC's claims with respect to approximately $153.5
million of outstanding Medicare receivables for nutrition therapy rendered on or
before December 31, 1999 (collectively, the "Settlement"). The Settlement was
approved by the United States District Court for the District of Massachusetts
on February 2, 2000.
In anticipation of the Settlement, the Company recorded a special
pre-tax charge against its consolidated earnings in 1999 totaling $601 million
($419 million after tax). This special pre-tax charge included (i) a charge of
$486.3 million for settlement payment obligations to the Government, (ii) a
$94.3 million write-off of the remaining receivables described above, and (iii)
a reserve for other related costs of $20.4 million. The settlement payment
obligations to the Government and the amounts due to the Company for the
outstanding Medicare receivables have been classified in the balance sheet at
their expected settlement dates.
Under the definitive agreements with the Government, the Company entered
into a note payable for the settlement payment obligations to the Government.
Interest on installment payments to the Government will accrue at 6.3% on $51.2
million of the obligation and at 7.5% annually on the balance, until paid in
full.
In February 2000, the Company made initial payments to the Government
totaling $286.4 million. The remaining obligations will be paid in six quarterly
installments beginning April 2000 and ending July 2001. The first four quarterly
installments will be made in the amount of $35.4 million including interest at
7.5%. The remaining two installments of $27.8 million including interest at 6.3%
will be made in April and July 2001, respectively.
In addition, the Company will receive approximately $59.2 million from
the Government related to the Company's claims for outstanding Medicare
receivables. In March 2000, the Company received an initial payment from the
Government of $38.4 million. The remaining balance will be received by the
Company in four quarterly payments beginning in May 2000 and ending February
2001. The quarterly receipts from the Government will be for principal of $5.2
million plus interest at 7.5%.
NOTE 5. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
DISTRICT OF MASSACHUSETTS
With one exception, each of the qui tam or "whistleblower" actions which
served as the basis for the recently settled federal government investigation
were dismissed as a result of the Settlement. The exception is a portion of a
qui tam proceeding filed in the United States District Court for the Middle
District of Tennessee on December 15, 1994. That action was transferred to the
United States District Court for the District of Massachusetts in 1995, and
disclosed to the Company in September 1999. The portion of this qui tam action
that was not dismissed as a result of the settlement alleges, among other
things, that the Company violated the Medicare and Medicaid Anti-kickback
Statute by providing discounted hemodialysis products to induce the purchase of
laboratory services. In the Settlement Agreements, the U. S. government has
declined to continue to pursue further the investigation or prosecution of these
allegations. The government and the current and former employees who filed this
qui tam action, called "relators," offered to dismiss this portion of this qui
tam action in connection with the settlement. However, this offer required that
the Company grant a full release of all of the Company's claims against the
relators, and the Company was unwilling to do so. While there can be no
assurance, the Company believes that the resolution of these remaining
allegations will not have a material adverse impact on the Company's business,
financial condition or results of operations.
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COMMERCIAL INSURER LITIGATION
In 1997, the Company, NMC, and certain named NMC subsidiaries, were
served with civil complaint filed by Aetna Life Insurance Company in the U.S.
District Court for the Southern District of New York. Based in large part on
information contained in prior reports filed by the Company with the Securities
and Exchange Commission, the lawsuit alleges inappropriate billing practices for
nutritional therapy, diagnostic and clinical laboratory tests and
misrepresentations. In April 1999, Aetna amended its complaint to include its
affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make
certain other limited changes in its pleading. The amended complaint seeks
unspecified damages and costs. In February 2000, the Company was served with a
similar complaint filed by Connecticut General Life Insurance Company, Equitable
Life Assurance Society for the United States, Cigna Employee Benefits Services,
Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General
Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932)
seeking unspecified damages and costs. However, the Company, NMC and its
subsidiaries believe that there are substantial defenses to the claims asserted,
and intend to vigorously defend both lawsuits. Other private payors have
contacted the Company and may assert that NMC received excess payment and,
similarly, may join either lawsuit or file their own lawsuit seeking
reimbursement and other damages.
In May 1999, the Company filed counterclaims against Aetna Life
Insurance Company and Aetna U.S. Healthcare, Inc. based on inappropriate claim
denials and delays in claim payments. The Company is investigating similar
counterclaims against other private payors that have filed a complaint or
contacted them. An adverse result of these litigations could have a material
adverse effect on the Company's business, financial position and result of
operations.
Although the ultimate outcome on the Company of these proceedings cannot
be predicted at this time, an adverse result could have a material adverse
effect on the Company's business, financial condition and result of operations.
OBRA 93
The Omnibus Budget Reconciliation Act of 1993 affected the payment of
benefits under Medicare and employer health plans for dual-eligible ESRD
patients. In July 1994, the Health Care Financing Administration issued an
instruction to Medicare claims processors to the effect that Medicare benefits
for the patients affected by that act would be subject to a new 18-month
"coordination of benefits" period. This instruction had a positive impact on
NMC's dialysis revenues because, during the 18-month coordination of benefits
period, patients' employer health plans were responsible for payment, which was
generally at rates higher than those provided under Medicare.
In April 1995, the Health Care Financing Administration issued a new
instruction, reversing its original instruction in a manner that would
substantially diminish the positive effect of the original instruction on NMC's
dialysis business. The Health Care Financing Administration further proposed
that its new instruction be effective retroactive to August 1993, the effective
date of the Omnibus Budget Reconciliation Act of 1993.
NMC ceased to recognize the incremental revenue realized under the
original instruction as of July 1, 1995, but it continued to bill employer
health plans as primary payors for patients affected by the Omnibus Budget
Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC
commenced billing Medicare as primary payor for dual eligible ESRD patients
affected by the act, and then began to re-bill in compliance with the revised
policy for services rendered between April 24 and December 31, 1995.
On May 5, 1995, NMC filed a complaint in the U.S. District Court for the
District of Columbia (National Medical Care, Inc. and Bio-Medical Applications
of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A.
No.95-0860 (WBB) seeking to preclude the Health Care Financing Administration
from retroactively enforcing its April 24, 1995 implementation of the Omnibus
Budget Reconciliation Act of 1993 provision relating to the coordination of
benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a
preliminary injunction to preclude the Health Care Financing Administration from
enforcing its new policy retroactively, that is, to billing for services
provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court
granted NMC's request for a preliminary injunction and in December of 1996, NMC
moved for partial summary judgment seeking a declaration from the Court that the
Health Care Financing Administration's retroactive application of the April 1995
rule was legally invalid. The Health Care Financing Administration cross-moved
for summary judgement on the grounds that April 1995 rule was validly applied
prospectively. In January 1998, the court granted NMC's motion for partial
summary judgment and entered a declaratory judgement in favor of NMC, holding
the Health Care Financing Administration's retroactive application of the April
1995
12
<PAGE> 13
rule legally invalid. Based on its finding, the Court also permanently enjoined
the Health Care Financing Administration from enforcing and applying the April
1995 rule retroactively against NMC. The Court took no action on the Health Care
Financing Administration's motion for summary judgement pending completion of
the outstanding discovery. On October 5, 1998, NMC filed its own motion for
summary judgement requesting that the Court declare the Health Care Financing
Administration's prospective application of the April 1995 rule invalid and
permanently enjoin Health Care Financing Administration from prospectively
enforcing and applying the April 1995 rule. The Court has not yet ruled on the
parties' motions. The Health Care Financing Administration elected not to appeal
the Court's June 1995 and January 1998 orders. The Health Care Financing
Administration may, however, appeal all rulings at the conclusion of the
litigation. If the Health Care Financing Administration should successfully
appeal so that the revised interpretation would be applied retroactively, NMC
may be required to refund the payment received from employer health plans for
services provided after August 10, 1993 under the Health Care Financing
Administration's original implementation, and to re-bill Medicare for the same
services, which would result in a loss to NMC of approximately $120 million
attributable to all periods prior to December 31, 1995. Also, in this event, the
Company's business, financial condition and results of operations would be
materially adversely affected.
STATE OF FLORIDA
In October 1999, NMC received an Antitrust Civil Investigative Demand
("CID") from the Attorney General of the State of Florida ("Florida AG"). The
CID was issued by the Florida AG in the course of an investigation to determine
whether there is, has been, or may be a violation of federal and Florida laws
resulting from the possible monopolization of, or the entering into agreement in
restraint of, trade relating to the provision of dialysis products and services
in Florida.
The Company is cooperating with the Florida AG's investigation by
providing documents and other information to them. The impact of this
investigation on the business and financial condition, if any, cannot be
determined at this time.
OTHER LITIGATION AND POTENTIAL EXPOSURES
The Company, like other health care providers, conducts its operations
under intense government regulation and scrutiny. The Company must comply with
regulations which relate to or govern the safety and efficacy of medical
products and supplies, the operation of manufacturing facilities, laboratories
and dialysis clinics, and environmental and occupational health and safety. The
Company must also comply with the U.S. anti-kickback statute, the False Claims
Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable
laws or regulations may be amended, or enforcement agencies or courts may make
interpretations that differ from the Company's or the manner in which the
Company conduct its business. In the U.S., enforcement has become a high
priority for the federal government and some states, due in part to budgetary
constraints on the government reimbursement programs and the high level of
visibility accorded to government efforts to deal with alleged fraud and abuse.
In addition, the provisions of the False Claims Act authorizing payment of a
portion of any recovery to the party bringing the suit encourage private
plaintiffs commence "whistle blower" actions. By virtue of this regulatory
environment, as well as our corporate integrity agreement with the government,
the Company expects that its business activities and practices will continue to
be subject to expensive review by regulatory authorities, and the Company cannot
exclude the possibility of additional inquiries, claims and litigation relating
to its compliance with applicable laws and regulations. The Company may not
always be aware that an inquiry or action has begun, particularly in the case of
"whistle blower" actions, which are initially filed under court seal.
The Company operates a large number and wide variety of facilities
throughout the U.S. In such a decentralized system, it is often difficult to
maintain the desired level of oversight and control over the thousands of
individuals employed by many affiliate companies. The Company relies upon its
management structure, regulatory and legal resources, and the effective
operation of its compliance program to direct, manage and monitor the activities
of these employees. However, on occasion, the Company has identified instances
where employees, deliberately or inadvertently, have submitted inadequate or
false billings. The illegal actions of such persons may subject the Company and
its subsidiaries to liability under the False Claims Act, among other laws, and
the Company cannot predict whether law enforcement authorities may use such
information to initiate further investigations of the business practices
disclosed or any of its other business activities.
Physicians, hospitals and other participants in the health care
industry are also subject to a large number of lawsuits alleging professional
negligence, malpractice, product liability, worker's compensation or related
claims, many of which involve large claims and significant defense costs. The
Company has been subject to these suits due to the nature of its business and
the Company expects that those types of lawsuits may continue. Although the
Company maintains insurance at a level which it believes to be prudent, the
13
<PAGE> 14
Company cannot assure that the coverage limits will be adequate or that
insurance will cover all asserted claims. A successful claim against the Company
or any of its subsidiaries in excess of insurance coverage could have a material
adverse effect upon the Company and the results of its operations. Any claims,
regardless of their merit or eventual outcome, also may have a material adverse
effect on the Company's reputation and business.
CONTINGENT NON-NMC LIABILITIES OF W.R. GRACE & CO. (NOW KNOWN AS
FRESENIUS MEDICAL CARE HOLDINGS, INC.)
The Company was formed as a result of a series of transactions pursuant
to the Agreement and Plan of Reorganization (the "Merger") dated as of February
4, 1996 by and between W.R. Grace & Co.-Conn. ("Grace Chemicals"). In connection
with the Merger, Grace Chemicals agreed to indemnify the Company and NMC against
all liabilities of the Company and its successors, whether relating to events
occurring before or after the Merger, other than liabilities arising from or
relating to NMC operations. The Company remains contingently liable for certain
liabilities with respect to pre-Merger matters that are not related to NMC
operations. The Company believes that in view of the nature of the non-NMC
liabilities and Grace Chemicals' current financial position, the risk of
significant loss from non-NMC liabilities is remote.
Were events to violate the tax-free nature of the Merger, the resulting
tax liability would be the obligation of the Company. Subject to representations
by Grace Chemicals, the Company and Fresenius AG, Grace Chemicals has agreed to
indemnify the Company for such a tax liability. If the Company was not able to
collect on the indemnity, the tax liability would have a material adverse effect
on the Company's business, the financial condition of the Company and the
results of operations.
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<PAGE> 15
NOTE 6. INDUSTRY SEGMENTS INFORMATION
The Company's reportable segments are Dialysis Services and Dialysis
Products. For purposes of segment reporting, the Dialysis Services Division and
Spectra Renal Management are combined and reported as Dialysis Services. These
divisions are aggregated because of their similar economic classifications.
These include the fact that they are both health care service providers whose
services are provided to a common patient population, and both receive a
significant portion of their net revenue from Medicare and other government and
non-government third party payors. The Dialysis Products segment reflects the
activity of the Dialysis Products Division only.
The table below provides information for the three months ended March 31, 2000
and 1999 pertaining to the Company's two industry segments.
<TABLE>
<CAPTION>
LESS
DIALYSIS DIALYSIS INTERSEGMENT
SERVICES PRODUCTS SALES TOTAL
---------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
NET REVENUES
Three Months Ended 3/31/00 $ 630,002 $174,942 $59,829 $ 745,115
Three Months Ended 3/31/99 557,025 169,142 54,027 672,140
OPERATING EARNINGS
Three Months Ended 3/31/00 99,101 26,252 -- 125,353
Three Months Ended 3/31/99 87,802 29,056 -- 116,858
ASSETS 3/31/2000 1,952,864 652,074 -- 2,604,938
12/31/1999 1,918,612 645,263 -- 2,563,875
</TABLE>
Total assets of $4,618,753 is comprised of total assets for reportable
segments, $2,604,938; intangible assets not allocated to segments, $1,990,997;
financing agreement ($342,800); IDPN accounts receivable, $20,756; and other
corporate assets, $344,862.
The table below provides the reconciliations of reportable segment operating
earnings to the Company's consolidated totals.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEGMENT RECONCILIATION MARCH 31,
---------------------- ----------------------
2000 1999
-------- --------
<S> <C> <C>
INCOME BEFORE INCOME TAXES:
Total operating earnings for reportable segments $125,353 $116,858
Corporate G&A .................................. (25,798) (28,129)
Research and development expense ............... (1,197) (1,024)
Net interest expense ........................... (53,303) (50,126
-------- --------
Income Before Income Taxes .......................... $ 45,055 $ 37,579
======== ========
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company. The discussion should be read in conjunction with the
financial statements included elsewhere in this document.
This section contains certain forward-looking statements that are
subject to various risks and uncertainties. Such statements include, without
limitation, discussions concerning the outlook of the Company, government
reimbursement, future plans and management's expectations regarding future
performance. Actual results could differ materially from those contained in
these forward-looking statements due to certain factors including, without
limitation, changes in business, economic and competitive conditions, regulatory
reforms, foreign exchange rate fluctuations, uncertainties in litigation or
investigative proceedings, the realization of anticipated tax deductions, and
the availability of financing. These and other risks and uncertainties, which
are more fully described elsewhere in this Item 2 and in the Company's reports
filed from time to time with the Commission, could cause the Company's results
to differ materially from the results that have been or may be projected by or
on behalf of the Company.
RESULTS OF OPERATIONS
The following table summarizes certain operating results of the Company
by principal business unit for the periods indicated. Intercompany eliminations
primarily reflect sales of medical supplies by Dialysis Products to Dialysis
Services.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
(DOLLARS IN MILLIONS)
2000 1999
---- ----
<S> <C> <C>
NET REVENUES
Dialysis Services ................. $630 $557
Dialysis Products ................. 175 169
Intercompany Eliminations ......... (60) (54)
---- ----
Total Net Revenues .................... $745 $672
==== ====
Operating Earnings:
Dialysis Services ................. $ 99 $ 88
Dialysis Products ................. 26 29
---- ----
Total Operating Earnings .............. 125 117
---- ----
Other Expenses:
General Corporate ................. $ 26 $ 28
Research & Development ............ 1 1
Interest Expense, Net ............. 47 50
Interest Expense on Settlement, Net 6 --
---- ----
Total Other Expenses .................. 80 79
---- ----
Earnings Before Income Taxes .......... 45 38
Provision for Income Taxes ............ 22 20
---- ----
Net Income ............................ $ 23 $ 18
==== ====
</TABLE>
16
<PAGE> 17
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Net revenues for the first three months of 2000 increased by 11% ($73
million) over the comparable period in 1999. Net earnings for the first three
months of 2000 increased by 31% ($5 million) over the comparable period in 1999
as a result of increased operating earnings and decreased general corporate
expenses, partially offset by higher interest expenses.
