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HomeMy WebLinkAbout1987-2282120L NOTE Ordinance amended 2-2-88 by Ordinance No 88-030 a copy which is attached with original se Q / p ^ ^a 8 security agreement NO B( AN ORDINANCE AUTHORIZING ENTRY INTO AN AGREEMENT WITH THE COUNTY OF DENTON, THE FLOW MEMORIAL HOSPITAL BOARD OF DIRECTORS, THE H E FLOW TRUST, THE ATTORNEY GENERAL OF TEXAS, AND FLOW REGIONAL MEDICAL CENTER, INC FOR THE TRANSFER OF ASSETS OF FLOW MEMORIAL HOSPITAL, AND DECLARING AN EFFECTIVE DATE WHEREAS, the City of Denton through its City Council and the County of Denton through its Commissioners Court, have given serious consideration to the present and future health care needs of the residents of the community served by Flow Memorial Hospital, and WHEREAS, the City and the County have determined that significant changes are necessary to assure the future viability of the Hospital, and WHEREAS, the City and the County have determined that entering into an Asset Transfer Agreement with the Corporation to transfer assets of Flow Memorial Hospital to Flow Regional Medical Center, Inc , is in the best interests of the residents of the County of Denton and the City of Denton, an WHEREAS, such Asset Transfer Agreement is contingent on the right of at least 10% of the qualified voters by petition before the 31st day after this order to require a referendum on the assure of the Asset Transfer Agreement, and WHEREAS, the Office of the Attorney General of Texas has determined that the proposed agreement is consistent with the provisions of the H E Flow Trust, which was created for the purpose of establishing a hospital for the benefit of the people of Denton and Denton County, and will assist in fulfilling the purposes of the Trust, NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF DENTON SECTION I That subject to the contingencies set forth above as well as all conditions precedent set forth in the Agreement, the Mayor is hereby authorized to execute the Asset Transfer Agreement between the City of Denton, the County of Denton, Flow Memorial Hospital Board of Directors, the Trustees of the H E Flow Trust, the Attorney General of Texas and Flow Regional Medical Center, Inc , for the transfer of the assets of Flow Memorial Hospital to Flow Regional Medical Center, Inc , a copy of which is attached hereto and incorporated by reference herein SECTION II That the Mayor is hereby authorized to execute all documents related to the Agreement, including but not limited to a special warranty deed, a security agreement, and bill of sale SECTION II That this ordinance shall become effective immediately upon its passage and approval PASSED AND APPROVED this the 8th day of December, 1987 FAYMOTIEPHF14S,MAYOR ATTEST JE 1INERVALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY BY �I�. r 0,Y11 i,/7U1 ASSET TRANSFER AGREEMENT Between FLOW REGIONAL MEDICAL CENTER (a Texas non-profit corporation), COUNTY OF DENTON, TEXAS (a political subdivision of the State of Texas), CITY OF DENTON, TEXAS (a municipal corporation), H E FLOW TRUST (a charitable trust established February 14, 1946), JIM MATTOX, ATTORNEY GENERAL OF THE STATE OF TEXAS and BOARD OF DIRECTORS OF FLOW MEMORIAL HOSPITAL (a political subdivision of the State of Texas) Dated December 4, 1987 TABLE OF CONTENTS Page ARTICLE 1 PLAN OF ACQUISITION Section 1 1 Transfer of Assets by Transferors 2 Section 1 2 Liabilities to be Assumed 2 Section 1 3 Services to be Provided by Corporation 2 Section 1 4 Closing 3 Section 1 5 Execution and Delivery of Closing Documents 3 Section 1 6 Further Assurances 4 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF CORPORATION Section 2 1 Organization and Good Standing of Corporation 3 Section 2 2 Power and Authority 4 Section 2 3 Authority and Validity 4 Section 2 4 Binding Effect 4 Section 2 5 Necessary Approvals and Consents 4 Section 2 6 Compliance with Hospital and Survey Construction Act (Hill -Burton Act) 5 Section 2 7 Corporate Existence and Tax Status 5 ARTICLE 3 COVENANTS OF TRANSFERORS Section 3 1 Notice of Any Material Change 5 Section 3 2 Cooperation 6 ARTICLE 4 COVENANTS OF BOARD Section 4 1 Access 6 Section 4 2 Conduct of Business Before Closing Date 6 ARTICLE 5 COVENANTS OF CORPORATION Section 5 1 Cooperation 7 Section 5 2 Compliance with Hospital Survey and Construction Act (Hill -Burton Act) 7 Section 5 3 Maintenance of Corporate Existence and Tax Status 8 Section 5 4 No Discrimination 8 Section 5 5 Articles of Incorporation and Bylaws 8 Section 5 6 Management Contracts 10 Section 5 7 No Representation by Transferors as to Condition or Suitability 10 Section 5 8 Filing and Recording 11 ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF TRANSFERORS Section 6 1 Compliance 11 Section 6 2 Representations and Warranties 11 Page Section 6 3 Absence of Litigation 11 Section 6 4 Bylaws and Articles of Incorporation 12 Section 6 5 Licenses and Permits 12 Section 6 6 Declaratory Judgment 12 Section 6 7 Prior Indebtedness 12 Section 6 8 Approval by the Parties 12 Section 6 9 Loan Commitment 12 Section 6 10 Services Agreements 12 Section 6 11 Security Agreement 12 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF CORPORATION Section 7 1 Compliance 13 Section 7 2 Consents to Transaction 13 Section 7 3 Absence of Litigation 13 Section 7 4 Material Adverse Changes 13 Section 7 5 Licenses and Permits 13 Section 7 6 Declaratory Judgment 13 Section 7 7 Approval by the Parties 13 ARTICLE 8 EMPLOYMENT Section 8 1 Transfer of Employees 14 Section 8 2 Transfer of Hospital Service 14 Section 8 3 Retained Sick Leave and Vacation Time 14 ARTICLE 9 DEFAULTS AND REMEDIES Section 9 1 Transferors Defaults, Corporation's Remedies 14 Section 9 2 Corporation's Default, Transferors' Remedies 15 ARTICLE 10 MISCELLANEOUS Section 10 1 Termination 15 Section 10 2 Expenses 16 Section 10 3 Entire Agreement 16 Section 10 4 Counterparts 16 Section 10 5 Notices 16 Section 10 6 Successors and Assigns 17 Section 10 7 Governing Law 17 Section 10 8 Waiver and Other Action 17 Section 10 9 Severability 17 Section 10 10 Survival of Representations and Warranties 18 Section 10 11 Certain Persons Not Liable 18 Section 10 12 Limitation on Liability 18 Section 10 13 References 18 Section 10 14 Dissolution 18 2105L THIS AGREEMENT, made as of the day of December, 1987 among Flow Regional Medical Center, a Texas non-profit corporation ("Corporation"), the H E Flow Trust, a charitable trust established by an inter vivos gift made by H E Flow on February 14, 1946 and by the will of H E Flow dated January 17, 1946 and filed for probate on February 8, 1947 (the "Trust"), the County of Denton, Texas, a political subdivision of the State of Texas (the "County"), the City of Denton, Texas, a municipal corporation (the "City") and the Board of Directors of Flow Memorial Hospital, a political subdivision of the State of Texas (the "Board"), and the Office of the Attorney General of the State of Texas (the "Attorney General") WITNESSETH The County, the City, the Trust and the Board (referred to jointly herein as "Transferors") desire to transfer and the Corporation desires to acquire, all of the assets and property of Flow Memorial Hospital (the "Hospital"), and WHEREAS, the County through its Commissioners Court, the City through its City Council, and the Board of Directors of Flow Memorial Hospital have given serious consideration to the present and future health care needs of the residents of the community served by the Hospital and have determined that it is in the best interest of the citizens of Denton County for the parties to enter into this Asset Transfer Agreement, and WHEREAS, the Office of the Attorney General has determined that the proposed agreement is consistent with the provisions of the Trust, which was created for the purpose of establishing a hospital for the benefit of the people of Denton and Denton County, and will assist in fulfilling the purposes of the Trust, and WHEREAS, the Trustees of the H E Flow Trust have given serious consideration to the present and future health care needs of the community served by the Hospital and have determined that the purposes of the Trust, 1 e to create a Hospital for the citizens of Denton and Denton County, can best be fulfilled by entering into this Asset Transfer Agreement, and WHEREAS, the Asset Transfer Agreement is designed to provide for the continued existence and viability of Flow Memorial Hospital for the benefit of the City of Denton and Denton County, Texas, and the transfer is believed to be in the best interest of said Hospital and the people of Denton and Denton County, NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto covenant and agree as follows ARTICLE 1 PLAN OF ACQUISITION 1 1 Transfer of Assets by Transferors Subject to and upon the terms and conditions contained herein, Transferors shall transfer and Corporation shall acquire all the assets, business property, goodwill, and rights of Transferors which constitute or relate to the Hospital, of every kind and character, whether real or personal, tangible or intangible, owned or leased, all as the same shall exist on the Closing Date (as defined in Section 1 4), including all assets shown on the balance sheet of the Hospital dated as of September 30, 1987 or acquired after the date thereof, as well as all intangible properties such as rights to trade names, and all books and records regarding the foregoing (the "Assets") In the case of accounts receivable or other monies due the Board from the Medicare and Medicaid services provided and fiscal periods ending on or before December 31, 1987, the Board agrees to remit promptly to Corporation any such Medicare and Medicaid payments, if any, received by the Board after December 31, 1987 As consideration for the Assets, Corporation will assume all liabilities of Transferors as provided in Section 1 2 As additional consideration for the Assets, Corporation hereby covenants and agrees that it will continue to maintain and operate the Hospital as a non-profit entity described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and exempt from federal taxation under section 501(a) of the Code (or any successor sections of a subsequent income tax statute or code) in accordance with the trust purposes stated in the will of H E Flow dated January 17, 1946 and Deed of Trust dated February 14, 1946 As further consideration, Corporation agrees to fulfill its public purposes through providing the services stated in Section 1 3 1 2 Liabilities to be Assumed As partial consideration for the Assets, Corporation shall assume and agree to pay and dis- charge all liabilities of Transferors relating to the Hospital existing on the Closing Date Corporation specifically does not waive any and shall continue to assert any defenses that may be available to Transferors in the defense of any action to enforce or collect said liabilities 1 3 Services to be Provided by Corporation As partial n consideration for the Assets iaccordance with the purposes of the H E Flow Trust, Corporation agrees to provide in Denton, Texas, such hospital services usually and customarily provided by comparable community non-profit hospitals in Texas, and shall provide obstetrical (including prenatal and neonatal) and gynecological hospital services as soon as the Corporation determines that it is financially feasible to do so PAGE 2 The Corporation further covenants that it will keep proper books of record and accounts in accordance with generally accepted accounting principles and will make available to the public for inspection and copying during normal business hours Corporation's audited financial statements and annual federal tax returns Corporation agrees to file copies of its annual federal tax returns with the Charitable Trust Section of the Attorney General's Office 1 4 Closing The closing of the transactions contemplated by this Agreement (the "Closing"), which shall be effective at the close of business on the Closing Date, shall take place at 10 00 o'clock a m , Denton time at the Hospital, 1310 Scripture Street, Denton, Texas, on January 8, 1988, the first business day after the judgment contemplated by Sections 5 6 and 6 6 has become final and nonappealable, or on such other date and at such other time and place as is agreed upon by the parties hereto, but the Clos- ing shall occur not later than January 31, 1988, unless further extended by written agreement of the parties to this Agreement 1 5 Execution and Deliver of Closin Documents Before the closing each party shall cause to be prepared, and at the Closing the parties shall execute and deliver, each agreement and instru- ment required by this Agreement to be so executed and delivered and not theretofore accomplished At the closing (a) The Transferors shall execute and deliver to Cor- poration a special warranty deed and a bill of sale and shall deliver to Corporation possession of the Assets (the special warranty deed in the form attached hereto as Exhibit A and the Bill of Sale in the form attached hereto as Exhibit B), (b) Corporation shall deliver to the Transferors (i) an instrument of assumption relating to the obligations of the Transferors to be assumed by Corporation pursuant to Section 1 2 (the instrument in the form attached hereto as Exhibit C), (ii) a Loan Commitment evidencing the $400,000 note to be granted to Corporation not later than January 8, 1988 (the Loan Commitment in a form attached hereto as Exhibit D) , and ( iii ) an executed services agreement with the City for services to be provided by Corporation in 1988 and 1989, and (iv) an executed Security Agreement with the City of Denton securing the Corporation's performance under this and other agreements (the Security Agreement in the form attached hereto as Exhibit E) All of the above referenced instruments shall be delivered in a form and substance acceptable to the City (c) Each party also shall execute and deliver such other appropriate and customary documents as to the other parties PAGE 3 reasonably may request for the purpose of consummating the transaction contemplated by this Agreement All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or contemplated 1 6 Further Assurances After the closing, the parties hereto shall execute and deliver such additional documents and take such additional actions as may reasonably be deemed necessary or advisable by any party in order to consummate the transactions contemplated by this Agreement ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF CORPORATION 2 1 Organization and Good Standing of Corporation Corpora- tion is a non -prof t corporation duly organized, validly existing, and in good standing under the laws of the State of Texas 2 2 Power and Authority Corporation has the corporate power and authority and all licenses and permits required by governmen- tal authorities to own, lease, and operate its properties and assets and to carry on its business as currently being conducted 2 3 Authority and Validity Corporation has the corporate power and authority to execute, deliver, and perform its obligations under this Agreement and the other agreements and documents executed or to be executed by it in connection with this Agreement, and the execution, delivery, and performance by Corporation of this Agreement and the other agreements and documents executed or to be executed by it in connection with this Agreement have been duly authorized by all necessary corporate action 2 4 Binding Effect This Agreement and the other agree- ments and documents executed or to be executed by Corporation in connection with this Agreement have been or will have been duly executed and delivered by it and are or will be, when executed and delivered, its legal, valid, and binding obligations, enforceable in accordance with their terms except that (a) enforceability may be limited by bankruptcy, insol- vency, or other similar laws affecting creditors' rights, and (b) the availability of certain remedies may be limited equitable principles of general applicability 2 5 Necessar A rovals and Consents Except for approvals already obtained or fi ings, applications or notices already made PAGE 4 or given, no authorization, consent, permit, or license or approval of, or declaration, registration, or filing with, any person or governmental or regulatory authority or agency is necessary for the execution and delivery by Corporation of this Agreement or the other agreements executed or to be executed by Corporation in connection with this Agreement or the consummation by it of the transactions contemplated hereby and thereby 2 6 Compliance with Hospital and Survey Construction Act (Hill -Burton Act) Corporation represents