Document:

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                                                                    EXHIBIT 10.5

                        SETTLEMENT AGREEMENT AND RELEASE
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                                  I.  PARTIES
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     This Settlement Agreement ("Agreement") is entered by and among:

     A. The United States of America, acting through its Department of Justice
and the United States Attorneys' Offices for the Districts of Massachusetts and
the Southern District of Florida, and on behalf of (1) the United States
Department of Health and Human Services through its Office of Inspector
General("HHS-OIG"); (2) the United States Department of Defense through its
TRICARE Support Office ("TSO") (formerly the Office of the Civilian Health and
Medical Program of the Uniformed Services), a field activity of the Office of
the Secretary of Defense, through counsel; (3) the United States Office of
Personnel Management ("OPM"), through the Director of Programs; and (4) the
United States Department of Veteran Affairs ("VA"), through counsel;
(collectively the preceding will be referred to as the "United States");

     B. National Medical Care, Inc. ("NMC"), a Delaware corporation, and its
affiliate entities listed on Exhibit E hereto that provide or have provided
dialysis services (jointly and severally "DSD"); and Fresenius Medical Care
Holdings, Inc. ("FMCH") (d/b/a Fresenius Medical Care North America); and
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     C.  Gregory S. Price ("Price"), individually, and Richard Bradford
("Bradford"), individually, (collectively the "Relators"), each acting through
his authorized representative.
Collectively, all of the above will be referred to as "the Parties."

                                 II.  PREAMBLE
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     A.  WHEREAS, at all relevant times, NMC primarily was in the business of
providing dialysis and related services to patients with End-Stage Renal Disease
("ESRD") throughout the United States.

     B.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods and services to the
Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395-
1395ddd (1997), which is administered by HHS;

     C.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods and services to the
TRICARE Program (also known as the Civilian Health and Medical Program of the
Uniformed Services ("CHAMPUS")), 10 U.S.C. (S)(S) 1071-1106, which is
administered by the Department of Defense through the TSO;

     D.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods and services to the
Federal Employees Health Benefit Program ("FEHBP"), 5 U.S.C. (S)(S) 8901-8914,
which is administered by OPM;

     E.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods
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and services to the Railroad Retirement Medicare program ("Railroad Medicare"),
established under the Railroad Retirement Act of 1974, 45 U.S.C. (S)(S) 231-
231v, which is paid from the Medicare Trust Fund, and administered by the United
States Railroad Retirement Board ("RRB");

     F.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods and services to the
Veteran Affairs Program, 38 U.S.C. (S)(S) 1701-1743, which is administered by
the VA;

     G.  WHEREAS, DSD submitted or caused to be submitted ESRD claims for
payment for dialysis, patient care, and related goods and services to the
Medicaid programs, 42 U.S.C. (S)(S) 1396-1396v (1997), of the thirty-three
states of Alabama, Arizona, Arkansas, California, Connecticut, Colorado,
Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Texas, Virginia, West Virginia, Wisconsin, and the
District of Columbia, (the "Participating States"), and to the Territory of
Puerto Rico (the "Participating Territory");

     H.  WHEREAS, the United States contends that it has certain civil claims
against DSD and NMC, and against FMCH, as parent, for violations of the federal
statutes and/or common law doctrines, specified in Paragraph 10 below in
connection with the following conduct ("the Covered Conduct"):
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     (1) Failing to refund to HCFA or its fiscal intermediaries, overpayments
(hereinafter "Unreconciled Payments") received by DSD from Medicare that DSD
reported as Unreconciled Payments on HCFA Forms 838;

     (2) Failing to report on HCFA Forms 838 filed or caused to be filed by DSD
from 1991 to the present, Unreconciled Payments it had received from the
Medicare program, and recognized as income during the period 1975-1993;

     (3) In connection with amendments to the Medicare Secondary Payor
provisions made by the Omnibus Budget Reconciliation Act ("OBRA") of 1993 ("OBRA
`93"), failing to report to HCFA or its fiscal intermediaries on HCFA Forms 838
Unreconciled Payments at the time of billing to employer group health plans and
otherwise failing to report in a timely fashion to HCFA or its fiscal
intermediaries.

     (4) Failing to report and/or refund to HCFA or its fiscal intermediaries
overpayments that Home Dialysis Services, Inc. ("HDS"), a company established by
NMC, had received from the Medicare program resulting from its billing of home
dialysis services and equipment in excess of the Method II home dialysis cost
cap contained in OBRA `89;

     (5) Failing to report and/or refund to HCFA and its fiscal intermediaries
overpayments received by HDS from the Medicare program resulting from its
billing in excess of the reasonable charge for home dialysis prior to OBRA `89;
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          (6) Failing to report and/or refund to the Participating States and
Territory Medicaid programs overpayments received during the years 1975-1993;
          (7) Failing to report and/or refund to TRICARE overpayments received
during the years 1975-1993;
          (8) Failing to report and/or refund to FEHPB overpayments received
during the years 1975-1993; and
          (9) Failing to report and/or refund to the VA overpayments received
during the years 1975-1993.

     I.     WHEREAS, the United States also contends that it has certain
administrative claims against DSD and FMCH, as parent, under the provisions for
permissive exclusion from the Medicare, Medicaid and other federal health care
programs, 42 U.S.C. (S) 1320a-7(b), and the provisions for civil monetary
penalties, 42 U.S.C. (S) 1320a-7a, for the Covered Conduct.

     J.     WHEREAS, Relator Gregory S. Price has filed under seal a qui tam
                                                                     --- ---
complaint on behalf of the United States: United States ex rel. Price v. W.R.
                                          -----------------------------------
Grace & Co., National Medical Care, Inc., et al., Civil Action No. 97-11022-NG
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(D. Mass.)(the "Price Civil Action").

     K.     WHEREAS, Relator Richard Bradford has filed under seal a qui tam
                                                                     --- ---
complaint on behalf of the United States: United States ex rel. Bradford v.
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National Medical Care, Inc., et al., Civil Action No. 96-3350-Hoeveler (S.D.
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Fla.)(the "Bradford Civil Action").

     L.     WHEREAS, DSD, and FMCH specifically deny and affirmatively contest
the contentions of the United States as set
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forth in Paragraph H, above, and the allegations of the Relators in the Price
                                                                        -----
and Bradford Civil Actions, and specifically deny any wrongdoing in connection
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with those claims; and further contend that DSD's practices described in the
Covered Conduct were appropriate and lawful and did not result in any violations
of federal law, state law, or common law doctrines, and do not give rise to any
civil or administrative cause of action; and

     M.    WHEREAS, over the years, DSD reported Medicare Unreconciled Payments
on HCFA Forms 838 through the quarter ended December 31, 1998, of which NMC and
FMCH warrant and represent on Exhibit E attached hereto and incorporated herein
by reference, that $10,982,885.16 million has not yet been recouped by the
fiscal intermediaries as of January 3, 2000 and remains outstanding ("Unrecouped
Credit Balances"); and

     N.    WHEREAS, in order to avoid the delay, uncertainty, inconvenience and
expense of protracted litigation of these claims and contentions of the Parties,
the Parties reach a full and final compromise for the Covered Conduct, pursuant
to the Terms and Conditions set forth below.

                           III.  TERMS AND CONDITIONS
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     NOW, THEREFORE, in reliance on the representations contained herein and in
consideration of the mutual promises, covenants, and obligations in this
Agreement, and for good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree as follows:
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     1.  NMC and FMCH, collectively, shall pay to the United States and the
Participating States and Participating Territory, collectively, the sum of
sixteen million eight hundred seventeen thousand seven hundred eight dollars
($16,817,708) (the "Settlement Amount"), and this sum shall constitute a debt
immediately due and owing to the United States on the "First Payment Date",
which is the later of the dates on which (a) the four civil Settlement
Agreements are fully executed by the Parties, (b) all notices of dismissal
described in the civil Settlement Agreements are docketed by the Court, or (c)
the Court accepts LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC
Homecare, Inc.'s guilty pleas and imposes the sentences set forth in their
respective Plea Agreements.  NMC and FMCH, collectively, shall pay the
Settlement Amount to the United States according to the schedule, terms and
instructions contained in the Promissory Note executed contemporaneously with
this Agreement, attached as Exhibit A, and incorporated herein by reference.
Within a reasonable amount of time after receipt of the first payment from NMC
and FMCH pursuant to the terms of the Promissory Note, the United States shall
pay to (a) the Participating States, collectively, according to written payment
instructions from the Participating States, an amount of seven hundred fifty
four thousand one hundred twenty-five dollars ($754,125) as their share of the
Settlement Amount and (b) the Participating Territory, according to written
payment instructions from the Participating Territory, an amount of sixty
thousand one hundred
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fifty-five dollars ($60,155) as its share of the Settlement Amount.

     2.  As an express condition of the Settlement Agreement, to secure NMC's
and FMCH's payment obligations under Paragraph 1 of this Agreement (and the
other civil Settlement Agreements and criminal Plea Agreements being executed at
the same time), NMC and FMCH shall:

     (a) procure from the Bank of Nova Scotia and deliver or cause to be
delivered to the United States Attorney's Office for the District of
Massachusetts, on or before January 19, 2000, an amendment to the unconditional,
irrevocable Letter of Credit No. S020/43695/96 issued to the United States of
America on September 27, 1996 (the "Letter of Credit") to increase the amount of
the Letter of Credit to $189,634,446.00.  Such amendment shall be in the form
attached as Exhibit B.  Within 10 days of receipt by the U.S. Attorney's Office
of written confirmation from the transferring bank that a quarterly payment, as
described in Paragraphs 1.B. through 1.E. of the Promissory Note, or prepayment
of such quarterly payments, has been made to the United States, the United
States shall provide written permission to the Bank of Nova Scotia to reduce the
amount available for drawing under Letter of Credit No. S020/43695/96 by the
amount of the principal payment received.  In the event that the entire
outstanding payment obligation secured by the Letter of Credit is prepaid, then
the United States shall provide written permission to reduce the amount
available for drawing to zero.  The United States shall return this Letter of
Credit for cancellation when
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all obligations are paid in full or it is determined, by the United States, or
pursuant to a final and non-appealable order of a court of competent
jurisdiction, that NMC and FMCH have fulfilled all payment obligations pursuant
to this Agreement.

     (b) On January 19, 2000, NMC and FMCH shall establish an escrow account in
an initial amount of $236,401,919.00 to be held by an independent third party
agreeable to the United States, and NMC and FMCH shall increase the escrow
amount each day in an amount of $48,546.00 (through accrued interest and/or
deposits), beginning on January 20, 2000 and continuing through April 15, 2000,
when NMC and FMCH shall increase the escrow amount by an additional amount each
day of $7,271.00 (through accrued interest and/or deposits), for each quarterly
payment due before the first payment is due on the First Payment Date.  On the
First Payment Date, all funds in the escrow account shall be paid to the United
States to satisfy the payment obligation in Paragraph 1.  The terms and
conditions of this escrow account shall in no way limit NMC's and FMCH's payment
obligations to the United States secured by the Letter of Credit.

     3.  NMC and FMCH, collectively, agree to pay to the Health Care Financing
Administration ("HCFA") the Unrecouped Credit Balances, and this sum shall
constitute a debt immediately due and owing to the United States upon the later
of the date on which (a) this Agreement is fully executed by the Parties, or (b)
the notices of dismissal described in Paragraph 18 of this Agreement are filed
and docketed by the Court.  NMC and FMCH shall pay the Unrecouped Credit
Balances in accordance with
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written payment instructions to be provided by the United States Attorneys's
Office for the District of Massachusetts. HCFA shall direct its fiscal
intermediaries identified in Exhibit E, in writing, that they should cease any
efforts to recoup the Unrecouped Credit Balances received by DSD prior to
January 1, 1999 and reported by DSD on Forms 838. NMC and FMCH shall provide
HCFA with any additional documentation necessary to this process. In the event
that HCFA or any fiscal intermediary initiates a recoupment contrary to such
directions, NMC and FMCH shall notify Dara Corrigan, Associate General Counsel
of HCFA, and HCFA shall instruct the fiscal intermediary to suspend the
recoupment.

     4.  NMC and FMCH are in default of this Agreement on
the date of occurrence of any of the following events ("Events of Default"):

          a.  NMC's and FMCH's failure to procure, deliver or maintain the
Letter of Credit;

          b.  NMC's and FMCH's failure to pay any amount provided for in the
Promissory Note attached as Exhibit A within two days of when such payment is
due and payable;

          1.   NMC's and FMCH's failure to pay the Unreconciled
               Credit Balances as provided for in Paragraph 3 above;

                         d.  If prior to making the full payment of the amount
               due under the Promissory Note or Paragraph 3 above,(i) NMC and/or
               FMCH commences any case, proceeding, or other action (A) under

<PAGE>

               relief of debtors, seeking to have any order for relief of
               debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or
               insolvent, or (B) seeking appointment of a receiver, trustee,
               custodian or other similar official for NMC and/or FMCH or for
               all or any substantial part of NMC's and/or FMCH's assets; or
               (ii) there shall be commenced against NMC and/or FMCH any such
               case, proceeding or other action referred to in clause (i) which
               results in the entry of an order for relief and any such order
               remains undismissed, or undischarged or unbonded for a period of
               thirty (30) days; or (iii) NMC and/or FMCH takes any action
               authorizing, or in furtherance of, or indicating its consent to,
               approval of, or acquiescence in, any of the acts set forth above
               in this sub-Paragraph 4.d.;

          2.   Failure by NMC and FMCH to establish, maintain or
               make the required payments to the escrow account described in
               Paragraph 2b.
               If payments due under Paragraph 1 are received late, but within
               the two-day grace period provided in Paragraph 5 of the
               Promissory Note, interest incurred during such grace period will
               be assessed at two times the daily amount in effect on the date
               the payment was due.

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     6.   NMC and FMCH shall provide the United States written notice of an
Event of Default within two (2) business days of such event by overnight mail,
or facsimile followed by overnight delivery, to the United States Attorney's
Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA
02210, Attention: Suzanne E. Durrell, Assistant U.S. Attorney (or to the
attention of such other person as may be designated in writing by the United
States Attorney's Office).

     7.   Immediately upon the occurrence of an Event of Default,
without further notice or presentment and demand by the United States:

          a.  The Settlement Amount plus accrued interest through the end of the
applicable quarter as set forth in Paragraph 1 of the Promissory Note and the
Unreconciled Credit Balances referenced in Paragraph 3 above (minus any payments
to date of principle and accrued interest) shall become immediately due and
payable ("Settlement Default Amount").  Interest shall be calculated on the
Settlement Default Amount at the Prime Rate as published in the Wall Street
                                                                -----------
Journal on the Effective Date of this Agreement, plus 5% from the date of the
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Event of Default.

          b.  In addition, NMC and FMCH will pay the United States all
reasonable costs of collection and enforcement of this Agreement, including
attorney's fees and expenses, plus interest described in Paragraph 7.a. above.
The Settlement Default Amount, plus interest, described in Paragraph 7.a. above,
together with the costs of collection and enforcement described
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in this sub-paragraph, will be referred to as the "Default Obligation".

     8.   Upon the occurrence of an Event of Default, the United States may
exercise, at its sole option, one or more of the following rights:

          a.   The United States may draw the full amount available for drawing
under the Letter of Credit and retain all proceeds thereof.

          b.   The United States may enforce the terms of the Guarantee
Agreement between the United States of America, Fresenius Medical Care GMBH, a
German corporation and the predecessor of Fresenius Medical Care AG, W.R. Grace
& Co., a New York corporation, and National Medical Care, Inc., dated July 31,
1996, attached as Exhibit C.

          c.   The United States retains any and all other rights and remedies
it has or may have under law and equity.

          3.   No failure or delay on the part of the United States to exercise
               any right or remedy shall operate as a waiver of the United
               States' rights. No single or partial exercise by the United
               States of any right or remedy shall operate as a waiver of the
               United States' rights.

     9.   In an Event of Default under Paragraph 4.d. above (Commencement of
          Bankruptcy or Reorganization Proceeding): a. NMC and FMCH agree not to
          contest or oppose any motion filed by the United States seeking relief
          from or

<PAGE>

               modification of the automatic stay of 11 U.S.C. (S) 362(a); not
               to seek relief under 11 U.S.C. (S) 105 to enjoin or restrain the
               United States from recovering monies owed by NMC and FMCH arising
               out of this Agreement or the attached Promissory Note, or from
               recovering monies through presentment against the Letter of
               Credit. NMC and FMCH recognize that this express waiver is in
               consideration for the settlement of claims by the United States
               described in Preamble Paragraph H above, under the terms and
               conditions contained in this Settlement Agreement.

                         b.  By expressly waiving the automatic stay provision,
               NMC and FMCH agree not to oppose or interfere with any motion
               made in federal court (including bankruptcy courts) by the United
               States to suspend payments to NMC and DSD from the Title XVIII
               (Medicare), Title XIX (Medicaid) programs, and other federal
               health care programs;

                         c.  This Agreement shall be voidable at the sole
               option of the United States;

                         d.  If any term(s) of this Agreement are set aside for
               any reason, including as a result of a preference action brought
               pursuant to 11 U.S.C. (S) 547, the United States, at its sole
               option and in its discretion, may rescind all
<PAGE>

               terms of this Agreement and seek recovery of the full amount of
               claims and allegations identified herein and in the Civil
               Actions, or, in the alternative, enforce the remaining terms of
               this Agreement. In the event of rescission of this Agreement, all
               Parties reserve all rights, claims, and defenses that are
               available under law and equity as of the Effective Date of this
               Agreement; and

                          e.  In addition to the rights enumerated in Paragraph
               8.a. through 8.d. above, the United States and all other Parties
               shall retain all rights and claims they have or may have under
               law and equity.

                    10.   Subject to the exceptions and limitations in Paragraph
               11 below, in consideration of the obligations of DSD and FMCH set
               forth in this Agreement, conditioned upon payment in full of the
               Settlement Amount and the Unrecouped Credit Balances, subject to
               Paragraph 30, (concerning bankruptcy proceedings commenced within
               91 days of any payment under this Agreement), the United States,
               on behalf of itself, and its officers, agents, agencies, and
               departments, will release and will be deemed to have released DSD
               including NMC, FMCH, and the subsidiaries of NMC and FMCH listed
               on the
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               attached Exhibit D (collectively, the subsidiaries of NMC and
               FMCH listed on Exhibit D will be referred to as the "NMC
               Companies," and the corporate entities listed on Exhibit D
               comprise the only entities which constitute the "NMC Companies"
               within the meaning of this Agreement), and the current directors,
               officers, employees, and agents of the DSD, FMCH and the NMC
               Companies who were not employed by or in any way affiliated with
               DSD, FMCH and the NMC companies prior to September 30, 1996, from
               any civil or administrative monetary claim (including recoupment
               claims) that the United States has or may have under the False
               Claims Act, 31 U.S.C. (S)(S) 3729-3733; the Program Fraud Civil
               Remedies Act, 31 U.S.C. (S)(S) 3801-3812; the Civil Monetary
               Penalties Law, 42 U.S.C. (S) 1320a-7a; or common law claims for
               fraud, payment by mistake of fact, breach of contract or unjust
               enrichment for the conduct described in Preamble Paragraphs H and
               M above with respect to Medicare, Railroad Retirement Medicare,
               TRICARE, FEHBP, the VA, and/or the Medicaid programs of the
               Participating States and the Participating Territory.

                    11.  Notwithstanding any term of this Agreement, the United
               States specifically does not
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               release DSD, FMCH or the NMC Companies, or any individual from
               any and all of the following: (a) any potential criminal, civil
               or administrative claims arising under Title 26, U.S. Code
               (Internal Revenue Code); (b) any criminal liability; (c) any
               potential liability to the United States (or any agencies
               thereof) for any conduct other than that identified in Preamble
               Paragraphs H and M above, including but not limited to any
               allegations in the Civil Actions not encompassed by Preamble
               Paragraphs H and M; (d) any entities not specifically included on
               the list of NMC Companies set forth in Exhibit D; (e) any claims
               based upon such obligations as are created by this Agreement; (f)
               except as explicitly stated in this Agreement, any administrative
               liability, including mandatory exclusion from Federal health care
               programs; (g) any express or implied warranty claims or other
               claims for defective or deficient products and services provided
               by DSD, including quality of testing or product claims; (h) any
               claims for personal injury or property damage or for other
               consequential damages arising from the conduct described in
               Preamble Paragraphs H and M above; (i) any claims based upon
               failure to deliver items or services; (j) any civil or
               administrative claims against any individual who was an officer,

<PAGE>

               director, trustee, agent, employee, or was in any way affiliated
               with DSD or NMC's parents, subsidiaries, divisions, or affiliates
               at any time prior to September 30, 1996; or (k) any civil or
               administrative claims against any individual, including current
               directors, officers, employees and agents, who is criminally
               indicted or convicted of an offense, or who enters a criminal
               plea related to the conduct alleged in Preamble Paragraphs H and
               M above.

                    12.  FMCH, on behalf of itself and its parents, affiliates,
               subsidiaries, and divisions, including but not limited to NMC,
               has entered into a Corporate Integrity Agreement with HHS-OIG,
               which is incorporated by reference into this Agreement.  FMCH
               will immediately upon execution of this Agreement implement its
               obligations under the Corporate Integrity Agreement.

                    13.  In consideration of the obligations of DSD and FMCH
               set forth in this Agreement, conditioned upon payment in full of
               the Settlement Amount and the Unrecouped Credit Balances, subject
               to Paragraph 30 below (concerning bankruptcy proceedings
               commenced within 91 days of any payment under this Agreement),
               and conditioned upon FMCH's entering into the Corporate Integrity
<PAGE>

               Agreement incorporated by reference, the OIG-HHS agrees to
               release and refrain from instituting, directing, or maintaining
               any administrative claim or any action seeking exclusion from the
               Medicare, Medicaid or other Federal health care programs (as
               defined in 42 U.S.C. (S) 1320a-7b(f)) against DSD, FMCH or the
               NMC Companies and their current directors, officers, employees,
               and agents who were not employed by or in any way affiliated with
               DSD or any of NMC's parents, subsidiaries, divisions, or
               affiliates at any time prior to September 30, 1996, under 42
               U.S.C. (S) 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C.
               (S) 1320a-7(b) (permissive exclusion) for the conduct described
               in Preamble Paragraphs H and M, except as reserved in Paragraph
               11 above and as reserved in this Paragraph.  The OIG-HHS
               expressly reserves all rights to comply with any statutory
               obligations to exclude the DSD, FMCH and the NMC Companies from
               the Medicare, Medicaid, or other Federal health care programs
               under 42 U.S.C. (S) 1320a-7(a) (mandatory exclusion).  Nothing in
               this Paragraph precludes the OIG-HHS from taking action against
               entities or individuals for conduct and practices for which civil
               claims have been reserved in Paragraph 11 above.
<PAGE>

                    14.    In consideration of the obligations of DSD and
               FMCH set forth in this Agreement, conditioned upon payment in
               full of the Settlement Amount and Unrecouped Credit Balances, and
               subject to Paragraph 30 below (concerning bankruptcy proceedings
               commenced within 91 days of any payment under this Agreement),
               TSO agrees to release and refrain from instituting, directing, or
               maintaining any administrative claim or any action seeking
               exclusion from the TRICARE program against DSD, FMCH or the NMC
               Companies and their directors, officers, employees, and agents
               who were not employed by or in any way affiliated with DSD or
               NMC's subsidiaries, divisions, and affiliates at any time prior
               to September 30, 1996, under 32 C.F.R. (S) 199.9 for the conduct
               described in Preamble Paragraphs H and M, except as reserved in
               Paragraph 11 above and as reserved in this Paragraph.  The TSO
               expressly reserves all rights to comply with any statutory
               obligations to exclude DSD, FMCH and the NMC Companies from the
               TRICARE program under 32 C.F.R. (S)(S) 199.9(f)(1)(i)(A),
               (f)(1)(i)(B), (f)(1)(i)(D), and (f)(1)(iii).  Nothing in this
               Paragraph precludes the TSO from taking action against entities
               or persons, or for conduct or practices, for which
<PAGE>

               civil claims have been reserved in Paragraph 11 above.