DIALYSIS SERVICES
Dialysis Services net revenues for the first three months of 2000
increased by 13% ($73 million) over the comparable period in 1999, primarily as
a result of an 8% increase in the number of treatments provided, the impact of
increased Medicare reimbursement rates, improved anemia management (higher EPO
utilization), consolidation of previously managed locations, and increased
laboratory testing revenues. The treatment increase was a result of base
business growth and the impact of 1999 and 2000 acquisitions. The laboratory
testing revenues increased as a result of higher patient volume.
Dialysis Services operating earnings for the first three months of 2000
increased by 13% ($11 million) over the comparable period of 1999 primarily due
to the increase in treatment volume, improved anemia management (higher EPO
utilization), increased earnings from laboratory testing, and a decrease in the
provision for doubtful accounts. The reduction in the provision for doubtful
accounts as compared to 1999 is due to an increase in estimated bad debt
recovery from cost reports.
DIALYSIS PRODUCTS
Dialysis Products net revenues for the first three months of 2000
increased by 4% ($6 million) over the comparable period of 1999. This is due to
increased sales of machines ($5 million), concentrates ($2 million), bloodlines
($1 million), and other products ($2 million), partially offset by decreased
sales of peritoneal products ($3 million) and dialyzers ($1 million). Revenue
growth over the comparable period was primarily volume driven.
Dialysis Products operating earnings for the first three months of 2000
decreased by 10% ($3 million) over the comparable period of 1999. This is a
result of higher freight and distribution expenses as well as higher sales and
marketing costs.
OTHER EXPENSES
The Company's other expenses for the first three months of 2000
increased by 1% ($1 million) over the comparable period of 1999. General
corporate expenses decreased by $2 million and operating interest expense
decreased by $3 million primarily due to the change in the mix of debt
instruments at March 31, 2000 versus March 31, 1999. The decreases in general
corporate and operating interest expenses in 2000 were offset by the $6 million
of interest expense related to the settlement of the OIG investigation in
February 2000.
INCOME TAX RATE
The effective tax rate from operations for the first three months of
2000 (48.7%) is lower than the rate for the comparable period of 1999 (53.1%),
due to higher earnings in relation to the amount of non-deductible merger
goodwill.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements, including acquisitions, have
historically been funded by cash generated from operations.
Net cash flows provided by operating activities totaled $61 million in
2000 compared to $72 million in 1999. This decrease is due primarily to a $5
million increase in earnings, $5 million add back of non-cash items, and the
collection of $38 million for the IDPN accounts receivable. These increases in
cash from net income adjusted for non-cash items and the collection of IDPN
receivables were offset by a $59 million change in other working capital
primarily related to an increase in accounts receivable and a decrease in
accrued liabilities. The increase in accounts receivable balances is primarily
due to the increase in days sales outstanding resulting from slower payment
patterns from third parties,
17
<PAGE> 18
specifically from managed care plans. The decrease in accrued liabilities is
primarily due to timing of payments for accrued salaries and benefits and
unreconciled payments. Cash on hand was $16 million at March 31, 2000 compared
to $14 million at March 31, 1999.
Under the final settlement with the government, the Company is required
to make net settlement payments totaling approximately $427 million, of which
$14 million had previously been paid prior to 2000. This net amount includes
approximately $59.2 million for Medicare receivables from the Government. During
the first quarter of 2000, the Company made initial payments to the Government
of $286 million and received $38 million from the Government for the Company's
outstanding Medicare receivables for the intradialytic parenteral nutrition
therapy relating to the Settlement.
Under the definitive agreements with the Government, the Company
entered into a note payable for the settlement payment obligations to the
Government. Interest on installment payments to the Government will accrue at
6.3% on $51.2 million of the obligation and at 7.5% annually on the balance,
until paid in full.
Under the terms of the note payable, the remaining obligations will be
paid in six quarterly installments beginning April 2000 and ending July 2001.
The first four quarterly installments will be made in the amount of $35.4
million including interest at 7.5%. The remaining two installments of $27.8
million including interest at 6.3% will be made in April and July 2001,
respectively. The Government will remit the balance of the Company's outstanding
Medicare receivables in four quarterly payments of $5.2 million plus interest at
7.5%.
Net cash flows used in investing activities of operations totaled $56
million in 2000 compared to $22 million in 1999. The Company funded its
acquisitions and capital expenditures primarily through cash flows from
operations and intercompany borrowings. Acquisitions totaled $35 million and $5
million in 2000 and 1999, respectively, net of cash acquired. Capital
expenditures of $20 million and $17 million were made for internal expansion,
improvements, new furnishings and equipment in 2000 and 1999, respectively. The
Company intends to continue to enhance its presence in the U.S. by focusing its
expansion on the acquisition of clinics, expansion of existing clinics, and
opening of new clinics.
Net cash flows used in financing activities of operations totaled $2
million in 2000 compared to $42 million in 1999. During the first three months
of 2000, the Company made payments to the government totaling $286 million for
the Settlement. Additionally, the increase in borrowings of $297 million is due
primarily to an intercompany note payable entered into with Franconia
Acquisition, LLC ($344 million), a wholly-owned subsidiary of FMC, offset by
payments on intercompany borrowings. The Company expects to use a portion of
these borrowings to finance future acquisitions.
CONTINGENCIES
The Company is a plaintiff in litigation against the federal government
with respect to the implementation of OBRA 93 is seeking to change a proposed
revision to IDPN coverage policies, and is a defendant in significant commercial
insurance litigation. An adverse outcome in any of these matters, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Because of the significant complexities and uncertainties
associated with these proceedings, neither an estimate of the possible loss or
range of loss the Company may incur in respect of such matters nor a reserve
based on any such estimate can be reasonably made. See - Note 5, "Commitments
and Contingencies".
The Company believes that its existing credit facilities, cash
generated from operations and other current sources of financing are sufficient
to meet its foreseeable needs. If cash flows from operations or availability
under existing banking arrangements fall below expectations, the Company may be
required to consider other alternatives to maintain sufficient liquidity. There
can be no assurance that the Company will be able to do so on satisfactory
terms, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
IMPACT OF INFLATION
A substantial portion of the Company's net revenue is subject to
reimbursement rates which are regulated by the federal government and do not
automatically adjust for inflation. Non-governmental payors also are exerting
downward pressure on reimbursement levels. Increased operating costs that are
subject to inflation, such as labor and supply costs, without a compensating
increase in reimbursement rates, may adversely affect the Company's business and
results of operations.
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<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks due to changes in interest rates
and foreign currency rates. The Company uses derivative financial instruments,
including interest rate swaps and foreign exchange contracts, as part of its
market risk management strategy. These instruments are used as a means of
hedging exposure to interest rate and foreign currency fluctuations in
connection with debt obligations and purchase commitments. The Company does not
hold or issue derivative instruments for trading or speculative purposes.
Hedge accounting is applied if the derivative reduces the risk of the
underlying hedged item and is designated at inception as a hedge. Additionally,
changes in the value of the derivative must result in payoffs that are highly
correlated to the changes in value of the hedged item. Derivatives are measured
for effectiveness both at inception and on an ongoing basis.
The Company enters into foreign exchange contracts that are designated
as, and effective as, hedges for firmly committed purchases. Also, since the
Company carries a substantial amount of floating rate debt, the Company uses
interest rate swaps to synthetically change certain variable-rate debt
obligations to fixed-rate obligations, as well as options to mitigate the impact
of interest rate fluctuations.
Gains and losses on foreign exchange contracts accounted for as hedges
are deferred in other current assets or liabilities. The deferred gains and
losses are recognized as adjustments to the underlying hedged transaction when
the future sales or purchases are recognized. Interest rate swap payments and
receipts are recorded as part of interest expense. The fair value of the swap
contracts is not recognized in the financial statements. Cash flows from
derivatives are recognized in the consolidated statement of cash flows in the
same category as the item being hedged.
If a derivative instrument ceases to meet the criteria for deferral,
any subsequent gains or losses are recognized in operations. If a firm
commitment does not occur, the foreign exchange contract is terminated and any
gain or loss is recognized in operations. If a hedging instrument is sold or
terminated prior to maturity, gains or losses continue to be deferred until the
hedged item is recognized. Should a swap be terminated while the underlying
obligation remains outstanding, the gain or loss is capitalized as part of the
underlying obligation and amortized into interest expense over the remaining
term of the obligation.
19
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
DISTRICT OF MASSACHUSETTS
With one exception, each of the qui tam or whistleblower actions which
served as the basis for the recently settled federal government investigation
were dismissed as a result of the Settlement. The exception is a portion of a
qui tam proceeding filed in the United States District Court for the Middle
District of Tennessee on December 15, 1994. That action was transferred to the
United States District Court for the District of Massachusetts in 1995, and
disclosed to the Company in September 1999. The portion of this qui tam action
that was not dismissed as a result of the settlement alleges, among other
things, that the Company violated the Medicare and Medicaid Anti-kickback
Statute by providing discounted hemodialysis products to induce the purchase of
laboratory services. In the Settlement Agreements, the U. S. government has
declined to continue to pursue further the investigation or prosecution of these
allegations. The government and the current and former employees who filed this
qui tam action, called "relators," offered to dismiss this portion of this qui
tam action in connection with the settlement. However, this offer required that
the Company grant a full release of all of the Company's claims against the
relators, and the Company is unwilling to do so. While there can be no
assurance, the Company believe that the resolution of these remaining
allegations will not have a material adverse impact on the Company's business,
financial condition or results of operations.
COMMERCIAL INSURER LITIGATION
In 1997, the Company, NMC, and certain named NMC subsidiaries, were
served with a civil complaint filed by Aetna Life Insurance Company in the U.S.
District Court for the Southern District of New York. Based in large part on
information contained in prior reports filed by the Company with the Securities
and Exchange Commission, the lawsuit alleges inappropriate billing practices for
nutritional therapy, diagnostic and clinical laboratory tests and
misrepresentations. In April 1999, Aetna amended its complaint to include its
affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make
certain other limited changes in its pleading. The amended complaint seeks
unspecified damages and costs. In February 2000, the Company was served with a
similar complaint filed by Connecticut General Life Insurance Company, Equitable
Life Assurance Society of the United States, Cigna Employee Benefits Services,
Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General
Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932)
seeking unspecified damages and costs. However, the Company, NMC and its
subsidiaries believe that there are substantial defenses to the claims asserted,
and intend to vigorously defend both lawsuits. Other private payors have
contacted the Company and may assert that NMC received excess payment and,
similarly, may join either lawsuit or file their own lawsuit seeking
reimbursement and other damages.
In May 1999, the Company filed counterclaims against Aetna Life
Insurance Company and Aetna U.S. Healthcare, Inc. based on inappropriate claim
denials and delays in claim payments. The Company is investigating similar
counterclaims against other private payors that have filed a complaint or
contacted them. An adverse result of these litigations could have a material
adverse effect on the Company's business, financial position and result of
operations.
Although the ultimate outcome on the Company of these proceedings
cannot be predicted at this time, an adverse result could have a material
adverse effect on the Company's business, financial condition and result of
operations.
OBRA 93
The Omnibus Budget Reconciliation Act of 1993 affected the payment of
benefits under Medicare and employer health plans for dual-eligible ESRD
patients. In July 1994, the Health Care Financing Administration issued an
instruction to Medicare claims processors to the effect that Medicare benefits
for the patients affected by that act would be subject to a new 18-month
"coordination of benefits" period. This instruction had a positive impact on
NMC's dialysis revenues because, during the 18-month coordination of benefits
period, patients' employer health plans were responsible for payment, which was
generally at rates higher than those provided under Medicare.
In April 1995, the Health Care Financing Administration issued a new
instruction, reversing its original instruction in a
20
<PAGE> 21
manner that would substantially diminish the positive effect of the original
instruction on NMC's dialysis business. The Health Care Financing Administration
further proposed that its new instruction be effective retroactive to August
1993, the effective date of the Omnibus Budget Reconciliation Act of 1993.
NMC ceased to recognize the incremental revenue realized under the
original instruction as of July 1, 1995, but it continued to bill employer
health plans as primary payors for patients affected by the Omnibus Budget
Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC
commenced billing Medicare as primary payor for dual eligible ESRD patients
affected by the act, and then began to re-bill in compliance with the revised
policy for services rendered between April 24 and December 31, 1995.
On May 5, 1995, NMC filed a complaint in the U.S. District Court for
the District of Columbia (National Medical Care, Inc. and Bio-Medical
Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala,
C.A. No.95-0860 (WBB) seeking to preclude the Health Care Financing
Administration from retroactively enforcing its April 24, 1995 implementation of
the Omnibus Budget Reconciliation Act of 1993 provision relating to the
coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC
moved for a preliminary injunction to preclude the Health Care Financing
Administration from enforcing its new policy retroactively, that is, to billing
for services provided between August 10, 1993 and April 23, 1995. On June 6,
1995, the court granted NMC's request for a preliminary injunction and in
December of 1996, NMC moved for partial summary judgment seeking a declaration
from the Court that the Health Care Financing Administration's retroactive
application of the April 1995 rule was legally invalid. The Health Care
Financing Administration cross-moved for summary judgment on the grounds that
April 1995 rule was validly applied prospectively. In January 1998, the court
granted NMC's motion for partial summary judgment and entered a declaratory
judgment in favor of NMC, holding the Health Care Financing Administration's
retroactive application of the April 1995 rule legally invalid. Based on its
finding, the Court also permanently enjoined the Health Care Financing
Administration from enforcing and applying the April 1995 rule retroactively
against NMC. The Court took no action on the Health Care Financing
Administration's motion for summary judgment pending completion of the
outstanding discovery. On October 5, 1998, NMC filed its own motion for summary
judgment requesting that the Court declare the Health Care Financing
Administration's prospective application of the April 1995 rule invalid and
permanently enjoin Health Care Financing Administration from prospectively
enforcing and applying the April 1995 rule. The Court has not yet ruled on the
parties' motions. The Health Care Financing Administration elected not to appeal
the Court's June 1995 and January 1998 orders. The Health Care Financing
Administration may, however, appeal all rulings at the conclusion of the
litigation. If the Health Care Financing Administration should successfully
appeal so that the revised interpretation would be applied retroactively, NMC
may be required to refund the payment received from employer health plans for
services provided after August 10, 1993 under the Health Care Financing
Administration's original implementation, and to re-bill Medicare for the same
services, which would result in a loss to NMC of approximately $120 million
attributable to all periods prior to December 31, 1995. Also, in this event, the
Company's business, financial condition and results of operations would be
materially adversely affected.
STATE OF FLORIDA
In October 1999, NMC received an Antitrust Civil Investigative Demand
("CID") from the Attorney General of the State of Florida ("Florida AG") . The
CID was issued by the Florida AG in the course of an investigation to determine
whether there is, has been, or may be a violation of federal and Florida laws
resulting from the possible monopolization of, or the entering into agreement in
restraint of, trade relating to the provision of dialysis products and services
in Florida.
The Company is cooperating with the Florida AG's investigation by
providing documents and other information to them. The impact of this
investigation on the business and financial condition, if any, cannot be
determined at this time.
OTHER LITIGATION AND POTENTIAL EXPOSURES
The Company, like other health care providers, conducts its operations
under intense government regulation and scrutiny. The Company must comply with
regulations which relate to or govern the safety and efficacy of medical
products and supplies, the operation of manufacturing facilities, laboratories
and dialysis clinics, and environmental and occupational health and safety. The
Company must also comply with the U.S. anti-kickback statute, the False Claims
Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable
laws or regulations may be amended, or enforcement agencies or courts may make
interpretations that differ from the Company's or the manner in which the
Company conduct its business. In the U.S., enforcement has become a high
priority for the federal government and some states, due in part to budgetary
constraints on the government reimbursement programs
21
<PAGE> 22
and the high level of visibility accorded to government efforts to deal with
alleged fraud and abuse. In addition, the provisions of the False Claims Act
authorizing payment of a portion of any recovery to the party bringing the suit
encourage private plaintiffs commence "whistle blower" actions. By virtue of
this regulatory environment, as well as our corporate integrity agreement with
the government, the Company expects that its business activities and practices
will continue to be subject to expensive review by regulatory authorities, and
the Company cannot exclude the possibility of additional inquiries, claims and
litigation relating to its compliance with applicable laws and regulations. The
Company may not always be aware that an inquiry or action has begun,
particularly in the case of "whistle blower" actions, which are initially filed
under court seal.
The Company operates a large number and wide variety of facilities
throughout the U.S. In such a decentralized system, it is often difficult to
maintain the desired level of oversight and control over the thousands of
individuals employed by many affiliate companies. The Company relies upon its
management structure, regulatory and legal resources, and the effective
operation of its compliance program to direct, manage and monitor the activities
of these employees. However, on occasion, the Company has identified instances
where employees, deliberately or inadvertently, have submitted inadequate or
false billings. The illegal actions of such persons may subject the Company and
its subsidiaries to liability under the False Claims Act, among other laws, and
the Company cannot predict whether law enforcement authorities may use such
information to initiate further investigations of the business practices
disclosed or any of its other business activities.
