EXHIBIT 10.34
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GOVERNMENT PROGRAMS AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
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TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
section 1.1 "Cost Report".................................... 2
Section 1.2 "Departing NME Member" .......................... 2
Section 1.3 "New Hillhaven Group"............................ 2
Section 1.4 "NME Group"...................................... 2
Section 1.5 "Open Cost Reports".............................. 2
Section 1.6 "Regulations".................................... 2
Section 1.7 "Related Parties"................................ 2
Section 1.8 "Termination Cost Report"........................ 3
ARTICLE II
COST REPORT FILING
Section 2.1 Termination Cost Reports......................... 3
Section 2.2 Prior Cost Reports............................... 3
Section 2.3 Open Cost Reports and Other Matters ............. 3
Section 2.4 Cost Reporting Program........................... 4
Section 2.5 Recapture........................................ 4
Section 2.6 Supporting Documentation......................... 4
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
Section 3.1 Timely Notification.............................. 5
Section 3.2 Other Action..................................... 5
Section 3.3 Exchange of Information.......................... 5
Section 3.4 Retention of Records............................. 5
Section 3.5 Confidentiality.................................. 6
ARTICLE IV
MISCELLANEOUS
Section 4.l Expenses......................................... 6
Section 4.2 Notices.......................................... 6
Section 4.3 Compliance by Subsidiaries....................... 7
Section 4.4 Successors and Assigns........................... 7
Section 4.5 Titles and Headings.............................. 8
Section 4.6 Legal Enforceability............................. 8
Section 4.7 Governing Law.................................... 8
Section 4.8 Dispute Resolution Procedures.................... 8
GOVERNMENT PROGRAMS AGREEMENT
GOVERNMENT PROGRAMS AGREEMENT, dated as of January 31, 1990 (this
"Agreement"), between NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation
("NME") , on behalf of itself and the NME Group (as hereinafter defined) and THE
HILLHAVEN CORPORATION, a Nevada corporation ("New Hillhaven"), on behalf of
itself and the New Hillhaven Group (as hereinafter defined).
_________________
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement (as amended to the date hereof, the "Distribution
Agreement") providing for a reorganization of certain of the businesses
heretofore conducted by NME's long term care group including, without
limitation, any businesses heretofore disposed of (collectively, the
"Business"), and a pro rata distribution to the holders of NME's capital stock,
as of the record date established by NME in connection therewith, of
approximately 85% of the outstanding shares of capital stock of New Hillhaven
(the "Distribution") on or about January 31, 1990 (the "Distribution Date");
WHEREAS, pursuant to the Distribution Agreement, NME and New Hillhaven
will, among other things, provide for the transfer of certain assets and rights
of the Business to New Hillhaven and the assumption of certain liabilities and
obligations of the Business by New Hillhaven;
WHEREAS, except to the extent set forth in this Agreement, all of the
assets, rights, liabilities and obligations of the Business relating to
governmental health care programs, including without limitation Medicare and
Medicaid programs (collectively, the "Government Programs"), are included in the
assets, rights, liabilities and obligations of the Business that are being
transferred to and assumed by New Hillhaven pursuant to the Distribution
Agreement; and
WHEREAS, NME and New Hillhaven desire to provide specifically for the
treatment as between NME and New Hillhaven of certain matters relating to or
affecting the Government Programs as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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As used in this Agreement, the following defined terms shall have the
meanings set forth below (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
Section 1.1 "Cost Report" means the annual cost report, required to
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be filed as of the end of a provider cost year, or for any other required
period, with federal and/or state agencies or their designated intermediaries
with respect to reimbursement under the Regulations.
Section 1.2 "Departing NME Member" means (i) any direct or indirect
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subsidiary of NME which, as a result of the Distribution, will become a member
of the New Hillhaven Group or (ii) any direct or indirect subsidiary of NME
which has transferred its interests in long term care facilities pursuant to the
transactions contemplated by the Distribution Agreement.