                    15.  In consideration of the obligations of DSD and FMCH as
               set forth in this Agreement, conditioned upon payment in full of
               the Settlement Amount and Unrecouped Credit Balances, and subject
               to Paragraph 30 below (concerning bankruptcy proceedings
               commenced within 91 days of any payment under this Agreement),
               OPM agrees to release and refrain from instituting, directing, or
               maintaining any administrative claim or any action seeking
               exclusion from FEHBP against DSD, FMCH and the NMC Companies and
               their directors, officers, employees, and agents who were not
               employed by or in any way affiliated with DSD or NMC's
               subsidiaries, divisions, or affiliates at any time prior to
               September 30, 1996, under 5 U.S.C. (S) 8902a or 5 C.F.R. Part 970
               for the conduct described in Preamble Paragraphs H and M
               including that in the Civil Action, except as reserved
<PAGE>

               in Paragraph 11 above, and except if the DSD, FMCH or the NMC
               Companies or any individuals are excluded by the Office of
               Inspector General of HHS pursuant to 42 U.S.C. (S) 1320a-7(a).
               Nothing in this paragraph precludes OPM from taking action
               against entities or persons, or for conduct and practice for
               which civil claims have been reserved in Paragraph 11 above. 16.
               Bradford agrees that the settlement of his Civil Action is fair,
               adequate and reasonable under all the circumstances, pursuant to
               31 U.S.C. (S) 3730(c)(2)(B). Price agrees that the settlement of
               his Civil Action is fair, adequate and reasonable under all the
               circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). On the
               United States' receipt of the First Payment pursuant to Paragraph
               1 above, each of Relator Price and Bradford, for himself, his
               heirs, successors and assigns, will release and will be deemed to
               have released DSD, FMCH and the NMC Companies and their parents,
               affiliates, divisions, subsidiaries, predecessors, successors,
               assigns, and transferees, and any of their current or former
               directors, officers, employees, counsel, agents, and
               representatives from any and all claims that he has or may have
               that arise from or relate to any and all of the allegations in
               his Civil Action, the conduct described in Preamble Paragraphs H
               and M, and his employment with any of the corporate entities
               referenced in this Paragraph, except claims by Relators Price
               and/or Bradford for attorney's fees and costs pursuant to 31
               U.S.C. (S) 3730(d)(1). If NMC and FMCH default on their payment
               obligations under Paragraph 1
<PAGE>

               above, the respective releases given by Relator Price and
               Bradford shall, at the sole option and discretion of each
               Relator, upon written notice to NMC and FMCH, be rescinded.

                    17.  The United States agrees to pay Relators Bradford and
               Price according to the terms set forth below:

                         a.  The United States agrees to pay Relator Bradford
               18% from the Federal Share of the Settlement Amount attributable
               to the allegations in the Bradford qui tam ($799,194), a total
               principal amount of one hundred forty three thousand eight
               hundred fifty five dollars ($143,855) plus 18% of the interest
               paid by NMC and FMCH on that principal amount, if any. To satisfy
               this obligation, the United States will pay Relator Bradford as
               payments by NMC are received under the terms of the
<PAGE>

               Promissory Note, as more particularly set forth in Exhibit A to
               the Promissory Note as those payments relate to this Agreement.
               The first payment to Relator Bradford will be made within 21 days
               after the First Payment Date, and subsequent payments to Relator
               Bradford will be made within 21 days after each additional
               payment is received by the United States, by wire transfer to
               Relator Bradford in accordance with instructions to be provided
               by Relator's counsel.  Relator Bradford, for himself
               individually, and for his respective heirs, successors, and
               assigns, will release and will be deemed to have released and
               forever discharged the United States from any claims pursuant to
               31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b), (c), (d)
               and (d)(1), for a share of the proceeds of the Civil Action, from
               any claims for a share of the Settlement Amount, and from any
               claims arising from the filing of his Civil Action, and in full
               settlement of claims under this Agreement.  This Agreement does
               not resolve or in any manner affect any claims the United States
               has or may have against Relator Bradford, arising under Title 26,
               U.S. Code (Internal Revenue Code), or any claims arising under
               this Agreement.
<PAGE>

                    b.  The United States agrees to pay Relator Price 18% of the
               Federal Share of the Settlement Amount attributable to the
               allegations of the Price qui tam ($15,204,234), a total principal
               amount of two million seven hundred thirty six thousand seven
               hundred sixty two dollars ($2,736,762), plus 18% of the interest
               paid by NMC and FMCH on that principle amount of $15,204,234, if
               any.   To satisfy this obligation, the United States will pay
               Relator Price as payments by NMC are received under the terms of
               the Promissory Note, as more particularly set forth in Exhibit A
               to the Promissory Note as those payments relate to this
               Agreement.  The first payment to Relator Price will be made
               within 21 days after the First Payment Date, and subsequent
               payments to Relator Bradford will be made within 21 days after
               each additional payment is received by the United States, by wire
               transfer to Relator Price in accordance with instructions to be
               provided by Relator's counsel.  Relator Price, for himself
               individually, and for his respective heirs, successors, and
               assigns, will release and will be deemed to have released and
               forever discharged the United States from any claims pursuant to
               31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b), (c), (d)
               and (d)(1), for a
<PAGE>

               share of the proceeds of the Civil Action, from any claims for a
               share of the Settlement Amount, and from any claims arising from
               the filing of his Civil Action, and in full settlement of claims
               under this Agreement. This Agreement does not resolve or in any
               manner affect any claims the United States has or may have
               against Relator Price, arising under Title 26, U.S. Code
               (Internal Revenue Code), or any claims arising under this
               Agreement.

                    18.  After this Agreement is fully executed, the United
               States and the Relators will notify the Court that all pertinent
               Parties have stipulated that, to the extent alleged in Paragraph
               H only, the Civil Action shall be dismissed with prejudice
               effective upon receipt by the United States, the Participating
               States and Participating Territory of the payments described in
               Paragraph 1 above, pursuant to and consistent with the terms of
               this Agreement.  The United States and the Relators will also
               notify the court that all pertinent Parties have stipulated that
               the remaining claims by the Relators in the Civil Actions, to the
               extent not alleged in Preamble Paragraph H, shall be dismissed
               with prejudice as to the respective Relator and without prejudice
               as to the United States with the exception of Relators' claims
               for
<PAGE>

               attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1),
               which shall not be dismissed. The Parties agree that, except for
               Relator Bradford's claims for statutory attorney's fees and
               costs, which will remain in the jurisdiction of the United States
               District Court for the Southern District of Florida, the United
               States District Court for the District of Massachusetts shall
               maintain jurisdiction of any remaining claims in each Civil
               Action, in any Events of Default as defined in Paragraph 4, or in
               the event of disputes under this Agreement.

                    19. Effective upon the filing and docketing of the notices
               of dismissal described in Paragraph 18, DSD, FMCH and the NMC
               Companies, and their parent, successor, subsidiary and affiliate
               corporations release and will be deemed to have released each of
               Bradford and Price, individually, any and all claims that these
               corporations have or may have related to or arising from any of
               the allegations in the Civil Actions, the conduct described in
               Preamble Paragraph H and any matters arising from either
               Relator's employment with the corporate entities referenced in
               this Paragraph.

                    20. DSD, FMCH and the NMC Companies waive and will not
               assert any defenses these entities may have to any criminal
               prosecution or
<PAGE>

               administrative action relating to the conduct described in
               Preamble Paragraphs H and M, which defenses may be based in whole
               or in part on a contention that, under the Double Jeopardy Clause
               of the Fifth Amendment of the Constitution or Excessive Fines
               Clause of the Eighth Amendment of the Constitution, this
               Settlement Agreement bars a remedy sought in such criminal
               prosecution or administrative action. DSD and the NMC Companies
               further agree that nothing in this Agreement is punitive in
               purpose or effect.

                FMCH and the NMC Companies covenant to cooperate fully
and truthfully with the United States' civil investigation of individuals and
entities not specifically released in this Agreement.  Upon reasonable notice,
the NMC Companies will make reasonable efforts to facilitate access to, and
encourage the cooperation of, its directors, officers, and employees for
interviews and testimony, consistent with the rights and privileges of such
individuals, and will furnish to the United States, upon reasonable request, all
non-privileged documents and records in its possession, custody or control.

     22.  On the effective date of this Agreement, DSD, FMCH and the NMC
Companies release and will be deemed to have released the United States, its
agencies, employees, servants, and agents from any claims (including attorneys
fees, costs, and expenses of every kind and however denominated) which DSD and
the NMC
<PAGE>

Companies have or may have against the United States, its agencies, employees,
servants, and agents, related to or arising from the United States' civil,
criminal and administrative investigation and prosecution of DSD, NMC and FMCH.

     23.  The Settlement Amount and the Unrecouped Credit Balances that NMC and
FMCH must pay pursuant to Paragraphs 1 and 3 of this Agreement will not be
decreased as a result of the denial of claims for payment now being withheld
from payment by any Medicare carrier or intermediary, Railroad Retirement
Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payor, related to the
conduct described in Preamble Paragraph H; and DSD and the NMC Companies agree
not to resubmit to any Medicare carrier or intermediary, Railroad Retirement
Medicare carrier,  TRICARE, FEHBP, VA, or any Medicaid payor any previously
denied claims related to the conduct described in Preamble Paragraph H, and
agree not to appeal any such denials of claims.

     24.  The FMCH and the NMC Companies agree that all costs (as defined in the
Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles XVIII and
XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997) and 1396-
1396v(1997), and the regulations promulgated thereunder) incurred by or on
behalf of DSD and the NMC Companies, and their divisions, subsidiaries and
affiliates, and their present and former officers, directors, employees,
shareholders and agents in connection with: (a) the matters covered by this
Agreement; (b) the Government's audits, administrative, civil and criminal
investigation and prosecution of DSD and FMCH; (c) these corporate entities'
investigation,
<PAGE>

defense, and corrective actions undertaken in response to the Government's
administrative, civil and criminal investigations, and in connection with the
matters covered by this Agreement, and including the obligations undertaken
pursuant to the Corporate Integrity Agreement (including attorneys fees); (d)
the negotiation and performance of this Agreement, and the Corporate Integrity
Agreement; and (e) the payments made to the United States provided for in this
Agreement, and to Relators for attorney's fees and costs, are unallowable costs
on Government contracts and under Medicare, Railroad Retirement Medicare,
Medicaid, TRICARE, FEHBP, and the VA programs (hereafter, "unallowable costs").
These unallowable costs will be separately estimated and accounted for by DSD
and the NMC Companies and these entities will not charge such unallowable costs
directly or indirectly to any contracts with the United States or any Medicaid
program, or seek payment for such unallowable costs through any cost report,
cost statement, information statement or payment request submitted by the NMC
Companies or any of their divisions, subsidiaries or affiliates to the Medicare,
Railroad Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs.

     FMCH and the NMC Companies further agree that within 270 days of the
effective date of this Agreement these entities will identify to applicable
Medicare, Railroad Retirement Medicare, and TRICARE fiscal intermediaries,
carriers and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any
unallowable costs (as defined above) included in payments previously sought from
the United States, or any Medicaid Program, including, but not
<PAGE>

limited to, payments sought in any cost reports, cost statements, information
reports, or payment requests already submitted by the NMC Companies or any of
their subsidiaries, affiliates, or divisions and will request, and agree, that
such cost reports, cost statements, information reports or payment requests,
even if already settled, be adjusted to account for the effect of the inclusion
of the unallowable costs. FMCH and the NMC Companies agree that the United
States will be entitled to recoup from the NMC Companies any overpayment as a
result of the inclusion of such unallowable costs on previously-submitted cost
reports, information reports, cost statements or requests for payment. Any
payments due after the adjustments have been made shall be paid to the United
States pursuant to the direction of the Department of Justice, and/or the
affected agencies. The United States reserves its rights to disagree with any
calculations submitted by DSD, FMCH and the NMC Companies, or any of their
subsidiaries, affiliates or divisions, on the effect of inclusion of unallowable
costs (as defined above) on the NMC Companies or any of their subsidiaries,
affiliates or divisions' cost reports, cost statements or information reports.
Nothing in this Agreement shall constitute a waiver of the rights of the United
States to examine or reexamine the unallowable costs described above.

     25.  This Agreement is intended to be for the benefit of the Parties only,
and by this instrument the Parties do not release any claims against any other
person or entity except as
<PAGE>

specifically identified in Paragraphs 10, 13, 14, 15, 16, 17 and 19 above.

     26.  FMCH and the NMC Companies agree that they will not seek payment for
any of the health care billings covered by this Agreement from any health care
beneficiaries or their parents, sponsors, estates, heirs, successors or assigns.
DSD and the NMC Companies waive any causes of action against these beneficiaries
or their parents, sponsors, estates, heirs, successors, or assigns based upon
the claims for payment covered by this Agreement.

     27.  Nothing in this Agreement constitutes an agreement by the United
States concerning the characterization of the amounts paid hereunder for
purposes of any proceeding under Title 26 of the Internal Revenue Code.

     28.  Except as provided in Paragraph 7.b., and except for Relators' claim
for statutory attorney's fees and costs, each party to this Agreement will bear
its own legal and other costs incurred in connection with this matter, including
by way of example only, all costs incurred in the investigation and defense of
this matter, the preparation and performance of this Agreement, and all
corrective actions taken in response to the investigation and resolution of this
matter.

     29.  NMC and FMCH expressly warrant that they have reviewed their financial
condition and that they currently are solvent on a consolidated basis within the
meaning of 11 U.S.C. Section 547(b)(3), and expect to remain solvent on a
consolidated basis following payment to the United States hereunder. Further,
the
<PAGE>

Parties expressly warrant that, in evaluating whether to execute this Agreement,
the Parties (a) have intended that the mutual promises, covenants and
obligations set forth herein constitute a contemporaneous exchange for new value
given to DSD, NMC and FMCH within the meaning of 11 U.S.C. Section 547(c)(1),
and (b) have concluded that these mutual promises, covenants, and obligations
do, in fact, constitute such a contemporaneous exchange.

     30.  In the event NMC or FMCH commences, or a third party commences, within
91 days of any payment under of this Agreement, any case, proceeding, or other
action (i) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have any order for relief of NMC and/or FMCH's
debts, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or
(ii) seeking appointment of a receiver, trustee, custodian or other similar
official for NMC and/or FMCH or for all or any substantial part of NMC and/or
FMCH's assets, NMC and FMCH agree as follows:

          a.   NMC and FMCH's obligations under this Agreement may not be
avoided pursuant to 11 U.S.C. Section 547, and NMC and FMCH will not argue or
otherwise take the position in any such case, proceeding or action that:  (i)
NMC and/or FMCH's obligations under this Agreement may be avoided under 11
U.S.C. Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis at
the time this Agreement was entered into, or became insolvent on a consolidated
basis as a result of the payment made to the United States hereunder; or (iii)
the mutual promises, covenants and obligations set forth in this Agreement do
not
<PAGE>

constitute a contemporaneous exchange for new value given to NMC and/or FMCH.

          b. In the event that NMC and/or FMCH's obligations hereunder are
avoided pursuant to 11 U.S.C. Section 547, the United States, at its sole
option, may rescind the releases in this Agreement, and bring any civil and/or
administrative claim, action or proceeding against DSD, and/or FMCH for the
claims that would otherwise be covered by the releases provided in Paragraphs
10,13, 14 and 15 above. If the United States chooses to do so, DSD and FMCH
agree that (i) any such claims, actions or proceedings brought by the United
States (including any proceedings to suspend payments to NMC and DSD from
Medicare, Medicaid, or other federal health care programs) are not subject to an
"automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action,
case or proceeding described in the first clause of this Paragraph, and that DSD
and FMCH will not argue or otherwise contend that the United States' claims,
actions or proceedings are subject to an automatic stay; (ii) that DSD and FMCH
will not plead, argue or otherwise raise any defenses under the theories of
statute of limitations, laches, estoppel or similar theories, to any such civil
or administrative claims, actions or proceeding which are brought by the United
States within 90 calendar days of written notification to NMC and FMCH that the
releases herein have been rescinded pursuant to this Paragraph, except to the
extent such defenses were available on the date of this Agreement; and (iii) the
United States has a valid claim against NMC and FMCH in the

<PAGE>

amount of the Default Obligation, and the United States may pursue its claim,
inter alia, in the Price and Bradford Civil Actions, as well as in any other
case, action, or proceeding.

          c.   DSD and FMCH acknowledge that its agreements in this Paragraph
are provided in exchange for valuable consideration provided in this Agreement.

     31. DSD and FMCH and the Relators represent that this Agreement is freely
and voluntarily entered into without any degree of duress or compulsion
whatsoever.

     32. This Agreement is governed by the laws of the United States. The
Parties agree that the exclusive jurisdiction and venue for any disputes arising
between and among the Parties under this Agreement will be the United States
District Court for the District of Massachusetts, except that disputes arising
under the Corporate Integrity Agreement shall be resolved exclusively upon the
dispute resolution provisions set forth in the Corporate Integrity Agreemen t.

     33. The undersigned DSD and FMCH signatories represent and warrant that
they are authorized by their respective Board of Directors to execute this
Agreement. The undersigned United States signatories represent that they are
signing this Agreement in their respective official capacities and that they are
authorized to execute this Agreement.

     34. Except for the representations in Paragraph 29 (regarding solvency),
Paragraph 30 (concerning bankruptcy proceedings commenced within 91 days of any
payments under this Agreement), and Preamble Paragraph M (express
representations by

<PAGE>

NMC and FMCH upon which the United States relies), the Parties agree that
nothing in this Agreement constitutes an admission by any person or entity with
respect to any issue of law or fact.

     35. This Agreement is effective on the date of signature of the last
signatory to the Agreement (the "Effective Date").

     36. This Agreement shall be binding on all successors, transferees, heirs
and assigns.

     37. This Agreement, together with Exhibits A through E, and the Corporate
Integrity Agreement, constitute the complete agreement among the Parties with
regard to the conduct described in Preamble Paragraphs H and M and the Civil
Actions. This Agreement may not be amended except by written consent of the
Parties, except that only FMCH and OIG-HHS must agree in writing to modification
of the Corporate Integrity Agreement.

     38. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
Agreement.

                                    THE UNITED STATES OF AMERICA
                                    ----------------------------

     /s/ Suzanne E. Durrell                 January 18, 2000
By:  --------------------------     Dated:  ------------------
     SUZANNE E. DURRELL
     Assistant U.S. Attorney
     District of Massachusetts

     /s/ Mark A. Lavine                     January 18, 2000
By:  --------------------------     Dated:  ------------------
     MARK LAVINE
     Assistant U.S. Attorney
     Southern District of Florida

     /s/ Patricia M. Connolly               January 18, 2000
By:  --------------------------     Dated:  ------------------
     PATRICIA M. CONNOLLY
     Special Assistant U.S. Attorney
     District of Massachusetts

By:  /s/ Maya Guerra                        January 18, 2000
     --------------------------     Dated:  ------------------
     MAYA GUERRA
     Trial Attorney
     Civil Division
     U.S. Department of Justice

<PAGE>

     /s/ Lewis Morris                            1/18/00
By:  --------------------------     Dated:  ------------------
     LEWIS MORRIS
     Assistant Inspector General
     Office of Inspector General
     U.S. Department of Health and
          Human Services

     /s/ Frank D. Titus                     January 18, 2000
By:  --------------------------     Dated:  -------------------
     FRANK D. TITUS
     Assistant Director for
          Insurance Programs
     U.S. Office of Personnel
          Management

     /s/ Robert D. Seaman                   1-18-00
By:  --------------------------     Dated:  -------------------
     ROBERT D. SEAMAN
     General Counsel
     TRICARE Support Office
     U.S. Department of Defense
<PAGE>

                  NATIONAL MEDICAL CARE, INC.
              FRESENIUS MEDICAL CARE HOLDINGS, INC.

By:  /s/ Ben J. Lipps                    Dated:     1/18/00
     ------------------------                   --------------------
     Ben J. Lipps
     President
     National Medical Care, Inc.

By:  /s/ Ben J. Lipps                    Dated:     1/18/00
     ------------------------                   --------------------
     Ben J. Lipps
     President
     Fresenius Medical Care Holdings, Inc.

Acknowledged:
-------------

By:  /s/ Ronald L. Castle           Dated:      1/18/00
     ------------------------              -------------------
     RONALD L. CASTLE
     Counsel to NMC Dialysis
     Services Division, Inc.
     National Medical Care, Inc.
     Fresenius Medical Care Holdings, Inc.

