Exhibit 10.3

CORPORATE INTEGRITY AGREEMENT

BETWEEN THE

OFFICE OF INSPECTOR GENERAL

OF THE

DEPARTMENT OF HEALTH AND HUMAN SERVICES

AND

EXACTECH, INC.

 

I. PREAMBLE

Exactech, Inc. (Exactech) hereby enters into this Corporate Integrity Agreement
(CIA) with the Office of Inspector General (OIG) of the United States Department
of Health and Human Services (HHS) to promote compliance with the statutes,
regulations, and written directives of Medicare, Medicaid, and all other Federal
health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) (Federal health
care program requirements). Contemporaneously with this CIA, Exactech is
entering into a Settlement Agreement and Deferred Prosecution Agreement (DPA)
with the United States. This CIA shall apply only to U.S. operations of Exactech
that are subject to U.S. Federal health care program requirements.

Exactech represented to the OIG that, prior to the effective date of this CIA,
Exactech established a voluntary compliance program, which includes a corporate
compliance officer, a corporate compliance committee, a Code of Business Conduct
and Ethics for all employees, written policies and procedures, educational and
training initiatives, review and disciplinary procedures, a confidential
disclosure program, an ineligible persons screening program, and internal audit
and review procedures. Exactech agrees to continue the operation of its
compliance program in accordance with the terms set forth below for the term of
this CIA.

 

II. TERM AND SCOPE OF THE CIA

A. The period of the compliance obligations assumed by Exactech under this CIA
shall be 5 years from the effective date of this CIA, unless otherwise
specified. The effective date shall be the date on which the final signatory of
this CIA executes this CIA (Effective Date). Each one-year period, beginning
with the one-year period following the Effective Date, shall be referred to as a
“Reporting Period.”

 

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B. Suspension of Requirements of Section III.A through Section III.E.

The requirements set forth in Section III.A through Section III.E will be
suspended during the first 12 months of the CIA unless (a) the DPA is no longer
in effect; or (b) OIG lifts the suspension. The determination as to whether or
not to lift the suspension of Section III.A through Section III.E requirements
shall be made at the sole discretion of the OIG. In the event that any
requirements of Section III.A through Section III.E are no longer suspended,
Exactech shall within 90 days implement all requirements of Section III.A
through III.E. Within 30 days of Exactech’s engagement of an Independent Review
Organization (“IRO”), Exactech shall provide the information described in
Appendix A.

C. Sections VII, X, and XI shall expire no later than 120 days after OIG’s
receipt of: (1) Exactech’s final annual report; or (2) any additional materials
submitted by Exactech pursuant to OIG’s request, whichever is later.

D. The scope of this CIA shall be governed by the following definitions:

1. “Arrangements” means every arrangement or transaction that involves, directly
or indirectly, the offer, payment, solicitation, or receipt of anything of
value; and is between Exactech and any actual or potential source of health care
business or referrals to Exactech or any actual or potential recipient of health
care business or referrals from Exactech. The term “source of health care
business or referrals” shall mean any individual or entity that refers,
recommends, arranges for, orders, leases, or purchases any good, facility, item,
or service for which payment may be made in whole or in part by a Federal health
care program and the term “recipient of health care business or referrals” shall
mean any individual or entity (1) to whom Exactech refers an individual for the
furnishing or arranging for the furnishing of any item or service, or (2) from
whom Exactech purchases, leases or orders or arranges for or recommends the
purchasing, leasing, or ordering of any good, facility, item, or service for
which payment may be made in whole or in part by a Federal health care program;

2. “Focus Arrangements” means every Arrangement that is between Exactech and any
actual source of health care business or referrals to Exactech and involves,
directly or indirectly, the offer, payment, or provision of anything of value.

 

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Notwithstanding the foregoing provisions of Section II.D.2, any Arrangement that
satisfies the requirements of 42 C.F.R. § 411.357(g) (remuneration unrelated to
the provision of designated health services); 42 C.F.R. § 411.357(i) (payments
by a physician for items and services); 42 C.F.R. § 411.357(k) (non-monetary
compensation); or any exception to the prohibitions of 42 U.S.C. § 1395nn,
enacted following the Effective Date that does not require a written agreement
shall not be considered a Focus Arrangement for purposes of this CIA.

3. “Covered Persons” includes:

a. all owners of Exactech who are natural persons (other than shareholders who:
(1) have an ownership interest of less than 5%; and (2) acquired the ownership
interest through public trading), officers, directors, and employees of
Exactech;

b. all contractors, subcontractors, agents, and other persons who, on behalf of
Exactech, perform functions related to the sale or marketing of items or
services reimbursable by Federal health care programs;

and

c. all individuals that sell or market on behalf of Exactech items or services
for which reimbursement may be made by the Federal health care programs.

Notwithstanding the above, this term does not include part-time or per diem
employees, contractors, subcontractors, agents, and other persons who are not
reasonably expected to work more than 160 hours per year, except that any such
individuals shall become “Covered Persons” at the point when they work more than
160 hours during the calendar year.

4. “Arrangements Covered Persons” includes each Covered Person who is involved
with the development, approval, management, or review of Exactech’s
Arrangements.

 

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III. CORPORATE INTEGRITY OBLIGATIONS

Exactech shall maintain a Compliance Program that includes the following
elements:

A. Compliance Officer and Committee.

1. Compliance Officer. Exactech has appointed, and shall maintain during the
term of the CIA, an individual to serve as its Compliance Officer. To the extent
necessary, within 120 days after the Effective Date, Exactech shall modify the
position description, scope of responsibility, and authority of the Compliance
Officer such that the following requirements are satisfied. The Compliance
Officer shall be responsible for developing and implementing policies,
procedures, and practices designed to ensure compliance with the requirements
set forth in this CIA and with Federal health care program requirements. The
Compliance Officer shall be a member of senior management of Exactech, and shall
report directly to the Nominating, Compliance and Governance Committee of the
Board of Directors and indirectly to the President and CEO. The Compliance
Officer shall make periodic (at least quarterly) reports regarding compliance
matters directly to the Board of Directors of Exactech, and shall be authorized
to report on such matters to the Board of Directors at any time. The Compliance
Officer shall not be or be subordinate to the General Counsel or Chief Financial
Officer. The Compliance Officer shall be responsible for monitoring the
day-to-day compliance activities engaged in by Exactech as well as for any
reporting obligations created under this CIA. Any noncompliance job
responsibilities of the Compliance Officer shall be limited and must not
interfere with the Compliance Officer’s ability to perform the duties outlined
in this CIA.

Exactech shall report to OIG, in writing, any changes in the identity or
position description of the Compliance Officer, or any actions or changes that
would affect the Compliance Officer’s ability to perform the duties necessary to
meet the obligations in this CIA, within five days after such a change.

2. Compliance Committee. Exactech has appointed, and shall maintain during the
term of the CIA, a Compliance Committee. To the extent necessary, within 120
days after the Effective Date, Exactech shall amend the duties, responsibilities
and authorities of the Compliance Committee to meet the requirements set forth
below. The Compliance Committee shall, at a minimum, include the Compliance
Officer and other members of senior management necessary to meet the
requirements of this CIA (e.g.,

 

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senior executives of relevant departments, such as billing, clinical, human
resources, audit, and operations). The Compliance Officer shall chair the
Compliance Committee and the Committee shall support the Compliance Officer in
fulfilling his/her responsibilities (e.g., shall assist in the analysis of
Exactech’s risk areas and shall oversee monitoring of internal and external
audits and investigations). The Compliance Committee shall meet at least
quarterly.

Exactech shall report to OIG, in writing, any changes in the composition of the
Compliance Committee, or any actions or changes that would affect the Compliance
Committee’s ability to perform the duties necessary to meet the obligations in
this CIA, within 15 days after such a change.

