1987-228 2120L
NOTE Ordinance amended 2-2-88 by
Ordinance No 88-030 a copy which
· s attached with original ~ ~_~
securzty agreement NO
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 EFFECTIV5 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
enterlng into an Asset Transfer Agreement w~th 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
provzslons 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 thls ordinance shall become effective
immediately upon ~ts passage and approval
PASSED AND APPROVED this the 8th day of DecemDer, 1987
ATTEST
JE~I~E~ ~L~E~S, CITY gg~R~ETARY
APPROVED AS TO LEGAL FORM
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
ASSET TRANSFER AGREEMENT
Between
FLOW REGIONAL MEDICAL CENTER
(a Texas non-profit corporation),
COUNTY OF DENTONv TEXAS
(a political subdivision of the State of Texas),
CITY OF DENTONv 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 polltlcal 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 L~ab~l~tles 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 w~th 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 Not~ce of Any Mater~al 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 wlth 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
Sectlon 6 1 Compliance 11
Section 6 2 RepresentatIons and Warrant~es 11
-1-
Page
Section 6 3 Absence of Litigation 11
Sect~on 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
Sect~on 6 10 Servlces Agreements 12
Section 6 11 Security Agreement 12
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF CORPORATION
Section 7 t Compliance 13
Section 7 2 Consents to Transaction 13
Section 7 3 Absence of L~tlgatlon 13
Section 7 4 Mater~al Adverse Changes 13
Sectlon 7 5 Licenses and Permits 13
Section 7 6 Declaratory Judgment 13
Section 7 7 Approval by the Part~es 13
ARTICLE 8 EMPLOYMENT
Section 8 1 Transfer of Employees 14
Section 8 2 Transfer of Hospital Service 14
Section 8 3 Retained S~ck Leave and Vacation T~me 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 Governlng Law 17
Section 10 8 Waiver and Other Action 17
Section 10 9 Severab~l~ty 17
Section 10 10 Survival of Representations and Warrant~es 18
Section 10 11 Certain Persons Not L~able 18
Section 10 12 LImitation on L~ab~l~ty 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 lnter vivos gift made by H E Flow on
February 14, 1946 and by the will of H E Flow dated January 17,
1946 and f~led 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
corporatlon (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
3olntly 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
~nterest of the citizens of Denton County for the parties to
enter ~nto 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 g~ven
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
c~t~zens of Denton and Denton County, can best be fulfilled by
entering into th~s 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 C~ty of Denton and Denton County,
Texas, and the transfer ~s believed to be in the best ~nterest 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 ~n 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 f~scal 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 Hospltal 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) o~
the code (or any successor sections of a subsequent income tax
statute or code) ~n accordance w~th the trust purposes stated in
the wlll 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 l~abllltles of Transferors relating to the Hospital
ex~st~ng 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 b~ Corporation As partial
consideration for the Assets in accordance 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 ~n Texas, and shall
provide obstetrical (~ncludlng prenatal and neonatal) and
gynecological hospltal services as soon as the Corporation
determines that it ~s 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 f~nanclal 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 Off~ce
1 4 closing The closing of the transactions contemplated by
th~s Agreement (the "Closlng"), which shall be effective at the
close of business on the Closlng 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 t~me
and place as is agreed upon by the partles 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 Delivery of Closing Documents Before the
closing each party shall cause to be prepared, and at the Closing
the parties shall execute and deliver, each agreement and ~nstru-
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 speclal warranty deed and a b~ll 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
B~ll of Sale in the form attached hereto as Exhibit B),
(b) Corporation shall del~ver to the Transferors (~) an
~nstrument 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), (~l) a
Loan Commitment evidencing the $400,000 note to be granted to
Corporation not later than January 8, 1988 (the Loan Commitment
~n a form attached hereto as Exhibit D), and (~ll) an executed
services agreement w~th the C~ty for services to be provided by
corporation ~n 1988 and 1989, and (~v) an executed Security
Agreement with the C~ty of Denton securing the Corporation's
performance under this and other agreements (the ~ecur~ty
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 C~ty
(c) Each party also shall execute and deliver such other
approprlate and customary documents as to the other parties
PAGE 3
reasonably may request for the purpose of consummating the
transactlon 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-
tlon is a non-profit 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 bus~ness 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 ~t 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 thls 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 s~mllar laws affecting creditors' rights, and
(b) the availability of certain remedies may be limited
equitable principles of general applicability
2 5 Necessary Approvals and Consents Except for approvals
already obtained or filings, 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 th~s