By:  /s/ Alan E. Reider             Dated:      1/18/00
     -----------------------               -------------------
     ALAN E. REIDER
     Counsel to NMC Dialysis
     Services Division, Inc.
     National Medical Care, Inc.
     Fresenius Medical Care Holdings, Inc.
<PAGE>

                            RELATOR GREGORY S. PRICE

By: /s/ Gregory S. Price                 Dated:    1/18/00
   -----------------------                     ----------------
   Gregory S. Price

Acknowledged:
-------------

By: /s/ W. Christian Hoyer               Dated:    1/18/00
   -----------------------                     ----------------
   W. Christian Hoyer
   Counsel to Messr. Price
<PAGE>

                            RELATOR RICHARD BRADFORD

By: /s/ Richard Bradford                 Dated:   1/18/00
   -----------------------                     ----------------
   Richard Bradford

Acknowledged:
-------------

By: /s/ Robert Barnett                   Dated:   1/18/00
   -----------------------                     ----------------
   Robert Barnett
   Counsel to Messr. Bradford
<PAGE>

                                   EXHIBIT A
                               (Promissory Note)

The Promissory Note dated January 19, 2000 from National Medical Care, Inc. and
Fresenius Medical Care Holdings, Inc. payable to the order of the United States
is incorporated by reference to Exhibit A of Exhibit 10.2 to this Current Report
on Form 8-K.
<PAGE>

                                   EXHIBIT B
          (Amendment to Irrevocable Nontransferable Letter of Credit)

The Amendment to Irrevocable Nontransferable Letter of Credit dated January 19,
2000 issued by the Bank of Nova Scotia, Atlanta Agency to the United States is
incorporated by reference to Exhibit B of Exhibit 10.2 to this Current Report on
Form 8-K.
<PAGE>

                                   EXHIBIT C
                                  (Guarantee)

The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care
GmbH, the predecessor to Fresenius Medical Care AG, National Medical Care, Inc.,
W.R. Grace & Co. and the United States of America, is incorporated by reference
to the Company's Registration Statement on Form S-4 (Registration No. 333-09497)
dated August 2, 1996 and the exhibits thereto.
<PAGE>

                                   EXHIBIT D
                    (List of Fresenius Affiliated Entities)

The List of Fresenius Affiliated Entities is incorporated by reference to
Exhibit D of Exhibit 10.2 to this Current Report on Form 8-K.

<PAGE>

                                    EXHIBIT E

                     [LETTERHEAD OF FRESENIUS MEDICAL CARE]

                                        January 4, 2000

Mr. Alan Reider
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, NW
Washington, DC  20036-5339

Dear Alan:

     I enclose a summary of Medicare credit balances for FMC dialysis facilities
which were entered into the 4245 account through December 31, 1998, (Exhibit A).
These balances have not been recouped by the Medicare fiscal intermediaries as
of January 3, 2000.

     An explanation of procedures used to develop the summary is also enclosed.
(Exhibit B).

     A listing of all NMC dialysis billing centers and associated provider
numbers is being prepared and will be forwarded by separate cover.

     Please not that the total outstanding credit balance of $10,982,885. 16
excludes funds taken into income prior to 1994 which are addressed in the
pending civil settlement.

     Please do not hesitate to call me if you have any questions.

                                               Sincerely,

                                               /s/ John Markus

                                               John Markus
                                               Senior Vice President
                                               Corporate Compliance

JM/mep

Attachments

cc:  J. Chiel, Esq.
     D. Kott
     B. McGorty
     J. Ramella
<PAGE>

               MEDICARE UNRECONCILED PAYMENTS BY TRANSACTION CODE
                                THROUGH 12/31/98
                               FOR ALL FACILITIES
                             (QUERY RUN DATE 1/3/00)

     Transaction             Transaction                            Total
        Code                    Name                                Amount
--------------------------------------------------------------------------------
        OPR              Unreconciled Payment                    $74,681,842.81

        OPMR             Medicare Refund                         ($1,250,561.72)

        OPF              Refund                                  ($8,604,488.78)

        OPA              Recoupment                             ($50,302,511.80)

        OPD              Transfer to Corporate                   ($5,111,380.29)

        OPCC             Debit Correction                        ($5,490,761.40)

        OPCD             Credit Correction                        $6,185,324.36

        OPMD             Medicare Credit                            $163,526.07

        OPG              Audited Transaction                        $618,387.11
                                                                    -----------

                         Medicare UP Balance from System:        $10,889,366.36

                         Neomedica UP Balance:                       $93,518.80
                                                                     ----------

                         Total Medicare UP Balance:              $10,982,885.16
<PAGE>

              FRESENIUS MEDICAL CARE'S UNRECONCILED PAYMENT SYSTEM
                         AN OVERVIEW OF ACCOUNT 4245 AND
                          THE OPEN BALANCE CALCULATION

FMC, through input to the Medical Manager Cash Management System, posts all
payments which represent credit balances to the 4245 account which is the
Unreconciled Payment (U/P) account.  These credits are posted to the G/L as a
liability.  All subsequent debit and credit activity is made utilizing
transaction codes.

All U/P transactions are maintained in a separate database which currently
resides on the HP UX10.20 server.   There had been no purges to the database and
this database is accessed using a SQLPLUS query tool.

In preparation for our settlement of U/P issues with the OIG, query Q010200.txt
was run in January.  The selection criteria was to produce a summary of all
transactions for Medicare credit balances by year for all dates through December
31, 1998.  The U/P system does not produce an open balance report.  We have
calculated the U/P balance using the summaries of all the credit and debit
transactions.

This query report is the basis for determining the U/P balance for all Medicare
credit balances recorded in the system through December 31, 1998.  The report
indicates that $74,681,842.81 (transaction code OPR) in Medicare credits was
posted as unreconciled payments.  Of this amount $9,855,060.50 (transaction
codes OPF and OPMR) was refunded to Medicare and $50,302,511.80 was recouped by
Medicare (transaction code OPA).  The total of all Medicare refunds and
recoupments is $60,157,572.30 through December 31, 1998.

The $5,111,380.29 represents monies transferred to Corporate (transaction code
OPD) and taken into income.

Transaction codes OPCC and OPCD are debit and credit entries used to correct
errors and adjustments to U/Ps already keyed into the system.

Transaction code OPMD, a Medicare credit of $163,526.07, was occasionally
utilized in the past and is an addition to the U/P total.  We have not done a
detailed research of these entries.

Transaction code OPG entitled Audited Transaction $618,387.11 occurred from 1979
through 1981.  We have been advised that these were additions made to the U/P
account based on account audits.

The U/P Medicare Balance on the 4245 account for this time period is
$10,889,366.36.  In addition we have $93,518.80 in unrefunded and unrecouped
Medicare credit balances form Neomedica which maintains separate accounting
records and does not appear in our 4245 account.
<PAGE>

<TABLE>
<CAPTION>
FRESENIUS MEDICAL
CARE, N.A.
DIVISION SUMMARY BY FISCAL INTERMEDIARY

      Facility Name            Facility         Medicare provider      Fiscal Intermediary
                                Number                 #
-------------------------------------------------------------------------------------------------
<S>                               <C>              <C>            <C>
Mansfield                         1262               36-2508            Administar Federal
Central Ohio                      1272               36-2501            Administar Federal
Akron                             1273               36-2503            Administar Federal
Indianapolis                      1300               15-2500            Administar Federal
Marion County                     1362               15-2512            Administar Federal
Grant Park                        1433               36-2514            Administar Federal
Southern Indiana                  1434               15-2504            Administar Federal
Anderson                          1481               15-2510            Administar Federal
South Summit                      1633               36-2521            Administar Federal
Central Ohio East                 1639               36-2520            Administar Federal
Northwest Indianapolis            1697               15-2524            Administar Federal
Wooster                           1724               36-2531            Administar Federal
Ashland                           1795               18-2524            Administar Federal
Portsmouth                        1796               36-2534            Administar Federal
Heart Of Ohio                     1827               36-2549            Administar Federal
Scottsburg                        1906               15-2529            Administar Federal
Louisville                        1250               18-2503              Administar/Kent
Somerset                          1480               18-2516              Administar/Kent
West Louisville                   1490               18-2514              Administar/Kent
South Louisville                  1635               18-2523              Administar/Kent
East Louisville                   1676               18-2527              Administar/Kent
Prestonburg                       1791               18-2507              Administar/Kent
Hazard                            1792               18-2517              Administar/Kent
Morehead                          1793               18-2509              Administar/Kent
Bishop Lane                       1794               18-2521              Administar/Kent
BMA LEWISTON                      1102               20-2501         Assoc. Hosp. Svcs. of ME
BMA FRAMINGHAM                    1109               22-2504         Assoc. Hosp. Svcs. of ME
BMA BOSTON-TKC                    1110               22-2500         Assoc. Hosp. Svcs. of ME
BMA SPRINGFIELD                   1111               22-2502         Assoc. Hosp. Svcs. of ME
BMA CAPE COD                      1112               22-2501         Assoc. Hosp. Svcs. of ME
BMA PROVIDENCE                    1170               41-2500         Assoc. Hosp. Svcs. of ME
BMA PORTLAND                      1190               20-2500         Assoc. Hosp. Svcs. of ME
BMA BOSTON (CARNEY)               1211               22-2506         Assoc. Hosp. Svcs. of ME
BMA MEDFORD                       1246               22-2507         Assoc. Hosp. Svcs. of ME
BMA WOONSOCKET                    1307               41-2503         Assoc. Hosp. Svcs. of ME
BMA CHICOPEE                      1389               22-2513         Assoc. Hosp. Svcs. of ME
BMA BROCKTON                      1392               22-2505         Assoc. Hosp. Svcs. of ME
BMA WESTWOOD                      1422               22-2511         Assoc. Hosp. Svcs. of ME

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>          <C>
BMA DOVER                         1449               30-2501         Assoc. Hosp. Svcs. of ME
BMA NEW HAMPSHIRE                 1450               30-2500         Assoc. Hosp. Svcs. of ME
BMA MANCHESTER                    1487               30-2502         Assoc. Hosp. Svcs. of ME
BMA ROXBURY                       1630               22-2525         Assoc. Hosp. Svcs. of ME
BMA FALL RIVER                    1631               22-2516         Assoc. Hosp. Svcs. of ME
BMA SHREWSBURY                    1684               22-2521         Assoc. Hosp. Svcs. of ME
BMA NORTH PROVIDENCE              1691               41-2506         Assoc. Hosp. Svcs. of ME
BMA WARWICK                       1692               41-2504         Assoc. Hosp. Svcs. of ME
BMA BATH                          1761               20-2502         Assoc. Hosp. Svcs. of ME
BMA BOSTON                        1942               22-2522         Assoc. Hosp. Svcs. of ME
BMA STONEHAM                      1943               22-2524         Assoc. Hosp. Svcs. of ME
BMA WEYMOUTH                      1944               22-2519         Assoc. Hosp. Svcs. of ME
Ohio Valley                       1077               39-2579         BCBS  of W. Pennsylvania
Jefferson                         1081               39-2576         BCBS  of W. Pennsylvania
Harrisburg                        1087               39-2594         BCBS  of W. Pennsylvania
Latrobe                           1108               39-2561         BCBS  of W. Pennsylvania
Philadelphia                      1120               39-2501         BCBS  of W. Pennsylvania
Southwestern Penna                1122               39-2519         BCBS  of W. Pennsylvania
Pottsville                        1123               39-2518         BCBS  of W. Pennsylvania
Pittsburgh                        1175               39-2503         BCBS  of W. Pennsylvania
Greensburg                        1176               39-2520         BCBS  of W. Pennsylvania
Butler                            1178               39-2525         BCBS  of W. Pennsylvania
Hazleton                          1209               39-2524         BCBS  of W. Pennsylvania
Northern Philadelphia             1220               39-2509         BCBS  of W. Pennsylvania
Easton                            1222               39-2517         BCBS  of W. Pennsylvania
Bethlehem                         1223               39-2511         BCBS  of W. Pennsylvania
Wilkes Barre                      1271               39-2512         BCBS  of W. Pennsylvania
East Stroudsburg                  1274               39-2547         BCBS  of W. Pennsylvania
Allentown                         1276               39-2505         BCBS  of W. Pennsylvania
Central Philadelphia              1281               39-2507         BCBS  of W. Pennsylvania
West Penn                         1302               39-2542         BCBS  of W. Pennsylvania
Northeastern Philadelphia         1314               39-2533         BCBS  of W. Pennsylvania
South Hills                       1324               39-2544         BCBS  of W. Pennsylvania
Abington                          1333               39-2506         BCBS  of W. Pennsylvania
Temple/Germantown                 1342               39-2530         BCBS  of W. Pennsylvania
Northwest Philadelphia            1380               39-2560         BCBS  of W. Pennsylvania
Three Rivers                      1386               39-2559         BCBS  of W. Pennsylvania
Fairmount                         1395               39-2540         BCBS  of W. Pennsylvania
New Castle                        1417               39-2552         BCBS  of W. Pennsylvania
Kittanning                        1418               39-2554         BCBS  of W. Pennsylvania
Pittston                          1514               39-2621         BCBS  of W. Pennsylvania
Mon Valley                        1606               39-2565         BCBS  of W. Pennsylvania
Episcopal                         1638               39-2568         BCBS  of W. Pennsylvania
Parkview                          1652               39-2569         BCBS  of W. Pennsylvania
Uniontown                         1683               39-2553         BCBS  of W. Pennsylvania
Ellwood City                      1698               39-2578         BCBS  of W. Pennsylvania

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>           <C>
Fullerton                         1766               39-2603         BCBS  of W. Pennsylvania
Delco                             1831               39-2551         BCBS  of W. Pennsylvania
Manayunk                          1852               39-2611         BCBS  of W. Pennsylvania
South Philadelphia                1936               39-2607         BCBS  of W. Pennsylvania
Eastern Shore                     1066               01-2547              BCBS of Alabama
Mobile                            1204               01-2507              BCBS of Alabama
Huntsville                        1437               01-2522              BCBS of Alabama
Scottsboro                        1438               01-2519              BCBS of Alabama
Montgomery                        1462               01-2500              BCBS of Alabama
East Mobile                       1626               01-2524              BCBS of Alabama
West Mobile                       1627               01-2525              BCBS of Alabama
Prichard                          1634               01-2537              BCBS of Alabama
Univ S. Alabama                   1737               01-2559              BCBS of Alabama
Calhoun                           1050               11-2623              BCBS of Georgia
Tucker                            1113               11-2563              BCBS of Georgia
Dalton                            1164               11-2524              BCBS of Georgia
Marietta                          1212               11-2510              BCBS of Georgia
RCC Northern Georgia              1228               11-2551              BCBS of Georgia
Augusta                           1260               11-2501              BCBS of Georgia
Willette Wallace                  1268               11-2521              BCBS of Georgia
Thomson                           1270               11-2540              BCBS of Georgia
Carrollton                        1304               11-2520              BCBS of Georgia
Atlanta                           1308               11-2504              BCBS of Georgia
Eastman                           1309               11-2519              BCBS of Georgia
Warner Robbins                    1406               11-2531              BCBS of Georgia
Sandersville                      1407               11-2534              BCBS of Georgia
Macon                             1440               11-2533              BCBS of Georgia
Covington                         1442               11-2533              BCBS of Georgia
Dekalb-Gwinnett                   1443               11-2511              BCBS of Georgia
Coastal                           1561               11-2507              BCBS of Georgia
Washington                        1115               21-2503             BCBS of Maryland
Capitol Hill                      1116               09-2502             BCBS of Maryland
SE Washington                     1117               09-2505             BCBS of Maryland
Columbia Heights                  1118               09-2503             BCBS of Maryland
District of Columbia              1119               09-2501             BCBS of Maryland
Takoma Park                       1129               21-2533             BCBS of Maryland
Annapolis                         1181               21-2509             BCBS of Maryland
Baltimore                         1245               21-2504             BCBS of Maryland
Martin Luther King, Jr.           1306               09-2509             BCBS of Maryland
Laurel                            1354               21-2506             BCBS of Maryland
Leonardtown                       1355               21-2510             BCBS of Maryland
Camp Springs                      1356               21-2501             BCBS of Maryland
Anacostia                         1375               09-2508             BCBS of Maryland
Greater Baltimore                 1456               21-2531             BCBS of Maryland
Northeast D.C.                    1466               09-2515             BCBS of Maryland
La Plata                          1625               21-2541             BCBS of Maryland
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
South Annapolis                   1730               21-2557             BCBS of Maryland
Woodlawn                          1768               21-2558             BCBS of Maryland
Metropolitan                      1837               21-2524             BCBS of Maryland
Upper Marlboro                    1910               21-2559             BCBS of Maryland
QCDC Baltimore                    1948               21-2540             BCBS of Maryland
HIC Capitol                       1964               21-2562             BCBS of Maryland
HIC Baltimore                     1977               21-2554             BCBS of Maryland
BMA TRENTON                       1261               31-2504            BCBS of New Jersey
BMA JERSEY CITY                   1298               31-2502            BCBS of New Jersey
BMA PINEBROOK                     1330               31-2503            BCBS of New Jersey
BMA NEWARK                        1332               31-2505            BCBS of New Jersey
BMA IRVINGTON                     1334               31-2501            BCBS of New Jersey
BMA HILLSIDE                      1338               31-2506            BCBS of New Jersey
BMA HOBOKEN                       1716               31-2529            BCBS of New Jersey
BMA PRINCETON                     1717               31-2516            BCBS of New Jersey
BMA PLAINFIELD                    1720               31-2515            BCBS of New Jersey
BMA COLONIA                       1721               31-2518            BCBS of New Jersey
Rich Square                       1034               34-2586          BCBS of North Carolina
Pamlico                           1061               34-2561          BCBS of North Carolina
Lincolnton                        1092               34-2568          BCBS of North Carolina
Concord                           1126               34-2519          BCBS of North Carolina
West Charlotte                    1146               34-2554          BCBS of North Carolina
Chester                           1249               42-2518          BCBS of North Carolina
South Greensboro                  1269               34-2537          BCBS of North Carolina
North Charlotte                   1325               34-2549          BCBS of North Carolina
Charlotte                         1328               34-2503          BCBS of North Carolina
Gastonia                          1329               34-2513          BCBS of North Carolina
Kinston                           1358               34-2518          BCBS of North Carolina
Greesboro                         1366               34-2504          BCBS of North Carolina
New Bern                          1374               34-2534          BCBS of North Carolina
Asheboro                          1411               34-2524          BCBS of North Carolina
Monroe                            1415               34-2525          BCBS of North Carolina
Fayetteville                      1447               34-2510          BCBS of North Carolina
Lumberton                         1448               34-2528          BCBS of North Carolina
Burlington                        1482               34-2533          BCBS of North Carolina
Rocky Mount                       1498               34-2517          BCBS of North Carolina
Zebulon                           1520               34-2589          BCBS of North Carolina
Laurinburg                        1557               34-2540          BCBS of North Carolina
Windsor                           1607               34-2547          BCBS of North Carolina
Lenoir                            1608               34-2509          BCBS of North Carolina
Hickory                           1609               34-2516          BCBS of North Carolina
Albermarle                        1612               34-2555          BCBS of North Carolina
Raleigh                           1653               34-2512          BCBS of North Carolina
Smithfield                        1654               34-2545          BCBS of North Carolina
Cary                              1655               34-2544          BCBS of North Carolina
Roanoke Rapids                    1656               34-2542          BCBS of North Carolina

