<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............to..........
Commission file number 0-10454
UNIVERSAL HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2077891
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (610) 768-3300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding, as
of July 31, 1997:
Class A 2,060,929
Class B 30,020,414
Class C 207,230
Class D 33,325
Page One of Twelve Pages
<PAGE> 2
UNIVERSAL HEALTH SERVICES, INC.
I N D E X
PART I. FINANCIAL INFORMATION.....................................PAGE NO.
Item 1. Financial Statements
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1997 and 1996...............Three
Condensed Consolidated Balance Sheets - June 30, 1997
and December 31, 1996............................................Four
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996..........................Five
Notes to Condensed Consolidated Financial Statements.........Six & Seven
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....Eight, Nine & Ten
PART II. OTHER INFORMATION..........................................Eleven
SIGNATURE............................................................Twelve
Page Two of Twelve Pages
<PAGE> 3
PART I. FINANCIAL INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
Net revenues $343,826 $282,072 $683,996 $548,595
Operating charges:
Operating expenses 136,265 109,615 265,939 211,950
Salaries and wages 119,138 101,331 238,885 195,831
Provision for doubtful accounts 27,450 19,709 51,113 36,383
Depreciation and amortization 19,815 16,721 38,843 31,504
Lease and rental expense 9,307 9,573 18,428 18,978
Interest expense, net 5,384 5,972 10,340 10,620
-------- -------- -------- --------
317,359 262,921 623,548 505,266
-------- -------- -------- --------
Income before income taxes 26,467 19,151 60,448 43,329
Provision for income taxes 9,560 6,935 22,011 15,612
-------- -------- -------- --------
Net income $ 16,907 $ 12,216 $ 38,437 $ 27,717
======== ======== ======== ========
Earnings per common
and common share equivalents: $ 0.51 $ 0.42 $ 1.16 $ 0.96
======== ======== ======== ========
Weighted average number of
common shares and equivalents: 33,114 28,958 33,050 28,835
======== ======== ======== ========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
Page Three of Twelve Pages
<PAGE> 4
UNIVERSAL HEALTH SERVICES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 622 $ 288
Accounts receivable, net 149,406 145,364
Supplies 23,455 22,019
Deferred income taxes 13,067 12,313
Other current assets 14,242 13,969
----------- -----------
Total current assets 200,792 193,953
----------- -----------
Property and equipment 904,690 839,564
Less: accumulated depreciation (299,383) (271,936)
----------- -----------
605,307 567,628
----------- -----------
OTHER ASSETS:
Excess of cost over fair value of net
assets acquired 140,667 150,336
Deferred income taxes 11,284 9,993
Deferred charges 10,465 11,237
Other 35,658 32,648
----------- -----------
198,074 204,214
----------- -----------
$ 1,004,173 $ 965,795
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,634 $ 6,866
Accounts payable and accrued liabilities 145,293 132,441
Federal and state taxes -- 772
----------- -----------
Total current liabilities 150,927 140,079
----------- -----------
Other noncurrent liabilities 94,392 97,102
----------- -----------
Long-term debt, net of current maturities 263,115 275,634
----------- -----------
COMMON STOCKHOLDERS' EQUITY:
Class A Common Stock, 2,060,929 shares
outstanding in 1997, 2,060,929 in 1996 21 21
Class B Common Stock, 30,019,844 shares
outstanding in 1997, 29,816,153 in 1996 300 298
Class C Common Stock, 207,230 shares
outstanding in 1997, 207,230 in 1996 2 2
Class D Common Stock, 33,495 shares
outstanding in 1997, 36,805 in 1996 -- --
Capital in excess of par, net of deferred
compensation of $166,000 in 1997
and $377,000 in 1996 198,628 194,308
Retained earnings 296,788 258,351
----------- -----------
495,739 452,980
----------- -----------
$ 1,004,173 $ 965,795
=========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements
Page Four of Twelve Pages
<PAGE> 5
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted - unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
JUNE 30,
--------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,437 $ 27,717
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 38,843 31,504
Provision for self-insurance reserves 8,874 7,401
Changes in assets & liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (4,042) 7,466
Accrued interest (149) (491)
Accrued and deferred income taxes (773) 4,220
Other working capital accounts 10,424 13,384
Other assets and deferred charges (4,555) (7,141)
Other 5,118 327
Payments made in settlement of self-insurance claims (12,554) (5,639)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 79,623 78,748
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net (66,736) (50,432)
Acquisition of business -- (165,142)
Notes receivable related to acquisitions -- (10,545)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (66,736) (226,119)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt (13,751) --
Additional borrowings -- 47,330
Issuance of common stock 1,198 100,345
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (12,553) 147,675
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 334 304
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 288 34
========= =========
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 622 $ 338
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 10,489 $ 11,111
========= =========
Income taxes paid, net of refunds $ 22,784 $ 11,614
========= =========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
Page Five of Twelve Pages
<PAGE> 6
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and reflect all adjustments which, in the opinion of the
Company, are necessary to fairly present results for the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the accompanying disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements, accounting
policies and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
Prior to 1997, the Company included charity care services as a component of its
provision for doubtful accounts. Effective January 1, 1997, in accordance with
health care industry practice, the Company began excluding charity care from net
revenues, and has reclassified the 1996 amounts to conform with this
presentation. The change in presentation has no effect on reported net income.
(2) EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares
outstanding during the year adjusted to give effect to common stock equivalents.
In April 1996, the Company declared a two-for-one stock split in the form of a
100% stock dividend which was paid in May, 1996. All classes of common stock
participated on a pro rata basis. The weighted average number of common shares
and equivalents and earnings per common and common equivalent share for the
three and six months ended June 30, 1996 have been adjusted to reflect the
two-for-one stock split.
The Financial Accounting Standards Board recently issued Statement 128, Earnings
per Share, which is effective for financial statements for periods ending after
December 15, 1997. Pursuant to the provisions of Statement 128, the Company's
basic earnings per share would have been $.52 and $.43 for the three month
periods ended June 30, 1997 and 1996 and $1.19 and $.99 for the six months ended
June 30, 1997 and 1996, respectively. The diluted earnings per share would have
been $.51 and $.42 for the three month periods ended June 30, 1997 and 1996 and
$1.16 and $.96 for the six months ended June 30, 1997 and 1996, respectively.
(3) OTHER LIABILITIES
Other noncurrent liabilities include the long-term portion of the Company's
professional and general liability and workers' compensation reserves.
(4) COMMITMENT AND CONTINGENCIES
Under certain agreements, the Company has committed or guaranteed an aggregate
of $14 million related principally to the Company's self-insurance programs and
as support for various debt instruments and loan guarantees.
Page Six of Twelve Pages
<PAGE> 7
(5) SUBSEQUENT EVENTS
Subsequent to the end of the 1997 second quarter, the Company entered into a
partnership agreement for the ownership and operation of The George Washington
University Hospital, a 501-bed acute care facility located in Washington, D.C.
The Company holds an 80% interest in the partnership and The George Washington
University holds a 20% interest. The Company also entered into a management
agreement, which commenced in April 1997, to manage the operations of the
hospital. Pursuant to the terms of the partnership agreement, the Company will
provide an immediate commitment of $80 million ($40 million in cash and a $40
million letter of credit) as part of a total intended investment by the
partnership of $125 million over the next ten years for enhancement of the
hospital's operations.
Page Seven of Twelve Pages
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The matters discussed in this report as well as the news releases issued from
time to time by the Company contain certain forward-looking statements that
involve risks and uncertainties, including, among other things, that the
majority of the Company's revenues are produced by a small number of its total
facilities, possible changes in levels and terms of reimbursement for the
Company's charges by government programs or other third party payors, the
ability of the Company to successfully integrate its recent and proposed
acquisitions and the ability to continue to finance its growth on favorable
terms.
RESULTS OF OPERATIONS
Net revenues increased 22% or $62 million for the three months ended June 30,
1997 and 25% or $135 million for the six months ended June 30, 1997, over the
comparable prior year periods. Net revenues at hospital facilities owned during
both periods increased $33 million or 12% and $47 million or 9% for the three
and six months ended June 30, 1997, respectively, over the comparable prior year
periods. Also contributing to the increase in net revenues for the three and six
month periods was the acquisitions of a 357-bed medical complex located in
Amarillo, Texas and four behavioral health centers located in Pennsylvania, all
of which were acquired during the second quarter of 1996.
Earnings before interest, income taxes, depreciation, amortization and lease and
rental expense (EBITDAR) increased 19% or $10 million for the three months ended
June 30, 1997 and 23% or $24 million for the six months ended June 30, 1997 as
compared to the comparable prior year periods. Overall operating margins were
18% for the three months ended June 30, 1997 and 1996 and 19% for the six months
ended June 30, 1997 and 1996.
ACUTE CARE SERVICES
Net revenues from the Company's acute care hospitals, ambulatory treatment
centers and women's center accounted for 85% and 84% of consolidated net
revenues for the three month periods ended June 30, 1997 and 1996, and 85% and
86% of consolidated net revenues for the six month periods ended June 30, 1997
and 1996, respectively. Net revenues at the Company's acute care hospitals owned
during both periods increased 14% and 10% for the three and six month periods
ended June 30, 1997, respectively, over the comparable prior year periods.
Inpatient admissions at these facilities increased 7% during the 1997 second
quarter over the comparable prior year quarter and 3% for the six month period
ended June 30, 1997 as compared to the comparable prior year six month period.
Patient days at the Company's acute care facilities owned during both periods
increased 8% and 3% for the three and six months ended June 30, 1997,
respectively, over the comparable prior year periods. Outpatient activity at the
Company's acute care hospitals continues to increase as gross outpatient
revenues at the acute care facilities owned during both periods increased 12%
for each of the three and six month periods ended June 30, 1997 over the
comparable prior year periods. Gross outpatient revenues comprised 27% of the
Company's acute care gross patient revenues during the second quarter of 1997 as
compared to 26% during the 1996 second quarter and 26% for the six months ended
June 30, 1997 as compared to 25% for the prior year six month period. The
increase is primarily the result of advances in medical technologies, which
allow more services to be provided on an outpatient basis, and increased
pressure from Medicare, Medicaid, health maintenance organizations (HMOs),
preferred provider organizations (PPOs) and insurers to reduce hospital stays
and provide services, where possible, on a less expensive outpatient basis. To
accommodate the increased utilization of outpatient services, the Company has
expanded or redesigned several of its outpatient facilities and services.
Page Eight of Twelve Pages
<PAGE> 9
BEHAVIORAL HEALTH SERVICES
Net revenues from the Company's behavioral health services facilities accounted
for 15% of the Company's consolidated net revenues for the three month periods
ended June 30, 1997 and 1996 and 15% and 13% of consolidated net revenues for
the six month periods ended June 30, 1997 and 1996, respectively. Net revenues
at the Company's behavioral health centers owned during both periods remained
relatively unchanged during the 1997 second quarter as compared to the 1996
second quarter and decreased 1% for the six month period ended June 30, 1997 as
compared to the comparable 1996 period. Admissions and patient days at the
facilities owned during both periods increased 3% during the 1997 second quarter
over the 1996 second quarter as the average length of stay remained unchanged at
12.7 days in both three month periods. Admissions at these facilities increased
5% for the six month period ended June 30, 1997 as compared to the comparable
prior year period while patient days increased 2% during this period over the
comparable prior year period. The average length of stay decreased 4% to 11.9
days during the 1997 six month period as compared to 12.4 days in the comparable
prior year period. The relatively flat net revenues at the facilities owned
during both periods resulted primarily from continued pressure from payors to
reduce the average length of stay at these facilities as a large portion of the
Company's behavioral health services' revenues are reimbursed on a per diem
basis. The reduction in the average length of stay is a result of changing
practices in the delivery of behavioral health services and continued cost
containment pressures from payors which includes a greater emphasis on the
utilization of outpatient services. Management of the Company has responded to
these trends by developing and marketing new outpatient treatment programs. The
shift to outpatient care is reflected in higher revenues from outpatient
services, as gross outpatient revenues at the Company's behavioral health
services facilities owned during both periods increased 6% and 9% for the three
and six month periods ended June 30, 1997, respectively, over the comparable
prior year periods. Gross outpatient revenues comprised 22% of the Company's
behavioral health services' net revenues for the three months ended June 30,
1997 as compared to 18% during the 1996 comparable three month period and 20%
for the six month period ended June 30, 1997 as compared to 18% in the
comparable prior year period.
OTHER OPERATING RESULTS
Depreciation and amortization expense increased 19% or $3 million for the three
months ended June 30, 1997 and 23% or $7 million for the six months ended June
30, 1997, over the comparable prior year periods due primarily to the 1996
acquisitions mentioned above.
Interest expense decreased $600,000 or 10% for the three month period ended June
30, 1997 and $300,000 or 3% for the six month period ended June 30, 1997 over
the comparable prior year periods due primarily to lower average outstanding
borrowings and a slight decrease in rates. In June 1996, the Company issued four
million shares of its Class B Common Stock at a price of $26 per share. The
total net proceeds of $99.1 million generated from this stock issuance were used
to partially finance the 1996 purchase transitions mentioned above.
The effective tax rate was 36% for each of the three and six month periods ended
June 30, 1997 and 1996.
GENERAL TRENDS
An increased proportion of the Company's revenue is derived from fixed payment
services, including Medicare and Medicaid which accounted for 54% and 52% of the
Company's net patient revenues for the three month periods ended June 30, 1997
and 1996 and 52% and 50% for the six month periods ended June 30, 1997 and 1996,
respectively. The Company expects the Medicare and Medicaid revenues to continue
to increase as a larger portion of the general population qualifies for coverage
as a result of the aging of the population and expansion of state Medicaid
programs. The Medicare
Page Nine of Twelve Pages
<PAGE> 10
program reimburses the Company's hospitals primarily based on established rates
by a diagnosis related group for acute care hospitals and by cost based formula
for behavioral health facilities.
In addition to the Medicare and Medicaid programs, other payors continue to
actively negotiate the amounts they will pay for services performed. In general,
the Company expects the percentage of its business from managed care programs,
including HMOs and PPOs to grow. The consequent growth in managed care networks
and the resulting impact of these networks on the operating results of the
Company's facilities vary among the markets in which the Company operates.
In addition to the trends described above that continue to have an impact on
operating results, there are a number of other more general factors affecting
the Company's business. In August 1997, a five year budget plan was approved
which calls for a $115 billion reduction in the rate of increase in Medicare
spending over the next five years. Included in this proposal is a $39 billion
reduction in the future rate of increases to payments made to hospitals. The
Company is unable to quantify the effect of this plan, and no assurance can be
given that the implementation of this plan will not have a material adverse
effect on the Company's business. In Texas, a law has been passed which mandates
that the state senate apply for a waiver from current Medicaid regulations to
allow the state to require that certain Medicaid participants be serviced
through managed care providers. The Company is unable to predict whether Texas
will be granted such a waiver or the effect on the Company's business of such
waiver. Upon meeting certain conditions, and serving a disproportionately high
share of Texas' and South Carolina's low income patients, three of the Company's
facilities located in Texas and one in South Carolina became eligible and
received additional reimbursement from each state's disproportionate share
hospital fund. Included in the Company's financials was an aggregate of $8.3
million and $3.6 million for the three month periods ended June 30, 1997 and
1996 and $16.4 million and $5.4 million for the six months ended June 30, 1997
and 1996, respectively, received pursuant to the terms of these programs. These
programs, which terminate in the third quarter of 1997, have been renewed
although the Company is uncertain as to the amount of reimbursement to be
received pursuant to the terms of these programs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $80 million for the six months
ended June 30, 1997 and $79 million for the six months ended June 30, 1996. The
$1 million net increase during the 1997 six month period as compared to the 1996
comparable period was due primarily to a $20 million increase in the net income
plus the addback of the non-cash charges (depreciation, amortization and
provision for self-insurance reserves) offset by a $11 million increase in
income tax payments and a $7 million increase in payments made in settlement of
self-insurance reserves.
During the first quarter of 1997, the Company spent $67 million to finance
capital expenditures including a total of $38 million on the construction of a
new medical complex (including a 149-bed acute care facility) in Summerlin,
Nevada and a new 130-bed replacement facility in Edinburg, Texas. These
facilities are scheduled to open during the third and fourth quarters of 1997.
The Company also reduced outstanding debt by $14 million.
Subsequent to June 30, 1997, the Company entered into a new revolving credit
agreement. The new agreement, which matures in July 2002, provides for up to
$300 million of borrowing capacity. During the term of this agreement, the
Company has the option to petition the banks to increase the borrowing capacity
to $400 million. The agreement provides for interest at the Company's option at
the prime rate, certificate of deposit plus 3/8% to 5/8%, Euro-dollar plus 1/4%
to 1/2% or money market. A facility fee ranging from 1/8% to 3/8% is required on
the total commitment. As of June 30, 1997, the Company had $275 million of
unused borrowing capacity available under the terms of its new revolving credit
and existing commercial paper facilities.
Page Ten of Twelve Pages
<PAGE> 11
PART II. OTHER INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The following information relates to matters submitted to the stockholders
of Universal Health Services, Inc. (the "Company") at the Annual Meeting
of Stockholders held on May 21, 1997.
(b) Not applicable.
(c) At the meeting the following proposals, as described in the proxy
statement delivered to all the Company's stockholders were approved by the
votes indicated:
Adoption of the Amendment to the Company's Restated Certificate of
Incorporation
<TABLE>
<S> <C>
Votes cast in favor 25,334,848
Votes cast against 137,813
Votes abstained 2,722
Broker non-votes 0
</TABLE>
Election by Class A & Class C stockholders of Class I Directors, Martin
Meyerson and John H. Herrell:
<TABLE>
<CAPTION>
Martin Meyerson John H. Herrell
--------------- ---------------
<S> <C> <C>
Votes cast in favor 2,263,229 2,263,229
Votes withheld 0 0
</TABLE>
(d) Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Company's Restated Certificate of Incorporation and Amendments
thereto.
10.1 Credit agreement dated as of July 8, 1997 among Universal Health
Services, Inc., various banks and Morgan Guaranty Trust Company of New York, as
agent.
10.2 Agreement of Limited Partnership of District Hospital Partners,
L.P. (a District of Columbia Limited Partnership) by and among UHS of D.C.,
Inc. and The George Washington University.
