EXHIBIT 4.11
[XXXXXXXXXX XXXXXXXX LLP LETTERHEAD]
April 24, 2002
VIA ELECTRONIC TRANSMISSION
Xxxxx Xx Xxxxxxxxx
Xxxxxxxx Xxxxxx Xxxxx & Xxxxxx
One Embarcadero Center
16th Floor
San Francisco 94111
Re: Revised Agreement - Medicare Settlement Payment Obligations
Dear Xxxxx:
As you know, we have reached a revised Medicare Settlement Agreement
(the "MSA") with the United States Department of Justice on behalf of the
Department of Health and Human Services ("HHS") (collectively the "United
States") concerning the United States' claims for reimbursement of medical items
and services furnished to Medicare beneficiaries in connection with the
voluntary recall of certain lots Sulzer Orthopedics Inc.'s ("SOUS") Inter-Op(TM)
Acetabular Shell and Reprocessed Inter-Op Shells (collectively "Inter-Op
Shells"). It is our view that the MSA provides substantial benefits to SOUS and
the individuals affected by the Inter-Op Shells, including full releases to
Winterthur International America Insurance Company, Winterthur Swiss Insurance
Company and XL Winterthur International Insurance Switzerland and their
affiliates and subsidiaries as more fully set forth in the MSA ("Winterthur")
for certain claims which may be brought by the United States against SOUS and/or
Winterthur under various statutory provisions including those arising under the
Medicare Secondary Payer laws and related regulations, 42 U.S.C. Section
1395y(b)(2)-(3) & 42 C.F.R. Sections 411.20-411.37. The MSA also provides a
funding mechanism to ensure that Medicare beneficiaries receive timely and
appropriate medical care in connection with the Inter-Op Shells.
As a result, we are writing to memorialize Winterthur's agreement
("Letter Agreement") with regard to the payment obligations SOUS will undertake
in connection with the MSA. Any capitalized terms used in this Letter Agreement,
and not defined herein, are hereby given the meaning attributed in the MSA. This
revised Letter Agreement supercedes and replaces the agreement between SOUS and
Winterthur dated March 8, 2002.
Xxxxx Xx Xxxxxxxxx
May 14, 2002
Page 2
In consideration of the promises and covenants herein and for other
valid consideration, the receipt and sufficiency of which are hereby
acknowledged, SOUS and Winterthur agree as follows:
1. Winterthur represents that it provides liability insurance coverage
to SOUS under the April 1, 2000 - March 30, 2001 insurance policies (the
"Policies") as more fully set forth on Attachment A for the costs and expenses
due and owing under the MSA. Winterthur formerly agreed in principle to the
payment terms described below, but reserved the right to review the final
agreement. A copy of the MSA is attached hereto as Attachment X. Xxxxxxxxxx
agrees that it has had the opportunity to review the MSA before execution of the
MSA or this Letter Agreement and has been provided with any other documents
necessary for its review of the MSA.
2. Winterthur understands and agrees that the MSA confers a substantial
benefit to SOUS by providing significantly lower liability than SOUS might
otherwise be subject to and that the MSA includes releases for both SOUS,
Winterthur, and Xxxxxx XX.
3. Pursuant to Article IV of the MSA, Winterthur understands that SOUS
must wire or cause to be paid, within thirty (30) days following SOUS'
submission of the Initial Medicare List or any Supplemental Medicare List, an
amount equal to the total number of Covered Medicare Beneficiaries on the
Initial or Supplemental Medicare List times the applicable Per-Beneficiary Cap,
less any offsets, deductions or credits set forth in the MSA. Winterthur further
understands that in the event payment is not received within thirty (30) days
after submission of the Initial or Supplemental Medicare List, that the United
States may assess interest at the rate of the current applicable interest rate
pursuant to 45 C.F.R. Section 30.13(a) per annum from the date of default until
paid in full or the United States may declare SOUS to be in breach and terminate
the MSA. In the event the United States' terminates the MSA for failure to make
timely payment, the United States may file suit against SOUS or otherwise seek
payment from SOUS for any Covered Medicare Beneficiaries for whom SOUS has not
fulfilled its payment obligations and that, in such instance, the United States'
right of recovery would not be limited to the Per-Beneficiary Caps set forth in
the MSA.