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                               <C>              <C>            <C>
Clinton                           1688               34-2559          BCBS of North Carolina
Burke Cnty                        1699               34-2563          BCBS of North Carolina
Beatties Ford                     1772               34-2581          BCBS of North Carolina
West Pettigrew                    2016               34-2590          BCBS of North Carolina
Dunn                              2123               34-2557          BCBS of North Carolina
Wake                              2125               34-2522          BCBS of North Carolina
Pitt County                       1174               34-2502          BCBS of North Carolina
Queens QAKC Bal Sheet Acct        1106               33-2517                Empire BCBS
NY S.Queens                       1377               33-2531                Empire BCBS
Medical Center KC                 1594               33-3506                Empire BCBS
Nephro-Care                       2168               33-2534                Empire BCBS
RCC Brandywine                    1186               08-2501                Empire BCBS
RCC Millsboro                     1242               08-2503                Empire BCBS
RCC Central Delaware              1303               08-2502                Empire BCBS
Christiana                        1493               08-2506                Empire BCBS
Milford                           1719               08-2507                Empire BCBS
Southern Maryland/QCDC            1950               21-2539              Mutual of Omaha
Camden                            1254               42-2509          Palmetto Govt. Benefits
                                                                               Admin.
Beaufort                          1255               42-2514          Palmetto Govt. Benefits
                                                                               Admin.
Twin Oaks/Greenville              1279               42-2503          Palmetto Govt. Benefits
                                                                               Admin.
Columbia                          1294               42-2504          Palmetto Govt. Benefits
                                                                               Admin.
Lexington                         1379               42-2517          Palmetto Govt. Benefits
                                                                               Admin.
Georgetown                        1390               42-2519          Palmetto Govt. Benefits
                                                                               Admin.
Newberry                          1414               42-2531          Palmetto Govt. Benefits
                                                                               Admin.
S. Columbia                       1468               42-2543          Palmetto Govt. Benefits
                                                                               Admin.
Bennettsville                     1550               42-2520          Palmetto Govt. Benefits
                                                                               Admin.
Chesterfield                      1551               42-2551          Palmetto Govt. Benefits
                                                                               Admin.
Darlington                        1552               42-2530          Palmetto Govt. Benefits
                                                                               Admin.
Easley                            1554               42-2541          Palmetto Govt. Benefits
                                                                               Admin.
Kingstree                         1555               42-2521          Palmetto Govt. Benefits
                                                                               Admin.
LaurensCnty                       1556               42-2544          Palmetto Govt. Benefits
                                                                               Admin.
Marion                            1558               42-2545          Palmetto Govt. Benefits
                                                                               Admin.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
Mid-Town/Nothside                 1559               42-2546          Palmetto Govt. Benefits
                                                                               Admin.
Rock Hill                         1560               42-2538          Palmetto Govt. Benefits
                                                                               Admin.
West Columbia                     1675               42-2550          Palmetto Govt. Benefits
                                                                               Admin.
Lower Richland                    1771               42-2564          Palmetto Govt. Benefits
                                                                               Admin.
Sumter                            1840               42-2510          Palmetto Govt. Benefits
                                                                               Admin.
Manning                           1841               42-2537          Palmetto Govt. Benefits
                                                                               Admin.
Loris                             1843               42-2535          Palmetto Govt. Benefits
                                                                               Admin.
Myrtle Beach                      1844               42-2507          Palmetto Govt. Benefits
                                                                               Admin.
Florence                          2087               42-2505          Palmetto Govt. Benefits
                                                                               Admin.
Bristol                           1201               44-2519          Riverbend Govt. Benefits
                                                                               Admin.
Eastern Tennessee                 1312               44-2522          Riverbend Govt. Benefits
                                                                               Admin.
Johnson City                      1391               44-2501          Riverbend Govt. Benefits
                                                                               Admin.
Kingsport                         1693               44-2577          Riverbend Govt. Benefits
                                                                               Admin.
Dialysis Assoc West               1974               44-2533          Riverbend Govt. Benefits
                                                                               Admin.
N. Knoxville                      1978               44-2527          Riverbend Govt. Benefits
                                                                               Admin.
BMA Rio Grande City               1021               45-2666                TrailBlazer
QCDC-Univ. Kid. Ctr. North        1022               45-2662                TrailBlazer
St. John's                        1062               10-2684                TrailBlazer
Yazoo City                        1065               25-2536                TrailBlazer
Mesa                              1069               03-2539                TrailBlazer
Arcadia                           1070               03-2542                TrailBlazer
North County                      1074               26-2509                TrailBlazer
Normandy                          1075               26-2531                TrailBlazer
Central Phoenix                   1078               03-2517                TrailBlazer
Sun City West                     1084               03-2546                TrailBlazer
South Mountain                    1085               03-2545                TrailBlazer
Florida Kidney Center             1095               10-2559                TrailBlazer
Northwest Broward                 1096               10-2544                TrailBlazer
Northeast Broward                 1097               10-2570                TrailBlazer
Tamarac                           1098               10-2629                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>             <C>
Jacksonville                      1104               10-2612                TrailBlazer
New Iberia                        1107               19-2522                TrailBlazer
Belle Glade                       1114               10-2571                TrailBlazer
Miami                             1125               10-2503                TrailBlazer
Hialeah                           1127               10-2530                TrailBlazer
Tampa                             1130               10-2506                TrailBlazer
Eureka                            1137               05-2543                TrailBlazer
Los Angeles                       1140               05-2508                TrailBlazer
Long Beach                        1141               05-2523                TrailBlazer
Torrance                          1142               05-2556                TrailBlazer
Irving Dialysis Center            1143               45-2561                TrailBlazer
Oakland                           1147               05-2534                TrailBlazer
Fremont                           1149               05-2722                TrailBlazer
BMA Forth Worth                   1151               45-2502                TrailBlazer
BMA West Houston                  1154               45-2519                TrailBlazer
BMA Houston                       1155               45-2500                TrailBlazer
BMA Abilene                       1157               45-2511                TrailBlazer
BMA Amarillo                      1158               45-2513                TrailBlazer
BMA Corpus Christi                1159               45-2514                TrailBlazer
BMA Galveston                     1160               45-2520                TrailBlazer
Dublin                            1167               05-2568                TrailBlazer
BMA Santa Fe                      1169               32-2501                TrailBlazer
Union City                        1171               05-2571                TrailBlazer
Los Gatos                         1172               05-2694                TrailBlazer
BMA Alice                         1177               45-2537                TrailBlazer
Okeechobee                        1182               10-2589                TrailBlazer
BMA Pasadena                      1185               45-2533                TrailBlazer
Marrero                           1191               19-2521                TrailBlazer
Magee                             1193               25-2529                TrailBlazer
BMA Seguin                        1194               45-2545                TrailBlazer
Sanford                           1196               10-2546                TrailBlazer
BMA Rosenberg                     1197               45-2542                TrailBlazer
BMA Jasper                        1199               45-2573                TrailBlazer
BMA Laredo                        1210               45-2518                TrailBlazer
Humacao                           1214               40-2514                TrailBlazer
Mayaguez                          1215               40-2503                TrailBlazer
Permian Basin - Midland           1216               45-2512                TrailBlazer
Fort Collins                      1217               06-2505                TrailBlazer
BMA McAllen                       1218               45-2508                TrailBlazer
BMA Brownsville                   1219               45-2517                TrailBlazer
Deltona                           1224               10-2616                TrailBlazer
BMA Wichita Falls                 1226               45-2510                TrailBlazer
BMA Beaumont                      1227               45-2524                TrailBlazer
BMA Cypress Creek                 1229               45-2539                TrailBlazer
Caguas                            1231               40-2505                TrailBlazer
Bayamon                           1232               40-2504                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
Lincoln                           1236               03-2510                TrailBlazer
Ukiah                             1237               05-2548                TrailBlazer
BMA Uvalde                        1239               45-2540                TrailBlazer
Lafayette                         1240               19-2504                TrailBlazer
BMA S. San Antonio                1241               45-2544                TrailBlazer
South Phoenix                     1244               03-2508                TrailBlazer
Sarasota                          1252               10-2515                TrailBlazer
BMA Baytown                       1256               45-2575                TrailBlazer
Carbondale                        1258               14-2514                TrailBlazer
Gainsville                        1264               10-2512                TrailBlazer
Ponce                             1267               40-2502                TrailBlazer
BMA Albuquerque                   1278               32-2500                TrailBlazer
Santa Barbara                     1282               05-2513                TrailBlazer
BMA Bexar County                  1283               45-2527                TrailBlazer
San Juan                          1284               40-2501                TrailBlazer
BMA San Antonio                   1285               45-2507                TrailBlazer
Baton Rouge                       1286               19-2501                TrailBlazer
BMA West Ft. Worth                1287               45-2594                TrailBlazer
Bakersfield                       1288               05-2518                TrailBlazer
Whittier                          1289               05-2519                TrailBlazer
Treasure Coast North              1290               10-2525                TrailBlazer
Orlando                           1291               10-2511                TrailBlazer
St Petersburg                     1293               10-2519                TrailBlazer
Clearwater                        1297               10-2542                TrailBlazer
Sebring                           1301               10-2564                TrailBlazer
BMA N.E. San Antonio              1305               45-2565                TrailBlazer
BMA N. Houston                    1310               45-2574                TrailBlazer
Glendora                          1311               05-2681                TrailBlazer
BMA W. San Antonio                1316               45-2616                TrailBlazer
Vero Beach                        1317               10-2597                TrailBlazer
Phoenix                           1318               03-2503                TrailBlazer
BMA S. Plains                     1319               45-2506                TrailBlazer
BMA Bedford                       1321               45-2583                TrailBlazer
BMA Eagle Pass                    1322               45-2541                TrailBlazer
Wellington                        1337               10-2594                TrailBlazer
Inverness                         1339               10-2579                TrailBlazer
South St.Petersburg               1343               10-2547                TrailBlazer
Carolina                          1344               40-2507                TrailBlazer
Guayama                           1345               40-2509                TrailBlazer
Crystal River                     1346               10-2661                TrailBlazer
Lake City                         1347               10-2548                TrailBlazer
BMA N.E. Albuquerque              1349               32-2504                TrailBlazer
Alameda County                    1353               05-2586                TrailBlazer
Fresno                            1359               05-2677                TrailBlazer
Lantana                           1364               10-2539                TrailBlazer
Hollywood                         1367               10-2508                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
BMA S.W. Houston                  1373               45-2576                TrailBlazer
Thousand Oaks                     1383               05-2579                TrailBlazer
Ocala                             1385               10-2537                TrailBlazer
Natchitoches                      1387               19-2525                TrailBlazer
San German                        1393               40-2506                TrailBlazer
Arecibo                           1394               40-2508                TrailBlazer
Minden                            1400               19-2541                TrailBlazer
BMA Weslaco                       1401               45-2585                TrailBlazer
Chula Visata                      1402               05-2563                TrailBlazer
BMA Ennis                         1404               45-2582                TrailBlazer
Aguadilla                         1410               40-2513                TrailBlazer
Brandon                           1413               10-2584                TrailBlazer
Bradenton                         1419               10-2538                TrailBlazer
Palmetto                          1420               10-2562                TrailBlazer
Camarillo                         1423               05-2668                TrailBlazer
Greeley                           1424               06-2510                TrailBlazer
BMA S. Arlington                  1426               45-2592                TrailBlazer
BMA Central San Antonio           1427               45-2595                TrailBlazer
Jackson                           1435               25-2505                TrailBlazer
BMA Lubbock                       1444               45-2568                TrailBlazer
BMA Victoria                      1445               45-2567                TrailBlazer
Kendall                           1451               10-2522                TrailBlazer
Metropolitan Miami                1452               10-2566                TrailBlazer
Canton                            1454               25-2522                TrailBlazer
Glendale                          1455               03-2521                TrailBlazer
St. Augustine                     1461               10-2557                TrailBlazer
Gainsville East                   1467               10-2613                TrailBlazer
Rio Piedras                       1471               40-2515                TrailBlazer
Las Americas                      1472               40-2512                TrailBlazer
Port.St Lucie                     1473               10-2609                TrailBlazer
Apopka                            1474               10-2592                TrailBlazer
BMA Corsicana                     1477               45-2553                TrailBlazer
Southwest Jackson                 1483               25-2524                TrailBlazer
Carson                            1485               05-2687                TrailBlazer
BMA Clear Lake                    1489               45-2609                TrailBlazer
East Orlando                      1492               10-2619                TrailBlazer
Kansas City                       1494               26-2501                TrailBlazer
Blue Springs                      1495               26-2511                TrailBlazer
Desert Valley                     1496               03-2530                TrailBlazer
Belmont                           1565               14-2531                TrailBlazer
Bridgeport                        1566               14-2524                TrailBlazer
Loop/E. Delaware                  1567               14-2502                TrailBlazer
Evergreen                         1568               14-2545                TrailBlazer
Gurnee                            1569               14-2549                TrailBlazer
Hoffman Estates                   1570               14-2547                TrailBlazer
Lutheran General                  1571               14-2559                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>             <C>
Melrose Pk                        1572               14-2554                TrailBlazer
Marquette                         1573               14-2566                TrailBlazer
Cumberland/Norridge               1574               14-2521                TrailBlazer
Rolling Meadows                   1576               14-2525                TrailBlazer
South                             1577               14-2519                TrailBlazer
South Holland                     1578               14-2542                TrailBlazer
South Shore                       1579               14-2572                TrailBlazer
Mission Hills                     1614               05-2633                TrailBlazer
Midwest City                      1615               37-2510                TrailBlazer
BMA New Braunfels                 1618               45-2626                TrailBlazer
Madison Cty                       1619               44-2550                TrailBlazer
Souwest Tennessee                 1620               44-2544                TrailBlazer
Memphis                           1624               44-2569                TrailBlazer
East Mobile                       1626               01-2524                TrailBlazer
East Arkansas                     1644               04-2528                TrailBlazer
St. Louis                         1645               26-2507                TrailBlazer
St Charles                        1646               26-2521                TrailBlazer
Southwest Illinois                1647               14-2535                TrailBlazer
BMA N.W. Bexar Cnty               1648               45-2631                TrailBlazer
Jupiter                           1649               10-2657                TrailBlazer
BMA Texas City                    1651               45-2635                TrailBlazer
BMA Mission                       1657               45-2636                TrailBlazer
Estrella                          1659               03-2537                TrailBlazer
West Ponce                        1662               40-2517                TrailBlazer
BMA S.E. San Antonio              1664               45-2638                TrailBlazer
Live Oak                          1669               10-2652                TrailBlazer
Duval                             1670               10-2662                TrailBlazer
Petaluma                          1677               05-2624                TrailBlazer
Santa Rosa                        1678               05-2524                TrailBlazer
BMA Cleburne                      1679               45-2644                TrailBlazer
Culver City                       1690               05-2544                TrailBlazer
Penn Valley                       1695               26-2538                TrailBlazer
Homestead                         1705               10-2565                TrailBlazer
West Kendall                      1706               10-2595                TrailBlazer
Ventura County                    1711               05-2656                TrailBlazer
Las Posas                         1712               05-2692                TrailBlazer
South Miami                       1713               10-2502                TrailBlazer
Coconut Grove                     1714               10-2653                TrailBlazer
Bastrop                           1735               19-2594                TrailBlazer
Univ of S. Alabama                1737               01-2559                TrailBlazer
BMA W. Bexar Cnty                 1738               45-2668                TrailBlazer
BMA Jourdanton                    1739               45-2673                TrailBlazer
BMA N.W. Houston                  1740               45-2671                TrailBlazer
BMA Liberty                       1742               45-2669                TrailBlazer
BMA Dallas South                  1746               45-2679                TrailBlazer
BMA S. Central Dallas II          1748               45-2680                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
BMA Dallas Central                1749               45-2684                TrailBlazer
BMA N.W. Dallas II                1750               45-2683                TrailBlazer
Avon Park                         1753               10-2694                TrailBlazer
East Memphis                      1775               44-2524                TrailBlazer
BMA Central Ft. Worth             1784               45-2689                TrailBlazer
Woodward                          1790               37-3506                TrailBlazer
BMA Westminster                   1801               45-2709                TrailBlazer
Concord                           1802               05-2759                TrailBlazer
Walnut Creek                      1803               05-2758                TrailBlazer
Pittsburg                         1804               05-2757                TrailBlazer
Carrollwood                       1805               10-2681                TrailBlazer
Naples                            1806               10-2534                TrailBlazer
Bonita Springs                    1807               10-2650                TrailBlazer
BMA Dallas II                     1812               45-2698                TrailBlazer
BMA Dallas East                   1813               45-2700                TrailBlazer
BMA Garland II                    1817               45-2701                TrailBlazer
BMA S. Dallas County              1818               45-2697                TrailBlazer
Gulfport                          1822               25-2540                TrailBlazer
Graceland                         1838               44-2591                TrailBlazer
N.E. Tx Dialysis Center           1872               45-2694                TrailBlazer
Swiss Ave. Dialysis Ctr.          1874               45-2693                TrailBlazer
Village II Dialysis Ctr.          1875               45-2688                TrailBlazer
Oak Cliff Dialysis Ctr.           1876               45-2691                TrailBlazer
Redbird Dialysis Ctr.             1877               45-2699                TrailBlazer
S. Oak Cliff Dialysis Ctr.        1878               45-2687                TrailBlazer
Town Gate Dialysis Ctr.           1879               45-2690                TrailBlazer
Mockingbird Dialysis Ctr.         1881               45-2501                TrailBlazer
North Memphis                     1891               44-2593                TrailBlazer
Preferred Dialysis Mgmt.          1893               29-2507                TrailBlazer
West Boca                         1908               10-2582                TrailBlazer
BMA Cliffview                     1909               45-2674                TrailBlazer
Palatka                           1912               10-2676                TrailBlazer
El Centro                         1917               05-2690                TrailBlazer
Berkeley                          1920               05-2651                TrailBlazer
BMA West Texas                    1921               45-2604                TrailBlazer
North Phx                         1923               03-2550                TrailBlazer
Starke                            1924               10-2668                TrailBlazer
Parker                            1926               03-2522                TrailBlazer
Flagstaff                         1927               03-2524                TrailBlazer
Salt River                        1928               03-2529                TrailBlazer
Winslow                           1929               03-2536                TrailBlazer
QCDC St Louis                     1947               26-2528                TrailBlazer
Dallas/QCDC                       1952               45-2621                TrailBlazer
University Kidney Ctr.            1953               45-2603                TrailBlazer
North Coast                       1954               05-2708                TrailBlazer
Florida Ins.for Peritoneal        1973               10-2643                TrailBlazer

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>                               <C>              <C>            <C>
Hillcrest                         1981               05-2500                TrailBlazer
National City                     1982               05-2536                TrailBlazer
Chula Vista South                 1984               05-2653                TrailBlazer
N. Chicago/W. Belmont             2022               14-2523                TrailBlazer
Evanston                          2044               14-2511                TrailBlazer
Niles                             2052               14-2500                TrailBlazer
Morningstar                       2295               37-2537                TrailBlazer
Milwaukee South                   1082               52-2516          United Government Svcs.
Kempsville                        1083               49-2567          United Government Svcs.
Alexandria                        1132               49-2505          United Government Svcs.
Roanoke                           1133               49-2513          United Government Svcs.
Norfolk                           1135               49-2502          United Government Svcs.
Suffolk                           1195               49-2530          United Government Svcs.
Ann Arbor                         1253               23-2502          United Government Svcs.
Northeast  Wisconsin              1257               52-2500          United Government Svcs.
Livonia                           1263               23-2501          United Government Svcs.
Detroit                           1265               23-2500          United Government Svcs.
North Arlington                   1275               49-2515          United Government Svcs.
Fairfax                           1277               49-2504          United Government Svcs.
Fredericksburg                    1311               49-2508          United Government Svcs.
Martinsburg                       1331               51-2502          United Government Svcs.
Smyth County                      1340               49-2510          United Government Svcs.
New River Valley                  1361               49-2532          United Government Svcs.
North Roanoke                     1397               49-2548          United Government Svcs.
Charleston                        1398               51-2503          United Government Svcs.
Eastern Virginia                  1441               49-2538          United Government Svcs.
Bluefield                         1458               51-2501          United Government Svcs.
Dulles                            1488               49-2540          United Government Svcs.
Richmond                          1601               49-2519          United Government Svcs.
West End                          1602               49-2503          United Government Svcs.
Warrenton                         1603               49-2525          United Government Svcs.
Tappahanock                       1604               49-2536          United Government Svcs.
Adrian                            1605               23-2514          United Government Svcs.
Madison Heights                   1637               23-2525          United Government Svcs.
Owosso                            1663               23-2522          United Government Svcs.
Flint                             1667               23-2521          United Government Svcs.
Morgantown                        1680               51-2506          United Government Svcs.
Milwaukee South                   1685               52-2510          United Government Svcs.
Northwest Indianapolis            1686               23-2526          United Government Svcs.
Appleton                          1689               52-2514          United Government Svcs.
Oshkosh                           1696               52-2518          United Government Svcs.
Great Lakes                       1727               23-2533          United Government Svcs.
Farmville                         1797               49-2526          United Government Svcs.
St. Clair Shores                  1946               23-2517          United Government Svcs.
Mt. Vernon/QCDC                   1949               49-2557          United Government Svcs.
Norfolk Community Hosp.           1995               49-2585          United Government Svcs.
Crystal Springs                   2091               49-2570          United Government Svcs.
</TABLE><PAGE>

                                                                    EXHIBIT 10.6

                                                      U.S. Department of Justice

                                            United States Attorney
                                            District of Massachusetts

Main Reception: (617) 748-3100              United States Courthouse, Suite 9200
                                            1 Courthouse Way
                                            Boston, Massachusetts  02210

                                        January 13, 2000

BY HAND

Jonathan Chiel                        Jeffrey E. Stone
Choate, Hall & Stewart                McDermott, Will & Emery
Exchange Place                        227 West Monroe Street
53 State Street                       Chicago, IL 60606-5096
Boston, MA 02109-2891

Alan E. Reider, Esq.                  Harold Damelin
Breckinridge L. Willcox               Powers, Pyles, Sutter & Verville
Arent, Fox, Kintner, Plotkin & Kahn   Twelfth Floor
1050 Connecticut Avenue, NW           1875 Eye Street, NW
Washington, D.C. 20036                Washington, DC 20006-5409

Re:  LIFECHEM, INC.
     --------------

Dear Gentlemen:

     This letter sets forth the Agreement between the United States Department
of Justice and the United States Attorney for the District of Massachusetts
(collectively the "United States"), and your client, LIFECHEM, INC.,
("LIFECHEM"), a Delaware corporation, (collectively referred to as "the
Parties") as follows:

     1.   Guilty Plea
          -----------

     On or before January 19, 2000, or such other date as the Court may set,
LIFECHEM shall waive indictment and plead guilty to Count Two of the Information
attached hereto as Exhibit A, which charges LIFECHEM with a conspiracy to
defraud the United States and one of its agencies, the Health Care Financing
Administration, through the submission of false, fictitious and fraudulent
claims to the Medicare Program, in violation of 18 U.S.C. Section 286.

                                       1
<PAGE>

     2.   Sentencing Guidelines
          ---------------------

     The United States and LIFECHEM agree that the following provisions of the
United States Sentencing Guidelines ("U.S.S.G.") apply to sentencing of LIFECHEM
with respect to Count Two of the Information:

          (a)  pursuant to U.S.S.G. (S) 8C2.4(a), the loss to the United States
               from this offense for criminal sentencing purposes is
               $22,900,000;

          (b)  pursuant to U.S.S.G. (S) 8C2.5, the culpability score is 7,
               calculated as follows:

                    (1)  base score of 5 pursuant to (S) 8C2.5(a);

                    (1)  add 4 points pursuant to (S) 8C2.5(b)(2)(A)(i) and
                         (ii);

                    (1)  deduct 2 points pursuant to (S) 8C2.5(g)(2).

          (c)  pursuant to (S) 8C2.6, the applicable range for a multiplier is
               1.4 to 2.8, and the appropriate multiplier to be applied as to
               LIFECHEM is 1.6.

          (d)  the Parties agree that there is no basis for a departure under
               the Sentencing Guidelines, either upward or downward.

     3.   Agreed Disposition
          ------------------

     The United States and LIFECHEM agree pursuant to Fed. R. Crim. P.
11(e)(1)(C) that the following sentence is the appropriate disposition of Count
Two of the Information:

          (a)  a criminal fine in the amount of thirty six million six hundred
               forty thousand dollars, ($36,640,000) to be paid as follows:

               (1)  an amount of eighteen million one hundred five thousand
                    dollars ($18,105,000) shall be paid within 15 days of
                    sentencing;

               (2)  an amount of nine million two hundred sixty seven thousand
                    dollars ($9,267,000) shall be paid on or before April 16,
                    2001; and

               (3)  an amount of nine million two hundred sixty seven thousand
                    dollars ($9,267,000) shall be paid on or before July 16,
                    2001.

                                       2
<PAGE>

          (b)  a mandatory special assessment of $400 pursuant to 18 U.S.C. (S)
               3013, which shall be paid to the Clerk of Court on or before the
               date of sentencing.

LIFECHEM acknowledges that it is obligated, pursuant to 18 U.S.C. (S) 3612(f),
to pay interest on that portion of the fine which is not paid on or before the
fifteenth day after the Court enters judgment in this matter.

     In light of the pending civil action, United States ex rel. Jay A. Buford,
                                           ------------------------------------
et al. v. LIFECHEM, Inc., et al., Civil Action No. 95-10742-NG (D. Mass.), and
--------------------------------
the settlement agreement between LIFECHEM, INC. and others and the United States
relating to the civil action which is being signed contemporaneous with this
Plea Agreement (the "civil Settlement Agreement"), the parties agree the
complication and prolongation of the sentencing process that would result from
an attempt to fashion a proper restitution order outweighs the need to provide
restitution to the victims in this case, where, as here, the loss suffered by
each of the federal health care programs will be recompensed from amounts paid
as part of the civil Settlement Agreement.  See, 18 U.S.C. (S)
                                            ---
3663(a)(1)(B)(ii).  Therefore, the United States agrees that it will not seek a
separate restitution order as to LIFECHEM as part of the resolution of Count Two
of the Information.

     4.   No Further Prosecution of Defendant
          -----------------------------------

     The United States agrees that, other than the charge in Count Two of the
attached Information, it shall not further prosecute LIFECHEM for conduct which
(a) falls within the scope of the conspiracy which is charged in Count Two of
the Information; (b) was within the scope of the grand jury investigation
conducted by the U.S. Attorney; or (c) was known to the U.S. Attorney prior to
the date of execution of this letter.

     The U.S. Attorney expressly reserves the right to prosecute any individual,
including but not limited to present and former officers, directors, employees
and agents of LIFECHEM, in connection with the conduct encompassed by this Plea
Agreement or within the scope of the grand jury investigation.

     5.   Probation Department Not Bound By Agreement
          -------------------------------------------

     The Parties acknowledge that the disposition agreed upon by the Parties and
their calculations under the Sentencing Guidelines are not binding upon the
United States Probation Office.