10.3 Contribution Agreement between The George Washington University (a
congressionally chartered institution in the District of Columbia) and District
Hospital Partners, L.P. (a District of Columbia limited partnership).
27. Financial Data Schedule
(b) Reports on Form 8-K
None
11. Statement re computation of per share earnings is set forth on Page six in
Note 2 of the Notes to Condensed Consolidated Financial Statements.
All other items of this Report are inapplicable.
Page Eleven of Twelve Pages
<PAGE> 12
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Universal Health Services, Inc.
(Registrant)
Date: August 12, 1997 /s/ Kirk E. Gorman
-----------------------------------------
Kirk E. Gorman, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer).
Page Twelve of Twelve Pages
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION OF
UNIVERSAL HEALTH SERVICES, INC.
Universal Health Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That the board of directors of the Company, acting by written
consent without a meeting pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, adopted a resolution proposing and declaring
advisable the following amendment to the Restated Certificate of Incorporation
of said corporation:
RESOLVED, that the Restated Certificate of Incorporation be
amended by deleting in its entirety the Article thereof numbered
"FOURTH" and substituting therefor the following:
<PAGE> 2
FOURTH: The total number of shares of all classes of stock which the
Company shall have authority to issue is 68,200,000 shares, consisting of
12,000,000 shares of Class A Common Stock, par value $.01 per share (the "Class
A Common Stock"), 50,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), 1,200,000 shares of Class C Common Stock
par value $.01 per share (the "Class C Common Stock") and 5,000,000 shares of
Class D Common Stock, par value $.01 per share (the "Class D Common Stock").
As used in this Restated Certificate of Incorporation the term "Common Stock"
means collectively the Class A, Class B, Class C and Class D Common Stock.
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Company:
Except as provided in this Article FOURTH, the Class A, B, C and D
Common Stock shall have the same rights and privileges and shall rank equally,
share ratably and be identical in all respects as to all matters.
Part 1. Dividends, Combinations, and Subdivisions. (a) Holders of each
class of Common Stock shall be entitled to receive such dividends, payable in
cash or otherwise, as may be declared thereon by the Board of Directors from
time to time out of assets or funds of the Company legally available therefor,
provided that no dividend may be declared and paid to holders of any class of
Common Stock unless at the same time the Board of Directors shall also declare
and pay to the holders of all other classes of Common Stock a per share
dividend in an identical amount.
(b) After the initial distribution of the Class C and Class D Common
Stock, in the event that a dividend payable in common stock is declared on any
class of Common Stock, the Board of Directors shall also declare a dividend on
each of the other classes of Common Stock payable in the class of common stock
to which it relates equal on a per share basis.
<PAGE> 3
Part 2. Conversions. (a) Each share of Class A, Class C and Class D
Common Stock may at any time be converted into one fully paid and nonassessable
share of Class B Common Stock. Such right shall be exercised by the surrender
of the certificate representing such shares of Class A, Class C or Class D
Common Stock to be converted to the Company at any time during normal business
hours at the principal executive offices of the Company, or if an agent for the
registration of transfer of shares of Class A, Class C or Class D Common Stock
is then duly appointed and acting (said agent being hereinafter called the
"Transfer Agent") then at the office of the Transfer Agent, accompanied by a
written notice of the election by the holder thereof to convert and (if so
required by the Company or the Transfer Agent) by instruments of transfer, in
form satisfactory to the Company and to the Transfer Agent, duly executed by
such holder or his duly authorized attorney, and transfer tax stamps or funds
therefor, if required pursuant to subparagraph (f) below.
(b) As promptly as practicable after the surrender for conversion of a
certificate representing shares of Class A, Class C or Class D Common Stock in
the manner provided in subparagraph (a) above and the payment in cash of any
amount required by the provisions of subparagraphs (a) and (f) of this Part 2,
the Company will deliver or cause to be delivered at the office of the
Transfer Agent to or upon the written order of the holder of such certificate,
a certificate or certificates representing the number of full shares of Class B
Common Stock, issuable upon such conversion, issued in such name or names as
such holder may direct. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender of the
certificate representing shares of Class A, Class C and Class D Common Stock,
and all rights of the holder of such shares as such holder shall cease at such
time and the person or persons in whose name or names the certificate or
certificates representing the shares of Class B are Common Stock to be issued
shall be treated for all purposes as having become the record holder or holders
of such shares of Class B Common Stock at such time; provided, however, that
any such surrends and payment on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates representing shares of Class B Common
Stock are to be issued as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on which
such stock transfer books are open.
<PAGE> 4
(c) No adjustments in respect of dividends shall be made upon the
conversion of any share of Class A, Class C or Class D Common Stock, provided,
however, that if a share shall be converted subsequent to the record date for
the payment of a dividend or other distribution on shares of Class A, Class C or
Class D Common Stock but prior to such payment, the registered holder of such
share at the close of business on such record date shall be entitled to receive
the dividend or other distribution payable on such share on the date set for
payment of such dividend or other distribution notwithstanding the conversion
thereof or the Company's default in payment of the dividend due on such date.
(d) If the Company in any manner subdivides (by stock split or
otherwise) or combines (by reverse stock split or otherwise) the outstanding
shares of one class of Common Stock, the outstanding shares of the other classes
of Common Stock will be proportionately subdivided or combined.
(e) The Company covenants that it will a all times reserve and keep
available solely for the purpose of issuance upon conversion of the outstanding
shares of Class A, Class C and Class D Common Stock, such number of shares of
Class B Common Stock, as shall be issuable upon the conversion of all such
outstanding shares, provided, that nothing contained herein shall be construed
to preclude the Company from satisfying its obligations in respect of the
conversion of the outstanding shares of Class A, Class C and Class D Common
Stock by delivery of purchased shares of Class B Common Stock, which are held in
the treasury of the Company. The Company covenants that if any shares of Class B
Common Stock required to be reserved for purposes of conversion hereunder
require registration with or approval of any governmental authority under any
federal or state law before such shares of Class B Common Stock may be issued
upon conversion, the Company will cause such shares to be duly registered or
approved, as the case may be. The Company covenants that all shares of Class B
Common Stock which shall be issued upon conversion of the shares of Class A,
Class C and Class D Common Stock, will, upon issue, be fully paid and
non-assessable and not subject to any preemptive rights.
(f) The issuance of certificates for shares of Class B Common Stock upon
conversion of shares of Class A, Class C and Class D Common Stock, shall be made
without charge for any stamp or other similar tax in respect of such issuance.
However, if any such certificate is to be issued in a name other than that of
the holder of the share or shares of Class A, Class C or Class D Common Stock
converted, the person
<PAGE> 5
or persons requesting the issuance thereof shall pay to the Company the amount
of any tax which may be payable in respect of any transfer involved in such
issuance or shall establish to the satisfaction of the Company that such tax
has been paid.
Part 3. Registration of Transfer. The Company will keep at its
principal office (or such other place as the Company reasonably designates) a
register for the registration of shares of Common Stock. Upon the surrender of
any certificate representing shares of any class of Common Stock at such place,
the Company will, at the request of the record holder of such certificate,
execute and deliver (at the Company's expense) a new certificate or certificates
in exchange therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate (and the Company forthwith will
cancel such surrendered certificate). Each such new certificate, subject to the
restrictions set forth in Part 6 of this Article Fourth, will be registered in
such name and will represent such number of shares of such class as is requested
by the holder of the surrendered certificate and will be substantially identical
in form to the surrendered certificate.
Part 4. Replacement. (a) Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the registered holder, without
bond, will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of any class of
Common Stock and, in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Company (provided that if
the holder is a financial institution, with net assets in excess of $5 million,
its own agreement of indemnity will be satisfactory), or, in the case of any
such mutilation, upon surrender of such certificate, the Company will (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
(b) The term "outstanding" when used in this Article FOURTH with
reference to the shares of any class of Common Stock as of any particular time
will not include any such shares represented by any certificate in lieu of which
a new certificate has been executed and delivered by the Company in accordance
with Part 3 or this Part 4, but will include only those shares represented by
such new certificate.
-5-
<PAGE> 6
Part 5. Voting Rights. Except as expressly provided herein, at every
meeting of stockholders of the Company, every holder of Class A Common Stock
shall be entitled to one common stock vote in person or by proxy for each share
of Class A Common Stock standing in his name on the transfer books of the
Company; every holder of Class B Common Stock shall be entitled to one-tenth of
a common stock vote in person or by proxy as each share of Class B Common Stock
standing in his name on the transfer books of the Company; every holder of Class
C Common Stock shall be entitled to one hundred common stock votes in person or
by proxy for each share of Class C Common Stock standing in his name on the
transfer books of the Company; provided the holder of Class C Common Stock holds
a number of shares of Class A Common Stock equal to ten times the number of
shares of Class C Common Stock that holder holds; and every holder of class D
Common Stock shall be entitled to ten common stock votes in person or by proxy
for each share of Class D Common Stock standing in his name on the transfer
books of the Company; provided the holder of Class D Common Stock holds a number
of shares of Class B Common Stock equal to ten times the number of shares of
Class D Common Stock that holder holds. In the event a beneficial owner of Class
C or Class D Common Stock holds a number of shares of Class A or Class B Common
Stock, respectively, less than ten times the number of shares of Class C or
Class D Common Stock that beneficial owner holds, then that holder will be
entitled only to one common stock vote for every share of Class C Common Stock,
or one-tenth of a common stock vote for every share of Class D Common Stock,
which that owner holds in excess of one-tenth the number of shares of Class A or
Class B Common Stock, respectively, held by that owner. The Board of Directors
of the Company shall have the right, but not the obligation, to require a holder
of Class C or Class D Common Stock to furnish such documentation as is necessary
to prove that such holder meets the requirements of the two immediately
preceding sentences.
(i) With respect to the election of directors, the holders of Class
B and Class D Common Stock, voting together as a separate class, with
each share having one common stock vote, shall be entitled to elect that
number of directors which constitutes 20% of the total membership of the
Company's Board of Directors and if such 20% is not a whole number, then
the holders of Class B and Class D Common Stock will be entitled to
elect the nearest whole number of directors which constitutes 20% of
such membership, provided, that, except as contemplated by subparagraph
(vi) hereof, in no event shall such number less than one. Holders of
Class A and Class C Common Stock, voting together as a separate class,
with each share having one common stock vote, will be entitled to elect
the remaining directors.
<PAGE> 7
(a) Nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote for the
election of directors. Nominations made by stockholders shall be made by
notice in writing, delivered or mailed by first class United States
mail, postage prepaid, to the Secretary of the Company not less than 20
days prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 30 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Company not later than
the close of the tenth day following the day on which notice of the
meeting was mailed to stockholders.
(b) Each notice under subsection (a) shall set forth: (i)
the name, age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee; and (iii) the number of shares of stock
of the Company which are beneficially owned by each such nominee.
(c) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded.
(ii) The holders of Class B and Class D Common Stock will be entitled
to vote together as a separate class, with each share having one common stock
vote, on the removal, with cause (as defined in Article SIXTH, Part 2,
subparagraph (v)), of any director elected by the holders of Class B and Class D
Common Stock and the holders of Class A and Class C Common Stock will be
entitled to vote together as a separate class with each share having one common
stock vote, on the removal, with cause (as so defined), of any director elected
by the holders of Class A and Class C Common Stock.
(iii) The holders of Class B and Class D Common Stock shall be
entitled to vote together as a separate class on such other matters as may be
required by law to be submitted to such holders.
- 7 -
<PAGE> 8
(iv) The holders of Class B and Class D Common Stock shall in all
matters not referred to in (i), (ii) and (iii) above vote together with the
holders of Class A and Class C Common Stock as a single class, provided that,
except as set forth in the first paragraph of this Part 5, the holders of Class
A Common Stock shall have one common stock vote for each share; the holders of
Class B Common Stock shall have one-tenth of a common stock vote for each
share; the holders of Class C Common Stock shall have 100 common stock votes
for each share; and the holders of Class D Common Stock shall have ten common
stock votes for each share.
(v) Any vacancy in the office of a director may be filled by a vote
of holders of the classes entitled to elect said director voting together as a
separate class and, in the absence of a stockholder vote, in the case of a
vacancy in the office of a director elected by a particular class, such vacancy
may be filled by the remaining directors. Any directors elected by the board of
directors to fill a vacancy shall serve until the expiration of the term of the
director whose position was filled and until his successor has been chosen and
has qualified. The Board of Directors may increase the number of directors and
any vacancy so created may be filled by the Board of Directors, provided that
unless the conditions set forth in (vi) exist in respect of the next previous
Annual Meeting of Stockholders, the Board of Directors may be so enlarged by
the Board of Directors only to the extent that 20% of the enlarged Board of
Directors, rounded to the nearest whole number of directors which constitutes
20% of such membership consists of directors elected by the holders of the
Class B and Class D Common Stock or by persons appointed to fill vacancies
created by the death, resignation or removal or persons elected by the holders
of the Class B and Class D Common Stock.
(vi) The Class B and Class D Common Stock will not have the rights
to elect directors set forth in (i) or (v) above, if on the date for taking a
record for any stockholder meeting at which directors are to be elected, the
number of issued and outstanding shares of Class B and Class D Common Stock
(exclusive of any shares held in the Company's treasury) is less than 10% of
the aggregate number of issued and outstanding shares of all the common stock
(exclusive of shares held in the Company's treasury). In such case all
directors to be elected at such meeting shall be elected by holders of Class A,
Class B, Class C and Class D Common Stock
- 8 -
<PAGE> 9
voting together as a single class, provided that with respect to said
election the holders of Class A Common Stock shall have one common stock
vote for each share; the holders of Class B Common Stock shall have
one-tenth of a common stock vote for each share; the holders of Class C
Common Stock shall have 100 common stock votes for each share; and the
holders of Class D Common Stock shall have ten common stock votes for
each share.
Part 6. TRANSFER. (a) No person holding shares of Class C or Class D
Common Stock (a "Class Holder") may transfer, and the Company and the Transfer
Agent shall not register the transfer of, such shares of Class C or Class D
Common Stock, whether by sale, assignment, gift, devise, bequest, appointment or
otherwise. Any purported transfer of shares of Class C or Class D Common Stock
shall be null and void and of no effect and the purported transfer by a Class
Holder will result in the immediate and automatic conversion into shares of
Class B Common Stock of those shares of Class C and Class D Common Stock
purporting to be transferred. The purported transferee shall have no rights as a
stockholder of the Company and no other rights against, or with respect to, the
Company except the right to receive shares of Class B Common Stock upon the
immediate and automatic conversion into shares of Class B Common Stock of the
shares of Class C or Class D Common Stock purporting to be transferred. Upon the
death of any Class C or Class D Holder who is a natural person, or the
liquidation, dissolution or winding up of the business or affairs of any
corporation, partnership or trust, the shares of Class C and Class D Common
Stock held by such person shall immediately and automatically convert into an
equal number of shares of Class B Common Stock.
(b) Shares of Class C and Class D Common Stock shall be registered in
the name(s) of the beneficial owner(s) thereof (as hereafter defined) and not in
"street" or "nominee" names; provided, however, certificates representing shares
of Class C and Class D Common Stock issued as a stock dividend on the Company's
then outstanding common stock may be registered in the same name and manner as
the certificates representing the shares of Class A and Class B Common Stock
with respect to which the shares of Class C and Class D Common Stock are issued.
For the purposes of this Part 6, the term "beneficial owner(s)" of any shares
of Class C or Class D Common Stock shall mean the person or persons who possess
the power to dispose, or to direct the disposition of, such shares. Any shares
of Class C or Class D Common Stock registered in "street" or "nominee" name may
be transferred to the beneficial owner of such shares on the record date for
such
<PAGE> 10
stock dividend, upon proof satisfactory to the Company and the Transfer Agent
that such person was in fact the beneficial owner of such shares on the record
date for such stock dividend.
(c) Notwithstanding anything to the contrary set forth herein,
any Class Holder may pledge such holder's shares of Class C or Class D Common
Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares shall
not be transferred to, or registered in the name of, the pledgee and shall
remain subject to the provisions of this Part 6. In the event of foreclosure or
other similar action by the pledgee, such pledged shares of Class C or Class D
Common Stock may not be transferred to the pledgee and may only be converted
into shares of Class B Common Stock.
(d) The Company shall note on the certificates representing
the shares of Class C and Class D Common Stock the restrictions on transfer and
registration of transfer imposed by this Part 6.
(e) For purposes of this Part 6:
(i) Each joint owner of shares of Class C and Class D
Common Stock shall be considered a holder of Class C and Class D
Common Stock, respectively.
(ii) A minor for whom shares of Class C or Class D
Common Stock are held pursuant to a Uniform Gifts to Minors Act or
similar law shall be considered a holder of Class C and Class D
Common Stock, respectively.
(iii) Unless otherwise specified, the term "person"
includes a natural person, corporation, partnership,
unincorporated association, firm, joint venture, trust or other
entity.
Part 7. Distribution of Assets. (a) In the event the Company shall be
liquidated, dissolved or wound up, whether voluntarily or involuntarily, the
holders of the Class A, Class B, Class C and Class D Common Stock shall be
entitled to share ratably as a single class in the remaining net assets of the
Company, that is, an equal amount of net assets for each share of Class A, Class
B, Class C and Class D Common Stock. A merger or consolidation of the Company
with or into any other corporation or a sale or conveyance of all or any part of
the assets of the Company (which shall not in fact result in the liquidation of
the Company and the distribution of assets to stockholders) shall not be deemed
to be a voluntary or involuntary liquidation or dissolution or winding up of the
Company within the meaning of this Part 7.
<PAGE> 11
Part 8. Authorized Shares; Fractional Shares. (a) The number of
authorized shares of any class of Common Stock may not be increased unless
approved by the holders of a majority of the common stock votes attributable to
then outstanding shares of Common Stock entitled to vote, voting as a single
class.
(b) No fractional shares of Class B Common Stock shall be
issued upon conversion of shares of Class A, Class C and Class D Common Stock.
In lieu of fractional shares, the Transfer Agent shall pay an amount in cash
equal to the closing market price of the shares of Class B Common Stock on the
conversion date multiplied by the fraction of a share of Class B Common Stock
that would otherwise be issuable.