Physicians, hospitals and other participants in the health care
industry are also subject to a large number of lawsuits alleging professional
negligence, malpractice, product liability, worker's compensation or related
claims, many of which involve large claims and significant defense costs. The
Company has been subject to these suits due to the nature of its business and
the Company expects that those types of lawsuits may continue. Although the
Company maintains insurance at a level which it believes to be prudent, the
Company cannot assure that the coverage limits will be adequate or that
insurance will cover all asserted claims. A successful claim against the Company
or any of its subsidiaries in excess of insurance coverage could have a material
adverse effect upon the Company and the results of its operations. Any claims,
regardless of their merit or eventual outcome, also may have a material adverse
effect on the Company's reputation and business.
22
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 2.1 Agreement and Plan of Reorganization dated as of February 4, 1996
between W. R. Grace & Co. and Fresenius AG (incorporated herein
by reference to Appendix A to the Joint Proxy
Statement-Prospectus of Fresenius Medical Care AG, W. R. Grace &
Co. and Fresenius USA, Inc. dated August 2, 1996 and filed with
the Commission on August 5, 1996).
Exhibit 2.2 Distribution Agreement by and among W. R. Grace & Co., W. R.
Grace & Co.-Conn. and Fresenius AG dated as of February 4, 1996
(incorporated herein by reference to Exhibit A to Appendix A to
the Joint Proxy Statement-Prospectus of Fresenius Medical Care
AG, W. R. Grace & Co. and Fresenius USA, Inc. dated August 2,
1996 and filed with the Commission on August 5, 1996).
Exhibit 2.3 Contribution Agreement by and among Fresenius AG, Sterilpharma
GmbH and W. R. Grace & Co.-Conn. dated February 4, 1996
(incorporated herein by reference to Exhibit E to Appendix A to
the Joint Proxy-Statement Prospectus of Fresenius Medical Care
AG, W. R. Grace & Co. and Fresenius USA, Inc. dated August 2,
1996 and filed with the Commission on August 5, 1996).
Exhibit 3.1 Certificate of Incorporation of Fresenius Medical Care Holdings,
Inc. (f/k/a W. R. Grace & Co.) under Section 402 of the New York
Business Corporation Law dated March 23, 1988 (incorporated
herein by reference to the Form 8-K of the Company filed on May
9, 1988).
Exhibit 3.2 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
May 25, 1988 (changing the name to W. R. Grace & Co.,
incorporated herein by reference to the Form 8-K of the Company
filed on May 9, 1988).
Exhibit 3.3 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
September 27, 1996 (incorporated herein by reference to the Form
8-K of the Company filed with the Commission on October 15,
1996).
Exhibit 3.4 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
September 27, 1996 (changing the name to Fresenius National
Medical Care Holdings, Inc., incorporated herein by reference to
the Form 8-K of the Company filed with the Commission on October
15, 1996).
Exhibit 3.5 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. under Section 805 of the
New York Business Corporation Law dated June 12, 1997 (changing
name to Fresenius Medical Care Holdings, Inc., incorporated
herein by reference to the Form 10-Q of the Company filed with
the Commission on August 14, 1997).
Exhibit 3.6 Amended and Restated By-laws of Fresenius Medical Care Holdings,
Inc. (incorporated herein by reference to the Form 10-Q of the
Company filed with the Commission on August 14, 1997).
Exhibit 4.1 Credit Agreement dated as of September 27, 1996 among National
Medical Care, Inc. and Certain Subsidiaries and Affiliates, as
Borrowers, Certain Subsidiaries and Affiliates, as Guarantors,
the Lenders named therein, NationsBank, N.A., as paying agent and
The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank
AG and NationsBank, N.A., as Managing Agents (incorporated herein
by reference to the Form 6-K of Fresenius Medical Care AG filed
with the Commission on October 15, 1996).
23
<PAGE> 24
Exhibit 4.2 Amendment dated as of November 26, 1996 (amendment to the Credit
Agreement dated as of September 27, 1996, incorporated herein by
reference to the Form 8-K of Registrant filed with the Commission
on December 16, 1996).
Exhibit 4.3 Amendment No. 2 dated December 12, 1996 (second amendment to the
Credit Agreement dated as of September 27, 1996, incorporated
herein by reference to the Form 10-K of Registrant filed with the
Commission on March 31, 1997).
Exhibit 4.4 Amendment No. 3 dated June 13, 1997 to the Credit Agreement dated
as of September 27, 1996, among National Medical Care, Inc. and
Certain Subsidiaries and Affiliates, as Borrowers, Certain
Subsidiaries and Affiliates, as Guarantors, the Lenders named
therein, NationsBank, N.A., as paying agent and The Bank of Nova
Scotia, The Chase Manhattan Bank, Dresdner Bank AG and
NationsBank, N.A. as Managing Agents, as previously amended
(incorporated herein by reference to the Form 10-Q of the
Registrant filed with the Commission on November 14, 1997).
Exhibit 4.5 Amendment No. 4, dated August 26, 1997 to the Credit Agreement
dated as of September 27, 1996, among National Medical Care, Inc.
and Certain Subsidiaries and Affiliates, as Borrowers, Certain
Subsidiaries and Affiliates, as Guarantors, the Lenders named
therein, NationsBank, N.A., as paying agent and The Bank of Nova
Scotia, The Chase Manhattan Bank, Dresdner Bank AG and
NationsBank, N.A. as Managing Agents, as previously amended
(incorporated herein by reference to the Form 10-Q of Registrant
filed with Commission on November 14, 1997).
Exhibit 4.6 Amendment No. 5 dated December 12, 1997 to the Credit Agreement
dated as of September 27, 1996, among National Medical Care, Inc.
and Certain Subsidiaries and Affiliates, as Borrowers, Certain
Subsidiaries and Affiliates, as Guarantors, the Lenders named
therein, NationsBank, N.A., as paying agent and The Bank of Nova
Scotia, The Chase Manhattan Bank, Dresdner Bank AG and
NationsBank, N.A. as Managing Agents, as previously amended
(incorporated herein by reference to the Form 10-K of Registrant
filed with Commission on March 23, 1998).
Exhibit 4.7 Form of Consent to Modification of Amendment No. 5 dated December
12, 1997 to the Credit Agreement dated as of September 27, 1996
among National Medical Care, Inc. and Certain Subsidiaries and
Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as
Guarantors, the Lenders named therein, NationsBank, N.A., as
paying agent and The Bank of Nova Scotia, The Chase Manhattan
Bank, Dresdner Bank AG and NationsBank, N.A. as Managing Agents
(incorporated herein by reference to the Form 10-K of Registrant
filed with Commission on March 23, 1998).
Exhibit 4.8 Amendment No. 6 dated effective September 30, 1998 to the Credit
Agreement dated as of September 27, 1996, among National Medical
Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers,
Certain Subsidiaries and Affiliates, as Guarantors, the Lenders
named therein, NationsBank, as paying agent and The Bank of Nova
Scotia, The Chase Manhattan Bank, N.A., Dresdner Bank AG and
NationsBank, N.A. as Managing Agents, as previously amended
(incorporated herein by reference to the Form 10-Q of Registrant
filed with Commission on November 12, 1998).
Exhibit 4.9 Amendment No. 7 dated as of December 31, 1998 to the Credit
Agreement dated as of September 27, 1996 among National Medical
Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers,
Certain Subsidiaries and Affiliates Guarantors , the Lendors
named therein, Nations Bank, N.A. as paying agent and The Bank of
Nova Scotia, The Chase Manhattan Bank, Dresdner Bank A. G. and
Nations Bank, N.A. as Managing Agents (incorporated herein by
reference to the Form 10-K of registrant filed with Commission on
March 9, 1999).
Exhibit 4.10 Amendment No. 8 dated as of June 30, 1999 to the Credit Agreement
dated as of September 27, 1996 among National Medical Care, Inc.
and Certain Subsidiaries and Affiliates, as Borrowers, Certain
Subsidiaries and Affiliates Guarantors, the Lenders named
therein, NationsBank, N.A. as paying agent and The Bank of Nova
Scotia, The Chase Manhattan Bank, Dresdner Bank A.G. and
NationsBank, N.A. as Managing Agent (incorporated herein by
reference to the Form 10-K of registrant filed with Commission on
March 30, 2000).
Exhibit 4.11 Amendment No. 9 dated as of December 15, 1999 to the Credit
Agreement dated as of September 27, 1996 among National Medical
Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers,
Certain Subsidiaries and Affiliates Guarantors, the Lenders named
therein, NationsBank, N.A. as paying agent and The Bank of Nova
Scotia, The Chase
24
<PAGE> 25
Manhattan Bank, Dresdner Bank A.G. and Bank of America, N.A.
(formerly known as) NationsBank, N.A., as Managing Agent
(incorporated herein by reference to the Form 10-K of registrant
filed with Commission on March 30, 2000).
Exhibit 4.12 Fresenius Medical Care AG 1998 Stock Incentive Plan as amended
effective as of August 3, 1998 (incorporated herein by reference
to the Form 10-Q of Registrant filed with Commission on May 14,
1998).
Exhibit 4.13 Senior Subordinated Indenture dated November 27, 1996, among
Fresenius Medical Care AG, State Street Bank and Trust Company,
as successor to Fleet National Bank, as Trustee and the
Subsidiary Guarantors named therein (incorporated herein by
reference to the Form 10-K of Registrant filed with the
Commission on March 31, 1997).
Exhibit 4.14 Senior Subordinated Indenture dated as of February 19, 1998,
among Fresenius Medical Care AG, State Street Bank and Trust
Company as Trustee and Fresenius Medical Care Holdings, Inc., and
Fresenius Medical Care AG, as Guarantors with respect to the
issuance of 7 7/8% Senior Subordinated Notes due 2008
(incorporated herein by reference to the Form 10-K of Registrant
filed with Commission on March 23, 1998).
Exhibit 4.15 Senior Subordinated Indenture dated as of February 19, 1998 among
FMC Trust Finance S.a.r.l. Luxemborg, as Insurer, State Street
Bank and Trust Company as Trustee and Fresenius Medical Care
Holdings, Inc., and Fresenius Medical Care AG, as Guarantors with
respect to the issuance of 7 3/8% Senior Subordinated Notes due
2008 (incorporated herein by reference to the Form 10-K of
Registrant filed with Commission on March 23, 1998).
Exhibit 10.1 Employee Benefits and Compensation Agreement dated September 27,
1996 by and among W. R. Grace & Co., National Medical Care, Inc.,
and W. R. Grace & Co.-- Conn. (incorporated herein by reference
to the Registration Statement on Form F-1 of Fresenius Medical
Care AG, as amended (Registration No. 333-05922), dated November
22, 1996 and the exhibits thereto).
Exhibit 10.2 Purchase Agreement, effective January 1, 1995, between Baxter
Health Care Corporation and National Medical Care, Inc.,
including the addendum thereto (incorporated by reference to the
Form SE of Fresenius Medical Care dated July 29, 1996 and the
exhibits thereto).
Exhibit 10.3 Agreement, dated November 25, 1992 between Bergen Brunswig Drug
Company and National Medical Care, Inc., including the addendum
thereto (incorporated by reference to the Form SE of Fresenius
Medical Care dated July 29, 1996 and the exhibits thereto).
Exhibit 10.4 Product Purchase Agreement effective January 1, 2000 between
Amgen, Inc. and National Medical Care, Inc. (filed herewith).
Exhibit 10.5 Primary Guarantee dated July 31, 1996 (incorporated by reference
to the Registrant's Registration Statement on Form S-4
(Registration No. 333-09497) dated August 2, 1996 and the
exhibits thereto).
Exhibit 10.6 Secondary Guarantee dated July 31, 1996 (incorporated by
reference to the Registrant's Registration Statement on Form S-4
(Registration No. 333-09497) dated August 2, 1996 and the
exhibits thereto).
Exhibit 10.7 Receivables Purchase Agreement dated August 28, 1997 between
National Medical Care, Inc. and NMC Funding Corporation
(incorporated herein by reference to the Form 10-Q of the
Registrant filed with the Commission on November 14, 1997).
Exhibit 10.8 Amendment dated as of September 28, 1998 to the Receivables
Purchase Agreement dated as of August 28, 1997, by and between
NMC Funding Corporation, as Purchaser and National Medical Care,
Inc., as Seller (incorporated herein by reference to the Form
10-Q of Registrant filed with Commission on November 12, 1998).
Exhibit 10.9 Amended and Restated Transfer and Administration Agreement dated
as September 27, 1999 among Compass US Acquisition, LLC, NMC
Funding Corporation, National Medical Care, Inc., Enterprise
Funding Corporation, the Bank Investors listed therein,
Westdeutsche Landesbank Girozentrale, New York Branch, as an
administrative agent and Bank of America, N.A., as an
administrative agent (incorporated herein by reference to the
Form 10-K of registrant filed with the Commission on March
20, 2000).
25
<PAGE> 26
Exhibit 10.10 Employment agreement dated January 1, 1992 by and between Ben J.
Lipps and Fresenius USA, Inc. (incorporated herein by reference
to the Annual Report on Form 10-K of Fresenius USA, Inc., for the
year ended December 31, 1992).
Exhibit 10.11 Modification to FUSA Employment Agreement effective as of January
1, 1998 by and between Ben J. Lipps and Fresenius Medical Care AG
(incorporated herein by reference to the Form 10-Q of Registrant
filed with Commission on May 14, 1998).
Exhibit 10.12 Employment Agreement dated October 23, 1998 by and between Roger
G. Stoll and National Medical Care, Inc. (incorporated herein by
reference to the Form 10-K of Registrant filed with Commission on
March 9, 1999).
Exhibit 10.13 Employment Agreement dated November 11, 1998 by and between
William F. Grieco and National Medical Care, Inc., (incorporated
herein by reference to the Form 10-K of Registrant filed with
Commission on March 9, 1999).
Exhibit 10.14 Separation Agreement dated as of September 30, 1999 by and among
William F. Grieco and Fresenius Medical Care Holdings, Inc. and
Fresenius Medical Care AG (incorporated herein by reference to
the Form 10-K of Registrant filed with Commission on August 3,
1999).
Exhibit 10.15 Employment Agreement dated March 15, 2000 by and between Jerry A.
Schneider and National Medical Care, Inc. (a copy of which is
filed herewith).
Exhibit 10.16 Employment Agreement dated March 15, 2000 by and between Ronald
J. Kuerbitz and National Medical Care, Inc. (a copy of which is
filed herewith).
Exhibit 10.17 Employment Agreement dated March 15, 2000 by and between J.
Michael Lazarus and National Medical Care, Inc. (a copy of which
is filed herewith).
Exhibit 10.18 Subordinated Loan Note dated as of May 18, 1999, among National
Medical Care, Inc. and certain Subsidiaries with Fresenius AG as
lender (incorporated herein by reference to the Form 10-Q of
Registrant filed with Commission on November 22, 1999).
Exhibit 11 Statement re: Computation of Per Share Earnings.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On January 21, 2000, the Company filed a report on Form 8-K with respect
to the Company's settlement of the OIG Investigation with the United States
Government.
*Confidential treatment has been requested as to certain portions of this
Exhibit.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Fresenius Medical Care Holdings, Inc.
DATE: MAY 12, 2000 /s/ Ben J. Lipps
----------------------------------
NAME: Ben J. Lipps
TITLE: President (Chief Executive Officer)
DATE: MAY 12, 2000 /s/ Jerry A. Schneider
-----------------------------------
NAME: Jerry Schneider
TITLE: Chief Financial Officer
27
<PAGE> 1
EXHIBIT 10.4
The deleted portions of this Exhibit
contain confidential information
and have been filed separately with the
Securities and Exchange Commission
Amendment #2 dated March 27, 2000 to Agreement No. 19984813
- --------------------------------------------------------------------------------
Agreement No. 19984813, between Amgen Inc. ("Amgen") and National Medical Care,
Inc., including any prior amendments thereto, shall be amended, and for the
period commencing 1/1/2000 shall be restated in its entirety to read as stated
below.
This Agreement ("Agreement"), between Amgen Inc. ("Amgen") and National Medical
Care, Inc., including its subsidiaries and affiliates that are at least fifty
and one-tenth percent (50.10%) owned by National Medical Care, Inc. listed on
Appendix B, (collectively, "NMC"), sets forth the terms and conditions for the
purchase of EPOGEN(R) (Epoetin alfa) by NMC.
1. TERM OF AGREEMENT. The "Term" of this Agreement shall be defined as January
1, 2000 ("Commencement Date") through December 31, 2000 ("Termination
Date").