4. Winterthur understands and agrees that time is of the essence with
regard to any payment obligations due to the United States under the MSA and,
SOUS acknowledges and agrees that it must provide sufficient notice to
Winterthur such that Winterthur may arrange for funds, including through any
policies of reinsurance to which it may be entitled to pursue, so that it may
make timely payment obligations under the MSA. SOUS (1) shall provide Winterthur
with a copy of any Inter-Op Revision List furnished to the United States in
accordance with the MSA within five (5) days of furnishing such list to the
United States; (2) shall provide Winterthur with an estimate of the anticipated
Medicare payment which may be due to the United States based upon the Covered
Medicare Beneficiaries times the applicable Per-Beneficiary Cap that applies to
each Covered Medicare beneficiary within five (5) days of
Xxxxx Xx Xxxxxxxxx
May 14, 2002
Page 3
receipt of any Proposed Initial or Proposed Supplemental Medicare List submitted
by CMS to SOUS; and (3) on or before the submission of the Initial or any
Supplemental Medicare List to the United States (from which final payment is
based), SOUS shall notify Winterthur of what it believes to be the final amount
of payment that must be made to the United States for the Covered Medicare
Beneficiaries associated with such list. Unless Winterthur disputes SOUS'
calculation of payment that is due to the United States, Winterthur shall either
(1) wire the applicable payment directly to the United States directly within
thirty (30) days of receipt of the Initial Medicare or Supplemental Medicare
List; or, at Winterthur's sole discretion, (2) wire the applicable payment
directly to SOUS, or its designee, within fourteen (14) days of receipt of the
Initial Medicare or Supplemental Medicare List.
5. Winterthur shall have the right to have SOUS exercise its options
under Article VI of the MSA to obtain either a statistical sample or 100% claims
review of amounts paid by the United States to furnish Medicare Covered Items
and Service provided that, the results of such reports shall have no impact on
the amounts to be paid under this Letter Agreement unless it can be demonstrated
that the United States has failed to fulfill its obligations under the MSA. In
the event Winterthur desires a claims report pursuant to Article VI of the MSA,
Winterthur shall submit a written request to SOUS. Winterthur understands that
the provisions in Article VI of the MSA shall apply to the release of such
claims report(s) by the United States.
6. This Letter Agreement shall be subject to execution of the MSA in
the form as set forth in Attachment B and shall further be subject to the
required Judicial Approval set forth in Article VII. In the event Judicial
Approval cannot be obtained in accordance with the MSA, this Letter Agreement
including any payment obligations hereunder shall be null and void. SOUS may not
waive the requirement to seek Judicial Approval set forth in Article VII of the
MSA without the prior written consent of Winterthur.
7. In the event SOUS' obligations under the Medicare Settlement
Agreement are avoided for any reason, including, but not limited to, through the
exercise of a trustee's avoidance powers under the Bankruptcy Code, this Letter
Agreement including any payment obligations hereunder shall be null and void.
8. Winterthur's obligation to fund any payments under the MSA shall not
exceed the available, uneroded and unexhausted aggregate limits of SOUS'
insurance coverage under such Policies and shall exist only to the extent such
Policies have not been exhausted in connection with claims or expenses
attributable to the Policies which have been paid on or before any payment
obligation is due to the United States under the MSA. Any and all decisions
between Winterthur and SOUS as to exhaustion shall limit Winterthur's
obligations under this Letter Agreement. Any amounts which Winterthur
contributes to the Class Action Settlement Trust under the Policies shall be
counted for purposes of determining exhaustion even if such amounts have not
been distributed to Class Members or other claimants by the Trustee. For
purposes of this Letter Agreement, the Class Action Settlement refers to that
settlement agreement dated
Xxxxx Xx Xxxxxxxxx
May 14, 2002
Page 4
March 13, 2002, relating to the claims consolidated in the United States
District Court for the Northern District of Ohio, Eastern Division, and styled
In Re Sulzer Hip Prosthesis and Knee Prosthesis Liability Litigation (MDL No.
1401).
