Exhibit 10.13
SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS
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This Settlement Agreement and Release of Claims ("Settlement Agreement"),
entered into as of the 8th day of October, 2001, and intended to be effective on
April 9, 2001, is by and between, on the one hand, Sierra Health Services, Inc.,
a Nevada corporation ("SHS"), Texas Health Choice, L.C., fka HMO Texas, L.C., a
Texas limited liability company ("HMO Texas"), Sierra Health Life Insurance
Company ("SH&L"), Sierra Texas Systems ("Systems"), and The Medical Group of
Texas ("MedGrp") (SHS, HMO Texas, SH&L, Systems, and MedGrp are referred to
collectively as "Sierra" or the "Sierra Parties") and, on the other hand, ▇▇▇▇▇▇
Foundation Health Plan of Texas, a Texas non-profit corporation ("Kaiser
Texas"), Kaiser Foundation Hospitals, a California corporation ("KFH"), ▇▇▇▇▇▇
Foundation Health Plan, Inc., a California corporation ("KFHP"), and ▇▇▇▇▇▇
Permanente Insurance Company ("KPIC") (▇▇▇▇▇▇ Texas, KFH, KFHP, and KPIC are
referred to collectively as "Kaiser" or the "Kaiser Parties"); ▇▇▇▇▇ ▇. ▇▇▇▇
("▇▇▇▇"); and ▇▇▇▇▇▇▇ ▇▇▇▇ ("West"). Sierra, Kaiser, Hohl, and West are
collectively referred to as the "Parties".
WHEREAS, there is presently a dispute concerning the transaction between
Sierra and Kaiser memorialized in a series of agreements and exhibits dated as
of June 5, 1998, that pertains to the sale of certain Kaiser assets located in
and around Dallas, Texas, that became effective on October 31, 1998 (the
"Transaction"). The agreements underlying the Transaction include, but are not
limited to: (a) an Asset Sale and Purchase Agreement, between Kaiser Texas and
HMO Texas ("Purchase Agreement"); (b) an Asset Sale and Purchase Agreement
between HMO Texas and PMAT (the "PMAT Purchase Agreement"); (c) the Master
Purchase and Sale Agreement, between Kaiser Texas and HMO Texas with respect to
the Kaiser Real Estate ("Real Property Purchase Agreement"); (d) a Subsidy
Agreement dated October 31, 1998 ("Subsidy Agreement"); (e) a Transition
Agreement dated October 31, 1998 ("Transition Agreement"); (f) the Assumption
Reinsurance Agreement between Kaiser Texas and Texas HMO dated June 5, 1998
("Assumption Reinsurance Agreement"); (g) the Indemnity Reinsurance Agreement
between Kaiser Texas and SH&L dated June 5, 1998 ("Indemnity Reinsurance
Agreement"); (h) the Insurance Assumption Reinsurance Agreement between KPIC and
SH&L dated June 5, 1998 ("Insurance Assumption Reinsurance Agreement"); and
(i) the Indemnity Reinsurance Agreement between KPIC and SH&L dated June 5,
1998 ("KPIC Indemnity Reinsurance Agreement") (all as may have been subsequently
amended hereinafter collectively referred to as the "Related Agreements").
WHEREAS, the Transaction included the transfer of eight (8) parcels of
improved real property (collectively the "Real Estate").
WHEREAS, since the Transaction closed on October 31, 1998, a series of
disputes has developed among the Parties concerning the Transaction;
WHEREAS, on October 30, 2000, Sierra filed suit in the Alameda County
Superior Court against Kaiser, Hohl, and West (the "Action"). The Action bears
Case No. 832638-4; and
WHEREAS, the Parties desire to settle the claims raised in the Action, and
to fully and finally resolve, subject to the terms of this Settlement Agreement,
all disputes which have arisen relating to the Transaction as set forth below,
by the exchanges of consideration and performance of the obligations set forth
herein;
NOW, THEREFORE, the Parties agree as follows:
1. GENERAL TERMS.
1.1 Payment To Sierra. KFH shall pay Sierra $2.5 million ($2,500,000.00) as
of the date of the arbitration award pursuant to this Settlement Agreement.
1.2 Sierra agrees to make all payments due under the Note through the date
of the arbitration award.
1.3 Kaiser agrees to deposit into an interest bearing escrow an amount
equivalent to each payment Sierra makes pursuant to Section 1.2. This is not
intended to constitute a modification of the Loan Documents.
1.4 In the event that Sierra fails to make any of the payments required by
Section 1.2 such amount shall be deducted from the amount owed by Kaiser under
Section 1.1.
1.5 Amounts for Real Estate taxes accrued but unpaid by Sierra will be
deducted from either the amount owed by Kaiser under Section 1.1 or the escrow
amount, which shall be used by Kaiser to pay the Real Estate taxes.
1.6 On or before November 9, 2001, Sierra and Kaiser shall each nominate an
arbitrator pursuant to Section 13 of the Purchase Agreement. The arbitration
award shall be rendered on or before February 8, 2002.
1.7 If the arbitration award is in Sierra's favor, the arbitrator shall
direct payment to Sierra of the funds escrowed by Kaiser in Section 1.3.
1.8 Each parcel of the Real Estate is encumbered by Deeds of Trust in favor
of Kaiser Texas securing repayment of a promissory note issued by Texas HMO in
the original principal sum of Thirty-five Million Two Hundred Thousand Dollars
($35,200,000.00) (the "Note"). The Note and the Deeds of Trust were assigned by
Kaiser Texas to KFH pursuant to the Assignment and Assumption of Loan Documents
effective December 31, 2000. The Note is guaranteed by SHS ("Guarantee").
Nothing contained in this Settlement Agreement is intended to alter, modify or
amend the duties, obligations and rights of the Parties under the Note, the
Deeds of Trust, the Purchase Agreement, the Guarantee, or any of the Related
Agreements.
1.8(a) If a payment Event of Default, as defined under the Loan Documents
occurs prior to the rendition of a decision by the arbitrators, nothing
contained herein shall limit the right of Kaiser to pursue any remedy provided
for under the documents executed in connection with the Transaction or
applicable law.
1.9 Arbitration. Sierra and Kaiser agree to submit the following issue to
final and binding arbitration under Section 13 of the Purchase Agreement. The
arbitration shall decide only the issue of whether SHS is liable for any default
by HMO Texas in connection with the Real Estate beyond the obligations set forth
in Section 13 of the Note. If the decision is that SHS is so liable, the
decision will be in favor of Kaiser; if the decision is that SHS is not so
liable, the decision is in favor of SHS. Arbitration will be based solely on the
rights and obligations of the parties under the documents executed by the
Parties in connection with the Transaction, including in connection with the
closing thereof, and shall be interpreted without reference to or admission of
this agreement, the April 9, 2001 Mediator's Proposal, any drafts of this or any
other settlement agreement any discussion or correspondence relating to the
April 9, 2001 Mediator's proposal or to this or any other settlement agreement.
The arbitration shall be conducted pursuant to Section 13 of the Purchase
Agreement; provided, that Section 13 and its Exhibit shall be modified as
follows: (1) there will be no requests for admissions, or document demands, (2)
the parties will voluntarily produce all evidence to be introduced into evidence
at least 5 business days prior to the first depositions, (3) the parties will be
limited to three depositions per side of 7 hours per deposition, (4) depositions
of only identified witnesses and not any persons most knowledgeable, and (5) the
arbitration hearing shall be limited to 3 days, (6) 10 interrogatories with no
subparts.