2. QUALIFIED PURCHASES. All terms contained herein apply only to purchases
made hereunder, as confirmed by Amgen ("Qualified Purchases"), by NMC and,
subject to the terms of Section 13, to all affiliates opened, acquired, or
managed by NMC during the Term, for so long as such affiliates remain at
least fifty and one-tenth percent (50.10%) owned or managed by National
Medical Care, Inc. ("Affiliates"), through wholesalers chosen by NMC and
authorized by Amgen to participate in the program ("Authorized
Wholesalers") or directly from Amgen. In addition, and also subject to the
terms of Section 13, Affiliates of Renaissance Health Care, Clinic, Inc.,
Optimal Renal Care, L.L.C., Integrated Renal Care of the Pacific, and/or
any joint venture of NMC in which NMC holds at least a fifty and one-tenth
percent (50.10%) ownership interest, will also be eligible to participate,
although not required to purchase. Amgen agrees to reasonably approve
Authorized Wholesalers requested by NMC. The option to purchase on a direct
basis from Amgen is subject to receipt and approval, not to be unreasonably
withheld, of an "Application for Direct Ship Account".
3. PRICING. See Appendix A.
4. PAYMENT TERMS. The terms and conditions of this Agreement shall apply
whether NMC and/or Affiliates purchase EPOGEN(R) through an Authorized
Wholesaler or from Amgen directly.
5. PRODUCT ACQUISITION COSTS. As long as NMC and Affiliates are the [DELETED],
non-governmental, freestanding dialysis center (including home dialysis
affiliates) purchaser of EPOGEN(R) in the United States, Puerto Rico and
Guam during the Term, on an annual, calendar year basis, Amgen commits that
this Agreement provides NMC and Affiliates with [DELETED] for EPOGEN(R)
available to any freestanding dialysis center purchaser in the United
States and Puerto Rico with comparable growth and percentage of patients
with hematocrit levels greater than or equal to [DELETED]. If NMC and
Affiliates are not the [DELETED] non-governmental, freestanding dialysis
center purchaser of EPOGEN(R) in the United States, Puerto Rico and Guam
during the Term, on a calendar year basis, Amgen may provide [DELETED] for
EPOGEN(R) to [DELETED] non-governmental, freestanding dialysis center
purchaser(s). Qualification as a freestanding dialysis center shall be
determined by Amgen in its reasonable discretion, in accordance with
Amgen's customer classification policies, which generally classify
freestanding dialysis centers as independent, exclusive providers of
dialysis services, which (a) may not obtain EPOGEN(R) from or through a
hospital, or (b) are not otherwise affiliated with a hospital, nursing
home, or integrated health care system. This commitment excludes [DELETED]
available to any governmental entities, or [DELETED] mandated by Title 38
(Veterans' Benefits) or Title 42 (The Public Health and Welfare) of the
United States Code, or any other federal or state health care program.
Amgen's agreement to make this commitment is contingent upon its ability to
comply with all federal, state, local and military laws, statutes and
regulations.
6. MINIMUM PRODUCT PURCHASE AGREEMENT. NMC and Affiliates agree to purchase a
minimum of [DELETED] of EPOGEN(R) from Amgen hereunder during each
consecutive calendar quarter during the Term.
<PAGE> 2
7. DISCOUNT. Amgen will pay discounts and incentives in accordance with the
schedule and terms set forth in Appendix A attached hereto.
8. PAYMENT OF DISCOUNTS. Any discount (hereinafter defined as including a
discount at time of purchase, rebate, incentive or other concession
impacting the pricing of a product) earned hereunder shall be calculated in
accordance with this Agreement, based on Qualified Purchases, using
[DELETED] as the calculation price, and shall be paid in the form of a wire
transfer to NMC's corporate headquarters, except as otherwise provided. NMC
and Affiliates shall make available to Amgen any records concerning NMC's
and Affiliates' purchase amounts that Amgen or its auditors may reasonably
request. Amgen shall make available to NMC any records concerning NMC's and
Affiliates' purchase amounts that NMC or its auditors may reasonably
request. [DELETED] Amgen will use its best efforts to make any discount
(excluding discounts at time of purchase) pursuant to this Agreement
available in accordance with the terms referenced in Appendix A.
Availability of discounts is contingent upon Amgen receiving all relevant
purchase data from all Authorized Wholesalers designated by NMC, in a form
reasonably acceptable to Amgen, detailing NMC's and Affiliates' Qualified
Purchases of EPOGEN(R) for the relevant period, along with any other data
required by the terms of Appendix A. In the event of any purchases directly
from Amgen, all such purchase data shall be included in the calculation of
all discounts. In no event shall Amgen pay any discount on EPOGEN(R)
distributed by NMC or Affiliates to non-Affiliates of NMC (see Section 2
for definition of Affiliates). Subject to the section entitled "Breach of
Agreement", in the event that Amgen is notified in writing that National
Medical Care, Inc. and/or any of its subsidiaries or Affiliates (the
"Acquiree") is acquired by another entity or a change of control otherwise
occurs with respect to the Acquiree, any discount which may have been
earned hereunder prior to the effective date of the acquisition shall
vest, and shall be paid in the form of a wire transfer to NMC's corporate
headquarters subject to the conditions described herein.
9. TREATMENT OF DISCOUNTS. The parties agree that they will account for any
discount earned hereunder in a way that complies with all applicable
federal, state, and local laws and regulations, including without
limitation, Section 1128B(b) of the Social Security Act and its
implementing regulations, and if required by such statutes or regulations
(a) claim the benefit of such discount received, in whatever form, in the
fiscal year in which such discount was earned or the year after, (b) fully
and accurately report the value of such discount in any cost reports filed
under Title XVIII or Title XIX of the Social Security Act, or a state
health care program, and (c) provide, upon request by the U.S. Department
of Health and Human Services or a state agency or any other federally
funded state health care program, the information furnished by Amgen
concerning the amount or value of such discount. NMC agrees that it will
advise all Affiliates, in writing, of any discount received by NMC's
corporate headquarters hereunder with respect to purchases made by such
Affiliates and that NMC will advise said Affiliates as to their requirement
to account for any such discount in accordance with the above stated
requirements.
10. COMMITMENT TO PURCHASE. NMC and Affiliates agrees to purchase EPOGEN(R) for
all of its dialysis use requirements in the United States, Puerto Rico and
Guam for recombinant human erythropoietin. Amgen agrees to make such
EPOGEN(R) available to NMC and Affiliates through its Authorized
Wholesalers or directly from Amgen. In addition to other remedies available
to NMC and Affiliates, NMC and Affiliates may purchase another brand of
recombinant human erythropoietin for its dialysis use requirements in the
United States, Puerto Rico and Guam if, and only if, NMC and Affiliates
have informed Amgen, in writing, that NMC and Affiliates are unable to
acquire sufficient amounts of EPOGEN(R) to meet NMC's and Affiliates'
reasonable dialysis use requirements, and Amgen by itself, or through its
Authorized Wholesalers, is actually unable to supply NMC and Affiliates
with their reasonable dialysis use requirements of EPOGEN(R) within the
time period reasonably required by NMC and Affiliates, which, in no event
will be less than five (5) business days after Amgen's receipt of NMC's and
Affiliates' written notice. If the preceding requirements are met, NMC and
Affiliates will only be allowed to purchase another brand of recombinant
human erythropoietin for the time period, and to the extent, that Amgen is
unable to provide NMC and Affiliates with EPOGEN(R) to meet NMC's and
Affiliates' reasonable dialysis use requirements.
11. OWN USE. NMC hereby certifies that EPOGEN(R) purchased hereunder will be
for the "own use" by NMC and the Affiliates of NMC.
12. AUTHORIZED WHOLESALERS. A complete list of NMC's and Affiliates' current
Authorized Wholesalers, through whom NMC and Affiliates may purchase
EPOGEN(R) hereunder is attached as Appendix C. NMC and Affiliates agrees to
promptly
<PAGE> 3
provide Amgen with any additions, deletions, or changes to the initial list
of Authorized Wholesalers. Amgen requires no less than 30 days notice
before the effective date of change for any addition or deletion of
Authorized Wholesalers hereunder. Any proposed changes to the initial list
of Authorized Wholesalers must be in writing and are subject to reasonable
approval by Amgen.
13. SUBSIDIARIES AND AFFILIATES. Within 30 days of execution of this Agreement,
NMC shall provide a current listing of all Affiliates, and other entities,
that will be participating in this Agreement, designating which Affiliates
are owned and/or managed by NMC. Such listing will be incorporated into
this Agreement as Appendix B. Only those entities listed on Appendix B will
be eligible to participate in this Agreement. Any NMC managed Affiliate, or
other entity with an existing contract, may participate in either their
existing agreement with Amgen, or this Agreement, but not both. Each
managed Affiliate or entity must declare under which single Amgen contract
it will participate. Only Qualified Purchases under this Agreement will be
used in the calculation of pricing, discounts or other incentives under
this Agreement. NMC will notify Amgen of changes to Appendix B, and the
effective date of change. Such effective date of change may not be earlier
than the date the notice is received by Amgen. Any proposed change to
Appendix B will be subject to the reasonable approval of Amgen based upon
Amgen's then current legal and contractual requirements, and such proposed
affiliate's classification as a freestanding dialysis center or a home
dialysis support facility.
14. BREACH OF AGREEMENT. Either party may terminate this Agreement for a
material breach upon thirty (30) days advance written notice provided such
breach remains uncured at the end of the thirty (30) day period.
15. CONFIDENTIALITY. Both Amgen and NMC agree that this Agreement represents
and contains confidential information which will not be disclosed to any
third party, or otherwise made public, without prior written authorization
of the other party, except where such disclosure is contemplated hereunder
or required by law or court order. In the event NMC believes it is
obligated to disclose any such information as required by law or court
order, NMC will provide Amgen with prior written notice and an opportunity
to seek a protective order and NMC shall furnish only that portion of the
information that its counsel advises is required to be disclosed by law.
16. WARRANTIES. Each party represents and warrants to the other that this
Agreement (a) has been duly authorized, executed, and delivered by it, (b)
constitutes a valid, legal, and binding agreement enforceable against it in
accordance with the terms contained herein, and (c) does not conflict with
or violate any of its other contractual obligations, expressed or implied,
to which it is a party or by which it may be bound. NMC represents and
warrants that it has the power to bind National Medical Care, Inc. and the
subsidiaries and owned Affiliates listed on Appendix B to the terms
contained herein. NMC shall cause each managed Affiliate to be bound by the
terms and conditions of this Agreement through the execution of a joinder
agreement executed between NMC and each such managed Affiliate.
17. GOVERNING LAW. This Agreement will be governed by the laws of the State of
Delaware and the parties submit to the jurisdiction of Delaware courts,
both state and federal.
18. NOTICES. Any notice or other communication required or permitted hereunder
will be in writing and shall be deemed given or made when delivered in
person or when received by the other party sent by U.S. Mail, return
receipt requested, at the respective party's address set forth below or at
such other address as the party shall have furnished to the other in
accordance with this provision.
19. COMPLIANCE WITH HEALTH CARE PRICING LEGISLATION AND STATUTES.
Notwithstanding anything contained herein to the contrary, at any time
following the enactment of any federal, state, or local law or regulation
that materially reforms, modifies, alters, restricts, or otherwise affects
the pricing of or reimbursement available for EPOGEN(R), either party may
initiate good faith negotiations to modify this Agreement. If after
forty-five (45) days the parties are unable to in good faith mutually agree
to modifications to this Agreement, (a) either party may terminate this
Agreement immediately, or (b) Amgen may exclude any owned or managed
Affiliates from participating in this Agreement unless such owned or
managed Affiliate(s) certifies in writing that they are, or will be, exempt
from the provisions of such enacted law or
<PAGE> 4
regulation. Additionally, in order to assure compliance with any existing
federal, state or local statute, regulation or ordinance, Amgen reserves
the right, in its reasonable discretion, to exclude any owned or managed
Affiliates from the pricing, discount, and incentive provisions of this
Agreement. In the event there is a future change in Medicare, Medicaid, or
other federal or state statutes or regulations or in the interpretation
thereof, which renders any of the material terms of this Agreement unlawful
or unenforceable, this Agreement shall continue and shall be amended by the
parties as a result of good faith negotiations as necessary to bring the
Agreement into compliance with such statute and regulation.
20. MISCELLANEOUS. No modification of this Agreement shall be effective unless
made in writing and signed by a duly authorized representative of each
party. This Agreement constitutes the entire agreement of the parties
pertaining to the subject matter hereof and supersedes all prior written
and oral agreements and understandings pertaining hereto including without
limitation, any previous or existing contract or amendment for the purchase
of EPOGEN(R). Neither party shall have the right to assign this Agreement
to a third party without the prior written consent of the other party.
Neither party shall be liable for delays in performance and nonperformance
of this Agreement or any covenant contained herein caused by fire, flood,
storm, earthquake or other act of God, war, rebellion, riot, failure of
carriers to furnish transportation, strike, lockout or other labor
disturbances, act of government authority, inability to obtain material or
equipment, or any other cause of like or different nature beyond the
control of such party. However, during any time of nonperformance by Amgen
which involves NMC's and Affiliates' inability to obtain sufficient
EPOGEN(R) to meet NMC's and Affiliates' reasonable dialysis use
requirements the [DELETED] for such nonperformance, the [DELETED] and NMC
and Affiliates may purchase EPOGEN(R) from another supplier. The parties
shall execute and deliver all documents, provide all information, and take
or refrain from taking action as may be necessary or appropriate to achieve
the purposes of this Agreement. This Agreement may be executed in one or
more counterparts, each of which is deemed to be an original but all of
which taken together constitutes one and the same agreement. Amgen reserves
the right to rescind this offer if the parties fail to execute this
Agreement within thirty (30) days from the date of its offering.
Please retain one fully executed original for your records and return the other
fully executed original to Amgen.
THE PARTIES EXECUTED THIS AMENDMENT AS OF THE DATES SET FORTH BELOW.
AMGEN INC. NATIONAL MEDICAL CARE, INC.
Signature: \s\ Eric Benevich Signature: \s\ Robert J. McGorty
Print Name: Eric Benevich Print Name: Robert J. McGorty
Print Title: Product Manager Print Title: Vice President of
Finance and Administration
Date: 3/29/00 Date: 3/29/00
<PAGE> 5
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS
-------------------------------------------------
1. PRICING. NMC and Affiliates may purchase EPOGEN(R) directly from Amgen or
through Authorized Wholesalers at a [DELETED]. Resulting prices do not
include any wholesaler markup, service fees, or other charges.
2. [DELETED] NMC and Affiliates agree to provide [DELETED] for the purposes of
calculating [DELETED]. Amgen will accept the [DELETED] multiply each
[DELETED] by [DELETED] and apply the converted results to [DELETED].
[DELETED] Amgen will accept electronic data from the lab systems that
service each owned or managed Affiliate. For NMC to qualify for the
[DELETED] the following requirements must be met:
A. REQUIREMENTS: In order to participate in the [DELETED] NMC and
Affiliates must provide the following information for each dialysis
patient to Amgen or to a data collection vendor specified by Amgen, on
a [DELETED] basis, no later than [DELETED] after the end of [DELETED]:*
i) facility ID, [DELETED] [DELETED] for EPOGEN(R), [DELETED],
treatment date, [DELETED], [DELETED], [DELETED], [DELETED],
[DELETED], EPOGEN(R) dose (collectively the "Data"). Amgen may
utilize the Data for any purpose, and reserves the right to
audit all Data. Notwithstanding the foregoing, Amgen shall not
sell or re-sell any Data obtained pursuant to this Agreement.
Additionally, any use by Amgen of such Data shall be in a
format that does not identify NMC as the source of such Data,
unless NMC has consented to such use. Under no circumstances
should the Data include any patient identifiable information
including, without limitation, name, complete social security
number, address or birth date. The identity of the account
submitting the Data and any association with the Data will
remain confidential and will not be used in a manner that is
patient identifiable. The [DELETED] must be derived from
[DELETED] taken immediately before dialysis treatment using
any automated [DELETED] testing method (e.g [DELETED]) must be
reported to the [DELETED], and must be submitted in a format
acceptable to Amgen. Hand written reports are not acceptable;
electronic submission of the Data is preferred; and
ii) [DELETED] and
iii) a properly executed "Annual Certification Letter", a sample of
which is attached hereto as Exhibit #1, that will be provided
to NMC's corporate headquarters, unless otherwise requested,
after this Agreement is executed by both parties.
*NOTWITHSTANDING THE REQUIREMENT TO SUBMIT DATA ON A [DELETED] BASIS
REFERENCED ABOVE, THE [DELETED] DATA ELEMENTS REFERENCED IN 2a ii) ABOVE SHALL
BE REQUIRED FOR THE [DELETED] WITHIN [DELETED] DAYS FOLLOWING THE END OF THE
[DELETED]. COMMENCING WITH THE [DELETED] OF [DELETED], THE DATA ELEMENTS SET
FORTH IN 2a ii) SHALL BE REQUIRED ON A [DELETED] BASIS AS SET FORTH IN THIS
SECTION 2A.