Part 9. Business Combinations. 9A. Definitions. (i) The term "business
combination" as used in this Part 9 shall mean:
(a) any merger or consolidation of the Company with or into any
other individual, corporation, partnership or other person or entity, other
than a merger or consolidation pursuant to which the Company is the continuing
corporation and the result of which is not a sale, transfer or other
disposition of, or a modification of the form of, ownership of the Company;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or any other security device, of all
or any substantial part of the assets of the Company (including without
limitation any voting securities of a Subsidiary) or of a Subsidiary (which
assets of the Subsidiary constitute a substantial part of the assets of the
Company) to any other individual, corporation, partnership or other person or
entity; or
(c) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of business combination.
(ii) The term "related person business combination" as used in this
Part 9 shall mean:
(a) any merger or consolidation of the Company with or into a
related person;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or any other
<PAGE> 12
security device, of all or any substantial part of the assets of the Company
(including without limitation any voting securities of a subsidiary) or of a
Subsidiary, to a related person;
(c) any merger or consolidation of a related person with or into the
Company or a Subsidiary of the Company;
(d) any sale, lease, exchange, transfer or other disposition of all or
any substantial part of the assets of a related person to the Company or a
Subsidiary of the Company;
(e) the issuance of any securities of the Company or a Subsidiary of
the Company to a related person (other than to full time employees of the
Company);
(f) acquisition by the Company or a Subsidiary of the Company of any
securities of a related person;
(g) any reclassification of Common Stock of the Company, or any
recapitalization involving Common Stock of the Company, consummated within five
years after a related person becomes a related person; or
(h) any agreement, contract or other arrangement providing for any of
the transactions described in this definition of related person business
combination.
(iii) The term "related person" as used in this Part 9 shall mean and
include any individual, corporation, partnership or other person or entity
which, together with their "affiliates" and "associates" (defined below)
"beneficially" owns (as this term is defined in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934), in the aggregate,
5% or more of the outstanding shares of any class of Common Stock of the
Company, and any "affiliate" or "associate" (as those terms are defined in Rule
12b-2 under the Securities Exchange Act of 1934) of any such individual,
corporation, partnership or other person or entity and shall include all
persons or entities acting in concert with such related person. Notwithstanding
the foregoing, for the purposes of this definition, any shares of Common Stock
of the Company which any related person has the right to acquire at any time
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, shall be deemed beneficially owned by such related
person.
(iv) The term "substantial part" shall mean more than 10% of the total
assets of the company in question,
<PAGE> 13
taken as a whole including any subsidiaries, as of the end of its most recent
fiscal year ended prior to the time the determination is being made.
(v) The term "Subsidiary" as used in this Part 9 means any corporation
a majority of the voting stock of which is, at the time as of which any
determination is being made, owned by the Company either directly or through
one or more Subsidiaries.
9B. Stockholder's Vote. A proposed business combination or related
person business combination shall be approved in the manner contemplated by
law, but no such business combination shall be approved if any two or more
directors of the Company then in office shall have not voted in favor of such
proposed business combination or related person business combination unless
such business combination or related person business combination after having
been approved by the Board of Directors in the manner contemplated by law shall
have been approved by the affirmative vote of not less than 85% of the
outstanding Common Stock votes of the Company.
9C. Board of Directors' Vote. It shall be a proper corporate purpose
reasonably calculated to benefit stockholders for the Board of Directors to
base the response of the Company to any proposal for a business combination or
related person business combination on the Board of Directors' evaluation of
what is in the best interests of the Company; and the Board of Directors, in
evaluating what is in the best interests of the Company may consider:
(i) The best interest of the stockholders: for this purpose the
Board of Directors shall consider, among other factors, not only the
consideration being offered in the business combination or related person
business combination proposal in relation to the then current market price, but
also in relation to the then current value of the Company in a freely
negotiated transaction and in relation to the Board of Directors' then estimate
of the future value of the Company as an independent entity; and
(ii) Such other factors as the Board of Directors determines to
be relevant, including, among other factors, the social, legal and economic
effects upon the employees, patients and business of the Company or any of its
Subsidiaries, and the community in which the Company, or any of its
Subsidiaries, is located or operates.
<PAGE> 14
SECOND: That thereafter, pursuant to a vote taken at a meeting of the
stockholders of the Company held on November 20, 1985, a majority of the common
stock votes of the Company ratified the amendment referenced herein.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provision of Sections 211 and 242 of the General
Corporation Law of Delaware, as amended.
FOURTH: That the capital of said corporation will not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, Universal Health Services, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by Alan
B. Miller, its President, and Robert M. Dubbs, its Secretary, this ____ day of
November, 1985.
By: /s/ Alan B. Miller
________________________
Alan B. Miller
President
CORPORATE SEAL
ATTEST
By: /s/ Robert M. Dubbs
_________________________
Robert M. Dubbs
Secretary
<PAGE> 1
EXHIBIT 10.1
CONFORMED COPY
$300,000,000
CREDIT AGREEMENT
dated as of
July 8, 1997
among
UNIVERSAL HEALTH SERVICES, INC.
THE BANKS LISTED HEREIN
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
-----------------------
J.P. Morgan Securities Inc.,
Arranger
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. Method of Committed Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.03. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.09. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Method of Electing Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Scheduled Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.13. General Provisions as to Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.15. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.16. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.17. Regulation D Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.18. Takeout of Swingline Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.19. Increased Commitments, Additional Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.02. Borrowings and Issuances of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
<PAGE> 3
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . 41
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.06. Ownership of Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.07. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.08. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.11. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.04. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.07. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.08. Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.09. Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.10. Restricted Payments; Prepayments of Subordinated Debt . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.11. Consolidations, Mergers, Sales of Assets, Dissolutions, Reorganizations, etc . . . . . . . . . . 50
SECTION 5.12. Subsidiary Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.13. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.14. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.15. Additional Guarantors and Release of Guaranties . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.03. Cash Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.09. Agent's Fee; Arranger Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . . 62
SECTION 8.06. Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
iii
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SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.09. Counterparts; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
Pricing Schedule I
Pricing Schedule II
Schedule 1 -- Subsidiaries
Schedule 2 -- Insurance
Exhibit A -- Note
Exhibit B -- Money Market Quote Request
Exhibit C -- Invitation for Money Market Quotes
Exhibit D -- Money Market Quote
Exhibit E-1 -- Opinion of Counsel for the Borrower
Exhibit E-2 -- Opinion of the General Counsel of the Borrower
Exhibit F -- Opinion of Special Counsel for the Agent
Exhibit G -- Assignment and Assumption Agreement
Exhibit H -- Guaranty Agreement
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of July 8, 1997 among UNIVERSAL HEALTH SERVICES,
INC., the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ACCEPTABLE INSURER" means an insurance company (i) having an A.M.
Best rating of "A" or better and being in a financial size category of "X" or
larger (as such category is defined as of the date hereof) or (ii) otherwise
reasonably acceptable to the Required Banks.
"ADDITIONAL BANK" has the meaning set forth in Section 2.19.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"AGENT" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks under the Loan Documents, and its successors in
such capacity.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office, (iii) in the case of
its Money
<PAGE> 7
Market Loans, its Money Market Lending Office and (iv) in the case of its
Swingline Loans, its Swingline Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof, each
Additional Bank or Assignee which becomes a Bank pursuant to Section 2.19 or
9.06(c), and their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means (i) a Syndicated Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or the provisions of Article 8 or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BORROWER" means Universal Health Services, Inc., a Delaware
corporation, and its successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for 1996, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended March 31, 1997, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"BORROWING" has the meaning set forth in Section 1.03.
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD LOAN" means (i) a Syndicated Loan which bears interest at a CD
Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
2
<PAGE> 8
Interest Rate election or (ii) an overdue amount which was a CD Loan
immediately before it became overdue.
"CD MARGIN" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD RATE" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD REFERENCE BANKS" means The Chase Manhattan Bank, Bank of America
National Trust and Savings Association and Morgan Guaranty Trust Company of New
York.
"COMMITMENT" means (i) with respect to each Bank, the amount of such
Bank's Commitment, as such amount is set forth opposite the name of such Bank
on the signature pages hereof, (ii) with respect to any Additional Bank, the
amount of the Commitment assumed by it pursuant to Section 2.19 and (iii) with
respect to any Assignee, the amount of the transferor Bank's Commitment
assigned to it pursuant to Section 9.06(c), in each case as such amount may be
changed from time to time pursuant to Section 2.09, 2.11, 2.19 or 9.06(c);
provided that, if the context so requires, the term "Commitment" means the
obligation of a Bank to extend credit up to such amount to the Borrower
hereunder.
"COMMITTED LOAN" means a Syndicated Loan or a Swingline Loan.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date;
provided that from December 1 of any year to but not including June 30 of the
following year Consolidated Debt shall not include amounts borrowed to fund the
Voluntary Employment Benefit Association not exceeding the aggregate amount of
employee benefits prepaid by the Borrower and its Consolidated Subsidiaries
through payments to the Voluntary Employment Benefit Association during such
period.
"CONSOLIDATED EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period plus (ii) to the extent deducted in the
determination thereof, Consolidated Interest Expense, depreciation and
amortization expense and provision for income taxes plus (or minus) (iii) the
amount of any material nonrecurring items of loss (or gain), adjusted to
eliminate the effect of any such item on the provision for income taxes for
such period.
3
<PAGE> 9
"CONSOLIDATED EBITDAR" means, for any period, Consolidated EBITDA for
such period plus, to the extent deducted in determining Consolidated EBITDA for
such period, Consolidated Rental Expense for such period.
"CONSOLIDATED FINANCE LIABILITIES" means, at any date, the sum of (i)
Consolidated Debt at such date plus (ii) eight times Consolidated Rental
Expense for the period of four consecutive fiscal quarters most recently ended
on or prior to such date.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense (net of interest income) of the Borrower and its Consolidated
Subsidiaries determined on a consolidated basis for such period.
"CONSOLIDATED NET INCOME" for any period means the consolidated net
income of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries,
determined as of such date.
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any date, the Net
Tangible Assets of the Borrower and its Consolidated Subsidiaries determined on
a consolidated basis as of such date.
"CONSOLIDATED RENTAL EXPENSE" means, for any period, the lease and
rental expense of the Borrower and its Consolidated Subsidiaries under all
leases (other than capital leases), determined on a consolidated basis for such
period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements if such statements were prepared as of
such date.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 5.14 and the
definitions of Material Debt and
4
<PAGE> 10
Material Financial Obligations, all contingent obligations) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (vi) all Debt secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such
Person, and (vii) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(b).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
5
<PAGE> 11
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"EURO-DOLLAR LOAN" means (i) a Syndicated Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of
The Chase Manhattan Bank, Bank of America National Trust and Savings
Association and Morgan Guaranty Trust Company of New York.
6
<PAGE> 12
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
the United States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EVERGREEN LETTER OF CREDIT" means a Letter of Credit that is
automatically extended unless the Issuing Bank gives notice to the beneficiary
thereof stating that such Letter of Credit will not be extended.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of
August 2, 1994 as amended as of April 24, 1995 and May 10, 1996 among the
Borrower, the banks parties thereto and Morgan Guaranty Trust Company of New
York, as agent, as amended to the Effective Date.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"FIXED CHARGE COVERAGE RATIO" means, at any date, the ratio of
Consolidated EBITDAR to Fixed Charges for the period of four consecutive fiscal
quarters most recently ended on or prior to such date.
"FIXED CHARGES" means, for any period, the sum of Consolidated
Interest Expense and Consolidated Rental Expense for such period.
7
<PAGE> 13
"FIXED RATE BORROWING" means a CD Borrowing or a Euro-Dollar
Borrowing.
"FIXED RATE LOANS" means CD Loans, Euro-Dollar Loans, Swingline Loans
or Money Market Loans (excluding Swingline Loans or Money Market LIBOR Loans
bearing interest at the Base Rate) or any combination of the foregoing.
"GROUPS OF LOANS" means at any time a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar Loans
having the same Interest Period at such time or (iii) all CD Loans having the
same Interest Period at such time, provided that, if a Committed Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Article
8, such Loan shall be included in the same Group or Groups of Loans from time
to time as it would have been if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "GUARANTEE"
used as a verb has a corresponding meaning.
"GUARANTY AGREEMENT" means the Guaranty Agreement, dated as of the
date hereof between the Subsidiary Guarantors and the Agent, such Guaranty
Agreement to be substantially in the form of Exhibit H hereto, and as the same
may from time to time be amended, supplemented or otherwise modified.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
8
<PAGE> 14
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice, provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each CD Loan, the period commencing on the date
of borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable Notice
of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Swingline Loan, the period commencing on the
date of borrowing specified in the applicable Notice of Borrowing and ending
such number of days thereafter (but not more than 14 days) as the Borrower may
elect in such notice; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which
9
<PAGE> 15
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(4) with respect to each Money Market LIBOR Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such whole number of months thereafter as the Borrower may elect in
accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall, subject to clause (c)
below, be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date; and
(5) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 7 days)
as the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
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"ISSUING BANK" means NationsBank, N.A. and any other Bank that may
agree to issue letters of credit hereunder, in each case as issuer of a Letter
of Credit hereunder.
"LETTER OF CREDIT" means a letter of credit to be issued hereunder by
the Issuing Bank in accordance with Section 2.16.
"LETTER OF CREDIT LIABILITIES" means, for any Bank and at any time,
such Bank's ratable participation in the sum of (x) the amounts then owing by
the Borrower in respect of amounts drawn under Letters of Credit and (y) the
aggregate amount then available for drawing under all Letters of Credit.
"LEVERAGE RATIO" means, at any date, the ratio of (i) Consolidated
Finance Liabilities at such date to (ii) the sum of such Consolidated Finance
Liabilities plus Consolidated Net Worth at such date.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN" means a Committed Loan or a Money Market Loan and "LOANS" means
Committed Loans or Money Market Loans or both.
"LOAN DOCUMENTS" means this Agreement, the Notes and the Guaranty
Agreement.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal exceeding $1,000,000.
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<PAGE> 17
"MATERIAL FINANCIAL OBLIGATION" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$1,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by notice
to the Borrower and the Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank will be deemed to refer to either
or both of such offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section
2.03(d)(ii)(C).
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five-year period.
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<PAGE> 18
"NET TANGIBLE ASSETS" means, as to any Person or other business unit,
its gross assets, net of depreciation and other proper reserves, less its
goodwill and other intangible assets.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as
defined in Section 2.03 or a Notice of Money Market Borrowing (as defined in
Section 2.03(f).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in
Section 2.10(b).
"NOTICE OF ISSUANCE" has the meaning set forth in Section 2.16(b).
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"PRICING SCHEDULE" means (i) Pricing Schedule I attached hereto,
unless and until the Borrower shall have elected, by not less than five
Domestic Business Days' notice to the Banks, that Pricing Schedule II attached
hereto be the Pricing
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<PAGE> 19
Schedule and (ii) on and after the effective date of such notice, Pricing
Schedule II attached hereto. Such election, if made, shall be irrevocable.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY DATE" means each March 31, June 30, September 30 and
December 31.
"RECEIVABLES FINANCING" means a financing arrangement among the
Borrower, certain Subsidiaries of the Borrower, including a wholly-owned
special purpose Subsidiary of the Borrower and certain other parties pursuant
to which Subsidiaries of the Borrower will sell substantially all of their
accounts receivable from time to time to the special purpose Subsidiary of the
Borrower which will, in turn, sell or pledge such receivables to certain
investors for an aggregate purchase price outstanding not at any time in excess
of $125,000,000.
"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its common stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock (except shares acquired upon the conversion thereof into shares
of its common stock) or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock.
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but excluding the Termination Date.
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"SUBORDINATED DEBT" of any Person means all Debt which (i) by its
terms is not required to be repaid, in whole or in part, before the Termination
Date, (ii) bears interest at rates not greater than such Person shall
reasonably determine to be the prevailing market rate, at the time such
Subordinated Debt is issued, for interest on comparable subordinated debt
issued by comparable issuers, (iii) is subordinated in right of payment to such
Person's indebtedness, obligations and liabilities to the Banks under the Loan
Documents pursuant to payment and subordination provisions satisfactory in form
and substance to the Required Banks and (iv) is issued pursuant to loan
documents having covenants and events of default that are satisfactory in form
and substance to the Required Banks but that in no event are less favorable,
including with respect to rights of acceleration, to the Borrower than the
terms hereof.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "SUBSIDIARY" means a Subsidiary of the Borrower.
The term "SUBSIDIARY" shall include, without limitation, each partnership in
which the Borrower or one of its Subsidiaries is a partner which operates
surgical care centers or other health care facilities, except that none of (i)
any such Person, (ii) UHS Receivables Corporation, a Delaware corporation and
(iii) RCW of Edmond, Inc., an Oklahoma corporation shall be required to become
a Subsidiary Guarantor.
"SUPPLEMENTAL INDENTURE" means the Supplemental Indenture to be
entered into by the Borrower and PNC Bank, National Association, as trustee
amending the Indenture dated as of July 15, 1995, between the Borrower and PNC
Bank, National Association, as trustee.
"SUBSIDIARY GUARANTORS" means the Subsidiaries of the Borrower party
to the Guaranty Agreement.
"SWINGLINE BANK" means Morgan Guaranty Trust Company of New York, and
its successors.
"SWINGLINE LENDING OFFICE" means, as to the Swingline Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Swingline Lending Office)
or such other office as such Bank may hereafter designate as its Swingline
Lending Office by notice to the Borrower and the Agent.
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"SWINGLINE LOAN" means a loan made by the Swingline Bank pursuant to
Section 2.01(b).
"SWINGLINE TAKEOUT LOAN" means a Base Rate Loan made pursuant to
Section 2.18.
"SYNDICATED LOAN" means a Loan made by a Bank pursuant to Section
2.01(a); provided that, if any such loan or loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate Election, the term
"SYNDICATED LOAN" shall refer to the combined principal amount resulting from
such combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"TERMINATION DATE" means July 8, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"UNREFUNDED SWINGLINE LOANS" has the meaning set forth in Section
2.18(b).