2. RELEASES AND DISMISSALS.
2.1 Upon execution of this Settlement Agreement Sierra will dismiss the
Action with prejudice.
2.2 It is further agreed that the Parties (as between themselves) shall
assume and bear their own costs of the Action and resolution of all of the
claims referenced herein, including attorneys' fees and mediator expenses
incurred as a result of or in connection therewith.
2.3 Release Of Kaiser By Sierra. In exchange for performance and
satisfaction of the obligations assumed by the Parties hereto as set forth
above, and for other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, Sierra, for itself and its past and present
directors, officers, partners, employees, subsidiaries, affiliates, insurers,
attorneys, stockholders, agents, representatives, and successors in interest,
does hereby unconditionally, irrevocably and forever release and discharge
Kaiser and any and all of its directors, officers, employees, subsidiaries,
affiliates, insurers, attorneys, stockholders, agents, representatives, all past
or present persons or organizations cooperating in the conduct of the ▇▇▇▇▇▇
healthcare program commonly known as the ▇▇▇▇▇▇ Permanente Medical Care Program,
and all other persons of any kind who have acted or are acting by, through,
under, for, or in concert with Kaiser ("Kaiser Released Parties") from any and
all liabilities, acts, actions, causes or action, suits, proceedings, debts,
dues and sums of money, accounts, accountings, reckonings, bonds, bills,
covenants, contracts, (including any covenants to be performed under the Related
Agreements after October 31, 1998), controversies, conveyances, leases,
assignments, agreements, promises, representations, trespasses, costs, expenses,
damages, judgments, executions, defenses, offsets, counterclaims, claims and
demands, or any combination of the same, of any nature whatsoever, whether known
or unknown, contingent or certain, whether at law or in equity, irrespective of
whether arising from tort, contract, violations of laws or regulations, whether
alleging NEGLIGENCE, FRAUD or other intentional act, including any breach of
fiduciary duty, breach of any duty of fair dealing, breach of confidence, breach
of funding commitment, undue influence, duress, economic coercion, conflict of
interest, bad faith, violations of the Federal Racketeer Influence and Corrupt
Organization Act, or deceptive trade practices, which Sierra ever had, has, or
may have in the future against any Kaiser Released Parties on the basis of any
facts or circumstances arising out of or related to the Transaction, alleged or
which might have been alleged in the Action, related in any way to the
negotiation and/or performance (past, present or future) of the Related
Agreements, and/or arising in any way out of the assets purchased from Kaiser
pursuant to the Transaction including by way of example and not limitation the
specific Enumerated Claims set forth in Exhibit A attached hereto; provided,
however, that this release does not extend to:
a. any claims for breach of this Settlement Agreement;
b. any defaults or claims for breach of the Loan Documents, whether
arising or accruing before, on, or after the date of this Settlement
Agreement;
c. the dispute to be submitted to arbitration under this Settlement
Agreement;
d. any claim with respect to the letter agreement dated October 6, ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ regarding the acquisition of a
portion of the Real Estate by the Texas Department of Transportation;
e. any claims for access to records and remedies (including
indemnification) for failure to provide access to records under the
Related Agreements arising or accruing on or after October 8, 2001;
f. Any claims of any manner or type with respect to Visiting Members,
arising or accruing on or after October 8, 2001; and
g. any common law or statutory rights of contribution and contractual
rights of indemnity described and circumscribed in and by the Related
Agreements for any liability or obligation, but only to the extent
such liability or obligation is asserted by a private or governmental
third party not an affiliate of the Party asserting a right of
indemnification and not expressly released in items numbered 8, 9 and
19 of the Enumerated Claims set forth in Exhibit A.
h. The future breach of any continuing obligation under the Purchase
Agreement and Related Agreements, as modified to the extent such
obligation are not specifically waived , released, or otherwise
modified by this Settlement Agreement.
2.4 Release Of Sierra By Kaiser. In exchange for performance and
satisfaction of the obligations assumed by the Parties hereto as set forth
above, and for other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, Kaiser for itself and its past and present
directors, officers, partners, employees, subsidiaries, affiliates, insurers,
attorneys, stockholders, agents, representatives, and successors in interest,
does hereby unconditionally, irrevocably and forever release and discharge
Sierra and any and all of its directors, officers, employees, subsidiaries,
affiliates, insurers, attorneys, stockholders, agents, representatives, and all
other persons of any kind who have acted or are acting by, through, under for or
in concert with Sierra ("Sierra Released Parties") from any and all liabilities,
acts, actions, causes or action, suits, proceedings, debts, dues and sums of
money, accounts, accountings, reckonings, bonds, bills, covenants, contracts,
(including any covenants to be performed under the Related Agreements after
October 31, 1998), controversies, conveyances, leases, assignments, agreements,
promises, representations, trespasses, costs, expenses, damages, judgments,
executions, defenses, offsets, counterclaims, claims and demands, or any
combination of the same, of any nature whatsoever, whether known or unknown,
contingent or certain, whether at law or in equity, irrespective of whether
arising from tort, contract, violations of laws or regulations, whether alleging
NEGLIGENCE, FRAUD or other intentional act, including any breach of fiduciary
duty, breach of any duty of fair dealing, breach of confidence, breach of
funding commitment, undue influence, duress, economic coercion, conflict of
interest, bad faith, violations of the Federal Racketeer Influence and Corrupt
Organization Act, or deceptive trade practices, which Kaiser ever had, has, or
may have in the future against any Sierra Released Parties on the basis of any
facts or circumstances arising out of or related to the Transaction, alleged or
which might have been alleged in the Action, related in any way to the
negotiation and/or performance (past, present or future) of the Related
Agreements, and/or arising in any way out of the assets purchased from Kaiser
pursuant to the Transaction including by way of example and not limitation the
specific Enumerated Claims set forth in Exhibit A attached hereto; provided,
however, that this release does not extend to:
a. any claims for breach of this Settlement Agreement;
b. any defaults or claims for breach of the Loan Documents, whether
arising or accruing before, on, or after the date of this Settlement
Agreement;
c. the dispute to be submitted to arbitration under this Settlement
Agreement;
d. any claim with respect to the letter agreement dated October 6, ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ regarding the acquisition of a
portion of the Real Estate by the Texas Department of Transportation;
e. any claims for access to records and remedies (including
indemnification) for failure to provide access to records under the
Related Agreements arising or accruing on or after October 8, 2001;
f. any claims of any manner or type with respect to Visiting Members,
arising or accruing on or after October 8, 2001; and
g. any common law or statutory rights of contribution and contractual
rights of indemnity described and circumscribed in and by the Related
Agreements for any liability or obligation, but only to the extent
such liability or obligation is asserted by a private or governmental
third party not an affiliate of the Party asserting a right of
indemnification, and not expressly released in items numbered 8, 9 and
19 of the Enumerated Claims set forth in Exhibit A.
h. The future breach of any continuing obligation under the Purchase
Agreement and Related Agreements, as modified to the extent such
obligation are not specifically waived , released, or otherwise
modified by this Settlement Agreement.
