Exhibit 10.1


 


	
   

  	
   

  	
  U.S.
  Department of Justice

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Michael J. Sullivan

  
	
   

  	
   

  	
  United States Attorney

  
	
   

  	
   

  	
  District of Massachusetts

  
	
   

  	
   

  	
   

  
	
  Main Reception: (617) 748-3100

  	
   

  	
  John Joseph Moakley United States Courthouse

  
	
   

  	
   

  	
  1 Courthouse Way

  
	
   

  	
   

  	
  Suite 9200

  
	
   

  	
   

  	
  Boston, Massachusetts 02210

  
	
   

  	
   

  	
   

  
	
   

  	
  January 26,
  2009

  



 


Joseph
F. Savage, Jr.


Goodwin
Procter, LLP


Exchange
Place


Boston,
MA, 02109


 


Re:
NeuroMetrix, Inc.


 


Dear
Mr. Savage:


 


This
letter sets forth the agreement ( the “Agreement”) between the United States
Attorney’s Office for the District of Massachusetts (“USAO”) and your client,
NeuroMetrix, Inc. (“NeuroMetrix”):


 


WHEREAS,
NeuroMetrix is a Delaware corporation with a principal place of business in
Waltham, Massachusetts, that is in the business of design, development, promotion,
sale, and distribution of a medical device known as the NC-stat System to
physicians nationwide.  The NC-stat
System is a medical device used in physicians’ offices to assist in the
diagnosis of neuropathies in peripheral nerves and the spine that can be caused
by or associated with carpal tunnel syndrome, leg pain, diabetes, and other
clinical disorders.


 


WHEREAS,
the USAO conducted a criminal investigation regarding certain marketing
referral programs in which NeuroMetrix engaged, to wit, allegations that from
in or about August 2004 through in or about October 2006, NeuroMetrix
offered and paid illegal remuneration to physicians in the form of free boxes
of disposable biosensors to induce them to recommend purchase of the NC-stat
System to their colleagues for the purpose of conducting nerve conduction
studies that were reimbursed in whole or in part by the Medicare Program (the “Subject
Matter”).  As a result of its
investigation, the USAO informed NeuroMetrix that the USAO has determined that there
is sufficient basis to seek an indictment of NeuroMetrix for violations of
federal criminal law, specifically for violations of the Medicare Anti-Kickback
Act, 42 U.S.C. § 1320a-7b(b)(2).


 


WHEREAS,
NeuroMetrix represents the following:


 

















 


(a)                                  NeuroMetrix does not
endorse, ratify, or condone illegal conduct, and has taken steps to prevent
such conduct from occurring in the future;


 


(b)                                 NeuroMetrix discontinued all
marketing referral programs, which programs involved several hundred boxes of
free biosensors which were only a small fraction of the total number of
biosensors purchased by physicians during the relevant time period;


 


(c)                                  NeuroMetrix commenced a
thorough internal investigation under the supervision of a Special Committee of
the Board of Directors immediately upon notice of the allegations of improper
conduct;


 


(d)                                 NeuroMetrix cooperated with
the USAO in its investigation, which cooperation included making employees
available for interviews and testimony without subpoena; responding promptly to
requests for documents by producing hundreds of thousands of pages of
documents to the USAO, without subpoena and often within a week to ten days of
the request; and conducting and providing certain analyses on company computer
databases for data requested by the government;


 


(e)                                  NeuroMetrix instituted a
voluntary compliance program under the guidance of outside counsel (“compliance
counsel”);


 


(f)                                    NeuroMetrix reformed
relevant business practices based on its internal investigation and review by
compliance counsel, including discontinuance of all marketing referral
programs.


 


WHEREAS,
NeuroMetrix will enter into a five year corporate compliance agreement with the
Inspector General’s Office of the Department of Health and Human Services,
which requires NeuroMetrix to undertake various compliance obligations designed
to ensure compliance with Federal health care program requirements (“CIA”).  Among other provisions, the CIA includes “Specific
Training” obligations that require all remaining employees of NeuroMetrix to
receive annual training concerning proper methods for selling, marketing, and
promoting medical devices, including without limitation the antikickback laws
and regulations.  The HHS-OIG monitors
compliance with the CIA obligations and enforces any breaches in accordance
with the remedies set forth in the CIA.


 


WHEREAS,
the USAO has determined that an indictment of NeuroMetrix may cause
disproportionate harm to innocent individuals including current employees who
did not design or implement the marketing referral programs; NeuroMetrix’s
shareholders and customers who had no involvement in the criminal conduct under
investigation; and patients for whom the NC-stat System provides a
point-of-care alternative for nerve conduction studies; and the USAO does not
allege that the conduct in which NeuroMetrix engaged adversely affected patient
health or care.


 


NOW,
THEREFORE, the USAO and NeuroMetrix agree as follows:


 


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1.                                       This agreement
shall be in effect for thirty-six (36) months from the date of its execution.