Agreement or the other agreements executed or to be executed by
Corporation in connection w~th th~s Agreement or the consummation
by ~t of the transactions contemplated hereby and thereby
2 6 Compliance w~th Hos~ltal and Surve~ Construction Act
(H~ll-Burton Act) Corporation represents that it ~s an entity
that would have been eligible for the f~nanc~al 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 responslblllty for
providing the assurances originally glven 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 ~ncome 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 ~ts 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 wlthln thirty (30) days
of the t~me such status as a non-profit corporation is lost
ARTICLE 3 COVENANTS OF TRANSFERORS
Transferors covenant with Corporation as follows
3 1 Notice of an~ Material Change Transferors shall,
promptly after the first notice thereof but not later than the
Closing Date, notify Corporation ~n writing of the occurrence of
any event or the existence of any state of facts that constitutes
a material adverse change ~n the business, results or operation,
working capltalt assetsv l~ablllt~es, or condition (f~nanc~al 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 glve 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 th~s Agreement,
(b) cooperate with and keep Corporation ~nformed ~n
connection w~th th~s Agreement, and
(c) take such actions as Corporation may reasonably
request to consummate the transactions contemplated by this
Agreement and d~l~gently 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 w~th 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 (g~vlng
due regard to patient rights and patient confldentlallty) and
w~ll furnish or use ~ts best efforts to cause their representa-
tives to furnish promptly to Corporation and ~ts representatives
such additional f~nanc~al and operating data and other documents
and information (certified ~f requested and reasonably susceptible
to certification) relating to ~ts bus~ness and properties as
Corporation or ~ts duly authorized representatives may from time
to tlme reasonably request
4 2 Conduct of Bus~ness Before closing Date During the
period pending the Closing, Board
(a) shall conduct the Hospital's operations ~n the
ordinary and usual course of business consistent w~th past and
current practlces, and shall use their best efforts to maintain
and preserve ~ntact ~ts bus~ness organization and goodwill, to
retain the services of ~ts key employees, and to maintain sat~s-
factory relationships with suppllers, d~strlbutors, patients, and
others havlng bus~ness relationships w~th the Hospital,
(b) shall confer on a regular and frequent basis w~th
one or more representatives of Corporation to report materlal
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 bus~ness or properties, and
(d) shall not ~ncur any contractual obligation in excess
of $10,000 w~thout the written consent of the part~es
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 w~th and keep Transferors ~nformed ~n
connection w~th th~s Agreement,
(b) proceed promptly to make or give the necessary
applications, notices, requests, and f~llngs to obtain at the
earliest practicable date and, ~n 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 d~llgently attempt to satisfy, to the extent within
its control, all conditions precedent to its obligations to close
th~s Agreement as contemplated in Section 1 4
5 2 Compliance with Hospltal Survey and Construction Act
(Hill-Burton Act) To the extent that Flow Memorial Hospital ha~
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 ~t ~s
an entity that would have been eligible for the original grant
under the Hill-Burton Act, and ~t w~ll assume the Hospital's
responsibility for providing the assurances originally given by
the Hospital To the extent that Corporation is unsuccessful ~n
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, Corporatlon
agrees to assume any and all obligations and/or l~abll~t~es
~nclud~ng expenses of l~tlgat~on and administrative proceedings,
of Transferors, relating to any recovery attempted or made by the
federal government pursuant to the H~ll-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 ~ts 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 wlthln
thirty (30) days of the time such status as a nonprotlt
corporation is lost
5 4 No Discrimination Corporation agrees to make available
Hospltal services without discrimination on the ground of race,
color, national orlglnt 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 w~ll consist of n~ne numbers
and w~ll be entitled to manage the affairs of Corporation pursuant
to Section 2 14 of the Texas Non-Profit Corporation Act, including
the establishment of Hospltal policy, participation in long-term
strateglc planning, and the delegation of day-to-day management
actions for the Hospital The Board of Trustees' members will
each serve slx-year terms which will be staggered so that three
members' terms expire every two years (initial appointments w~ll
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
s~multaneously on the Board of Trustees Members of the Board of
Advisors w~ll 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 ~n 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 commlsslonv 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
prohlblt Corporation entering into any such contracts or engaging
in any such transactions w~th 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-
prletorshlp, partnership, firm, corporation, hold-
lng company, joint-stock company, receivership,
trust, or any other entity recognized in law,
(il) 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
(ill) 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-
lng 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 dlstrl-
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 facllltles
and services as the Board of Trustees of the
Corporation deems necessary
(il) Dissolution Upon dissolution of the corpora-
t~on, the Board of Trustees shall, after paying