that it is an entity that would have been eligible for the financial assistance obtained by the Hospital under the Hospital Survey and Construction Act, 42 U S C , sec 291, et seq (the "Hill -Burton Act"), and that it will assume the Hospital's responsibility for providing the assurances originally given by the Hospital Corporation represents that it has adopted a resolution formally assuming such obligations 2 7 Corporate Existence and Tax Status Corporation repre- sents that it is an organization described in Section 501(c) (3) of the Code, and is exempt from federal income tax under Section 501(a) of the Code Corporation agrees that it will at all times maintain its existence as a non-profit corporation and that it will take no action or suffer any action to be taken by others which will alter, change, or destroy its status as a non-profit corporation or its status as an organization described in Section 501(c) (3) of the Code and exempt from federal income taxation under Section 501(a) of the Code (or any successor sections of a subsequent federal income tax statute or code) If for any rea- son Corporation should lose its status as a non-profit corporation under Section 501(c) (3) of the Code, Corporation shall notify the City, the County and the Charitable Trust Section of the Office of the Attorney General of Texas within thirty (30) days of the time such status as a non-profit corporation is lost ARTICLE 3 COVENANTS OF TRANSFERORS Transferors covenant with Corporation as follows 3 1 Notice of any Material Change Transferors shall, promptly after the first notice thereof but not later than the Closing Date, notify Corporation in writing of the occurrence of any event or the existence of any state of facts that constitutes a material adverse change in the business, results or operation, working capital, assets, liabilities, or condition (financial or otherwise) of the Hospital (compared to such matters as they existed on the date of this Agreement) PAGE 5 3 2 Cooperation Transferors shall use their best efforts to (a) proceed promptly to make or give the necessary applications, notices, requests, and filings to obtain at the earliest practicable date and, in any event, before the Closing Date, the approvals, authorizations, and consents necessary to consummate the transactions contemplated by this Agreement, (b) cooperate with and keep Corporation informed in connection with this Agreement, and (c) take such actions as Corporation may reasonably request to consummate the transactions contemplated by this Agreement and diligently attempt to satisfy, to the extent within their control, all conditions precedent to their obligations to effectuate this Agreement ARTICLE 4 COVENANTS OF BOARD Board covenants with the Corporation as follows 4 1 Access During the period pending the Closing Date, Board shall afford to Corporation and to Corporation's officers, employees, accountants, counsel, and other authorized represen- tatives full access during regular business hours to its assets, properties, books, contracts, commitments, and records (giving due regard to patient rights and patient confidentiality) and will furnish or use its best efforts to cause their representa- tives to furnish promptly to Corporation and its representatives such additional financial and operating data and other documents and information (certified if requested and reasonably susceptible to certification) relating to its business and properties as Corporation or its duly authorized representatives may from time to time reasonably request 4 2 Conduct of Business Before Closing Date During the period pending the Closing, Board (a) shall conduct the Hospital's operations in the ordinary and usual course of business consistent with past and current practices, and shall use their best efforts to maintain and preserve intact its business organization and goodwill, to retain the services of its key employees, and to maintain satis- factory relationships with suppliers, distributors, patients, and others having business relationships with the Hospital, (b) shall confer on a regular and frequent basis with one or more representatives of Corporation to report material operational matters and the general status of ongoing operations, PAGE 6 (c) shall notify Corporation of any emergency or other change in the normal course of the Hospital's business and of any governmental complaints, investigations, or hearings (or communi- cations indicating that the same may be contemplated) if such emergency, change, complaint, investigation, or hearings would be material to the Hospital's business or properties, and (d) shall not incur any contractual obligation in excess of $10,000 without the written consent of the parties ARTICLE 5 COVENANTS OF CORPORATION Corporation covenants and agrees with Transferors as follows 5 1 Cooperation Corporation shall use its best efforts to (a) cooperate with and keep Transferors informed in connection with this Agreement, (b) proceed promptly to make or give the necessary applications, notices, requests, and filings to obtain at the earliest practicable date and, in any event, before the Closing Date, the approvals, authorizations, and consents necessary to consummate the transactions contemplated by this Agreement, and (c) take such actions as Transferors may reasonably request to consummate the transactions contemplated by this Agreement and diligently attempt to satisfy, to the extent within its control, all conditions precedent to its obligations to close this Agreement as contemplated in Section 1 4 lance with Hospital Survey and Construction (Hill -Burton Act) To the extent that Flow Memorial Hospital nas any obligation for any federal financial assistance under the Hill -Burton Act, Corporation agrees that it will use its best efforts to obtain the appropriate state and federal approval for the transfer of the Hospital Corporation represents that it is an entity that would have been eligible for the original grant under the Hill -Burton Act, and it will assume the Hospital's responsibility for providing the assurances originally given by the Hospital To the extent that Corporation is unsuccessful in obtaining such approval, so as to relieve the Transferors of such obligations, the Corporation agrees to be solely responsible for liabilities of Transferors relating to the Hospital under the Hill -Burton Act Notwithstanding the foregoing, Corporation agrees to assume any and all obligations and/or liabilities including expenses of litigation and administrative proceedings, of Transferors, relating to any recovery attempted or made by the federal government pursuant to the Hill -Burton Act PAGE 7 5 3 Maintenance of Corporate Existence and Tax Status Corporation represents that it is an organization described in Section 501(c) (3) of the Code and is exempt from federal income tax under Section 501(a) of the Code Corporation agrees that it will at all times maintain its existence as a non-profit corpo- ration and that it will take no action or suffer any action to be taken by others which will alter, change, or destroy its status as a non-profit corporation or its status as an organization described in Section 501(c) (3) of the Code and exempt from federal income taxation under Section 501(a) of the Code If for any reason Corporation should lose its status as a non-profit corporation under Section 501(c) (3) of the Code, Corporation shall notify the City, the County, and the Charitable Trust Section of the Office of the Attorney General of Texas within thirty (30) days of the time such status as a nonprofit corporation is lost 5 4 No Discrimination Corporation agrees to make available Hospital services without discrimination on the ground of race, color, national origin, or creed 5 5 Articles of Incorporation and Bylaws The Articles of Incorporation and/or the Bylaws of Corporation shall provide for a Board of Trustees and a Board of Advisors with the following structure and powers (a) the Board of Trustees will consist of nine numbers and will be entitled to manage the affairs of Corporation pursuant to Section 2 14 of the Texas Non -Profit Corporation Act, including the establishment of Hospital policy, participation in long-term strategic planning, and the delegation of day-to-day management actions for the Hospital The Board of Trustees' members will each serve six -year terms which will be staggered so that three members' terms expire every two years (initial appointments will be for 2, 4 and 6 year terms, three in each group), (b) the Board of Advisors will consist of twenty-eight members who will advise the Board of Trustees concerning the health care needs of the region and the affairs of Corporation No member of the Board of Advisors will be eligible to serve simultaneously on the Board of Trustees Members of the Board of Advisors will serve four-year, staggered terms with the terms of seven members expiring every year (initial appointments will be for 1, 2, 3 and 4 year terms, seven in each group) Members of the Board of Advisors will not be permitted to serve successive terms, (c) vacancies in either of said boards created by expirations of terms, resignations, or otherwise, will be filled by election by the Board of Advisors, and PAGE 8 (d) the Bylaws of Corporation shall contain a conflict of interest policy which will prohibit Corporation entering into any contracts or engaging in any transactions except for physician's services (including those relating to the purchasing of services, personal property or real property or which involve any sales commission, broker's commission or finder's fee) with any member of the Board of Trustees, any relative of any such member or any business entity of which any such member or combination of members own or owns 10% or more of the equity interest In addition, such conflict of interest policy will prohibit Corporation entering into any such contracts or engaging in any such transactions with any business entity in which a majority of the members of the Board of Trustees own any equity interest or with any business entity of which any member of the Board of Trustees owns any equity interest unless members of the Board of Trustees who comprise a majority of such Board and which own no equity interest of such entity approve such contract or transaction For purposes of this provision (1) the term "business entity" shall mean a sole pro- prietorship, partnership, firm, corporation, hold- ing company, joint-stock company, receivership, trust, or any other entity recognized in law, (11) a person related in the first degree by either affinity or consanguinity to a member of the Board of Trustees shall be deemed to be a relative of such member, and (111) the term "equity interest" shall mean (A) with respect to a corporation, the capital stock there- of, (B) with respect to a trust, a beneficial interest therein and (C) with respect to a partnership or any other entity, an interest in the capital or profits thereof (e) The Articles of Incorporation shall contain the follow- ing provisions (1) Purpose The purposes for which the corporation is organized are (1) To operate exclusively for charitable, scientific, literary, or educational purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, of 1986, as amended, (or any successor sections of a subsequent income tax statute or code) by engaging directly in sup- port of such purposes or by making distributions to other organizations for use, by the distri- butees, in support of such purposes, and (2) In furtherance of such purposes, to provide for the PAGE 9 health care needs of the people of Denton and Denton County by maintaining and operating Flow Memorial Hospital, a community hospital estab- lished under the will of H E Flow dated January 17, 1946, and such other health care facilities and services as the Board of Trustees of the Corporation deems necessary (11) Dissolution Upon dissolution of the corpora- tion, the Board of Trustees shall, after paying or making provision for payment of all the lia- bilities, debts and obligations of the corpora- tion, transfer and convey all of the assets of the corporation, pursuant to a court order after notification to the Attorney General's Office, to an organization or organizations operated and organized exclusively for one or more exempt purposes consistent with the intent expressed in Item 9 of the Will of H E Flow dated January 17, 1946, and within the meaning of section 501(c)(3) of the Code and then recognized as exempt from federal income taxation under section 501(a) of the Code 5 6 Management Contracts So long as it is subject to the Hill -Burton Act, Corporation covenants that if it enters into any agreement, formal or informal, providing for management of the Hospital or part thereof, the agreement will contain the following provisions (a) Either (i) the Board of Trustees of Corporation retains authority to terminate the agreement at any time upon reasonable notice to the contractor or (11) the agreement will be submitted promptly to the Department of Health and Human Services for its review under its regulations, and in the event the Secretary of Health and Human Services (the "Secretary") deter- mines that the agreement results in the Hospital ceasing to be a public or non-profit facility for which a grant could have been made under the Hill -Burton Act, then the Board of Trustees shall have the right to terminate the agreement by giving 30 days notice to the contractor, (b) No employee of the contractor may be a member of the Corporation's Board of Trustees, and/or any other provisions required by law to insure that the management agreement does not affect Corporation's status as a public or non-profit corporation eligible to receive grants under the Hill -Burton Act 5 7 No Representation D; itability The Corporation ferors a ledges tt ondition ( at it has exam PAGE 10 the Hospital Facility and any and all improvements or structures thereon and knows the condition thereof and accepts the same in said condition, that the Transferors have made no warranty, either express or implied, as to the condition of the Hospital Facility or any part thereof or that the Hospital Facility will be suitable for the Corporation's purposes or needs, and that the Corporation entering into this Agreement is relying solely upon its own examination thereof The Corporation further acknowledges that it has been given the opportunity to examine the books and records, including the financial information, with respect to the existing Hospital Facilities and that neither the Transferors, the Trust, the City nor the County has made any representation or warranty in regard to the same 5 I Filing and Recording The Corporation shall file and record or cause to be filed and recorded this Agreement ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF TRANSFERORS Except as may be waived by Transferors, the obligations of Transferors to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction on or before the Closing Date of each of the following conditions 6 1 Compliance Corporation shall have, or shall have caused to be, satisfied or complied with and performed in all material respects all terms, covenants, and conditions of this Agreement to be complied with or performed by it on or before the Closing Date 6 2 Representations and Warranties All of the representa- tions and warranties made by Corporation in this Agreement and in all certificates and other documents delivered by Corporation to Transferors pursuant hereto or in connection with the transactions contemplated hereby shall have been true and correct in all material respects as of the date hereof or thereof and shall be true and correct in all material respects at the Closing Date with the same force and effect as if such representations and warranties had been made at and as of the Closing Date, except for changes permitted or contemplated hereby of thereby 6 3 Absence of Litigation No order, judgment, or decree by e any court or govrnmental agency or authority shall be in effect that enjoins, restrains, or prohibits the consummation of the transactions contemplated by this Agreement Further, in PAGE 11 accordance with the provisions of TEX REV CIV STAT ANN art 4437(c) 2, neither the City nor the County have received a petition signed by at least ten percent (10%) of their qualified voters requesting an election before the 31st day after the date upon which the City and the County have ordered that the Hospital be transferred to Corporation 6 4 Bylaws and Articles of Incorporation The Articles of Incorporation and the Bylaws of Corporation shall contain the provisions required by Section 5 5 hereof 