Section 1.3 "New Hillhaven Group" means New Hillhaven and its present
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and future direct and indirect subsidiaries and, in addition, any partnerships
in which New Hillhaven or any such subsidiary has or will have an interest.
Section 1.4 "NME Group" means NME and its present and future direct
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and indirect subsidiaries (including Old Hillhaven, as defined in Section 2.2),
other than members of the New Hillhaven Group.
Section 1.5 "Open Cost Reports" means any Cost Reports that are or
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will be, and Termination Cost Reports that will be, in various stages of audit,
appeal, reopening and/or litigation, including any Cost Report filed by Old
Hillhaven that is considered by Old Hillhaven to be closed but which, within the
applicable statute of limitations, is reopened by action of any federal or state
agency seeking to make corrections, adjustments or new determinations on issues
previously considered to have been settled.
Section 1.6 "Regulations" means all federal and state regulations
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governing payments by federal or state agencies under Government Programs.
Section 1.7 "Related Parties" means parties which are deemed to be
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related under 42 C.F.R. (S) 413.17 by virtue of ownership or control and/or
under applicable state regulations with respect to Medicaid.
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Section 1.8 "Termination Cost Report" means a Cost Report covering
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the period from June 1, 1989 to and including the Distribution Date, to be
prepared and filed by New Hillhaven on behalf of members of the NME Group with
federal or state agencies under the Regulations.
ARTICLE II
COST REPORT FILING
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Section 2.1 Termination Cost Reports. It is the intent of the
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parties to treat the transactions contemplated by the Distribution Agreement
(the "Transactions") as being among Related Parties. New Hillhaven and the
Departing NME Members shall be solely responsible for preparing and filing all
Termination Cost Reports required by the Regulations as a consequence of the
Transactions. Each such Termination Cost Report shall be filed on a timely
basis, subject to any extensions that may be granted, and prepared in a manner
consistent with the previous Cost Report filings for the Departing NME Member,
including all elections taken therein.
Section 2.2 Prior Cost Reports. The Hillhaven Corporation, a
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Tennessee corporation and a Wholly-owned subsidiary of NME ("Old Hillhaven"),
has filed Cost Reports with respect to the Business for all Departing NME
Members for all periods prior to the Distribution Date, as required by the
Regulations.
Section 2.3 Open Cost Reports and Other Matters. In addition to Open
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Cost Reports, the federal and state agencies may make adjustments resulting from
the audit of the NME home office and any subsidiary or any other person or
entity deemed to be a Related Party which has provided services to Old Hillhaven
and New Hillhaven. The parties hereto acknowledge and agree that among the
assets, rights, liabilities and obligations of the Business being transferred to
and assumed by New Hillhaven pursuant to the Distribution Agreement are the
accounts receivable and accounts payable recorded on the books of Old Hillhaven
or of any direct or indirect subsidiary thereof relating to Open Cost Reports,
any other asset or liability (whether or not recorded on the books of Old
Hillhaven or of any such subsidiary) relating to Open Cost Reports and all other
administrative responsibilities and financial or other obligations relating to
such Open Cost Reports. Any benefit or detriment resulting from the finalization
of the Open Cost Reports, other than with respect to such Open Cost Reports
relating to facilities subject to Management Agreements (as defined in the
Distribution Agreement), shall accrue to or be the responsibility of New
Hillhaven, and New Hillhaven shall indemnify and hold harmless NME and all
members of the NME Group from and against any loss, liability, claim, expense or
damage arising out of any Open
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Cost Report. New Hillhaven shall be responsible for the preparation and filing
of all Costs Reports relating to each facility subject to a Management Agreement
as long as such Agreement is in effect.