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
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<PAGE> 22
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article V to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article V for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article 2 on the same date, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate Loans, have the
same initial Interest Period. Borrowings are classified for purposes of this
Agreement either by reference to the pricing of Loans comprising such Borrowing
(e.g., a "FIXED RATE BORROWING" is a Euro-Dollar Borrowing, a CD Borrowing, a
Swingline Borrowing or a Money Market Borrowing (excluding any such Borrowing
consisting of Swingline Loans or Money Market LIBOR Loans bearing interest at
the Base Rate), and a "EURO-DOLLAR BORROWING" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article 2 under which
participation therein is determined (i.e., a "CONVENTIONAL BORROWING" is a
Borrowing under Section 2.01(a) in which all Banks participate in proportion to
their Commitments, while a "MONEY MARKET BORROWING" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the basis of
their bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Syndicated Loans. During the
Revolving Credit Period each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to make Loans to the Borrower from time to time in
amounts such that the aggregate unpaid principal amount of Committed Loans by
such Bank, together with its Letter of Credit Liabilities and its participating
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interests in any Unrefunded Swingline Loans, shall at no time exceed the amount
of its Commitment. Each Borrowing under this subsection (other than a
Swingline Takeout Borrowing) shall be in an aggregate principal amount of
$5,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount available to the Borrower in accordance with
Section 3.02) and shall be made from the several Banks ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, repay, or to the extent permitted by Section 2.12,
prepay Loans and reborrow at any time during the Revolving Credit Period under
this Section.
(b) Swingline Loans. From time to time prior to the Termination
Date, the Swingline Bank agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this subsection from time
to time in amounts such that (i) the aggregate principal amount of its
Committed Loans at any one time outstanding shall not exceed the amount of its
Commitment and (ii) the aggregate principal amount of Swingline Loans at any
time outstanding shall not exceed $20,000,000. Within the foregoing limits,
the Borrower may borrow under this subsection, repay or, to the extent
permitted by Section 2.12, prepay Loans and reborrow at any time during the
Revolving Credit Period under this subsection; provided that the proceeds of a
Swingline Borrowing may not be used, in whole or in part, to refund any prior
Swingline Borrowing. Each Borrowing under this subsection 2.01(b) shall be in
an aggregate principal amount of $2,000,000 or any larger multiple of $500,000
(except that any such Borrowing may be in the aggregate amount available in
accordance with Section 3.02.
SECTION 2.02. Method of Committed Borrowing. The Borrower shall give
the Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing or Swingline
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Swingline Borrowing and a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to be Swingline
Loans;
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(d) in the case of a Syndicated Borrowing, whether the Loans
comprising such Borrowing are to bear interest initially at the Base Rate, a CD
Rate or a Euro-Dollar Rate; and
(e) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowings. (a) The Money Market Option.
In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may,
as set forth in this Section, request the Banks to make offers to make Money
Market Loans to the Borrower from time to time during the Revolving Credit
Period. The Banks may, but shall have no obligation to, make such offers and
the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile a Money Market Quote Request substantially in the
form of Exhibit B hereto so as to be received not later than 10:30 A.M. (New
York City time) on (x) the fifth Euro-Dollar Business Day before the date of
Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic
Business Day next preceding the date of Borrowing proposed therein, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall
be $5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
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The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly after receiving a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile an Invitation for Money Market Quotes substantially in the form of
Exhibit C hereto, which shall constitute an invitation by the Borrower to each
Bank to submit Money Market Quotes offering to make the Money Market Loans to
which such Money Market Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection 2.03(d) and
must be submitted to the Agent by telex or facsimile at its address referred to
in Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth
Euro-Dollar Business Day before the proposed date of Borrowing, in the case of
a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective); provided that Money Market Quotes submitted by
the Agent (or any affiliate of the Agent) in the capacity of a Bank may be
submitted, and may only be submitted, if the Agent or such affiliate notifies
the Borrower of the terms of the offer or offers contained therein not later
than (x) one hour before the deadline for the other Banks, in the case of a
LIBOR Auction or (y) 15 minutes before the deadline for the other Banks, in the
case of an Absolute Rate Auction. Subject to Articles 3 and 8, any Money
Market Quote so made shall not be revocable except with the written consent of
the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be substantially in the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
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(B) the principal amount of the Money Market Loan
for which each such offer is being made, which principal amount
(w) may be greater than or less than the Commitment of the
quoting Bank, (x) must be $5,000,000 or a larger multiple of
$1,000,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount of
Money Market Loans for which offers being made by such quoting
Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank Offered Rate (the
"MONEY MARKET MARGIN") offered for each such Money Market Loan,
expressed as a percentage (specified to the nearest 1/10,000th of
1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest 1/10,000th
of 1%) (the "MONEY MARKET ABSOLUTE RATE") offered for each such
Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the information
required by subsection (d)(ii) above;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms of (i) any Money Market Quote submitted by a Bank that is
in
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accordance with subsection (d) and (ii) any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless
such subsequent Money Market Quote is submitted solely to correct a manifest
error in such former Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for
which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day before the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective), the Borrower shall notify the Agent
of its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "NOTICE OF MONEY
MARKET BORROWING") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing
must be $5,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with
the requirements of this Agreement.
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(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
Each Borrowing under this Section 2.03 shall be in an aggregate
principal amount of $1,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
(but in any event on the same day) notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank shall make available its ratable share of such
Borrowing, in Federal or other funds immediately available in New York City, to
the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) of this Section 2.04 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the
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Borrower, a rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the
case of such Bank, the Federal Funds Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the "NOTE" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a),
the Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and
may, if such Bank so elects in connection with any transfer or enforcement of
its Note, endorse on the schedule forming a part thereof appropriate notations
to evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. (a) Each Syndicated Loan shall
mature, and the principal amount thereof shall be due and payable, together
with accrued interest thereon, on the Termination Date.
(b) Each Swingline Loan included in any Swingline Borrowing and each
Money Market Loan included in any Money Market Borrowing shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the last day of the Interest Period applicable to such
Borrowing.
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SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable in arrears on each
Quarterly Date and, with respect to the principal amount of any Base Rate Loan
converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is
so converted. Any overdue principal of or overdue interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
overdue interest on any CD Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the higher
of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate
applicable to such Loan at the date such payment was due.
The "ADJUSTED CD RATE" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
--------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary,
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to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00
A.M. (New York City time) (or as soon thereafter as practicable) on the first
day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of
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such Interest Period in an amount approximately equal to the principal amount
of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such
Interest Period is to apply and for a period of time comparable to such
Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Loan at the
date such payment was due and (ii) the sum of 2% plus the Euro-Dollar Margin
for such day plus the quotient obtained (rounded upward, if necessary, to the
next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period of time not longer than
three months as the Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference Bank in the London
interbank market for the applicable period determined as provided above by (y)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day).
(e) Each Swingline Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the Base Rate for such day or such other
rate as may be from time to time determined by mutual agreement between the
Swingline Bank and the Borrower. Interest on each Swingline Loan shall be
payable at the maturity of such Loan. Any overdue principal of or interest on
any Swingline Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the Base Rate for such
day.
(f) Subject to Section 8.01, the unpaid principal amount of each
Money Market LIBOR Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the sum of the London Interbank Offered Rate for such Interest Period
(determined in accordance with Section 2.07(c) as if the related Money Market
LIBOR Borrowing were a Euro-Dollar Borrowing) plus (or minus) the Money Market
Margin quoted by the Bank making such Loan. The unpaid principal amount of
each Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank making
such Loan. Such interest shall be payable for each Interest Period on the last
day thereof and, if such
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<PAGE> 33
Interest Period is longer than three months, at intervals of three months after
the first day thereof. Any overdue principal of or interest on any Money
Market Loan shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the Base Rate for such day.
(g) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(h) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated hereby. If any Reference Bank does not
furnish a timely quotation, the Agent shall determine the relevant interest
rate on the basis of the quotation or quotations furnished by the remaining
Reference Bank or Banks or, if none of such quotations is available on a timely
basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Fees. (a) The Borrower shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Effective Date to but excluding the
date of termination of the Commitments in their entirety, on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including such date of termination to but excluding the date the Loans and
Letter of Credit Liabilities shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans and Letter of Credit
Liabilities.
(b) The Borrower shall pay to the Agent (i) for the account of the
Banks ratably a letter of credit fee accruing daily on the aggregate amount
then available for drawing under all outstanding Letters of Credit at the
Letter of Credit Fee Rate (determined daily in accordance with the Pricing
Schedule) and (ii) for the account of each Issuing Bank a letter of credit
fronting fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit issued by such Issuing Bank at a rate per annum
mutually agreed from time to time by the Borrower and such Issuing Bank.
(c) Accrued fees under this Section shall be payable quarterly in
arrears on each Quarterly Date and on the date of termination of the
Commitments in their entirety (and, if later, the date the Loans and Letter of
Credit Liabilities shall be repaid in their entirety).
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SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Commitments at
any time, if no Loans or Letter of Credit Liabilities are outstanding at such
time or (ii) ratably reduce from time to time by an aggregate amount of
$5,000,000 or a larger multiple of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Loans and Letter of Credit Liabilities.
SECTION 2.10. Method of Electing Interest Rates. (a) The Loans
included in each Syndicated Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8 and the last sentence of this
subsection (a)), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert such Loans to CD Loans as of any Domestic Business Day
or to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, subject to Section 2.14 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Agent not later than 11:00 A.M. (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected in such notice is to be effective (unless the relevant Loans are to be
converted to Domestic Loans of the other type or are CD Rate Loans to be
continued as CD Rate Loans for an additional Interest Period, in which case
such notice shall be delivered to the Agent not later than 11:00 A.M. (New York
City time) on the second Domestic Business Day before such conversion or
continuation is to be
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<PAGE> 35
effective). A Notice of Interest Rate Election may, if it so specifies, apply
to only a portion of the aggregate principal amount of the relevant Group of
Loans, provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each $5,000,000 or any
larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with the
applicable clause of subsection 2.10(a) above;
(iii) if the Loans comprising such Group are to be
converted, the new type of Loans and, if the Loans being converted are
to be Fixed Rate Loans, the duration of the next succeeding Interest
Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of the term "INTEREST PERIOD".
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection 2.10(a) above, the Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If no Notice of Interest Rate Election is timely
received prior to the end of an Interest Period for any Group of Loans, the
Borrower shall be deemed to have elected that such Group of Loans be converted
to Base Rate Loans as of the last day of such Interest Period.
(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall not
constitute a "BORROWING" subject to the provisions of Section 3.02.
SECTION 2.11. Scheduled Termination of Commitments. The Commitments
shall terminate on the Termination Date, and any Loans then
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outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.12. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Loan to Section 2.14, the Borrower may, upon at least one Domestic
Business Day's notice to the Agent, prepay any Group of Domestic Loans, any
Swingline Borrowing (or any Money Market Borrowing bearing interest at the Base
Rate pursuant to Section 8.01, or upon at least three Euro-Dollar Business
Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case
in whole at any time, or from time to time in part in amounts aggregating
$5,000,000 ($1,000,000 in the case of a Swingline Borrowing) or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Except as provided in subsection 2.12(a) above the Borrower may
not prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.13. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans, Swingline Loans or Letter of Credit Liabilities or of fees
shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, the Money
Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of
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<PAGE> 37
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than
the last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails
to borrow, prepay, convert or continue any Fixed Rate Loans after notice has
been given to any Bank in accordance with Section 2.04(a), 2.12(c) or 2.10(c),
the Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that
such Bank shall have delivered to the Borrower and the Agent a certificate as
to the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.16. Letters of Credit. (a) Subject to the terms and
conditions hereof, the Issuing Bank agrees to issue Letters of Credit hereunder
from time to time before the tenth day before the Termination Date upon the
request of the Borrower; provided that, immediately after each Letter of Credit
is issued (i) the
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<PAGE> 38
aggregate amount of the Letter of Credit Liabilities plus the aggregate
outstanding amount of all Loans shall not exceed the aggregate amount of the
Commitments and (ii) the aggregate Letter of Credit Liabilities shall not
exceed $50,000,000. Upon the date of issuance by the Issuing Bank of a Letter
of Credit, the Issuing Bank shall be deemed, without further action by any
party hereto, to have sold to each Bank, and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the Issuing Bank, a
participation in such Letter of Credit and the related Letter of Credit
Liabilities in the proportion their respective Commitments bear to the
aggregate Commitments.
(b) The Borrower shall give the Issuing Bank notice at least five
Domestic Business Days prior to the requested issuance of a Letter of Credit
specifying the date such Letter of Credit is to be issued, and describing the
terms of such Letter of Credit and the nature of the transactions to be
supported thereby (such notice, including any such notice given in connection
with the extension of a Letter of Credit, a "NOTICE OF ISSUANCE"). Upon receipt
of a Notice of Issuance, the Issuing Bank shall promptly notify the Agent, and
the Agent shall promptly notify each Bank of the contents thereof and of the
amount of such Bank's participation in such Letter of Credit. The issuance by
the Issuing Bank of each Letter of Credit shall, in addition to the conditions
precedent set forth in Article 3, be subject to the conditions precedent that
such Letter of Credit shall be in such form and contain such terms as shall be
satisfactory to the Issuing Bank and that the Borrower shall have executed and
delivered such other instruments and agreements relating to such Letter of
Credit as the Issuing Bank shall have reasonably requested. The Borrower shall
also pay to the Issuing Bank for its own account issuance, drawing, amendment
and extension charges in the amounts and at the times as agreed between the
Borrower and the Issuing Bank. The extension or renewal of any Letter of Credit
shall be deemed to be an issuance of such Letter of Credit, and if any Letter
of Credit contains a provision pursuant to which it is deemed to be extended
unless notice of termination is given by the Issuing Bank, the Issuing Bank
shall timely give such notice of termination unless it has theretofore timely
received a Notice of Issuance and the other conditions to issuance of a Letter
of Credit have also theretofore been met with respect to such extension.
(c) No Letter of Credit shall have a term extending or be so
extendible beyond the fifth Domestic Business Day preceding the Termination
Date. Subject to the preceding sentence, each Letter of Credit issued
hereunder shall expire on or before the first anniversary of the date of such
issuance; provided that the expiry date of any Letter of Credit may be extended
from time to time (i) at the Borrower's request or (ii) in the case of an
Evergreen Letter of Credit, automatically, in each case so long as such
extension is for a period not exceeding one year and is granted (or the last
day on which notice can be given to prevent
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such extension occurs) no earlier than three months before the then existing
expiry date thereof.
(d) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the Issuing Bank shall notify
the Agent and the Agent shall promptly notify the Borrower and each other Bank
as to the amount to be paid as a result of such demand or drawing and the
payment date. The Borrower shall be irrevocably and unconditionally obligated
forthwith to reimburse the Issuing Bank for any amounts paid by the Issuing
Bank upon any drawing under any Letter of Credit, without presentment, demand,
protest or other formalities of any kind. All such amounts paid by the Issuing
Bank and remaining unpaid by the Borrower shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the Base Rate for such day. In addition, each Bank will pay to the Agent, for
the account of the Issuing Bank, immediately upon the Issuing Bank's demand at
any time during the period commencing after such drawing until reimbursement
therefor in full by the Borrower, an amount equal to such Bank's ratable share
of such drawing (in proportion to its participation therein), together with
interest on such amount for each day from the date of the Issuing Bank's demand
for such payment (or, if such demand is made after 12:00 Noon (New York City
time) on such date, from the next succeeding Domestic Business Day) to the date
of payment by such Bank of such amount at a rate of interest per annum equal to
the Federal Funds Rate. The Issuing Bank will pay to each Bank ratably all
amounts received from the Borrower for application in payment of its
reimbursement obligations in respect of any Letter of Credit, but only to the
extent such Bank has made payment to the Issuing Bank in respect of such Letter
of Credit pursuant hereto.
(e) The obligations of the Borrower and each Bank under subsection
2.16(d) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances:
(i) the use which may be made of the Letter of Credit by,
or any acts or omission of, a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting);
(ii) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary of
a Letter of Credit (or any Person for whom the beneficiary may be
acting), the Banks (including the Issuing Bank) or any other Person,
whether in connection
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with this Agreement or the Letter of Credit or any document related
hereto or thereto or any unrelated transaction;
(iii) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(iv) payment under a Letter of Credit to the beneficiary of
such Letter of Credit against presentation to the Issuing Bank of a
draft or certificate that does not comply with the terms of the Letter
of Credit; or
(v) any other act or omission to act or delay of any kind
by any Bank (including the Issuing Bank), the Agent or any other Person
or any other event or circumstance whatsoever that might, but for the
provisions of this subsection (v), constitute a legal or equitable
discharge of the Borrower's or the Bank's obligations hereunder.
(f) The Borrower hereby indemnifies and holds harmless each Bank
(including the Issuing Bank) and the Agent from and against any and all claims,
damages, losses, liabilities, costs or expenses which such Bank or the Agent
may incur (including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Issuing Bank may incur by reason of or
in connection with the failure of any other Bank to fulfill or comply with its
obligations to such Issuing Bank hereunder (but nothing herein contained shall
affect any rights the Borrower may have against such defaulting Bank)), and
none of the Banks (including the Issuing Bank) nor the Agent nor any of their
officers or directors or employees or agents shall be liable or responsible, by
reason of or in connection with the execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit, including without
limitation any of the circumstances enumerated in subsection 2.16(d) above, as
well as (i) any error, omission, interruption or delay in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii)
any loss or delay in the transmission of any document required in order to make
a drawing under a Letter of Credit, and (iii) any consequences arising from
causes beyond the control of the Issuing Bank, including without limitation any
government acts, or any other circumstances whatsoever in making or failing to
make payment under such Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Bank for any claims, damages, losses,
liabilities, costs or expenses, and the Borrower shall have a claim for direct
(but not consequential) damage suffered by it, to the extent found by a court
of competent jurisdiction to have been caused by (x) the willful misconduct or
gross negligence of the Issuing Bank to comply in any material respect with the
UCP in determining whether a request presented under any Letter
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of Credit complied with the terms of such Letter of Credit or (y) the Issuing
Bank's failure to pay under any Letter of Credit after the presentation to it
of a request strictly complying with the terms and conditions of the Letter of
Credit. Nothing in this subsection 2.16(f) is intended to limit the obligations
of the Borrower under any other provision of this Agreement. To the extent the
Borrower does not indemnify the Issuing Bank as required by this subsection,
the Banks agree to do so ratably in accordance with their Commitments.
SECTION 2.17. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after such Bank
gives such notice and (y) shall notify the Borrower at least five Euro-Dollar
Business Days before each date on which interest is payable on the Euro-Dollar
Loans of the amount then due it under this Section.