 


2.                                       NeuroMetrix
admits to and acknowledges that it is responsible for the acts of its employees
as set forth in the Information attached hereto as Appendix A, and agrees that
the marketing referral programs violated 42 U.S.C. § 320a-7b(b)(2)(B).  NeuroMetrix agrees that the facts in Appendix
A are accurate in their entirety and NeuroMetrix agrees not to contradict the
facts stated therein.


 


3.                                       NeuroMetrix
agrees that, if it violates any terms of this Agreement, the USAO may file the
attached criminal Information in the United States District Court for the
District of Massachusetts charging NeuroMetrix with a violation of 42 U.S.C. §
1320a-7b(b)(2).


 


4.                                       NeuroMetrix
will not, through its present or future directors, officers, employees, agents,
attorneys, affiliates, parents or subsidiaries, make any public statements,
including statements or positions in litigation in which any United States
department or agency is a party, contradicting any statement of fact set forth
in the Information attached as Appendix A. 
Any such contradictory public statement by NeuroMetrix, its present or
future directors, officers, employees, agents, attorneys, affiliates, parents
or subsidiaries shall constitute a breach of this Agreement, and subject to the
provisions in Paragraph 5 below, NeuroMetrix shall be subject to prosecution on
the Information attached to this agreement.


 


5.                                       The decision as
to whether any public statement by any such person contradicting a statement
contained in Appendix A will be imputed to NeuroMetrix for the purpose of
determining whether NeuroMetrix has breached this Agreement shall be at the
sole reasonable discretion of the USAO. 
Upon the USAO reaching a determination that such a contradictory
statement has been made by NeuroMetrix, the USAO shall so notify NeuroMetrix in
writing and NeuroMetrix may avoid a breach of this Agreement by publicly
repudiating such statement within five (5) days after written notification
by the USAO.  This paragraph is not
intended to apply to any statement made by any individual in the course of any
criminal, regulatory or civil matter initiated by the USAO against such
individual, unless such individual is speaking on behalf of NeuroMetrix.  Consistent with NeuroMetrix’s obligation not
to make a contradictory public statement, NeuroMetrix may take good faith
positions in litigation involving any private party.


 


6.                                       During the term
of this Agreement, NeuroMetrix agrees to continue to cooperate fully with the
USAO, and, as directed by the USAO, with any other federal, state or foreign
law enforcement or regulatory agency regarding the Subject Matter.  The duty to cooperate includes an affirmative
duty of full and truthful disclosure. 
NeuroMetrix shall truthfully disclose to the USAO all information
respecting the activities of NeuroMetrix and its present and former directors,
officers,


 


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employees,
agents, attorneys, parents, affiliates and subsidiaries relating to Subject
Matter about which the USAO may inquire, or which NeuroMetrix reasonably
believes is material to the investigation by the USAO.  NeuroMetrix agrees that its cooperation
concerning the Subject Matter shall include, but is not limited to, the
following:


 


(a)                                  providing reasonable access
to NeuroMetrix’s documents, facilities and directors, officers, employees,
agents, affiliates and subsidiaries for matters relating to the investigation
of the Subject Matter;


 


(b)                                 assembling, organizing and
producing, or taking reasonable steps to effectuate the production of, on
request from the USAO, all documents, records, or other tangible evidence
related to the investigation in NeuroMetrix’s possession, custody or control in
such reasonable format that the USAO requests;


 


(c)                                  using its reasonable best
efforts to make available its present or former directors, officers, employees,
agents, affiliates and subsidiaries to provide information and/or testimony
related to the investigation of the Subject Matter as requested, including
sworn testimony before a federal grand jury or in federal trials, as well as
interviews with federal law enforcement authorities.  Cooperation under this sub-paragraph will
include identification of witnesses who, to NeuroMetrix’s knowledge, may have
material information regarding the investigation of the Subject Matter.


 


(d)                                 providing testimony and
other information deemed necessary by the USAO or the court to establish the
original location, authenticity, or other evidentiary foundation to admit into
evidence documents in any criminal case or other proceeding as requested by the
USAO; and


 


(e)                                  maintaining NeuroMetrix as a
lawfully organized and adequately capitalized entity for purposes of this
Agreement during the time this Agreement is in effect.


 


Nothing
in this paragraph constitutes an agreement that NeuroMetrix will waive the
attorney-client privilege or work product protections.  The cooperation provisions of this paragraph
shall not apply in the event that the USAO pursues a criminal prosecution
against NeuroMetrix.


 


7.                                       In exchange for
the agreement of the USAO set forth in Paragraph 8 below, NeuroMetrix agrees:


 


(a)                                  to accept
responsibility as set forth in Paragraph 2 through 5 above.