B. Written Standards.

1. Code of Conduct. Within 90 days after the Effective Date, Exactech shall
develop, implement, and distribute a written Code of Conduct to all Covered
Persons. Exactech shall make the promotion of, and adherence to, the Code of
Conduct an element in evaluating the performance of all employees. The Code of
Conduct shall at a minimum, set forth the following elements:

a. Exactech’s commitment to full compliance with all Federal health care program
requirements;

b. Exactech’s requirement that all of its Covered Persons shall be expected to
comply with all Federal health care program requirements and with Exactech’s own
Policies and Procedures;

c. the requirement that all of Exactech’s Covered Persons shall be expected to
report to the Compliance Officer, or other appropriate individual designated by
Exactech, suspected violations of any Federal health care program requirements
or of Exactech’s own Policies and Procedures;

d. the right of all individuals to use the Disclosure Program described in
Section III.F, and Exactech’s commitment to nonretaliation and to maintain, as
appropriate, confidentiality and anonymity with respect to such disclosures.

 

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Within 90 days after the Effective Date, each Covered Person shall certify, in
writing, that he or she has received, read, understood, and shall abide by
Exactech’s Code of Conduct. New Covered Persons shall receive the Code of
Conduct and shall complete the required certification within 30 days after
becoming a Covered Person or within 90 days after the Effective Date, whichever
is later.

Exactech shall periodically review the Code of Conduct to determine if revisions
are appropriate and shall make any necessary revisions based on such review. Any
revised Code of Conduct shall be distributed within 30 days after any revisions
are finalized. Each Covered Person shall certify, in writing, that he or she has
received, read, understood, and shall abide by the revised Code of Conduct
within 30 days after the distribution of the revised Code of Conduct.

2. Policies and Procedures. Within 90 days after the Effective Date, Exactech
shall implement written Policies and Procedures regarding the operation of
Exactech’s compliance program, including the compliance program requirements
outlined in this CIA, and Exactech’s compliance with Federal health care program
requirements. The Policies and Procedures also shall address:

a. 42 U.S.C. § 1320a-7b(b) (Anti-Kickback Statute) and the regulations and other
guidance documents related to this statute, and business or financial
arrangements or contracts that generate unlawful Federal health care program
business in violation of the Anti-Kickback Statute; and

b. the requirements set forth in Section III.D (Compliance with the
Anti-Kickback Statute).

Within 90 days after the Effective Date, the relevant portions of the Policies
and Procedures shall be distributed and/or made available (electronically or in
hard copy form) to all Covered Persons whose job functions relate to those
Policies and Procedures. Appropriate and knowledgeable staff shall be available
to explain the Policies and Procedures.

 

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At least annually (and more frequently, if appropriate), Exactech shall assess
and update, as necessary, the Policies and Procedures. Within 30 days after the
effective date of any revisions, the relevant portions of any such revised
Policies and Procedures shall be distributed and/or made available to all
Covered Persons whose job functions relate to those Policies and Procedures.

C. Training and Education.

1. General Training. Within 90 days after the Effective Date, Exactech shall
provide at least two hours of General Training to each Covered Person. This
training, at a minimum, shall explain Exactech’s:

a. CIA requirements; and

b. Exactech’s Compliance Program, including the Code of Conduct.

New Covered Persons shall receive the General Training described above within 30
days after becoming a Covered Person or within 90 days after the Effective Date,
whichever is later. After receiving the initial General Training described
above, each Covered Person shall receive at least one hour of General Training
in each subsequent Reporting Period.

2. Arrangements Training. Within 90 days after the Effective Date, each
Arrangements Covered Person shall receive at least three hours of Arrangements
Training, in addition to the General Training required above. The Arrangements
Training shall include a discussion of:

a. Arrangements that potentially implicate the Anti-Kickback Statute as well as
the regulations and other guidance documents related to this statute;

b. Exactech’s policies, procedures, and other requirements relating to
Arrangements and Focus Arrangements, including but not limited to the Focus
Arrangements Tracking System, the internal review and approval process, and the
tracking of remuneration to and from sources of health care business or
referrals required by Section III.D of the CIA;

 

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c. the personal obligation of each individual involved in the development,
approval, management, or review of Exactech’s Arrangements to know the
applicable legal requirements and Exactech’s policies and procedures;

d. the legal sanctions under the Anti-Kickback Statute; and

e. examples of violations of the Anti-Kickback Statute.

New Arrangements Covered Persons shall receive this training within 30 days
after the beginning of their employment or becoming Arrangements Covered
Persons, or within 90 days after the Effective Date, whichever is later.

After receiving the initial Arrangements Training described in this Section,
each Arrangements Covered Person shall receive at least two hours of
Arrangements Training in each subsequent Reporting Period.

3. Certification. Each individual who is required to attend training shall
certify, in writing, or in electronic form, if applicable, that he or she has
received the required training. The certification shall specify the type of
training received and the date received. The Compliance Officer (or designee)
shall retain the certifications, along with all course materials. These shall be
made available to OIG, upon request.

4. Qualifications of Trainer. Persons providing the training shall be
knowledgeable about the subject area.

5. Update of Training. Exactech shall review the training annually, and, where
appropriate, update the training to reflect changes in Federal health care
program requirements, any issues discovered during internal audits or the
Arrangements Review, and any other relevant information.

6. Computer-based Training. Exactech may provide the training required under
this CIA through appropriate computer-based training approaches. If Exactech
chooses to provide computer-based training, it shall make available
appropriately qualified and knowledgeable staff or trainers to answer questions
or provide additional information to the individuals receiving such training.

 

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D. Compliance with the Anti-Kickback Statute.

1. Focus Arrangements Procedures. Within 90 days after the Effective Date,
Exactech shall create procedures reasonably designed to ensure that each
existing and new or renewed Focus Arrangement does not violate the Anti-Kickback
Statute or the regulations, directives, and guidance related to this statute
(Focus Arrangements Procedures). These procedures shall include the following:

a. creating and maintaining a centralized tracking system for all existing and
new or renewed Focus Arrangements (Focus Arrangements Tracking System);

b. tracking remuneration to and from all parties to Focus Arrangements;

c. tracking service and activity logs to ensure that parties to the Focus
Arrangement are performing the services required under the applicable Focus
Arrangement(s) (if applicable);

d. monitoring the use of leased space, medical supplies, medical devices,
equipment, or other patient care items to ensure that such use is consistent
with the terms of the applicable Focus Arrangement(s) (if applicable);

e. establishing and implementing a written review and approval process for all
Focus Arrangements, the purpose of which is to ensure that all new and existing
or renewed Focus Arrangements do not violate the Anti-Kickback Statute, and that
includes at least the following: (i) a legal review of all Focus Arrangements by
counsel with expertise in the Anti-Kickback Statute, (ii) a process for
specifying the business need or business rationale for all Focus Arrangements,
and (iii) a process for determining and documenting the fair market value of the
remuneration specified in the Focus Arrangement;

 

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f. requiring the Compliance Officer to review the Focus Arrangements Tracking
System, internal review and approval process, and other Focus Arrangements
Procedures on at least an annual basis and to provide a report on the results of
such review to the Compliance Committee; and

g. implementing effective responses when suspected violations of the
Anti-Kickback Statute are discovered, including disclosing Reportable Events
pursuant to Section III.I. when appropriate.

2. New or Renewed Focus Arrangements. Prior to entering into new Focus
Arrangements or renewing existing Focus Arrangements, in addition to complying
with the Focus Arrangements Procedures set forth above, Exactech shall comply
with the following requirements (Focus Arrangements Requirements):

a. Ensure that each Focus Arrangement is set forth in writing and signed by
Exactech and the other parties to the Focus Arrangement;

b. Include in the written agreement a requirement that each party to a Focus
Arrangement who meets the definition of a Covered Person shall complete the
Arrangements Training set forth in Section III.C.2 of this CIA. Additionally,
Exactech shall provide each party to the Focus Arrangement with a copy of its
Code of Conduct and Anti- Kickback Statute Policies and Procedures;

c. Include in the written agreement a certification by the parties to the Focus
Arrangement that the parties shall not violate the Anti- Kickback Statute with
respect to the performance of the Arrangement.

3. Records Retention and Access. Exactech shall retain and make available to
OIG, upon request, the Focus Arrangements Tracking System and all supporting
documentation of the Focus Arrangements subject to this Section and, to the
extent available, all non-privileged communications related to the Focus
Arrangements and the actual performance of the duties under the Focus
Arrangements.