or making provision for payment of all the l~a-
b~l~tles, debts and obligations of the corpora-
t~on, transfer and convey all of the assets of
the corporation, pursuant to a court order after
notification to the Attorney General's Offlce, to
an organization or organizations operated and
organized exclusively for one or more exempt
purposes consistent w~th the intent expressed in
Item 9 of the W~ll of H E Flow dated January
17, 1946, and w~thln the meaning of section
501(c)(3) of the Code and then recognized as
exempt from federal lncome taxatlon under section
501(a) of the code
5 6 Management Contracts So long as ~t is subject to the
H~ll-Burton Actt Corporation covenants that if it enters ~nto any
agreement, formal or ~nformal, providing for management of the
Hospital or part thereof, the agreement w~ll contain the
following provisions
(a) Either (1) the Board of Trustees of Corporation
retains authorlty to termlnate 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 ~ts review under ~ts regulations, and ~n the event the
Secretary of Health and Human Services (the "Secretary") deter-
m~nes 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 r~ght to terminate the agreement by giving 30 days
not~ce to the contractor,
(b) No employee of the contractor may be a member of the
Corporatlon's Board of Trustees, and/or any other provisions
required by law to ~nsure 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 b~ Transferors as to Condition or
Su~tabll~t~ The Corporation acknowledges that it has examined
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 ~s relying solely upon
its own examination thereof
The Corporation further acknowledges that it has been given
the opportunity to examine the books and records, ~ncludlng the
financial information, w~th respect to the existing Hospital
Facilities and that neither the Transferors, the Trust, the C~ty
nor the County has made any representation or warranty in regard
to the same
5 8 F~l~n~ and Recordln~ The Corporation shall file and
record or cause to be f~led 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, sat~sfled or complied with and performed in all
material respects all terms, covenants, and conditions of this
Agreement to be complied wlth or performed by it on or before the
closing Date
6 2 Representations and Warrant~es 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 ~n connection with the transactions
contemplated hereby shall have been true and correct in all
mater~al 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
warrant~es had been made at and as of the closing Date, except
for changes permitted or contemplated hereby of thereby
6 3 Absence of Lite,at,on 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 thls Agreement Further, in
PAGE 11
accordance with the provisions of TEX REV CIV STAT ANN art
4437(c) 2, neither the C~ty nor the County have received a
petltlon signed by at least ten percent (10%) of their qualified
voters requesting an elect~on 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 bus~ness 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
the action currently pending in the 158th Judicial Dlstr~ct
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 th~s Agreement and the transactions contemplated
herein ~n appropriate proceedings complying w~th 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 C~ty
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, satlsfled or complied with and performed in all
mater~al respects all terms, covenants, and conditions of this
Agreement to be complied w~th 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 f~l~ngs w~th, any persons,
governmental authority, or governmental agency required to be
obtained or made ~n connection with the consummation of the
transactions contemplated by th~s Agreement
7 3 Absence of L~t~at~on 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 mater~ally interfere
w~th the operation of the assets and business of the Hospital
after the Closing Date
7 4 Mater~al Adverse Chan~e~ No mater~al adverse change ~n
the business, properties, assets, liabilities, results of
operations, or condition, financial or otherwise, of the Hospital
shall have occurred
7 5 L~censes and Permits Corporation shall have obtained
all permits and l~censes 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 f~nal, non-appealable judgment
shall have been rendered by a court of competent jurisdiction
upholding the legality of th~s Agreement covering such matters as
may be reasonably requested by Transferors and specifically
~nclud~ng approval of the Settlement and Compromise Agreement ~n
the action currently pending ~n the 158th Judicial District
Court, Denton County, Texas, and known as Cause No 87-1907-C
7 7 Approval by the Part~es The Commissioners Court of the
County, the Clty Council of the C~ty, the Trustees of the Trust
and the Board of D~rectors 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 Hospltal
shall become employees of Corporation There will be no loss in
status (e g , ]ob 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 H~s~ltal 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 fall 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 Cor~oratlon's Default, Transferors' Remedies
(a) Cor~oratlon's Default Corporation shall be deemed
to be in default hereunder upon the occurrence of any one or more
of the following events
(1) Corporatlon falls in any material respect to
meet, comply or to perform any other covenant,
condltlon~ or obligation on its part required
within the time limits and in the manner required
in th~s 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 ~s 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
(11) Enforce specific performance of this Agreement
against Corporation or any other party
(ill) 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 th~s Agreement and the transactions
contemplated hereby
10 3 Entire Agreement Th~s Agreement, the exhibits hereto,
and the other documents executed or delivered pursuant hereto