B. CALCULATION: Assuming NMC and Affiliates have fulfilled all
requirements as described in Section 2(a) above, NMC's [DELETED]
payment will be calculated as follows: The "Average Patient [DELETED] "
for each dialysis patient will be based upon the average of all
[DELETED] gathered for each patient during each [DELETED] of the Term.
The [DELETED] of all dialysis patients with Average Patient [DELETED]
greater than or equal to [DELETED] will be determined by dividing the
total number of dialysis patients with Average Patient [DELETED]
greater than or equal to [DELETED] by the total number of dialysis
patients treated by NMC and Affiliates. The [DELETED] will be
calculated based on NMC's and Affiliates' overall performance in
accordance with Amgen's discount calculation policies.
<PAGE> 6
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS (CONTINUED)
-------------------------------------------------------------
C. PAYMENT: The [DELETED] will be calculated on a [DELETED] and paid to
NMC's corporate headquarters, except as otherwise provided hereunder.
Payment is contingent upon receipt by Amgen of the Annual Certification
Letter (attached hereto as Exhibit 1) and all required Data for the
corresponding [DELETED]. Data shall be submitted to Amgen [DELETED] and
no later than [DELETED]. If Data is [DELETED], NMC will not qualify for
the [DELETED] for that [DELETED]. [DELETED]. However, if Amgen
determines that any Affiliate(s) is consistently not submitting the
required Data, Amgen reserves the right in its reasonable discretion to
exclude such Affiliate's Qualified Purchases of EPOGEN(R)from the
calculation of the [DELETED] for any relevant [DELETED]. [DELETED]
payments will be based on the Data received from the [DELETED], and
will equal a percentage of NMC's and Affiliates' total Qualified
Purchases of EPOGEN(R) during each relevant [DELETED] (exclusive of any
Qualified Purchases of EPOGEN(R) made by NMC or any Affiliate not
meeting the Data submission requirements described above) as governed
by the [DELETED] schedules listed below. Amgen reserves the right to
modify the [DELETED] if the EPOGEN(R) package insert language changes.
[DELETED].
<PAGE> 7
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS (CONTINUED)
-------------------------------------------------------------
[DELETED] INCENTIVE [DELETED] SCHEDULES:
[DELETED]
[DELETED]
D. VESTING: The [DELETED] will vest on the [DELETED] and be paid in
accordance with the terms and conditions of Section 2 c) Payment above.
<PAGE> 8
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS (CONTINUED)
3. [DELETED]: NMC shall be eligible to receive a [DELETED] if certain data
elements are transmitted to Amgen [DELETED]. The [DELETED] will be
calculated as a percentage of Qualified Purchases of
EPOGEN(R) attributable to NMC and all Affiliates during each [DELETED]
In order to qualify for the [DELETED], the following [DELETED] must be
submitted by NMC and all Affiliates in an [DELETED] format reasonably
acceptable to Amgen[DELETED] Facility ID, [DELETED] [DELETED],
[DELETED] for EPOGEN(R), [DELETED], treatment date, [DELETED],
[DELETED], [DELETED], [DELETED], calculated [DELETED], EPOGEN(R) dose,
[DELETED], and [DELETED]. Such [DELETED] must be submitted on a
[DELETED] basis, and no later than [DELETED]. If such [DELETED] is
received more than [DELETED], NMC will not qualify for the [DELETED]
for that [DELETED]. [DELETED] However, if Amgen determines that any
Affiliate(s) is consistently not submitting the required [DELETED]
Amgen reserves the right in its sole discretion to exclude such
Affiliate's Qualified Purchases of EPOGEN(R) from the calculation of
the [DELETED] for any relevant [DELETED]. [DELETED]
4. [DELETED] NMC may qualify for the [DELETED] as described below.
A. CALCULATION: NMC's [DELETED] will be calculated in accordance
with the following formula and with each relevant [DELETED]
schedule listed below:
[DELETED] = A X B
where
A = [DELETED].
B = [DELETED]
C = [DELETED]
D = [DELETED]
<PAGE> 9
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS (CONTINUED)
-------------------------------------------------------------
[DELETED] INCENTIVE [DELETED] SCHEDULES:
[DELETED]
[DELETED]
(C-D)/D B
------- -
[DELETED]
[DELETED]
[DELETED]
(C-D)/D B
------- -
[DELETED]
[DELETED]
[DELETED]
(C-D)/D B
------- -
[DELETED]
[DELETED]
[DELETED]
(C-D)/D B
------- -
[DELETED]
<PAGE> 10
APPENDIX A: DISCOUNT PRICING, SCHEDULE, AND TERMS (CONTINUED)
-------------------------------------------------------------
For the purposes of calculating [DELETED], Amgen will incorporate purchases of
any newly created facility (but not facilities added through acquisition).
[DELETED]
B. VESTING: NMC's [DELETED] will vest on the [DELETED], and will be paid in
accordance with the terms and conditions described above.
5. [DELETED]. NMC may qualify for the [DELETED] as described below.
A. CALCULATION: NMC's [DELETED] will be calculated in accordance with the
following formula and in accordance with the [DELETED] schedule listed
below.
[DELETED] = A X B
where
A = [DELETED].
B = [DELETED].
C = [DELETED].
D = [DELETED].
[DELETED]
(C-D)/D B
------- -
[DELETED]
B. VESTING: NMC's [DELETED] will vest on the last day of the Term, and will be
paid [DELETED] thereafter.
<PAGE> 11
APPENDIX B: LIST OF NMC SUBSIDIARIES AND AFFILIATES
---------------------------------------------------
SUBSIDIARIES:
-------------
Bio-Medical Applications Management Co., Inc. and its subsidiaries
Erika, Inc.
Infusion Care, Inc.
LifeChem, Inc.
National Medical Care HomeCare Division, Inc.
Renal Research Institute, Inc.
Spectra Renal Management
AFFILIATES:
-----------
See Contract List Attached
<PAGE> 12
APPENDIX C: LIST OF NMC AUTHORIZED WHOLESALERS
----------------------------------------------
TO ENSURE YOU RECEIVE THE APPROPRIATE DISCOUNT, IT IS IMPORTANT THAT WE HAVE
YOUR CURRENT LIST OF AUTHORIZED WHOLESALERS. THE FOLLOWING LIST REPRESENTS THE
WHOLESALERS AMGEN CURRENTLY HAS ASSOCIATED WITH YOUR CONTRACT. PLEASE UPDATE THE
LIST BY ADDING OR DELETING WHOLESALERS AS NECESSARY.
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, CA 92668
J.M. Blanco Inc.
Calle D - Lote No. 21
Guaynabo, PR 00965
Metro Medical Supply, Inc.
3332 Powell Avenue
Nashville, TN 37204
Bellco Drug Corporation
101 East Hoffman Avenue
Lindenhurst, NY 11757
<PAGE> 13
EXHIBIT #1
SAMPLE ANNUAL CERTIFICATION LETTER
----------------------------------
Month X, 199X
FSDC Legal Name
Street Address
City, ST Zip
RE: EPOGEN(R)(Epoetin alfa) Agreement No. 19984813
Dear ____________:
Thank you for your participation in the [DELETED] Incentive Program. In order
for us to enroll you, we require that a duly authorized representative of your
organization sign the certification below.
Upon receipt of this executed document, we will calculate the value of your
incentive. If we do not receive the executed certification, we cannot provide
you with this incentive.
If you have any questions regarding this letter please contact me at [DELETED].
Thank you for your assistance in returning this certification.
Sincerely,
[DELETED]
Outcomes Incentive Analyst
CERTIFICATION:
On behalf of FSDC Legal Name and all eligible Affiliates participating in the
[DELETED] Incentive Program under Agreement No. 19984813, the undersigned hereby
certifies that the [DELETED] data submitted for each eligible Affiliate includes
the required [DELETED] results from all dialysis patients of such Affiliate, and
does not include [DELETED] results from non-patients. The party executing this
document also represents and warrants that it (i) has no reason to believe that
the submitted [DELETED] data is incorrect, and (ii) is authorized to make this
certification on behalf of all eligible Affiliates submitting [DELETED] data.
FSDC LEGAL NAME
Signature:
--------------------------
Print Name:
--------------------------
Print Title:
--------------------------
Date:
--------------------------
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into this 15th day of March, 2000, by and
between Fresenius Medical Care North America ("FMC" or the "EMPLOYER"), with
principal offices located at 95 Hayden Avenue, Lexington, MA 02420 and Jerry A.
Schneider ( "EMPLOYEE") currently residing at 44 Kings Grant Road, Weston, MA
02493.
WITNESSETH:
WHEREAS, FMC desires to employ EMPLOYEE as Chief Financial Officer at FMC and
its affiliated corporations in North America, and
WHEREAS, the parties hereto desire to express the terms and conditions of such
employment.
NOW THEREFORE, it is understood and agreed to between the parties as follows:
1. EMPLOYMENT. FMC hereby employs EMPLOYEE as Chief Financial Officer, and
EMPLOYEE hereby accepts the employment upon the terms and conditions of
this Agreement.
2. TERM. The term of this Agreement shall commence as of March 15, 2000 and
shall terminate as of March 15, 2003 in accordance with the provisions
hereinafter stated. THE INITIAL TERM SHALL BE RENEWED BY A SUCCESSIVE THREE
(3) YEAR PERIOD UNLESS EITHER PARTY GIVES WRITTEN NOTICE OF NON-RENEWAL TO
THE OTHER PARTY AT LEAST THIRTY (30) DAYS PRIOR TO ANY TERMINATION DATE.
THE INITIAL TERM AND ANY SUBSEQUENT RENEWAL PERIODS SHALL BE CALLED THE
"EMPLOYMENT TERM."
3. DUTIES AND RESPONSIBILITIES. EMPLOYEE shall serve full time as FMC's Chief
Financial Officer and will be responsible for all financial functions,
including debt management, bank relationships and human resources. EMPLOYEE
shall report directly to the Chief Executive Officer of FMC and shall also
report to the Chief Financial Officer of Fresenius AG on debt management
and investor relations issues. EMPLOYEE shall to the best of his ability
and experience competently, loyally, diligently and conscientiously perform
all of the duties and obligations expressly or implicitly required under
this Agreement. EMPLOYEE further agrees that, in conducting business in the
interest of the EMPLOYER, he will not engage in, knowingly permit others
under his control to carry on, or induce others to engage in any practice
or commit any acts in violation of any federal or state or local law or
ordinance.
4. COMPENSATION AND BENEFITS.
a) BASE SALARY. EMPLOYER shall pay EMPLOYEE for all services rendered a base
salary of Three Hundred Seventy Two Thousand, Six Hundred Dollars
($372,600) per year, (the "Base Salary"), payable in accordance with FMC's
payroll procedures, subject to customary withholding and employment taxes.
At the end of each year of employment hereunder, EMPLOYEE's performance for
the prior year shall be reviewed and evaluated. If EMPLOYEE's performance
is satisfactory, EMPLOYEE shall receive an increase in his base salary
commensurate with level of achievement.
b) INCENTIVE COMPENSATION. During EMPLOYEE's employment with FMC, EMPLOYEE
shall be entitled to participate in FMC's Management Bonus Plan and any
other such incentive compensation plans as are now available or may become
available to other similarly positioned senior executives of FMC. EMPLOYEE
will be in the senior executive eligibility Level I, wherein the target
level bonus is forty percent (40%) and the maximum bonus is eighty percent
(80%) of base salary. Funding for the plan is based upon attainment of
specific individual and company financial objectives. EMPLOYEE's
entitlement to a bonus under the Management Bonus Plan will be governed by
terms of that Plan.
<PAGE> 2
c) STOCK PLAN. EMPLOYEE shall be eligible to participate in the current
Fresenius Medical Care AG Stock Incentive Plan, and any future stock
incentive plan (individually a "Stock Plan" and collectively, the "Stock
Plans"), subject to IRS approval of such respective Stock Plans. In
addition to the existing options to purchase Fresenius Medical Care AG
Preference Shares previously granted to EMPLOYEE (the "Existing Options"),
EMPLOYEE shall be eligible to receive additional option grants in amounts
as and if approved by the Fresenius Medical Care AG Managing Board.
d) BENEFIT PROGRAMS. EMPLOYEE shall continue to be eligible to participate in
the group employee benefits programs at the senior executive level as now
established or which subsequently become available.
e) LIFE INSURANCE. EMPLOYEE will be provided with life insurance in accordance
with FMC's policy, currently capped at Four Hundred Thousand Dollars
($400,000). EMPLOYEE will be provided with the opportunity to purchase
supplemental life insurance of an additional Six Hundred Thousand Dollars
($600,000) beyond the current policy of coverage at his own expense, with
proof of good health.
f) AUTOMOBILE. EMPLOYEE will be provided with a company car allowance of Seven
Hundred Dollars ($700) paid monthly and treated as ordinary income.
g) FINANCIAL PLANNING/TAX PREPARATION. EMPLOYEE will be provided with an
allowance of Two Thousand Dollars ($2,000) to be paid based upon submitted
documentation of expenses incurred as a result of financial planning
assistance or income tax preparation. Reimbursement will be treated as
ordinary income.
h) EXPENSES. EMPLOYEE will be reimbursed for travel and other expenses related
to the performance of his duties under the Agreement and in accordance with
the EMPLOYER's policies.
i) VACATION/PTO. EMPLOYEE shall be allowed to carry-over up to two hundred
(200) hours from year-to-year without losing such time. EMPLOYEE shall
also accrue PTO days at the maximum available to senior executives under
the Executive Vacation Policy which currently provides for thirty (30)
days of PTO per year.
5. TERMINATION OF EMPLOYMENT. EMPLOYEE's employment hereunder may be
terminated under the following circumstances:
a) DEATH. EMPLOYEE's employment hereunder shall terminate upon his death.
b) TOTAL DISABILITY. The EMPLOYER may terminate EMPLOYEE's employment
hereunder upon EMPLOYEE becoming "Totally Disabled." For purposes of this
Agreement, EMPLOYEE shall be "Totally Disabled" if EMPLOYEE is physically
or mentally incapacitated so as to render EMPLOYEE incapable of performing
EMPLOYEE's usual and customary duties under this Agreement. EMPLOYEE's
receipt of Social Security disability benefits or disability benefits under
a Company-sponsored long-term disability plan shall be deemed conclusive
evidence of Total Disability for purpose of this Agreement; provided,
however, that in the absence of EMPLOYEE's receipt of such Social Security
or long-term disability benefits, the Company's Board of Directors may, in
its reasonable discretion (but based upon medical evidence), determine that
EMPLOYEE is Totally Disabled.
c) VOLUNTARY TERMINATION. EMPLOYER or EMPLOYEE may terminate EMPLOYEE's
employment hereunder at any time after providing written notice to the
other party. The EMPLOYEE is required to give the EMPLOYER at least thirty
(30) days written notice if he wishes to terminate his employment pursuant
to this provision.
d) TERMINATION BY THE EMPLOYER FOR CAUSE. The EMPLOYER may terminate
EMPLOYEE's employment for Cause at any time after providing written notice
to EMPLOYEE. For purposes of this Agreement, the term "Cause" shall mean,
with respect to the EMPLOYEE, any of the following: (i) commission by
EMPLOYEE of a felony or of any criminal act involving moral turpitude which
results in an arrest or indictment; (ii) deliberate and continual refusal
to satisfactorily perform employment duties reasonably requested by the
EMPLOYER
2
<PAGE> 3
after 20 days' written notice by certified mail of such failure to perform,
specifying that the failure constitutes cause (other than as a result of
vacation, sickness, illness or injury); (iii) fraud or embezzlement
determined in accordance with the EMPLOYER's normal, internal investigative
procedures consistently applied in comparable circumstances to EMPLOYEES;
(iv) gross misconduct or gross negligence in connection with the business
of the EMPLOYER which has substantial effect on the EMPLOYER; (v) failure
to obtain and maintain in good order any licenses required for EMPLOYEE to
perform his duties under this Agreement; or (vi) a breach of any of the
covenants set forth in Section 7 below. EMPLOYEE will be considered to have
been terminated for "Cause" if the EMPLOYER determines that EMPLOYEE
engaged in an act constituting "Cause," regardless of whether the
individual terminates employment voluntarily or is terminated
involuntarily, and regardless of whether the individual's termination
initially was considered to have been for "Cause." The determination of
"Cause" shall be made by the EMPLOYER in its sole discretion, and shall be
final and binding on all parties.
e) TERMINATION BY EMPLOYEE FOR CAUSE. This Agreement may be terminated by
EMPLOYEE in the event of a breach by FMC of any of its obligations under
this Agreement, provided EMPLOYEE gives FMC written notice specifying the
manner in which he believes FMC has breached this Agreement and FMC has
thirty (30) days from receipt of such notice to cure such breach, or in the
case of other than a non-payment of money breach, if such breach cannot be
cured within thirty (30) days, to commence a good faith effort to cure.