 

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E. Review Procedures.

1. General Description.

a. Engagement of Independent Review Organization. Within 90 days after the
Effective Date, Exactech shall engage an individual or entity (or entities),
such as an accounting, auditing, law, or consulting firm (hereinafter
“Independent Review Organization” or “IRO”), to perform the review outlined in
Appendix B of this CIA. (Arrangements Review). The IRO engaged by Exactech to
perform the Arrangements Review shall be knowledgeable about the Anti- Kickback
Statute and the regulations and other guidance documents related to this
statute.

Each IRO shall assess, along with Exactech, whether it can perform the IRO
review in a professionally independent and objective fashion, as appropriate to
the nature of the engagement, taking into account any other business
relationships or other engagements that may exist. The engagement of the IRO for
the Arrangements Review shall not be deemed to create an attorney-client or
other privileged relationship between Exactech and the IRO. The other applicable
requirements relating to the IRO(s) are outlined in Appendix A to this CIA,
which is incorporated by reference.

b. Frequency of Arrangements Review. The Arrangements Review shall be performed
annually and shall cover each of the Reporting Periods. The IRO(s) shall perform
all components of each annual Arrangements Review.

c. Retention of Records. The IRO and Exactech shall retain and make available to
OIG, upon request, all work papers, supporting documentation, correspondence,
and draft reports (those exchanged between the IRO and Exactech) related to the
reviews.

 

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d. Responsibilities and Liabilities. Nothing in this Section III.E affects
Exactech’s responsibilities or liabilities under any criminal, civil, or
administrative laws or regulations applicable to any Federal health care program
including, but not limited to, the Anti-Kickback Statute.

2. Arrangements Review. The IRO shall perform Arrangements Reviews and prepare
reports as outlined in Appendix B to this CIA, which is incorporated by
reference.

3. Validation Review. In the event OIG has reason to believe that:
(a) Exactech’s Arrangements Review fails to conform to the requirements of this
CIA; or (b) the IRO’s findings or Arrangements Review results are inaccurate,
OIG may, at its sole discretion, conduct its own review to determine whether the
Arrangements Review complied with the requirements of the CIA and/or the
findings or Arrangements Review results are inaccurate (Validation Review).
Exactech shall pay for the reasonable cost of any such review performed by OIG
or any of its designated agents. Any Validation Review of Reports submitted as
part of Exactech’s final Annual Report shall be initiated no later than one year
after Exactech’s final submission (as described in Section II) is received by
OIG.

Prior to initiating a Validation Review, OIG shall notify Exactech of its intent
to do so and provide a written explanation of why OIG believes such a review is
necessary. To resolve any concerns raised by OIG, Exactech may request a meeting
with OIG to: (a) discuss the results of any Arrangements Review submissions or
findings; (b) present any additional information to clarify the results of the
Arrangements Review or to correct the inaccuracy of the Arrangements Review;
and/or (c) propose alternatives to the proposed Validation Review. Exactech
agrees to provide any additional information as may be requested by OIG under
this Section III.E.3. in an expedited manner. OIG will attempt in good faith to
resolve any Arrangements Review issues with Exactech prior to conducting a
Validation Review. However, the final determination as to whether or not to
proceed with a Validation Review shall be made at the sole discretion of OIG.

4. Independence and Objectivity Certification. The IRO shall include in its
report(s) to Exactech a certification or sworn affidavit that it has evaluated
its professional independence and objectivity, as appropriate to the nature of
the engagement, with regard to the Arrangements Review and that it has concluded
that it is, in fact, independent and objective.

 

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5. New or Renewed Consulting Agreements. All new Consulting Agreements and
renewals executed on or after the Effective Date shall require Consultants to
disclose their financial engagement with Exactech to their patients, as well as
to their affiliated hospitals.

a. “Consultant” is defined as any United States-based orthopaedic surgeon, PhD,
health care professional, non-physician practitioner, medical fellow, resident
or student, hospital, medical institution, or any employee or agent of any
educational or health care organization that Exactech retains for any personal
or professional services or compensates or remunerates in any way, directly or
indirectly, for or in anticipation of personal or professional services relating
to hip and knee reconstruction and replacement in the United States. The term
“Consultant” shall not include accountants, auditors, attorneys, fair market
value specialists, CME providers, reimbursement specialists, any non-physician
engineering or marketing consultants, or any other types of non-physician
professionals or entities excluded from this definition by the OIG upon
recommendation by Exactech.

b. “Consulting Agreement” includes all contracts with Consultants for services
to be performed on behalf of Exactech relating to hip and knee reconstruction
and replacement in the United States. This includes, but is not limited to,
agreements for compensation, payments, remuneration, honoraria, fellowships,
professional meetings, speaking engagements, teaching, publications, clinical
studies, fee-for-service consulting, product development and license agreements,
research, and professional services agreements. The term “Consulting Agreement”
also includes agreements to provide grants, donations, sponsorships and other
forms of payment to medical educational organizations, medical societies and
training institutions.

 

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F. Disclosure Program.

Exactech currently has a disclosure program that Exactech represents is designed
to facilitate communications relating to compliance with Federal health care
program requirements and Exactech’s policies (the (Disclosure Program”).
Exactech shall continue to maintain a Disclosure Program that includes a
mechanism (e.g., a toll-free compliance telephone line) to enable individuals to
disclose, to the Compliance Officer or some other person who is not in the
disclosing individual’s chain of command, any identified issues or questions
associated with Exactech’s policies, conduct, practices, or procedures with
respect to a Federal health care program believed by the individual to be a
potential violation of criminal, civil, or administrative law. Exactech shall
appropriately publicize the existence of the disclosure mechanism (e.g., via
periodic e-mails to employees or by posting the information in prominent common
areas).

The Disclosure Program shall emphasize a nonretribution, nonretaliation policy,
and shall include a reporting mechanism for anonymous communications for which
appropriate confidentiality shall be maintained. Upon receipt of a disclosure,
the Compliance Officer (or designee) shall gather all relevant information from
the disclosing individual. The Compliance Officer (or designee) shall make a
preliminary, good faith inquiry into the allegations set forth in every
disclosure to ensure that he or she has obtained all of the information
necessary to determine whether a further review should be conducted. For any
disclosure that is sufficiently specific so that it reasonably: (1) permits a
determination of the appropriateness of the alleged improper practice; and (2)
provides an opportunity for taking corrective action, Exactech shall conduct an
internal review of the allegations set forth in the disclosure and ensure that
proper follow-up is conducted.

The Compliance Officer (or designee) shall maintain a disclosure log, which
shall include a record and summary of each disclosure received (whether
anonymous or not), the status of the respective internal reviews, and any
corrective action taken in response to the internal reviews. The disclosure log
shall be made available to OIG upon request.

 

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G. Ineligible Persons.

1. Definitions. For purposes of this CIA:

a. an “Ineligible Person” shall include an individual or entity who:

i. is currently excluded, debarred, suspended, or otherwise ineligible to
participate in the Federal health care programs or in Federal procurement or
nonprocurement programs; or

ii. has been convicted of a criminal offense that falls within the scope of 42
U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or
otherwise declared ineligible.

b. “Exclusion Lists” include:

i. the HHS/OIG List of Excluded Individuals/Entities (available through the
Internet at http://www.oig.hhs.gov); and

ii. the General Services Administration’s List of Parties Excluded from Federal
Programs (available through the Internet at http://www.epls.gov).

2. Screening Requirements. Exactech shall ensure that all Covered Persons are
not Ineligible Persons, by implementing the following screening requirements.

a. Exactech shall screen all Covered Persons against the Exclusion Lists prior
to engaging their services and, as part of the hiring or contracting process,
shall require such Covered Persons to disclose whether they are Ineligible
Persons.

b. Exactech shall screen all Covered Persons against the Exclusion Lists within
90 days after the Effective Date and on an annual basis thereafter.

 

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c. Exactech shall implement a policy requiring all Covered Persons to disclose
immediately any debarment, exclusion, suspension, or other event that makes that
person an Ineligible Person.