6 5 Licenses and Permits Corporation shall have obtained all permits and licenses required by governmental authorities to own and operate the Hospital and to carry on the business of the Hospital as presently being conducted 6 6 Declaratory Judgment A final, non -appealable judgment shall have been rendered by a court of competent jurisdiction upholding the legality of this Agreement covering such matters as may be reasonably requested by Transferors and specifically including approval of the Settlement and Compromise Agreement in the action currently pending in the 158th Judicial District Court, Denton County, Texas, and known as Cause No 87-1907-C 6 7 Prior Indebtedness The holders of the Board's $290,000 Hospital Board Revenue Bonds - Series 1975 and $280,000 Hospital Board Revenue Bonds - Series 1975--A shall have acknowledged and approved this Agreement 6 8 Approval by the Parties The Commissioners Court of the County, the City Council of the City, the Board of Directors of Flow Memorial Hospital and the Trustees of the Trust shall each have approved this Agreement and the transactions contemplated herein in appropriate proceedings complying with all applicable laws 6 9 Loan Commitment The corporation shall have delivered a loan commitment evidencing a note in the amount of $400,000 to be granted to Corporation not later than January 5, 1988, in a form and substance acceptable to Transferors 6 10 Services Agreement Corporation shall have delivered to the City a Services Agreement in a form and substance acceptable to the City 6 11 Security Agreement Corporation shall have delivered to the City a Security Agreement in a form and substance acceptable to the City PAGE 12 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF CORPORATION Except as may be waived by Corporation, the obligations of Corporation to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction on or before the Closing Date, of each of the following conditions 7 1 Compliance Transferors shall have, or shall have caused to be, satisfied or complied with and performed in all material respects all terms, covenants, and conditions of this Agreement to be complied with or performed by them on or before the Closing Date 7 2 Consents to Transactions Transferors and Corporation shall have received all consents or approvals, and made all applications, requests, notices, and filings with, any persons, governmental authority, or governmental agency required to be obtained or made in connection with the consummation of the transactions contemplated by this Agreement 7 3 Absence of Litigation No order, judgment, or decree by any court or governmental agency or authority shall be in effect that enjoins, restrains, or prohibits the consummation of the transactions contemplated by this Agreement or, in the sole judgment of Corporation, otherwise would materially interfere with the operation of the assets and business of the Hospital after the Closing Date 7 4 Material Adverse Changes No material adverse change in the business, properties, assets, liabilities, results of operations, or condition, financial or otherwise, of the Hospital shall have occurred 7 5 Licenses and Permits Corporation shall have obtained all permits and licenses required by governmental authorities to own and operate the Hospital and to carry on the business of the Hospital as presently being conducted 7 6 Declaratory Judgment A final, non -appealable judgment shall have been rendered by a court of competent jurisdiction upholding the legality of this Agreement covering such matters as may be reasonably requested by Transferors and specifically including approval of the Settlement and Compromise Agreement in the action currently pending in the 158th Judicial District Court, Denton County, Texas, and known as Cause No 87-1907-C 7 7 Approval by the Parties The Commissioners Court of the County, the City Council of the City, the Trustees of the Trust and the Board of Directors of Flow Memorial Hospital shall each PAGE 13 have approved this Agreement and the transactions contemplated herein in appropriate proceedings complying with all applicable laws ARTICLE 8 EMPLOYMENT 8 1 Transfer of Employees On and as of the Closing Date, all employees who were on such date employed at the Hospital shall become employees of Corporation There will be no loss in status (e g , job description, job classifications, etc ) or seniority of Hospital employees, solely by reason of this Agreement, at the time they become employees of Corporation In addition, all Hospital employees will be transferred to Corporation at the existing or a higher salary/pay scale This provision shall not affect Corporation's rights to make decisions with respect to its employees in the ordinary course of its business after the Closing 8 2 Transfer of Hospital Service From the Closing Date, the seniority of Hospital employees will be based upon their original date of hire at the Hospital and those years of service will be carried forward and count toward years of service with Corporation 8 3 Retained Sick Leave and Vacation Time On and as of the Closing Date, sick leave and vacation time accumulated by the Hospital employees will be transferred and honored by Corporation ARTICLE 9 DEFAULTS AND REMEDIES 9 1 Transferor's Defaults, Corporation's Remedies (a) Transferor's Defaults Transferors shall be deemed to be in default hereunder upon the occurrence of any one or more of the following events (1) Transferors fail to meet, comply with, or perform any covenant, agreement, or obligation on their part required within the time limits and in the manner required in this Agreement (b) Corporation's Remedies If Transferors are deemed to be in default hereunder Corporation may, at its sole option, do any one of the following (1) Terminate this Agreement by written notice delivered to Transferors on or before the Closing Date PAGE 14 (11) Enforce specific performance of this Agreement against Transferors 9 2 Corporation's Default, Transferors' Remedies (a) Corporeration's Default Corporation shall be deemed to be in default heunder upon the occurrence of any one or more of the following events (i) Corporation fails in any material respect to meet, comply or to perform any other covenant, condition, or obligation on its part required within the time limits and in the manner required in this Agreement Such obligations set out in Articles 1 and 5 of this Agreement Such obligations extend beyond the Closing Date of this Agreement (b) Transferors' Remedies If Corporation is deemed to be in default hereunder, Transferors may, at Transferors' sole option, do any of the following (1) terminate this Agreement by giving to the Corporation written notice delivered to Corporation on or before the Closing Date (ii) Enforce specific performance of this Agreement against Corporation or any other party (111) Exercise any other right or remedy Transferors may have at law or in equity by reason of such default ARTICLE 10 MISCELLANEOUS 10 1 Termination This Agreement and the transactions con- templated hereby may be terminated at any time on or before the Closing Date (a) by mutual consent of Transferors and Corporation, (b) by Corporation if there has been any material fail- ure on the part of Transferors to comply with their obligations hereunder, (c) by Transferors if there has been a material misrepre- sentation or breach of warranty in the representations and warranties of Corporation set forth herein or if there has been PAGE 15 any material failure on the part of Corporation to comply with its obligations hereunder, and 10 2 Expenses Each party hereto shall pay its own expenses incurred in connection with this Agreement and the transactions contemplated hereby 10 3 Entire Agreement This Agreement, the exhibits hereto, and the other documents executed or delivered pursuant hereto contain the complete agreement among the parties with respect to the transactions contemplated hereby and superseded all prior agreements and understandings among the parties with respect to such transactions Section and other headings are for reference purposes only and shall not affect the interpretation or construction of this Lease The parties hereto have not made any representation or warranty except as expressly set forth in this Agreement or in any other document executed or delivered pursuant hereto 10 4 Counterparts This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute only one original 10 5 Notices All notices, demands, requests, or other communications that may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first class, registered, or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery, telegram, or telex, addressed as follows If to Transferors County of Denton, Texas Courthouse on the Square Denton, Texas 76201 Attention County Judge City of Denton, Texas Municipal Building 215 East McKinney Street Denton, Texas 76201 Attention City Attorney Board of Directors Flow Memorial Hospital 1310 Scripture Street Denton, Texas 76201 PAGE 16 if to Corporation If to Foundation If to Attorney General H E Flow Trust c/o Vic Burgess, County Judge Courthouse on the Square Denton, Texas Flow Regional Medical Center c/o President 1310 Scripture Street Denton, Texas 76202 Flow Foundation c/o Walter Lea, Chairperson 108 Valleyview Circle Argyle, Texas 76226 Attorney General Attn Charitable P O Box 12548 of Texas Trust Section Austin, Texas 78711 Each party may designate by notice in writing a new address to which and notice, demand, request, or communications may there- after be so given, served, or sent Each notice, demand, request, or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger, or (with respect to a telex) the answer back being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation 10 6 Successors and Assigns This Agreement and the rights, interests, and obligations hereunder shall be binding upon and shall inure to the benefit of the parties hereto and their heirs, personal representatives, successors, and assigns 10 7 Governing Law This Agreement shall be construed and enforced in accordance with he laws of the State of Texas 10 8 Waiver and Other Action This Agreement may be amended, modified, or supplemented only by a written instrument executed by the parties against which enforcement of the amend- ment, modification, or supplement is sought 10 9 Severability if any provision of this Agreement is held to be illegal, invalid, or unenforceable, such provision PAGE 17 shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance, and in lieu of such illegal, invalid, or unenforceable provisions, there shall be added automatically as part of this Agreement, a provision as similar in it terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable 10 10 Survival of Representatios and Warranties Each representation or warranty made by n any party hereto shall survive the closing of the transactions contemplated hereby 10 11 Certain Persons Not Liable Neither the governing bodies nor any officer or employee of the Board, the City, the County, the Trust or Corporation shall be personally liable for the payment of any sum, or for the performance of any obligation under, this Agreement The officers, governing bodies, agents, trustees, and employees of the Board, the City, the County, the Trust and Corporation shall have no personal liability for any costs, losses, damages, or liabilities caused or subsequently incurred by any of the parties hereto or any officer, director, agent, or employees of any thereof in connection with or as a result of this Agreement 10 12 Limitation on Liability All obligations of the Transferors expressed or implied in this Agreement or otherwise incurred in connection with Assets for the payment of money or for damages resulting from any misrepresentation of breach of any covenant, undertaking, agreement, or warranty shall be limited so as to comply with all applicable laws 10 13 References Unless otherwise indicated, all references in this Agreement to Sections or Articles are to the Sections and Articles, respectively, of this Agreement 10 14 Dissolution Upon the dissolution of the Corpora- tion, the Board of Directors shall, after paying or making pro- vision for the payment of all liabilities, debts and obligations of the Corporation, transfer and convey all of the assets of the Corporation, pursuant to a court order after notification to the Attorney General's Office, to an organization or organizations operated and organized exclusively for one or more exempt purposes consistent with the intent expressed in Item 9 of the will of H E Flow dated January 17, 1946, and within the meaning of section 501(c)(3) of the Code and then recognized as exempt from federal income taxation under section 501(a) of the Code PAGE 18 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written H E FLOW TRUST m m BY BY / 4 ;� ROBIN KAIN, TRUSTEE JIM MATTOX, ATTORNEY GENERAL BY 614� 4174a- ANN KITCHEN, ASSISTANT ATTORNEY GENERAL BOARD OF DIRECTORS OF FLOW MEMORIAL HOSPITAL BY MAR H WILLIAMS, CHAIRPERSON FLOW REGIONAL MEDICAL CENTER, INC R BY ,ENNETT K K, PRESIDENT COUNTY OF DENTON, TEXAS BY VIC BURGESS, COUNT JUDGE CITY OF DENTON, TEXAS BY RAY S E HENS, MAYOR PAGE 19 THE STATE OF TEXAS § COUNTY OF DENTON N Before imp, th undersigned authority, on this y personally appeared I / C. /L r GY M of the County of Dent , Texas, a political d isi of the State of Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that, being properly authorized to do so, he executed the same for the purposes and consideration therein expressed and in the capacity therein stated for and on behalf of said County of Denton G VEN UNDER MY HAND AND SEAL OF OFFICE, this the 1� day of , 198f 3.4JEANETiE SCOTT No4ry pNET E SC d Tacn My Carries bn Expires mud 8L 1589 My Commission expires THE STATE OF TEXAS S COUNTY OF DENTON S Befor e, th nder�igned authority, on this day personally appeared y t/�L.� , -� 1C� -j F of the City of Denton Texas, a municipal coivporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that, being properly authorized to do so, he executed the same for the purposes and consideration therein expressed and in the capacity therein stated for and on behalf of said City of Denton �% N U DER MY HAND AND SEAL OF OFFICE, this the, 0::-_day of , 198:�: P JEANETTE SCOTT J:��2 Mohr pabUc We of Texas q My Commission Expires March 311989 N/ GRY�7PUBLIC, STATE OF TEXAS My Commission expires PAGE 20 THE STATE OF TEXAS $ COUNTY OF DENTON $ Before,rme, 11tthe yyn�de�rs g gd authorit�y on this day personally appeared Il �C�'1CLlR0M /a ", ('�1(aA'_ �ii _AZPb of the Board Pt Directors of Flow Memorial Hosjpital, a political subdivision of the State of Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that, being properly authorized to do so, he executed the same for the purposes and consideration therein expressed and in the capacity therein stated for and on behalf of said Board of Directors of Flow Memorial Hospital VEN U DER MY HAND AND SEAL OF OFFICE, this the �Q day of u 1 198 7 IEANETTE SOOTY SMY Cw bn EE*ft WA 3311 INN My Commission expires THE STATE OF TEXAS S COUNTY OF DENTON S N T RY PUBLIC, STATE OF TEXAS 9_ 3 J- d Before me, the undersigned authority, on this day personally appeared SEMNEii /(/�¢u , �reEfID�7" of the Flow Regional Medical Center, a Texas non-profit corpora- tion, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that, being properly authorized to do so, he executed the same for the purposes and consideration therein expressed and in the capacity therein stated for and on behalf of said Flow Regional Medical Center IVEN UN ER MY HAND AND SEAL OF OFFICE, this thej --4 day of , 198�1 AMMUM MYOmM�'1�9 N T RY PUBLIC, S ATE OF TEXAS My Commission expires 3-3 / - 9 PAGE 21 THE STATE OF TEXAS S COUNTY OF DENTON S Before me, the undersigned, a Notary Public in and for the State of Texas, on this day personally appeared Vic Burgess, as Trustee of the H E Flow Trust, known to me to be the person whose and is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as his free act and deed for the purposes and consideration therein expressed and in the capacity therein stated MY HAND AND SEAL OF OFFICE, this the rrX day VEN UNDER of , 1981 JEANETTE SCOTT Not" Pak so d twee o pry Comniewko Fxgm Mash S1, iM19 My commission expires THE STATE OF TEXAS 5 COUNTY OF DENTON S CL',e�i �TZGGGv�C�� NQPtRY PUBLIC, STATE OF TEXAS Before me, the undersigned, a Notary Public in and for the State of Texas, on this day personally appeared Ray Stephens, as Trustee of the H E Flow Trust, known to me to be the person whose and is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as his free act and deed for the purposes and