Section 2.4 Cost Reporting Program. NME is a party to a License
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Agreement, dated March 20, 1987 (the "License Agreement"), with Peat Marwick
Main & Co. ("PMM") pursuant to which NME has acquired the exclusive right to use
PMM's cost report preparation package, known as "CompuCost," a copy of which has
previously been furnished to New Hillhaven. The License Agreement has been
amended to grant to New Hillhaven the non-exclusive right to use the CompuCost
package until the expiration of the License Agreement in 1992. Following the
Distribution, both NME and New Hillhaven shall have rights to use the CompuCost
package. For so long as New Hillhaven elects to use the CompuCost package, New
Hillhaven shall pay promptly to NME upon demand 50% of any and all costs and
expenses required to be paid to PMM pursuant to the License Agreement. New
Hillhaven shall be under no obligation to continue the use of such cost
reporting package and, at its election, New Hillhaven may terminate such
arrangement and make other arrangements either directly with PMM or any other
cost reporting vendor of New Hillhaven's choice. Except as otherwise provided in
the Services Agreement dated as of the Distribution Date between NME and New
Hillhaven, NME shall not be responsible for any training in the proper use of
the software program.
Section 2.5 Recapture. If there shall occur any event (other than
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an event arising solely from the Distribution as provided in the Distribution
Agreement) which (i) results in recapture or other costs under the Regulations
being imposed upon NME or any member of the NME Group and (ii) relates to the
Business, New Hillhaven shall indemnify and hold harmless NME and all such
members from and against any loss, liability, claim, expense or damage arising
therefrom.
Section 2.6 Supporting Documentation. (a) NME shall furnish to New
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Hillhaven, annually within 30 days after the end of NME's fiscal year and from
time to time at New Hillhaven's written request and upon reasonable notice, the
book basis of the assets, the actual depreciation for the period and the
liability and interest expense for all retained assets which are the subject of
separate lease arrangements between the parties. In addition, the related
property records will be made available to program auditors and to New Hillhaven
for their inspection and audit subject to reasonable notification of such
audits. If New Hillhaven has such access to the foregoing information and
records, New Hillhaven shall be solely responsible for supporting the basis of
the assets and liabilities reflected on its Cost
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Report (except where inaccurate information has been provided to New Hillhaven
by NME) and for making appropriate arrangements for the review of the
documentation referred to above in support of these bases.
(b) Each party hereto will furnish to the other party, annually
within 75 days after the end of such party's fiscal year and from time to time
at such other party's request and upon reasonable notice, such information set
forth in subsection (a) above and such other information as will enable such
other party to file its home office cost reports in a timely manner.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
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Section 3.1 Timely Notification. Each party shall notify the other
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of all significant issues (determined in good faith by the notifying party)
arising out of an audit with respect to the Termination Cost Reports and/or any
other material or significant issues relating to the Government Programs. NME
shall participate in Providing information with respect to such issues,
including making available its records relating to such Government Programs.
Section 3.2 Other Action. New Hillhaven shall have the right to take
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all reasonable and appropriate action in connection with the conduct of any
audit or other proceeding with respect to reimbursement under the Regulations,
provided that New Hillhaven shall not take any such action which could
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reasonably be expected to have an adverse impact on NME or any member of the NME
Group with respect to such reimbursement.
Section 3.3 Exchange of Information. Each of NME and New Hillhaven
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shall cooperate with the other and provide the other with information upon
request in connection with the preparation or filing of a Cost Report or in
conducting any audit or other proceeding relating to Government Programs.
Section 3.4 Retention of Records. Each of NME and New Hillhaven
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shall retain, and shall cause its subsidiaries to retain, pursuant to NME's
Record Retention Program, a copy of which has been made available to New
Hillhaven, all Termination Cost Reports, Cost Reports, schedules, workpapers,
and other records and documents related to the Business and the Regulations
filed through the Distribution Date ("Information"), except as otherwise
required by law or except to the extent that such Information is in the public
domain or in the possess ion of the other party; provided, that after the
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expiration of the
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applicable retention period set forth in such Program, such Information shall
not be destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (a) the party proposing to destroy or otherwise dispose
of such Information, shall provide no less than 90 days' prior written notice to
the other, specifying in reasonable detail the Information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of such requesting party.