Nothing in this Section affects Exactech’s responsibility to refrain from (and
liability for) billing Federal health care programs for items or services
furnished, ordered, or prescribed by an excluded person. Exactech understands
that items or services furnished by excluded persons are not payable by Federal
health care programs and that Exactech may be liable for criminal, civil, and
administrative sanctions for employing or contracting with an excluded person
regardless of whether Exactech meets the requirements of this Section III.G.

3. Removal Requirement. If Exactech has actual notice that a Covered Person has
become an Ineligible Person, Exactech shall remove such Covered Person from
responsibility for, or involvement with, Exactech’s business operations related
to the Federal health care programs and shall remove such Covered Person from
any position for which the Covered Person’s compensation or the items or
services furnished, ordered, or prescribed by the Covered Person are paid in
whole or part, directly or indirectly, by Federal health care programs or
otherwise with Federal funds at least until such time as the Covered Person is
reinstated into participation in the Federal health care programs.

4. Pending Charges and Proposed Exclusions. If Exactech has actual notice that a
Covered Person is charged with a criminal offense that falls within the scope of
42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or is proposed for exclusion during
the Covered Person’s employment or contract term of during the term of a
physician’s or other practitioner’s medical staff privilege, Exactech shall take
all appropriate actions to ensure that the responsibilities of that Covered
Person have not and shall not adversely affect the quality of care rendered to
any beneficiary, patient, or resident, or any claims submitted to any Federal
health care program.

H. Notification of Government Investigation or Legal Proceedings.

Within 30 days after discovery, Exactech shall notify OIG, in writing, of any
ongoing investigation or legal proceeding known to Exactech conducted or brought
by a governmental entity or its agents involving an allegation that Exactech has
committed a crime or has engaged in fraudulent activities. This notification
shall include a description of the allegation, the identity of the investigating
or prosecuting agency, and the status of such investigation or legal proceeding.
Exactech shall also provide written notice to OIG within 30 days after the
resolution of the matter, and shall provide OIG with a description of the
findings and/or results of the investigation or proceedings, if any.

 

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I. Reportable Events.

1. Definition of Reportable Event. For purposes of this CIA, a “Reportable
Event” means anything that involves:

a. a matter that a reasonable person would consider a probable violation of
criminal, civil, or administrative laws applicable to any Federal health care
program for which penalties or exclusion may be authorized;

b. the employment of or contracting with a Covered Person who is an Ineligible
Person as defined by Section III.G.l.a; or

c. the filing of a bankruptcy petition by Exactech.

A Reportable Event may be the result of an isolated event or a series of
occurrences.

2. Reporting of Reportable Events. If Exactech determines (after a reasonable
opportunity to conduct an appropriate review or investigation of the
allegations) through any means that there is a Reportable Event, Exactech shall
notify OIG, in writing, within 30 days after making the determination that the
Reportable Event exists.

3. Reportable Events under Section III.I.1.a. and b. For Reportable Events under
Section III.I.1.a and III.I.1.b, the report to the OIG shall include:

a. a complete description of the Reportable Event, including the relevant facts,
persons involved, and legal and Federal health care program authorities
implicated;

b. a description of Exactech’s actions taken to correct the Reportable Event;
and

c. any further steps Exactech plans to take to address the Reportable Event and
prevent it from recurring.

 

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4. Reportable Events under Section III.I.1.c. For Reportable Events under
Section III.I.1.c, the report to the OIG shall include documentation of the
bankruptcy filing and a description of any Federal health care program
authorities implicated.

J. Cooperation With Government Investigations.

Upon reasonable notice, Exactech shall cooperate with all OIG investigations and
understands that full cooperation includes: (1) prompt and truthful disclosure
to OIG of all matters relating to any Federal or state health care law
investigation, prosecution, or other enforcement action, related to the Covered
Conduct, including other matters involving possible violations of Federal or
state health care law by individuals or entities in the orthopedic medical
device industry; and (2) truthful testimony in any administrative hearing and/or
court proceeding. Exactech, upon reasonable notice, will make reasonable efforts
to facilitate access to, and encourage the cooperation of, its directors,
officers, and employees for interviews and testimony, and will furnish to the
OIG, upon reasonable request, all documents and records in its possession,
custody, or control relating to the Covered Conduct. Section III.J. shall not
require the Company’s waiver of attorney-client and work product protections.
Nothing in Section III.J. shall be construed as a waiver of any applicable
attorney-client or work product privileges.

As used herein, the term “Covered Conduct” shall have the same meaning as set
forth in the Civil Settlement Agreement.

 

IV. CHANGES TO BUSINESS UNITS OR LOCATIONS

A. Change or Closure of Unit or Location.

In the event that, after the Effective Date, Exactech changes locations or
closes a business unit or location related to the furnishing of items or
services that may be reimbursed by Federal health care programs, Exactech shall
notify OIG of this fact as soon as possible, but no later than within 30 days
after the date of change or closure of the location.

B. Purchase or Establishment of New Unit or Location.

In the event that, after the Effective Date, Exactech purchases or establishes a
new business unit or location related to the furnishing of items or services
that may be reimbursed by Federal health care programs, Exactech shall notify
OIG at least 30 days

 

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prior to such purchase or the operation of the new business unit or location.
This notification shall include the address of the new business unit or
location, phone number, fax number, the location’s Medicare and state Medicaid
program provider number and/or supplier number(s), (if applicable), and the name
and address of each contractor that issued each number (if applicable). Each new
business unit or location and all Covered Persons at each new business unit or
location shall be subject to the applicable requirements of this CIA.

C. Sale of Unit or Location.

In the event that, after the Effective Date, Exactech proposes to sell any or
all of its business units or locations that are subject to this CIA, Exactech
shall notify OIG of the proposed sale at least 30 days prior to the sale of such
business unit or location. This notification shall include a description of the
business unit or location to be sold, a brief description of the terms of the
sale, and the name and contact information of the prospective purchaser. This
CIA shall be binding on the purchaser of such business unit or location, unless
otherwise determined and agreed to in writing by the OIG.

 

V. IMPLEMENTATION AND ANNUAL REPORTS

A. Implementation Report.

Within 90 days after either the termination or lifting of the suspension,
Exactech shall submit a written report to OIG summarizing the status of its
implementation of the requirements of this CIA (Implementation Report). The
Implementation Report shall, at a minimum, include:

1. the name, address, phone number, and position description of the Compliance
Officer required by Section III.A, and a summary of other noncompliance job
responsibilities the Compliance Officer may have;

2. the names and positions of the members of the Compliance Committee required
by Section III.A;

3. a copy of Exactech’s Code of Conduct required by Section III.B.1;

4. a summary of all Policies and Procedures required by Section III.B.2 (a copy
of such Policies and Procedures shall be made available to OIG upon request);

 

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5. the number of individuals required to complete the Code of Conduct
certification required by Section III.B.1, the percentage of individuals who
have completed such certification, and an explanation of any exceptions (the
documentation supporting this information shall be available to OIG, upon
request);

6. the following information regarding each type of training required by Section
III.C:

a. a description of such training, including a summary of the topics covered,
the length of sessions, and a schedule of training sessions;

b. the number of individuals required to be trained, percentage of individuals
actually trained, and an explanation of any exceptions.

A copy of all training materials and the documentation supporting this
information shall be available to OIG, upon request.

7. a description of the Focus Arrangements Tracking System required by Section
III.D.1.a;

8. a description of the internal review and approval process required by Section
III.D.1.e;

9. a description of the tracking and monitoring procedures and other Focus
Arrangements Procedures required by Section III.D.l;

10. a description of the Disclosure Program required by Section III.F;

11. information regarding the IRO(s) described in Appendix A;

12. a description of the process by which Exactech fulfills the requirements of
Section III.G regarding Ineligible Persons;

 

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13. a list of all of Exactech’s locations (including locations and mailing
addresses); the corresponding name under which each location is doing business;
the corresponding phone numbers and fax numbers; each location’s Medicare and
state Medicaid program provider number(s) and/or supplier number(s) (if
applicable); and the name and address of each Medicare and state Medicaid
program contractor to which Exactech currently submits claims (if applicable);

14. a description of Exactech’s corporate structure, including identification of
any parent and sister companies, subsidiaries, and their respective lines of
business;

15. a summary of Reportable Events (as defined in Section III.I.) identified
during the Reporting Period and the status of any corrective and preventative
action relating to all such Reportable Events;

16. a summary of the disclosures in the disclosure log required by Section III.F
that: (a) relate to Federal health care programs; or (b) involve allegations of
conduct that may involve illegal remunerations or inappropriate referrals in
violation of the Anti-Kickback Statute;

17. a summary describing any ongoing investigation or legal proceeding required
to have been reported pursuant to Section III.H. The summary shall include a
description of the allegation, the identity of the investigating or prosecuting
agency, and the status of such investigation or legal proceeding; and

18. the certifications required by Section V.D.