consideration therein expressed and in the capacity therein stated IVEN U DER MY HAND AND SEAL OF OFFICE, this the,42i t day of , 198j aJEANETTE N*q Publk M* N Tmt GC v C myc000ebewb4kumerd$L10 Y PUBLIC, STATE OF TEXAS My commission expires PAGE 22 THE STATE OF TEXAS 5 COUNTY OF DENTON 5 Before me, the undersigned, a Notary Public in and for the State of Texas, on this day personally appeared George Highfill, as Trustee of the H E Flow Trust, known to me to be the person whose and is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as his free act and deed for the purposes and consideration therein expressed and in the capacity therein stated D G EN UN ER MY HAND AND SEAL OF OFFICE, this the of " day of , 9hb THE STATE OF TEXAS S COUNTY OF DENTON S Before me, the undersigned, a Notary Public in and for the State of Texas, on this day personally appeared Robin Kain, as Trustee of the H E Flow Trust, known to me to be the person whose and is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as his free act and deed for the purposes and consideration therein expressed and in the capacity therein stated G VEN UNDER MY HAND AND SEAL OF OFFICE, this theg/4 day of —1 198 1 JEANETTE SCOTT NobryPubk ftb of Tmr MY Con m=WB Explrm Mach $1, IM My commission expires N09ARY PUBLIC, STATE OF TEXAS PAGE 23 THE STATE OF TEXAS S COUNTY OF DENTON 5 Before me, the undersigned authority, on this day personally appeared Ann Kitchen, Assistant Attorney General of the State of Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that, being properly authorized to do so, she executed the same for the purposes and consideration therein expressed and in the capacity therein stated for and on behalf of said Jim Mattox, Attorney General for the State of Texas LIVEN UNDER MY HAND AND SEAL OF OFFICE, this the �/ `� day of I�Ik /h��u U , 198OEM SW �Notary VUW Sw of Tew MYwwmhWoE*Wmuch $1.1W NOTARY PUBLIC, STATE OF TEXAS My Commission expires CPX PAGE 24 I, the undersigned, County Clerk of Denton County, Texas, hereby certify that the foregoing instrument of writing, dated as of , with its certificates of authentication, was filed for record in my office on the day of , 198 , at o'clock M , andruly recorded in the Dee of Records of said County, in Book , at Page WITNESS MY OFFICIAL HAND AND SEAL OF OFFICE, this the day of , 198_ MARILYN ROBINSON, COUNTY CLERK DENTON COUNTY, TEXAS M DEPUTY PAGE 25 SPECIAL WARRANTY DEED THE STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENTS COUNTY OF DENTON § That the County of Denton, Texas, a political subdivi- sion of the State of Texas (the "County'), the City of Denton, Texas, a municipal corporation (the "City"), the Board of Directors of Flow Memorial Hospital, a political subdivision of the State of Texas created pursuant to Arti- cle 44941-1 of the Texas Civil Statutes (the "Board"), and H E Flow Trust, a testamentary trust (the "Trust") (the County, the City, the Board and the Trust being collectively referred to herein as "Grantors"), for an in consideration of the sum of Ten and No/100 Dollars ($10 00) cash in hand paid by Flow Regional Medical Center, Inc ("Grantee'), a Texas nonprofit corporation, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantors, have GRANTED, SOLD and CONVEYED, and by these presents do GRANT, SELL and CONVEY unto Grantee, subject to the covenants and restrictions hereinafter described, all that certain real property (the "Property") lying and being situated in Denton, Denton County, r1exas, more particularly described in Exhibit A attached hereto and made a part hereof for all purposes This conveyance shall include all and singular the rights and appurtenances pertaining to the Property, including all and singular any improvements situated thereon and any fixtures thereunto attached TO HAVE AND TO HOLD the Property together with all and singular the rights and appurtenances thereto in anywise belonging, unto Grantee, its successors and assigns, for- ever, and Grantors do hereby bind themselves, their respec- tive successors and assigns, TO WARRANT AND DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming of to claim the same or any part thereof by, through or under Grantors, but not otherwise, subject to any and all covenants, conditions, restrictions, reservations, easements and other encumbrances of record or apparent from visual inspection This conveyance is made and accepted subject to the terms, provisions and conditions of that certain Security Agreement of even date herewith (the 'Security Agreement") by and between Grantee and the City, and this conveyance shall be further made and accepted subject to the covenants and restrictions (the "Covenants') contained in (i) that certain Compromise Settlement Agreement (the 'Settlement Agreement") of even date herewith by and among the City, the County, the Board, Jim Mattox, Attorney General of the State of Texas, the Trust, Flow Memorial Foundation, a Texas nonprofit corporation, and Grantee, (ii) that certain Asset Transfer Agreement (herein so called) of even date herewith executed by and among the County, the City, the Board and Grantee, and (iii) that certain Services Agreement (the "Services Agreement") of even date herewith, by and between Grantee and the City (the Settlement Agreement, the Asset Transfer Agreement and the Services Agreement being herein collectively referred to as the "Agreements"), which Cove- nants are hereby declared to be covenants running with the Property and shall be binding upon all persons acquiring the Property, and any person, by the acceptance of title to the Property shall thereby agree and covenant to abide by and fully perform the Covenants If any person shall violate or attempt to violate the Covenants, it shall be lawful for Grantors or any of them (but no other party) to prosecute proceedings at law or in equity against such person either to prevent such violation, to correct such violation, or to recover damages or other relief for such violation Invali- dation of any one or any part of the Covenants by judgment or court order shall in no wise affect any of the other Covenants, which shall remain in full force and effect The Covenants shall be in full force and effect until the date of the discharge and release of the Security Agreement pursuant to Article VI thereof Copies of the Agreements and the Security Agreement may be obtained from the office of the City Attorney for the City of Denton, Municipal Building, Denton, Texas 76201 To additionally secure performance of and compliance with the terms and conditions of the Agreements, Grantee has executed and delivered a Deed of Trust of even date herewith conveying the herein described property to Bernard A Duco, Jr , Trustee EXECUTED as of the day of January, 1988 COUNTY OF DENTON, TEXAS By Vic Burgess, County Judge CITY OF DENTON, TEXAS By Ray Stephens, Mayor -2- BOARD OF DIRECTORS, FLOW MEMORIAL HOSPITAL By Mary H Williams, President H E FLOW TRUST By By U/ UTA THE STATE OF TEXAS § COUNTY OF DENTON § Ray Stephens, Trustee Vic Burgess, Trustee George Highfill, Trustee Robin Lane, Trustee BEFORE ME, the undersigned authority, on this day personally appeared Vic Burgess, County Judge of the County of Denton, Texas, known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said political subdivision of the State of Texas in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the __ day of January, 1988 Notary Public in and for the State of Texas My Commission Expires -3- THE STATE OF TEXAS § COUNTY OF DENTON § BEFORE ME, the undersigned authority, on this day personally appeared Ray Stephens Mayor of the City of Denton, Texas, a municipal corporation, known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said municipal corporation, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the day of January, 1988 Notary Public in and for the State of Texas My Commission Expires THE STATE OF TEXAS § COUNTY OF DENTON § BEFORE ME, the undersigned authority on this day personally appeared Mary H Williams, President of the Board of Directors of Flow Memorial Hospital known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that she executed the same as the act and deed of said political subdivision of the State of Texas created pursuant to Article 44941-1 of the Texas Civil Statutes, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _ day of January, 1988 Notary Public in and for the State of Texas My Commission Expires THE STATE OF TEXAS § § COUNTY OF DENTON § BEFORE ME, the undersigned authority on this day personally appeared Ray Stephens, Trustee of H E Flow Trust, known to me to be the officer whose name is sub- scribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said testamentary trust, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the __ day of January, 1988 Notary Public in and for the State of Texas My Commission Expires THE STATE OF TEXAS § § COUNTY OF DENTON § BEFORE ME the undersigned authority, on this day personally appeared Vic Burgess, Trustee of H E Flow Trust, known to me to be the officer whose name is sub- scribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said testamentary trust, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the day of January, 1988 Notary Public in and for the State of Texas My Commission Expires -5- THE STATE OF TEXAS § COUNTY OF DENTON § BEFORE ME, the undersigned authority, on this day personally appeared George Highfill, Trustee of H E Flow Trust, known to me to be the officer whose name is sub- scribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said testamentary trust, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _ day of January, 1988 Notary Public in and for the State of Texas My Commission Expires THE STATE OF TEXAS § COUNTY OF DENTON § BEFORE ME, the undersigned authority on this day personally appeared Robin Lane Trustee of H E Flow Trust known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said testamentary trust in the capacity therein stated, for the purposes and considera- tion therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _ day of January, 1988 Notary Public in and for the State of Texas My Commission Expires ffm The address of Grantee is Flow Regional Medical Center, Inc c/o President 218 North Elm Street Denton Texas 76202 /Hr/MWC/k27-7b 039 -7- EXHIBIT A That certain tract or parcel of land situated in the City of Denton and County of Denton, State of Texas, part of the R Beaumont Survey, Abstract No 31, and more particularly described as follows (as described in that certain Deed of Conveyance dated May 26, 1949, from the Trustees of Flow Memorial Hospital, a political subdivision of the State of Texas created pursuant to Article 44941-1 of the Texas Civil Statutes, to the City of Denton, a municipal corporation, and Denton County, a political subdivision of the State of Texas, as filed in the Real Property rRecords of Denton County, tmder Clerk's File Noon Vet_ 3e; I_(Li P4, 2� ) BEGINNING at a concrete marker 60 feet north of the south boundary line of Scripture Street in the City of Denton, Texas, and 60 feet east of the west boundary line of Bryan Street in the City of Denton, Texas, THENCE North 880 56' East 707 5 feet to the point of curva- ture of a circular curve to the left, THENCE in a Northeasterly direction along the arc of said curve whose radius is 131 feet, a distance of 205 78 feet to the point of tangency of said curve, THENCE North 00 17' east 464 5 feet to a concrete marker for corner, THENCE North 890 38' West 839 2 feet to a concrete marker for corner, THENCE South 00 14' West 602 feet to a place of beginning, and being the same tract of land conveyed by Addie Scrip- ture, et al to the Flow Memorial Hospital Trustees by deed dated August 1, 1947, and recorded in Volume 337, page 472 of the Deed Records of Denton County, Texas, less that portion of said tract dedicated to the public for street purposes /Hr/MWC/k27-7a 039 Onf , 1 Sf� 1 SECURITY AGRFFMENT THIS SECURITY AGREEMFNT dated as of the LL6kday of January, 1988 (the "Security Agreement"), executed by FLOW REGIONAL MEDICAL CFNTER, INC , a texas nonprofit corporation (the "Medical Center"), and the City of Denton, a municipal corporation located in the County of Denton, texas (the "Secured Party") ➢IIINE5aEIH WHFREAS, a certain Compromise Settlement Agreement dated as of December 4, 1987 (the "Settlement Agreement"), has been duly executed by and among the Secured Party, the County of Denton, Texas, a politi- cal subdivision of the State of Texas (the "County"), the Board of Directors of Flow Memorial Hospital, a political subdivision of the State of Texas created pursuant to Article 44941-1 of the Texas Civil Statutc,s (the "Board of Directors"), Jim Mattox, Attorney General of the State of Texas (the "Attorney General"), 11 E Flow Trust, a testa- mentary trust (the "Trust"), Flow Memorial Foundation a Texas nonpro- fit corporation, and the Medical Center WHIREAS, a certain Asset Transfer Agreement dated as of December 4, 1987 (the "Asset Transfer Agreement"), has been duly oxecuted by and among the Medical Center, the County, the Board of Directors, the crust, the Attorney General and the Secured Party, WIILREAS, a certain Services Agreemont dated of even date herewith (the "Services Agreement"), has been duly executed by and between the Medical Center and the Secured Party, and WIiFRFAS, the Secured Party desires to �ecurp the Medical Center's performance of and compliance with certain Obligations (as hereinafter d(fined) and the Medical Center desires to provide such security NOW, THEREFORE, the Medical Center, in consideration of the fore- going premises, and of the obligations, covenants and agreements here- inafter mentioned and the sum of Ten Dollars ($10 00) to it duly paid at or before the execution and delivery of these presents and for other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, in order to secure the Medical Center's performance of and compliance with the Obligations as hereinafter defined, does hereby grant, transfer, assign, pledge and convey to the Secured Party and its successors and assigns, and grant the Secured Party and its successors and assigns a security interest in, all of its rights, titles and interests in and to the following described pro- perty, rights, titles, interests and estates (herein collectively called the "Collateral"), to wit all of the real property described on Fxhibit A attached hereto and incorporated herein by reference, which is situat- ed in Denton County Texas, together with all buildings, SK1 a - fixtures and improvements now or hereafter located on said land, and all rights, titles and interests of the Medical Center in and to all property abutting the above described land, and in and to all easements, streets and rights -of -way of every character adjoining the land above described, serving said land, affording ingress and egress thereto, or public or private utility connections thereto, whether said easements, right-of-way and streets shall be public or private, and all appurtenances, hereditaments, servitudes, rights, ways, privileges, prescriptions and advantages thereunto belonging or in anywise appertaining, and all strips and gores and any land lying in the bed of any street or road opened or proposed, in front of or adjoining said land, and together with all equipment, inventory, fixtures and articles of personal property of every kind, type, nature, and description (including, but not limited to, all awnings, screens, shades, blinds, mirrors, rugs, carpets, drapes, furniture appliances, art objects, cabinets, coun- ters, shelves, fittings, maintenance equipment, tools, landscaping and all plumbing, heating, air conditioning, lighting, all electrification and ventilating systems and all equipment and fixtures therefor, all laundry, refrigerating, cooking, incineration equipment, and all other machinery, equipment, fixtures and supplies, replacement parts and building materials, and all attachments and accessions thereto, which are now owned or which are hereafter acquired by the Medical Center, and now or hereafter located in, on or upon or attached in any manner to the land described above or any improvements now or hereafter located thereon, and all proceeds thereof, the name of the property and all telephone listings, all agreements, guaranties or contracts entered into by Medical Center or its successors in connection with the operation or maintenance of said land or improvements thereon, and all building permits or approvals granted by any governmental authority pertaining to said operation or maintenance, and all proceeds of any such property including cash, and including, but not limited to, all