2.5 Release Of ▇▇▇▇ and West By Sierra. In exchange for performance and
satisfaction of the obligations assumed by the Parties hereto as set forth
above, and for other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, Sierra, for itself and its past and present
directors, officers, partners, employees, subsidiaries, affiliates, insurers,
attorneys, stockholders, agents, representatives, and successors in interest,
does hereby unconditionally, irrevocably and forever release and discharge ▇▇▇▇
and West and any and all of its directors, officers, employees, subsidiaries,
affiliates, insurers, attorneys, stockholders, agents, representatives, all past
or present persons or organizations cooperating in the conduct of the ▇▇▇▇▇▇
healthcare program commonly known as the ▇▇▇▇▇▇ Permanente Medical Care Program,
and all other persons of any kind who have acted or are acting by, through,
under for or in concert with ▇▇▇▇ or West ("▇▇▇▇/West Released Parties") from
any and all liabilities, acts, actions, causes or action, suits, proceedings,
debts, dues and sums of money, accounts, accountings, reckonings, bonds, bills,
covenants, contracts, (including any covenants to be performed under the Related
Agreements after October 31, 1998), controversies, conveyances, leases,
assignments, agreements, promises, representations, trespasses, costs, expenses,
damages, judgments, executions, defenses, offsets, counterclaims, claims and
demands, or any combination of the same, of any nature whatsoever, whether known
or unknown, contingent or certain, whether at law or in equity, irrespective of
whether arising from tort, contract, violations of laws or regulations, whether
alleging NEGLIGENCE, FRAUD or other intentional act, including any breach of
fiduciary duty, breach of any duty of fair dealing, breach of confidence, breach
of funding commitment, undue influence, duress, economic coercion, conflict of
interest, bad faith, violations of the Federal Racketeer Influence and Corrupt
Organization Act, or deceptive trade practices, which Sierra ever had, has, or
may have in the future against any ▇▇▇▇/West Released Parties on the basis of
any facts or circumstances arising out of or related to the Transaction, alleged
or which might have been alleged in the Action, related in any way to the
negotiation and/or performance (past, present or future) of the Related
Agreements, and/or arising in any way out of the assets purchased from Kaiser
pursuant to the Transaction including by way of example and not limitation the
specific Enumerated Claims set forth in Exhibit A attached hereto; provided,
however, that nothing in this section shall effect the scope of Sierra's release
of Kaiser or ▇▇▇▇▇▇'▇ release of Sierra.
2.6 Release Of Sierra By ▇▇▇▇ and West. In exchange for performance and
satisfaction of the obligations assumed by the Parties hereto as set forth
above, and for other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, ▇▇▇▇ and West, for itself and its past and
present directors, officers, partners, employees, subsidiaries, affiliates,
insurers, attorneys, stockholders, agents, representatives, and successors in
interest, does hereby unconditionally, irrevocably and forever release and
discharge Sierra and any and all of its directors, officers, employees,
subsidiaries, affiliates, insurers, attorneys, stockholders, agents,
representatives, all past or present persons or organizations and all other
persons of any kind who have acted or are acting by, through, under for or in
concert with Sierra ("Sierra Released Parties") from any and all liabilities,
acts, actions, causes or action, suits, proceedings, debts, dues and sums of
money, accounts, accountings, reckonings, bonds, bills, covenants, contracts,
(including any covenants to be performed under the Related Agreements after
October 31, 1998), controversies, conveyances, leases, assignments, agreements,
promises, representations, trespasses, costs, expenses, damages, judgments,
executions, defenses, offsets, counterclaims, claims and demands, or any
combination of the same, of any nature whatsoever, whether known or unknown,
contingent or certain, whether at law or in equity, irrespective of whether
arising from tort, contract, violations of laws or regulations, whether alleging
NEGLIGENCE, FRAUD or other intentional act, including any breach of fiduciary
duty, breach of any duty of fair dealing, breach of confidence, breach of
funding commitment, undue influence, duress, economic coercion, conflict of
interest, bad faith, violations of the Federal Racketeer Influence and Corrupt
Organization Act, or deceptive trade practices, which Sierra ever had, has, or
may have in the future against any Kaiser Released Parties on the basis of any
facts or circumstances arising out of or related to the Transaction, alleged or
which might have been alleged in the Action, related in any way to the
negotiation and/or performance (past, present or future) of the Related
Agreements, and/or arising in any way out of the assets purchased from Kaiser
pursuant to the Transaction including by way of example and not limitation the
specific Enumerated Claims set forth in Exhibit A attached hereto; provided,
however, that nothing in this section shall effect the scope of Sierra's release
of Kaiser or ▇▇▇▇▇▇'▇ release of Sierra.
2.7 Waiver Of Civil Code Section 1542. It is the intention of the Parties
hereto that the foregoing mutual releases shall be effective as a bar to all
actions, causes of action, obligations, costs, expenses, attorneys' fees,
damages, losses, claims, liabilities and demands of whatsoever character, nature
and kind, known or unknown, suspected or unsuspected, hereinabove specified to
be so barred; in furtherance of this intention, the Parties hereto expressly
waive any and all rights and benefits that may be conferred upon them by the
provisions of Section 1542 of the California Civil Code, or by any similar
statute applicable in any jurisdiction in which this Settlement Agreement may be
implemented, to the extent that any such statutes may be applicable. Section
1542 provides as follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
The Parties hereby acknowledge that the foregoing waiver of the provisions of
Section 1542 of the California Civil Code was separately bargained for. The
Parties expressly consent that this release shall be given full force and effect
in accordance with each and all of its provisions relating to unknown and
unsuspected claims, demands and causes of action, if any, to the same effect as
those terms and provisions relating to any other claims, demands and causes of
action hereinabove specified.
2.8 Released Claims Not Previously Assigned. The Parties represent that
they have the full and complete authority to provide the releases set forth
above, and that they have not previously assigned, deeded, or transferred, any
of the rights of claims released by this Settlement Agreement, except as
provided in Section 3.2, below.
2.9 Limitation Of Liability. The Parties agree that no claim or payment
pursuant to this Settlement Agreement shall be included in the minimum dollar
limitations set forth in Section 11.3 of the Purchase Agreement. However, the
payment of $2.5 million ($2,500,000.00) pursuant to Section 1.1 of this
Settlement Agreement, and the payment of Four Million Ninety-two Thousand Four
Hundred Ninety-three Dollars and twenty-one cents ($4,092,493.21) by Kaiser to
Sierra in April, 2000, shall be aggregated and will be treated as an "aggregate
liability" of Kaiser for purposes of Section 11.3.2 of the Asset Purchase
Agreement.
3. MISCELLANEOUS.
3.1 April 13, 2000, Letter. This Settlement Agreement shall supersede and
replace in all respects that one certain letter of settlement dated April 13,
2000, and that as of April 9, 2001, such letter shall be of no further force and
effect.
3.2 Assignment. Pursuant to Amendment No. 3, dated April 13, 2000, to the
Purchase Agreement, this Settlement Agreement constitutes (1) notice by the
"Kaiser Parties" to the "Sierra Parties" of the assignment and assumption of all
liabilities, duties, obligations, and rights of the "Kaiser Parties" under the
"Purchase Agreement" and the "Related Agreements" to KFH; (2) an agreement of
assignment by the "Kaiser Parties" and the assumption by KFH of all such
liabilities, duties, obligations, and rights, effective April 9, 2001; and (3)
the "Sierra Parties'" acknowledgement and consent to such assignment and
assumption. The use of quotation marks in this Section 3.2 indicates that the
meaning of the term within quotation marks shall reflect the meaning given to
such term in Amendment No. 3 if such term has a different meaning in this
Settlement Agreement.