B. Monitor Reports.

1. Exactech shall submit to OIG any report or written recommendations produced
by the Monitor (as defined under the DPA) pursuant to the DPA within 5 days of
Exactech receiving any report or written recommendations from the Monitor.

2. Exactech shall submit to OIG any report Exactech provides to the Monitor
pursuant to the DPA at the same time Exactech provides such documentation to the
Monitor.

3. Any written documentation Exactech provides to the Monitor pursuant to the
DPA shall be made available to the OIG upon request.

 

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C. Annual Reports.

Exactech shall submit to OIG annually a report with respect to the status of,
and findings regarding, Exactech’s compliance activities for each Reporting
Period (Annual Report).

Each Annual Report shall include, at a minimum:

1. any change in the identity, position description, or other noncompliance job
responsibilities of the Compliance Officer and any change in the membership of
the Compliance Committee described in Section III.A;

2. a summary of any significant changes or amendments to the Policies and
Procedures required by Section III.B.2 and the reasons for such changes (e.g.,
change in contractor policy);

3. the number of individuals required to complete the Code of Conduct
certification required by Section III.B.1, the percentage of individuals who
have completed such certification, and an explanation of any exceptions (the
documentation supporting this information shall be available to OIG, upon
request);

4. the following information regarding each type of training required by Section
III.C:

a. a description of the initial and annual training, including a summary of the
topics covered, the length of sessions, and a schedule of training sessions;

b. the number of individuals required to complete the initial and annual
training, the percentage of individuals who actually completed the initial and
annual training, and an explanation of any exceptions.

A copy of all training materials and the documentation supporting this
information shall be available to OIG, upon request.

5. a description of any changes to the Focus Arrangements Tracking System
required by Section III.D.1.a;

 

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6. a description of any changes to the internal review and approval process
required by Section III.D.1.e;

7. a description of any changes to the tracking and monitoring procedures and
other Focus Arrangements Procedures required by Section III.D.1;

8. a complete copy of all reports prepared pursuant to Section III.E, along with
a copy of the IRO’s engagement letter;

9. Exactech’s response to the reports prepared pursuant to Section III.E., along
with corrective action plan(s) related to any issues raised by the reports;

10. a summary and description of any and all current and prior engagements and
agreements between Exactech and the IRO, if different from what was submitted as
part of the Implementation Report;

11. a certification from the IRO regarding its professional independence and
objectivity with respect to Exactech;

12. a summary of Reportable Events (as defined in Section III.I.) identified
during the Reporting Period and the status of any corrective and preventative
action relating to all such Reportable Events;

13. a summary of the disclosures in the disclosure log required by Section III.F
that: (a) relate to Federal health care programs; or (b) involve allegations of
conduct that may involve illegal remunerations or inappropriate referrals in
violation of the Anti-Kickback Statute;

14. any changes to the process by which Exactech fulfills the requirements of
Section III.G regarding Ineligible Persons;

15. a summary describing any ongoing investigation or legal proceeding required
to have been reported pursuant to Section III.H. The summary shall include a
description of the allegation, the identity of the investigating or prosecuting
agency, and the status of such investigation or legal proceeding;

 

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16. a description of all changes to the most recently provided list of
Exactech’s locations (including addresses) as required by Section V.A.13; the
corresponding name under which each location is doing business; the
corresponding phone numbers and fax numbers; each location’s Medicare and state
Medicaid program provider number(s) and/or supplier number(s) (if applicable);
and the name and address of each Medicare and state Medicaid program contractor
to which Exactech currently submits claims (if applicable); and

17. the certifications required by Section V.D.

The first Annual Report shall be received by OIG no later than 60 days after the
end of the second Reporting Period. Subsequent Annual Reports shall be received
by OIG no later than the anniversary date of the due date of the first Annual
Report.

D. Certifications.

The Implementation Report and Annual Reports shall include a certification by
the Compliance Officer that:

1. to the best of his or her knowledge, except as otherwise described in the
applicable report, Exactech is in compliance with all of the requirements of
this CIA;

2. to the best of his or her knowledge, Exactech has implemented procedures
reasonably designed to ensure that all Focus Arrangements do not violate the
Anti-Kickback Statute, including the Focus Arrangements Procedures required in
Section III.D of the CIA;

3. to the best of his or her knowledge, Exactech has fulfilled the requirements
for New and Renewed Focus Arrangements under Section III.D.2 of the CIA;

4. he or she has reviewed the Report and has made reasonable inquiry regarding
its content and believes that the information in the Report is accurate and
truthful; and

 

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E. Designation of Information. Exactech shall clearly identify any portions of
its submissions that it believes are trade secrets, or information that is
commercial or financial and privileged or confidential, and therefore
potentially exempt from disclosure under the Freedom of Information Act (FOIA),
5 U.S.C. § 552. Exactech shall refrain from identifying any information as
exempt from disclosure if that information does not meet the criteria for
exemption from disclosure under FOIA.

 

VI. NOTIFICATIONS AND SUBMISSION OF REPORTS

Unless otherwise stated in writing after the Effective Date, all notifications
and reports required under this CIA shall be submitted to the following
entities:

 

OIG:       Administrative and Civil Remedies Branch    Office of Counsel to the
Inspector General    Office of Inspector General    U.S. Department of Health
and Human Services    Cohen Building, Room 5527    330 Independence Avenue, S.W.
   Washington, DC 20201    Telephone:  202.619.2078    Facsimile:  202.205.0604
Exactech:    Michael S. Simpson    Vice President, Quality/Clinical/Regulatory
Affairs    Corporate Compliance Officer    2320 NW 66 Court    Gainesville, FL
32653    Telephone:  352.377.1140    Facsimile:  352.378.2617   
mike.simpson@exac.com

 

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Unless otherwise specified, all notifications and reports required by this CIA
may be made by certified mail, overnight mail, hand delivery, or other means,
provided that there is proof that such notification was received. For purposes
of this requirement, internal facsimile confirmation sheets do not constitute
proof of receipt. Upon request by OIG, Exactech may be required to provide OIG
with an electronic copy of each notification or report required by this CIA in
searchable portable document format (pdf), either instead of or in addition to,
a paper copy.

 

VII. OIG INSPECTION, AUDIT, AND REVIEW RIGHTS

In addition to any other rights OIG may have by statute, regulation, or
contract, OIG or its duly authorized representative(s) may examine or request
copies of Exactech’s books, records, and other documents and supporting
materials and/or conduct on-site reviews of any of Exactech’s locations for the
purpose of verifying and evaluating: (a) Exactech’s compliance with the terms of
this CIA; and (b) Exactech’s compliance with the requirements of the Federal
health care programs in which it participates. The documentation described above
shall be made available by Exactech to OIG or its duly authorized
representative(s) at all reasonable times for inspection, audit, or
reproduction. Furthermore, for purposes of this provision, OIG or its duly
authorized representative(s) may interview any of Exactech’s employees,
contractors, or agents who consent to be interviewed at the individual’s place
of business during normal business hours or at such other place and time as may
be mutually agreed upon between the individual and OIG. Exactech shall assist
OIG or its duly authorized representative(s) in contacting and arranging
interviews with such individuals upon OIG’s request. Exactech’s employees may
elect to be interviewed with or without a representative of Exactech present.