     6.   Fed. R. Crim. P. 11(e)(1)(C) Agreement
          --------------------------------------

     LIFECHEM's plea shall be tendered pursuant to Fed. R. Crim. P. 11(e)(1)(C).
LIFECHEM cannot withdraw its plea of guilty unless the sentencing judge rejects
this Plea Agreement.  If the sentencing judge rejects the guilty plea, this Plea
Agreement shall be null and void at the option of either the United States or
LIFECHEM, except as set forth in Paragraph 8

                                       3
<PAGE>

below. If LIFECHEM's guilty plea is withdrawn on LIFECHEM's motion for any
reason, this Plea Agreement shall be null and void at the option of the U.S.
Attorney, except as set forth in Paragraph 8 below.

     7.   Civil and Administrative Liability
          ----------------------------------

     By entering into this Plea Agreement, the United States does not compromise
any civil or administrative liability, including but not limited to any False
Claims Act or tax liability, which LIFECHEM may have incurred or may incur as a
result of its conduct and its plea of guilty to Count Two of the Information.

     8.   Waiver of Defenses
          ------------------

     In the event that LIFECHEM's guilty plea is not accepted by the Court for
whatever reason, or is later withdrawn for whatever reason, LIFECHEM hereby
waives, and agrees not to interpose, any defense to any charges brought against
it which it might otherwise have under any statute of limitations or the Speedy
Trial Act, except any such defense that LIFECHEM may already have for conduct
occurring before March 1, 1994, if charges are filed within 90 days of the date
on which such guilty plea is rejected or withdrawn.

     9.   Breach of Agreement
          -------------------

     If the United States Attorney determines that LIFECHEM has failed to comply
with any provision of this Plea Agreement, or has committed any crime between
the date of this letter and the date of sentencing in this matter, the United
States may, at its sole option, be released from its commitments under this Plea
Agreement in their entirety by notifying LIFECHEM, through counsel or otherwise,
in writing.  The United States may also pursue all remedies available under the
law, irrespective of whether it elects to be released from its commitments under
this Plea Agreement.  LIFECHEM recognizes that no such breach by LIFECHEM of any
obligation under this Plea Agreement shall give rise to grounds for withdrawal
of its guilty plea.  LIFECHEM understands that, should it breach any provision
of this Plea Agreement, the United States will have the right to use against
LIFECHEM before any grand jury, at any trial or hearing, or for sentencing
purposes, any statements which may be made by LIFECHEM, and any information,
materials, documents or objects which may be provided by it to the government
subsequent to this Plea Agreement, without any limitation.

     10.  Corporate Authorization
          -----------------------

     LIFECHEM shall provide to the United States and the Court a certified copy
of a resolution of the Board of Directors of LIFECHEM, affirming that the Board
of Directors has authority to enter into the Plea Agreement and has (1) reviewed
the Information in this case and the proposed  Plea Agreement; (2) consulted
with legal counsel of LIFECHEM's choice in connection with the matter; (3) voted
to enter into the proposed Plea Agreement; (4) voted to authorize LIFECHEM to
plead guilty to Count Two of the attached Information; and (5) voted to
authorize the corporate officer identified below to execute the Plea Agreement
and all other documents necessary to carry out the provisions of the Plea
Agreement. LIFECHEM agrees that

                                       4
<PAGE>

counsel identified below will appear on behalf of LIFECHEM and enter the guilty
plea and will also appear for the imposition of sentence.

     11.  Who Is Bound By Agreement
          -------------------------

     This Plea Agreement binds LIFECHEM and the United States Department of
Justice, including each of its United States Attorney's Offices, and can not and
does not bind the Tax Division of the U.S. Department of Justice, the Internal
Revenue Service of the U.S. Department of Treasury, or any other federal, state
or local prosecutive authority.

     12.  Complete Agreement
          ------------------

     With regard to the disposition of Count Two of the attached Information,
this Plea Agreement is the complete and only agreement between the Parties.  No
promises, representations, agreements or conditions have been entered into other
than those set forth in this letter in connection with Count Two.  This Plea
Agreement supersedes prior understandings, if any, of the parties, whether
written or oral in connection with the disposition of Count Two.  This Plea
Agreement can be modified or supplemented only in a written memorandum signed by
the Parties or on the record in court.

     If this letter accurately reflects the Agreement entered into between the
United States and your client LIFECHEM, INC., please sign the Acknowledgment of
Plea Agreement below, provide evidence of the requisite authorization to enter
into this Plea Agreement, and return the original of this letter to Assistant
U.S. Attorneys Susan G. Winkler and Susan Hanson-Philbrick.

                                        Very truly yours,

                                   By: /s/ Mark W. Pearlstein
                                       -------------------------------------
                                       MARK W. PEARLSTEIN
                                       Acting United States Attorney
                                       District of Massachusetts

                                   By:  /s/ John Keeney (mwp)
                                        ------------------------------
                                        JOHN C. KEENEY
                                        Deputy Assistant Attorney General
                                        Criminal Division
                                        Department of Justice

                                       5
<PAGE>

                   CORPORATE ACKNOWLEDGMENT OF PLEA AGREEMENT
                   ------------------------------------------

     The Directors of LIFECHEM, INC. have read this Plea Agreement and the
attached criminal Information, in their entirety, and have discussed this matter
with legal counsel of the corporation's choosing, including undersigned counsel.
As set forth in the attached resolution, the Board of Directors has authorized
me, as an officer of the corporation, to enter into this Plea Agreement on
behalf of the corporation.  I hereby acknowledge, on behalf of LIFECHEM, INC.,
that this letter fully sets forth LIFECHEM's agreement with the U.S. Attorney
relating to the disposition of Count Two of the attached Information, and that
no additional promises or representations have been made to the corporation by
any official of the United States in connection with the disposition of that
charge.  LIFECHEM, Inc. is entering into this Agreement freely, voluntarily and
knowingly because it is guilty of the offense set forth in Count Two of the
Information and it believes this Plea Agreement is in its best interest.

Dated: 1/18/00                /s/ Ben J. Lipps
                              ----------------------------
                              Ben J. Lipps
                              President, LIFECHEM, INC.

Dated: January 18, 2000       /s/ Jonathan Chiel
                              ----------------------------
                              Jonathan Chiel
                              Choate, Hall & Stewart

Dated: 1/18/000               /s/ Alan E. Reider
                              -----------------------------
                              Alan E. Reider
                              Arent, Fox, Kintner, Plotkin & Kahn

Dated: 1/18/000               /s/ Breckinridge L. Willcox
                              -----------------------------
                              Breckinridge L. Willcox
                              Arent, Fox, Kintner, Plotkin & Kahn

Dated: January 18, 2000       /s/ Jeffrey E. Stone
                              -----------------------------
                              Jeffrey E. Stone
                              McDermott, Will & Emery

Dated: 1/18/2000              /s/ Harold Damelin
                              -----------------------------
                              Harold Damelin
                              Powers, Pyles, Sutter & Verville

                              Attorneys for LIFECHEM, INC.

                                       6
<PAGE>

                                   EXHIBIT A
                                   ---------

                         UNITED STATES DISTRICT COURT
                           DISTRICT OF MASSACHUSETTS

UNITED STATES OF AMERICA         )
                                 ) No.
v.                               )
                                 ) 18 U.S.C. (S)371 (Conspiracy)
NMC HOMECARE, INC.;              ) 18 U.S.C. (S)286 (Conspiracy)
LIFECHEM, INC.; and              )
NMC MEDICAL PRODUCTS, INC.       )
                                 )
               Defendants.       )

                                  INFORMATION
                                  -----------

     The United States Attorney alleges that:

                              General Allegations
                              -------------------

     At all times material to this Information, unless otherwise alleged:

     1.   National Medical Care, Inc. (NMC) was a Delaware corporation engaged
in the kidnedialysis business throughout the United States. From prior to 1990
to October 1, 1996 NMC was headquartered in Waltham, MA, and a wholly-owned
subsidiary of W.R. Grace & Co. On or about October 1, 1996 NMC, W.R. Grace & Co.
and Fresenius AG, a German corporation, underwent a reorganization in which NMC
became a wholly-owned subsidiary of Fresenius Medical Care Holdings, Inc., an
indirect subsidiary of Fresenius AG. Thereafter, the business of NMC was
conducted under the name Fresenius Medical Care, North America, from offices
headquartered in Lexington, MA.

     1.   During most of the period charged in this
<PAGE>

Information, NMC conducted its business through three principal divisions.
Dialysis Services Division ("DSD") operated over 300 kidney dialysis centers
located throughout the United States and provided dialysis services to over
30,000 patients. Medical Products Division manufactured and distributed kidney
dialysis products, including dialyzers, bloodlines and dialysis solutions, to
NMC owned dialysis facilities and independent dialysis facilities. Medical
Products Division also operated a clinical blood testing laboratory, known as
LIFECHEM, which specialized in blood testing for kidney dialysis patients. The
Homecare Division sold infusion therapies, respiratory therapies and durable
medical equipment, primarily to patients in the home setting.

     1.   NMC owned and operated dialysis facilities which were often named
"Bio-Medical Applications of (the name of the community where the facility was
located)," and were frequently referred to as "BMAs." Within NMC, independent
dialysis facilities, not owned or operated by NMC, were frequently referred to
as "non-BMAs."

     1.   NMC Homecare, Inc., ("NMC Homecare"), a defendant herein, was a
Delaware corporation and a wholly owned subsidiary of NMC, with a principal
place of business of Waltham, MA.

     1.   NMC Medical Products, Inc. ("MPD"), a defendant herein, was a Delaware
corporation and a wholly owned subsidiary of NMC, with a principal place of
business of Rockleigh, New Jersey. MPD was formerly known as National Medical
Care Medical Products
<PAGE>

Division, Inc., and before that, as Erika, Inc.

     6.   LIFECHEM, INC. ("LIFECHEM"), a defendant herein, was a Delaware
corporation, headquartered in Northvale, N.J. and a subsidiary of NMC, which
operated clinical blood testing laboratories in Northvale, N.J. and Woodland
Hills, CA.

                             The Medicare Program
                             --------------------
     7.   The Medicare program ("Medicare") was a United States government
benefit program, created by Title XVIII of the Social Security Act of 1965, that
paid for certain medical services for persons 65 years of age and older and
certain other persons.

     8.   The Health Care Financing Administration ("HCFA") was an agency of the
United States Department of Health and Human Services ("HHS"), which was
responsible for the administration of the Medicare program.

     9.   Medicare was divided into two parts, A and B. In general, Part A paid
for covered medical services provided to eligible beneficiaries in hospitals.
Part B, in general, paid for covered physician services, and other covered goods
and services, provided to eligible beneficiaries outside of the hospital
setting.

     10.  HCFA designated certain health insurance companies, known as Fiscal
Intermediaries ("FIs"), to process claims for Medicare Part A benefits. HCFA
designated certain other health insurance companies, known as carriers, to
process claims for Medicare Part B benefits.

     11.  It was a basic tenet of Medicare coverage that Medicare would
reimburse only for covered goods or services, provided to

                                       3
<PAGE>

an eligible beneficiary, which were medically necessary for the diagnosis or
treatment of illness or injury.

                           The Medicare ESRD Program
                           -------------------------

     12.  End Stage Renal Disease (ESRD) was an irreversible and permanent
impairment of kidney function requiring dialysis or kidney transplantation to
sustain life. The most common form of dialysis, hemodialysis, typically involved
treatments three times per week, in which the patient's blood was removed from
the body, passed through a dialysis machine to remove impurities and toxins, and
then returned to the patient's body.

     13.  In or about July 1, 1973 Medicare coverage was extended to certain
persons suffering from ESRD, without regard to their age. In general, Medicare
paid eighty percent (80%) of the Medicare allowable amount for covered services
needed by ESRD patients.

     14.  Medicare established a composite rate to cover the costs of equipment,
supplies, certain blood laboratory tests and other services associated with
dialysis treatments at independent dialysis facilities. Medicare paid 80 percent
of the composite rate directly to the facility for each dialysis treatment
provided to an eligible ESRD patient.

     15.  Medicare also established a monthly capitation rate to cover the cost
of physician outpatient services relating to the care of an eligible patient for
ESRD. Medicare paid 80 percent of the capitation rate for the physician's
services relating to eligible dialysis patients.

                                    CHAMPUS
                                    -------

                                       4
<PAGE>

     16.  The Civilian Health and Medical Program of the Uniform Service
("CHAMPUS") was a health insurance program, administered by the United States
Department of Defense, to provide health insurance to retired military personnel
and the civilian dependents of active duty, retired and deceased military
personnel.

                                       5
<PAGE>

COUNT ONE   (18 U.S.C. (S)371 Conspiracy to Defraud the United States relating
---------
             to IDPN)

     17.  The allegations contained in paragraphs 1 to 4 and 7 to 15 are
incorporated herein and realleged as if set forth in full.

     18.  One of the products which NMC Homecare sold was intradialytic
parenteral nutrition ("IDPN"), a nutrition therapy which was provided
intravenously to dialysis patients during their dialysis treatments. IDPN was
one of the most profitable products which NMC Homecare sold and in some of the
years IDPN accounted for virtually all of the profits of NMC Homecare. Medicare
was NMC Homecare's principal source of reimbursement for IDPN.

     19.  Medicare reimbursed for IDPN under the prosthetic device benefit
provision of the Social Security Act. Pursuant to a 1984 National Coverage
Determination, parenteral and enteral nutrition (PEN) therapies, including IDPN,
were a covered Medicare service only if the patient suffered from a severe
pathology of the alimentary tract which did not allow absorption of sufficient
nutrients to maintain weight and strength commensurate with the patient's
general condition. For IDPN to be a covered service, Medicare also required that
(1) the patient's impairment be permanent, meaning it was expected to last for
at least 90 consecutive days; (2) the therapy be ordered, by a physician, in
writing; and (3) the claim be supported by sufficient medical documentation to
permit an independent conclusion that the requirements of Medicare's prosthetic
device benefit were satisfied.

                                       6
<PAGE>

19.       Medicare did not cover IDPN if it was supplemental nutrition, even if
it was prescribed by a physician to treat malnutrition.

19.       NMC Homecare provided IDPN to patients in both BMAs and non-BMAs. NMC
Homecare was the exclusive supplier of IDPN to patients in BMAs, but had to
compete with other IDPN suppliers to provide IDPN to patients at non-BMAs.

19.       NMC Homecare employed IDPN Coordinators to market IDPN. IDPN
Coordinators were usually Registered Nurses ("RNs") or Renal Dieticians who were
assigned a designated geographic territory. IDPN Coordinators called on dialysis
facilities within their territory, both BMAs and non-BMAs; promoted the use of
IDPN; assessed whether patients were candidates for IDPN; prepared paperwork
relating to the billing for IDPN; and negotiated IDPN contracts with non-BMAs.
IDPN Coordinators were paid a base salary, plus a commission for each patient
they put on service for IDPN.

19.       NMC Homecare maintained a Clinical Reimbursement Department which was
responsible for training IDPN Coordinators, reviewing documentation relating to
IDPN billing, monitoring Medicare policies and practices relating to IDPN
reimbursement, and appealing denied IDPN claims.

19.       NMC Homecare usually paid an administration fee, bag fee or hang fee
("hang fee") to the dialysis facility in

                                       7
<PAGE>

connection with the administration of IDPN. This hang fee purported to
compensate the dialysis facility for the services and resources it devoted to
managing and administering IDPN. NMC Homecare's standard hang fee rate was $30
for each bag of IDPN administered. NMC Homecare paid its standard hang fee to
the BMAs, and a majority of the non-BMAs, throughout the conspiratorial period
alleged in this count. NMC Homecare paid hang fees in excess of $30 per bag to
80 non-BMAs, more or less, for various portions of the conspiratorial period
alleged in this count.

19.       Beginning in or about February, 1992 and continuing until at least in
or about November, 1995 NMC Homecare purported to use an IDPN Administration Fee
Calculation Tool ("calculation tool") to justify hang fees in excess of $30 per
bag. The calculation tool purported to calculate the amount of time, on average,
which various members of the dialysis facility staff spent on managing or
administering IDPN, and then multiplied the time, by average wage rates, to
calculate an average cost per IDPN treatment.

19.       Throughout the period charged in this Information, calculation tools
were not, in fact, used to determine the amount of the hang fee which NMC
Homecare would pay to a non-BMA. Those amounts were determined primarily by the
level of competition which existed for the IDPN business of the non-BMA, the
potential volume of IDPN business at issue, and the amount NMC Homecare believed
was necessary to obtain or maintain the non-BMA's IDPN

                                       8
<PAGE>

business. In many instances, when NMC Homecare paid a hang fee to a non-BMA in
excess of $30 per bag, NMC Homecare simply ignored its purported calculation
tool requirement, or it obtained a sham calculation tool which did not reflect
the non-BMA's true costs. NMC Homecare did not establish procedures to review
calculation tools to insure they reflected a non-BMA's true costs.

19.       NMC Homecare usually submitted a claim for reimbursement to Medicare
monthly for each Medicare beneficiary on IDPN. Claims were submitted on form
HCFA 1500, or its electronic equivalent, and separate reimbursement was provided
for (1) the IDPN solution; (2) lipids, if administered; (3) rental of a pole;
(4) rental of an infusion pump; and (5) an administration kit, which covered the
disposable supplies used to administer IDPN.

19.       Blue Cross Blue Shield of South Carolina ("BC/BS of SC") was the
carrier that processed virtually all of NMC Homecare's IDPN claims during the
period May, 1988 to December, 1993. Beginning in or about January, 1994 Medicare
transferred responsibility for processing IDPN claims to four Durable Medical
Equipment Regional Carriers ("DMERCs"), known as DMERCs A, B, C and D.

19.       Medicare required that each IDPN claim be supported by a Certificate
of Medical Necessity ("CMN"), signed by physician, indicating that in the
physician's opinion the supplies and

                                       9
<PAGE>

equipment were medically necessary and the physician would be supervising the
patient's treatment. Medicare required an initial certification, for a three
month period, followed by subsequent recertifications for varying periods of
time. Medicare also required a recertification whenever there was a change in
the patient's IDPN prescription.

19.       Medicare also required that each IDPN claim be supported by sufficient
medical documentation to demonstrate that the prosthetic device benefit was
satisfied. In or about the Fall of 1988 NMC Homecare developed the IDPN
Information Sheet ("IIS form") to document the medical condition of Medicare
beneficiaries. The format of the IIS form was approved by BC/BS of SC. In 1994,
when Medicare transferred IDPN claims processing to the DMERCs, NMC Homecare
renamed the IIS form the Clinical Nutrition Summary ("CNS"). IIS and CNS forms
were used to meet Medicare's medical documentation requirement relating to IDPN.

19.       Throughout the period charged in this Information, NMC Homecare's IDPN
Coordinators typically drafted an IIS or CNS form for each new Medicare IDPN
patient and submitted it to the Clinical Reimbursement Department for review and
comment. Thereafter, the IIS or CNS form was typed in final form and a CMN was
prepared, using the IIS or CNS form. Both the IIS/CNS form and the CMN were
submitted to the patient's physician for signature. Most physicians signed
IIS/CNS and CMN forms without making any changes in them. Thereafter, the
IIS/CNS and CMN forms were returned to NMC Homecare and used as the basis for

                                      10

<PAGE>

billing IDPN to Medicare. On some occasions the IIS/CNS form was submitted to
Medicare to substantiate a patient's medical condition. On other occasions, the
IIS/CNS form served as the source document for an electronic claim summary which
was transmitted to Medicare in support of the IDPN claim.

19.       If a Medicare IDPN claim was denied, there were three levels of review
available to NMC Homecare. The first level, known as Informal Review, was
conducted by carrier personnel, who essentially gave the claim a second look.
The next level, known as a carrier Fair Hearing ("FH"), was conducted either in
person or by phone, and resulted in a formal written decision. The third level
of review involved the submission of the disputed claim to an independent
Administrative Law Judge ("ALJ").

                                The Conspiracy
                                --------------
          33.  Beginning in or about May 1988, and continuing until at least
June 1996, the exact dates being unknown to the United States Attorney, in the
District of Massachusetts and elsewhere, the defendant herein,

                              NMC HOMECARE, INC.,

did knowingly, willfully and unlawfully combine, conspire, confederate and agree
with others, known and unknown, to defraud the United States, by impeding,
impairing, obstructing and defeating the lawful governmental function of various
departments and agencies of the United States, including particularly HHS and
HCFA, in the implementation, execution and administration of the Medicare
program, including particularly Medicare's PEN benefit.

                                      11
<PAGE>

     34.  The conspiracy consisted essentially of an unlawful agreement and
understanding among the defendant and the co-conspirators:

          (a)  to submit claims to Medicare for reimbursement for
IDPN, based on false, fraudulent and misleading statements and material
omissions, relating to the beneficiary's medical condition and eligibility for
coverage;

          (b) to submit claims to Medicare for reimbursement for
IDPN administration kits, based on false statements relating to the number of
kits actually used; and

          (c) to offer and pay hang fees, educational grants and
other remuneration to dialysis facilities and others, for the purpose of
inducing IDPN referrals which were paid for, in part, by Medicare.

35.       Pursuant to this unlawful conspiracy, the United States paid NMC
Homecare in excess of $110 million for improper Medicare IDPN claims.

                               Manner and Means
                               ----------------

     The manner and means by which NMC Homecare and the co-conspirators formed
and carried out the conspiracy included, among other things, the following:

            False and Misleading Statements and Material Omissions
            ------------------------------------------------------

35.       In or about 1989, NMC Homecare organized an IDPN Task Force to prepare
paperwork required to bill old, previously unbilled or denied, IDPN claims. Many
of the patients to whom

                                      12
<PAGE>

these claims related were placed on IDPN without the clinical indications
mandated by Medicare. When it was discovered that documentation relating to the
medical condition of many of these patients was missing, NMC Homecare instructed
the Task Force to use "clinical creativity" in preparing IIS and CMN forms for
these patients. Pursuant to these instructions, IIS and CMN forms were prepared
and filed with Medicare, which contained false, fictitious and misleading
information, material omissions and statements which were not supported in the
patient's medical records.

35.       It was the policy and practice of NMC Homecare to prepare IIS, CNS and
CMN forms which contained false, misleading, unsupported and inaccurate
information relating to the patient's medical condition. IDPN Coordinators were
instructed to list GI diagnoses which were historical, as opposed to currently
active conditions, without indicating that the condition was historical. IDPN
Coordinators were told to list weight loss and low serum albumin scores as
evidence of GI malabsorption problems, and omit other causes of weight loss and
low albumin, such as alcoholism, AIDS, depression, anorexia, lack of appetite
and recent hospitalizations. IDPN Coordinators were instructed to list GI
symptoms, such as nausea, vomiting or diarrhea, as indications of malabsorption,
while omitting and concealing other causes for these symptoms, such as uremia
due to inadequate dialysis or the side effects of medications.

35.       It was the policy and practice of NMC Homecare to instruct its IDPN
Coordinators that when no GI diagnosis existed

                                      13
<PAGE>

in a patient's medical records, the IDPN Coordinator could infer, from symptoms,
the diagnoses of Malabsorption Syndrome, Uremic Malabsorption, Protein Calorie
Malabsorption, or Gastroparesis, without disclosing to Medicare that these
diagnoses had been inferred by NMC Homecare.