SECTION 2.18. Takeout of Swingline Loans. (a) In the event that any
Swingline Borrowing shall not be repaid in full at or prior to the maturity
thereof, the Agent shall, on behalf of the Borrower (the Borrower hereby
irrevocably directing and authorizing the Agent so to act on its behalf), give
a Notice of Borrowing requesting the Banks, including the Swingline Bank, to
make a Base Rate Borrowing in an amount equal to the unpaid principal amount of
such Swingline Borrowing. Each Bank will make the proceeds of its Base Rate
Loan included in such Borrowing available to the Agent for the account of the
Swingline Bank on such date in accordance with Section 2.04. The proceeds of
such Base Rate Borrowing shall be immediately applied to repay such Swingline
Borrowing.
(b) If, for any reason, a Base Rate Borrowing may not be (as
determined by the Agent in its sole discretion), or is not, made pursuant to
subsection (a) above to refund Swingline Loans as required by said clause,
then, effective on the date such Borrowing would otherwise have been made, each
Bank severally, unconditionally and irrevocably agrees that it shall purchase
an undivided participating interest in such Swingline Loans ("UNREFUNDED
SWINGLINE LOANS") in an amount equal to the amount of the Loan which otherwise
would have been made by such Bank pursuant to subsection (a), which purchase
shall be funded by
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the time such Loan would have been required to be funded pursuant to Section
2.04 by transfer to the Agent, for the account of the Swingline Bank, in
immediately available funds, of the amount of its participation.
(c) Whenever, at any time after the Swingline Bank has received from
any Bank payment in full for such Bank's participating interest in a Swingline
Loan, the Swingline Bank (or the Agent on its behalf) receives any payment on
account thereof, the Swingline Bank (or the Agent, as the case may be) will
promptly distribute to such Bank its participating interest in such payment
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Bank's participating interest was outstanding
and funded); provided, however, that in the event that such payment is
subsequently required to be returned, such Bank will return to the Swingline
Bank (or the Agent, as the case may be) any portion thereof previously
distributed by the Swingline Bank (or the Agent, as the case may be) to it.
(d) Each Bank's obligation to purchase and fund participating
interests pursuant to this Section shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation: (i)
any setoff, counterclaim, recoupment, defense or other right which such Bank or
the Borrower may have against the Swingline Bank, or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or the
failure to satisfy any of the conditions specified in Article 3; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
any breach of this Agreement by the Borrower or any Bank; or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
SECTION 2.19. Increased Commitments, Additional Banks. (a) From
time to time (but no more than two times), the Borrower may, upon at least 15
Domestic Business Days' notice to the Agent (which shall promptly provide a
copy of such notice to the Banks), propose to increase the aggregate amount of
the Commitments by an amount not less than $25,000,000 (the amount of any such
increase, the "INCREASED COMMITMENTS"). Each Bank party to this Agreement at
such time shall have the right (but no obligation), for a period of 15 days
following receipt of such notice, to elect by notice to the Borrower and the
Agent to increase its Commitment by a principal amount which bears the same
ratio to the Increased Commitments as its then Commitment bears to the
aggregate Commitments then existing. Any Bank not responding within 15 days of
receipt of such notice shall be deemed to have declined to increase its
Commitment.
(b) If any Bank party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may,
within
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10 days of the Banks' response, designate one or more of the existing Banks or
other financial institutions acceptable to the Agent and the Borrower which at
the time agree to (i) in the case of any such lender that is an existing Bank,
increase its Commitment and (ii) in the case of any other such lender (an
"ADDITIONAL BANK"), become a party to this Agreement with a Commitment of not
less than $10,000,000. The sum of the increases in the Commitments of the
existing Banks pursuant to this subsection (b) plus the Commitments of the
Additional Banks shall not in the aggregate exceed the unsubscribed amount of
the Increased Commitments.
(c) Any increase in the Commitments pursuant to this Section 2.19
shall be subject to satisfaction of the following conditions:
(i) before and after giving effect to such increase, all
representations and warranties contained in Article 4 shall be true;
(ii) at the time of such increase, no Default shall have
occurred and be continuing or would result from such increase; and
(iii) after giving effect to such increase, the aggregate
amount of all increases in Commitments made pursuant to this Section
2.19 shall not exceed $100,000,000.
(d) An increase in the aggregate amount of the Commitments pursuant
to this Section 2.19 shall become effective upon the receipt by the Agent of
(i) an agreement in form and substance satisfactory to the Agent signed by the
Borrower, by each Additional Bank and by each other Bank whose Commitment is to
be increased, setting forth the new Commitments of such Banks and setting forth
the agreement of each Additional Bank to become a party to this Agreement and
to be bound by all the terms and provisions hereof, (ii) such evidence of
appropriate corporate authorization on the part of the Borrower with respect to
the Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Agent may reasonably request and
(iii) such evidence of the satisfaction of the conditions set forth in
subsection (c) above as the Agent may reasonably request.
(e) Upon any increase in the aggregate amount of the Commitments
pursuant to this Section 2.19, within five Domestic Business Days, in the case
of Base Rate Loans then outstanding, and at the end of the then current
Interest Period with respect thereto, in the case of Committed Fixed Rate Loans
then outstanding, the Borrower shall prepay or repay such Loans in their
entirety and, to the extent the Borrower elects to do so and subject to the
conditions specified in Article 3, the
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Borrower shall reborrow Committed Loans from the Banks in proportion to
their respective Commitments after giving effect to such increase, until such
time as all outstanding Committed Loans are held by the Banks in such
proportion.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on
the date (the "EFFECTIVE DATE") on which the Agent shall have received each of
the following documents, each dated the Effective Date unless otherwise
indicated:
(a) counterparts hereof signed by each of the parties hereto (or, in
the case of any party as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of telegraphic,
telex, facsimile transmission or other written confirmation from such party of
execution of a counterpart hereof signed by such party);
(b) a duly executed Note for the account of each Bank dated on or
before the Effective Date complying with the provisions of Section 2.05;
(c) counterparts of the Guaranty Agreement, duly executed by each of
the Subsidiaries listed on the signature pages thereof;
(d) an opinion of Fulbright & Jaworski L.L.P., substantially in the
form of Exhibit E-1 hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(e) an opinion of the General Counsel of the Borrower, substantially
in the form of Exhibit E-2 hereto and covering such additional matters relating
to the transactions contemplated hereby as the Required Banks may reasonably
request;
(f) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(g) all documents the Agent may reasonably request relating to the
existence of the Borrower, the corporate authority for and the validity of the
Loan Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent; and
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(h) evidence satisfactory to the Agent of the payment of all
principal of and interest on any loans outstanding under, and all accrued
commitment fees under, the Existing Credit Agreement.
The Agent shall promptly notify the Borrower and the Banks of the Effective
Date, and such notice shall be conclusive and binding on all parties hereto.
The Borrower and the Banks party to the Existing Credit Agreement, comprising
the "REQUIRED BANKS" as defined therein, hereby agree that (i) the commitments
of the banks under the Existing Credit Agreement shall terminate in their
entirety immediately and automatically upon the effectiveness of this
Agreement, without further action by any party to the Existing Credit
Agreement, (ii) all accrued facility fees under the Existing Credit Agreement
shall be due and payable at such time and (iii) subject to Section 2.12 of the
Existing Credit Agreement, the Borrower may prepay any and all loans
outstanding thereunder on the date of effectiveness of this Agreement.
SECTION 3.02. Borrowings and Issuances of Letters of Credit. The
obligation of any Bank to make a Loan on the occasion of any Borrowing and the
obligation of the Issuing Bank to issue (or renew or extend the term of) any
Letter of Credit is subject to the satisfaction of the following conditions;
provided that if such Borrowing is a Swingline Takeout Borrowing, only the
conditions set forth in clauses 3.02(a) and 3.02(b) must be satisfied:
(a) receipt (or deemed receipt) by the Agent of a Notice of
Borrowing as required by Section 2.02 or Section 2.03 or receipt by the Issuing
Bank of a Notice of Issuance as required by Section 2.16(b), as the case may
be;
(b) the fact that, immediately after such Borrowing or issuance of
such Letter of Credit (i) the sum of the aggregate outstanding principal
amount of the Loans and the aggregate amount of Letter of Credit Liabilities
will not exceed the aggregate amount of the Commitments, (ii) the aggregate
outstanding principal amount of Swingline Loans will not exceed $20,000,000 and
(iii) the aggregate amount of Letter of Credit Liabilities will not exceed
$50,000,000;
(c) the fact that, immediately before and after such Borrowing or
issuance of such Letter of Credit, no Default shall have occurred and be
continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing or issuance of such Letter of Credit.
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Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date of such Borrowing
as to the facts specified in clauses 3.02(b), 3.02(c) and 3.02(d) (unless such
Borrowing is a Swingline Takeout Borrowing, in which case the Borrower shall be
deemed to represent and warrant as to the facts specified in clause 3.02(b)).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Existence and Power. The Borrower and each of its
Subsidiaries is a corporation, partnership, limited liability company or other
entity duly organized, validly existing and, where applicable, in good standing
under the laws of their respective jurisdictions of organization and have all
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on their business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes and by the Subsidiaries party thereto of the Guaranty
Agreement are within the Borrower's and such Subsidiaries' respective powers,
have been duly authorized by all necessary action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of such Subsidiaries or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms. Unless
terminated pursuant to Section 5.15(b), the Guaranty Agreement constitutes a
valid and binding agreement of each Subsidiary that is a party thereto,
enforceable against it in accordance with its terms.
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SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1996 and the related consolidated
statements of income, common stockholders' equity and cash flows for the fiscal
year then ended, reported on by Arthur Andersen LLP and set forth in the
Borrower's 1996 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of income, common stockholders' equity and cash flows
for the three months then ended, set forth in the Borrower's Latest Form 10-Q,
a copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection 4.04(a), the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such three-month period (subject to normal year-end
adjustments).
(c) Since March 31, 1997, there has been no material adverse change
in the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity of any of the
Loan Documents.
SECTION 4.06. Ownership of Capital Stock of Subsidiaries. The
Subsidiaries of the Borrower existing on the date hereof are listed on Schedule
1 hereto. All shares of the capital stock of each Subsidiary of the Borrower
that is a corporation are owned by the Borrower, directly or indirectly through
Subsidiaries, free and clear of all Liens.
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SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting
of a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.08. Environmental Matters. In the ordinary course of its
business, the Borrower reviews when and as appropriate the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.09. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
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SECTION 4.10. Not an Investment Company. The Borrower is not an
"INVESTMENT COMPANY" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished
by the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the Banks in
writing any and all facts which materially and adversely affect or could
reasonably be expected to materially and adversely affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the ability of the Borrower to perform its obligations under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid or any Letter of
Credit Liabilities remain outstanding:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a consolidated and consolidating
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end
of such fiscal year and the related consolidated and consolidating statements
of income and common stockholders' equity and consolidated statement of cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on in a manner acceptable to
the Securities and Exchange Commission by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing or, in the
case of the consolidating financial statements, certified as to fairness of
presentation, generally accepted accounting principles and consistency by the
Borrower's chief financial officer or chief accounting officer, except that the
consolidating financial statements with respect to the special purpose
Subsidiary referred to in the definition of "RECEIVABLES FINANCING" need not be
so certified as to generally accepted accounting principles;
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(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower, a
consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of income and common stockholders'
equity and consolidated statement of cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's previous fiscal year,
all certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency by the
chief financial officer or the chief accounting officer of the Borrower, except
that the consolidating financial statements with respect to the special purpose
Subsidiary referred to in the definition of "RECEIVABLES FINANCING" need not be
so certified as to generally accepted accounting principles;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses 5.01(a) and 5.01(b) above, a certificate of
the chief financial officer or the chief accounting officer of the Borrower
setting forth (i) in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.07
to 5.12, inclusive, on the date of such financial statements, (ii) the Leverage
Ratio, Fixed Charge Coverage Ratio and Consolidated Net Worth as at the date of
such financial statements and (iii) stating whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause 5.01(a) above, a statement of the firm of
independent public accountants which reported on such statements (i) whether
anything has come to their attention to cause them to believe that any Default
existed on the date of such statements and (ii) confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause 5.01(c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate of
the chief financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower is taking
or proposes to take with respect thereto;
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(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "REPORTABLE EVENT" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(i) (x) no later than the end of each fiscal year an executive
summary report of Johnson & Higgins or any other nationally recognized actuary
selected by the Borrower with the consent of the Required Banks (which consent
will not be unreasonably withheld) of the Borrower's estimated cost of
insurance, including self-insurance, for the following fiscal year (provided
that the Borrower will deliver to the Agent the full report at the same time),
and (y) by the end of each fiscal year, a certificate of the chief financial
officer of the Borrower to the effect that, to provide for the insurance cost
allocation, the Borrower has debited its
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income statement for such fiscal year in accordance with the recommendations
set forth in the summary report of Johnson & Higgins (or other actuary referred
to above) concerning such fiscal year; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. (a) The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same.
(b) The Borrower will, and will cause each Subsidiary to, comply
with the provisions of each material lease to which it is a party.
(c) The Borrower shall not permit any Subsidiary to agree to any
amendment or modification of any lease which would be adverse to the interests
of such Subsidiary, the Borrower or the Banks.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all property useful and
necessary to its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Borrower will maintain, and will cause each Subsidiary to
maintain (either in the name of the Borrower or in such Subsidiary's own name),
insurance policies against such risks, in at least such amounts and upon such
terms as are set forth in Schedule 2 hereto; provided that the Borrower shall
not be required to maintain insurance specified in the preceding sentence (i)
if an independent insurance broker, insurance agent or other insurance
representative reasonably satisfactory to the Required Banks shall certify to
the Banks that such requirement with respect to such insurance cannot be
complied with in a recognized insurance market by reason of the unavailability
to companies of established repute engaged in the same or a similar business of
insurance with respect to one or more risks so required to be insured against
or the amount of insurance so required to be maintained or (ii) in respect of
any assets sold by the Borrower, for events occurring after the sale of such
assets. The Borrower may replace any insurance company named in Schedule 2
hereto with an Acceptable Insurer, and may decrease the amount of insurance not
constituting self-insurance
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carried with the consent of the Required Banks. The Borrower may self-insure
for professional and general liability claims, including, without limitation,
workers compensation, so long as the Borrower shall maintain, and make
additions to, reserves not less than such amounts as may be necessary so as to
permit the Borrower to make the statement required in the chief financial
officer's certificate pursuant to Section 5.01(i). The Borrower will furnish to
the Banks (i) upon request of any Bank through the Agent from time to time,
full information as to the insurance carried, including the full report
referred to in Section 5.01(i), (ii) within five days of receipt of notice from
any insurer, a copy of any notice of cancellation or material change in
coverage from that existing on the date of this Agreement and (iii) forthwith,
notice of any cancellation or nonrenewal of coverage by the Borrower. The
Borrower will self-insure risks in excess of $25,000,000 per occurrence only
with the consent of the Required Banks.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Except as permitted by Section 5.11 the Borrower will continue, and will cause
each Subsidiary to continue, to engage in business of the same general type as
now conducted by the Borrower and its Subsidiaries, and will preserve, renew
and keep in full force and effect, and, except as permitted by Section 5.11,
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective corporate or partnership existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries in conformity with generally
accepted accounting principles shall be made of all dealings and transactions
in relation to its business and activities; and will permit, and will cause
each Subsidiary to permit, representatives of any Bank at such Bank's expense
to visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
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SECTION 5.07. Leverage Ratio. The Leverage Ratio will not, at any
time exceed 0.65 to 1.00.
SECTION 5.08. Minimum Consolidated Net Worth. Consolidated Net Worth
will at no time be less than the sum of $382,495,000 plus 50% of Cumulative
Positive Net Income. For purposes of this Section, "CUMULATIVE POSITIVE NET
INCOME" means, as of any date, the sum of Consolidated Net Income for each
fiscal year ending after the Effective Date (or, in the case of the first such
fiscal year, the last three fiscal quarters thereof, treated as a single
period) and on or prior to such date for which such Consolidated Net Income is
a positive amount, disregarding any fiscal year for which Consolidated Net
Income is a negative amount.
SECTION 5.09. Fixed Charge Coverage. The Fixed Charge Coverage Ratio
will not, at the last day of any fiscal quarter ending during any fiscal year
set forth below, be less than the ratio set forth below opposite such year:
<TABLE>
<CAPTION>
Fiscal Year Ending Ratio
------------------ -----
<S> <C>
December 31, 1997 3.50 to 1.0
December 31, 1998 3.50 to 1.0
December 31, 1999 3.50 to 1.0
December 31, 2000 4.00 to 1.0
December 31, 2001 4.25 to 1.0
December 31, 2002 4.25 to 1.0
</TABLE>
SECTION 5.10. Restricted Payments; Prepayments of Subordinated Debt.
The Borrower will not, and will not permit any of its Subsidiaries to, (i)
declare or make any Restricted Payment or (ii) prepay, purchase, redeem or
otherwise acquire for value (except in compliance with compulsory amortization
or sinking fund requirements (including, without limitation, purchases thereof
made to fulfill sinking fund requirements within 12 months of any sinking fund
payment date) or any other mandatory prepayment provisions and in compliance
with the subordination provisions of such Subordinated Debt), or make any
payment of interest or deposit funds with any paying agent therefor more than
five business days before the time such payment or deposit is due with respect
to, or agree to the modification or amendment of any of the terms of
subordination or payment of, or
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amortization or sinking fund requirements applicable to, any Subordinated Debt;
provided that, so long as no Default has occurred and is continuing, the
Borrower may make Restricted Payments so long as the aggregate amount of
Restricted Payments made pursuant to this proviso after the Effective Date does
not exceed the sum of (i) $50,000,000 plus (ii) 50% of Consolidated Net Income
of the Borrower and its Consolidated Subsidiaries for the period from March 31,
1997 through the end of the Borrower's then most recent fiscal quarter (treated
for this purpose as a single accounting period).