contain the complete agreement among the parties w~th 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 th~s
Agreement or ~n 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 th~s
Agreement shall be in writing and shall be mailed by first class,
registered, or certified mall, 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 Bulldlng
215 East McKlnney Street
Denton, Texas 76201
Attention C~ty Attorney
Board of D~rectors
Flow Memorial Hospital
1310 Scripture Street
Denton, Texas 76201
PAGE 16
H E Flow Trust
c/o Vic Burgess, County Judge
Courthouse on the Square
Denton, Texas
If to Corporation Flow Regional Medical Center
c/o President
1310 Scripture Street
Denton, Texas 76202
If to Foundation Flow Foundation
c/o Walter Lea, Chairperson
108 Valleyvlew Circle
Argyle, Texas 76226
If to Attorney General Attorney General of Texas
Attn Charitable Trust Section
P O Box 12548
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 ~s
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 Dy the addressee upon
presentation
10 6 Successors and Assigns Th~s Agreement and the r~ghts,
interests, and obligations hereunder shall be binding upon and
shall ~nure to the benefit of the parties hereto and their he~rs,
personal representatives, successors, and assigns
10 7 Governln~ Law Th~s 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 Severablllt~ If any provision of this Agreement is
held to be ~llegal, 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 ~n full force and effect and shall not be
affected by the ~llegal, invalid, or unenforceable provision or
by Its severance, and ~n lieu of such ~llegal, ~nval~d, or
unenforceable provisions, there shall be added automatically as
part of thls Agreement, a provision as similar in it terms to
such illegal, ~nvalld, or unenforceable provision as may be
possible and be legal, valid, and enforceable
10 10 Survival of Representations and Warrant~es Each
representation or warranty made by any party hereto shall survive
the closing of the transactions contemplated hereby
10 11 Certain Persons Not L~able 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, th~s Agreement The officers, governing bodies, agents,
trustees, and employees of the Board, the C~ty, the County, the
Trust and Corporation shall have no personal liability for any
costs, losses, damages, or liabilities caused or subsequently
~ncurred by any of the parties hereto or any officer, director,
agentt or employees of any thereof in connection with or as a
result of th~s Agreement
10 12 L~mltatlon on L~ab~l~t~ All obligations of the
Transferors expressed or implied ~n this Agreement or otherwise
incurred ~n connection w~th 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 w~th 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 th~s Agreement
10 14 Dissolution Upon the dissolution of the Corpora-
t~on, the Board of Directors shall, after paying or making pro-
v~slon for the payment of all llab~lltles, 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 Off~ce, to an organization or organizations
operated and organized exclusively for one or more exempt purposes
consistent w~th the intent expressed ~n 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 BOARD OF DIRECTORS OF
PLOW MEMORIAL HOSPITAL
E MAR~H WILLIAMS, CHAIRPERSON
BY /_~/~j ~/~~ FLOW REGIONAL MEDICAL CENTER, INS
~fIC BURGE~S; TR~EE
BY ~ BY .~//~ -/~-~ ~
GEORGE I~FILL, T US~_~ .~ENNETT KI~K, PRESIDENT
BY ~ ~4~t COUNTY OF DENTON, TEXAS
ROBIN KAIN, TRUSTEE
JIM MATTOX~ ATTORNEY GENERAL BY _
VIC BURGESS, COUNT~ JUDGE
ANN KITCHEN, ASSISTANT
ATTORNEY GENERAL
CITY OF DENTON, TEXAS
PAGE 19
THE STATE OF TEXAS §
COUNTY OF DENTON §
Before lmm, thgnunderslgned authorlty,~on th~s~d~y personally
appeared IJ~ /~~ , ~/~.~w_~&~7.~-~ e
of the County of DentrOL, Texas, a political ~bd~.~lsl~_~ of th
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 there~n expressed and in the
capacity therein stated for and on behalf of said County of
Denton
~VEN UNDER MY HAND AND SEAL OF OFFICE, this the ~ day
of ~, 198 ~
No~m~ Pu~ ~de ~ Tram
j_~NO~Y/_~ PUBLIC, STATE OF TEXAS
My
Commlsslon
expires
THE STATE OF TEXAS
COUNTY OF DENTON
Before~e, ther~nderalgned ~authorlty,. on this day personally
appeared
of the City ~f~Denton~ Texas, a munIcipal corporation, known to
me to be the person whose name is subscribed to the foregoing
~nstrument, and acknowledged to me that, being properly
authorized to do so, he executed the same for the purposes and
consideration there~n expressed and ~n the capacity there~n
stated for and on behalf of sa~d C~ty of Denton
HAND. AND SEAL OF OFFICE, this thej~day
of ,
~mmmmn~March~llg80 NQT~RY PUBLIC, ST~ATE OF T S
My Commlsslon expires
PAGE 20
THE STATE OF TEXAS
COUNTY OF DENTON
Befor^9 me, ,~he 9nders%g~9~ authorlt~, on, this day personally
appeared [[\~£ . _~f~, ~ ~//j~/;~ , ~Q~/~4~j~ ~7~
of the Board ~f Directors of Flow Memorial Hospital, 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 there~n
expressed and in the capacity there~n stated for and on behalf of
sa~d Board of Directors of Flow Memorial Hospital
C~IVEN UNDER MY HAND AND SEAL OF OFFICE, thls the~ day
of ~C~ , 198 ~
N~'yPubl~,Sb~dTms ~'
N~ARY PUBLIC, STATE OF TEXAS
My Commission expires ~-=~/-d~
THE STATE OF TEXAS
COUNTY OF DENTON
Before me, the undersigned authorlty,._on this day personally
appeared
of the Flow Regional Medical Center, a Texas non-profit corpora-
tlon, 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
there~n stated for and on behalf of said Flow Regional Medical
Center
~IVEN UNDER MY HAND AND SEAL OF OFFICE, this the~ ~ day
of~.~V~k~ , 1987
My Commission expires
PAGE 21
THE STATE OF TEXAS §
COUNTY OF DENTON §
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
the capacity therein stated
~My HAND AND SEAL OF OFFICE, this the ~day
of , 198~
My commission expires ~-
THE STATE OF TEXAS S
COUNTY OF DENTON §
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
the capacity therein stated
.~ MY HAND AND SEAL OF OFFICE, this the~--~~
day
of~~ , 198 ~
JEANETTE ~COTT
~ PUBLIC, STATE OF TEXAS