Additionally, this Agreement may be terminated by Employee, if there is a
reduction in Employee's responsibilities or FMC experiences a change in
control defined as any of the following: i) the transfer (whether by sale,
dividend, exchange, lease, merger, consolidation or otherwise) of greater
that 50 percent (50%) of the voting power of FMC; ii) the transfer (whether
by sale, dividend, exchange, lease, merger, consolidation or otherwise) of
all or substantially all the assets or stock of FMC; or iii) any other
action which results in persons other than the current majority
shareholders of FMC, having the voting power to direct the management of
FMC or if FMC relocates its corporate headquarters more than fifty (50)
miles from its present location in Lexington, Massachusetts.
f) NOTICE OF TERMINATION. Any termination by the EMPLOYER or the EMPLOYEE
under this Agreement shall be communicated by notice of termination to the
other party hereto. For purposes of this Agreement, a Notice of Termination
shall mean a notice in writing which shall indicate the specific
termination provision in this Agreement relied upon to terminate EMPLOYEE's
employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of EMPLOYEE's
employment under the provision so indicated.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
a) Under all circumstances, upon termination the EMPLOYEE shall be entitled to
receive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination; and
(ii) Any benefits to which EMPLOYEE may be entitled upon
termination pursuant to the plans, policies and arrangements
referred to in Section 4 hereof shall be determined and paid
in accordance with the terms of such plans, policies and
arrangements. ** EMPLOYEE shall have three (3) years from any
such termination to exercise his Vested Stock Options. Should
he fail to exercise these options within this period, they
will be forfeited at the end of that period.
b) In the event that EMPLOYEE's employment hereunder is voluntarily terminated
by the EMPLOYER in accordance with Section 5(c), or in the event that
EMPLOYEE's employment hereunder is terminated by the EMPLOYEE in accordance
with Section 5(e), the EMPLOYEE shall also be entitled to receive:
(iii) The balance of the salary payments equivalent to the number of
months remaining in the term of the Employment Agreement. At a
minimum, the number of months for salary continuance would
3
<PAGE> 4
be eighteen (18) at the rate in effect on the date of
termination of employment, such amount to be paid in a lump
sum as soon as is practicable thereafter; and
(iv) A pro-rated portion of the EMPLOYEE's annual bonus based upon
termination of work date.
c) Any stock options or other awards will continue to vest in accordance with
the terms of the award and the plan pursuant to which it was made. If the
terms of any award and governing plan are silent with respect to
termination of employment, such award will lapse immediately upon such
termination.
7. NON-DISCLOSURE/NON COMPETITION AGREEMENT. EMPLOYEE acknowledges that during
the term of employment with EMPLOYER, he will have access to and become
acquainted with Confidential Information of the EMPLOYER. Confidential
Information means all information related to the present or planned
business of FMC that has not been released publicly by authorized
representatives of FMC, and shall include but not be limited to, trade
secrets and know-how, inventions, marketing and sales programs, employee,
customer, patient and supplier information, information from patient
medical records, financial data, pricing information, regulatory approval
and reimbursement strategies, data, operations and clinical manuals.
EMPLOYEE agrees not to use or disclose, directly or indirectly, any
Confidential Information of FMC at any time and in any manner, except as
required in the course of his employment with FMC or with the express
written authority of FMC.
EMPLOYEE understands that his non-disclosure obligations will continue
following his termination of employment.
EMPLOYEE agrees that during the term of his employment, and for a period of
one (1) year immediately after, he leaves the employment of FMC for any
reason or the end of the period during which EMPLOYEE continues to receive
salary continuation after leaving the employment of FMC, whichever is
greater, EMPLOYEE will not directly or indirectly for his own benefit or
the benefit of others:
a) render services for a competing organization in connection with
competing products as an employee, officer, agent, broker,
consultant, partner, stockholder (except that EMPLOYEE may own
three percent (3%) or less of the equity securities of any
publicly-traded company);
b) hire or seek to persuade any employee of FMC to discontinue
employment or to become employed in any competing organization or
seek to persuade any independent contractor or supplier to
discontinue its relationship with FMC; and
c) solicit, direct, take away or attempt to take away any business
or customers of FMC.
Nothing in this Agreement would preclude EMPLOYEE from working for a
competitor of FMC's subsequent to termination of EMPLOYEE's employment
provided EMPLOYEE will not be engaged, directly or indirectly, in any
business in which FMC is actively engaged at the time of EMPLOYEE's
termination or in any new business which FMC is in the process of setting
up in which EMPLOYEE had direct involvement while employed by FMC. EMPLOYEE
also agrees to inform FMC of any such employment with a competitor before
beginning such employment.
8. ENFORCEMENT OF COVENANTS.
a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. EMPLOYEE agrees
that in the event that the EMPLOYER determines that EMPLOYEE has breached
any of the covenants set forth in Section 7 hereof during EMPLOYEE's
employment, the EMPLOYER shall have the right to terminate EMPLOYEE's
employment for "Cause." For purposes of this Agreement, the term "Cause"
shall mean, with respect to the EMPLOYEE, any of the following: (i)
commission by EMPLOYEE of a felony or of any criminal act involving moral
turpitude which results in an arrest or indictment; (ii) deliberate and
continual refusal to
4
<PAGE> 5
satisfactorily perform employment duties reasonably requested by the
EMPLOYER after 20 days' written notice by certified mail of such failure to
perform, specifying that the failure constitutes cause (other than as a
result of vacation, sickness, illness or injury); (iii) fraud or
embezzlement determined in accordance with the EMPLOYER's normal, internal
investigative procedures consistently applied in comparable circumstances
to EMPLOYEES; (iv) gross misconduct or gross negligence in connection with
the business of the EMPLOYER which has substantial effect on the EMPLOYER;
(v) failure to obtain and maintain in good order any licenses required for
EMPLOYEE to perform his duties under this Agreement; or (vi) a breach of
any of the covenants set forth in Section 7 above. EMPLOYEE will be
considered to have been terminated for "Cause" if the EMPLOYER determines
that EMPLOYEE engaged in an act constituting "Cause," regardless of whether
the individual terminates employment voluntarily or is terminated
involuntarily, and regardless of whether the individual's termination
initially was considered to have been for "Cause." The determination of
"Cause" shall be made by the EMPLOYER in its sole discretion, and shall be
final and binding on all parties.
In addition, EMPLOYEE agrees that if the EMPLOYER determines that EMPLOYEE
has breached any of the covenants set forth in Section 7 at any time, the
EMPLOYER shall have the right, notwithstanding anything herein to the
contrary, to discontinue any or all amounts otherwise payable to EMPLOYEE
hereunder. Such termination of employment or discontinuance of payments
shall be in addition to and shall not limit any and all other rights and
remedies that the EMPLOYER may have against EMPLOYEE.
b) RIGHT TO INJUNCTION. EMPLOYEE acknowledges that a breach of the covenants
set forth in Section 7 hereof will cause irreparable damage to the EMPLOYER
with respect to which the EMPLOYER's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of the
covenants set forth in this section by EMPLOYEE, EMPLOYEE and the EMPLOYER
agree that the EMPLOYER shall be entitled to the following particular forms
of relief, in addition to remedies otherwise available to it at law or
equity: (i) injunctions, both preliminary and permanent, enjoining or
retraining such breach or anticipatory breach and EMPLOYEE hereby consents
to the issuance thereof forthwith and without bond by any court of
competent jurisdiction; and (ii) recovery of all reasonable sums expended
and costs, including reasonable attorney's fees, incurred by the EMPLOYER
to enforce the covenants set forth in this section.
c) SEPARABILITY OF COVENANTS. The covenants contained in Section 7 hereof
constitute a series of separate covenants, one for each applicable State in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding, a court shall hold that any
of the covenants set forth in Section 7 exceed the time, geographic, or
occupational limitations permitted by applicable laws, EMPLOYEE and the
EMPLOYER agree that such provisions shall and are hereby reformed to the
maximum time, geographic, or occupational limitations permitted by such
laws. Further, in the event a court shall hold unenforceable any of the
separate covenants deemed included herein, then such unenforceable covenant
or covenants shall be deemed eliminated from the provisions of this
Agreement for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants to be enforced in such proceeding.
EMPLOYEE and the EMPLOYER further agree that the covenants in Section 7
shall each be construed as a separate agreement independent of any other
provisions of this Agreement, and the existence of any claim or cause of
action by Employee against the Company whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the
Company of any of the covenants in Section 7.
9. FMC DOCUMENTS AND EQUIPMENT. All documents and equipment relating to the
business of FMC, whether prepared by EMPLOYEE or otherwise coming into
EMPLOYEE's possession, are the exclusive property of FMC, and must not be
removed from the premises of FMC except as required in the course of
employment. Any such documents and equipment must be returned to FMC when
EMPLOYEE leaves the employment of FMC.
10. WITHHOLDING OF TAXES. The EMPLOYER may withhold from any compensation and
benefits payable under this Agreement all applicable federal, state, local,
or other taxes.
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11. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement shall constitute the entire
agreement between the parties and supersedes all existing agreements
between them, whether oral or written, with respect to the subject matter
hereof. Any waiver, alteration, or modification of any of the provisions of
this Agreement, or cancellation or replacement of this Agreement shall be
accomplished in writing and signed by the respective parties.
12. NOTICES. Any notice, consent, request or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by registered or certified
mail, return receipt requested, to those listed below at their following
respective addresses or at such other address as each may specify by notice
to the others:
To the Employer:
Fresenius Medical Care North America
Corporate Headquarters
Two Ledgemont Center
95 Hayden Avenue
Lexington, MA 02420-9192
Attention: Vice President, Human Resources
To Employee:
At the address for Employee set forth above
13. GOVERNING LAW. This Agreement shall be construed in accordance with, and
the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
14. SEPARABILITY. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the
undersigned duly authorized persons as of the day and year first stated above.
NATIONAL MEDICAL, INC. D/B/A
FRESENIUS MEDICAL CARE
NORTH AMERICA,
WITNESS EMPLOYER
/s/ Brian O'Connell By: /s/ Ben Lipps 4/20/00
- ------------------------ ------------------------- -------
Ben J. Lipps (DATE)
Chief Executive Officer
WITNESS JERRY A. SCHNEIDER
/s/ Patricia Hanna /s/ Jerry A. Schneider 4/3/00
- ------------------------ ------------------------- ------
(Employee Signature) (DATE)
6
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into this 15th day of March, 2000, by and
between Fresenius Medical Care North America ("FMC" or the "EMPLOYER"), with
principal offices located at 95 Hayden Avenue, Lexington, MA 02420 and Ronald J.
Kuerbitz ( "EMPLOYEE") currently residing at 47 Park Avenue, Wellesley, MA
02481.
WITNESSETH:
WHEREAS, FMC desires to employ EMPLOYEE as Senior Vice President and General
Counsel of FMC and its affiliated corporations in North America, and
WHEREAS, the parties hereto desire to express the terms and conditions of such
employment.
NOW THEREFORE, it is understood and agreed to between the parties as follows:
1. EMPLOYMENT. FMC hereby employs EMPLOYEE as Senior Vice President and
General Counsel, and EMPLOYEE hereby accepts the employment upon the terms
and conditions of this Agreement.
2. TERM. The term of this Agreement shall commence as of March 15, 2000 and
shall terminate as of March 15, 2003 in accordance with the provisions
hereinafter stated. THE INITIAL TERM SHALL BE RENEWED BY A SUCCESSIVE THREE
(3) YEAR PERIOD UNLESS EITHER PARTY GIVES WRITTEN NOTICE OF NON-RENEWAL TO
THE OTHER PARTY AT LEAST THIRTY (30) DAYS PRIOR TO ANY TERMINATION DATE.
THE INITIAL TERM AND ANY SUBSEQUENT RENEWAL PERIODS SHALL BE CALLED THE
"EMPLOYMENT TERM."
3. DUTIES AND RESPONSIBILITIES. EMPLOYEE shall serve full time as FMC's Senior
Vice President and General Counsel and will be responsible for the
management and organization of the Law Department as well as retain the
Mergers and Acquisitions activities associated with the former Business
Development group. EMPLOYEE shall report directly to the Chief Executive
Officer of FMC. EMPLOYEE shall to the best of his ability and experience
competently, loyally, diligently and conscientiously perform all of the
duties and obligations expressly or implicitly required under this
Agreement. EMPLOYEE further agrees that, in conducting business in the
interest of the EMPLOYER, he will not engage in, knowingly permit others
under his control to carry on, or induce others to engage in any practice
or commit any acts in violation of any federal or state or local law or
ordinance.
4. COMPENSATION AND BENEFITS.
a) BASE SALARY. EMPLOYER shall pay EMPLOYEE for all services rendered a base
salary of Three Hundred Thousand Dollars ($300,000) per year, (the "Base
Salary"), payable in accordance with FMC's payroll procedures, subject to
customary withholding and employment taxes. At the end of each year of
employment hereunder, EMPLOYEE's performance for the prior year shall be
reviewed and evaluated. If EMPLOYEE's performance is satisfactory, EMPLOYEE
shall receive an increase in his base salary commensurate with level of
achievement.
b) INCENTIVE COMPENSATION. During EMPLOYEE's employment with FMC, EMPLOYEE
shall be entitled to participate in FMC's Management Bonus Plan and any
other such incentive compensation plans as are now available or may become
available to other similarly positioned senior executives of FMC. EMPLOYEE
will be in the senior executive eligibility Level I, wherein the target
level bonus is forty percent (40%) and the maximum bonus is eighty percent
(80%) of base salary. Funding for the plan is based upon attainment of
specific individual and company financial objectives. EMPLOYEE's
entitlement to a bonus under the Management Bonus Plan will be governed by
terms of that Plan.
<PAGE> 2
c) STOCK PLAN. EMPLOYEE shall be eligible to participate in the current
Fresenius Medical Care AG Stock Incentive Plan, and any future stock
incentive plan (individually a "Stock Plan" and collectively, the "Stock
Plans"), subject to IRS approval of such respective Stock Plans. In
addition to the existing options to purchase Fresenius Medical Care AG
Preference Shares previously granted to EMPLOYEE (the "Existing Options"),
EMPLOYEE shall be eligible to receive additional option grants in amounts
as and if approved by the Fresenius Medical Care AG Managing Board.
d) BENEFIT PROGRAMS. EMPLOYEE shall continue to be eligible to participate in
the group employee benefits programs at the senior executive level as now
established or which subsequently become available.
e) LIFE INSURANCE. EMPLOYEE will be provided with life insurance in accordance
with FMC's policy, currently capped at Four Hundred Thousand Dollars
($400,000). EMPLOYEE will be provided with the opportunity to purchase
supplemental life insurance of an additional Six Hundred Thousand Dollars
($600,000) beyond the current policy of coverage at his own expense, with
proof of good health.
f) AUTOMOBILE. EMPLOYEE will be provided with a company car allowance of Seven
Hundred Dollars ($700) paid monthly and treated as ordinary income.
g) FINANCIAL PLANNING/TAX PREPARATION. EMPLOYEE will be provided with an
allowance of Two Thousand Dollars ($2,000) to be paid based upon submitted
documentation of expenses incurred as a result of financial planning
assistance or income tax preparation. Reimbursement will be treated as
ordinary income.
h) EXPENSES. EMPLOYEE will be reimbursed for travel and other expenses related
to the performance of his duties under the Agreement and in accordance with
the EMPLOYER's policies.
i) VACATION/PTO. EMPLOYEE shall be allowed to carry-over up to two hundred
(200) hours from year-to-year without losing such time. EMPLOYEE shall also
accrue PTO days at the maximum available to senior executives under the
Executive Vacation Policy which currently provides for thirty (30) days of
PTO per year.