3.3 Compromise. This Settlement Agreement is the compromise and settlement
of disputed claims. Nothing contained herein is or is to be construed as an
admission by any party of the claims asserted against it.
3.4. Further Assurances. The Parties hereto agree to execute such other
documents and to take such other actions as may reasonably be necessary to
further the purposes and implement the provisions of this Settlement Agreement.
3.5 Governing Law. This Settlement Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Texas.
3.6 Benefit And Burden. This Settlement Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective representatives,
agents and successors.
3.7 Waiver And Amendment. No breach of any provision hereof can be waived
unless in writing. Waiver of any breach shall not be deemed to be a waiver of
any other breach of the same or any other provisions hereof. This Settlement
Agreement may be amended only by a written instrument executed by the Parties.
3.8 Captions And Interpretation. Section titles or captions contained
herein are inserted as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Settlement Agreement or any
provision hereof. No provision in this Settlement Agreement is to be interpreted
for or against either party because that party or its legal representative
drafted such provision.
3.9 Number And Gender. Whenever required by the context hereof, the
singular shall be deemed to include the plural and the plural shall be deemed to
include the singular, and the masculine, feminine and neater genders shall each
be deemed to include the other.
3.10 No Reliance. Except for representations expressly stated herein, none
of the Parties are entering into this Agreement in reliance upon the
representation of the other parties.
3.11 Independent Advice Of Counsel. Each of the Parties represents and
declares that in executing this Settlement Agreement it has relied solely upon
its own judgment, belief and knowledge, and the advice and recommendations of
its own independently selected counsel, concerning the nature, extent and
duration of its rights and claims, and that it has not been influenced to any
extent whatsoever in executing the same by any representations or statements
covering any matters made by the other Parties hereto or by any person
representing the other Parties.
3.12 Voluntary Agreement. Each of the Parties hereto further represents and
declares that it has carefully read this Settlement Agreement and knows its
contents and that each of the Parties signs the same freely and voluntarily.
3.15 Prohibition Against Assignment Without Consent. The rights and
obligations created under this Settlement Agreement are not subject to
assignment or transfer without the express written consent of the Sierra Parties
and the Kaiser Parties, each of whom may grant or withhold such consent in its
sole and exclusive discretion. Any assignment in violation of this prohibition
shall not release the assignor from any liability under this Settlement
Agreement and shall additionally make the assignor unconditionally, jointly and
severally liable for the acts of the assignee.
3.16 Exoneration Of Fraud Claims. Notwithstanding any other provision of
this Settlement Agreement, Sierra agrees to make a public statement concerning
this settlement which states, in substance, the following:
Sierra is pleased to announce that it has settled its
lawsuit against ▇▇▇▇▇▇ Permanente concerning the acquisition
of certain of its assets located in and around Dallas,
Texas. In that lawsuit, Sierra had alleged that it was
defrauded by ▇▇▇▇▇▇ Permanente. In the course of the
parties' subsequent discussions aimed at resolving the
lawsuit, it became apparent that, while there were a number
of misunderstandings and disagreements between the parties,
none of the conduct amounted to fraud, and Sierra does not
believe that it was defrauded by ▇▇▇▇▇▇ Permanente or the
other individuals who were named as defendants.
3.17 Arbitration.
(a) Conciliation And Mediation. If a dispute between Kaiser and Sierra
relating to this Settlement Agreement (other than the dispute being submitted to
arbitration under Section 1 of this Settlement Agreement), or under any other
agreement executed and delivered in connection herewith, is not resolved within
fifteen (15) days from the date that either party has notified the other that
such dispute exists, then such dispute shall be submitted jointly for
conciliation to the president or his designee of each party. If such senior
executive officers are unable to resolve the dispute within thirty (30) days
from the date that it is first presented to them, either party may give notice
to the other party that the dispute shall be submitted to non-binding mediation
with a mediator acceptable to both parties, and the parties shall, for a sixty
(60) day period from the receipt of such notice, seek in good faith to resolve
such dispute in mediation. If the parties are not able to resolve the dispute in
mediation, then such dispute shall be referred to binding arbitration.
(b) Arbitration. Any dispute submitted to arbitration pursuant to this
Section shall be determined by the decision of a board of arbitration consisting
of three members ("Board of Arbitration") selected as hereinafter provided.
Kaiser shall select an arbitrator and Sierra shall select an arbitrator, each of
whom shall be a member of the Board of Arbitration who is independent of the
parties. A third Board of Arbitration member, independent of the parties, shall
be selected by mutual agreement of the other two Board of Arbitration members.
If the other two Board of Arbitration members fail to reach agreement on such
third member within twenty (20) days after their selection, such third member
shall thereafter be selected by the American Arbitration Association upon
application made to it for such purpose by any party to the arbitration. The
Board of Arbitration shall meet in Dallas, Texas, or such other place as a
majority of the members of the Board of Arbitration determines more appropriate,
and shall reach and render a decision in writing (which shall state the reasons
for its decisions in writing and shall make such decisions entirely on the basis
of the substantive law governing the Agreement and which shall be concurred in
by a majority of the members of the Board of Arbitration) with respect to the
items in dispute. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the Commercial Rules of Arbitration of the
American Arbitration Association in effect as of the date of the arbitration,
except as provided in Exhibit B. To the extent practical, decisions of the Board
of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to Buyer and
Seller. Any decision made by the Board of Arbitration (either prior to or after
the expiration of such 30 calendar day period) shall be final, binding and
conclusive on Buyer and Seller (except as may be provided in Exhibit B) and each
party to the arbitration shall be entitled to enforce such decision to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. The fees and expenses of the Board of Arbitration and the
reasonable fees and expenses of legal counsel and consultants of the parties
shall be allocated among the Parties as the Board of Arbitration deems
appropriate.
(c) Judicial Relief. The Parties expressly agree that nothing in this
arbitration agreement will prevent, impair, or in any way prejudice ▇▇▇▇▇▇'▇
rights to seek preliminary injunctive relief and/or other judicial relief with
respect to any action for judicial or non-judicial foreclosure with respect to
the Real Estate.
(d) This Section 3.16 does not apply to ▇▇▇▇ and West.
3.17 Attorneys' Fees And Costs. In the event that any proceeding is
commenced to enforce the terms of this Settlement Agreement, or for damages
arising therefrom, the prevailing party in that action shall be entitled to its
reasonable attorneys' fees and costs of suit.
3.18 Counterparts. This Settlement Agreement may be executed in
counterparts, each of which shall be deemed an original and which together shall
constitute one and the same instrument.
3.19 Notice. Notice to the Parties with respect to any matters referenced
or required by this Settlement Agreement will be provided by facsimile and U.S.
Mail as follows:
To the Kaiser Parties:
Executive Vice President of Alliance and Acquisition Services
▇▇▇▇▇▇ Foundation Health Plan
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Sierra Parties:
General Counsel
Sierra Health Services
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3.20 Signatures. By their signatures below, each of the corporate
representatives executing this Settlement Agreement represents his/her authority
to bind the corporation to this Settlement Agreement.
3.21 This Agreement is effective as among the Parties who sign it,
irrespective of whether all Parties sign it.
Table of Exhibits
Exhibit A Enumerated Claims Being Released
Exhibit B Exceptions to Commercial Rules of Arbitration of the
American Arbitration Association
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement effective as of the date and year above written.