My commission expires ~ /}~
PAGE 22
THE STATE OF TEXAS §
COUNTY OF DENTON ~
Before me, the undersigned, a Notary Public in and for the
State of Texas, on this day personally appeared George Hlghflll,
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
the capacity therein stated
MY HAND AND SEAL OF OFFICE, this the~/~r~day
Ho~ ~dT~
~~l~ NOT~Y PUBLIC, STATE OF TEXAS
My commission expires
THE STATE OF TEXAS §
COUNTY OF DENTON ~
Before me, the undersigned, a Notary Public in and for the
State of Texas, on this day personally appeared Robin Ka~n, 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 h~s free act and
deed for the purposes and consideration therein expressed and in
the capacity thereln stated
AND SEAL OF OFFICE, this the~ day
~m~~8~l~ NOTARY PUBLIC, STAT XAS
My commlsslon expires
PAGE 23
THE STATE OF TEXAS
COUNTY OF DENTON
Before me, the undersigned authority, on this day personally
appeared Ann K~tchen, Assistant Attorney General of the State of
Texas, known to me to be the person whose name ~s suDscr~bed to
the foregoing ~nstrument, 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 sa~d J~m Mattox, Attorney
General for the State of Texas
.~IVEN UNDER MY HAND AND SEAL OF OFFICE, th~s the ~/~-~day
N,O~RY PUBLIC, STATE OF TEXAS
My Commission expires ~ 3/-~
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 , and--d-~
recorded in the Deed 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
BY
DEPUTY
PAGE 25
SPECIAL ~{DEED
THF 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, sub3ect to the covenants and restrictions
hereinafter described, all that certain real property (the
"Ploperty") lying and being situated in Denton, Denton
County, %exas, 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, mncludlng all
and singular any improvements situated thereon and any
fixtures thereunto attached
TO HAVE AND TO HOLD the Property together wmth all and
singular the rights and appurtenances thereto in anywms~
belonging, unto Grantee, ~ts 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
assmgns, against every person whomsoever lawfully claiming
o~ to claim the same or any part thereof by, through or
under Grantors, but not otherwise, sub3ect to any and all
covenants, condmtlons, restrictions, ~eservatlons, easements
and other encumbrances of record or apparent from visual
inspection
This conveyance is made and accepted sub3ect to the
terms, provisions and conditions of that certamn 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 sub3ect to the covenants
and restrictions (the "Covenants') contained mn (i) that
certain Compromise Settlement Agreement (the 'Settlement
Agreement") of even date herewith by and among the City, the
County, the Board, J~m Mattox, Attorney General of the State
of Texas, the Trust, Flow Memorial Foundation, a Texas
nonprofit corporation, and Grantee, (~i) that certain Asset
Transfer Agreement (herein so called) of even date herewith
executed by and among the County, the C~ty, the Board and
Grantee, and (1ii) 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 here~n
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 t~tle 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 ]udgment
or court order shall in no w~se 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
Ray Stephens, Trustee
By
Vic Burgess, Trustee
By
George Hlghflll, Trustee
By
Robin Lane, Trustee
THE STATE OF TEXAS §
COUNTY OF DENTON §
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 sa~d
political subdivision of the State of Texas an the capac%ty
therein stated, for the purposes and cons~deratlon therein
~xpressed and that all statements therein are true
GIVEN UNDER MY HAND AND SEAL OF OFFICE th~s the ___ day
of January, 1988
Notary Public in and for
the State of Texas
My Commlss~on 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 qTATE 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 there~n 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
-4-
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 Commlsslon 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
there~n 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 Commiss~on Expires
-5-
THE STATE OF TEXAS §
COUNTY OF DENTON §
BEFORE ME, the undersigned authority, on this day
personally appeared George Hlghflll, Trustee of H E Flow
Trust, known to me to be the officer whose name ls 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 capaclty there~n stated, for the purposes and
consideration therein expressed and that all statements
therein are true
GIVEN UNDER MY HAND AND SEAL OF OFFICE thls 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 ~s 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
-6-
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~Records of Denton
County, u~der Clerk's Pile No~a
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 88° 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 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 0° 14' West 602 feet to a place of beginning,
and being the same tract of land conveyed by Addle scrip-
ture, et al to the Flow Memorial Hospital Trustees by deed
dated August 1, 1947, and recorded an 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
~I~tlRITY AgRFFNENT
THIS SECURITY AGREEMENT dated as of the /~-~day of January, 1988
(the "Security Agreement"), executed by FLOW REGIONAL MEDICAL CENTER,
INC , a rexes nonprofit corporation (the "Medical Center"), and the
City of Denton, a municipal corporation located In the County of
Denton, Rexes (the "Secured Party")
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 Bosrd of
Directors of Flow Memorial Hospital, a political subdivision of the
~tat~ of Tsxas created pursuant to Article 4494i-1 of ths Texas Civil
Statutes (the "Board of Directors"), lim Martex, 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 ~orporation, and the Medical Center
WHIREAS, a certain Asset Transfer Agreement dated as of
De, ember 4, 1987 (the "Asset Transfer Agreement"), has been duly
exocut-d by and among the Medical Center, ihs County, the Board of