35.       IDPN Coordinators listed false and fictitious information on IIS, CNS,
and CMN forms submitted to Medicare, including diagnoses and GI symptoms the
patient did not have, medications the patient was not taking, weight losses the
patient had not suffered and blood lab values which were not accurate.

35.       It was the policy and practice of NMC Homecare to always assert on
IIS/CNS forms that the patient's GI impairment was expected to be of permanent
duration (at least 90 days), that all medications taken to treat GI symptoms had
been unsuccessful, and that IDPN would be life sustaining, even when these
statements were false.

35.       It was the policy and practice of NMC Homecare to exaggerate,
embellish and misrepresent patients' GI symptoms, such as nausea, vomiting and
diarrhea. IDPN Coordinators were encouraged by the Clinical Reimbursement
Department to use adjectives, such as chronic, persistent, or intractable, when
these terms did not accurately reflect the patient's condition and to list
frequencies and durations for symptoms which were false.

35.       It was the policy and practice of NMC Homecare to misrepresent the
medications which patients had received to control GI symptoms, including
listing medications which had not

                                      14
<PAGE>

been prescribed; listing medications which were prescribed as PRN (as needed)
but had not in fact been used; and misrepresenting the time period medications
had been tried and the medication's effect on the symptom.

35.       It was the policy and practice of NMC Homecare to misrepresent the
patient's blood laboratory values relating to nutrition, including serum albumin
and total protein. IDPN Coordinators were instructed that the IIS/CNS forms
should show declining lab values, with scores below the normal range. The
Clinical Reimbursement Department told IDPN Coordinators they should omit lab
values which showed an improving nutritional state. IDPN Coordinators listed
false and fictitious lab values on IIS, CNS and CMN forms, transposed lab values
to make them appear to be in a declining pattern, and omitted lab values to
conceal a patient's improved nutritional status.

35.       It was the policy and practice of NMC Homecare to misrepresent the
patient's weight and weight history on IIS, CNS and CMN forms. IDPN Coordinators
sometimes listed false weight losses and false usual body weights ("UBWs"). IDPN
Coordinators were encouraged to show declining weights over time and to ignore
and conceal weight gain. IDPN Coordinators asserted on IIS/CNS forms that weight
loss was due to nausea, vomiting or diarrhea, or the inability to ingest, retain
or absorb nutrients, and concealed and failed to disclose that the weight loss
was due to amputations, hospitalizations, depression, infections, other
catabolic stresses, failure to eat or lack of someone to prepare

                                      15
<PAGE>

food.

35.       It was NMC Homecare's policy and practice to make false, fictitious,
misleading and unsupported statements on IIS, CNS and CMN forms regarding
patient's dietary intake and fluid restrictions. IDPN Coordinators listed
dietary intake and fluid restrictions which were false, fictitious, unsupported
in the patient's medical records or not representative of the patient's usual
condition. IDPN Coordinators also falsely asserted patients were unable to
maintain dietary intake due to nausea or vomiting, when, in fact, their medical
records showed they were not eating due to depression, lack of appetite or the
dislike of hospital food.

35.       It was NMC Homecare's policy and practice to list false, fictitious
and misleading information on IIS, CNS and CMN forms relating to enteral trials.
IDPN Coordinators falsely listed specific enteral supplements as having been
tried, when they had not been used; and listed supplements as having been tried
and been unsuccessful, when the supplement was not prescribed until at or about
the time the IDPN was ordered. IDPN Coordinators were told never to list on
IIS/CNS forms that the reason why enteral supplements were unsuccessful was
because the patient disliked the taste, or could not afford to purchase the
supplement, even if these reasons were the true cause.

35.       NMC Homecare often put false, fictitious and misleading information on
CMN forms including information about the patient's weight, whether the patient
was on other therapies or

                                      16

<PAGE>

treatments that may affect the patient's nutritional needs, diagnoses, GI
symptoms, weight loss and GI impairment. NMC Homecare often prepared CMN forms
for re-certification periods using outdated and inaccurate information, but
nonetheless representing to Medicare that this information applied to the re-
certification period.

35.       In connection with appeals of denied IDPN claims, NMC Homecare made
false, fictitious and fraudulent statements and material omissions to carrier
personnel, in connection with Informal Reviews and Fair Hearings, and to
Administrative Law Judges, in connection with ALJ appeals. In appealing denied
IDPN claims, NMC Homecare would typically continue to rely on IIS, CNS and CMN
forms which contained false, fictitious and fraudulent statements, and material
omissions. It would also attempt to supplement the record with selective
portions of the patient's medical records which purported to support findings of
GI impairment and malabsorption, while ignoring, and not submitting, other
portions of the medical record which contradicted or undercut such findings. On
some occasions NMC Homecare would withdraw claims from appeal at the FH or ALJ
level, because it had concluded the patient did not meet Medicare coverage
criteria. When it did so, NMC Homecare would fail to repay to Medicare funds it
had received relating to that patient, on other IDPN claims for other dates of
service.

                   False Billing of IDPN Administration Kits
                   -----------------------------------------

35.       In or about February 1991 BC/BS of SC issued a

                                      17
<PAGE>

Medicare Advisory to NMC Homecare and other IDPN suppliers indicating that when
billing for IDPN administration kits, procedure code B 4224, suppliers must bill
for the total number of actual days used, instead of a one month supply kit. NMC
Homecare had been billing for a one month supply kit, even though IDPN was
administered only 12 or 13 times per month to patients who received IDPN
throughout the month. Upon receiving the Medicare Advisory, NMC Homecare's
billing center personnel initiated steps to comply with this Medicare Advisory.

35.       NMC Homecare's senior officers realized that this Medicare Advisory
would reduce NMC Homecare's revenue on IDPN administration kits by $360 per
patient per month. NMC Homecare's senior officers instructed the billing center
not to implement the February 1991 Medicare Advisory relating to administration
kits.

35.       Thereafter, on monthly HCFA 1500 claim forms for IDPN patients, for
dates of service between March 1, 1991 and April 30, 1992, NMC Homecare falsely
and fraudulently listed on the claim form either that it had supplied a one
month administration kit or that it had provided 30 or 31 administration kits.
In the case of patients who received IDPN for only part of the month, NMC
Homecare falsely and fraudulently listed the number of days between the
patient's first and last IDPN treatment during the month. These false and
fraudulent claims were paid by BC/BS of SC.

                                      18
<PAGE>

35.       In or about May 1992 BC/BS of SC issued a second Medicare Advisory to
NMC Homecare and other IDPN suppliers regarding procedure code B 4224,
administration kits. This Advisory expressly stated that IDPN suppliers should
not bill for 31 administration kits, if the patient only received IDPN 12-13
times per month. Upon receipt of this Advisory NMC Homecare's billing center
personnel again initiated steps to comply with this Advisory.

35.       NMC Homecare's senior officers at Waltham, MA realized that
implementing this Advisory would reduce NMC Homecare's IDPN revenues and profits
by nine (9) percent, or approximately $400,000 per month. NMC Homecare's senior
officers instructed the billing center personnel not to implement the May 1992
Medicare Advisory relating to IDPN administration kits and to continue billing
as they had been doing.

35.      Thereafter, on monthly HCFA 1500 claim forms for IDPN patients, for
dates of service between May 1, 1992 and June 30, 1992, NMC Homecare falsely and
fraudulently listed on the claim forms that it had provided 30 or 31
administration kits, when, in fact, it had only provided 12 or 13 administration
kits. In the case of patients who received IDPN for only part of the month, NMC
Homecare falsely and fraudulently listed the number of days between the
patient's first and last IDPN treatment during the month. These false and
fraudulent claims were paid by BC/BS of SC.

                                      19
<PAGE>

               Hang Fees, Education Grants and Other Inducements
               -------------------------------------------------

35.       It was the policy and practice of NMC Homecare to offer and pay hang
fees in excess of $30 per bag, educational grants, and other remuneration to
non-BMAs in order to induce IDPN referrals and to maintain existing IDPN
customers. Such inducements were provided to non-BMAs when NMC Homecare was
faced with competing IDPN suppliers and NMC Homecare believed that higher hang
fees and other inducements were necessary to obtain or maintain the non-BMA's
IDPN business.

35.       IDPN Coordinators, General Manager, Regional Directors and other NMC
Homecare staff were instructed to consider the IDPN referral potential of the
non-BMA and the degree of competition from other IDPN providers, in deciding how
high the hang fees and other inducements should be. In competitive situations,
NMC Homecare regularly determined what it was willing to offer and pay a non-BMA
for its IDPN business without regard to what the non-BMA's actual cost was in
administering IDPN.

35.       In or about February 1992 NMC Homecare introduced the calculation tool
as a marketing device designed to respond to competitors who were offering
inflated hang fees. Although the written policy of NMC Homecare, beginning in
February 1992, was to require a calculation tool from a non-BMA before NMC
Homecare would pay a hang fee in excess of $30 per bag, that policy was often
ignored and the practice of NMC Homecare was to pay hang

                                      20
<PAGE>

fees in excess of $30 per bag, without obtaining a calculation tool, when such
payments were needed to obtain or maintain IDPN business.

35.       In or about the summer of 1993 NMC Homecare became aware that the
Inspector General of the U.S. Department of Health and Human Services had issued
a report stating that hang fees in the $25 to $60 per bag range were legally
questionable and apparent violations of the Medicare Anti-kickback Act. NMC
Homecare's senior management directed that a sample calculation tool be prepared
which purported to justify NMC Homecare's standard $30 hang fee. NMC Homecare
knew that the true incremental cost to a dialysis facility of administering IDPN
was less than $30 a bag and that it was illegal to pay a non-BMA more than its
actual cost of administering IDPN.

35.       In or about October 1993 NMC Homecare directed its IDPN Coordinators
to take its new sample calculation tool to their existing customers who were
receiving hang fees of $40 or more, but for whom NMC Homecare did not have a
calculation tool. IDPN Coordinators were instructed to complete the tool with
the facility to ensure that the cost reported on the calculation tool matched or
was close to the hang fee amount NMC Homecare was already paying that non-BMA.

35.       NMC Homecare regularly "backed into" the numbers on calculation tools.
It was the practice of NMC Homecare personnel to complete the tool by starting
with the final number desired,

                                      21
<PAGE>

and fill in the time estimates needed to reach that final number. 61. NMC
Homecare's IDPN Coordinators prepared sample calculation tools at specified
levels, such as $40, $45 and $50 per bag, exchanged these calculation tools
among themselves, provided these sample calculation tools to customers so they
could fill out their own tool and sometimes submitted calculation tools to NMC
Homecare headquarters without any input from the customer.

62.       It was the policy and practice of NMC Homecare that no efforts were
made to ensure that the costs reported on calculation tools were the true,
actual costs of the non-BMAs in administering IDPN. Non-BMAs were not required
to submit back-up documentation to substantiate purported costs greatly in
excess of NMC Homecare's standard $30 hang fee, most calculation tools were not
signed by the non-BMA, and most calculation tools received no review for
accuracy or reasonableness.

62.       It was the policy and practice of NMC Homecare to provide purported
educational grants to non-BMAs as inducements to obtain IDPN referrals.
Following the HHS Inspector General's 1993 report on hang fees, some non-BMAs
preferred education grants, rather than higher hang fees, in return for their
IDPN business. In awarding educational grants to non-BMAs, NMC Homecare
instructed its General Managers to weigh the anticipated benefit of the grant
(i.e. IDPN referrals) against its cost in deciding whether to pay an educational
grant.

                                  OVERT ACTS
                                  ----------

                                      22
<PAGE>

     In furtherance of the conspiracy, and to effect the objects thereof, NMC
Homecare and the co-conspirators, performed the following overt acts, among
others, in the District of Massachusetts and elsewhere:

64.       In or about November 1988, NMC Homecare began using the IIS form in
connection with the preparation of IDPN claims to Medicare. This form allowed
NMC Homecare to pick and choose the information it would present to Medicare in
support its IDPN claims. 65. On or about December 1, 1988, NMC Homecare issued
check No. 113 in the amount of ten thousand dollars ($10,000) payable to Florida
Kidney Center for a purported education grant.

65.       In or about March 1989, NMC Homecare's Clinical Reimbursement
Department submitted 102 claims to Medicare for IDPN for dates of service in the
period 10/1/87 to 4/30/88, in which it purposely deleted medical documentation
which would tend to show the patient did not meet Medicare's coverage criteria.

65.       In or about August 1989, NMC Homecare created an IDPN Task Force to
clean-up previously unbilled IDPN claims from 1987 and 1988. These claims were
unbilled because there was insufficient documentation that the patient met
Medicare's coverage criteria for IDPN.

65.       In or about November 1989, members of the IDPN Task Force visited
dialysis units in Mississippi, Florida, Maryland,

                                      23
<PAGE>

Puerto Rico and Massachusetts to prepare IIS forms relating to the IDPN clean-up
project.

65.       In or about November 1989, NMC Homecare's Cincinnati/Columbus, Ohio
branch wrote 14 IIS forms in one day, as part of the IDPN clean-up project, with
assistance from an IDPN Coordinator assigned to the IDPN Task Force.

65.       On or about November 30, 1989, NMC Homecare's Midwest Regional
Director notified the President of NMC Homecare that a non-BMA in his territory
had been approached by a competitor who offered a $50 hang fee and NMC Homecare
decided that it would match that fee in order to be certain it would keep the
account.

65.       On or about March 2, 1990, the President of NMC Homecare signed a
purported Research Agreement between NMC Homecare and Florida Kidney Center
which required NMC Homecare to pay Florida Kidney Center one hundred thousand
($100,000) dollars.

65.       On or about April 2, 1990, NMC Homecare signed an IDPN contract with
Florida Kidney Center which provided that NMC Homecare would pay Florida Kidney
Center a $35 per bag hang fee, a $35 per month per patient nutritional
assessment fee, and provide Florida Kidney Center with five (5) cases of enteral
supplements, per month.

65.       In or about June 1990, NMC Homecare agreed to increase the hang fee
paid to Houston Kidney Center from $30 to $50 per

                                      24
<PAGE>

bag, in response to competitive pressures from another IDPN supplier.

65.       In or about November 1990, NMC Homecare executives met in Ontario,
California to discuss IDPN scale-up efforts in the Pacific Region.

65.       In or about December 1990, the Manager of the Clinical Reimbursement
Department traveled to Waltham, Massachusetts to meet with various NMC Homecare
executives in preparation for the first meeting of the IDPN Special Interest
Group.

65.       On or about December 18, 1990, NMC Homecare increased its hang fee
payments to L.E. Cox Medical Center in Springfield, Missouri in response to
competition from another IDPN provider.

65.       On or about January 10, 1991, the IDPN Special Interest Group met in
Waltham, Massachusetts to discuss expanding NMC Homecare's IDPN business.

65.       In or about February 1991, NMC Homecare's V.P. of Finance caused a
copy of the Medicare Advisory relating to billing for IDPN administration kits
to be faxed to NMC Homecare's headquarters in Waltham, Massachusetts.

65.       In or about February and March 1991, senior executives at NMC
Homecare's headquarters held a series of meetings relating to billing Medicare
of IDPN administration kits and decided not

                                      25
<PAGE>

to bill for the number of kits actually used, in direct contravention of
Medicare's requirements.

65.       In or about early March 1991, at the request of the V.P. of
Operations, the Clinical Reimbursement Department analyzed the Medicare payment
history on patients from Florida Kidney Centers, in preparation for a hang fee
offer NMC Homecare was contemplating in response to competitive pressures.

65.       On or about March 15, 1991, NMC Homecare's V.P. of Operations made a
financial offer to Florida Kidney Centers for the purpose of securing its IDPN
business. The offer included the following incentives: (1) a $65 hang fee; (2) a
weekly $50 payment per patient for dietary consultations; (3) a $30,000 annual
educational grant; (4) a $20,000 annual indigent patient drug fund; and (5)
$15,000 worth of computer equipment.

65.       On or about June 14, 1991, NMC Homecare issued an IDPN Clinical Manual
which authorized IDPN Coordinators to infer the existence of certain GI
diagnoses in potential IDPN patients, when no other GI diagnosis was available.

65.       In or about September 1991, NMC Homecare agreed with Houston Kidney
Center to increase its hang fee from $50 to $60 per bag, in response to
competitive pressure.

65.       In or about October 1991, the Clinical Reimbursement Department
reported to NMC Homecare headquarters that the quality

                                      26
<PAGE>

of clinical documentation supporting IDPN claims had decreased as the volume of
IDPN patients had increased.

65.       In or about February 1992, NMC Homecare held a national sales meeting
in Phoenix, Arizona in which the Clinical Reimbursement Department made a
presentation to the IDPN Coordinators regarding the preparation of IIS forms.

65.       On or about February 10, 1992, NMC Homecare provided its sales staff
with a sample calculation tool to use when negotiating IDPN contracts.

65.       On or about February 28, 1992, NMC Homecare issued a policy memorandum
to the field authorizing General Managers to award a non-BMA an education grant
of up to $4,000 per year.

65.       In or about May 1992, NMC Homecare's Lenexa, Kansas billing center
notified NMC Homecare headquarters staff that a Medicare Advisory had been
received stating that an IDPN provider could not bill for 31 administration kits
if the patient received IDPN only 12-13 times in that month.

65.       In or about June 1992, a series of meetings were held among NMC
Homecare senior executives to discuss billing for IDPN administrative kits.

65.       On or about July 4, 1992, the President of NMC directed

                                      27
<PAGE>

the V.P. of Finance of NMC Homecare not to make any change in how NMC Homecare
billed IDPN administration kits without talking with him.

65.       On or about July 27, 1992, NMC Homecare entered into an IDPN contract
with Lourdes Hospital in Paducah, Kentucky in which NMC Homecare agreed to pay a
$50 hang fee.

65.       On or about August 11 to 14, 1992, a group of NMC Homecare executives
met in Lenexa, Kansas with the recently resigned head of the BC/BS of SC PEN
unit to discuss processing of IDPN claims.

65.       On or about September 11, 1992, NMC Homecare entered into an IDPN
contract with Clark County Dialysis in Cincinnati, Ohio in which NMC Homecare
agreed to pay a hang fee of $50.

65.       On or about December 5, 1992, in response to competition from another
IDPN provider, NMC Homecare entered into an IDPN contract with Bon Secours
Dialysis Center in Baltimore, Maryland to pay a $40 hang fee for each bag of
IDPN administered.

95.       On or about December 23, 1992, NMC Homecare delivered two checks
totaling $37,040 to Woodland Dialysis for hang fee payments covering IDPN
therapies provided during the final eight months of 1992.

96.       On or about January 26, 1993, NMC Homecare initiated IDPN therapy for
Patient No. 1, a patient at BMA El Paso-West. The IIS form for this patient
contains numerous false statements

                                      28
<PAGE>

and material omissions, including GI symptoms the patient did not have,
medications she was not taking, and false assertions she had been hospitalized
for diabetic gastroparesis.

96.       In or about February 1993, the Clinical Reimbursement Department made
a presentation at NMC Homecare's National Managers Meeting. The presentation
included a slide marked "Not to be used as a handout," in which it listed
certain preferred medications to list on IIS forms, suggested that IIS forms not
show alternating symptoms of diarrhea and constipation, and that they not show
anorexia, alcohol induced or psychological conditions, senility and phrases such
as "avoids eating" or any indication that the patient did not eat.

96.       On or about June 18, 1993, NMC Homecare entered into an IDPN contract
with Woodland Dialysis in which NMC Homecare agreed to a hang fee of $52 per bag
and to provide $17,000 in educational grants.

96.       In or about August 1993, NMC Homecare's IDPN Product Manager delivered
a memorandum to the V.P. of Marketing, stating that the calculation tool was
"developed as a marketing tool" to overcome "competitors offering inflated hang
fees . . . when a non-BMA completes the calculation tool, they will be lucky to
get $20.00. That was the point . . . sometimes the reps are confused and think
they can't pay a certain amount unless the facility can justify it using the
hang fee tool, that was not the intent."

                                      29
<PAGE>

96.       On or about August 30, 1993, NMC Homecare executed an IDPN contract
with the Hortense & Louis Rubin Dialysis Center in Albany, New York in which NMC
Homecare agreed to pay a hang fee of $45 per bag.

96.       On or about September 1, 1993, NMC Homecare senior executives held the
first of a series of meetings at corporate headquarters in Waltham,
Massachusetts to discuss IDPN hang fees, among other things.

96.       On or about September 20, 1993, NMC Homecare entered into an IDPN
contract with Good Samaritan Hospital in Portland, Oregon in which NMC Homecare
agreed to pay a hang fee of $41 per bag.

96.       On or about September 22, 1993, NMC Homecare entered into an IDPN
contract with Lexington Clinic Kidney Center in Lexington, Kentucky in which it
agreed to pay a hang fee of $45.

96.       On or about October 13, 1993, the IDPN Product Manager sent a memo to
the President of NMC Homecare in which she stated that only 80% of NMC
Homecare's IDPN patients have "real" justified GI dysfunction.

96.       On or about October 15, 1993, NMC Homecare issued a memorandum to its
sales staff requiring that calculation tools be submitted within 30 days for all
non-BMAs receiving hang fee

                                      30
<PAGE>

payments of $40 or more for which no calculation tool was on file. In this
memorandum, NMC Homecare instructed its employees to work with the non-BMAs to
ensure that the cost reported on the calculation tool is consistent with (or
close to) the hang fee currently being paid to that facility.

96.       On or about October 18, 1993, NMC Homecare executed an IDPN contract
with Dialysis Center of Middle Georgia in Macon, Georgia in which it agreed to
pay a $40 hang fee.

96.       On or about October 28 and 29, 1993, NMC Homecare held a national
meeting of IDPN Coordinators in Waltham, Massachusetts, to discuss its hang fee
policies, among other things.

96.       On or about November 8, 1993, NMC Homecare's San Diego branch General
Manager approved the payment of a $1,560 invoice submitted by San Diego Dialysis
Services for IDPN treatments provided in October 1993 at the rate of $60 per
bag.

96.       On or about November 13, 1993, NMC Homecare signed an IDPN contract
with Houston Kidney Center-Southeast in which NMC Homecare agreed to pay a hang
fee of $50 per bag.

96.       On or about January 4, 1994, NMC Homecare executed an addendum to its
IDPN contract with Ozarks Dialysis Services in Springfield, Missouri in which
NMC Homecare agreed to pay a hang

                                      31
<PAGE>

fee of $50 per bag.

96.       On or about January 26, 1994, NMC Homecare sent a memo to its field
staff authorizing General Manager to give annual educational grants to non-BMAs
of up to $4,000.