9. In connection with this Letter Agreement, any notices or other
communications required or permitted shall be in writing and deemed given and
received if delivered in person, by overnight delivery service, by first-class
United States mail, postage prepaid and certified, or by facsimile. Any such
notice shall be deemed given as of the date of the receipt and shall be
delivered to the parties as follows:
SOUS: Sulzer Orthopedics Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, President
Xxxxxxxxx: 512.432.9305
with copies to:
Xxxxx Xxxxxxxxx
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: 919.510.6105
Sulzer Medica USA Inc.
0 Xxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile: 713.561.6380
Winterthur:
Xx. Xxxx Xxxx
Chief Claims Officer
XL Winterthur International
Xxxxxxxxxxxxxxxxx 00
XX Xxx 000,
XX-0000 Xxxxxxxxxx, Xxxxxxxxxxx
Xxxxx Xx Xxxxxxxxx
May 14, 2002
Page 5
with copies to:
Xxxxx XxXxxxxxxxx
Xxxxxxxx Xxxxxx Xxxxx & Xxxxxx
One Embarcadero Center
16th Floor
San Francisco 94111
Facsimile: 415.781.2635
10. In the event any one or more of the provisions contained in this
Letter Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Letter Agreement. All other
provisions shall be valid, legal, and enforceable as if the invalid, illegal, or
unenforceable provision had never been included in this Letter Agreement. SOUS
and Winterthur enter into this Letter Agreement freely and voluntarily after
having consulted counsel with regard to the legal significance of the Letter
Agreement.
11. This Letter Agreement, along with the Policies, shall constitute
the entire agreement of the parties relating to Winterthur's obligations with
respect to the Agreement, and shall not be changed, modified, amended, extended,
terminated, waived, discharged or added to without the express written consent
of counsel on behalf of SOUS and Winterthur. This Letter Agreement, along with
the Policies, contains the entire understanding of the parties and supersedes
all prior or contemporaneous understandings, agreements, negotiations,
discussions, and draft agreements between the parties on or with respect to the
issues addressed herein, unless expressly referenced or incorporated herein.
12. This Letter Agreement is limited to the funding obligations under
the MSA and does not address or resolve any other claims that SOUS has or may
have against Winterthur in connection with the Policy or any other policies of
insurance which have been issued by Winterthur.
13. In the case of any Refund which may be issued by the United States
to SOUS as set forth in Article IV.C of the MSA which is attributable to amounts
previously paid or funded by Winterthur, SOUS shall remit such refund payment
directly to Winterthur or the Settlement Trust, if required by such terms of the
Class Action Settlement or any subsequent agreement between Winterthur and SOUS,
within fifteen (15) days of receipt.
14. SOUS may not assign nor transfer the Policies nor any rights under
the Policies to the United States or any division, agency or department thereof.
15. This Letter Agreement is for the sole benefit of SOUS and
Winterthur and no other party or entity including, but not limited to the United
States, shall be a third-party beneficiary to this Letter Agreement or the
rights, duties and obligations set forth herein.
Xxxxx Xx Xxxxxxxxx
May 14, 2002
Page 6
16. Nothing in this Letter Agreement or the MSA shall be deemed to
change the status or Winterthur or its Policies with respect to jurisdiction, or
lack thereof, in the courts of the United States or any State of the United
States.
Provided that this Letter Agreement accurately reflects our agreements
in connection with the MSA, please have a duly authorized individual sign below,
returning the original signed copy to my attention. Thank you for your
consideration in this matter.
Sincerely,
/s/ XXXXX X. XXXXXXXXX
Xxxxx X. Xxxxxxxxx
Enclosures
IN WITNESS WHEREOF, the parties have caused this Letter Agreement to be executed
by their duly authorized representatives to be effective as of the date executed
by the party to be charged.
XL WINTERTHUR INTERNATIONAL INSURANCE SWITZERLAND
By: /s/ XXXX XXXX
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Typed Name: Xxxx Xxxx
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Title: Chief Claims Officer
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SULZER ORTHOPEDICS INC.
By: /s/ XXXXX XXXXX
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Typed Name: Xxxxx Xxxxx
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Title: President
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