])t~ctors, the trust, the Attorney General and the Secured Party,
WHEREAS, a certain Services Agreement deled oi even date herewith
(the "qelvices Agreement"), has been duly ~xecuted by and between tho
Modtcal Center and the Secured Party, and
WHFRFAS, the Secured Party desires to ~ecure the Medical Center's
performance of and compliance with certain Obligations (as hereinafter
dl£1n~d) and the Medical Center desires to provide such security
NOW, TREREFORE, the Medical Center, in consideratzon of the fore-
going premises, and of the obligat]ons, covenants and agreements here-
tnafter 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 a~d valuable consideration, the receipt and sufftciency of all of
which are hsreby acknowledged, in order to secure the Medical Center's
p~rtormance of and compliance with the Obligations as hereinafter
defined, does hereby grant, transfer, assign, pledge and convey to the
Secur.d Party snd 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-
party, rights, tit]es, interests and estat.s (herein collectively
cai)ed tile "Collateral"), to wit
al) of the real property described on Exhibit A attached
hereto and incorporated here~n by referonce, which is situat-
ed in Denton County Texas, together with al) 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 ail
equipment and fixtures therefor, all laundry, refrigerating,
cooking, incineration equipment, and ali 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 ali
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 ]and 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 Jn(]uding
cash, and including, but not ]~mited to, ail equipment,
inventory, instruments, chattel papers, certificates of
deposit, money, deposit accounts, accounts, general intangi-
bles and other property of every kind, typ~, 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 HOID 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
-2-
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
lncludea 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, matertalmen'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-
(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 hsva set aside adequate
(d) The lien of this Security Agreement, and
(e) 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 th. Agreement~
Section 2 02 Instruments of Further Assurance, Recording The
Medical Center covenants that it will do, execute, ackr~ow~edg~ mild
deliver, or cause to be done, executed, acknowledged and delivered,
such supplements hereto and such further acts, instruments and trans-
f.rs 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
~tse]f, 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
her.by 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-
formsnce of the Obligations, the Medical Center expressly covenants and
agrees with the Secured Party that
-4-
A No lien, security interest, right or remedy Jn favor of the
~ecured 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 qection 2 03 hereof, proceed with reasonable diligence to correct
any defect in title to the Collateral should any such dafect 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 ~nterests 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 op]~ton of
~ecured Party shall be necessary, proper or appropriate to (J) 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 Ob]iga-
tfons,
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
gently contesting in good faith any such impositions,
E The Medical Center will keep and maintain the Co]lateral in a
good stats 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-
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 payabla Due proof of payment before delinquen-
cy of all such bills shall be furnished by the Msdical Center to the
Securad Party upon request, provided that nothing herein contained
shall prohibit the Medical C~nter from duly and diligently contesting
in good faith any bill for labor or material,
G The M~dical Center will permit the Secured Party and its
agents, representatives and employees at all reasonable timss and upon
reasonable prior notice to axamine 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 rs-
lease any part of the Collateral now or hereafter subject to the lisn
hereof without releasing any other part of the Collateral or other
security, and without affecting the lien and security interest hersof
as to the part or parts thereof not so released,
I Th~ Medical Center will notify the Secured Party in writing
promptly of the commencsment of any legal proceedings affecting the
Co]lateral or the Obligations, or any part of either, and will take
such action as may be necassary to protect and preserve the S~cured
Party's rights thereby affected, and should the Medical Center fail or
refuse to take any such action, the Sscured Party may but ~hall not be
required to, at the Secured Party's election, take such action on
b~half and in the name of the Medical Center and at the Medical Cen-
ter's cost and axpense, and
J The M~dical C~nter will maintmin its corporate existence and
wi]] maintain and procure all necessary frsnchises and permits to the
end that it shall bs and continue to be a nonprofit corporation duly
organizad under the laws of tha State of Texas snd a~ an exempt organ-
±zation undar 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
ths Collateral as contemplated herein
ARTICLF III
EVENTS OF DEFAULT
Section 3 01 Events of D~fault The Medical Center shall be in
default under this Security Agrsement upon the occurrsnce of any one of
the following events or conditions (each an "Event of Default")
(a) Default in the parformance of or compliance with any of th~
Obligations,
-6-
5;%7
(b) Default in the payment of any indebtedness of the Medical
Center to others than to the Secured Party Jn 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 Jn 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 voluntsrily suspend transac-
tion of its business, shs]l commence a voluntary cage under
the federal bankruptcy laws, as now constituted or heresfter