5. TERMINATION OF EMPLOYMENT. EMPLOYEE's employment hereunder may be
terminated under the following circumstances:
a) DEATH. EMPLOYEE's employment hereunder shall terminate upon his death.
b) TOTAL DISABILITY. The EMPLOYER may terminate EMPLOYEE's employment
hereunder upon EMPLOYEE becoming "Totally Disabled." For purposes of this
Agreement, EMPLOYEE shall be "Totally Disabled" if EMPLOYEE is physically
or mentally incapacitated so as to render EMPLOYEE incapable of performing
EMPLOYEE's usual and customary duties under this Agreement. EMPLOYEE's
receipt of Social Security disability benefits or disability benefits under
a Company-sponsored long-term disability plan shall be deemed conclusive
evidence of Total Disability for purpose of this Agreement; provided,
however, that in the absence of EMPLOYEE's receipt of such Social Security
or long-term disability benefits, the Company's Board of Directors may, in
its reasonable discretion (but based upon medical evidence), determine that
EMPLOYEE is Totally Disabled.
c) VOLUNTARY TERMINATION. EMPLOYER or EMPLOYEE may terminate EMPLOYEE's
employment hereunder at any time after providing written notice to the
other party. The EMPLOYEE is required to give the EMPLOYER at least thirty
(30) days written notice if he wishes to terminate his employment pursuant
to this provision.
d) TERMINATION BY THE EMPLOYER FOR CAUSE. The EMPLOYER may terminate
EMPLOYEE's employment for Cause at any time after providing written notice
to EMPLOYEE. For purposes of this Agreement, the term "Cause" shall mean,
with respect to the EMPLOYEE, any of the following: (i) commission by
EMPLOYEE of a felony or of any criminal act involving moral turpitude which
results in an arrest or indictment; (ii) deliberate and continual refusal
to satisfactorily perform employment duties reasonably requested by the
EMPLOYER
2
<PAGE> 3
after 20 days' written notice by certified mail of such failure to perform,
specifying that the failure constitutes cause (other than as a result of
vacation, sickness, illness or injury); (iii) fraud or embezzlement
determined in accordance with the EMPLOYER's normal, internal investigative
procedures consistently applied in comparable circumstances to EMPLOYEES;
(iv) gross misconduct or gross negligence in connection with the business
of the EMPLOYER which has substantial effect on the EMPLOYER; (v) failure
to obtain and maintain in good order any licenses required for EMPLOYEE to
perform his duties under this Agreement; or (vi) a breach of any of the
covenants set forth in Section 7 below. EMPLOYEE will be considered to have
been terminated for "Cause" if the EMPLOYER determines that EMPLOYEE
engaged in an act constituting "Cause," regardless of whether the
individual terminates employment voluntarily or is terminated
involuntarily, and regardless of whether the individual's termination
initially was considered to have been for "Cause." The determination of
"Cause" shall be made by the EMPLOYER in its sole discretion, and shall be
final and binding on all parties.
e) TERMINATION BY EMPLOYEE FOR CAUSE. This Agreement may be terminated by
EMPLOYEE in the event of a breach by FMC of any of its obligations under
this Agreement, provided EMPLOYEE gives FMC written notice specifying the
manner in which he believes FMC has breached this Agreement and FMC has
thirty (30) days from receipt of such notice to cure such breach, or in the
case of other than a non-payment of money breach, if such breach cannot be
cured within thirty (30) days, to commence a good faith effort to cure.
Additionally, this Agreement may be terminated by Employee, if there is a
reduction in Employee's responsibilities or FMC experiences a change in
control defined as any of the following: i) the transfer (whether by sale,
dividend, exchange, lease, merger, consolidation or otherwise) of greater
that 50 percent (50%) of the voting power of FMC; ii) the transfer
(whether by sale, dividend, exchange, lease, merger, consolidation or
otherwise) of all or substantially all the assets or stock of FMC; or iii)
any other action which results in persons other than the current majority
shareholders of FMC, having the voting power to direct the management of
FMC or if FMC relocates its corporate headquarters more than fifty (50)
miles from its present location in Lexington, Massachusetts.
f) NOTICE OF TERMINATION. Any termination by the EMPLOYER or the EMPLOYEE
under this Agreement shall be communicated by notice of termination to the
other party hereto. For purposes of this Agreement, a Notice of Termination
shall mean a notice in writing which shall indicate the specific
termination provision in this Agreement relied upon to terminate EMPLOYEE's
employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of EMPLOYEE's
employment under the provision so indicated.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
a) Under all circumstances, upon termination the EMPLOYEE shall be entitled to
receive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination; and
(ii) Any benefits to which EMPLOYEE may be entitled upon
termination pursuant to the plans, policies and arrangements
referred to in Section 4 hereof shall be determined and paid
in accordance with the terms of such plans, policies and
arrangements. ** EMPLOYEE shall have three (3) years from any
such termination to exercise his Vested Stock Options. Should
he fail to exercise these options within this period, they
will be forfeited at the end of that period.
b) In the event that EMPLOYEE's employment hereunder is voluntarily terminated
by the EMPLOYER in accordance with Section 5(c), or in the event that
EMPLOYEE's employment hereunder is terminated by the EMPLOYEE in accordance
with Section 5(e), the EMPLOYEE shall also be entitled to receive:
(iii) The balance of the salary payments equivalent to the number of
months remaining in the term of the Employment Agreement. At a
minimum, the number of months for salary continuance would
3
<PAGE> 4
be eighteen (18) at the rate in effect on the date of
termination of employment, such amount to be paid in a lump
sum as soon as is practicable thereafter; and
(iv) A pro-rated portion of the EMPLOYEE's annual bonus based upon
termination of work date.
c) Any stock options or other awards will continue to vest in accordance with
the terms of the award and the plan pursuant to which it was made. If the
terms of any award and governing plan are silent with respect to
termination of employment, such award will lapse immediately upon such
termination.
7. NON-DISCLOSURE/NON COMPETITION AGREEMENT. EMPLOYEE acknowledges that during
the term of employment with EMPLOYER, he will have access to and become
acquainted with Confidential Information of the EMPLOYER. Confidential
Information means all information related to the present or planned
business of FMC that has not been released publicly by authorized
representatives of FMC, and shall include but not be limited to, trade
secrets and know-how, inventions, marketing and sales programs, employee,
customer, patient and supplier information, information from patient
medical records, financial data, pricing information, regulatory approval
and reimbursement strategies, data, operations and clinical manuals.
EMPLOYEE agrees not to use or disclose, directly or indirectly, any
Confidential Information of FMC at any time and in any manner, except as
required in the course of his employment with FMC or with the express
written authority of FMC.
EMPLOYEE understands that his non-disclosure obligations will continue
following his termination of employment.
EMPLOYEE agrees that during the term of his employment, and for a period of
one (1) year immediately after, he leaves the employment of FMC for any
reason or the end of the period during which EMPLOYEE continues to receive
salary continuation after leaving the employment of FMC, whichever is
greater, EMPLOYEE will not directly or indirectly for his own benefit or
the benefit of others:
a) render services for a competing organization in connection with
competing products as an employee, officer, agent, broker,
consultant, partner, stockholder (except that EMPLOYEE may own
three percent (3%) or less of the equity securities of any
publicly-traded company);
b) hire or seek to persuade any employee of FMC to discontinue
employment or to become employed in any competing organization or
seek to persuade any independent contractor or supplier to
discontinue its relationship with FMC; and
c) solicit, direct, take away or attempt to take away any business
or customers of FMC.
Nothing in this Agreement would preclude EMPLOYEE from working for a
competitor of FMC's subsequent to termination of EMPLOYEE's employment
provided EMPLOYEE will not be engaged, directly or indirectly, in any
business in which FMC is actively engaged at the time of EMPLOYEE's
termination or in any new business which FMC is in the process of setting
up in which EMPLOYEE had direct involvement while employed by FMC. EMPLOYEE
also agrees to inform FMC of any such employment with a competitor before
beginning such employment.
8. ENFORCEMENT OF COVENANTS.
a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. EMPLOYEE agrees
that in the event that the EMPLOYER determines that EMPLOYEE has breached
any of the covenants set forth in Section 7 hereof during EMPLOYEE's
employment, the EMPLOYER shall have the right to terminate EMPLOYEE's
employment for "Cause." For purposes of this Agreement, the term "Cause"
shall mean, with respect to the EMPLOYEE, any of the following: (i)
commission by EMPLOYEE of a felony or of any criminal act involving moral
turpitude which results in an arrest or indictment; (ii) deliberate and
continual refusal to
4
<PAGE> 5
satisfactorily perform employment duties reasonably requested by the
EMPLOYER after 20 days' written notice by certified mail of such failure to
perform, specifying that the failure constitutes cause (other than as a
result of vacation, sickness, illness or injury); (iii) fraud or
embezzlement determined in accordance with the EMPLOYER's normal, internal
investigative procedures consistently applied in comparable circumstances
to EMPLOYEES; (iv) gross misconduct or gross negligence in connection with
the business of the EMPLOYER which has substantial effect on the EMPLOYER;
(v) failure to obtain and maintain in good order any licenses required for
EMPLOYEE to perform his duties under this Agreement; or (vi) a breach of
any of the covenants set forth in Section 7 above. EMPLOYEE will be
considered to have been terminated for "Cause" if the EMPLOYER determines
that EMPLOYEE engaged in an act constituting "Cause," regardless of whether
the individual terminates employment voluntarily or is terminated
involuntarily, and regardless of whether the individual's termination
initially was considered to have been for "Cause." The determination of
"Cause" shall be made by the EMPLOYER in its sole discretion, and shall be
final and binding on all parties.
In addition, EMPLOYEE agrees that if the EMPLOYER determines that EMPLOYEE
has breached any of the covenants set forth in Section 7 at any time, the
EMPLOYER shall have the right, notwithstanding anything herein to the
contrary, to discontinue any or all amounts otherwise payable to EMPLOYEE
hereunder. Such termination of employment or discontinuance of payments
shall be in addition to and shall not limit any and all other rights and
remedies that the EMPLOYER may have against EMPLOYEE.
b) RIGHT TO INJUNCTION. EMPLOYEE acknowledges that a breach of the covenants
set forth in Section 7 hereof will cause irreparable damage to the EMPLOYER
with respect to which the EMPLOYER's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of the
covenants set forth in this section by EMPLOYEE, EMPLOYEE and the EMPLOYER
agree that the EMPLOYER shall be entitled to the following particular forms
of relief, in addition to remedies otherwise available to it at law or
equity: (i) injunctions, both preliminary and permanent, enjoining or
retraining such breach or anticipatory breach and EMPLOYEE hereby consents
to the issuance thereof forthwith and without bond by any court of
competent jurisdiction; and (ii) recovery of all reasonable sums expended
and costs, including reasonable attorney's fees, incurred by the EMPLOYER
to enforce the covenants set forth in this section.
c) SEPARABILITY OF COVENANTS. The covenants contained in Section 7 hereof
constitute a series of separate covenants, one for each applicable State in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding, a court shall hold that any
of the covenants set forth in Section 7 exceed the time, geographic, or
occupational limitations permitted by applicable laws, EMPLOYEE and the
EMPLOYER agree that such provisions shall and are hereby reformed to the
maximum time, geographic, or occupational limitations permitted by such
laws. Further, in the event a court shall hold unenforceable any of the
separate covenants deemed included herein, then such unenforceable covenant
or covenants shall be deemed eliminated from the provisions of this
Agreement for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants to be enforced in such proceeding.
EMPLOYEE and the EMPLOYER further agree that the covenants in Section 7
shall each be construed as a separate agreement independent of any other
provisions of this Agreement, and the existence of any claim or cause of
action by Employee against the Company whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the
Company of any of the covenants in Section 7.
9. FMC DOCUMENTS AND EQUIPMENT. All documents and equipment relating to the
business of FMC, whether prepared by EMPLOYEE or otherwise coming into
EMPLOYEE's possession, are the exclusive property of FMC, and must not be
removed from the premises of FMC except as required in the course of
employment. Any such documents and equipment must be returned to FMC when
EMPLOYEE leaves the employment of FMC.
10. WITHHOLDING OF TAXES. The EMPLOYER may withhold from any compensation and
benefits payable under this Agreement all applicable federal, state, local,
or other taxes.
5
<PAGE> 6
11. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement shall constitute the entire
agreement between the parties and supersedes all existing agreements
between them, whether oral or written, with respect to the subject matter
hereof. Any waiver, alteration, or modification of any of the provisions of
this Agreement, or cancellation or replacement of this Agreement shall be
accomplished in writing and signed by the respective parties.
12. NOTICES. Any notice, consent, request or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by registered or certified
mail, return receipt requested, to those listed below at their following
respective addresses or at such other address as each may specify by notice
to the others:
To the Employer:
Fresenius Medical Care North America
Corporate Headquarters
Two Ledgemont Center
95 Hayden Avenue
Lexington, MA 02420-9192
Attention: Vice President, Human Resources
To Employee:
At the address for Employee set forth above
13. GOVERNING LAW. This Agreement shall be construed in accordance with, and
the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
14. SEPARABILITY. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the
undersigned duly authorized persons as of the day and year first stated above.
NATIONAL MEDICAL, INC. d/b/a
FRESENIUS MEDICAL CARE
NORTH AMERICA,
WITNESS EMPLOYER
/s/ Barb Read By: /s/ Ben Lipps 4/20/00
- ------------------------- -------------------- -------
Ben J. Lipps (DATE)
Chief Executive Officer
WITNESS RONALD J. KUERBITZ
/s/ Brian O'Connell /s/ Ronald J. Kuerbitz
- ------------------------ (Employee Signature) (DATE)
6
<PAGE> 1
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into this 15th day of March, 2000, by and
between Fresenius Medical Care North America ("FMC" or the "EMPLOYER"), with
principal offices located at 95 Hayden Avenue, Lexington, MA 02420 and J.
Michael Lazarus ( "EMPLOYEE") currently residing at 60 Old Colony Road,
Wellesley, MA 02481.
WITNESSETH:
WHEREAS, FMC desires to employ EMPLOYEE as Medical Director and Senior Vice
President at FMC and its affiliated corporations in North America, and
WHEREAS, the parties hereto desire to express the terms and conditions of such
employment.
NOW THEREFORE, it is understood and agreed to between the parties as follows:
1. EMPLOYMENT. FMC hereby employs EMPLOYEE as Medical Director and Senior Vice
President, and EMPLOYEE hereby accepts the employment upon the terms and
conditions of this Agreement.
2. TERM. The term of this Agreement shall commence as of March 15, 2000 and
shall terminate as of March 15, 2003 in accordance with the provisions
hereinafter stated. THE INITIAL TERM SHALL BE RENEWED BY A SUCCESSIVE THREE
(3) YEAR PERIOD UNLESS EITHER PARTY GIVES WRITTEN NOTICE OF NON-RENEWAL TO
THE OTHER PARTY AT LEAST THIRTY (30) DAYS PRIOR TO ANY TERMINATION DATE.
THE INITIAL TERM AND ANY SUBSEQUENT RENEWAL PERIODS SHALL BE CALLED THE
"EMPLOYMENT TERM."
3. DUTIES AND RESPONSIBILITIES. EMPLOYEE shall serve full time as FMC's
Medical Director and Senior Vice President and will be responsible for
supervising and overseeing all matters pertaining to Clinical Quality and
the Medical Department. EMPLOYEE shall report directly to the Chief
Executive Officer of FMC. EMPLOYEE shall to the best of his ability and
experience competently, loyally, diligently and conscientiously perform all
of the duties and obligations expressly or implicitly required under this
Agreement. EMPLOYEE further agrees that, in conducting business in the
interest of the EMPLOYER, he will not engage in, knowingly permit others
under his control to carry on, or induce others to engage in any practice
or commit any acts in violation of any federal or state or local law or
ordinance.
4. COMPENSATION AND BENEFITS.
a) BASE SALARY. EMPLOYER shall pay EMPLOYEE for all services rendered a base
salary of Five Hundred Five Thousand, Six Hundred Twenty Dollars ($505,620)
per year, (the "Base Salary"), payable in accordance with FMC's payroll
procedures, subject to customary withholding and employment taxes. At the
end of each year of employment hereunder, EMPLOYEE's performance for the
prior year shall be reviewed and evaluated. If EMPLOYEE's performance is
satisfactory, EMPLOYEE shall receive an increase in his base salary
commensurate with level of achievement.
b) INCENTIVE COMPENSATION. During EMPLOYEE's employment with FMC, EMPLOYEE
shall be entitled to participate in FMC's Management Bonus Plan and any
other such incentive compensation plans as are now available or may become
available to other similarly positioned senior executives of FMC. EMPLOYEE
will be in the senior executive eligibility Level I, wherein the target
level bonus is forty percent (40%) and the maximum bonus is eighty percent
(80%) of base salary. Funding for the plan is based upon attainment of
specific individual and company financial objectives. EMPLOYEE's
entitlement to a bonus under the Management Bonus Plan will be governed by
terms of that Plan.
c) STOCK PLAN. EMPLOYEE shall be eligible to participate in the current
Fresenius Medical Care AG Stock Incentive Plan, and any future stock
incentive plan (individually a "Stock Plan" and collectively, the "Stock
<PAGE> 2
Plans"), subject to IRS approval of such respective Stock Plans. In
addition to the existing options to purchase Fresenius Medical Care AG
Preference Shares previously granted to EMPLOYEE (the "Existing Options"),
EMPLOYEE shall be eligible to receive additional option grants in amounts
as and if approved by the Fresenius Medical Care AG Managing Board.
d) BENEFIT PROGRAMS. EMPLOYEE shall continue to be eligible to participate in
the group employee benefits programs at the senior executive level as now
established or which subsequently become available.
e) LIFE INSURANCE. EMPLOYEE will be provided with life insurance in accordance
with FMC's policy, currently capped at Four Hundred Thousand Dollars
($400,000). EMPLOYEE will be provided with the opportunity to purchase
supplemental life insurance of an additional Six Hundred Thousand Dollars
($600,000) beyond the current policy of coverage at his own expense, with
proof of good health.