SECTION 5.11. Consolidations, Mergers, Sales of Assets, Dissolutions,
Reorganizations, etc. (a) The Borrower will not, nor will it permit any
Subsidiary to, enter into any transaction of merger or consolidation,
reorganize, liquidate, dissolve or wind up (or suffer any reorganization,
liquidation, dissolution or winding up) or convey, sell, lease or otherwise
dispose of, in one or a series of related transactions, substantially all of
its property, assets or business, except:
(i) the Borrower and its Subsidiaries may sell their
inventory in the ordinary course of business;
(ii) any Subsidiary of the Borrower may be voluntarily
liquidated, dissolved or wound up or merged into or consolidated with,
or may convey all or any part of its property, assets or business to,
the Borrower or any Wholly-Owned Consolidated Subsidiary; provided that
(A) if a Subsidiary of the Borrower is merged into or consolidated with
the Borrower or any Wholly-Owned Consolidated Subsidiary, the Borrower
or such Wholly-Owned Consolidated Subsidiary, as the case may be, shall
be the surviving corporation and (B) no disposition of assets referred
to above in this clause (ii) of this Section shall be permitted if,
immediately after giving effect thereto, a Default shall have occurred
and be continuing; and
(iii) any Subsidiary of the Borrower may sell substantially
all of its accounts receivable to the special purpose Subsidiary
referred to in the definition of "RECEIVABLES FINANCING" pursuant to
the Receivables Financing and such Subsidiary may obtain financing of
up to $125,000,000 by selling or pledging substantially all such
accounts receivable to certain investors.
Notwithstanding the foregoing, (X) the Borrower may permit any Subsidiary to
enter into any transaction of merger or consolidation, reorganize, liquidate,
dissolve or wind up (or suffer any reorganization, liquidation, dissolution or
winding up of such Subsidiary) or convey, sell, lease or otherwise dispose of,
in one or a series of related transactions, substantially all of its property,
assets or
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business, and (Y) the Borrower may trade or exchange (through formation of
joint ventures or otherwise), the assets of any Subsidiary for similar assets,
provided that the aggregate amount of Net Tangible Assets so disposed of
pursuant to clauses (X) and (Y) during the term of this Agreement shall not
exceed 15% of Consolidated Net Tangible Assets, determined as of the last day
of the fiscal quarter most recently ended on or prior to the date of
consummation of the most recent such trade or exchange.
SECTION 5.12. Subsidiary Debt. The Borrower will not, after the date
of this Agreement, permit any of its Subsidiaries to incur, assume or suffer to
exist any Debt except (A) Debt existing on the date hereof, (B) Debt owing to
the Borrower or a Wholly-Owned Consolidated Subsidiary, (C) non-recourse
financing approved in advance in writing by the Required Banks, (D) Debt
secured by Liens permitted pursuant to Section 5.14, (E) Guarantees of letter
of credit reimbursement obligations of the Borrower in an aggregate amount
(contingent and non-contingent) at no time exceeding $30,000,000 and (F) Debt
(other than Debt permitted pursuant to clauses (A), (B), (C), (D) and (E)
hereof) not exceeding in aggregate principal amount at any time outstanding for
all Subsidiaries the greater of (i) $30,000,000 or (ii) 10% of Consolidated
Net Worth.
SECTION 5.13. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower for its general corporate purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any
"MARGIN STOCK" within the meaning of Regulation U.
SECTION 5.14. Negative Pledge. The Borrower will not, and will not
permit any Subsidiary to, create, assume or suffer to exist any Lien on any
asset (including the stock and assets of any Subsidiary) now owned or hereafter
acquired by it, except:
(a) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $5,000,000;
(b) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement, in an aggregate principal amount not
exceeding $36,000,000;
(c) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
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(d) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset;
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(e) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary and
not created in contemplation of such event;
(f) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section; provided that such Debt is not increased and is not
secured by any additional assets;
(h) Liens arising in the ordinary course of its business which (i)
do not secure Debt or Derivatives Obligations, (ii) do not secure obligations
exceeding $20,000,000 in aggregate amount and (iii) do not in the aggregate
materially detract from the value of its assets or materially impair the use
thereof in the operation of its business;
(i) Liens arising out of the Receivables Financing; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time outstanding
not to exceed 5% of Consolidated Net Worth.
SECTION 5.15. Additional Guarantors and Release of Guaranties. (a)
Additional Guarantors. The Borrower represents and warrants that, as of the
date of this Agreement, the Guarantors set forth on the signature pages of the
Guaranty Agreement constitute all Subsidiaries (except as contemplated by the
definition of the term "SUBSIDIARY"). The Borrower agrees, within ten days
after any Person hereafter becomes a Subsidiary, to cause such Person to become
a Guarantor (as defined in the Guaranty Agreement) under the Guaranty
Agreement, and in connection therewith to deliver such opinions of counsel and
other documents relating to such Guarantor and its obligations thereunder as
the Agent may reasonably request.
(b) Release of Guarantees. Upon the effectiveness of the
Supplemental Indenture, each Guarantor's obligations under the Guaranty
Agreement shall be
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discharged; provided that the Agent shall have received a true and correct copy
of the Supplemental Indenture.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or
interest on any Loan, any fees or any other amount payable hereunder;
(b) the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant contained in Sections 5.07 to 5.15, inclusive;
(c) the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant or agreement contained in this Agreement (other than those
covered by clause 6.01(a) or 6.01(b) above) or the Guaranty Agreement for 10
days after notice thereof has been given to the Borrower or such Subsidiary by
the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower or any of its Subsidiaries in the Loan Documents or in any
certificate, financial statement or other document delivered pursuant hereto or
thereto shall prove to have been incorrect in any material respect when made
(or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its
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property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be entered against the
Borrower or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate
a Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or the
PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer any Material
Plan; or a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $1,000,000;
(j) a judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of 10
days; or
(k) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) (except a person that
has or a group of persons each of which has as of the date hereof more than 10%
of such voting common stock) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under said Act) of 25% or more of the outstanding shares of voting common stock
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of the Borrower; or, during any period of 24 consecutive calendar months,
individuals who were either (i) directors of the Borrower on the first day of
such period or (ii) elected to fill vacancies caused by the ordinary course
resignation or retirement of any other director and whose nomination or
election was approved by a vote of at least a majority of directors then still
in office who were directors of the Borrower on the first day of such period,
shall cease to constitute a majority of the board of directors of the Borrower;
then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrower terminate the Commitments and they shall
thereupon terminate, (ii) if requested by Banks holding at least 66 2/3% of the
aggregate principal amount of the Loans, by notice to the Borrower declare the
Notes (together with accrued interest thereon) to be, and the Notes shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of Default specified
in clause 6.01(g) or 6.01(h) above with respect to the Borrower, without any
notice to the Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the Agent upon
the instruction of the Banks having at least 66 2/3% in aggregate amount of the
Commitments (or, if the Commitments shall have been terminated, holding at
least 66 2/3% of the Letter of Credit Liabilities), pay to the Agent an amount
in immediately available funds (which funds shall be held as collateral
pursuant to arrangements satisfactory to the Agent) equal to the aggregate
amount available for drawing under all Letters of Credit then outstanding at
such time, provided that, upon the occurrence of any Event of Default specified
in Section 6.01(g) or 6.01(h) with respect to the Borrower, the Borrower shall
pay such amount forthwith without any notice or demand or any other act by the
Agent or the Banks.
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ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under the Loan Documents as any
other Bank and may exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent under the
Loan Documents are only those expressly set forth therein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection with the
Loan Documents (i) with the consent or at the request of the Required Banks or
(ii) in the absence of its own gross negligence or willful misconduct. Neither
the Agent nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with the Loan Documents or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the Borrower
or any of its Subsidiaries; (iii) the satisfaction of any condition specified
in Article 3, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of the Loan Documents or any
other instrument or writing furnished in connection therewith. The Agent shall
not incur any liability by acting in
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reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Without limiting the generality of the foregoing, the use of the term "agent"
in this Agreement with reference to the Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with the Loan Documents or any action taken or
omitted by such indemnitees thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and on the
basis of such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and on the basis of such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under the Loan Documents.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent with (so long as no Default shall have occurred and be continuing) the
consent of the Borrower, which consent shall not be unreasonably withheld. If
no successor Agent shall have been so appointed by the Required Banks with the
Borrower's consent, and shall have accepted such appointment, within 60 days
after the retiring Agent gives notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent,
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the provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee; Arranger Fee. The Borrower shall pay to
the Agent for its own account and to J.P. Morgan Securities Inc. ("JPMSI"), in
its capacity as arranger, for its own account, fees in the amounts and at the
times previously agreed upon between the Borrower and the Agent and JPMSI,
respectively.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD
Loan, Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50%
or more of the aggregate amount of the Commitments advise the Agent that the
Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to such
Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for
such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar
Loan, as the case may be, shall be converted into a Base Rate Loan on the last
day of the then current Interest Period applicable thereto. Unless the Borrower
notifies the Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is
a Syndicated Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, then the Money
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Market LIBOR Loans comprising such Borrowing shall bear interest for each day
from and including the first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund any of its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or Letter of Credit or
any obligation to make Committed Loans or issue or participate in any Letter of
Credit or (y) the date of any related Money Market Quote, in the case of any
Money Market Loan, the adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with
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respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its Note
or its obligation to make Fixed Rate Loans or its obligations hereunder in
respect of Letters of Credit and the result of any of the foregoing is to
increase the cost to such Bank (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan or of issuing or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank. A certificate of any
Bank claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest
60
<PAGE> 66
error. In determining such amount, such Bank may use any reasonable averaging
and attribution methods.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower or any Subsidiary pursuant to any Loan Document, and all liabilities
with respect thereto, excluding (i) in the case of each Bank and the Agent,
taxes imposed on its income, net worth or gross receipts and franchise or
similar taxes imposed on it, by a jurisdiction under the laws of which such
Bank or the Agent (as the case may be) is organized or in which its principal
executive office is located or, in the case of each Bank, in which its
Applicable Lending Office is located and (ii) in the case of each Bank, any
United States withholding tax imposed on such payments but only to the extent
that such Bank is subject to United States withholding tax at the time such
Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or
from the execution or delivery of, or otherwise with respect to, any Loan
Document.
(b) Any and all payments by the Borrower to or for the account of
any Bank or the Agent hereunder or under any Note shall be made without
deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be
required by law to deduct any Taxes or Other Taxes from any such payments, (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 8.04) such Bank or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Borrower shall furnish
to the Agent, at its address referred to in Section 9.01, the original or a
certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.04) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect
61
<PAGE> 67
thereto. This indemnification shall be paid within 15 days after such Bank or
the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Bank is entitled to benefits under an income tax treaty to which the
United States is a party which exempts the Bank from United States withholding
tax or reduces the rate of withholding tax on payments of interest for the
account of such Bank or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States.
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(b) or 8.04(c) with respect to Taxes imposed by the United States; provided
that if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office if, in the judgment of
such Bank, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or convert outstanding Loans
to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04 with respect to its
CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such
62
<PAGE> 68
Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank
to make Euro-Dollar Loans or to convert or continue outstanding Loans into
Euro-Dollar Loans shall be suspended pursuant to Section 8.02 or (ii) any Bank
shall demand compensation pursuant to Section 8.03 or 8.04, the Borrower shall
have the right, with the assistance of the Agent and the Issuing Banks, to seek
a mutually satisfactory bank or banks (which may be one or more of the Banks)
to purchase the outstanding Loans of such Bank and to assume the Commitment and
Letter of Credit Liabilities of such Bank.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(x) in the case of the Borrower or the Agent, at its address, facsimile number
or telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the
63
<PAGE> 69
Borrower. Each such notice, request or other communication shall be effective
(i) if given by telex, when such telex is transmitted to the telex number
specified in this Section and the appropriate answerback is received, (ii) if
given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (iii) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address specified in this Section; provided
that notices to the Agent or any Issuing Bank under Article 2 or Article 8
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege under the Loan Documents shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements
of special counsel for the Agent, in connection with the preparation of the
Loan Documents, any waiver or consent thereunder or any amendment thereof or
any Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Agent and each Bank,
including fees and disbursements of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Subject to Section 2.18, each Bank
agrees that if it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount then due
with
64
<PAGE> 70
respect to the Loans and Letter of Credit Liabilities held by it which is
greater than the proportion received by any other Bank in respect of the
aggregate amount then due and interest due with respect to the Loans and Letter
of Credit Liabilities held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
and Letter of Credit Liabilities held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments then
due with respect to the Loans and Letter of Credit Liabilities held by the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to
the payment of indebtedness of the Borrower other than its indebtedness under
the Loan Documents. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in
the Loans and Letter of Credit Liabilities, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent, the Swingline Bank or any Issuing Bank are
affected thereby, by such Person); provided that no such amendment or waiver
shall, unless signed by all the Banks, (i) increase or decrease the Commitment
of any Bank (except (x) as contemplated by Section 2.19 or (y) for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or the
amount to be reimbursed in respect of any Letter of Credit or any interest
thereon or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or for reimbursement in respect of any
Letter of Credit or interest thereon or any fees hereunder or for termination
of any Commitment, (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes and Letter of Credit
Liabilities, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of
this Agreement, (v) change this Section 9.05 or (vi) permit the subordination
of any payment or right of payment due to the Banks under the Loan Documents.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or
65
<PAGE> 71
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment
or any or all of its Loans and Letter of Credit Liabilities. In the event of
any such grant by a Bank of a participating interest to a Participant, whether
or not upon notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower,
the Issuing Banks and the Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under the Loan
Documents. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower under the Loan
Documents including, without limitation, the right to approve any amendment,
modification or waiver of any provision thereof; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii) or (iii) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection 9.06(c) or 9.06(d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection 9.06(b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to
an initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under the Loan Documents, and such Assignee shall assume such
rights and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit G hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower,
the Agent and the Issuing Banks, which consents shall not be unreasonably
withheld; provided that if an Assignee is an affiliate of such transferor Bank
or was a Bank immediately prior to such assignment, no such consent shall be
required. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee, such Assignee shall be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of
66
<PAGE> 72
any assignment pursuant to this subsection 9.06(c), the transferor Bank, the
Agent and the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to the Borrower and the Agent certification
as to exemption from deduction or withholding of any United States federal
income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under the Loan Documents to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"MARGIN STOCK" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same
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<PAGE> 73
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT,
THE BANKS AND THE ISSUING BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
68
<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
UNIVERSAL HEALTH SERVICES, INC.
By /s/ Kirk E. Gorman
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
Facsimile number: (610) 768-3318
69
<PAGE> 75
<TABLE>
<CAPTION>
Commitments
- -----------
<S> <C>
$66,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Penelope J. B. Cox
------------------------------------------
Title: Vice President
$43,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
successor by merger to BANK OF
AMERICA ILLINOIS
By /s/ Anthony L. Trunzo
------------------------------------------
Title: Vice President
$43,000,000 THE CHASE MANHATTAN BANK
By /s/ Dawn Lee Lum
------------------------------------------
Title: Vice President
$43,000,000 NATIONSBANK, N.A.
By /s/ Kevin Wagley
------------------------------------------
Title: Vice President
$30,000,000 FIRST UNION NATIONAL BANK
By /s/ Joseph H. Towell
------------------------------------------
Title: Senior Vice President
</TABLE>
70
<PAGE> 76
<TABLE>
<S> <C>
$30,000,000 PNC BANK, N.A.
By /s/ Jack Swire
------------------------------------------
Title: Vice President
$15,000,000 CORESTATES BANK, N.A.
By /s/ Lisa Rothenberger
------------------------------------------
Title: Commercial Officer
$15,000,000 FLEET NATIONAL BANK
By /s/ Ginger Stolzenthaler
------------------------------------------
Title: Senior Vice President
$15,000,000 MELLON BANK, N.A.
By /s/ Carol Paige
------------------------------------------
Title: Vice President
- --------------------
Total Commitments
$300,000,000
====================
</TABLE>
71
<PAGE> 77
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By /s/ Penelope J. B. Cox
---------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615 MGT
Facsimile number: (212) 648-5018
72
<PAGE> 78
PRICING SCHEDULE I
(RATIO BASED PRICING)
The "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE RATE" and "LC FEE
RATE" for any day are the respective percentages set forth below in the
applicable row under the column corresponding to the Status that exists on such
day:
<TABLE>
<CAPTION>
==============================================================================
Status Level I Level II Level III Level IV
==============================================================================
<S> <C> <C> <C> <C>
Euro-Dollar Margin 0.250% 0.350% 0.425% 0.500%
------------------------------------------------------------------------------
CD Margin 0.375% 0.475% 0.550% 0.625%
------------------------------------------------------------------------------
Facility Fee Rate 0.125% 0.150% 0.200% 0.375%
------------------------------------------------------------------------------
LC Fee Rate 0.250% 0.350% 0.425% 0.500%
==============================================================================
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if, at such date, the Applicable
Leverage Ratio is less than 0.45.
"LEVEL II STATUS" exists at any date if, at such date, (i) the
Applicable Leverage Ratio is less than 0.55 and (ii) Level I Status does not
exist.
"LEVEL III STATUS" exists at any date if, at such date, (i) the
Applicable Leverage Ratio is less than 0.65 and (ii) neither Level I Status nor
Level II Status exists.
"LEVEL IV STATUS" exists at any date if, at such date, no other Status
exists.
"APPLICABLE LEVERAGE RATIO" means, for each day during any Quarter,
the Leverage Ratio as at the last day of the second preceding Quarter (e.g. the
Applicable Leverage Ratio for each day during the Quarter ending on March 31,
1997 shall be the Leverage Ratio as at September 30, 1996).
"QUARTER" means each period of three consecutive calendar months
consisting of (i) January, February and March; (ii) April, May and June; (iii)
July, August and September and (iv) October, November and December.
"STATUS" refers to the determination of which of Level I Status, Level
II Status, Level III Status or Level IV Status exists at any date.
<PAGE> 79
PRICING SCHEDULE II
(RATINGS BASED PRICING)
The "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE RATE" and "LC FEE
RATE" for any day are the respective percentages set forth below in the
applicable row under the column corresponding to the status that exists on such
day:
<TABLE>
<CAPTION>
==================================================================================================
Status Level I Level II Level III Level IV Level V
==================================================================================================
<S> <C> <C> <C> <C> <C>
Euro-Dollar Margin 0.2150% 0.2875% 0.3500% 0.4250% 0.5000%
- --------------------------------------------------------------------------------------------------
CD Margin 0.3400% 0.4125% 0.4750% 0.5500% 0.6250%
- --------------------------------------------------------------------------------------------------
Facility Fee Rate 0.1100% 0.1375% 0.1500% 0.2000% 0.3750%
- --------------------------------------------------------------------------------------------------
LC Fee Rate 0.2150% 0.2875% 0.3500% 0.4250% 0.5000%
==================================================================================================
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if, at such date, the Borrower is
rated (i) "BBB" or higher by S&P and no lower than Baa3 by Moody's or (ii)
"Baa2" or higher by Moody's and no lower than BBB- by S&P.