SIERRA HEALTH SERVICES, INC., TEXAS HEALTH CHOICE, L.C.,
fka HMO TEXAS, L.C.,
By: By:
-------------------------- -----------------------
Title Title
------------------------ -----------------------
SIERRA HEALTH & LIFE INSURANCE COMPANY SIERRA TEXAS SYSTEMS
By: By:
-------------------------------------- -------------------------
Title Title
------------------------------------- -----------------------
THE MEDICAL GROUP OF TEXAS
By:
-----------------------
Title
---------------------
APPROVED AS TO FORM:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
By:
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Attorneys for SIERRA HEALTH SERVICES,
INC.; TEXAS HEALTH CHOICE, L.C., fka
HMO TEXAS, L.C.; SIERRA HEALTH & LIFE
INSURANCE COMPANY; SIERRA TEXAS SYSTEMS;
and THE MEDICAL GROUP OF TEXAS
▇▇▇▇▇▇ FOUNDATION HEALTH PLAN OF TEXAS KAISER FOUNDATION HOSPITALS
By: By:
---------------------------------- --------------------------
Title Title
--------------------------------- ------------------------
▇▇▇▇▇▇ FOUNDATION HEALTH PLAN, INC. THE PERMANENTE MEDICAL
ASSOCIATION OF TEXAS
By: By:
------------------------------ ---------------------------
Title Title:
-------------------------
▇▇▇▇▇▇ PERMANENTE INSURANCE COMPANY
By:
------------------------------
Title
------------------------------
APPROVED AS TO FORM:
JENKENS & ▇▇▇▇▇▇▇▇▇, PC
By:
--------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Attorneys for ▇▇▇▇▇▇ FOUNDATION
HEALTH PLAN OF TEXAS;
▇▇▇▇▇▇ FOUNDATION HOSPITALS;
THE PERMANENTE MEDICAL ASSOCIATION
OF TEXAS; ▇▇▇▇▇▇ FOUNDATION HEALTH
PLAN, INC.; and ▇▇▇▇▇▇ PERMANENTE
INSURANCE COMPANY
---------------------------------- --------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
APPROVED AS TO FORM:
LAW OFFICE OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Attorneys for ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇
UNCONDITIONAL GUARANTY
----------------------
THIS UNCONDITIONAL GUARANTY is made effective the 31st day of December,
2001 by the undersigned SIERRA HEALTH SERVICES, INC., a Nevada corporation
(hereinafter referred to collectively as "Guarantor", whether one or more), in
favor of ▇▇▇▇▇▇ FOUNDATION HOSPITALS, a California nonprofit public benefit
corporation ("Lender").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor, whose address is set
forth below, hereby agrees as follows:
1. Guarantor unconditionally and absolutely guarantees, jointly and
severally, to Lender the prompt and full payment, performance and observance,
when due, of all amounts payable under that certain Deed of Trust Note (the
"Original Note") dated October 31, 1998, executed by TEXAS HEALTH CHOICE, L.C.,
a Texas limited liability company (the "Borrower"), and payable to the order of
▇▇▇▇▇▇ Foundation Health Plan of Texas ("Original Mortgagee") in the original
principal amount of $35,200,000, as (a) endorsed, assigned and transferred to
Lender pursuant to those certain Assignment and Assumption of Loan Documents
dated effective December 31, 2000, executed by Original Mortgagee and Lender and
recorded in Volume 98214, Page 04429, Records, Dallas County, Texas and under
Document Number D201091657, Real Property Records, Tarrant County, Texas and (b
) amended by that certain Modification of Deed of Trust Note dated effective
December 31, 2001, executed by Borrower Lender and Guarantor (the "Note
Modification") [the Original Note and the Note Modification are referred to
collectively as the "Note"] and any and all renewals, extensions and
rearrangements of all or any part of the indebtedness, obligations and
liabilities herein described, whether or not Borrower is personally liable for
any such indebtedness, liabilities, or obligations or whether recourse or not,
whether joint or several, secured or unsecured, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, direct or
indirect, or whether incurred by Borrower as principal, accommodation party or
otherwise, and interest on all of the above amounts as agreed upon between
Borrower and Lender, or if there is no agreement, at the highest lawful rate.
All indebtedness, obligations and liabilities hereinabove described and covered
or intended to be covered by this Unconditional Guaranty, or intended so to be,
are hereinafter sometimes collectively referred to as the "Guaranteed
Indebtedness." Without limiting the foregoing, Guarantor unconditionally,
irrevocably and absolutely guarantees to Lender and to every subsequent holder
or holders of the Note that (a) the principal of and interest on, and reasonable
attorneys' fees provided for in, the Note will be promptly paid when due in
accordance with the provisions thereof or, in the case of an extension of time
of payment in whole or in part of the Note, all sums will be promptly paid when
due in accordance with the terms of the extension; (b) all covenants and
agreements of Borrower contained in the Note, those certain Deeds of Trust and
Security Agreement (collectively, the "Deeds of Trust"), to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustee, recorded in Volume 98214, Page 4929 of the Deed of Trust Records of
Dallas County, Texas and under County Clerk's File Number D198254090, Deed of
Trust Records, Tarrant County, Texas covering certain real property described
therein, as amended by (I) that certain letter agreement dated October 6, 1999,
between Borrower and Original Mortgagee regarding condemnation of a portion of
the property located in Tarrant County, Texas covered by the Deeds of Trust, and
(II) those certain Modification of Deed of Trust and Security Agreements dated
effective December 31, 2001 executed by Borrower, Lender, and Guarantor,
(collectively, the "DOT Modifications"), and any other instrument, whether
presently existing or hereinafter entered into, evidencing, securing or
governing the disbursement of the Guaranteed Indebtedness, will be duly and
promptly observed and performed and (c) all additional amounts owing or which
hereafter becoming owing by Borrower under the terms of the Note, the Deeds of
Trust, the Note Modification, the DOT Modifications, and any other instrument,
whether presently existing or hereinafter entered into, evidencing, securing or
governing the disbursement of the Guaranteed Indebtedness (collectively the
"Loan Documents") will be promptly paid when due.
2. The obligations of Guarantor shall be performable without demand of
Lender and shall be unconditional irrespective of the genuineness, validity,
regularity or enforceability of the Note, the Deeds of Trust, any other Loan
Documents, or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or a guarantor, and Guarantor hereby waives the
benefit of all principles or provisions of law, statutory or otherwise, which
are or might be in conflict with the terms of this Unconditional Guaranty, and
agrees that the obligations of Guarantor shall not be affected by any
circumstances, whether or not referred to in this Unconditional Guaranty, which
might otherwise constitute a legal or equitable discharge of a surety or
guarantor, other than satisfaction in full of the Guaranteed Indebtedness.
Specifically, to the extent this Unconditional Guaranty is governed by the laws
of the State of Texas, the Guarantor waives the benefits of any right of
discharge under Article 34 of the Texas Business and Commerce Code and any other
rights of sureties and guarantors thereunder. Without limiting the generality of
the foregoing, the Guarantor hereby waives diligence, presentment, demand of
payment, protest, all notices (whether of nonpayment, acceleration, dishonor,
protest or otherwise) with respect to the Note, notice of acceptance of this
Unconditional Guaranty and of the incurring by Borrower of any of the
obligations hereinbefore mentioned, all demands whatsoever, and all rights to
require Lender to (a) proceed against Borrower; (b) proceed against or exhaust
any collateral held by Lender to secure the payment of the indebtedness
guaranteed hereby or (c) pursue any other remedy it may now or hereafter have
against Borrower.