equipment, inventory, instruments, chattel papers, certificates of deposit, money, deposit accounts, accounts, general intangi- bles and other property of every kind, type, nature and description which are acquired with any such cash proceeds, to the full extent now allowed by the laws of the State of Texas TO HAVE AND TO HOTD the said Collateial, whether now owned or held or hereafter acquired, unto the Secured Party, its successors and assigns forever IN TRUST NEVERTHELESS, upon the terms herein set forth for the benefit of the Secured Party to secure the Medical Center's performance of and compliance with the Obligations, present and future -2- 5H 3 IT IS HEREBY COVENANTED, DECLARED AND AGREED that the liens and interests created under this Security Agreement to secure the Medical Center's performance of and compliance with the Obligations, both present and future, shall be first, prior and superior to any lien, reservation of title or other interest heretofore, contemporaneously or subsequently suffered or granted by the Medical Center, its legal representatives, successors or assigns, except only those (if any) expressly hereinafter referred to or described, and that the Collateral shall be held, dealt with and disposed of by the Secured Party, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Security Agreement as follows ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1 01 Definitions "Facilities" means and includes the assets, property, facilities and business of Flow Memorial Hospital which are located at 1310 Scripture Street, Denton County, Texas, and includes any modifications, substitutions for or additions thereto and therefor "Obligations" means and includes (a) The observance and performance of and compliance with all of the obligations, covenants and conditions ex- pressed or implied in the Asset Transfer Agreement, the Settlement Agreement, the Services Agreement and the Security Agreement (collectively, the "Agreements"), (b) The repayment upon an Event of Default (as hereinafter defined) of any and all sums, together with interest (if any) accruing thereon, which may hereinafter be advanced by or on behalf of the Secured Party or the County to or for the benefit of the Medical Center pursuant to the terms and conditions of the Agreements or otherwise, and (c) The payment of any and all sums from time to time owing by the Medical Center under the Settlement Agreement "Permitted Encumbrances" means and includes (a) Mechanic's, materialmen's, workmen's, vendor's or other undetermined liens and charges incident to construction or maintenance provided that the same shall be dis- charged in the ordinary course of business or the amount or validity of the same shall be duly and diligently contested in good faith with any pending execution thereof appropriately stayed, (b) The lien of taxes and assessments which are not delin- quent, -3- SA�f (c) The lien of taxes and assessments which are delinquent but the amount or validity of which is being duly and diligently contested in good faith and with respect to which the Medical Center shall have set aside adequate reserves, (d) The lien of this Security Agreement, and (a) The lien, if any, created by any of the documents per- taining to the issuance, security and repayment of the $290,000 Denton County -City of Denton, Texas Hospital Board Revenue Bonds, Series 1975 and $280,000 Denton County -City of Denton, Texas, Hospital Board Revenue Bonds, Series 1975-A Section 1 02 Interpretations The article and section headings of this Security Agreement are for reference purposes only and shall not affect its interpretation in any respect ARTICLE II GENFRAL COVENANTS AND PROVISIONS Section 2 01 Performance of Covenants The Medical Center covenants that it will faithfully perform at all times all covenants, undertakings, stipulations and provisions contained in the Agreements Section 2 02 Instruments of Further Assurance,_ Recording The Medical Center covenants that it will do, execute, ac.kriowledge and deliver, or cause to be done, executed, acknowledged and delivered, such supplements hereto and such further acts, instruments and trans- fers as the Secured Party may require for the better assigning, pledg- ing and confirming unto the Secured Party of, or granting a security interest in, the Collateral pledged and assigned hereunder Section 2 03 Warranty of Title The Medical Center hereby binds itself, its successors and assigns, to warrant and defend all and singular, title to the Collateral unto the Secured Party, its succes- sors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under the Medical Center, but not otherwise, subject to the Security Interest created hereby and the Permitted Encumbrances Obligor further warrants and represents that Obligor has not heretofore signed any financing state- ment directly or indirectly affecting the Collateral or any part there- of, and no such financing statement signed by Obligor is now on file in any public office except only those statements (if any) relating to the Permitted Encumbrances Section 2 04 General For the purpose of better securing per- formance of the Obligations, the Medical Center expressly covenants and agrees with the Secured Party that -4- S45 A No lien, security interest, right or remedy in favor of the Secured Party granted in or secured by this Security Agreement shall be considered as exclusive, but all liens, security interests, rights and remedies under this Security Agreement shall be cumulative of each other, and of all others which the Secured Party may now or hereafter have as security for and in respect of the Medical Center's performance of and compliance with the Obligations and all parts thereof, B The Medical Center will, to the extent obligated to do so under Section 2 03 hereof, proceed with reasonable diligence to correct any defect in title to the Collateral should any such defect be found to exist after the execution and delivery of this Security Agreement and in this connection, should it be found after the execution and delivery of this Security Agreement that there exists with respect to any of the Collateral any lien or encumbrance equal or superior in rank or priority to the lien and security interests created under this Security Agreement (other than liens or encumbrances included in the Permitted Encumbrances), or should any such lien or encumbrance hereaf- ter arise, then the Medical Center will promptly discharge and remove any such lien or encumbrance from the Collateral so affected, C Upon request of the Secured Party, the Medical Center will promptly correct any defect, which may be discovered after the execu- tion and delivery of this Security Agreement, in the Agreements or in any other writings secured hereby or executed in connection herewith, in the execution or acknowledgement hereof or thereof, or in the description of the Collateral, and will execute, acknowledge and deliv- er such further assurances and documents as in the opinion of the Secured Party shall be necessary, proper or appropriate to (1) convey and assign to the Secured Party all the Collateral herein conveyed or assigned, or intended so to be, or (ii) properly evidence or give notice of the Obligations or of each lien and security interest secui- ing the Medical Center's performance of and compliance with the Obliga- tions, D The Medical Center will, at the Medical Center's own cost and expense, pay and discharge all taxes, assessments, maintenance charges and other impositions of every kind and character charged, levied, assessed or imposed against the Collateral, or any portion thereof, as the same become payable, and before they become delinquent, and upon request of the Secured Party, shall furnish due proof of such payment to the Security Party promptly after payment, provided that nothing herein contained shall prohibit the Medical Center from duly and dili- gently contesting in good faith any such impositions, E The Medical Center will keep and maintain the Collateral in a good state of repair and condition, and will not tear down, damage or attempt to remove any of the Collateral, or permit the same to be torn down or removed, without the prior written consent of the Secured Party, -5- G9=1 F The Medical Center will promptly pay all bills for labor and materials incurred in connection with the Collateral and shall never permit to be fixed against the Collateral, or any part thereof, any lien, even though inferior to the lien hereof, for any such bill which may be legally due and payable Due proof of payment before delinquen- cy of all such bills shall be furnished by the Medical Center to the Secured Party upon request, provided that nothing herein contained shall prohibit the Medical Center from duly and diligently contesting in good faith any bill for labor or material, G The Medical Center will permit the Secured Party and its agents, representatives and employees at all reasonable times and upon reasonable prior notice to examine and inspect the Collateral, and will furnish to the Secured Party on request all pertinent information in regard to the Collateral, H The Secured Party at all times shall have the right to re- lease any part of the Collateral now or hereafter subject to the lien hereof without releasing any other part of the Collateral or other security, and without affecting the lien and security interest hereof as to the part or parts thereof not so released, I The Medical Center will notify the Secured Party in writing promptly of the commencement of any legal proceedings affecting the Collateral or the Obligations, or any part of either, and will take such action as may be necessary to protect and preserve the Secured Party's rights thereby affected, and should the Medical Center fail or refuse to take any such action, the Secured Party may but ;hall not be required to, at the Secured Party's election, take such action on behalf and in the name of the Medical Center and at the Medical Cen- ter's cost and expense, and J The Medical Center will maintain its corporate existence and will maintain and procure all necessary franchises and permits to the end that it shall be and continue to be a nonprofit corporation duly organized under the laws of the State of Texas and as an exempt organ- ization under the provisions of Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code), by the operation of Sec- tion 501(c)(3) of the Code, with full power and authority to own all of the Collateral as contemplated herein ARTICLF III EVENTS OF DEFAULT Section 3 01 Events of Default The Medical Center shall be in default under this Security Agreement upon the occurrence of any one of the following events or conditions (each an "Event of Default") (a) Default in the performance of or compliance with any of the Obligations, SR7 (b) Default in the payment of any indebtedness of the Medical Center to others than to the Secured Party in accordance with the terms of any of the instruments evidencing or securing the same, (c) If any warranty, representation or statement herein or in any other document executed by the Medical Center in connection with any of the Agreements, proves to be false or materially misleading when made, (d) The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Medical Center in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, examiner, sequestrator (or similar official) of the Medical Center or for any substantial part of any of its property, or ordering of the winding -up or liquidation of its affairs and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days, (e) The Medical Center shall become insolvent or unable to pay its debts as they mature, shall voluntarily suspend transac- tion of its business, shall commence a voluntary cRse under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall consent to the ap- pointment of or taking possession by a receiver, liquidator, assignee, trustee, examiner, custodian, sequestrator (or other similar official) of the Medical Center or for any substantial part of its property or shall make a general assignment for the benefit of creditors, or shall fail gener- ally to pay its debts as they become due, or shall take any corporate action in furthPrancP of any of the foregoing, or (f) The Settlement Agreement, the Asset Transfer Agreement or the Services Agreement is held to be illegal, invalid or unen- forceable Upon the occurrence of any one or more of the Events of Default, and at any time thereafter, the Secured Party may elect, the Medical Center hereby expressly waiving notice, demand and presentment to the extent permitted, to declare any and all sums referenced in subsec- tions (b) and (c) of the definition of the term "Obligations" set forth in Article I hereof immediately due and payable in full and to declare the Medical Center in default under any or all of the Agreements and so exercise any and all rights arising to the Secured Party as a conse- quence of the Medical Centers default -7- Section 3 02 General A The Secured Party may remedy any Fvent of Default, without waiving the same, or may waive any Event of Default without waiving any prior or subsequent Event of Default B The security interest and liens herein created shall not be affected by or affect any other security taken for the Medical Center's performance of and compliance with the Obligations, or any part thereof and the Secured Party shall not be limited by any election of remedies If it chooses to foreclose the security interests and lien granted hereunder by suit The right to sell under the terms hereof shall also exist cumulative with said suit and one method shall not bar the other, but both may be exercised at the same or different times, nor shall one be a defehse to the other C The Secured Party shall have the power to endorse and is hereby appointed the Medical Center's agent and attorney -in -fact for the purpose of doing any and every act which the Medical Center is obligated to do by this Security Agreement and to exercise all rights of the Medical Center relating to the Collateral ARTICLE IV PERFORMANCE OF THE MEDICAL CENTER'S OBLIGATIONS Section 4 01 Performance of the Medical Center's Obligations If the Medical Center should fail to comply with any of the agreements, covenants or obligations of the Medical Center under thi, or any other instrument securing, guaranteeing or otherwise relating to the Obliga- tions or any part thereof, or under any of the Agreements then the Secured Party may perform the same for the account and at the expense of the Medical Center but shall not be obligated to do so any and all expenses incurred or paid in so doing shall be deemed to be part of the Obligations and shall be payable by the Medical Center to the Secured Party, together with interest at the greater of (1) the rate of ten percent (10%) per annum, or to the extent permitted, or (ii) the highest nonusurious lawful rate from the date when same was so incurred or paid, the amount thereof and accrued interest thereon shall be due and payable on demand and shall be secured by and under this Security Agreement, and the amount and nature of such expense and the time when paid shall be fully established by the affidavit of an officer of the Secured Party Section 4 02 No Waiver The exercise of the privileges granted in this Article IV shall in no event be considered or constitute a waiver of the rights of the Secured Party, but is cumulative of such rights given by the Agreements, and all security instruments, guaran- tees and other instruments now or hereafter executed by (or accepted by the Medical Center as binding upon) the Medical Center, and of all rights and remedies available to the Secured Party under law 5*q9 ARTICLE V SECURITY INTEREST Section 5 01 Security Interest Without limiting any of the provisions of this Security Agreement, the Medical Center, as obligor, and referred to in this Article as "Obligor," expressly grants unto the Secured Party a security interest in all of the Collateral (including both that now and that hereafter existing) to the full extent that any portion of the Collateral may be subject to the Uniform Commercial Code of the State of Texas or other states where any portion of the Collat- eral may be situated (as applicable, the "Uniform Commercial Code") The security interest granted herein hereby covers and includes in addition to the Collateral all equipment, general intangibles, fixtures and other personal property used, or acquired by or for the benefit of Obligor, or otherwise related to the Collateral, and all products and proceeds thereof Section 5 02 Covenants Obligor covenants and agrees with the Secured Party that A In addition to and cumulative of