 


(b)                                 to pay one million two
hundred thousand dollars ($1,200,000) to the United States Treasury pursuant to
electronic fund transfer instructions


 


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that
will be provided by the USAO.  This
payment is a material term of this Agreement. 
Failure to make payment within two business days of execution of this
Agreement renders the Agreement null and void.


 


(c)                                  to continue to cooperate
with the USAO in its investigation of the matters described herein as more
fully set forth in Paragraph 6 above.


 


8.                                       In light of
NeuroMetrix’s remedial actions to date and its willingness to (a) acknowledge
responsibility for the behavior of its employees; (b) cooperate with the
USAO and other governmental agencies; (c) demonstrate its future good
conduct through full compliance with the terms of the CIA; and (d) fully
comply with all the obligations undertaken this Agreement, the USAO agrees that
it will not prosecute NeuroMetrix on the attached Information or any other
matters investigated by the USAO as of the date of this Agreement.


 


9.                                       For the term of
this Agreement, should the USAO in its sole reasonable discretion, determine
that NeuroMetrix (a) has knowingly and willfully given false, incomplete
or misleading information under this Agreement; (b) engaged in conduct
subsequent to the execution of this Agreement that constitutes a federal crime;
or (c) has otherwise knowingly breached any provision of this Agreement
(these three circumstances, (a), (b) and (c), are collectively referred to
herein as “Breach”), NeuroMetrix shall, in the USAO’s sole reasonable
discretion, thereafter be subject to prosecution(s) for any federal
criminal violations, including, without limitation, the offense charged in the
Information.  NeuroMetrix waives any
right it may have to proceed by way of Indictment for the offense covered by
the attached Information.  NeuroMetrix
waives venue and any legal or procedural defects in the attached
Information.  NeuroMetrix agrees that the
applicable statute of limitations period (or any other legal equitable or
constitutional basis for barring prosecution based on the passage of time) for
the offense charged in the Information shall be tolled for a period of time
equal to the term of this Agreement at the time a Breach is declared plus an
additional six months after the declaration of the Breach.  For all other offenses not charged in the
Information that are not time-barred as of the date of this Agreement,
NeuroMetrix agrees that the applicable statute of limitations period (or any
other legal, equitable or constitutional basis upon which a prosecution may be
time-barred), shall be tolled for the time period equal to the term of this
Agreement at the time a Breach is declared plus an additional six months after
the declaration of the Breach.  Further,
NeuroMetrix waives any rights it may have to a speedy trial pursuant to the
Fifth or Sixth Amendments to the United States Constitution, 18 U.S.C. § 3161,
Federal Rule of Criminal Procedure 48(b), any applicable local rule of
the United States District Court for the District of Massachusetts, or any
other applicable legal or equitable principle. 
NeuroMetrix’s agreements herein are knowing and voluntary and in express
reliance on the advice of counsel.


 


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10.                                 The decision as to whether
conduct and statements of any individual will be imputed to NeuroMetrix for the
purpose of determining whether NeuroMetrix has committed a Breach shall be in
the sole reasonable discretion of the USAO.


 


11.                                 Should the USAO determine
that NeuroMetrix has committed a Breach, the USAO shall provide written notice
to NeuroMetrix of the alleged breach and provide NeuroMetrix with a two-week
period in which to make a presentation to the USAO to demonstrate that: (a) no
Breach has occurred, (b) the Breach is not a knowing breach, or (c) the
Breach has been cured.  The parties
hereto expressly understand and agree that should NeuroMetrix fail to make a
presentation to the USAO within a two-week period, it shall be conclusively
presumed, at the USAO’s option, that NeuroMetrix has committed a Breach.  In the event of a Breach that results in a
prosecution of NeuroMetrix, such a prosecution may be premised upon any
information provided by or on behalf of NeuroMetrix to the USAO at any time,
unless otherwise agreed when the information was provided.


 


12.                                 NeuroMetrix agrees that in
the event that the USAO, in its sole reasonable discretion, determines that
NeuroMetrix has committed a Breach:  (a) NeuroMetrix
will not contest the filing of the Information nor the admissibility into
evidence of the facts set forth in the Information (paragraphs 1-14)  as binding admissions of NeuroMetrix; (b) NeuroMetrix
will not contradict the contents of the Information; (c) all statements
made by or on behalf of NeuroMetrix and any employee (current or former), or
any testimony given by NeuroMetrix and any employee (current or former) before
a grand jury or elsewhere, and any leads derived from such statements and
testimony, shall be admissible in evidence against NeuroMetrix if proffered by
the USAO in any criminal proceedings brought by the USAO against NeuroMetrix; (d) NeuroMetrix
shall not assert any claim under the U.S. Constitution, the rules of
evidence, common law or any other legal or equitable principle, that statements
made by or on behalf of NeuroMetrix prior to or subsequent to this Agreement,
or any leads therefrom, should be suppressed; and (e) NeuroMetrix shall
not assert that the conduct set forth in the Information fails to provide a
sufficient factual or legal basis to support the charge set forth in the
Information.