96.       On or about February 7, 1994, NMC Homecare participated in a telephone
Fair Hearing relating to the appeal of denied IDPN claims relating to Patient
No. 2, a patient at BMA Chicopee. NMC Homecare failed to advise the FH officer
that there were numerous false statements and material omissions on the IIS form
it submitted in support of this hearing, including false statements relating to
symptoms, medications, lab values and enteral supplements.

96.       On or about February 9, 1994, NMC Homecare initiated IDPN therapy for
Patient No. 3, a patient at the BMA of McAllen, Texas. The IIS form relating to
this patient contained numerous false statements and material omissions,
including false diagnosis, symptoms, medications, weight loss and enteral
supplements, and failure to disclose the patient had been started on IDPN
because of two hospitalizations.

96.       On or about February 17, 1994, the President of NMC Homecare wrote to
the President of NMC, stating that NMC Homecare's IDPN patient census had fallen
dramatically in the last several months because in the past NMC Homecare had
been

                                      32
<PAGE>

able to put patients on IDPN "w/o GI disorder/malabsorption," but the new DMERCs
were applying the coverage criteria more strictly.

96.       On or about April 22, 1994, NMC Homecare initiated IDPN therapy for
Patient No. 4, a patient in the Cincinnati, Ohio area. The IIS form for this
patient contains false information and material omissions, including using an
albumin lab value of 2.8 to justify IDPN, when a repeat test, one week later,
before IDPN therapy started, had a value of 4.2.

96.       On or about May 26, 1994, NMC Homecare participated in a telephone
Fair Hearing on denied IDPN claims relating to Patient No. 2. It continued to
rely on an IIS form containing numerous false statements and material omissions,
and also falsely reported to the FH officer that the patient had lost 30 pounds
in four months prior to the start of IDPN.

96.       Beginning on or about October 10, 1994, and continuing through on or
about October 6, 1995, as detailed below, for the patient indicated, NMC
Homecare submitted a claim to Medicare for reimbursement for IDPN, which was
paid, which was a false claim, because it was based on an IIS form which
contained false statements and material omissions:

       Patient No. 1    Patient No. 3  Patient No. 4
       -------------    -------------  -------------

       10/10/94         10/11/94       01/04/95
       11/11/94         11/17/94       01/10/95
       12/08/94         12/12/94       02/21/95
       01/09/95                        03/07/95
       02/08/95                        04/07/95

                                      33
<PAGE>

          03/09/95                        05/08/95
          03/17/95                        06/13/95
          04/11/95                        07/07/95
          05/11/95                        09/07/95
          06/09/95                        09/12/95
          07/12/95                        10/06/95
          08/11/95
          09/08/95

96.       In or about November 1994, NMC Homecare paid $1,300 to Bethany
Dialysis in Bethany, Oklahoma, representing hang fee payments at $50 per bag for
IDPN treatments administered during the month of October 1994.

96.       In or about November 1994, NMC Homecare paid $1,600 to Lourdes
Dialysis in Paducah, Kentucky, representing hang fee payments at $40 per bag for
IDPN treatments administered during the month of October 1994.

96.       On or about December 1, 1994, NMC Homecare issued check number 19157
in the amount of $2,385 to Hortense & Louis Rubin Dialysis Center representing
hang fee payments at $45 per bag for IDPN treatments administered during the
month of September 1994.

96.       In or about January 1995, NMC Homecare paid $946 to Angelina Dialysis
in Houston, Texas, representing hang fee payments at $43 per bag for IDPN
treatments administered during the month of December 1994.

96.       On or about January 19, 1995, NMC Homecare issued check

                                      34
<PAGE>

number 025273 in the amount of $6,360 to Houston Kidney Center representing hang
fee payments at $60 per bag for IDPN treatments administered during the month of
December 1994.

96.       On or about January 28, 1995, NMC Homecare issued check number 035821
in the amount of $5,160 and check number 035820 in the amount of $1,548 to
Woodland Dialysis representing hang fee payments at $52 per bag for IDPN
treatments at Woodland during the month of December 1994.

96.       On or about March 14, 1995, NMC Homecare executed an amendment to an
IDPN contract with AKC Broward, in Pompano Beach, Florida, in which NMC Homecare
agreed to pay a hang fee of $40 per bag.

96.       On or about June 9, 1995, NMC Homecare decided to withdraw IDPN claims
relating to Patient No. 2 from an ALJ Hearing scheduled for June 27, 1995. NMC
Homecare knew there was no GI diagnosis. NMC Homecare failed to disclose to the
ALJ, however, the numerous false statements and material omissions it had used
to get prior claims paid relating to this patient and failed to refund the money
to Medicare it had received on those claims.

96.       In or about July 1995, NMC Homecare paid $2,650 to Midway Dialysis
Center, representing hang fee payments at $50 per bag for IDPN treatments
administered during the month of June 1995.

96.       On or about July 5, 1995, NMC Homecare executed an

                                      35
<PAGE>

IDPN contract with Beverly Hospital in Beverly, Massachusetts in which NMC
Homecare agreed to pay a hang fee of $40 per bag.

96.       On or about August 28, 1995, NMC Homecare executed an IDPN contract
with Jewish Hospital Dialysis Unit in St. Louis, Missouri in which NMC Homecare
agreed to pay a hang fee of $40 per bag.

96.       In or about September 1995, NMC Homecare paid $5,880 to Charlotte
Hungerford Hospital in Torrington, Connecticut, representing hang fee payments
at $40 per bag for IDPN treatments administered during the month of August 1995.

96.       In or about October 1995, NMC Homecare paid $1,560 to Missouri Delta
Community Hospital in Sikeston, Missouri, representing hang fee payments at $40
per bag for IDPN treatments administered during the month of September 1995.

96.       In or about November 1995, NMC Homecare paid $1,800 to Nephroplex
Service Center in Mount Vernon, Illinois, representing hang fee payments at $40
per bag for IDPN treatments administered during the month of October 1995.

96.       In or about November 1995, NMC Homecare paid $2,720 to Quachita
Regional Dialysis Center in Kansas, representing hang fee payments at $40 per
bag for IDPN treatments administered

                                      36
<PAGE>

during the month of October 1995. (All in violation of Title 18, United States
Code, Section 371.)

                                      37
<PAGE>

COUNT TWO           (18 U.S.C. (S) 286  -- Conspiracy to Defraud the
---------
                    United States by Obtaining Payment of False or Fraudulent
                    Claims) 133. The allegations set forth in paragraphs 1-3 and
                    5-16 are incorporated herein and realleged as if fully set
                    forth herein.

134.      LIFECHEM was a clinical blood testing laboratory which specialized in
performing blood tests for ESRD patients. LIFECHEM operated two clinical
laboratories, one located in Northvale, New Jersey, and the other in Woodland
Hills, California. BMAs were generally required to use LIFECHEM for laboratory
blood tests. LIFECHEM had to compete with other blood testing laboratories for
the business of non-BMAs.

135.      LIFECHEM was an approved supplier of Medicare services under Title
XVIII of the Social Security Act of 1965. As an approved supplier, LIFECHEM was
authorized to submit directly to the carriers under contract with HCFA lawful
claims for reimbursement for clinical laboratory blood tests. At all pertinent
times, LIFECHEM submitted its claims for Medicare reimbursement to Pennsylvania
Blue Shield of Camp Hill, Pennsylvania, later known as Xact Medicare Services, a
carrier under contract with HCFA. LIFECHEM was also authorized to submit
directly to CHAMPUS claims for laboratory services provided to individuals
covered by CHAMPUS.

136.      MPD employed a sales force of Dialysis Services Specialists, who were
assigned a designated geographic territory and sold both the dialysis products
of MPD and the blood testing services of LIFECHEM. These salespersons called on
both BMAs and

                                      38
<PAGE>

non-BMAs within their territory and their compensation included salary and
commissions.

137.      For ESRD patients who received dialysis treatments at a Medicare
approved dialysis facility, Medicare established a composite rate payment that
was paid directly to the dialysis facility and included payment for certain
laboratory blood tests at designated frequencies that were needed in the care
and treatment of ESRD patients. These laboratory blood tests covered by the
composite rate were known as "Routine Tests," and were not separately billable
by LIFECHEM to Medicare. Medicare paid the dialysis facility for the Routine
Tests, and it was the responsibility of the dialysis facility to pay the blood
testing laboratory, such as LIFECHEM, for its provision of Routine Tests.

138.      Frequently ESRD patients suffered from additional medical problems and
complications which required medical treatment beyond the process of dialysis.
For such persons, additional monitoring of the blood was sometimes medically
necessary, and these additional laboratory blood tests were referred to as
"Non-Routine Tests."

139.      The Medicare Program separately paid for Non-Routine Tests by directly
reimbursing the clinical laboratory, such as LIFECHEM, on a fee-for-service
basis. The Non-Routine Tests were lawfully reimbursable by the Medicare Program
only if they were reasonable and medically necessary for the diagnosis or
treatment of signs or symptoms of illness or injury in ESRD patients other than
ESRD, except for certain Non-Routine Tests enumerated by HCFA that were allowed
at specified frequencies for ESRD patients

                                      39
<PAGE>

 ("Medicare Allowable Tests"). To obtain reimbursement for Non-Routine Tests
provided to ESRD patients, LIFECHEM was required to certify to HCFA, through its
Medicare carrier, that the tests were medically necessary.

140.      An automated laboratory machine, sometimes known as a sequential
multiple analysis computer, was capable of performing a "panel" or "battery" of
more than 20 chemistry tests on a single specimen of blood. At LIFECHEM, at all
pertinent times, this automated battery of chemistry tests was known as a "Chem
20." For most ESRD patients, once a month, Medicare paid for LIFECHEM's Chem 20
as part of the Composite Rate Payment made directly to the dialysis facilities.
The defendant LIFECHEM knew that individual chemistry tests, performed as part
of LIFECHEM's monthly Chem 20, were not lawfully separately billable to Medicare
on a fee-for-service basis, and that to submit separate bills for such services
constituted duplicate bills for services for which Medicare had already paid.

141.      From in or about the mid-1980's, LIFECHEM offered for sale to dialysis
physicians, and received reimbursement from Medicare and from CHAMPUS for, a
group of tests that LIFECHEM called a Hepatitis panel. The Hepatitis panel
consisted of, among other tests, a Hepatitis B surface antigen test ("antigen"),
a Hepatitis B surface antibody test ("antibody"), and a Hepatitis B IgM Core
test ("IgM Core")(collectively, the "Hepatitis B related tests"). At relevant
times, the Hepatitis B related tests were also offered individually.

142.      For all ESRD patients, Medicare and CHAMPUS paid for

                                      40
<PAGE>

one annual antibody test or one annual IgM Core test, but not both, as a
Medicare Allowable Test. Medicare and CHAMPUS paid for additional antibody and
IgM Core tests so long as the tests were medically necessary for the treatment
or diagnosis of the patient's medical condition other than ESRD.

143.      Prior to August, 1991, LIFECHEM knew that IgM Core tests were not
routinely medically necessary for any ESRD patient, but were only necessary for
ESRD patients in certain limited circumstances such as upon admission or
readmission to a dialysis facility or for the rare patient who had active
Hepatitis B disease. LIFECHEM further knew, prior to August, 1991, that while
the IgM Core test was separately available to physicians, physicians rarely, if
ever, individually ordered the IgM Core test for their ESRD patients.

144.      Medicare also paid for a clinical laboratory test for the Hepatitis C
antibody ("Hepatitis C") so long as the test was ordered by a physician who
considered the test to be medically necessary for the treatment or diagnosis of
the patient's medical condition other than ESRD.

145.      As of August, 1991, LIFECHEM knew that repeat Hepatitis C testing on
ESRD patients who were confirmed positive for the Hepatitis C antibody was not
medically necessary. LIFECHEM further knew, as of August, 1991, that while
LIFECHEM made the Hepatitis C test available to physicians, physicians
infrequently ordered the Hepatitis C test for their ESRD patients.

                                 The Conspiracy
                                 --------------

                                      41
<PAGE>

146.      From in or about January, 1991 through in or about June, 1997, the
exact dates being unknown to the United States Attorney, in Waltham and
elsewhere in the District of Massachusetts, in Northvale and Rockleigh, New
Jersey, and elsewhere in the United States, the defendant

     LIFECHEM, INC., together with others known and unknown to the United States
Attorney, did knowingly, intentionally and willfully agree, combine, and
conspire to defraud the United States, and its agency the Health Care Financing
Administration, in its administration of the Medicare Program, by obtaining and
aiding to obtain the payment and allowance of hundreds of thousands of false,
fictitious and fraudulent claims for: (1) Hepatitis B IgM Core tests included as
part of a Hepatitis panel that LIFECHEM knew were not medically necessary for
the diagnosis or treatment of Medicare beneficiaries because the tests were
performed on patients who were existing patients in a dialysis facility and who
did not suffer from active Hepatitis B disease; (2) Hepatitis C Antibody tests
included as part of a Hepatitis panel that LIFECHEM knew were not medically
necessary for the diagnosis or treatment of Medicare beneficiaries because they
were performed on ESRD patients who had already been confirmed positive for the
Hepatitis C antibody; (3) chemistry tests performed by the laboratory as part of
LIFECHEM's automated Chem 20 for which Medicare had already paid through the
Composite Rate Payment, and which LIFECHEM knew were not lawfully billable a
second time to

                                      42
<PAGE>

Medicare; and (4) additional medically unnecessary blood laboratory tests
generated by LIFECHEM's paneling and marketing activities designed to manipulate
physician ordering practices for blood laboratory tests on their ESRD patients,
all for the purpose of obtaining a substantial increase in orders for particular
laboratory tests that were highly profitable for LIFECHEM, without regard to
whether the increased testing was medically necessary for the diagnosis or
treatment of Medicare beneficiaries; so that LIFECHEM could unlawfully obtain at
least $22,900,000 in reimbursement from the Medicare Program to which it was not
entitled.

                          OBJECTIVE OF THE CONSPIRACY
                          ---------------------------

147.   LIFECHEM had, as the objective of this conspiracy, increasing the
laboratory blood testing conducted on thousands of ESRD patients, without regard
to the medical necessity for such blood testing in the diagnosis or treatment of
those Medicare beneficiaries, all to obtain unlawful reimbursement from the
Medicare program for that additional medically unnecessary testing. LIFECHEM
obtained this additional reimbursement by submitting false, fictitious and
fraudulent claims for payment to the Medicare Program for these blood tests,
which claims falsely certified to Medicare that the laboratory blood tests were
medically necessary when LIFECHEM knew that they were not. A further objective
of the conspiracy was to submit false, fictitious and fraudulent claims for
payment for individual chemistry tests that were being performed in the
laboratory on a sequential multi-channel analyzer as part of LIFECHEM's
automated

                                      43
<PAGE>

Chem 20, for which Medicare had already paid, all to enable LIFECHEM to obtain
further unlawful reimbursement from the Medicare program to which LIFECHEM was
not entitled. As a consequence of these unlawful objectives, LIFECHEM also
submitted claims for medically unnecessary blood testing to other federal health
care insurance programs, including CHAMPUS, that sought payment for the
performance of medically unnecessary laboratory tests on dialysis patients
insured by those programs.

148.      As a result of this conspiracy, the defendant LIFECHEM, together with
others known and unknown to the United States Attorney, in fact defrauded the
United States and the Medicare Program through the submission of false,
fictitious and fraudulent claims in an amount of $22,900,000 dollars.

                       MANNER AND MEANS OF THE CONSPIRACY
                       ----------------------------------
149.      It was a part of the manner and means of the conspiracy that the
defendant LIFECHEM, together with others known and unknown to the United States
Attorney:

     a.   bundled a Hepatitis C antibody test with LIFECHEM's Hepatitis panel,
so that each time a doctor ordered a Hepatitis panel, a Hepatitis C antibody
test was performed for the same patient, without regard to whether the test was
medically necessary in the treatment and diagnosis of the patient's medical
condition;

     b.   marketed and promoted the frequent ordering of LIFECHEM's Hepatitis
panel for all ESRD patients, so that each time a doctor ordered a Hepatitis
panel, the IgM Core test was automatically performed for the same patient
without regard to

                                      44
<PAGE>

whether the test was medically necessary in the treatment and diagnosis of the
patient's medical condition;

     c.   supplied to physicians LIFECHEM's paper requisition or laboratory test
order forms which made it difficult for physicians to (1) order LIFECHEM's
Hepatitis panel without the bundled Hepatitis C test and IgM Core test; and (2)
understand what Hepatitis tests were included on LIFECHEM's Hepatitis panel; and
which discouraged physicians from ordering LIFECHEM's Hepatitis panel without
the bundled tests;

     d.   misled physicians by falsely suggesting to them that ordering
LIFECHEM's laboratory blood tests in a panel or profile such as the Hepatitis
panel was cheaper or more economical than selectively ordering individual blood
tests, and by failing to disclose to physicians the fact that LIFECHEM was
charging the Medicare Program separately for each of the bundled tests at the
Medicare fee schedule;

     e.   provided incentives in the form of commissions to MPD's sales force to
encourage and promote the sale to the BMAs of LIFECHEM's Hepatitis panels
without regard to whether the additional Hepatitis C and IgM Core tests within
the Hepatitis panel were medically necessary in the diagnosis and treatment of
the patients' conditions other than ESRD;

     f.   supplied to dialysis facilities a computer and computerized test
ordering software which encouraged physicians to order LIFECHEM's Hepatitis
panels rather than individual tests; which made it difficult to order LIFECHEM's
Hepatitis panel without the bundled Hepatitis C test or IgM Core test; and

                                      45
<PAGE>

which made it difficult for physicians to understand what tests were included on
LIFECHEM's Hepatitis panel;

     g.   utilized certain MPD sales personnel to install a computerized
ordering system in the BMAs, and submitted or caused to be submitted claims for
payment to Medicare for a sudden increase in orders from the BMAs of LIFECHEM's
Hepatitis panels in one sales region, without regard to whether the additional
tests were medically necessary in the diagnosis or treatment of the ESRD
patients' medical conditions other than ESRD;

     h.   misled physicians in some instances by incorrectly suggesting to them
that BMA medical policy required or encouraged the routine ordering of
LIFECHEM's Hepatitis panels;

     i.   obtained diagnosis codes, known as ICD-9 codes, for Hepatitis panels
from dialysis clinics to enable LIFECHEM to provide medical justification to the
Medicare carrier for the Non-Routine Tests, without disclosing to the Medicare
carrier that not every test on the Hepatitis panel had been ordered separately
by the physician as being medically necessary;

     j.   billed the Medicare Program for these bundled Hepatitis C and IgM Core
tests, all the while knowing that the tests had not been ordered knowingly by
doctors as medically necessary tests for their patients, and further falsely
certified to the Medicare Program and to CHAMPUS that the tests were medically
necessary when LIFECHEM knew that many of them were not medically necessary;

     k.   collected from the Medicare Program about $16.00, more or less, for
each Hepatitis B IgM Core test; $19.00, more or

                                      46

<PAGE>

less, for each Hepatitis C antibody test; and collected from CHAMPUS about
$34.00, more or less, for each Hepatitis B IgM Core test; and

          l.  billed the Medicare Program for the same test twice by billing
once to the dialysis facility for the entire panel which was reimbursed by
Medicare through the composite rate, and again directly to the Medicare Program
for certain individual tests included within the panel, knowing that the bills
were duplicate bills and were not lawfully reimbursable.

                                  OVERT ACTS
                                  ----------

     150. In furtherance of the conspiracy, the defendant LIFECHEM, together
with others known and unknown to the United States Attorney, committed, among
other acts, the following overt acts in the District of Massachusetts and
elsewhere:

          a.   In or about May, 1991, the defendant LIFECHEM and others
initiated a Profit Recovery Program to offset revenue losses from government
regulatory actions in connection with the manufacturing of certain MPD dialysis
products by adding the Hepatitis C test to LIFECHEM's Hepatitis panel, and by
marketing and causing the substitution of the Hepatitis panel for the individual
Hepatitis test ordering practices then in place at the BMAs (the "Hepatitis
plan").

          b.   In or about June 1991,  the General Manager of LIFECHEM obtained
approval from the President of NMC, and the President and the Vice President of
Finance of MPD, among others, to purchase equipment to enable LIFECHEM to
perform additional Hepatitis testing that was expected to result from the
Hepatitis

                                      47
<PAGE>

plan, which, the General Manager informed her superiors, included an estimated
additional 55,000 Hepatitis C tests and an additional 94,117 IgM Core tests that
she expected would result from the implementation of the Hepatitis plan in the
first year alone.

          c.   In or about June, 1991, to justify approval to purchase the
laboratory equipment that defendant LIFECHEM needed to perform the additional
Hepatitis tests, the General Manager of LIFECHEM informed the President of NMC,
and the President and Vice President of Finance of MPD, among others, that
LIFECHEM projected an increase in 1991 revenue by $524,000 and profit from
operations ("PFO") by $308,000 if the Hepatitis C test could be added to the
Hepatitis panel by July 1, 1991, with a five year projected revenue stream of
over $6,000,000 and PFO of over $3,300,000; and that LIFECHEM projected an
increase in 1991 revenue by $2,083,000 with a PFO of $1,330,000 if Hepatitis
panels were substituted for individual Hepatitis test ordering in the BMAs, with
a five year projected revenue stream of $27,453,952 with a PFO of $18,989,618.

          d.   In or about June 1991, the LIFECHEM Product Manager notified the
MPD sales force about the new plan to market LIFECHEM's Hepatitis panels and
explained that the goal was to cause BMA physicians to order the entire
Hepatitis panel rather than the separate Hepatitis B antigen and/or antibody
tests then being ordered by those physicians.

          e.  On or about July 31, 1991, the LIFECHEM Product Manager announced
the addition of the Hepatitis C test to the

                                      48
<PAGE>

LIFECHEM Hepatitis panel, without providing customers an option on the pre-
printed requisition forms to obtain the LIFECHEM Hepatitis panel without the
added Hepatitis C test.

          f.  In or about August 1991, the LIFECHEM General Manager and Product
Manager, and the MPD Vice-President of Marketing, rejected a plan to prevent
repeated medically unnecessary testing for Hepatitis C on ESRD patients who were
previously confirmed positive for the antibody.

          g.  In or about September, 1991, the LIFECHEM General Manager directed
that no separate panel would be included on the LIFECHEM pre-printed requisition
form to provide doctors the choice of ordering LIFECHEM's Hepatitis panel
without the added Hepatitis C blood test, despite complaints about the lack of
choice from both physicians and the MPD sales force, and despite requests
certain from physicians to delete the Hepatitis C test from the Hepatitis panel.

          h.  In or about January 1992, after an important customer of LIFECHEM
threatened to withdraw its entire laboratory business if the Hepatitis C test
was not deleted from LIFECHEM's Hepatitis panel, LIFECHEM created a special
panel without the Hepatitis C test for that particular customer only, and did
not offer that choice to any other LIFECHEM customer.

          i.  LIFECHEM supplied to dialysis clinics preprinted paper LIFECHEM
requisition forms that, from August, 1991 through early 1993, did not list the
contents of the Hepatitis panel on the front of the form and did not offer
physicians the option of ordering LIFECHEM's Hepatitis panel without the
Hepatitis C test.