any other remedies granted in this instrument to the Secured Party, the Secured Party may, upon or at any time after an Event of Default under this Security Agreement as provided in Article III hereof, proceed under the Uniform Commercial Code as to all or any part of the Collateral and shall have and may exercise with respect to the Collateral all the rights, remedies and powers of a secured party under the Uniform Commercial Code, including, without limitation, the right and power to sell, at public or private gale or sales, or otherwise dispose of, lease or utilize the Collateral and any part or parts thereof in any manner authorized or permitted under the Uniform Commercial Code after default by an debtor Among the rights of the Secured Party upon and after the occurrence of an Event of Default under this Security Agreement as provided in Arti- cle III hereof, and without limitation, the Secured Party shall have the right to take possession of the Collateral and to enter upon any premises where the same may be situated for such purpose without being deemed guilty of trespass and without liability for damages thereby occasioned, and to take any action deemed necessary, appropriate or desirable by the Secured Party, at its option and in its discretion, to repair, refurbish or otherwise prepare the Collateral for gale, lease or other use or disposition as herein authorized To the extent per- mitted by law, Obligor hereby waives, or does not waive, appraisement, at the option of the Secured Party to be exercised by it at any time prior to judgment in any such proceeding, and Obligor further agrees to waive, to the extent it may lawfully do so, the benefit of all stay, extension or redemption laws now or hereafter in force, and all rights of redemption to which it may be entitled, and Obligor expressly waives any notices of sale or other disposition of the Collateral and any other rights or remedies of a debtor or formalities prescribed by law relative to sale or disposition of the Collateral or exercise of any other right or remedy of the Secured Party existing after default hereunder, and to the extent any such notice is required and cannot be waived, Obligor agrees that if such notice is personally delivered or mailed, postage prepaid, to Obligor at the address designated hereafter ME S 11410 in this Security Agreement (or at Obligor's most recent address as shown by the records of the Secured Party) at least ten (10) days before the time of any public sale or disposition, or the date after which the Collateral will be sold or disposed of by private Sale, such notice shall be deemed reasonable and shall fully satisfy any require- ment for giving any such notice B After the occurrence of an Event of Default under this Secu- rity Agreement as provided in Article III hereof, the Secured Party is expressly granted the right, at its option, to transfer at any time to itself or its nominee the Collateral, or any part thereof, and to receive the monies, income, proceeds or benefits attributable or accru- ing thereto and to hold the same as security for the performance of and compliance with the Obligations and to apply it in accordance with Article III hereof All rights to marshalling of assets or sale in Inverse order of alienation, including any such rights with respect to the Collateral, are hereby waived C All recitals in any instrument of assignment or any other instrument executed by the Secured Party incident to sale, transfer, assignment, lease or other disposition or utilization of the Collateral or any part thereof hereunder shall be full proof of the matters stated therein, and no other proof shall be required to establish full legal propriety of the sale or other action or of any fact, condition or thing incident thereto, and all prerequisites of such sale or other action and of the fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred D Should the Secured Party elect to exercise its rights under the Uniform Commercial Code as to part of the personal property or fixtures described herein, this election shall not preclude the Secured Party from exercising any or all of the rights and remedies granted by the other Articles of this Security Agreement as to the remaining personal property or fixtures E The Secured Party is authorized to file in any jurisdiction where the Secured Party deems it necessary, one or more financing statements, one or more continuation statements or one or more mort- gages or Deeds of Trust, and at the request of the Secured Party, Obligor will join the Secured Party in executing one or more financing statements, continuation statements or both pursuant to the Uniform Commercial Code in form satisfactory to the Secured Party, or one or more mortgages or Deeds of Trust in all public offices at any time and from time to time whenever filing or recording of any financing state- ment, continuation statement, mortgage or Deed of Trust is deemed by the Secured Party to be necessary or desirable ARTICLE VI DISCHARGE OF SECURITY INTEREST When all of the liabilities or indebtedness resulting from or related to the operation, construction or maintenance of the Facilities existing as of December 31, 1987, including, without limitation, the -10- Utilities Debt referenced in Section 1 2 of the Settlement Agreement, have been paid, performed or satisfied in full, if this Security Agreement has not theretofore been foreclosed, the Secured Party shall reassign to the Medical Center, without recourse or warranty, express or implied, the then existing rights, titles and interest of the Secured Party in and to the Collateral arising pursuant to the terms of the Security Agreement, the costs of such reassignment to be borne by the Medical Center, and the Medical Center's obligations hereunder shall be deemed fully satisfied and discharged in full ARTICLE VII GENERAL Section 7 01 Extension, Rearrangement, Discharge or Renewal of Obligations It is expressly agreed that any part of the security herein described, or any other security for the Medical Center's per- formance of and compliance with the Obligations, may be waived or released without in anywise altering, varying or diminishing the force, effect or lien of this Security Agreement, and the lien and security interest granted by this Security Agreement shall continue as a prior lien and security interest on all of the Collateral not expressly so released, until all sums with interest and charges hereby secured are fully paid and the Obligations are performed and complied with, and no other security now existing or hereafter taken to secure the perfor- mance of and compliance with the Obligations or any part thereof shall in any manner impair or affect the security given by this Security Agreement, and all security for the Medical Center's performance of and compliance with the Obligations or any part thereof anall be taken, considered and held as cumulative Section 7 02 Notice Except where certified or registered mail notice is required by applicable law, service of any notice to the Medical Center required or permitted hereunder shall be completed upon hand delivery or deposit of the notice enclosed in a first-class postage prepaid wrapper, properly addressed to the Medical Center at the Medical Center's address designated hereafter in this Security Agreement (or to the Medical Center's most recent address as shown by the records of the Secured Party in a post office or official deposito- ry under the care and custody of the United States Postal Service), and the affidavit of any person having knowledge of the facts concerning such hand delivery or mailing shall be conclusive evidence of the fact of such service, provided, that such method of giving notice shall not be exclusive, but instead any notice may be given to the Medical Center in any manner permitted or recognized by law lows Notice desired to be given hereunder, shall be addressed as fol- To the Secured Party City of Denton, Texas Municipal Building Denton, Texas 76201 Attn City Attorney -11- 54/oZ- To the Medical Center Flow Regional Medical Center, Inc 218 North Elm Street Denton, Texas 76202 Attn President or to such other address as indicated in writing by either party Section 7 03 Severability In the event any item, term or provision contained in this Security Agreement is in conflict, or may hereafter be held to be in conflict, with the laws of the State of Texas or of the United States, this Security Agreement shall be affect- ed only as to such particular item, term or provision, and shall in all other respects remain in full force and effect Section 7 04 Governing Law This Security Agreement shall be governed in all respects, including validity, interpretation and af- fect, by, and shall be enforceable in accordance with, the laws of the State of Texas and of the United States IN WITNESS WHEREOF, Flow Regional Medical Center, Inc and the City of Denton have caused this Security Agreement to be executed on their behalf by their duly authorized representatives as of the date first written above FLOW REGIONAL MEDICAL CENTER, INC By Sennett Ki President CITY OF DFNTON By — — Ray S phens, Payor 250A SJ4 L3 THE STATE OF TEXAS § COUNTY OF DENTON § BEFORE ME, the undersigned authority, on this day personally appeared Sennett Kirk, President of Flow Regional Medical Center, Inc , known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said nonprofit corporation, in the capacity therein stated, for the purposes and consideration therein expressed and that all state- ments therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the /Aay of Janu- ary, 1988 . Ndery hibk eft d TM Taw My Ibmmkdon Lou MKO 31. an THE STATF OF TEXAS § § COUNTY OF DENTON § No a y Public in and fo th State of !n c My Commission Expires BEFORE ME, the undersigned authority, on this day personally appeared Ray Stephens, Mayor of the City of Denton, known to mr to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said municipal corporation, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the /��y of Janu- ary, 1988 OWNJEANETTE SCOT[MY Cm b' 3bb d Taw bib" UK* 31,10 /Hr/MWC/k27-7a 032 oz�� c4of'?__ NqVy Public d or t e State of in pp My Commission Expires 3 ' .31'd -13- 5'q/ � EXHIBIT A That certain tract or parcel of land situated in art Cot y of the Denton and County of Denton, State of Texas, p R Beaumont Survey, Abstract No 31, and more particularly described as follows (as described in that certain Deed of Conveyance dated May 26, 1949, from the Trustees of the H E Flow Trust, a charitable trust, to the City of Denton, a municipal corporation, and Denton County, apolitical subdivision of the State of Texas, as filed in the Real Property Deed Records of Denton County at Page 252 of Volume 351, to -wit BEGINNING at a concrete marker 60 feet north of the south boundary line of Scripture Street in the City of Denton, Texas, and 60 feet east of the west boundary line of Bryan Street in the City of Denton, Texas, THENCE North 880 56' East 707 5 feet to the point of curvature of a circular curve to the left, THENCE in a Northeasterly direction along the arc of said curve whose radius is 131 feet, a distance of 205 78 feet to the point of tangency of said curve, THENCE North 00 17' east 464 5 feet to a concrete marker for corner, THENCE North 890 38' West 839 2 feet to a concrete marker for corner, THENCE South 00 14' West 602 feet to a place of beginning, and being the same tract of land conveyed by Addle Scripture, et al to the Flow Memorial Hospital Trustees by deed dated August 1, 1947, and recorded in Volume 337, page 472 of the Deed Records of Denton County, Texas, less that portion of said tract dedicated to the public for street purposes /qs,4i 2197L AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE AN AMENDED AND RESTATED SECURITY AGREEMENT BETWEEN THE CITY AND FLOW REGIONAL MEDICAL CENTER, INC , AND PROVIDING AN EFFECTIVE DATE WHEREAS, on December 8, 1987 the City Council, with the adoption of Ordinance No 87-229, authorized the Mayor to execute a Security Agreement between the City and Flow Regional Medical Center, Inc to protect the City's interests in the transfer of its interest of Flow Memorial Hospital, and WHEREAS, Flow Regional Medical Center has requested that Article VI of the Security Agreement be amended to provide for a date reasonably certain for the discharge of the security interest, and WHEREAS, the City Council has agreed to such request and amendment, NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION I That the Mayor is hereby authorized to execute the en a and Restated Security Agreement between the City and Flow Regional Medical Center, a copy of which is attached hereto and incorporated by reference herein SECTION II That the City Secretary is hereby directed to affix a copy of this ordinance, with the executed Agreement attached, to the original Security Agreement dated January 15, 1988, inscribing on the original Agreement the fact that it has been amended and the effective date of such Amendment SECTION III That this ordinance shall become effective imme ate y upon its passage and approval PASSED AND APPROVED this the gAd day of 1988 1 ATTEST URED FER 4 "ER , CITY SECRETINY APP VED AS TO LEGAL FORM DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY lg5Ag- AMENDED AND RESTATED SECURITY AGREEMENT THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of the 15th day of January, 1988 (the "Security Agreement"), executed by FLOW REGIONAL MEDICAL CENTER, INC , a Texas nonprofit corporation (the "Medical Center"), and the City of Denton, a municipal corporation located in the County of Denton, Texas (the "Secured Party") W I I N E a a E I H WHEREAS, that certain Security Agreement (the "Original Security Agreement") by and between the Medical Center and the Secured Party was executed on January 15, 1988, WHEREAS, the Medical Center and the Secured Party intend that this Security Agreement replace and supersede the Original Security Agree- ment in its entirety, WHEREAS, a certain Compromise Settlement Agreement dated as of December 4, 1987 (the "Settlement Agreement"), has been duly executed by and among the Secured Party, the County of Denton, Texas, a politi- cal subdivision of the State of Texas (the "County"), the Board of Directors of Flow Memorial Hospital, a political subdivision of the State of Texas created pursuant to Article 44941-1 of the Texas Civil Statutes (the "Board of Directors"), Jim Mattox, Attorney General of the State of Texas (the "Attorney General"), H E Flow Trust, a testa- mentary trust (the "Trust"), Flow Memorial Foundation, a Texas nonpro- fit corporation, and the Medical Center, WHEREAS, a certain Asset Transfer Agreement dated as of December 4, 1987 (the "Asset Transfer Agreement"), has been duly executed by and among the Medical Center, the County, the Board of Directors, the Trust, the Attorney General and the Secured Party, WHEREAS, a certain Services Agreement dated of even date herewith (the "Services Agreement"), has been duly executed by and between the Medical Center and the Secured Party, and WHEREAS, the Secured Party desires to secure the Medical Center's performance of and compliance with certain Obligations (as hereinafter defined) and the Medical Center desires to provide such security NOW, THEREFORE, the Medical Center, in consideration of the fore- going premises, and of the obligations, covenants and agreements here- inafter mentioned and the sum of Ten Dollars ($10 00) to it duly paid at or before the execution and delivery of these presents and for other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, in order to secure the Medical Center's performance of and compliance with the Obligations as hereinafter defined, does hereby grant, transfer, assign, pledge and convey to the 45)q 3 Secured Party and its successors and assigns, and grant the Secured Party and its successors and assigns a security interest in, all of its rights, titles and interests in and to the following described pro- perty, rights, titles, interests and estates (herein collectively called the "Collateral"), to wit all of the real property described on Exhibit A attached hereto and incorporated herein by reference, which is situat- ed in Denton County, Texas, together with all buildings, fixtures and improvements now or hereafter located on said land, and all rights, titles and interests of the Medical Center in and to all property abutting the above described land, and in and to all easements, streets and rights -of -way of every character adjoining the land above described, serving said land, affording ingress and egress thereto, or public or private utility connections thereto, whether said