"LEVEL II STATUS" exists at any date if, at such date, the Borrower is
rated "BBB-" or higher by S&P and "Baa3" or higher by Moody's.
"LEVEL III STATUS" exists at any date if, at such date, (i) (x) the
Borrower is rated "BBB-" or higher by S&P and no lower than "Ba1" by Moody's,
or (y) the Borrower is rated Baa3 or higher by Moody's and no lower than BB+ by
S&P and (ii) neither Level I Status or Level II Status exists.
"LEVEL IV STATUS" exists at any date if, at such date, the Borrower is
rated "BB+" by S&P and "Ba1" by Moody's.
"LEVEL V STATUS" exists at any date if, at such date, no other Status
exists.
"MOODY'S" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"STATUS" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status or Level V Status exists at any
date.
<PAGE> 80
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating assigned to any
other debt security of the Borrower shall be disregarded. The ratings in effect
for any day are those in effect at the close of business on such day.
2
<PAGE> 81
SCHEDULE 1
Subsidiaries
<PAGE> 82
SCHEDULE 2
Insurance
<PAGE> 83
EXHIBIT A
NOTE
New York, New York
_______________, 1997
For value received, Universal Health Services, Inc., a Delaware
corporation (the "BORROWER"), promises to pay to the order of _____________
(the "BANK"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of July 8, 1997 among the Borrower, the banks listed on the signature
pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as the
same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined
in the Credit Agreement are used herein with the same meanings. Reference is
made to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
UNIVERSAL HEALTH SERVICES, INC.
By
------------------------------------------
Title:
A-1
<PAGE> 84
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Amount of Principal Maturity Notation
Date Loan Type of Loan Repaid Date Made By
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE> 85
EXHIBIT B - Money Market Quote Request
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Universal Health Services, Inc. (the "Borrower")
Re: Credit Agreement (as the same may be amended from time to time, the
"Credit Agreement") dated as of July 8, 1997 among the Borrower, the
Banks party thereto and the Agent
We hereby give notice pursuant to Section ? of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
------------------
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the Credit Agreement.
UNIVERSAL HEALTH SERVICES, INC.
By
-----------------------------
Name:
Title:
- -----------------------
* Amount must be $5,000,000 or a larger multiple of $1,000,000.
** Not less than one month (LIBOR Auction) or not less than 7 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
B-1
<PAGE> 86
EXHIBIT C - Invitation for Money Market Quotes
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Universal Health Services, Inc.
(the "Borrower")
Pursuant to Section ? of the Credit Agreement dated as of June 11,
1997 among the Borrower, the Banks party thereto and the undersigned, as Agent,
we are pleased on behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing:
------------------
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] (New
York City time) on [date].
Terms used herein have the meanings assigned to them in the Credit Agreement.
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By
-------------------------------
Authorized Officer
C-1
<PAGE> 87
EXHIBIT D - Money Market Quote
FORM OF MONEY MARKET QUOTE
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to Universal Health Services, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, ____, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank:
--------------------------------
2. Person to contact at Quoting Bank:
-----------------------------
3. Date of Borrowing: *
--------------------
4. We hereby offer to make Money Market Loan(s) in the
following principal amounts, for the following Interest
Periods and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- -------------------------------------
<S> <C> <C>
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of June 11, 1997 among Universal Health Services, Inc., the Banks
party thereto and yourselves, as Agent,
- ----------------------
*As specified in the related Invitation.
**Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Each bid must be made
for $5,000,000 or a larger multiple of $1,000,000..
***Not less than one month or not less than 7 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
****Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000th of
1%) and specify whether PLUS or MINUS .
*****Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
D-1
<PAGE> 88
irrevocably obligate(s) us to make the Money Market Loan(s) for which any
offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
----------------- -------------------------
Authorized Officer
D-2
<PAGE> 89
EXHIBIT E-1
[Opinion of Fulbright & Jaworski L.L.P.,
Counsel for the Borrower]
To the Banks Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Re: CREDIT AGREEMENT DATED AS OF JULY 8, 1997, AMONG UNIVERSAL
HEALTH SERVICES, INC., THE BANKS NAMED THEREIN (THE "BANKS")
AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK (THE "AGENT"),
AS AGENT FOR SUCH BANKS
Ladies and Gentlemen:
We have acted as counsel to Universal Health Services, Inc., a
Delaware corporation (the "COMPANY"), and its existing corporate Subsidiaries,
in connection with (a) the Credit Agreement referred to above (the "CREDIT
AGREEMENT"), which provides for the extension of loans to the Company by the
Banks in an aggregate principal amount not exceeding $300,000,000 at any one
time outstanding, and (b) the Guaranty Agreement dated as of July 8, 1997 among
the Subsidiaries of the Company named therein and the Agent (the "GUARANTY
AGREEMENT"). All terms defined in the Credit Agreement are used herein with
their defined meanings unless the context otherwise requires.
In connection with our acting as counsel to the Company and its
existing corporate Subsidiaries, we have examined such certificates of officers
of the Company and its Subsidiaries and originals or copies certified to our
satisfaction of such corporate documents and resolutions of the Company and its
Subsidiaries and other corporate records as we have deemed relevant and
necessary as the basis for our opinion hereinafter set forth. We have relied
upon (i) such certificates of officers of the Company and its Subsidiaries with
respect to the accuracy of factual matters contained therein and (ii) certain
certificates of public officials.
On the basis of the foregoing, we are of the opinion that:
E1-1
<PAGE> 90
1. Each of the Company and its existing corporate Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is duly qualified as a
foreign corporation and in good standing in each other jurisdiction in which
the conduct of its business or the ownership of its property requires such
qualification.
2. Each of the Company and its existing Subsidiaries has all
corporate powers required to own its properties and conduct its business as now
conducted. The Company has the corporate power and authority to execute,
deliver and perform the Credit Agreement and the Notes and to borrow under the
Credit Agreement. The Company has taken all necessary corporate action to
authorize the borrowings under the Credit Agreement and to authorize the
execution, delivery and performance of the Credit Agreement and the Notes. Each
of the Credit Agreement and the Notes has been duly executed and delivered by
the Company and constitutes a valid and binding agreement or obligation of the
Company, as the case may be, enforceable against the Company in accordance with
its terms. No consent of any other Person (including stockholders of the
Company) and no license, approval or authorization of, exemption by, or
registration or declaration with, any governmental body is required in
connection with the execution, delivery or performance by the Company, or the
validity or enforceability against the Company of the Credit Agreement and the
Notes.
3. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes and by the Subsidiaries that are party thereto
of the Guaranty Agreement will not violate any provision of any existing law or
regulation or the Restated Certificate of Incorporation, as amended, or By-Laws
of the Company or the charter or by-laws of any such Subsidiary or, to the best
of our knowledge after due inquiry, of any judgment, order, decree or award of
any court, arbitrator or governmental body, any mortgage, indenture, security
agreement, contract, undertaking or other agreement to which the Company or any
Subsidiary is a party or that is or may be binding upon any of them or any of
their respective properties or assets and of which we have knowledge and will
not result in the imposition or creation of any Lien on any thereof pursuant to
the provisions of any such mortgage, indenture, security agreement, contract,
undertaking or other agreement to which the Company or any Subsidiary is a
party or that is or may be binding upon any of them or any of their respective
properties or assets and of which we have knowledge.
4. Each Subsidiary that is a party to the Guaranty Agreement has
taken all necessary corporate action to authorize the execution and delivery of
the Guaranty Agreement and the Guaranty Agreement has been duly executed and
delivered by each such Subsidiary. The Guaranty Agreement is a valid and
binding agreement of each Subsidiary party thereto enforceable against each
such Subsidiary in accordance with its terms.
5. No consent of any other Person and no license, approval or
authorization of, exemption by, or registration or declaration with, any
governmental body is required in
E1-2
<PAGE> 91
connection with the execution, delivery, performance, validity or
enforceability of the Guaranty Agreement.
6. To the best of our knowledge after due inquiry, except as set
forth on Exhibit A hereto, and as described in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, which has previously been
delivered to the Banks, there are no actions, suits or proceedings pending or
threatened against or affecting the Company or any Subsidiary or any of their
respective properties in any court or before any arbitrator of any kind or
before or by any governmental body, except actions, suits or proceedings of the
character normally incident to the kind of business conducted by the Company
and its Subsidiaries that (a) would not materially impair the right or ability
of the Company or any Subsidiary to carry on its business substantially as now
conducted and (b) would not have a material adverse effect on the consolidated
financial condition of the Company and its Subsidiaries, and there are no
actions, suits or proceedings pending or threatened that relate to or which in
any manner draw into question the validity of any of the transactions
contemplated by the Credit Agreement or the Guaranty Agreement.
7. Neither the Company nor any of its Subsidiaries is an
"INVESTMENT COMPANY" or an "AFFILIATED PERSON" thereof, within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
The opinions set forth above are subject to the following
qualifications:
(a) The enforceability of (i) the Company's obligations under
the Credit Agreement and the Notes and (ii) each of the Subsidiaries
obligations under the Guaranty Agreement is subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally;
(b) We express no opinion as to the availability of the
equitable remedy of specific performance (other than with respect to
obligations for the payment of money) or injunctive relief;
(c) With respect to permits, licenses, approvals and
governmental authorizations required for the Company and the
Subsidiaries to own their respective properties and conduct their
respective businesses, we have relied solely upon certificates of
officers of the Company and the Subsidiaries;
(d) With respect to the organization, existence, qualification
and good standing of the Company's Subsidiaries, and the matters set
forth in Item 6, we have, with your permission relied solely upon
certificates of officers of the Company and such Subsidiaries and the
opinion of Bruce R. Gilbert, General Counsel of the Company;
E1-3
<PAGE> 92
(e) Nothing herein shall constitute an opinion as to the laws
of any jurisdiction other than the laws of the State of New York, the
General Corporation Law of the State of Delaware and the Federal laws
of the United States; and
(f) We express no opinion as to the applicability (and, if
applicable, the effect) of Section 548 of the United States Bankruptcy
Code or any comparable provision of state law or other state
fraudulent conveyance laws to the questions addressed in paragraph 4
or the conclusions expressed with respect thereto.
Very truly yours,
E1-4
<PAGE> 93
EXHIBIT E-2
[Opinion of General Counsel of the Borrower]
[Effective Date]
To the Banks Referred to Below Fulbright & Jaworski L.L.P.
c/o Morgan Guaranty Trust Company 666 Fifth Avenue
of New York, as Agent New York, NY 10103
60 Wall Street
New York, New York 10260-0060
Re: CREDIT AGREEMENT DATED AS OF JULY 8, 1997, AMONG UNIVERSAL
HEALTH SERVICES, INC., THE BANKS NAMED THEREIN (THE "BANKS")
AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK (THE "AGENT"),
AS AGENT FOR SUCH BANKS
Ladies and Gentlemen:
I am General Counsel to Universal Health Services, Inc., a Delaware
corporation (the "COMPANY"), and its existing corporate Subsidiaries, and I am
rendering this opinion in connection with (a) the Credit Agreement referred to
above (the "CREDIT AGREEMENT"), which provides for the extension of loans to
the Company by the Banks in an aggregate principal amount not exceeding
$300,000,000 at any one time outstanding, and (b) the Guaranty Agreement dated
as of July 8, 1997 among the Subsidiaries of the Company named therein and the
Agent (the "GUARANTY AGREEMENT"). All terms defined in the Credit Agreement are
used herein with their defined meanings unless the context otherwise requires.
In connection with this opinion I have examined such certificates of
officers of the Company and its Subsidiaries and originals or copies certified
to my satisfaction of such corporate documents and resolutions of the Company
and its Subsidiaries and other corporate records as I have deemed relevant and
necessary as the basis for my opinion hereinafter set forth. I have relied upon
(i) such certificates of officers of the Company and its Subsidiaries with
respect to the accuracy of factual matters contained therein with respect to
the operations and properties of the Company and its Subsidiaries and (ii)
certain certificates of public officials.
On the basis of the foregoing, I am of the opinion that:
E2-1
<PAGE> 94
1. Each of the Company and its existing corporate Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is duly qualified as a
foreign corporation and in good standing in each other jurisdiction in which
the conduct of its business or the ownership of its property requires such
qualification.
2. Each of the Company and its existing Subsidiaries has all
corporate powers required to own its properties and conduct its business as now
conducted. The Company has the corporate power and authority to execute,
deliver and perform the Credit Agreement and the Notes and to borrow under the
Credit Agreement. The Company has taken all necessary corporate action to
authorize the borrowings under the Credit Agreement and to authorize the
execution, delivery and performance of the Credit Agreement and the Notes.
3. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes and by the Subsidiaries that are party thereto
of the Guaranty Agreement will not violate any provision of any existing law or
regulation or the Restated Certificate of Incorporation, as amended, or By-Laws
of the Company or the charter or by-laws of any such Subsidiary or, to the best
of my knowledge after due inquiry, of any judgment, order, decree or award of
any court, arbitrator or governmental body, any mortgage, indenture, security
agreement, contract, undertaking or other agreement to which the Company or any
Subsidiary is a party or that is or may be binding upon any of them or any of
their respective properties or assets and of which I have knowledge and will
not result in the imposition or creation of any Lien on any thereof pursuant to
the provisions of any such mortgage, indenture, security agreement, contract,
undertaking or other agreement to which the Company or any Subsidiary is a
party or that is or may be binding upon any of them or any of their respective
properties or assets and of which I have knowledge.
4. Each Subsidiary that is a party to the Guaranty Agreement has
taken all necessary corporate action to authorize the execution and delivery of
the Guaranty Agreement and the Guaranty Agreement has been duly executed and
delivered by each such Subsidiary. The Guaranty Agreement is a valid and
binding agreement of each Subsidiary party thereto enforceable against each
such Subsidiary in accordance with its terms.
5. No consent of any other Person and no license, approval or
authorization of, exemption by, or registration or declaration with, any
governmental body is required in connection with the execution, delivery,
performance, validity or enforceability of the Guaranty Agreement.
6. To the best of my knowledge after due inquiry, except as
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, which has previously been delivered to the Banks, there are
no actions, suits or proceedings pending or threatened against or affecting the
Company or any Subsidiary or any of their
E2-2
<PAGE> 95
respective properties in any court or before any arbitrator of any kind or
before or by any governmental body, except actions, suits or proceedings of the
character normally incident to the kind of business conducted by the Company
and its Subsidiaries that (a) would not materially impair the right or ability
of the Company or any Subsidiary to carry on its business substantially as now
conducted and (b) would not have a material adverse effect on the consolidated
financial condition of the Company and its Subsidiaries, and there are no
actions, suits or proceedings pending or threatened that relate to or which in
any manner draw into question the validity of any of the transactions
contemplated by the Credit Agreement or the Guaranty Agreement.
The opinions set forth above are subject to the following qualifications:
(a) The enforceability of (i) the Company's obligations under
the Credit Agreement and the Notes and (ii) each of the Subsidiaries
obligations under the Guaranty Agreement are subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally;
(b) I express no opinion as to the availability of the
equitable remedy of specific performance (other than with respect to
obligations for the payment of money) or injunctive relief; and
(c) I am qualified to practice law in the Commonwealth of
Pennsylvania and nothing herein shall constitute an opinion as to the
laws of any jurisdiction other than the laws of the Commonwealth of
Pennsylvania and the federal law of the United States of America.
Very truly yours,
E2-3
<PAGE> 96
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"CREDIT AGREEMENT") dated as of July 8, 1997 among Universal Health Services,
Inc., a Delaware corporation (the "BORROWER"), the banks listed on the
signature pages thereof (the "BANKS") and Morgan Guaranty Trust Company of New
York, as Agent (the "AGENT"), and have acted as special counsel for the Agent
for the purpose of rendering this opinion pursuant to Section 3.01(f) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of
F-1
<PAGE> 97
America and the General Corporation Law of the State of Delaware. In giving the
foregoing opinion, we express no opinion as to the effect (if any) of any law
of any jurisdiction (except the State of New York) in which any Bank is located
which limits the rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
F-2
<PAGE> 98
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"ASSIGNOR"), [ASSIGNEE] (the "ASSIGNEE"), UNIVERSAL HEALTH SERVICES, INC. (the
"BORROWER"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "AGENT")
and [ISSUING BANK(S)], as Issuing Bank(s).
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Credit Agreement dated as of July 8, 1997 among the Borrower,
the Assignor and the other Banks party thereto, as Banks, and the Agent (the
"CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of Credit
in an aggregate principal amount at any time outstanding not to exceed
$___,000,000;
WHEREAS, Syndicated Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof;
WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement and the other Loan Documents
in respect of a portion of its Commitment thereunder in an amount equal to
$__________ (the "ASSIGNED AMOUNT"), together with a corresponding portion of
its outstanding Conventional Loans and Letter of Credit Liabilities, and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement and the
other Loan
G-1
<PAGE> 99
Documents to the extent of the Assigned Amount, and the Assignee hereby accepts
such assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the Syndicated Loans made by, and Letter of Credit
Liabilities of, the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent
and the payment of the amounts specified in Section 3 required to be paid on
the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that facility and Letter of Credit fees accrued to the date hereof
in respect of the Assigned Amount are for the account of the Assignor and such
fees accruing from and including the date hereof are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
SECTION 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower, the Issuing Banks and the Agent
pursuant to Section 10.06(c) of the Credit Agreement. The execution of this
Agreement by the Borrower, the Issuing Banks and the Agent is evidence of this
consent. Pursuant to Section 10.06(c) the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to evidence the assignment
and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of the
Borrower or any of its Subsidiaries, or the validity and enforceability of the
obligations of the Borrower or any of its Subsidiaries in respect of any Loan
Document. The Assignee acknowledges that it has,
- -----------------
*Amount should combine principal together with accrued interest
and breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the Assignee. It may
be preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
G-2
<PAGE> 100
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower and its Subsidiaries.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
------------------------------
Title:
[ASSIGNEE]
By
------------------------------
Title:
UNIVERSAL HEALTH SERVICES, INC.