Additionally, this Agreement may be terminated by Employee, if there is a
reduction in Employee's responsibilities or FMC experiences a change in
control defined as any of the following: i) the transfer (whether by sale,
dividend, exchange, lease, merger, consolidation or otherwise) of greater
that 50 percent (50%) of the voting power of FMC; ii) the transfer (whether
by sale, dividend, exchange, lease, merger, consolidation or otherwise) of
all or substantially all the assets or stock of FMC; or iii) any other
action which results in persons other than the current majority
shareholders of FMC, having the voting power to direct the management of
FMC or if FMC relocates its corporate headquarters more than fifty (50)
miles from its present location in Lexington, Massachusetts.
f) AUTOMOBILE. EMPLOYEE will be provided with a company car allowance of Seven
Hundred Dollars ($700) paid monthly and treated as ordinary income.
g) FINANCIAL PLANNING/TAX PREPARATION. EMPLOYEE will be provided with an
allowance of Two Thousand Dollars ($2,000) to be paid based upon submitted
documentation of expenses incurred as a result of financial planning
assistance or income tax preparation. Reimbursement will be treated as
ordinary income.
h) EXPENSES. EMPLOYEE will be reimbursed for travel and other expenses related
to the performance of his duties under the Agreement and in accordance with
the EMPLOYER's policies.
i) VACATION/PTO. EMPLOYEE shall be allowed to carry-over up to two hundred
(200) hours from year-to-year without losing such time. EMPLOYEE shall also
accrue PTO days at the maximum available to senior executives under the
Executive Vacation Policy which currently provides for thirty (30) days of
PTO per year.
5. TERMINATION OF EMPLOYMENT. EMPLOYEE's employment hereunder may be
terminated under the following circumstances:
a) DEATH. EMPLOYEE's employment hereunder shall terminate upon his death.
b) TOTAL DISABILITY. The EMPLOYER may terminate EMPLOYEE's employment
hereunder upon EMPLOYEE becoming "Totally Disabled." For purposes of this
Agreement, EMPLOYEE shall be "Totally Disabled" if EMPLOYEE is physically
or mentally incapacitated so as to render EMPLOYEE incapable of performing
EMPLOYEE's usual and customary duties under this Agreement. EMPLOYEE's
receipt of Social Security disability benefits or disability benefits under
a Company-sponsored long-term disability plan shall be deemed conclusive
evidence of Total Disability for purpose of this Agreement; provided,
however, that in the absence of EMPLOYEE's receipt of such Social Security
or long-term disability benefits, the Company's Board of Directors may, in
its reasonable discretion (but based upon medical evidence), determine that
EMPLOYEE is Totally Disabled.
c) VOLUNTARY TERMINATION. EMPLOYER or EMPLOYEE may terminate EMPLOYEE's
employment hereunder at any time after providing written notice to the
other party. The EMPLOYEE is required to give the
2
<PAGE> 3
EMPLOYER at least thirty (30) days written notice if he wishes to terminate
his employment pursuant to this provision.
d) TERMINATION BY THE EMPLOYER FOR CAUSE. The EMPLOYER may terminate
EMPLOYEE's employment for Cause at any time after providing written notice
to EMPLOYEE. For purposes of this Agreement, the term "Cause" shall mean,
with respect to the EMPLOYEE, any of the following: (i) commission by
EMPLOYEE of a felony or of any criminal act involving moral turpitude which
results in an arrest or indictment; (ii) deliberate and continual refusal
to satisfactorily perform employment duties reasonably requested by the
EMPLOYER after 20 days' written notice by certified mail of such failure to
perform, specifying that the failure constitutes cause (other than as a
result of vacation, sickness, illness or injury); (iii) fraud or
embezzlement determined in accordance with the EMPLOYER's normal, internal
investigative procedures consistently applied in comparable circumstances
to EMPLOYEES; (iv) gross misconduct or gross negligence in connection with
the business of the EMPLOYER which has substantial effect on the EMPLOYER;
(v) failure to obtain and maintain in good order any licenses required for
EMPLOYEE to perform his duties under this Agreement; or (vi) a breach of
any of the covenants set forth in Section 7 below. EMPLOYEE will be
considered to have been terminated for "Cause" if the EMPLOYER determines
that EMPLOYEE engaged in an act constituting "Cause," regardless of whether
the individual terminates employment voluntarily or is terminated
involuntarily, and regardless of whether the individual's termination
initially was considered to have been for "Cause." The determination of
"Cause" shall be made by the EMPLOYER in its sole discretion, and shall be
final and binding on all parties.
e) TERMINATION BY EMPLOYEE FOR CAUSE. This Agreement may be terminated by
EMPLOYEE in the event of a breach by FMC of any of its obligations under
this Agreement, provided EMPLOYEE gives FMC written notice specifying the
manner in which he believes FMC has breached this Agreement and FMC has
thirty (30) days from receipt of such notice to cure such breach, or in the
case of other than a non-payment of money breach, if such breach cannot be
cured within thirty (30) days, to commence a good faith effort to cure.
Additionally, this Agreement may be terminated by Employee, if there is a
reduction in Employee's responsibilities or FMC experiences a change in
control defined as any of the following: i) the transfer (whether by sale,
dividend, exchange, lease, merger, consolidation or otherwise) of greater
that 50 percent (50%) of the voting power of FMC; ii) the transfer (whether
by sale, dividend, exchange, lease, merger, consolidation or otherwise) of
all or substantially all the assets or stock of FMC; or iii) any other
action which results in persons other than the current majority
shareholders of FMC, having the voting power to direct the management of
FMC or if FMC relocates its corporate headquarters more than fifty (50)
miles from its present location in Lexington, Massachusetts.
f) NOTICE OF TERMINATION. Any termination by the EMPLOYER or the EMPLOYEE
under this Agreement shall be communicated by notice of termination to the
other party hereto. For purposes of this Agreement, a Notice of Termination
shall mean a notice in writing which shall indicate the specific
termination provision in this Agreement relied upon to terminate EMPLOYEE's
employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of EMPLOYEE's
employment under the provision so indicated.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
a) Under all circumstances, upon termination the EMPLOYEE shall be entitled to
receive:
(i) Any accrued but unpaid Base Salary for services rendered to the
date of termination; and
(ii) Any benefits to which EMPLOYEE may be entitled upon termination
pursuant to the plans, policies and arrangements referred to in
Section 4 hereof shall be determined and paid in
3
<PAGE> 4
accordance with the terms of such plans, policies and
arrangements. ** EMPLOYEE shall have three (3) years from any
such termination to exercise his Vested Stock Options. Should
he fail to exercise these options within this period, they
will be forfeited at the end of that period.
b) In the event that EMPLOYEE's employment hereunder is voluntarily terminated
by the EMPLOYER in accordance with Section 5(c), or in the event that
EMPLOYEE's employment hereunder is terminated by the EMPLOYEE in accordance
with Section 5(e), the EMPLOYEE shall also be entitled to receive:
(iii) The balance of the salary payments equivalent to the number of
months remaining in the term of the Employment Agreement. At a
minimum, the number of months for salary continuance would be
eighteen (18) at the rate in effect on the date of termination
of employment, such amount to be paid in a lump sum as soon as
is practicable thereafter; and
(iv) A pro-rated portion of the EMPLOYEE's annual bonus based upon
termination of work date.
c) Any stock options or other awards will continue to vest in accordance with
the terms of the award and the plan pursuant to which it was made. If the
terms of any award and governing plan are silent with respect to
termination of employment, such award will lapse immediately upon such
termination.
7. NON-DISCLOSURE/NON COMPETITION AGREEMENT. EMPLOYEE acknowledges that during
the term of employment with EMPLOYER, he will have access to and become
acquainted with Confidential Information of the EMPLOYER. Confidential
Information means all information related to the present or planned
business of FMC that has not been released publicly by authorized
representatives of FMC, and shall include but not be limited to, trade
secrets and know-how, inventions, marketing and sales programs, employee,
customer, patient and supplier information, information from patient
medical records, financial data, pricing information, regulatory approval
and reimbursement strategies, data, operations and clinical manuals.
EMPLOYEE agrees not to use or disclose, directly or indirectly, any
Confidential Information of FMC at any time and in any manner, except as
required in the course of his employment with FMC or with the express
written authority of FMC.
EMPLOYEE understands that his non-disclosure obligations will continue
following his termination of employment.
EMPLOYEE agrees that during the term of his employment, and for a period of
one (1) year immediately after, he leaves the employment of FMC for any
reason or the end of the period during which EMPLOYEE continues to receive
salary continuation after leaving the employment of FMC, whichever is
greater, EMPLOYEE will not directly or indirectly for his own benefit or
the benefit of others:
a) render services for a competing organization in connection with
competing products as an employee, officer, agent, broker,
consultant, partner, stockholder (except that EMPLOYEE may own
three percent (3%) or less of the equity securities of any
publicly-traded company);
b) hire or seek to persuade any employee of FMC to discontinue
employment or to become employed in any competing organization or
seek to persuade any independent contractor or supplier to
discontinue its relationship with FMC; and
c) solicit, direct, take away or attempt to take away any business
or customers of FMC.
Nothing in this Agreement would preclude EMPLOYEE from working for a
competitor of FMC's subsequent to termination of EMPLOYEE's employment
provided EMPLOYEE will not be engaged, directly or indirectly, in any
business in which FMC is actively engaged at the time of EMPLOYEE's
termination or in any new business which FMC is in the process of setting
up in which EMPLOYEE had direct involvement while
4
<PAGE> 5
employed by FMC. EMPLOYEE also agrees to inform FMC of any such employment
with a competitor before beginning such employment.
8. ENFORCEMENT OF COVENANTS.
a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. EMPLOYEE agrees
that in the event that the EMPLOYER determines that EMPLOYEE has breached
any of the covenants set forth in Section 7 hereof during EMPLOYEE's
employment, the EMPLOYER shall have the right to terminate EMPLOYEE's
employment for "Cause." For purposes of this Agreement, the term "Cause"
shall mean, with respect to the EMPLOYEE, any of the following: (i)
commission by EMPLOYEE of a felony or of any criminal act involving moral
turpitude which results in an arrest or indictment; (ii) deliberate and
continual refusal to satisfactorily perform employment duties reasonably
requested by the EMPLOYER after 20 days' written notice by certified mail
of such failure to perform, specifying that the failure constitutes cause
(other than as a result of vacation, sickness, illness or injury); (iii)
fraud or embezzlement determined in accordance with the EMPLOYER's normal,
internal investigative procedures consistently applied in comparable
circumstances to EMPLOYEES; (iv) gross misconduct or gross negligence in
connection with the business of the EMPLOYER which has substantial effect
on the EMPLOYER; (v) failure to obtain and maintain in good order any
licenses required for EMPLOYEE to perform his duties under this Agreement;
or (vi) a breach of any of the covenants set forth in Section 7 above.
EMPLOYEE will be considered to have been terminated for "Cause" if the
EMPLOYER determines that EMPLOYEE engaged in an act constituting "Cause,"
regardless of whether the individual terminates employment voluntarily or
is terminated involuntarily, and regardless of whether the individual's
termination initially was considered to have been for "Cause." The
determination of "Cause" shall be made by the EMPLOYER in its sole
discretion, and shall be final and binding on all parties.
In addition, EMPLOYEE agrees that if the EMPLOYER determines that EMPLOYEE
has breached any of the covenants set forth in Section 7 at any time, the
EMPLOYER shall have the right, notwithstanding anything herein to the
contrary, to discontinue any or all amounts otherwise payable to EMPLOYEE
hereunder. Such termination of employment or discontinuance of payments
shall be in addition to and shall not limit any and all other rights and
remedies that the EMPLOYER may have against EMPLOYEE.
b) RIGHT TO INJUNCTION. EMPLOYEE acknowledges that a breach of the covenants
set forth in Section 7 hereof will cause irreparable damage to the EMPLOYER
with respect to which the EMPLOYER's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of the
covenants set forth in this section by EMPLOYEE, EMPLOYEE and the EMPLOYER
agree that the EMPLOYER shall be entitled to the following particular forms
of relief, in addition to remedies otherwise available to it at law or
equity: (i) injunctions, both preliminary and permanent, enjoining or
retraining such breach or anticipatory breach and EMPLOYEE hereby consents
to the issuance thereof forthwith and without bond by any court of
competent jurisdiction; and (ii) recovery of all reasonable sums expended
and costs, including reasonable attorney's fees, incurred by the EMPLOYER
to enforce the covenants set forth in this section.
c) SEPARABILITY OF COVENANTS. The covenants contained in Section 7 hereof
constitute a series of separate covenants, one for each applicable State in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding, a court shall hold that any
of the covenants set forth in Section 7 exceed the time, geographic, or
occupational limitations permitted by applicable laws, EMPLOYEE and the
EMPLOYER agree that such provisions shall and are hereby reformed to the
maximum time, geographic, or occupational limitations permitted by such
laws. Further, in the event a court shall hold unenforceable any of the
separate covenants deemed included herein, then such unenforceable covenant
or covenants shall be deemed eliminated from the provisions of this
Agreement for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants to be enforced in such proceeding.
EMPLOYEE and the EMPLOYER further agree that the covenants in Section 7
shall each be construed as a separate agreement independent of any other
provisions of this Agreement, and the existence of any claim or cause of
action by Employee against the Company whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the
Company of any of the covenants in Section 7.
5
<PAGE> 6
9. FMC DOCUMENTS AND EQUIPMENT. All documents and equipment relating to the
business of FMC, whether prepared by EMPLOYEE or otherwise coming into
EMPLOYEE's possession, are the exclusive property of FMC, and must not be
removed from the premises of FMC except as required in the course of
employment. Any such documents and equipment must be returned to FMC when
EMPLOYEE leaves the employment of FMC.
10. WITHHOLDING OF TAXES. The EMPLOYER may withhold from any compensation and
benefits payable under this Agreement all applicable federal, state, local,
or other taxes.
11. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement shall constitute the entire
agreement between the parties and supersedes all existing agreements
between them, whether oral or written, with respect to the subject matter
hereof. Any waiver, alteration, or modification of any of the provisions of
this Agreement, or cancellation or replacement of this Agreement shall be
accomplished in writing and signed by the respective parties.
12. NOTICES. Any notice, consent, request or other communication made or given
in connection with this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by registered or certified
mail, return receipt requested, to those listed below at their following
respective addresses or at such other address as each may specify by notice
to the others:
To the Employer:
Fresenius Medical Care North America
Corporate Headquarters
Two Ledgemont Center
95 Hayden Avenue
Lexington, MA 02420-9192
Attention: Vice President, Human Resources
To Employee:
At the address for Employee set forth above
13. GOVERNING LAW. This Agreement shall be construed in accordance with, and
the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
14. SEPARABILITY. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full force
and effect.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the
undersigned duly authorized persons as of the day and year first stated above.
NATIONAL MEDICAL, INC. d/b/a
FRESENIUS MEDICAL CARE
NORTH AMERICA,
WITNESS EMPLOYER
/s/ Brian O'Connell By: /s/ Ben Lipps 4/20/00
- ------------------------ ---------------------------- --------
Ben J. Lipps (DATE)
Chief Executive Officer
WITNESS J. MICHAEL LAZARUS
/s/ Lorraine Gettings /s/ J. Michael Lazarus, M.D. 4/6/2000
- ------------------------ ---------------------------- --------
(Employee Signature) (DATE)
<PAGE> 1
EXHIBIT 11
FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE
COMPUTATION
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
------- -------
<S> <C> <C>
The weighted average number of shares of
Common Stock were as follows ...................................... 90,000 90,000
======= =======
Income used in the computation of earnings per share were as follows:
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
CONSOLIDATED 2000 1999
------- -------
<S> <C> <C>
Net earnings ........................................................ $23,094 $17,627
Dividends paid on preferred stocks .................................. (130) (130)
------- -------
Income used in per share computation of earnings $22,964 $17,497
======= =======
Basic and fully dilutive earnings per share ......................... $ 0.26 $ 0.19
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 15,941
<SECURITIES> 0
<RECEIVABLES> 402,986
<ALLOWANCES> 66,058
<INVENTORY> 177,158
<CURRENT-ASSETS> 877,605
<PP&E> 686,230
<DEPRECIATION> 256,963
<TOTAL-ASSETS> 4,618,753
<CURRENT-LIABILITIES> 1,361,961
<BONDS> 0
0
16,318
<COMMON> 90,000
<OTHER-SE> 1,538,827
<TOTAL-LIABILITY-AND-EQUITY> 4,618,753
<SALES> 119,038
<TOTAL-REVENUES> 745,115
<CGS> 86,455
<TOTAL-COSTS> 506,858
<OTHER-EXPENSES> 127,520
<LOSS-PROVISION> 12,379
<INTEREST-EXPENSE> 53,303
<INCOME-PRETAX> 45,055
<INCOME-TAX> 21,961
<INCOME-CONTINUING> 23,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,094
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