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 ~ha]] 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 furthersuce 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 MedJcal
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
-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 term~ 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 defefise 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 Obl~ttons
If the Medical Center should fail to comply with any of the agreements,
covenants or obligations of the Medical Center under th], o£ 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
and payable on demand and shall be secured by and under this Security
Agreement, and the amount and nature of ~uch expense and the time when
paid ~hall be fully established by the affidavit of mn officer of the
Secured Party
Section 4 02 No Waiver The exercise of the privileges granted
in thi~ 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 Defsult 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, ~nc]udtng,
without limitation, the right and power to sell, at publ]( ot private
~ale 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 ~ecured Party shall have
th. 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, lea~e
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 formalitie~ 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 Js required and cannot be
waived, Obligor agrees that if such notice Js personally delivered or
mai]ed, postage prepaid, to Obligor at the address d~signated hereafter
-9-
in this Security Agreement (or at OblJgor'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 Collsteral
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 prereqniqites 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 .lect 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 f~nancing
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 coats 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
OENERAL
Section 7 O1 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 ~ecurity given by this ~ecurity
Agreement, and all security for the Medical Center's performance of and
compliance with the Obligations or any part thereof srtnl] 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 affidav]t of any person having knowledge of the facts concerning
such hand delivery or mailing shall be conclusive evidence of the fact
of ~uch 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
Notice desired to be given hereunder, shall be addressed as fol-
lows
To the Secured Party City of Denton, Texas
Municipal Building
Denton, Texas 76201
Attn City Attorney
-11-
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 Saverabilit¥ In the event any item, term or
provision contained in this Security Agreement is in conflict, or may
hereafter he 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 Thi~ 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
qtate 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 representmtives as of the date
first written above
FLOW REGIONAL MEDICAL CENTER, INC
S~s~ident
CITY OF DFNTON
By Ray S~S ~e~
-12-
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, tn the capaclty thereln stated~ for
the purposes and conslderatlon thereln expressed and that all state-
ments therein are true
GIVEN ~DER MY HAND AND SEAL OF OFFICE this the/~ay of Janu-
ary, 1988
~My~~a[~ th~State of ~
STA=
COUN~ OF DENTON }
BEFORE ME, the undersigned authority, on this day personally
appeared Ray Stephens, Mayor of the City of Denton, known to mo to be
the officer whose name is subscribed to the foregolng 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 ail statements therein are
true
GIVEN UNDER MY HAND A~ SEAL OF OFFICE this tbe ~y of Ianu-
ary, 1988
~My~~S~~ /
/Hr/MWC/k27-7a 032
-13-
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 the H E
Flow Trust, a charitable trust, 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 at Page 252 of Volume
351, to-wlt
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 88° 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 ~s 131 feet, a distance of 205 78 feet to the
point of tangency of sald 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 0~ 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
2197L
No
AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE AN ~END~D AND
RESTATED SECURITY AGREEMENT BETWEEN THE CITY MD FLOW REGIONAL
MEDICAL CENTER, INC , AND PROVIDING AN EFFECTIVE DATE
Wq4EREAS, 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 ~reement 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 mat the Mayor is hereby authorized to execute
the Amended 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 ~reement 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
immediately upon its passage and approval
PASSED AND APPROVED this the~ day of ~, 1988
ATTEST
~P~OVED AS TO LEGAL FORM
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
A~NDED AND RESTATED SECURITY AGREEHENT
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")
WHEREAS, that certain Security Agreement (the "Original Security
Agreament") by and between the Medical Center and the Secured Party was
executed on January 15, 198S,
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 4&94t-I 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
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 end 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-
TO HAVE AND TO MOLD 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 sat 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 futura, 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
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 Agreement~ 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, materialman's, workmen's, vendor's or other
undetermined liens and charges incident to construction
-3-
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
hut 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
(e) 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
GENERAL COVENANTS AND PROVISIONS