Section 3.5 Confidentiality. Subject to any contrary requirement of
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law and the right of each party to enforce its rights hereunder in any legal
action, each party shall keep strictly confidential, and shall cause its
employees and agents to keep strictly confidential, any information of or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provision of this Agreement; provided, however, that such obligation to maintain
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confidentiality shall not apply to information which (i) at the time of
disclosure was in the public domain, (ii) after disclosure enters the public
domain not as a result of acts by the receiving party, (iii) was already
independently in the possession of the receiving party at the time of disclosure
or (iv) is received by the receiving party from a third party who did not
receive such information from the disclosing party under an obligation of
confidentiality.
ARTICLE IV
MISCELLANEOUS
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Section 4.1 Expenses. Unless otherwise expressly provided in this
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Agreement, each party shall bear any and all expenses that result from its
fulfillment of its obligations under the Agreement.
Section 4.2 Notices. All notices, consents, requests, instructions,
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approvals and other communications hereunder shall be in writing and shall be
deemed to have been duly given, if delivered in person or by courier,
telegraphed, telexed or sent by facsimile transmission or mailed, by certified
or registered mail, postage prepaid at the following address (or at such other
address provided by one party to the other party in writing):
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If to NME:
National Medical Enterprises, Inc.
0000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy no.: (000) 000-0000
Attention: Senior Vice President,
Government Programs
with a copy to:
National Medical Enterprises, Inc.
0000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy no.: (000) 000-0000
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Telecopy no.: (000) 000-0000
Attention: President
with a copy to:
The Hillhaven Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Telecopy no.: (000) 000-0000
Attention: General Counsel
Section 4.3 Compliance by Subsidiaries. Each of the parties hereto
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agrees to take all necessary steps to cause its present and future subsidiaries
to comply with the provision: of this Agreement.
Section 4.4 Successors and Assigns. This Agreement and all of the
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provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, except that New Hillhaven
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of NME.
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Section 4.5 Titles and Headings. Titles and headings to sections herein
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are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 4.6 Legal Enforceability. Any provision of this Agreement which
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is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision or remedies otherwise available to any party
hereto. Without prejudice to any rights or remedies otherwise available to any
party hereto, each party hereto acknowledges that damages would be an inadequate
remedy for any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
Section 4.7 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California.
Section 4.8 Dispute Resolution Procedures. All disputes arising out of or
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relating to this Agreement shall be resolved pursuant to the reference procedure
set forth in California Code of Civil Procedure Sections 638 et seq. The
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parties hereby agree to submit to the jurisdiction of the Superior Court of the
County of Los Angeles, State of California (the "Superior Court") for such
purpose. Either party may initiate the procedure set forth in this Section by
providing the other party with notice setting forth the nature of the dispute
(the "Reference Notice"). The parties shall designate to the Superior Court a
referee who is an active attorney or retired judge living in the County of Los
Angeles who shall resolve the dispute. If the parties are unable to designate a
referee within 20 days after the receipt of the Reference Notice, the parties
shall request that the Superior Court appoint a referee. In connection with any
proceeding pursuant to this Section, the parties shall have all discovery rights
which would have been available had the matters which are the subject of the
dispute been decided by the Superior Court. Discovery proceedings may be noticed
and commenced immediately after delivery of the Reference Notice. The hearing
before the referee shall begin no later than 60 days after the receipt of the
Reference Notice. All discovery in connection with the reference proceeding
shall be concluded no later than 15 days prior to the commencement of the
hearing. Judgment upon the award rendered by the referee shall be entered in the
Superior Court. Nothing in this Section shall be construed to impair the right
of either party to appeal from such judgment.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
THE HILLHAVEN CORPORATION
By: /s/ Xxxxxxxxxxx X. Xxxxxx
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Name: Xxxxxxxxxxx X. Xxxxxx
Title: Ptesident
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