 

VIII. DOCUMENT AND RECORD RETENTION

Exactech shall maintain for inspection all documents and records relating to
reimbursement from the Federal health care programs, or to compliance with this
CIA, for six (6) years (or longer if otherwise required by law) from the
Effective Date.

 

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IX. DISCLOSURES

Consistent with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall
make a reasonable effort to notify Exactech prior to any release by OIG of
information submitted by Exactech pursuant to its obligations under this CIA and
identified upon submission by Exactech as trade secrets, or information that is
commercial or financial and privileged or confidential, under the FOIA rules.
With respect to such releases, Exactech shall have the rights set forth at 45
C.F.R. § 5.65(d).

 

X. BREACH AND DEFAULT PROVISIONS

Exactech is expected to fully and timely comply with all of its CIA obligations.

A. Stipulated Penalties for Failure to Comply with Certain Obligations. As a
contractual remedy, Exactech and OIG hereby agree that failure to comply with
certain obligations as set forth in this CIA may lead to the imposition of the
following monetary penalties (hereinafter referred to as “Stipulated Penalties”)
in accordance with the following provisions.

1. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
the date the obligation became due) for each calendar day Exactech fails to
establish and implement any of the following obligations as described in Section
III:

a. a Compliance Officer;

b. a Compliance Committee;

c. a written Code of Conduct;

d. written Policies and Procedures;

e. the training of Covered Persons and Arrangements Covered Persons;

f. the Focus Arrangements Procedures and/or Focus Arrangements Requirements
described in Sections III.D.1 and III.D.2;

g. a Disclosure Program;

 

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h. Ineligible Persons screening and removal requirements;

i. notification of Government investigations or legal proceedings; and

j. reporting of Reportable Events.

2. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
the date the obligation became due) for each day Exactech fails to engage an
IRO, as required in Section III.E and Appendix A.

3. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
the date the obligation became due) for each day Exactech fails to submit the
Implementation Report, documentation required under Section V.B., or any Annual
Reports to OIG in accordance with the requirements of Section V by the deadlines
for submission.

4. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
the date the obligation became due) for each day Exactech fails to submit the
annual Arrangements Review Report in accordance with the requirements of Section
III.E and Appendix B.

5. A Stipulated Penalty of $1,500 for each day Exactech fails to grant access as
required in Section VII. (This Stipulated Penalty shall begin to accrue on the
date Exactech fails to grant access.)

6. A Stipulated Penalty of $5,000 for each false certification submitted by or
on behalf of Exactech as part of its Implementation Report, Annual Report,
additional documentation to a report (as requested by the OIG), or otherwise
required by this CIA.

7. A Stipulated Penalty of $ 10,000 (which shall begin to accrue on the day
after the date the obligation became due) for each day Exactech fails to
cooperate and otherwise satisfy any of the obligations and requirements as
described in Section III.J.

 

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8. A Stipulated Penalty of $1,000 for each day Exactech fails to comply fully
and adequately with any obligation of this CIA. OIG shall provide notice to
Exactech stating the specific grounds for its determination that Exactech has
failed to comply fully and adequately with the CIA obligation(s) at issue and
steps Exactech shall take to comply with the CIA. (This Stipulated Penalty shall
begin to accrue 10 days after Exactech receives this notice from OIG of the
failure to comply.) A Stipulated Penalty as described in this Subsection shall
not be demanded for any violation for which OIG has sought a Stipulated Penalty
under Subsections 1-7 of this Section.

B. Timely Written Requests for Extensions.

Exactech may, in advance of the due date, submit a timely written request for an
extension of time to perform any act or file any notification or report required
by this CIA. Notwithstanding any other provision in this Section, if OIG grants
the timely written request with respect to an act, notification, or report,
Stipulated Penalties for failure to perform the act or file the notification or
report shall not begin to accrue until one day after Exactech fails to meet the
revised deadline set by OIG. Notwithstanding any other provision in this
Section, if OIG denies such a timely written request, Stipulated Penalties for
failure to perform the act or file the notification or report shall not begin to
accrue until three business days after Exactech receives OIG’s written denial of
such request or the original due date, whichever is later. A “timely written
request” is defined as a request in writing received by OIG at least five
business days prior to the date by which any act is due to be performed or any
notification or report is due to be filed.

C. Payment of Stipulated Penalties.

1. Demand Letter. Upon a finding that Exactech has failed to comply with any of
the obligations described in Section X.A and after determining that Stipulated
Penalties are appropriate, OIG shall notify Exactech of: (a) Exactech’s failure
to comply; and (b) OIG’s exercise of its contractual right to demand payment of
the Stipulated Penalties (this notification is referred to as the “Demand
Letter”). Such Demand Letter shall specifically state the conduct that the OIG
contends constitutes the basis for imposing the Stipulated Penalty.

 

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2. Response to Demand Letter. Within 10 days after the receipt of the Demand
Letter, Exactech shall either: (a) cure the breach to OIG’s satisfaction and pay
the applicable Stipulated Penalties or (b) request a hearing before an HHS
administrative law judge (ALJ) to dispute OIG’s determination of noncompliance,
pursuant to the agreed upon provisions set forth below in Section X.E. In the
event Exactech elects to request an ALJ hearing, the Stipulated Penalties shall
continue to accrue until Exactech cures, to OIG’s satisfaction, the alleged
breach in dispute. Failure to respond to the Demand Letter in one of these two
manners within the allowed time period shall be considered a material breach of
this CIA and shall be grounds for exclusion under Section X.D.

3. Form of Payment. Payment of the Stipulated Penalties shall be made by
electronic funds transfer to an account specified by OIG in the Demand Letter.

4. Independence from Material Breach Determination. Except as set forth in
Section X.D.l.d,, these provisions for payment of Stipulated Penalties shall not
affect or otherwise set a standard for OIG’s decision that Exactech has
materially breached this CIA, which decision shall be made at OIG’s discretion
and shall be governed by the provisions in Section X.D, below.

D. Exclusion for Material Breach of this CIA.

1. Definition of Material Breach. A material breach of this CIA means:

a. a failure by Exactech to report a Reportable Event, take corrective action,
and make the appropriate refunds, as required in Section III.I;

b. a repeated or flagrant violation of the obligations under this CIA,
including, but not limited to, the obligations addressed in Section X.A;

c. a failure to respond to a Demand Letter concerning the payment of Stipulated
Penalties in accordance with Section X.C; or

d. a failure to engage and use an IRO in accordance with Section III.E and
Appendix A.

e. a repeated or flagrant failure by Exactech to cooperate in accordance with
Section III.J.

 

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2. Notice of Material Breach and Intent to Exclude. The parties agree that a
material breach of this CIA by Exactech constitutes an independent basis for
Exactech’s exclusion from participation in the Federal health care programs.
Upon a determination by OIG that Exactech has materially breached this CIA and
that exclusion is the appropriate remedy, OIG shall notify Exactech of:
(a) Exactech’s material breach; and (b) OIG’s intent to exercise its contractual
right to impose exclusion (this notification is hereinafter referred to as the
“Notice of Material Breach and Intent to Exclude”).

3. Opportunity to Cure. Exactech shall have 30 days from the date of receipt of
the Notice of Material Breach and Intent to Exclude to demonstrate to OIG’s
satisfaction that:

a. Exactech is in compliance with the obligations of the CIA cited by OIG as
being the basis for the material breach;

b. the alleged material breach has been cured; or

c. the alleged material breach cannot be cured within the 30-day period, but
that: (i) Exactech has begun to take action to cure the material breach;
(ii) Exactech is pursuing such action with due diligence; and (iii) Exactech has
provided to OIG a reasonable timetable for curing the material breach.

4. Exclusion Letter. If, at the conclusion of the 30-day period, Exactech fails
to satisfy the requirements of Section X.D.3, OIG may exclude Exactech from
participation in the Federal health care programs. OIG shall notify Exactech in
writing of its determination to exclude Exactech (this letter shall be referred
to hereinafter as the “Exclusion Letter”). Subject to the Dispute Resolution
provisions in Section X.E, below, the exclusion shall go into effect 30 days
after the date of Exactech’s receipt of the Exclusion Letter. The exclusion
shall have national effect and shall also apply to all other Federal procurement
and nonprocurement programs. Reinstatement to program participation is not
automatic. After the end of the period of exclusion, Exactech may apply for
reinstatement by submitting a written request for reinstatement in accordance
with the provisions at 42 C.F.R. §§ 1001.3001-.3004.