easements, right-of-way and streets shall be public or private, and all appurtenances, hereditaments, servitudes, rights, ways, privileges, prescriptions and advantages thereunto belonging or in anywise appertaining, and all strips and gores and any land lying in the bed of any street or road opened or proposed, in front of or adjoining said land, and together with all equipment, inventory, fixtures and articles of personal property of every kind, type, nature, and description (including, but not limited to, all awnings, screens, shades, blinds, mirrors, rugs, carpets, drapes, furniture appliances, art objects, cabinets, coun- ters, shelves, fittings, maintenance equipment, tools, landscaping and all plumbing, heating, air conditioning, lighting, all electrification and ventilating systems and all equipment and fixtures therefor, all laundry, refrigerating, cooking, incineration equipment, and all other machinery, equipment, fixtures and supplies, replacement parts and building materials, and all attachments and accessions thereto, which are now owned or which are hereafter acquired by the Medical Center, and now or hereafter located in, on or upon or attached in any manner to the land described above or any improvements now or hereafter located thereon, and all proceeds thereof, the name of the property and all telephone listings, all agreements, guaranties or contracts entered into by Medical Center or its successors in connection with the operation or maintenance of said land or improvements thereon, and all building permits or approvals granted by any governmental authority pertaining to said operation or maintenance, and all proceeds of any such property including cash, and including, but not limited to, all equipment, inventory, instruments, chattel papers, certificates of deposit, money, deposit accounts, accounts, general intangi- bles and other property of every kind, type, nature and description which are acquired with any such cash proceeds, to the full extent now allowed by the laws of the State of Texas -2- ,45,4 4/ TO HAVE AND TO HOLD the said Collateral, whether now owned or held or hereafter acquired, unto the Secured Party, its successors and assigns, forever IN TRUST NEVERTHELESS, upon the terms herein set forth for the benefit of the Secured Party to secure the Medical Center's performance of and compliance with the Obligations, present and future IT IS HEREBY COVENANTED, DECLARED AND AGREED that the liens and interests created under this Security Agreement to secure the Medical Center's performance of and compliance with the Obligations, both present and future, shall be first, prior and superior to any lien, reservation of title or other interest heretofore, contemporaneously or subsequently suffered or granted by the Medical Center, its legal representatives, successors or assigns, except only those (if any) expressly hereinafter referred to or described, and that the Collateral shall be held, dealt with and disposed of by the Secured Party, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Security Agreement as follows ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1 01 Definitions "Facilities" means and includes the assets, property, facilities and business of Flow Memorial Hospital which are located at 1310 Scripture Street, Denton County, Texas, and includes any modifications, substitutions for or additions thereto and therefor "Obligations" means and includes (a) The observance and performance of and compliance with all of the obligations, covenants and conditions ex- pressed or implied in the Asset Transfer Agreement, the Settlement Agreement, the Services Agreement and the Security Agreement (collectively, the "Agreements"), (b) The repayment upon an Event of Default (as hereinafter defined) of any and all sums, together with interest (if any) accruing thereon, which may hereinafter be advanced by or on behalf of the Secured Party or the County to or for the benefit of the Medical Center pursuant to the terms and conditions of the Agreement9 or otherwise, and (c) The payment of any and all sums from time to time owing by the Medical Center under the Settlement Agreement "Permitted Encumbrances" means and includes (a) Mechanic's, materialmen's, workmen's, vendor's or other undetermined liens and charges incident to construction -3- -4s'�qs or maintenance provided that the same shall be dis- charged in the ordinary course of business or the amount or validity of the same shall be duly and diligently contested in good faith with any pending execution thereof appropriately stayed (b) The lien of taxes and assessments which are not delin- quent, (c) The lien of taxes and assessments which are delinquent but the amount or validity of which is being duly and diligently contested in good faith and with respect to which the Medical Center shall have set aside adequate reserves, (d) The lien of this Security Agreement, and (a) The lien, if any, created by any of the documents per- taining to the issuance, security and repayment of the 0290,000 Denton County -City of Denton, Texas Hospital Board Revenue Bonds, Series 1975 and $280,000 Denton County -City of Denton, Texas, Hospital Board Revenue Bonds, Series 1975-A Section 1 02 Interpretations The article and section headings of this Security Agreement are for reference purposes only and shall not affect its interpretation in any respect ARTICLE II GENERAL COVENANTS AND PROVISIONS Section 2 01 Performance of Covenants The Medical Center covenants that it will faithfully perform at all times all covenants, undertakings, stipulations and provisions contained in the Agreements Section 2 02 Instruments of Further Assurance, Recordinx The Medical Center covenants that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such supplements hereto and such further acts, instruments and trans- fers as the Secured Party may require for the better assigning, pledg- ing and confirming unto the Secured Party of, or granting a security interest in, the Collateral pledged and assigned hereunder Section 2 03 Warranty of Title The Medical Center hereby binds itself, its successors and assigns, to warrant and defend all and singular, title to the Collateral unto the Secured Party, its succes- sors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under the Medical Center, but not otherwise, subject to the Security Interest created hereby and the Permitted Encumbrances Obligor further warrants and represents that Obligor has not heretofore signed any financing state- -4- ment directly or indirectly affecting the Collateral or any part there- of, and no such financing statement signed by Obligor is now on file in any public office except only those statements (if any) relating to the Permitted Encumbrances Section 2 04 General For the purpose of better securing per- formance of the Obligations, the Medical Center expressly covenants and agrees with the Secured Party that A No lien, security interest, right or remedy in favor of the Secured Party granted in or secured by this Security Agreement shall be considered as exclusive, but all liens, security interests, rights and remedies under this Security Agreement shall be cumulative of each other, and of all others which the Secured Party may now or hereafter have as security for and in respect of the Medical Center's performance of and compliance with the Obligations and all parts thereof, B The Medical Center will, to the extent obligated to do so under Section 2 03 hereof, proceed with reasonable diligence to correct any defect in title to the Collateral should any such defect be found to exist after the execution and delivery of this Security Agreement and in this connection, should it be found after the execution and delivery of this Security Agreement that there exists with respect to any of the Collateral any lien or encumbrance equal or superior in rank or priority to the lien and security interests created under this Security Agreement (other than liens or encumbrances included in the Permitted Encumbrances), or should any such lien or encumbrance hereaf- ter arise, then the Medical Center will promptly discharge and remove any such lien or encumbrance from the Collateral so affected, C Upon request of the Secured Party, the Medical Center will promptly correct any defect, which may be discovered after the execu- tion and delivery of this Security Agreement, in the Agreements or in any other writings secured hereby or executed in connection herewith, in the execution or acknowledgement hereof or thereof, or in the description of the Collateral, and will execute, acknowledge and deliv- er such further assurances and documents as in the opinion of the Secured Party shall be necessary, proper or appropriate to (i) convey and assign to the Secured Party all the Collateral herein conveyed or assigned, or intended so to be, or (ii) properly evidence or give notice of the Obligations or of each lien and security interest secur- ing the Medical Center's performance of and compliance with the Obliga- tions, D The Medical Center will, at the Medical Center's own cost and expense, pay and discharge all taxes, assessments, maintenance charges and other impositions of every kind and character charged, levied, assessed or imposed against the Collateral, or any portion thereof, as the same become payable, and before they become delinquent, and upon request of the Secured Party, shall furnish due proof of such payment to the Security Party promptly after payment, provided that nothing -5- 14s,"q- 7 herein contained shall prohibit the Medical Center from duly and dili- gently contesting in good faith any such impositions, E The Medical Center will keep and maintain the Collateral in a good state of repair and condition, and will not tear down, damage or attempt to remove any of the Collateral, or permit the same to be torn down or removed, without the prior written consent of the Secured Party, F The Medical Center will promptly pay all bills for labor and materials incurred in connection with the Collateral and shall never permit to be fixed against the Collateral, or any part thereof, any lien, even though inferior to the lien hereof, for any such bill which may be legally due and payable Due proof of payment before delinquen- cy of all such bills shall be furnished by the Medical Center to the Secured Party upon request, provided that nothing herein contained shall prohibit the Medical Center from duly and diligently contesting in good faith any bill for labor or material, G The Medical Center will permit the Secured Party and its agents, representatives and employees at all reasonable times and upon reasonable prior notice to examine and inspect the Collateral, and will furnish to the Secured Party on request all pertinent information in regard to the Collateral, H The Secured Party at all times shall have the right to re- lease any part of the Collateral now or hereafter subject to the lien hereof without releasing any other part of the Collateral or other security, and without affecting the lien and security interest hereof as to the part or parts thereof not so released, I The Medical Center will notify the Secured Party in writing promptly of the commencement of any legal proceedings affecting the Collateral or the Obligations, or any part of either, and will take such action as may be necessary to protect and preserve the Secured Party's rights thereby affected, and should the Medical Center fail or refuse to take any such action, the Secured Party may but shall not be required to, at the Secured Party's election, take such action on behalf and in the name of the Medical Center and at the Medical Cen- ter's cost and expense, and J The Medical Center will maintain its corporate existence and will, maintain and procure all necessary franchises and permits to the end that it shall be and continue to be a nonprofit corporation duly organized under the laws of the State of Texas and as an exempt organ- ization under the provisions of Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code), by the operation of Sec- tion 501(c)(3) of the Code, with full power and authority to own all of the Collateral as contemplated herein :M. t4s,4g ARTICLE III EVENTS OF DEFAULT Section 3 01 Events of Default The Medical Center shall be in default under this Security Agreement upon the occurrence of any one of the following events or conditions (each an "Event of Default") (a) Default in the performance of or compliance with any of the Obligations, (b) Default in the payment of any indebtedness of the Medical Center to others than to the Secured Party in accordance with the terms of any of the instruments evidencing or securing the same, (c) If any warranty, representation or statement herein or in any other document executed by the Medical Center in connection with any of the Agreements, proves to be false or materially misleading when made, (d) The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Medical Center in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, examiner, sequestrator (or similar official) of the Medical Center or for any substantial part of any of its property, or ordering of the winding -up or liquidation of its affairs and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days, (e) The Medical Center shall become insolvent or unable to pay its debts as they mature, shall voluntarily suspend transac- tion of its business, shall commence a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall consent to the ap- pointment of or taking possession by a receiver, liquidator, assignee, trustee, examiner, custodian, sequestrator (or other similar official) of the Medical Center or for any substantial part of its property or shall make a general assignment for the benefit of creditors, or shall fail gener- ally to pay its debts as they become due, or shall take any corporate action in furtherance of any of the foregoing, or (f) The Settlement Agreement, the Asset Transfer Agreement or the Services Agreement is held to be illegal, invalid or unen- forceable -7- me Upon the occurrence of any one or more of the Events of Default, and at any time thereafter, the Secured Party may elect, the Medical Center hereby expressly waiving notice, demand and presentment to the extent permitted, to declare any and all sums referenced in subsec- tions (b) and (c) of the definition of the term "Obligations" set forth in Article I hereof immediately due and payable in full and to declare the Medical Center in default under any or all of the Agreements and so exercise any and all rights arising to the Secured Party as a conse- quence of the Medical Center's default Section 3 02 General A The Secured Party may remedy any Event of Default, without waiving the same, or may waive any Event of Default without waiving any prior or subsequent Event of Default B The security interest and liens herein created shall not be affected by or affect any other security taken for the Medical Center's performance of and compliance with the Obligations, or any part thereof and the Secured Party shall not be limited by any election of remedies if it chooses to foreclose the security interests and lien granted hereunder by suit The right to sell under the terms hereof shall also exist cumulative with said suit and one method shall not bar the other, but both may be exercised at the same or different times, nor shall one be a defense to the other C The Secured Party shall have the power to endorse and is hereby appointed the Medical Center's agent and attorney -in -fact for the purpose of doing any and every act which the Medical Center is obligated to do by this Security Agreement and to exercise all rights of the Medical Center relating to the Collateral ARTICLE IV PERFORMANCE OF THE MEDICAL CENTER'S OBLIGATIONS Section 4 01 Performance of the Medical Center's Obligations If the Medical Center should fail to comply with any of the agreements, covenants or obligations of the Medical Center under this or any other instrument securing, guaranteeing or otherwise relating to the Obliga- tions or any part thereof, or under any of the Agreements, then the Secured Party may perform the same for the account and at the expense of the Medical Center but shall not be obligated to do so, any and all expenses incurred or paid in so doing shall be deemed to be part of the Obligations and shall be payable by the Medical Center to the Secured Party, together with interest at the greater of (i) the rate of ten percent (10%) per annum, or to the extent permitted, or (ii) the highest nonusurious lawful rate from the date when same was so incurred or paid, the amount thereof and accrued interest thereon shall be