Section 2 01 Performa/%ce 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, Recordin~ 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 end 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 siEned 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 Mediaal 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 connectioo 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 Eivs
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 p~omptly after payment, provided that nothing
-5-
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 Cen~sr 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,
M The Secured Party at all times shall have the right to
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 ell of
the Collateral as contemplated herein
-6-
ARTICLE III
EVENTS OF DEFAULT
~ection 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 compliancs with any of the
Obligations,
(b) Default in the payment of any indebtedness of the Msdical
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-
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 O1 Perforce-ne 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-
tioss 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
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 ss 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")
Tho 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-
mitred 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 assi~nment 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 he 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
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from time to time whanavsr filing or recording of any financing stats-
ment, continuation statement, mortgage or Dasd of Trust is dssmed by
the Secured Party to be necessary or dssirable
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 I 2 of the Settlement Agreement
and the liabilities and indebtedness listed on Exhibit B attached
hereto,
B The ~edical Center pays, pa=forms 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 daf/ned), 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 &nd 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 1SO-bed acute-care hospital located
Denton. Texas at the time the Insurance is procured If the Secured
Party and the Medical Center cannot agree upon the amounts of such
coverages the Secured Party and the Medical Center shall select an
indsp~ndent professional insurance consultant (the "Consultant")
acceptable to both to determine the amounts of such coverages The
deters/nation of the Consultant regarding the amounts of such coverages
shall be final cna binding on the Secured Party and the Medical Center
As used /n this Article VI. "Release Date" shall mean that date after
December 31, 1992, on which the Medical Center has fully and completely
satislfiad conditions A and B in this Article VI
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ARTICLE VII
GENERAL
Section 7 01 Extension, Rearrangement, ~zscharge or Renewal of
Obligations It is expressly agreed that any pert 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
~ection 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 desi~nated 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 eKclusive, but instead any notice may be given to the Medical Center
in any manner permitted or recognized by law
Notice desired to bo given hereunder, shall be addressed as fol-
lows
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 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
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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 Governin~ 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 SupersedinK 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 Ragional 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
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TH~ STATE OF TEXAS §
COUNTY OF DENTON §
2EFORE ~E. the undersigned authority~ on this day personally
appeared gannett K~rk. President of Fi~ ~e~ional ~edical Cen~er~ Inc.
~o~. to ~e to be the off,car whose n~e is subs=r/bed to the fore~oin~
instr~ont ~d stated to ~e that he executed the s~e as the act ~d
deed of said nonprofit corporatton~ in the capacity therein stated, for
the purposes ~d considerat~on therein expressed ~d that all state-
ments therein are true
GI~N ~ER ~ ~ ~ SEAL OF OFFICE this the __ day of
February. 1988
Notary Public in and for
the State of
}fy Commission Expires
TH~ STATE OF TEXAS §
COUNTY OF DENTON §
BEFORE ~E, the undersi~ned authority, on this day personally
appeared Ray Stephens, Nayor of the City of Denton, known to me to be
the officer whose name is subscribed to the foregoing instrument and
stated to ma 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 ~Y HA~D AND SEAL OF OFFICE this the ~ day of
February. 1988
N4%~i~' ~[bfict~an.d for
/Hr/~/C/a2$-Sa 032
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 4&94i-1 of the Texas Civil
Statutes, to the City of Denton, a municipal corporation, end 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 88° 56' East 707 $ 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 0° 17' east 464 $ feat to a concrete marker for corner,
THENCE North 89° 38' West 839 2 feet to a concrete marker for corner,
THENCE South 0° 14' West 602 feet to a place of beginning, and being
the same tract of land conveyed by Addie 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
/Hr/MWC/a25-Sa 032
OTHER OUTSTANDING LIABILITIES
Not included in Dec 31, 898?
Balance Sheet
McDonald Douglas $34,095
Blue Cross Blue Shield $B67,005
Medicare/Medicaid $1~,426
FLOW MEMORIAL HOSPITAL
NOTES PAYABLE
09/30/87
Principal Payment
Balance Monthly Due Pay-Off
Note 09/30/87 Payment Date Data
Linc--CT Scanner $ 446,802 71 $ 9,022 00 15th 12/15/91
Sovran--IHC Software 128,040 99 3,211 00 1st 11/01/91
Sovran--IHC Software 112, 722 56 3,211 O0 1st 04/30/91
Sovran--Dec Data Equipment 117,050 79 2,911 O0 1st 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
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