3. Guarantor hereby agrees that, at any time or from time to time, without
notice to Guarantor and without affecting the liability of Guarantor, (a) the
time for payment of the principal of or interest on the Guaranteed Indebtedness,
the Note may be extended or the Note may be renewed in whole or in part; (b) the
time for Borrower's performance of or compliance with any other instrument
evidencing, securing or governing the disbursement of the Guaranteed
Indebtedness, whether presently existing or hereinafter entered into, may be
extended or such performance or compliance may be waived; (c) the maturity of
the Note may be accelerated as provided therein or in the Deeds of Trust, or any
other instrument evidencing, securing or governing the disbursement of the
Guaranteed Indebtedness, whether presently existing or hereinafter entered into;
(d) the Note, the Deeds of Trust, the Note Modification, DOT Modifications, the
Loan Documents, or any other instrument evidencing, securing or governing the
disbursement of the Guaranteed Indebtedness, whether presently existing or
hereinafter entered into, may be modified or amended by the Lender and Borrower
in any respect, including, but not limited to, an increase in the principal
amount and (e) any security for the Guaranteed Indebtedness may be modified,
exchanged, surrendered or otherwise dealt with or additional security may be
pledged or mortgaged for the Guaranteed Indebtedness.
4. Guarantor hereby acknowledges that the withdrawal from, or liquidation,
dissolution, termination or restructuring of, any ownership interest in
Borrower, or any partner thereof, shall not alter, affect or in any way limit
the obligations of Guarantor hereunder and this Unconditional Guaranty shall
continue in full force and effect. Guarantor hereby acknowledges that Lender is
the current owner and holder in due course of the Note and current beneficiary
under the Deeds of Trust, as amended by the DOT Modifications.
5. If this Unconditional Guaranty shall be placed in the hands of an
attorney for collection or should it be collected by legal proceedings or
through any probate or bankruptcy court, Guarantor agrees to pay to Lender
reasonable attorneys' and collection fees.
6. Lender may assign its rights under this Unconditional Guaranty in whole
or in part and upon any such assignment, all the terms and provisions of this
Unconditional Guaranty shall inure to the benefit of such assignee to the extent
so assigned. The terms used to designate any of the parties herein shall be
deemed to include the heirs, legal representatives, successors and assigns of
such parties; and the term "Lender" shall include, in addition to Lender, any
lawful owner, holder or pledgee of any Guaranteed Indebtedness, including,
without limitation, the Note.
7. Lender is relying and is entitled to rely upon each and all of the
provisions of this Unconditional Guaranty; and accordingly, if any provision or
provisions of this instrument should be held to be invalid or ineffective, then
all other provisions shall continue in full force and effect.
8. This Unconditional Guaranty shall be enforceable despite any exculpation
from liability granted to Borrower. Without limiting the foregoing, Guarantor
agrees and acknowledges that notwithstanding the provisions of Paragraph 13 of
the Note or any other provision of the Loan Documents which exculpates or may
exculpate Borrower or limits or may limit the liability of the Borrower with
respect to the Guarantied Indebtedness, Guarantor is and shall be absolutely and
unconditionally personally liable for the payment and performance of the
Guaranteed Indebtedness. Guarantor hereby unconditionally and absolutely waives
and relinquishes any defense or claim based in whole or in part on contract or
statutory or common law that would limit the liability of Guarantor under this
Guaranty because of any exculpation or limitation of liability or recourse
granted to or claimed by Borrower, including without limitation the provisions
of Paragraph 13 of the Note or Section 13.22 of the Deeds of Trust. In addition,
Guarantor agrees and acknowledges that notwithstanding the provisions of
Paragraph 13 of the Note, or Section 13.22 of the Deeds of Trust, or any other
provision of the Loan Documents which exculpates Borrower or limits the
liability of the Borrower with respect to the Guarantied Indebtedness, Guarantor
is and shall be absolutely and unconditionally personally liable for the payment
and performance of the Guaranteed Indebtedness.
9. The obligations of Guarantor and any other guarantor of the Guaranteed
Indebtedness or the Note shall be joint and several. Guarantor agrees that
Lender, in its discretion, may (a) bring suit against Guarantor or any one of
the undersigned and any other guarantor of the Guaranteed Indebtedness or the
Note jointly and severally or against any one or more of them; (b) compound or
settle with any one or more of the guarantors of the Guaranteed Indebtedness or
the Note for such consideration as Lender may deem proper; (c) release one or
more of the undersigned or any other guarantors of the Guaranteed Indebtedness
or the Note from liability thereunder and (d) otherwise deal with Guarantor and
any other guarantor of the Guaranteed Indebtedness or the Note, or any one or
more of them, in any manner whatsoever, and that no such action shall impair the
rights of Lender to collect the indebtedness hereby guaranteed from Guarantor.
If any payment by Borrower is held to constitute a preference under the
bankruptcy laws, or if for any reason Lender is required to refund any sums to
Borrower, such amounts shall not constitute a release of any liability of
Guarantor hereunder, but Guarantor agrees to pay such amount to Lender on
demand. In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment, order
or decision thereunder, Lender must rescind or restore any payment, or any part
thereof, received by Lender in satisfaction of any amount owed by Borrower to
Lender, any prior release or discharge from the terms of this Unconditional
Guaranty given to Guarantor by Lender shall be without effect, and this
Unconditional Guaranty shall remain in full force and effect. It is the
intention of Lender and Guarantor that Guarantor's obligations hereunder shall
not be affected because any payment by Borrower to Lender is held to constitute
a preference under any bankruptcy laws. Nothing contained in this paragraph
shall in any way affect or impair the rights or obligations of the Guarantor
with respect to any other guarantor of the Guaranteed Indebtedness or the Note
evidencing the Guaranteed Indebtedness.
10. Any indebtedness of Borrower now or hereafter held by Guarantor is
hereby subordinated to all indebtedness of Borrower to Lender guaranteed hereby;
and any such indebtedness of Borrower shall be collected, enforced and received
by Guarantor, as trustee for Lender, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this
Unconditional Guaranty. Until the obligations of Borrower guaranteed hereby have
been paid in full and there has expired the maximum possible period thereafter
during which any payment made by Borrower to Lender with respect to the
Guaranteed Indebtedness could be deemed a preference under the United States
Bankruptcy Code, Guarantor shall have no right of subrogation unless such right
is expressly granted in writing by Lender.
11. In the event Borrower is a corporation, joint stock association or
partnership, or is hereafter incorporated, if the indebtedness at any time
hereafter exceeds the amount permitted by law, or Borrower is not liable because
the act of creating the obligation is ultra ▇▇▇▇▇, or the officers or persons
creating indebtedness to the Lender which Guarantor agrees to pay cannot be
enforced against the corporation, joint stock association or partnership, such
fact shall in no manner affect Guarantor's liability hereunder; but Guarantor
shall be liable hereunder, notwithstanding said corporation, joint stock
association or partnership is not liable for such indebtedness and to the same
extent as Guarantor would have been if the indebtedness of Borrower had been
unenforceable against it.
12. Lender, in its sole discretion, may apply all payments received by it
from Borrower and any other guarantor or realized by it from any security in
such manner and order or priority as Lender sees fit, to any obligations of
Borrower under the Loan Documents, whether or not any of the obligations to
which payment is applied are due at the time of such application.
13. This Unconditional Guaranty shall be binding upon Guarantor and its
successors and assigns, and shall inure to the benefit of Lender and its
successors and assigns.