                                      49
<PAGE>

          j.  From in or about 1991 through 1994, certain members of the MPD
sales force falsely informed some physicians and others that ordering the
LIFECHEM Hepatitis panel was the standard of care at the BMA's, falsely informed
physicians and others that ordering the tests in the LIFECHEM Hepatitis panel
was more economical than ordering tests separately as needed for individual
patients, and failed to provide material information to physicians and others
regarding the cost to Medicare for the often medically unnecessary Hepatitis C
tests and IgM Core tests included on LIFECHEM's Hepatitis panel.

          k.  In or about June, 1992, MPD announced a new commission program
designed to increase sales of LIFECHEM's Hepatitis panel by paying each sales
representative $3.00 for each additional Hepatitis panel sold with the Hepatitis
C test, and $2.00 per panel for every Hepatitis panel sold without the Hepatitis
C test.

          l.   In or about August, 1992, LIFECHEM's General Manager sought and
received approval from the President of NMC, and the President and the Vice
President of Finance of MPD, and others, to purchase equipment for LIFECHEM to
perform the anticipated additional Hepatitis tests resulting from the further
sales and marketing efforts, and she informed them that the projected increase
in 1992 revenues would be $763,000 with PFO by $465,000 as a result of the
additional testing to be performed by  LIFECHEM.

          m.   From in or about January, 1993 through June, 1994, LIFECHEM
purchased and installed a computerized laboratory test

                                      51
<PAGE>

ordering system in both BMA and non-BMA dialysis clinics, which system included
software that did not include on the computerized ordering screen the contents
of the Hepatitis panel, and that made it difficult to order the Hepatitis panel
without the added Hepatitis C test, and that made it difficult to order
Hepatitis tests for individual patients based upon their serologic status.

          n.   From in or about January, 1993 through June, 1994, LIFECHEM
directed the sales force of MPD, and others, to install the computers and to
instruct employees of the dialysis facilities about how to set up standing
orders, and how to use an "assign all" function on the LIFECHEM computerized
ordering system, that would assign the test for all patients, or a designated
group of patients, in a dialysis facility, and would assign for billing purposes
and insert into the computer the same ICD-9 diagnosis code as the medical
justification for performing a particular laboratory blood test for each and
every patient, or group of patients, at a given facility, regardless of each
individual patient's medical condition.

          o.  From in or about March, 1994 through June, 1994, LIFECHEM utilized
the MPD sales force to install LIFECHEM's computerized ordering system at the
BMAs, despite the potential for abuse by a sales force whose commissions were
tied directly to the number of BMA orders for particular enumerated laboratory
tests, such as Hepatitis panels, and which, in some cases, resulted in increased
medically unnecessary laboratory blood testing and caused the addition of tests
to orders for individual patients without the physician's knowledge or approval.

                                      51
<PAGE>

          p.   From in or about August, 1991 through June, 1997, the defendant
LIFECHEM submitted false, fictitious and fraudulent claims to the Medicare
Program for Hepatitis B IgM Core tests that the defendant LIFECHEM knew were not
medically necessary for the diagnosis or treatment of a Medicare Program
beneficiary, and without disclosing that lack of medical necessity to the
Medicare Program, HCFA, or any carriers employed by the Medicare Program for the
processing and payment of claims. By this conduct, the defendant LIFECHEM
received at least $8,000,000 in payment from Medicare to which LIFECHEM was not
entitled. Among many other medically unnecessary Hepatitis B IgM Core tests that
LIFECHEM caused to be billed to the Medicare Program were the following tests,
conducted on or about the dates set forth below, and billed to the Medicare
Program on or about the dates set forth below, using the "HIC" code indicated:
---------------------------------------------------------------------------
     HIC No.           Date of Service         Date Claim Submitted
-----------------  -----------------------  -------------------------------
Patient A               8/15/94                 8/23/94
---------------------------------------------------------------------------
Patient A               9/19/94                 9/27/94
---------------------------------------------------------------------------
Patient A              10/17/94                10/24/94
---------------------------------------------------------------------------
Patient A              11/14/94                11/22/94
---------------------------------------------------------------------------
Patient A              12/12/94                12/19/94
---------------------------------------------------------------------------
Patient A                1/2/95                 1/17/95
---------------------------------------------------------------------------
Patient A                2/6/95                 2/16/95
---------------------------------------------------------------------------
Patient A                3/6/95                 3/14/95
---------------------------------------------------------------------------
Patient A                4/3/95                 4/20/95
---------------------------------------------------------------------------
Patient A                5/1/95                  5/8/95
---------------------------------------------------------------------------
Patient B                8/3/94                 8/10/94
---------------------------------------------------------------------------
Patient B                9/7/94                 9/14/94

                                      52
<PAGE>

---------------------------------------------------------------------------
Patient B              10/5/94                  10/14/94
---------------------------------------------------------------------------
Patient B              11/9/94                  11/15/94
---------------------------------------------------------------------------
Patient B              12/7/94                  12/13/94
---------------------------------------------------------------------------
Patient B               1/4/95                   1/17/95
---------------------------------------------------------------------------
Patient B               2/8/95                   2/23/95
---------------------------------------------------------------------------
Patient B               3/8/95                   3/14/95
---------------------------------------------------------------------------
Patient B               5/3/95                    5/9/95
---------------------------------------------------------------------------
Patient B               7/5/95                   7/17/95
---------------------------------------------------------------------------
Patient B               8/9/95                   8/15/95
---------------------------------------------------------------------------
Patient B               9/6/95                   9/12/95
---------------------------------------------------------------------------
Patient C               8/1/94                    8/8/94
---------------------------------------------------------------------------
Patient C              9/12/94                   9/22/94
---------------------------------------------------------------------------
Patient C              10/3/94                  10/10/94
---------------------------------------------------------------------------
Patient C              11/7/94                  11/14/94
---------------------------------------------------------------------------
Patient C              12/5/94                  12/19/94
---------------------------------------------------------------------------
Patient C               1/9/95                   1/19/95
---------------------------------------------------------------------------
Patient C               2/6/95                   2/16/95
---------------------------------------------------------------------------
Patient C               3/6/95                   3/16/96
---------------------------------------------------------------------------
Patient D               8/4/95                   8/15/94
---------------------------------------------------------------------------
Patient D               9/8/94                   9/19/94
---------------------------------------------------------------------------
Patient D              10/6/94                  10/12/94
---------------------------------------------------------------------------
Patient D              11/3/94                  11/10/94
---------------------------------------------------------------------------
Patient D              12/8/94                  12/19/94
---------------------------------------------------------------------------
Patient D               1/5/95                   1/17/95
---------------------------------------------------------------------------
Patient D               2/2/95                   2/14/95
---------------------------------------------------------------------------
Patient D               3/2/95                    3/9/95
---------------------------------------------------------------------------
Patient D               4/7/95                   4/21/95
---------------------------------------------------------------------------
Patient D               5/4/95                   5/11/95
---------------------------------------------------------------------------
Patient D               6/8/95                   6/15/95
---------------------------------------------------------------------------
Patient D               7/6/95                   7/14/95
---------------------------------------------------------------------------
Patient D               8/3/95                    8/8/95

                                      53
<PAGE>

---------------------------------------------------------------------------
Patient E               8/8/94                   8/15/94
---------------------------------------------------------------------------
Patient E              9/13/94                   9/20/94
---------------------------------------------------------------------------
Patient E             10/10/94                  10/18/94
---------------------------------------------------------------------------
Patient E             11/14/94                  11/21/94
---------------------------------------------------------------------------
Patient E             12/12/94                  12/19/94
---------------------------------------------------------------------------
Patient E               1/9/95                   1/24/95
---------------------------------------------------------------------------
Patient E              2/13/95                   2/28/95
---------------------------------------------------------------------------
Patient E              3/13/95                   3/23/95
---------------------------------------------------------------------------
Patient E              4/10/95                   4/21/95
---------------------------------------------------------------------------
Patient E               5/8/95                   5/15/95
---------------------------------------------------------------------------
Patient E              7/17/95                   7/25/95
---------------------------------------------------------------------------
Patient E              8/21/95                   8/29/95
---------------------------------------------------------------------------
Patient F               2/8/95                   2/27/95
---------------------------------------------------------------------------
Patient F               4/6/95                   4/20/95
---------------------------------------------------------------------------
Patient F               5/3/95                   5/11/95
---------------------------------------------------------------------------
Patient F               6/7/95                   6/15/95
---------------------------------------------------------------------------
Patient F               7/5/95                   7/14/95
---------------------------------------------------------------------------
Patient F               8/9/95                   8/17/95
---------------------------------------------------------------------------
Patient F               9/6/95                   9/12/95
---------------------------------------------------------------------------

          q.   From in or about August, 1991 through June, 1997, the defendant
LIFECHEM submitted false, fictitious and fraudulent claims for payment to the
Medicare Program for Hepatitis C antibody tests that LIFECHEM knew were not
medically necessary for the diagnosis or treatment of a Medicare Program
beneficiary, and without disclosing that lack of medical necessity to the
Medicare Program, HCFA, or any carriers employed by the Medicare Program for the
processing and payment of claims.  By this conduct, LIFECHEM received at least
$1,900,000 in payment to

                                      54
<PAGE>

which LIFECHEM was not entitled. Among many other medically unnecessary
Hepatitis B IgM Core tests that LIFECHEM caused to be billed to the Medicare
Program were the following tests, conducted on or about the dates set forth
below, and billed to the Medicare Program on or about the dates set forth below,
using the "HIC" code indicated:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------
     HIC No.                   Date of Service         Date Claim Submitted
     -------                   ---------------         --------------------
---------------------------------------------------------------------------
<S>                            <C>                     <C>
Patient A                          8/15/94                      8/23/94
---------------------------------------------------------------------------
Patient A                          9/19/94                      9/27/94
---------------------------------------------------------------------------
Patient A                         10/17/94                     10/24/94
---------------------------------------------------------------------------
Patient A                         11/14/94                     11/22/94
---------------------------------------------------------------------------
Patient A                         12/12/94                     12/19/94
---------------------------------------------------------------------------
Patient A                           1/2/95                      1/17/95
---------------------------------------------------------------------------
Patient A                           2/6/95                      2/16/95
---------------------------------------------------------------------------
Patient A                           3/6/95                      3/14/95
---------------------------------------------------------------------------
Patient A                           4/3/95                      4/20/95
---------------------------------------------------------------------------
Patient A                           5/1/95                       5/8/95
---------------------------------------------------------------------------
Patient B                           8/3/94                      8/10/94
---------------------------------------------------------------------------
Patient B                           9/7/94                      9/14/94
---------------------------------------------------------------------------
Patient B                          10/5/94                     10/14/94
---------------------------------------------------------------------------
Patient B                          11/9/94                     11/15/94
---------------------------------------------------------------------------
Patient B                          12/7/94                     12/13/94
---------------------------------------------------------------------------
Patient B                           1/4/95                      1/17/95
---------------------------------------------------------------------------
Patient B                           2/8/95                      2/23/95
---------------------------------------------------------------------------
Patient B                           3/8/95                      3/14/95
---------------------------------------------------------------------------
Patient B                           5/3/95                       5/9/95
---------------------------------------------------------------------------
Patient B                           7/5/95                      7/17/95
---------------------------------------------------------------------------
Patient B                           8/9/95                      8/15/95
---------------------------------------------------------------------------
Patient B                           9/6/95                      9/12/95
---------------------------------------------------------------------------
Patient C                           8/1/94                       8/8/94
---------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
---------------------------------------------------------------------------
<S>                               <C>                          <C>
Patient C                          9/12/94                      9/22/94
---------------------------------------------------------------------------
Patient C                          10/3/94                     10/10/94
---------------------------------------------------------------------------
Patient C                          11/7/94                     11/14/94
---------------------------------------------------------------------------
Patient C                          12/5/94                     12/19/94
---------------------------------------------------------------------------
Patient C                           1/9/95                      1/19/95
---------------------------------------------------------------------------
Patient C                           2/6/95                      2/16/95
---------------------------------------------------------------------------
Patient C                           3/6/95                      3/16/96
---------------------------------------------------------------------------
Patient D                           8/4/95                      8/15/94
---------------------------------------------------------------------------
Patient D                           9/8/94                      9/19/94
---------------------------------------------------------------------------
Patient D                          10/6/94                     10/12/94
---------------------------------------------------------------------------
Patient D                          11/3/94                     11/10/94
---------------------------------------------------------------------------
Patient D                          12/8/94                     12/19/94
---------------------------------------------------------------------------
Patient D                           1/5/95                      1/17/95
---------------------------------------------------------------------------
Patient D                           2/2/95                      2/14/95
---------------------------------------------------------------------------
Patient D                           3/2/95                       3/9/95
---------------------------------------------------------------------------
Patient D                           4/7/95                      4/21/95
---------------------------------------------------------------------------
Patient D                           5/4/95                      5/11/95
---------------------------------------------------------------------------
Patient D                           6/8/95                      6/15/95
---------------------------------------------------------------------------
Patient D                           7/6/95                      7/14/95
---------------------------------------------------------------------------
Patient D                           8/3/95                       8/8/95
---------------------------------------------------------------------------
Patient E                           8/8/94                      8/15/94
---------------------------------------------------------------------------
Patient E                          9/13/94                      9/20/94
---------------------------------------------------------------------------
Patient E                         10/10/94                     10/18/94
---------------------------------------------------------------------------
Patient E                         11/14/94                     11/21/94
---------------------------------------------------------------------------
Patient E                         12/12/94                     12/19/94
---------------------------------------------------------------------------
Patient E                           1/9/95                      1/24/95
---------------------------------------------------------------------------
Patient E                          2/13/95                      2/28/95
---------------------------------------------------------------------------
Patient E                          3/13/95                      3/23/95
---------------------------------------------------------------------------
Patient E                          4/10/95                      4/21/95
---------------------------------------------------------------------------
Patient E                           5/8/95                      5/15/95
---------------------------------------------------------------------------
Patient E                          7/17/95                      7/25/95
---------------------------------------------------------------------------
</TABLE>
<PAGE>

_______________________________________________________________________
Patient E                          8/21/95                      8/29/95
-----------------------------------------------------------------------
Patient F                           2/8/95                      2/27/95
-----------------------------------------------------------------------
Patient F                           4/6/95                      4/20/95
-----------------------------------------------------------------------
Patient F                           5/3/95                      5/11/95
-----------------------------------------------------------------------
Patient F                           6/7/95                      6/15/95
-----------------------------------------------------------------------
Patient F                           7/5/95                      7/14/95
-----------------------------------------------------------------------
Patient F                           8/9/95                      8/17/95
-----------------------------------------------------------------------
Patient F                           9/6/95                      9/12/95
-----------------------------------------------------------------------

          r.   From in or about August, 1991 through June, 1997, the defendant
LIFECHEM submitted false, fictitious and fraudulent claims to CHAMPUS for
Hepatitis B IgM Core tests that LIFECHEM knew were not medically necessary for
the diagnosis or treatment of the medical condition of a CHAMPUS beneficiary,
and without disclosing that lack of medical necessity to the CHAMPUS Program.
By this conduct, LIFECHEM received payments for these tests from CHAMPUS to
which LIFECHEM was not entitled.  Among other medically unnecessary Hepatitis B
IgM Core tests that LIFECHEM caused to be billed to CHAMPUS were the following
tests, conducted on or about the dates set forth below, and reimbursed by
CHAMPUS on or about the dates set forth below:

----------------------------------------------------------------------
 Patient/Test              Date of Service        Reimbursement Date
 ------------              ---------------        ------------------
----------------------------------------------------------------------
Patient X/IgM Core         5/4/95                  9/5/95
----------------------------------------------------------------------
Patient Y/IgM Core         5/4/95                  9/5/95
----------------------------------------------------------------------
Patient Y/IgM Core         6/8/95                 7/22/95
----------------------------------------------------------------------
Patient Y/IgM Core         7/6/95                 8/21/95
----------------------------------------------------------------------
Patient Y/IgM COre         8/2/95                 9/16/95
----------------------------------------------------------------------

          s.   In or about June, 1990, LIFECHEM installed a new

                                     57
<PAGE>

computer billing system and began submitting claims for payment to the Medicare
program that were generated by that new computer system, despite the fact that
the billing computer had not been completely programmed with the Medicare ESRD
billing rules, and the billing computer had not been parallel tested to
determine whether or not it generated accurate claims for payment.

          t.   By July, 1990, LIFECHEM knew that the new billing computer was
generating inaccurate claims for payment for laboratory blood tests conducted on
ESRD patients but continued to submit those false claims for payment to the
Medicare Program.

          u.   In or about February, 1991, LIFECHEM discovered a computer
programming error that caused the new billing computer to generate claims for
payment to the Medicare program for individual chemistry tests that were
performed in the laboratory on a automated chemistry analyzer as part of
LIFECHEM's automated Chem 20, despite the fact that Medicare had already paid
for the monthly Chem 20 for most ESRD patients by directly paying the dialysis
facilities the Composite Rate Payment.

          v.   From in or about February, 1991 through at least June, 1992,
LIFECHEM submitted false, fictitious and fraudulent claims for payment for
individual chemistry tests for which LIFECHEM knew Medicare had already paid,
without disclosing to the Medicare Program that those claims for payment were
duplicate bills to the Medicare Program, HCFA, or any carriers employed by the
Medicare Program for the processing and payment of claims. By this conduct,
LIFECHEM received at least $5,300,000 in payment to which LIFECHEM was not
entitled.

                                      58
<PAGE>

     All in violation of Title 18, United States Code, Section 286.

                                      59
<PAGE>

     COUNT THREE   (18 U.S.C. (S) 371 -- Conspiracy to Commit an Offense)
     -----------

     151. The allegations set forth in paragraphs 1-3, 5-16, and 134-145
are realleged as if fully set forth herein and incorporated in full.

     152. From in or about May, 1987 through in or about July, 1996, the exact
dates being unknown to the United States Attorney, in the Districts of
Massachusetts, Florida, North Carolina, and New Jersey, and elsewhere across the
United States, the defendant

     NMC MEDICAL PRODUCTS, INC.

together with others known and unknown to the United States Attorney, knowingly,
willfully, and intentionally combined, conspired, confederated and agreed to
commit an offense against the United States and its agency the Health Care
Financing Administration, namely, to knowingly, willfully and intentionally
offer and pay remuneration, directly and indirectly, overtly and covertly, in
cash and in kind, to induce dialysis facilities to order, and arrange for the
ordering, from LIFECHEM of a service and item paid for, in whole or in part, by
the Medicare Program, specifically clinical laboratory blood testing conducted
for dialysis patients in the facilities, all in violation of Title 42, United
States Code, Section 1320a-7b(b)(2)(B).

                                      60
<PAGE>

                          OBJECTIVE OF THE CONSPIRACY
                          ---------------------------

     153.   The objective of the conspiracy was to offer and give things of
value to dialysis clinics, and to their employees, owners, and administrators,
for the purpose of inducing dialysis clinics to order, and to arrange for the
ordering of LIFECHEM's laboratory blood testing services, including Non-Routine
Tests and medically unnecessary laboratory blood tests for dialysis patients,
which services were paid for primarily by Medicare.

                       MANNER AND MEANS OF THE CONSPIRACY
                       ----------------------------------

     154.   It was a part of the manner and means by which the conspiracy was
accomplished that the defendant MPD, together with others known and unknown to
the United States Attorney, offered and paid remuneration to certain dialysis
facilities in the form of lavish entertainment and hunting trips, payment of
salary and benefits for full-time dialysis center staff who were not devoted to
spinning and packaging blood tests for shipment to LIFECHEM, payment of study
grants for research that was never performed, and payment of up-front rebates on
dialysis products based upon commitments to purchase certain volumes of product
that were never met, all for the purpose of inducing the referral of orders for
laboratory blood testing services to LIFECHEM, including orders for Non-Routine
Tests that were not medically necessary for the diagnosis or treatment of
Medicare beneficiaries, which services were paid for primarily by Medicare Trust
Funds.

     155.   As a result of MPD's knowing, willful and intentional payment of
illegal remuneration to various dialysis facilities to obtain referral of their
laboratory blood testing business to

                                      61
<PAGE>

LIFECHEM, MPD generated an unlawful pecuniary gain or profit from that
laboratory business in an amount of at least $9,500,000.

                                   OVERT ACTS
                                   ----------

     156. In furtherance of the conspiracy, the defendant MPD, together with
others known and unknown to the United States Attorney, committed among other
acts the following overt acts in the District of Massachusetts and elsewhere:

          a.    In or about 1992, MPD knowingly, willfully and intentionally
offered and paid to the manager/administrator of Dialysis Facility I illegal
remuneration in the form of payment for a bear hunting trip to Canada to induce
him to refer Dialysis Facilities I's laboratory blood testing business to
LIFECHEM.

          b.    At various times between May, 1987 and January, 1995, MPD
knowingly, willfully and intentionally offered and paid to Dialysis Facility F
illegal remuneration in the form of payment of salary and benefits for two full-
time dialysis center personnel whose responsibilities were not limited to
spinning and packaging blood for shipment to LIFECHEM but included
administrative, clerical and nursing practitioner work, and in the form of
grants for studies that were never performed, all to induce referrals of
Dialysis Facility F's laboratory blood testing business to LIFECHEM;

          c.    In or about December, 1990, MPD knowingly, willfully and
intentionally offered and paid to Dialysis Facility G illegal remuneration in
the form of payment for lavish holiday entertainment parties including a yacht
rental worth thousands of dollars to induce referrals of dialysis facility G's
laboratory blood testing business to LIFECHEM; and

          d.    At various times between 1991 and 1993, MPD knowingly, willfully
and intentionally offered and paid to Dialysis Facilities B and J illegal
remuneration in the form of an up-front credit on

                                      62
<PAGE>

dialysis products based upon a commitment to purchase a specified volume of
dialysis products that was not met, to induce referrals of Dialysis Facilities B
and J's laboratory blood testing business to LIFECHEM. All in violation of Title
18 United States Code, Section 371.

                              Respectfully submitted,

                              MARK W. PEARLSTEIN
                              Acting United States Attorney

                              /s/ Peter A. Mullin
                              ---------------------------
                              PETER A. MULLIN
                              Assistant U.S. Attorney

                              /s/ Susan Winkler
                              ---------------------------
                              SUSAN G. WINKLER
                              Assistant U.S. Attorney

                              /s/ Susan Hanson-Philbrick
                              ---------------------------
                              SUSAN HANSON-PHILBRICK
                              Assistant U.S. Attorney

                              /s/ Joshua Levy
                              ---------------------------
                              JOSHUA LEVY
----------------------------  Assistant U.S. Attorney
Dated: January 19, 2000

                                      63

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