 

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E. Dispute Resolution

1. Review Rights. Upon OIG’s delivery to Exactech of its Demand Letter or of its
Exclusion Letter, and as an agreed-upon contractual remedy for the resolution of
disputes arising under this CIA, Exactech shall be afforded certain review
rights comparable to the ones that are provided in 42 U.S.C. § 1320a-7(f) and 42
C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion
sought pursuant to this CIA. Specifically, OIG’s determination to demand payment
of Stipulated Penalties or to seek exclusion shall be subject to review by an
HHS ALJ and, in the event of an appeal, the HHS Departmental Appeals Board
(DAB), in a manner consistent with the provisions in 42 C.F.R. § 1005.2-1005.21.
Notwithstanding the language in 42 C.F.R. § 1005.2(c), the request for a hearing
involving Stipulated Penalties shall be made within 10 days after receipt of the
Demand Letter and the request for a hearing involving exclusion shall be made
within 25 days after receipt of the Exclusion Letter.

2. Stipulated Penalties Review. Notwithstanding any provision of Title 42 of the
United States Code or Title 42 of the Code of Federal Regulations, the only
issues in a proceeding for Stipulated Penalties under this CIA shall be:
(a) whether Exactech was in full and timely compliance with the obligations of
this CIA for which OIG demands payment; and (b) the period of noncompliance.
Exactech shall have the burden of proving its full and timely compliance and the
steps taken to cure the noncompliance, if any. OIG shall not have the right to
appeal to the DAB an adverse ALJ decision related to Stipulated Penalties. If
the ALJ agrees with OIG with regard to a finding of a breach of this CIA and
orders Exactech to pay Stipulated Penalties, such Stipulated Penalties shall
become due and payable 20 days after the ALJ issues such a decision unless
Exactech requests review of the ALJ decision by the DAB. If the ALJ decision is
properly appealed to the DAB and the DAB upholds the determination of OIG, the
Stipulated Penalties shall become due and payable 20 days after the DAB issues
its decision.

3. Exclusion Review. Notwithstanding any provision of Title 42 of the United
States Code or Title 42 of the Code of Federal Regulations, the only issues in a
proceeding for exclusion based on a material breach of this CIA shall be:

a. whether Exactech was in material breach of this CIA;

b. whether such breach was continuing on the date of the Exclusion Letter; and

 

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c. whether the alleged material breach could not have been cured within the
30-day period, but that: (i) Exactech had begun to take action to cure the
material breach within that period; (ii) Exactech has pursued and is pursuing
such action with due diligence; and (iii) Exactech provided to OIG within that
period a reasonable timetable for curing the material breach and Exactech has
followed the timetable.

For purposes of the exclusion herein, exclusion shall take effect only after an
ALJ decision favorable to OIG, or, if the ALJ rules for Exactech, only after a
DAB decision in favor of OIG. Exactech’s election of its contractual right to
appeal to the DAB shall not abrogate OIG’s authority to exclude Exactech upon
the issuance of an ALJ’s decision in favor of OIG. If the ALJ sustains the
determination of OIG and determines that exclusion is authorized, such exclusion
shall take effect 20 days after the ALJ issues such a decision, notwithstanding
that Exactech may request review of the ALJ decision by the DAB. If the DAB
finds in favor of OIG after an ALJ decision adverse to OIG, the exclusion shall
take effect 20 days after the DAB decision. Exactech shall waive its right to
any notice of such an exclusion if a decision upholding the exclusion is
rendered by the ALJ or DAB. If the DAB finds in favor of Exactech, Exactech
shall be reinstated effective on the date of the original exclusion.

4. Finality of Decision. The review by an ALJ or DAB provided for above shall
not be considered to be an appeal right arising under any statutes or
regulations. Consequently, the parties to this CIA agree that the DAB’s decision
(or the ALJ’s decision if not appealed) shall be considered final for all
purposes under this CIA.

 

XI. EFFECTIVE AND BINDING AGREEMENT

Exactech and OIG agree as follows:

A. This CIA shall be binding on the successors, assigns, and transferees of
Exactech;

B. This CIA shall become final and binding on the later of (1) the date the
final signature is obtained on the CIA; or (2) the date the Civil Settlement
Agreement becomes effective.

 

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C. This CIA constitutes the complete agreement between the parties and may not
be amended except by written consent of the parties to this CIA;

D. OIG may agree to a suspension of Exactech’s obligations under this CIA based
on a certification by Exactech that it is no longer providing health care items
or services that will be billed to any Federal health care program and that it
does not have any ownership or control interest, as defined in 42 U.S.C.
§1320a-3, in any entity that bills any Federal health care program. If Exactech
is relieved of its CIA obligations, Exactech will be required to notify OIG in
writing at least 30 days in advance if Exactech plans to resume providing health
care items or services that are billed to any Federal health care program or to
obtain an ownership or control interest in any entity that bills any Federal
health care program. At such time, OIG shall evaluate whether the CIA will be
reactivated or modified.

E. The undersigned Exactech signatories represent and warrant that they are
authorized to execute this CIA. The undersigned OIG signatory represents that he
is signing this CIA in his official capacity and that he is authorized to
execute this CIA.

F. This CIA may be executed in counterparts, each of which constitutes an
original and all of which constitute one and the same CIA. Facsimiles of
signatures shall constitute acceptable, binding signatures for purposes of this
CIA.

 

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ON BEHALF OF EXACTECH

 

/S/ WILLIAM PETTY

    December 2, 2010         WILLIAM PETTY     DATE

Chief Executive Officer

   

Exactech, Inc.

   

/S/ WILLIAM B. ECK

    December 3, 2010         WILLIAM B. ECK     DATE

Greenberg Traurig, LLP

   

Counsel for Exactech, Inc.

   

 

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ON BEHALF OF THE OFFICE OF INSPECTOR GENERAL

OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

 

/s/ GREGORY E. DEMSKE

    12/7/2010            

GREGORY E. DEMSKE

    DATE

Assistant Inspector General for Legal Affairs

   

Office of Inspector General

   

U. S. Department of Health and Human Services

   

/s/ ROBERT M. PENEZIC

    12/7/2010            

ROBERT M. PENEZIC

    DATE

Senior Counsel

   

Office of Counsel to the Inspector General

   

Office of Inspector General

   

U. S. Department of Health and Human Services

   

 

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APPENDIX A

INDEPENDENT REVIEW ORGANIZATION

This Appendix contains the requirements relating to the Independent Review
Organization (IRO) required by Section III.E of the CIA.

 

A. IRO Engagement.

Exactech shall engage an IRO that possesses the qualifications set forth in
Paragraph C, of this Appendix, to perform the responsibilities in Paragraph D,
of this Appendix. The IRO shall conduct the review in a professionally
independent and objective fashion, as set forth in Paragraph E, of this
Appendix. Within 30 days after OIG receives the information identified in
Paragraph B, of this Appendix, OIG will notify Exactech if the IRO is
unacceptable. Absent notification from OIG that the IRO is unacceptable,
Exactech may continue to engage the IRO.

If Exactech engages a new IRO during the term of the CIA, this IRO shall also
meet the requirements of this Appendix. If a new IRO is engaged, Exactech shall
submit the information identified in Paragraph B, of this Appendix, to OIG
within 30 days of engagement of the IRO. Within 30 days after OIG receives this
information, OIG will notify Exactech if the IRO is unacceptable. Absent
notification from OIG that the IRO is unacceptable, Exactech may continue to
engage the IRO.

 

B. Information Regarding the IRO.

 

  1. identity, address, and phone number;

 

  2. a copy of the engagement letter;

 

  3. a summary and description of any and all current and prior engagements and
agreements between Exactech and the IRO;

 

  4. the proposed start and completion dates of the Arrangements Review;

 

  5. a certification from the IRO regarding its professional independence and
objectivity with respect to Exactech; and

 

  6. the professional qualifications of individuals assigned by the IRO to the
engagement.