due andlpayable on demand and shall be secured by and under this Security Agreement, and the amount and nature of such expense and the time when paid shall be fully established by the affidavit of an officer of the Secured Party -8- i4s,4la Section 4 02 No Waiver The exercise of the privileges granted in this Article IV shall in no event be considered or constitute a waiver of the rights of the Secured Party, but is cumulative of such rights given by the Agreements, and all security instruments, guaran- tees and other instruments now or hereafter executed by (or accepted by the Medical Center as binding upon) the Medical Center, and of all rights and remedies available to the Secured Party under law ARTICLE V SECURITY INTEREST Section 5 01 Security Interest Without limiting any of the provisions of this Security Agreement, the Medical Center, as obligor, and referred to in this Article as "Obligor," expressly grants unto the Secured Party a security interest in all of the Collateral (including both that now and that hereafter existing) to the full extent that any portion of the Collateral may be subject to the Uniform Commercial Code of the State of Texas or other states where any portion of the Collat- eral may be situated (as applicable, the "Uniform Commercial Code") The security interest granted herein hereby covers and includes in addition to the Collateral all equipment, general intangibles, fixtures and other personal property used, or acquired by or for the benefit of Obligor, or otherwise related to the Collateral, and all products and proceeds thereof Section 5 02 Covenants Obligor covenants and agrees with the Secured Party that A In addition to and cumulative of any other remedies granted in this instrument to the Secured Party, the Secured Party may, upon or at any time after an Event of Default under this Security Agreement as provided in Article III hereof, proceed under the Uniform Commercial Code as to all or any part of the Collateral and shall have and may exercise with respect to the Collateral all the rights, remedies and powers of a secured party under the Uniform Commercial Code, including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of, lease or utilize the Collateral and any part or parts thereof in any manner authorized or permitted under the Uniform Commercial Code after default by an debtor Among the rights of the Secured Party upon and after the occurrence of an Event of Default under this Security Agreement as provided in Arti- cle III hereof, and without limitation, the Secured Party shall have the right to take possession of the Collateral and to enter upon any premises where the same may be situated for such purpose without being deemed guilty of trespass and without liability for damages thereby occasioned, and to take any action deemed necessary, appropriate or desirable by the Secured Party, at its option and in its discretion, to repair, refurbish or otherwise prepare the Collateral for sale, lease or other use or disposition as herein authorized To the extent per- mitted by law, Obligor hereby waives, or does not waive, appraisement, at the option of the Secured Party to be exercised by it at any time prior to judgment in any such proceeding, and Obligor further agrees to waive, to the extent it may lawfully do so, the benefit of all stay, -9. extension or redemption laws now or hereafter in force, and all rights of redemption to which it may be entitled, and Obligor expressly waives any notices of sale or other disposition of the Collateral and any other rights or remedies of a debtor or formalities prescribed by law relative to sale or disposition of the Collateral or exercise of any other right or remedy of the Secured Party existing after default hereunder, and to the extent any such notice is required and cannot be waived, Obligor agrees that if such notice is personally delivered or mailed, postage prepaid, to Obligor at the address designated hereafter in this Security Agreement (or at Obligor's most recent address as shown by the records of the Secured Party) at least ten (10) days before the time of any public sale or disposition, or the date after which the Collateral will be sold or disposed of by private sale, such notice shall be deemed reasonable and shall fully satisfy any require- ment for giving any such notice B After the occurrence of an Event of Default under this Secu- rity Agreement as provided in Article III hereof, the Secured Party is expressly granted the right, at its option, to transfer at any time to itself or its nominee the Collateral, or any part thereof, and to receive the monies, income, proceeds or benefits attributable or accru- ing thereto and to hold the same as security for the performance of and compliance with the Obligations and to apply it in accordance with Article III hereof All rights to marshalling of assets or sale in inverse order of alienation, including any such rights with respect to the Collateral, are hereby waived C All recitals in any instrument of assignment or any other instrument executed by the Secured Party incident to sale, transfer, assignment, lease or other disposition or utilization of the Collateral or any part thereof hereunder shall be full proof of the matters stated therein, and no other proof shall be required to establish full legal propriety of the sale or other action or of any fact, condition or thing incident thereto, and all prerequisites of such sale or other action and of the fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred D Should the Secured Party elect to exercise its rights under the Uniform Commercial Code as to part of the personal property or fixtures described herein, this election shall not preclude the Secured Party from exercising any or all of the rights and remedies granted by the other Articles of this Security Agreement as to the remaining personal property or fixtures E The Secured Party is authorized to file in any jurisdiction where the Secured Party deems it necessary, one or more financing statements, one or more continuation statements or one or more mort- gages or Deeds of Trust, and at the request of the Secured Party, Obligor will join the Secured Party in executing one or more financing statements, continuation statements or both pursuant to the Uniform Commercial Code in form satisfactory to the Secured Party, or one or more mortgages or Deeds of Trust in all public offices at any time and -10- from time to time whenever filing or recording of any financing state- ment, continuation statement, mortgage or Deed of Trust is deemed by the Secured Party to be necessary or desirable ARTICLE VI DISCHARGE OF SECURITY INTEREST At any time after December 31, 1992, if this Security Agreement has not heretofore been foreclosed, the Secured Party shall reassign to the Medical Center, without recourse or warranty, express or implied, the then existing rights, titles and interest of the Secured Party in and to the Collateral arising pursuant to the terms of this Security Agreement, the costs of such reassignment to be borne by the Medical Center, and the Medical Center's obligations hereunder shall be deemed fully satisfied and discharged in full, upon the full and complete satisfaction of the following conditions A The Medical Center pays, performs or satisfies in full the Utilities Debt referenced in Section 1 2 of the Settlement Agreement and the liabilities and indebtedness listed on Exhibit B attached hereto, B The Medical Center pays, performs or satisfies in full all of the other liabilities or indebtedness resulting from or related to the operation, construction or maintenance of the Facilities on or before December 31, 1987, not otherwise described or referenced in condition A in this Article VI and which are known or asserted prior to the Release Date (as herein defined), and C The Medical Center procures, at its cost and expense, professional and comprehensive general liability insurance (the "Insurance") covering the Secured Party as loss payee for claims resulting from or related to the operation, construction or maintenance of the Facilities on or before December 31, 1987, that are asserted or known and not otherwise paid, performed or satisfied in full, at any time from the Release Date until January 1, 2008, inclusive The Insurance shall provide such amounts of "per occurrence" coverage, "annual aggregate" coverage, and "umbrella excess" coverage as are considered standard for a 150-bed acute -care hospital located in Denton, Texas at the time the Insurance is procured If the Secured Party and the Medical Center cannot agree upon the amounts of such coverage, the Secured Party and the Medical Center shall select an independent professional insurance consultant (the "Consultant") acceptable to both to determine the amounts of such coverages The determination of the Consultant regarding the amounts of such coverages shall be final and binding on the Secured Party and the Medical Center As used in this Article VI, "Release Date" shall mean that date after December 31, 1992, on which the Medical Center has fully and completely satisfied conditions A and B in this Article VI -11- .4s,-ia ARTICLE VII GENERAL Section 7 01 Extension, Rearranxement, rischarxe or Renewal of Obligations It is expressly agreed that any part of the security herein described, or any other security for the Medical Center's per- formance of and compliance with the Obligations, may be waived or released without in anywise altering, varying or diminishing the force, effect or lien of this Security Agreement, and the lien and security interest granted by this Security Agreement shall continue as a prior lien and security interest on all of the Collateral not expressly so released, until all sums with interest and charges hereby secured are fully paid and the Obligations are performed and complied with, and no other security now existing or hereafter taken to secure the perfor- mance of and compliance with the Obligations or any part thereof shall in any manner impair or affect the security given by this Security Agreement, and all security for the Medical Center's performance of and compliance with the Obligations or any part thereof shall be taken, considered and held as cumulative Section 7 02 Notice Except where certified or registered mail notice is required by applicable law, service of any notice to the Medical Center required or permitted hereunder shall be completed upon hand delivery or deposit of the notice, enclosed in a first-class postage prepaid wrapper, properly addressed to the Medical Center at the Medical Center's address designated hereafter in this Security Agreement (or to the Medical Center's most recent address as shown by the records of the Secured Party in a post office or official deposito- ry under the care and custody of the United States Postal Service), and the affidavit of any person having knowledge of the facts concerning such hand delivery or mailing shall be conclusive evidence of the fact of such service, provided, that such method of giving notice shall not be exclusive, but instead any notice may be given to the Medical Center in any manner permitted or recognized by law lows Notice desired to be given hereunder, shall be addressed as fol- To the Secured Party City of Denton, Texas Municipal Building Denton, Texas 76201 Attn City Attorney To the Medical Center Flow Regional Medical Center, Inc 218 North Elm Street Denton, Texas 76202 Attn President or to such other address as indicated in writing by either party Section 7 03 Severability In the event any item, term provision contained in this Security Agreement is in conflict, or hereafter be held to be in conflict, with the laws of the State -12- or may of f 5,4,1Y Texas or of the United States, this Security Agreement shall be affect- ed only as to such particular item, term or provision, and shall in all other respects remain in full force and effect Section 7 04 GoverninY Law This Security Agreement shall be governed in all respects, including validity, interpretation and af- fect, by, and shall be enforceable in accordance with, the laws of the State of Texas and of the United States Section 7 05 SupersedinII Effect This Security Agreement shall replace and supersede the Original Security Agreement in its entirety, and the Original Security Agreement shall become null and void immediately upon the execution hereof IN WITNESS WHEREOF, Flow Regional Medical Center, Inc and the City of Denton have caused this Security Agreement to be executed on their behalf by their duly authorized representatives as of the date first written above FLOW REGIONAL MEDICAL CENTER, INC By Sennett Kirk, President CITY OF DENTON By Ray St I lens, M yor -13- 11s1�-is THE STATE OF TEXAS 3 COUNTY OF DENTON BEFORE ME, the undersigned authority, on this day personally appeared Sennett Kirk, President of Flow Regional Medical Center, Inc , known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said nonprofit corporation, in the capacity therein stated, for the purposes and consideration therein expressed and that all state- ments therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _ day of February, 1988 Notary Public in and for the State of My Commission Expires THE STATE OF TEXAS § 3 COUNTY OF DENTON § BEFORE ME, the undersigned authority, on this day personally appeared Ray Stephens, Mayor of the City of Denton, known to me to be the officer whose name is subscribed to the foregoing instrument and stated to me that he executed the same as the act and deed of said municipal corporation, in the capacity therein stated, for the purposes and consideration therein expressed and that all statements therein are true GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 6e day of February, 1988 Ndtlary P blic and for tfiTstate of My Commission Expires /Hr/WC/a25-8a 032 -14- EXHIBIT A That certain tract or parcel of land situated in the City of Denton and County of Denton, State of Texas, part of the R Beaumont Survey, Abstract No 31, and more particularly described as follows (as described in that certain Dead of Conveyance dated May 26, 1949, from the Trustees of Flow Memorial Hospital, a political subdivision of the State of Texas created pursuant to Article 44941-1 of the Texas Civil Statutes, to the City of Denton, a municipal corporation, and Denton County, a political subdivision of the State of Texas, as filed in the Real Property Deed Records of Denton County, in Volume 351 at Page 252 BEGINNING at a concrete marker 60 feet north of the south boundary line of Scripture Street in the City of Denton, Texas, and 60 feet east of the west boundary line of Bryan Street in the City of Denton, Texas, THENCE North 880 56' East 707 5 feet to the point of curvature of a circular curve to the left, THENCE in a Northeasterly direction along the are of said curve whose radius is 131 feet, a distance of 205 78 feet to the point of tangency of said curve, THENCE North 0° 17' east 464 5 feet to a concrete marker for corner, THENCE North 89° 38' West 839 2 feet to a concrete marker for corner, THENCE South 00 14' West 602 feet to a place of beginning, and being the same tract of land conveyed by Addis Scripture, at al to the Flow Memorial Hospital Trustees by dead dated August 1, 1947, and recorded in Volume 337, page 472 of the Deed Records of Denton County, Texas, less that portion of said tract dedicated to the public for street purposes /Hr/MWC/a25-8a 032 %5!f/? OTHER OUTSTANDING LIABILITIES Not included in Dec 31, 2987 Balance Sheet McDonald Douglas $34,095 Blue Cross Blue Shield $267,005 Medicare/Medicaid $14,426 /4s,4 i9 FLOW MEMORIAL HOSPITAL NOTES PAYABLE 09/30/87 Principal Payment Balance Monthly Due Pay -Off Note 09/30/87 Payment Date Date Linc--CT Scanner $ 446,802 71 $ 9,022 00 15th 12/15/91 Sovran--IHC Software 128,040 99 3,211 00 let 11/01/91 Sovran--IHC Software 112, 722 56 3,211 00 1st 04/30/91 Sovran--Dec Data Equipment 117,050 79 2,911 00 let 06/15/91 Bank of Lincolnwood --CT Scanner 313,238 51 8,639 70 15th 12/15/90 Charter Financial --Beds & GTE 231,737 26 6,551 88 15th 02/15/91 Lanier--2 Word Processors pd FSB 9007-Gas Sterilizer 6570 18 413 09 3rd 02/03/89 FSB 9008--Mammography pd FSB 9009--Phaco Emulsifier pd -- -- __ FSB 9010--Ultrasound pd FSB 9011--Electrocardiograph 54,537 29 1,954 86 1st 04/01/90 FSB 9012--EEG Machine 3,147 07 462 04 1st 04/01/88 FSB 9013--2 Anesthesia Machines 18,853 22 1,059 96 15th 04/15/89 Sovran--IBM 211,695 54 5,483 00 1st 04/30/91 $1,644,396 12 $ 42,919 05 m m o e e e e e e O e �e m e • Y Y Y Y M Y M Y V O O M M O n r M m b J W 4 W 4 M Y M M O i + y e O N b b 0 b 0 e ♦ + + C C ! 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