 


13.                                 NeuroMetrix agrees that the
consequences for a Breach as set forth in this Agreement, including without
limitation, those set forth in paragraph 3 of this Agreement, are remedies to
which the USAO is entitled in the event of a Breach and shall survive in the
event of a Breach.  NeuroMetrix further
agrees that the USAO’s remedies for a Breach are not limited to those set forth
in this Agreement.  NeuroMetrix further
agrees that in the event of a Breach, NeuroMetrix shall nevertheless be bound
by its waivers of any legal, equitable or constitutional rights set forth in
this Agreement, including, without limitation, its waivers in paragraphs 9 and
12 of this Agreement, and those provisions shall survive even in the event of a
Breach.


 


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14.                                 NeuroMetrix agrees that if
it sells or merges all or substantially all of the business operations as they
exist as of the date of this Agreement, it shall include in any contract for
sale or merger a provision binding the purchaser/successor to the obligations
described in this Agreement.


 


15.                                 The parties understand and
acknowledge that this Agreement is binding on NeuroMetrix and the USAO, but
specifically does not bind any other federal agencies, or any state or local
law enforcement or licensing authorities.


 


16.                                 Nothing in this Agreement
restricts in any way the ability of the USAO from proceeding against any
individual or entity not a party to this Agreement.


 


17.                                 This Agreement expires
thirty-six (36) months from the Effective Date; provided that if on the
Effective Date the USAO or any other federal law enforcement or regulatory
agency with which the USAO has directed NeuroMetrix to cooperate is then
conducting any investigation, prosecution or proceeding relating to this
investigation, then this Agreement shall expire on the date that any such
investigation, prosecution or proceeding is finally terminated, as determined
by the governmental department or agency conducting the investigation,
prosecution or proceeding.  Between
thirty (30) and sixty (60) calendar days before the expiration of this
Agreement, NeuroMetrix shall submit to the USAO a written certification that
NeuroMetrix is in compliance with this Agreement.


 


18.                                 NeuroMetrix and the USAO
agree that this Agreement, including Appendix A,  shall be made available to the public.


 


19.                                 NeuroMetrix warrants and
represents that its Board of Directors has duly authorized, in a specific
resolution, the execution and delivery of this Agreement by NeuroMetrix, and
that the person signing the Agreement has authority to bind NeuroMetrix.  NeuroMetrix further agrees that it will
deliver concurrently with an executed copy of the Agreement a copy of the
requisite corporate resolution authorizing it to enter into this Agreement.


 


20.                                 This Agreement (including
Appendix A) constitutes the entire agreement, and supersedes all other prior
agreements or understandings, both oral and written, among the parties with
respect to the subject matter hereof.


 


21.                                 This Agreement may not be
modified except in writing signed by the parties.


 


22.                                 This Agreement may be
executed in counterparts, each of which shall be deemed an original but all of
which taken together shall constitute one and the same agreement.  The exchange of copies of this Agreement and
of signature pages by facsimile or electronic transmission shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes.  Signatures of the parties transmitted by
facsimile or


 


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electronic
transmission shall be deemed to be their original signatures for all purposes.


 


23.                                 NeuroMetrix agrees that
should a dispute between NeuroMetrix and the USAO arise as to the meaning of
any provision of this Agreement, any ambiguities as to the terms of this
Agreement shall be construed in favor of the USAO.


 


24.                                 The Effective Date of this
Agreement shall be the date upon which this Agreement is fully executed by the
parties.


 


 


	
   

  	
   

  	
  MICHAEL
  J. SULLIVAN

  
	
   

  	
   

  	
  United
  States Attorney

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Diane C. Freniere  

  
	
   

  	
   

  	
  Diane
  C. Freniere

  
	
   

  	
   

  	
  White
  Collar Section Chief

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Susan G. Winkler

  
	
   

  	
   

  	
  Susan
  G. Winkler

  
	
   

  	
   

  	
  Health
  Care Fraud Chief

  
	
   

  	
   

  	
   

  
	
  NeuroMetrix, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  Shai Gozani

  	
   

  	
   

  	
   

  
	
  Its:
  

  	
   President & CEO

  	
   

  	
  Dated:
  

  	
  2/5/09

  	
   

  
	
  NeuroMetrix, Inc.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Joseph F. Savage, Jr.

  	
   

  	
  Dated:
  

  	
  2/5/09

  	
   

  
	
  Joseph
  F. Savage, Jr.

  	
   

  	
   

  	
   

  
	
  Goodwin
  Procter, LLP

  	
   

  	
   

  	
   

  
	
  Counsel
  to NeuroMetrix, Inc.

  	
   

  	
   

  	
   

  



 


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