 

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C. IRO Qualifications.

The IRO shall:

1. assign individuals to conduct the Arrangements Review engagement who are
knowledgeable in the requirements of the Anti-Kickback Statute and the
regulations and other guidance documents related to this statute; and

2. have sufficient staff and resources to conduct the reviews required by the
CIA on a timely basis.

 

D. IRO Responsibilities.

The IRQ shall:

1. perform each Arrangements Review in accordance with the specific requirements
of the CIA;

2. respond to all OIG inquiries in a prompt, objective, and factual manner; and

3. prepare timely, clear, well-written reports that include all the information
required by Appendix B to the CIA.

 

E. IRO Independence and Objectivity.

The IRO must perform the Arrangements Review in a professionally independent and
objective fashion, as appropriate to the nature of the engagement, taking into
account any other business relationships or engagements that may exist between
the IRO and Exactech.

 

F. IRO Removal/Termination.

1. Provider. If Exactech terminates its IRO during the course of the engagement,
Exactech must submit a notice explaining its reasons to OIG no later than 30
days after termination. Exactech must engage a new IRO in accordance with
Paragraph A, of this Appendix.

2. OIG Removal of IRO. In the event OIG has reason to believe that the IRO does
not possess the qualifications described in Paragraph B, of this Appendix, is
not independent and objective as set forth in Paragraph E, of this Appendix, or
has failed to carry out its responsibilities as described in Paragraph D, of
this Appendix, OIG may, at its sole discretion, require Exactech to engage a new
IRO in accordance with Paragraph A of this Appendix.

 

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Prior to requiring Exactech to engage a new IRO, OIG shall notify Exactech of
its intent to do so and provide a written explanation of why OIG believes such a
step is necessary. To resolve any concerns raised by OIG, Exactech may request a
meeting with OIG to discuss any aspect of the IRO’s qualifications, independence
or performance of its responsibilities and to present additional information
regarding these matters. Exactech shall provide any additional information as
may be requested by OIG under this Paragraph in an expedited manner. OIG will
attempt in good faith to resolve any differences regarding the IRO with Exactech
prior to requiring Exactech to terminate the IRO. However, the final
determination as to whether or not to require Exactech to engage a new IRO shall
be made at the sole discretion of OIG.

 

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APPENDIX B

ARRANGEMENTS REVIEW

The Arrangements Review shall consist of two components: a systems review and a
transactions review. The IRO shall perform all components of each Arrangements
Review. If there are no material changes to Exactech’s systems, processes,
policies, and procedures relating to Arrangements, the Arrangements Systems
Review shall be performed for the second and fourth Reporting Periods. If
Exactech materially changes the Arrangements systems, processes, policies and
procedures, the IRO shall perform an Arrangements Systems Review for the
Reporting Period in which such changes were made in addition to conducting the
systems review for the second and fourth Reporting Periods. The Arrangements
Transactions Review shall be performed annually and shall cover each of the five
Reporting Periods.

A. Arrangements Systems Review. The Arrangements Systems Review shall be a
review of Exactech’s systems, processes, policies, and procedures relating to
the initiation, review, approval, and tracking of Arrangements. Specifically,
the IRO shall review the following:

1. Exactech’s systems, policies, processes, and procedures with respect to
creating and maintaining a centralized tracking system for all existing and new
and renewed Focus Arrangements (Focus Arrangements Tracking System), including a
detailed description of the information captured in the Focus Arrangements
Tracking System;

2. Exactech’s systems, policies, processes, and procedures for tracking
remuneration to and from all parties to Focus Arrangements;

3. Exactech’s systems, policies, processes, and procedures for tracking service
and activity logs to ensure that parties to the Focus Arrangement are performing
the services required under the applicable Focus Arrangement(s) (if applicable);

4. Exactech’s systems, policies, processes, and procedures for monitoring the
use of leased space, medical supplies, medical devices, equipment, or other
patient care items to ensure that such use is consistent with the terms of the
applicable Focus Arrangement(s) (if applicable);

5. Exactech’s systems, policies, processes, and procedures for initiating
Arrangements, including those policies that identify the individuals with
authority to initiate an Arrangement and that specify the business need or
business rationale required to initiate an Arrangement;

 

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6. Exactech’s systems, policies, processes, and procedures for the internal
review and approval of all Arrangements, including those policies that identify
the individuals required to approve each type or category of Arrangement entered
into by Exactech, the internal controls designed to ensure that all required
approvals are obtained, and the processes for ensuring that all Focus
Arrangements are subject to a legal review by counsel with expertise in the
Anti-Kickback Statute;

7. the Compliance Officer’s annual review of and reporting to the Compliance
Committee on the Focus Arrangements Tracking System, Exactech’s internal review
and approval process, and other Arrangements procedures;

8. Exactech’s systems, policies, processes, and procedures for implementing
effective responses when suspected violations of the Anti-Kickback Statute are
discovered, including disclosing Reportable Events and quantifying and repaying
Overpayments when appropriate; and

9. Exactech’s systems, policies, processes, and procedures for ensuring that all
new and renewed Focus Arrangements comply with the Focus Arrangements
Requirements set forth in Section III.D.2 of the CIA.

B. Arrangements Systems Review Report. The IRO shall prepare a report based upon
each Arrangements Systems Review performed. The report shall include the
following items:

1. a description of the documentation (including policies) reviewed and
personnel interviewed;

2. a detailed description of Exactech’s systems, policies, processes, and
procedures relating to the items identified in Section A.1-9 above;

3. findings and supporting rationale regarding weaknesses in Exactech’s systems,
processes, policies, and procedures relating to Arrangements described in
Section A.1-9 above; and

4. recommendations to improve Exactech’s systems, policies, processes, or
procedures relating to Arrangements described in Section A.1-9 above.

 

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C. Arrangements Transactions Review. The Arrangements Transactions Review shall
consist of a review by the IRO of a randomly selected sample of the lesser of
either: (a) 20 Focus Arrangements; or (b) 20 percent of Focus Arrangements. The
IRO shall assess whether Exactech has complied with the Focus Arrangements
Procedures and the Focus Arrangements Requirements described in Sections III.D.l
and III.D.2 of the CIA, with respect to the selected Focus Arrangements.

The IRO’s assessment with respect to each Focus Arrangement that is subject to
review shall include:

1. verifying that the Focus Arrangement is maintained in Exactech’s centralized
tracking system in a manner that permits the IRO to identify the parties to the
Focus Arrangement and the relevant terms of the Focus Arrangement (i.e., the
items/services/equipment/space to be provided, the amount of compensation, the
effective date, the expiration date; etc.)

2. verifying that the Focus Arrangement was subject to the internal review and
approval process (including both a legal and business review) and obtained the
necessary approvals and that such review and approval is appropriately
documented;

3. verifying that the remuneration related to the Focus Arrangement is properly
tracked;

4. verifying that the service and activity logs are properly completed and
reviewed (if applicable);

5. verifying that leased space, medical supplies, medical devices, and
equipment, and other patient care items are properly monitored (if applicable);
and

6. verifying that the Focus Arrangement satisfies the Focus Arrangements
Requirements of Section III.D.2 of the CIA.

D. Arrangements Transaction Review Report. The Arrangements Transaction Review
Report shall include the following information:

1. Review Methodology.

 

  a. Review Protocol: A detailed narrative description of the procedures
performed and a description of the sampling unit and universe utilized in
performing the procedures for the sample reviewed.

 

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  b. Sources of Data: A full description of the documentation and other
information, if applicable, relied upon by the IRO in performing the
Arrangements Transaction Review.

2. Review Findings. The IRO’s findings with respect to whether Exactech has
complied with the Focus Arrangements Procedures and Focus Arrangements
Requirements with respect to each of the randomly selected Focus Arrangements
reviewed by the IRO. In addition, the Arrangements Transactions Review Report
shall include observations, findings and recommendations on possible
improvements to Exactech’s policies, procedures, and systems in place to ensure
that all Focus Arrangements comply with the Focus Arrangements Procedures and
Focus Arrangements Requirements.

 

Exactech, Inc. - Appendix B

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