14. THIS UNCONDITIONAL GUARANTY AND ALL RIGHTS, OBLIGATIONS AND LIABILITIES
ARISING HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING
EFFECT TO TEXAS' PRINCIPLES OF CONFLICTS OF LAW). AS A MATERIAL INDUCEMENT TO
LENDER TO ACCEPT THIS UNCONDITIONAL GUARANTY, GUARANTOR UNCONDITIONALLY AND
IRREVOCABLY COVENANTS AND AGREES THAT EXCLUSIVE VENUE FOR ANY ACTION IN
CONNECTION WITH THIS UNCONDITIONAL GUARANTY SHALL BE IN THE NORTHERN DISTRICT OF
TEXAS, DALLAS DIVISION; AND IF GUARANTOR FAILS TO HONOR THE VENUE STIPULATIONS
CONTAINED IN THIS PARAGRAPH, LENDER SHALL HAVE THE RIGHT TO REQUIRE REMOVAL OF
ALL PROCEEDINGS TO THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. GUARANTOR
ACKNOWLEDGES THAT IT IS NOT IN A DISPARATE BARGAINING POSITION, HAS
SOPHISTICATED FINANCIAL AND ECONOMIC EXPERIENCE AND THAT THE VENUE SELECTION
CONTAINED HEREIN IS NOT UNREASONABLE, UNJUST, INCONVENIENT OR OVERREACHING. THIS
AGREEMENT SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
15. Until the obligations of Borrower guaranteed hereby have been paid in
full and there has expired the maximum possible period thereafter during which
any payment made by Borrower to Lender with respect to the Guaranteed
Indebtedness could be deemed a preference under the United States Bankruptcy
Code, Guarantor hereby irrevocably waives all claims or other rights which it
may now have or hereafter acquire against Borrower or any other guarantor of the
Note that arise from the existence, payment, performance or enforcement of
Guarantor's liabilities or obligations under this Guaranty or any other loan
paper, including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification, whether or not such right, claim
or remedy arises in equity or under contract, statute or common law. Without
limiting the generality of the foregoing, until the obligations of Borrower
guaranteed hereby have been paid in full and there has expired the maximum
possible period thereafter during which any payment made by Borrower to Lender
with respect to the Guaranteed Indebtedness could be deemed a preference under
the United States Bankruptcy Code, Guarantor hereby irrevocably waives any right
or claim against Borrower or any other person to which Guarantor would otherwise
become subrogated under Chapter 34 of the Texas Business and Commerce Code.
16. THIS WRITTEN UNCONDITIONAL GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS,
UNDERSTANDINGS, REPRESENTATIONS, AND STATEMENTS, ORAL OR WRITTEN, ARE MERGED
INTO THIS UNCONDITIONAL GUARANTY. NEITHER THIS AGREEMENT NOR ANY PROVISION
HEREOF MAY BE WAIVED, MODIFIED, AMENDED, DISCHARGED, OR TERMINATED EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH THE ENFORCEMENT OF SUCH
WAIVER, MODIFICATION, AMENDMENT, DISCHARGE, OR TERMINATION IS SOUGHT, AND THEN
ONLY TO THE EXTENT SET FORTH IN SUCH INSTRUMENT.
17. LENDER WILL GIVE GUARANTOR A COPY OF ANY NOTICES OF ANY EVENT OF
DEFAULT, AS DEFINED IN THE DEED OF TRUST, OR ANY EVENT OF WHICH LENDER HAS
ACTUAL KNOWLEDGE, WHICH WITH THE PASSAGE OF TIME OR NOTICE OR BOTH COULD
CONSTITUTE AN EVENT OF DEFAULT, AS DEFINED IN THE DEED OF TRUST, AND WILL PERMIT
GUARANTOR THE SAME OPPORTUNITY TO CURE SUCH EVENT OF DEFAULT, INCLUDING NOTICES
OF FORECLOSURE, AS IS AFFORDED TO BORROWER.
IN WITNESS WHEREOF, this Unconditional Guaranty has been duly executed by
the undersigned effective as of the 31st day of December, 2001.
GUARANTOR:
SIERRA HEALTH SERVICES, INC.
By:
--------------------------------------------
Print Name:
-----------------------------------
Title:
--------------------------------------------
Address:
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
ATTEST:
By:
--------------------------------------------
Print Name:
-----------------------------------
___________________ Secretary
MODIFICATION OF DEED OF TRUST NOTE
THIS MODIFICATION OF DEED OF TRUST NOTE (the "Agreement") is entered into
by and between TEXAS HEALTH CHOICE, L.C., a Texas limited liability company
("Maker"), whose address for notice hereunder is 2724 N. Tenaya Way, P. O. ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, SIERRA HEALTH SERVICES, INC., a Nevada
corporation ("Guarantor), whose address for notice hereunder is ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ FOUNDATION HOSPITALS, a California
nonprofit public benefit corporation ("Holder"), whose address for notice
hereunder is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
General Counsel.
R E C I T A L S:
---------------
WHEREAS, Holder is the holder of that certain Deed of Trust Note ("Note"),
dated October 31, 1998, in the original principal amount of $35,200,000, made by
Maker to ▇▇▇▇▇▇ Foundation Health Plan of Texas ("KFHPTx"), which Note evidences
a loan ("Loan") made by KFHPTx to Maker. To secure the repayment of the Note,
Maker also executed and delivered a Deed of Trust and Security Agreement
("Tarrant Deed of Trust"), dated October 31, 1998, recorded on November 2, 1998,
as Instrument Number D198254090, Real Property Records, Tarrant County, Texas,
and a Deed of Trust and Security Agreement ("Dallas Deed of Trust"), dated
October 31, 1998, recorded in Volume 98214, beginning at Page 4429, Real
Property Records, Dallas County, Texas (collectively, the Tarrant Deed of Trust
and the Dallas Deed of Trust are referred to as the "Deed of Trust") that grant
a first lien on the property ("Property") described in the Deed of Trust.
WHEREAS, Guarantor has executed that certain Limited Guaranty dated October
31, 1998 (the "Limited Guaranty") and that certain Asset Sale and Purchase
Agreement dated June 5, 1998, executed by KFHPTx, Maker and Guarantor,
containing among other provisions, Section 14.2 (the "Sale Guaranty"). Holder,
Maker, and Guarantor have disputed the continued effectiveness of the Sale
Guaranty as it relates to the Security Instruments and the Loan, as defined in
the Deed of Trust, as amended by the Modification of Deed of Trust. The Limited
Guaranty and the Sale Guaranty are referred to collectively as the "Guaranty."
WHEREAS The Note was endorsed by KFHPTx to the order of Holder and the
Deeds of Trust assigned to Holder pursuant to certain Assignments and
Assumptions of Loan Documents executed by KFHPTx and Holder dated effective
December 31, 2000. The Guaranty was assigned to Holder pursuant to that certain
Assignment of Guaranty dated effective December 31, 2000.
WHEREAS, Holder agreed to pay Maker, Guarantor, and certain of their
affiliates $2,500,000.00 (the "Principal Prepayment Amount") pursuant to Section
1 of that certain Settlement Agreement dated October 3, 2001, effective April 9,
2001 (the "Settlement Agreement").
WHEREAS, Holder and Maker have agreed to modify certain terms and
conditions of the Note as set forth in this Agreement.
WHEREAS, concurrently with the execution of this Agreement, Maker, Holder
and Guarantor have entered into two certain Modifications of Deed of Trust and
Security Agreement of even date with this Agreement (the "Modification of Deed
of Trust").
WHEREAS, concurrently with the execution of this Agreement, Guarantor has
executed and delivered an absolute, unconditional guaranty (the "New Guaranty")
of the indebtedness and obligations evidenced or secured by the Note, as amended
by this Agreement, and Deed of Trust, as amended by the Deed of Trust
Modification.
WHEREAS, in accordance with the terms of this Agreement, Maker, Guarantor,
and Holder agreed to modify the terms of the Note, as set forth herein below.
NOW, THEREFORE, in consideration of the premises, the consents and
agreements set forth in the Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Maker, Guarantor, and Holder hereby amend the Note as follows:
1. The parties agree that, as of December 31, 2001, unpaid principal on the
Note equaled $33,737,796.75. The foregoing principal balance takes into
consideration, among other things, receipt by Holder of the monthly installment
on the Note payable on January 1, 2002. In consideration of certain other
agreements by Guarantor, including without limitation the execution and delivery
of the New Guaranty, Holder hereby forgives payment of principal outstanding on
this Note in the amount of $8,500,000.00 (the "Forgiven Principal Amount") as of
December 31, 2001. Maker hereby directs Holder to apply the Principal Prepayment
Amount to prepay a portion of the outstanding principal of this Note. Upon
application of the Principal Prepayment Amount, Maker and Guarantor, on behalf
of themselves and their affiliates, release all claims against Holder and its
affiliates under Section 1 of the Settlement Agreement with respect to the
$2,500,000.00 as applied to the Note. The parties agree that it shall never be
necessary to refer to the Settlement Agreement in connection with the
interpretation of this Agreement or any other Security Instrument except in
connection with the confirmation of the payment and satisfaction of the
obligations of Holder under Section 1 of the Settlement Agreement. Following the
application of the Principal Prepayment Amount and the Forgiven Principal Amount
as provided in this Agreement, the outstanding principal balance of the Note
will be $22,737,796.75 as of December 31, 2001. Provided no Event of Default, as
defined in the Deed of Trust, shall exist, payment of monthly installments on
the Note shall be suspended for 12 months commencing with the installment due on
February 1, 2002 and recommencing on February 1, 2003 and continuing regularly
thereafter on the first day of each calendar month until maturity of the Note as
provided in Paragraph 4 of the Note, as amended by this Agreement. The Forgiven
Principal Amount and the Principal Prepayment Amount shall not (a) be deemed to
apply towards any release price under Section 13.18 of the Deed of Trust, as
amended by the Modification of Deed of Trust, or (b) relieve Maker from the
obligation to make regular monthly installments as provided under the Note, as
amended hereby.
2. Paragraph 4 of the Note is amended to read as follows:
"4. Principal and Interest Payments; Prepayment. Interest at the
Stated Rate for the period from the date of this Note through and including
the last day of the month in which the Note is executed shall be payable in
advance upon execution of this Note. Principal and interest at the Stated
Rate shall be due and payable in arrears in monthly installments of
$211,041.78 commencing on February 1, 2002, and continuing regularly on the
first day of each calendar month thereafter until the earlier to occur of
(a) November 1, 2006 when the entire amount hereof, principal and interest
then remaining unpaid, shall be then due and payable or (b) any
acceleration of payment permitted hereby. Each installment shall be applied
first to the payment of accrued interest due on the unpaid principal hereof
and the remainder shall be applied to the reduction of unpaid principal.
Maker may prepay this Note in part or in whole without premium, however all
releases of the lien of the Deed of Trust shall be subject to the
provisions of Section 13.18 of the Deed of Trust. Any prepayment shall be
applied to reduce the accrued interest, then principal of the Note, but
shall not relieve Maker from the obligation to make regular monthly
installments of $211,041.78 until the entire principal balance and all
accrued interest has been paid in full."
3. Maker and Guarantor hereby agree that the modification of the Note set
forth herein shall in no manner impair the Guaranty, the Deed of Trust, the
Note, or the liens securing the same and that said liens shall not in any manner
be waived, the purpose of this Agreement being simply to modify the Note, and to
carry forward all liens securing the same, which are acknowledged by Maker and
Guarantor to be valid and subsisting.
4. Except as otherwise provided herein, the terms and provisions of the
Note, Guaranty, and Deed of Trust shall be and remain in full force and effect
as therein written. Maker hereby ratifies the agreements made by it to Holder
under the Note, Deed of Trust and each other agreement executed or delivered by
Maker in connection with the Loan and agrees that the Note, except to the extent
modified hereby, the Deed of Trust, and each such other agreement shall remain
in full force and effect. As inducement to Holder and in consideration of the
agreements of Holder herein contained, concurrently with the execution and
delivery of this Agreement by Holder, Guarantor hereby agrees to execute and
deliver the New Guaranty in replacement of the Guaranty. Guarantor and Maker
agree and acknowledge that but for the execution, delivery and performance of
the New Guaranty, Holder would not enter into or deliver this Agreement,
Modification of Deed of Trust, or substitution of the Guaranty. Holder agrees
that and acknowledges that upon execution and delivery by Guarantor of the New
Guaranty to Holder, (a) the Limited Guaranty shall be released and terminated
and of no further force and effect and (b) the Sales Guaranty shall be released
and terminated and no further force or effect as it may relate in any manner
whatsoever to the Security Instruments or the Loan, but shall continue to be
effective in accordance with its terms as to all other obligations or
indebtedness guarantied. Promptly after the execution and delivery of this
Agreement, the Modification of Deed of Trust, and New Guaranty, Holder shall
return all original copies of the Limited Guaranty to Guarantor.
5. This Agreement and all of the covenants and agreements contained herein
shall be and are binding upon and shall inure to the benefit of Maker,
Guarantor, and Holder and each of their respective successors and assigns.
6. EXCEPT TO THE EXTENT THAT THE LAWS OF THE UNITED STATES MAY REQUIRE OR
OTHERWISE CONTROL, THIS AGREEMENT AND THE TERMS AND PROVISIONS HEREOF, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREIN, SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, (WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAW OF SUCH STATE).
7. This Agreement may be executed in multiple counterparts, each of which
shall be regarded for all purposes as one original, it shall not be necessary
that all signatories thereto sign all such counterparts so long as at least one
such counterpart shall be signed by each such signatory, and such counterparts
shall constitute but one and the same instrument.
8. As a condition to the effectiveness of the Modification of Deed of
Trust, and this Agreement, concurrently with the execution and delivery of this
Agreement, all those amounts held in escrow pursuant to that certain Escrow
Agreement dated November 1, 2001, executed by American Escrow Company, Inc.,
Beneficiary and Grantor shall be released and delivered to Beneficiary upon
execution and delivery of this Agreement by all parties hereto.
9. THIS WRITTEN AGREEMENT, THE NEW GUARANTY, AND THE MODIFICATION OF DEED
OF TRUST, TOGETHER WITH THE NOTE AND DEED OF TRUST, REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. FURTHERMORE, GUARANTOR, MAKER AND
HOLDER AGREE THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED effective as of the 31st day of December, 2001.
MAKER:
TEXAS HEALTH CHOICE, L.C.
By:
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Print Name:
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Title:
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HOLDER:
▇▇▇▇▇▇ FOUNDATION HOSPITALS
By:
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Print Name:
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Title:
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GUARANTOR:
SIERRA HEALTH SERVICES, INC.
By:
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Print Name:
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Title:
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