By
------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By
------------------------------
Title:
G-3
<PAGE> 101
[ISSUING BANK
By
------------------------------
Title:]
G-4
<PAGE> 102
EXHIBIT H
GUARANTY AGREEMENT
AGREEMENT dated as of July 8, 1997 among each of the Guarantors listed
on the signature pages hereof under the caption "GUARANTORS" and each Person
that shall, at any time after the date hereof, become a Guarantor hereunder
(individually a "GUARANTOR" and collectively the "GUARANTORS") and Morgan
Guaranty Trust Company of New York, as Agent.
W I T N E S S E T H :
WHEREAS, Universal Health Services, Inc., a Delaware corporation (the
"BORROWER"), of which each of the Guarantors is a Subsidiary, has entered into
a Credit Agreement (as the same may be amended from time to time, the "CREDIT
AGREEMENT") dated as of July 8, 1997 with the banks listed on the signature
pages thereof (the "BANKS") and Morgan Guaranty Trust Company of New York, as
Agent, pursuant to which the Borrower is entitled, subject to certain
conditions, to borrow up to $300,000,000 which amount may be increased under
certain conditions to $400,000,000;
WHEREAS, the Credit Agreement provides, among other things, that one
condition to its effectiveness is the execution and delivery by the Borrower's
Subsidiaries of this Agreement; and
WHEREAS, in conjunction with the transactions contemplated by the
Credit Agreement and in consideration of the financial and other support that
the Borrower has provided, and such financial and other support as the Borrower
may in the future provide, to the Guarantors, and in order to induce the Banks
and the Agent to enter into the Credit Agreement and to make Loans thereunder,
the Guarantors are willing to guarantee the obligations of the Borrower under
the Credit Agreement and the Notes.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
H-1
<PAGE> 103
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms defined in the Credit Agreement and
not otherwise defined herein are used herein as therein defined. In addition
the following term, as used herein, has the following meaning:
"OBLIGATIONS" means (i) all obligations of the Borrower in respect of
principal of and interest on the Loans and the Letter of Credit Liabilities and
(ii) all renewals or extensions of the foregoing, in each case whether now
outstanding or hereafter arising; provided that the foregoing shall not
constitute Obligations for purposes hereof to the extent the principal amount
thereof outstanding at the time enforcement hereof is sought exceeds
$225,000,000. The Obligations shall include, without limitation, any interest,
costs, fees and expenses which accrue on or with respect to any of the
foregoing, whether before or after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization by the
Borrower, and whether or not allowed or allowable as a claim in any such
proceeding, any such interest, costs, fees and expenses that would have accrued
thereon or with respect thereto but for the commencement of such case,
proceeding or other action.
ARTICLE II
The Guarantee
SECTION 2.01. The Guarantee. Subject to Section 2.03, the Guarantors
hereby unconditionally, irrevocably and jointly and severally guarantee to the
Banks and the Agent, and to each of them, the due and punctual payment of all
Obligations as and when the same shall become due and payable, whether at
maturity, by declaration or otherwise, according to the terms thereof. In case
of failure by the Borrower punctually to pay any Obligation, the Guarantors,
subject to Section 2.03, hereby unconditionally agree to cause such payment to
be made punctually as and when the same shall become due and payable, whether
at maturity or by declaration or otherwise, and as if such payment were made by
the Borrower.
SECTION 2.02. Guarantees Unconditional. The obligations of the
Guarantors under this Article II shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower under the Credit
Agreement or the Notes by operation of law or otherwise;
H-2
<PAGE> 104
(b) any modification or amendment of or supplement to the
Credit Agreement;
(c) any modification, amendment, waiver, release,
non-perfection or invalidity of any direct or indirect security, or of
any guarantee or other liability of any third party, for any
obligation of the Borrower under the Credit Agreement or the Notes;
(d) any change in the corporate existence, structure or
ownership of the Borrower or its Subsidiaries, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Borrower or its Subsidiaries or their assets or any resulting release
or discharge of any obligation of the Borrower contained in the Credit
Agreement or the Notes;
(e) the existence of any claim, set-off or other rights which
the Guarantors may have at any time against the Borrower, the Agent or
any Bank or any other Person, whether or not arising in connection
with any of the Credit Agreement or the Notes; provided that nothing
herein shall prevent the assertion of any such claim by separate suit
or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against
the Borrower for any reason of any of the Credit Agreement, or any
provision of applicable law or regulation purporting to prohibit the
payment by the Borrower of the principal of or interest on any Note or
any other amount payable by the Borrower under the Credit Related
Agreement or the Notes; or
(g) any other act or omission to act or delay of any kind by
the Borrower, the Agent, any Bank or any other Person or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defense to
the obligations of the Guarantors under this Article II.
SECTION 2.03. Limit of Liability. Each Guarantor shall be liable
under this Agreement only for amounts aggregating up to the largest amount that
would not render its obligations hereunder subject to avoidance under Section
548 of the United States Bankruptcy Code or any comparable provisions of any
applicable state law.
SECTION 2.04. Discharge; Reinstatement in Certain Circumstances. The
Guarantors' obligations under this Article II shall remain in full force and
effect until either (i) the condition specified in Section 5.15(b) of the
Credit Agreement has been met or (ii) the Commitments are terminated and all
principal of and interest on the Notes and all other amounts payable by the
Borrower under the Credit Agreement shall have been paid in full. If at any
time any payment of the principal of or interest on any Note or any other
amount payable by the Borrower under the Credit Agreement is rescinded or must
be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, the Guarantors' obligations under
this Article II with respect
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to such payment shall be reinstated at such time as though such payment had
become due but had not been made at such time.
SECTION 2.05. Waiver of Notice. The Guarantors irrevocably waive
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the Borrower or any other Person.
SECTION 2.06. Waiver of Subrogation. The Guarantors irrevocably
waive any and all rights to which they may be entitled, by operation of law or
otherwise, upon making any payment hereunder to be subrogated to the rights of
the payee against the Borrower with respect to such payment or otherwise to be
reimbursed, indemnified or exonerated by the Borrower in respect thereof.
SECTION 2.07. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under the Credit Agreement is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms of the Credit
Agreement shall nonetheless be payable by the Guarantors hereunder forthwith on
demand by the Agent made at the request of the Required Banks.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Notices. Unless otherwise specified herein, all
notices, requests and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party at its address or telex or facsimile number
set forth on the signature pages hereof or such other address or telex or
facsimile number as such party may hereafter specify for the purpose by notice
to the to the other party hereto. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in or pursuant to this Section 4.01
and the appropriate answerback is received, (ii) if given by facsimile
transmission, when such facsimile is transmitted to the facsimile transmission
number specified in or pursuant to this Section 4.01 and telephonic
confirmation of receipt thereof is received, (iii) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iv) if given by any other means, when
delivered at the address specified in this Section 4.01.
SECTION 3.02. No Waiver. No failure or delay by Agent in exercising
any right, power or privilege under this Agreement or any other Loan Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further
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<PAGE> 106
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein and therein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 3.03. Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and is signed by the Guarantors and the Agent with the prior written
consent of the Required Banks under the Credit Agreement.
SECTION 3.04. Governing Law; Submission to Jurisdiction; Waiver of a
Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
EACH GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY
NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH GUARANTOR AND THE AGENT HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 3.05. Successors and Assigns. This Agreement is for the
benefit of the Agent and the Banks and their respective successors and assigns
and in the event of an assignment of the Loans, the Notes or other amounts
payable under the Credit Agreement, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness. All the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
SECTION 3.06. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, and
all of which taken together shall constitute a single instrument, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Agent shall have received a
counterpart hereof signed by the each Guarantor listed on the signature page
hereof and when the Credit Agreement shall become effective in accordance with
its terms. Thereafter, upon execution and delivery of
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<PAGE> 107
a counterpart of this Agreement on behalf on any other Guarantor, this
Agreement shall become effective with respect to such Guarantor as of the date
of such delivery.
SECTION 3.07. Severability. If any provision of this Guaranty
Agreement is prohibited, unenforceable or not authorized, or to the extent that
any portion of the Obligations hereunder may be voidable or subject to
avoidance, in any jurisdiction, such provision or the Obligation shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability, non-authorization or portion so subject without invalidating
or limiting the remaining provisions hereof or remaining portion of the
Obligations or affecting the validity, enforceability or legality of such
provision or such portion of the Obligations in any other jurisdiction.
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<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By
----------------------------------
Name:
Title:
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615 MGT
Facsimile number: (212) 648-5018
GUARANTORS
AIKEN REGIONAL MEDICAL CENTERS, INC.
THE ARBOUR, INC.
ARBOUR ELDER SERVICES, INC.
ASC OF CANTON, INC.
ASC OF CLARKSTON, INC.
ASC OF CORONA, INC.
ASC OF LAS VEGAS, INC.
ASC OF LITTLETON, INC.
ASC OF MIDWEST CITY, INC.
ASC OF NEW ALBANY, INC.
ASC OF PALM SPRINGS, INC.
ASC OF PONCA CITY, INC.
ASC OF SPRINGFIELD, INC.
ASC OF ST. GEORGE
THE BRIDGEWAY, INC.
CHILDREN'S HOSPITAL OF McALLEN, INC.
COMPREHENSIVE OCCUPATIONAL AND
CLINICAL HEALTH, INC.
DEL AMO HOSPITAL, INC.
FOREST VIEW PSYCHIATRIC HOSPITAL, INC.
GLEN OAKS HOSPITAL, INC.
HEALTH CARE FINANCE & CONSTRUCTION
CORP.
HRI CLINICS, INC.
HRI HOSPITAL, INC.
INTERNAL MEDICINE ASSOCIATES OF
DOCTORS' HOSPITAL, INC.
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<PAGE> 109
LA AMISTAD RESIDENTIAL TREATMENT
CENTER, INC.
McALLEN MEDICAL CENTER, INC.
MERIDELL ACHIEVEMENT CENTER, INC.
MERION BUILDING MANAGEMENT, INC.
NORTHWEST TEXAS HEALTHCARE SYSTEM,
INC.
PUEBLO MEDICAL CENTER, INC.
RELATIONAL THERAPY CLINIC, INC.
RIVER CREST HOSPITAL, INC.
RIVER OAKS, INC.
RIVER PARISHES INTERNAL MEDICINE, INC.
SPARKS FAMILY HOSPITAL, INC.
TONOPAH HEALTH SERVICES, INC.
TURNING POINT CARE CENTER, INC.
TWO RIVERS PSYCHIATRIC HOSPITAL, INC.
UHS HOLDING COMPANY, INC.
UHS INTERNATIONAL, LIMITED
UHS LAS VEGAS PROPERTIES, INC.
UHS OF AUBURN, INC.
UHS OF BELMONT, INC.
UHS OF BETHESDA, INC.
UHS OF COLUMBIA, INC.
UHS OF De La RONDE, INC.
UHS OF DELAWARE, INC.
UHS OF D.C., INC.
UHS OF FAYETVILLE, INC.
UHS OF FLORIDA, INC.
UHS OF FULLER, INC.
UHS OF ILLINOIS, INC.
UHS OF MAITLAND, INC.
UHS OF MANATEE, INC.
UHS OF NEW ORLEANS, INC.
UHS OF NEW YORK, INC.
UHS OF ODESSA, INC.
UHS OF PENNSYLVANIA, INC.
UHS OF PLANTATION, INC.
UHS OF RECOVERY FOUNDATION, INC.
UHS OF RIVER PARISHES, INC.
UHS OF RIVERTON, INC.
UHS OF SHREVEPORT, INC.
UHS OF SPRINGFIELD, INC.
UHS OF TIMBERLAWN, INC.
UHS OF VERMONT, INC.
UHS OF WALTHAM, INC.
UHSR CORPORATION
UNIVERSAL HEALTH NETWORK, INC.
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<PAGE> 110
UNIVERSAL HEALTH PENNSYLVANIA
PROPERTIES, INC.
UNIVERSAL HEALTH RECOVERY CENTERS,
INC.
UNIVERSAL HEALTH SERVICES OF CEDAR
HILL, INC.
UNIVERSAL HEALTH SERVICES OF
CONCORD, INC.
UNIVERSAL HEALTH SERVICES OF INLAND
VALLEY, INC.
UNIVERSAL HEALTH SERVICES OF
NEVADA, INC.
UNIVERSAL HMO, INC.
UNIVERSAL TREATMENT CENTERS, INC.
VICTORIA REGIONAL MEDICAL CENTER,
INC.
WELLINGTON PHYSICIAN ALLIANCES, INC.
WELLINGTON REGIONAL MEDICAL CENTER
INCORPORATED
By
--------------------------------------
Name:
Title:
c/o Universal Health Services, Inc.
367 South Gulph Road
King of Prussia, PA 19406
Facsimile number: (610) 768-3318
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<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
AGREEMENT OF
LIMITED PARTNERSHIP
OF
DISTRICT HOSPITAL PARTNERS, L.P.
(a District of Columbia Limited Partnership)
by and among
UHS of D.C., Inc.
and
THE GEORGE WASHINGTON UNIVERSITY
Dated as of April 2, 1997
<PAGE> 2
LIMITED PARTNERSHIP AGREEMENT
OF
DISTRICT HOSPITAL PARTNERS, L.P.
This LIMITED PARTNERSHIP AGREEMENT (the "Agreement") is made and
entered into as of April 2, 1997 (the "Effective Date"), by and among UHS of
D.C., Inc., a Delaware corporation, as the general partner and a limited partner
("UHS"), and THE GEORGE WASHINGTON UNIVERSITY, a congressionally chartered
institution in the District of Columbia, as a limited partner (the
"University"). The parties to this Agreement shall also be referred to
individually as a "Partner" and collectively as the "Partners."
R E C I T A L S
WHEREAS, The George Washington University is a highly regarded
university and academic medical center that has among its activities and
affiliates The George Washington University Hospital (the "Hospital"), The
George Washington University School of Medicine and Health Sciences (the "School
of Medicine"), and The George Washington University faculty practice plan (the
"Medical Faculty Associates").
WHEREAS, The George Washington University, through its School of
Medicine and Medical Faculty Associates, trains physicians and allied health
professionals through a program of classroom and clinical education that meets
high academic standards.
WHEREAS, The Hospital is a 501-bed tertiary care hospital licensed as
an acute care hospital in the District of Columbia, founded in 1944 and
maintaining a strong commitment to community service.
WHEREAS, UHS is an affiliate of Universal Health Services, Inc. ("UHS
Parent"), a nationally known health care organization that has expertise in
managing and operating hospitals, developing regional networks, and providing
efficient, cost-effective community health care.
WHEREAS, UHS and UHS Parent recognize the Hospital as an important
asset of the District of Columbia community, recognize the academic mission and
charitable purposes of the University and the School of Medicine, recognize the
Hospital's significant contributions to the community, and have committed to
provide community service.
WHEREAS, the Partners intend to bring their health care resources
together in order to create efficiencies, compete effectively in the health care
market, provide affordable, high quality health care services in the community,
and enhance the graduate and undergraduate medical education programs of the
School of Medicine as well as the Medical Faculty
<PAGE> 3
Associates and attending physicians. An ongoing clinical and academic
affiliation between the parties will meet their respective objectives by
improving the training of health care professionals and the delivery of high
quality health care services in the community.
WHEREAS, the Partners desire to form a limited partnership under the
laws of the District of Columbia for the purposes and on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Partners agree as follows:
1. Definitions. When used in this Agreement, the following terms shall
have the meanings set forth below:
1.1. "Act" means the District of Columbia Uniform Limited
Partnership Act of 1987, being District of Columbia Code Section 41-401 et seq.,
as amended.
1.2. "Adjusted Capital Account Deficit" means, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which
such Partner is obligated to restore pursuant to any provision of this Agreement
or is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.
The foregoing definition of "Adjusted Capital Account Deficit" is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations and shall be interpreted consistently therewith.
1.3. "Agreement" means this Agreement of Limited Partnership,
as amended from time to time.
1.4. "Ancillary Agreements" means the Academic Affiliation
Agreement, the HMO Hospital Services Agreement, the Guaranty Agreement, the
Trademark License Agreement, the Parking Rental Agreement, the Management
Agreement, and the Ground Lease which the Partners intend to execute as of the
Transfer Date.
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<PAGE> 4
1.5. "Assignee" means a Person acquiring a Transferred
Interest as set forth in Section 13.1.
1.6. "Bankruptcy" means the institution of any proceedings
under federal or state laws for relief of debtors, including filing of a
voluntary or involuntary petition in bankruptcy or the adjudication of a Person
as insolvent or bankrupt, or the assignment of a Person's property for the
benefit of creditors, or the appointment of a receiver, trustee or a conservator
of any substantial portion of the Person's assets or the seizure by a sheriff,
receiver, trustee or conservator of any substantial portion of the Person's
assets, and the failure, in the case of any of these events, to obtain the
dismissal of the proceeding or removal of the conservator, receiver or trustee
within thirty (30) days of the event.
1.7. "Capital Account" means, for any given Partner, an
account determined and maintained throughout the full term of the Partnership
for such Partner in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv). Subject to and in accordance with said Regulation, each
Partner's Capital Account balance at any time shall equal such Partner's Capital
Contribution increased by the Partner's allocable share of Partnership Profits,
and decreased by Distributions made to the Partner by the Partnership and the
Partner's allocable share of Partnership Losses. Upon the contribution to or
Distribution from the Partnership of property, including money, in connection
with the admission to or retirement from the Partnership of a Partner,
respectively, the assets of the Partnership shall be revalued on the books of
the Partnership to reflect the fair market value of such assets at the time of
the occurrence of such event, and the Capital Accounts of the Partners shall be
adjusted in the manner provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(f).
1.8. "Capital Contribution" means, for any given Partner, the
aggregate of the money and the fair market value of any property contributed by
the Partner to the capital of the Partnership (net of any liability secured by
such contributed property that the Partnership assumes or takes subject to as
primary obligor) pursuant to Section 3 hereof.
1.9. "Capital Plan" means the plan described in Section 3.7.2.
1.10. "Centers of Emphasis" means the six (6) clinical
programs at the Hospital that the University and UHS have identified as areas of
special emphasis and that are more fully described in Section 3.8.
1.11. "Chief Executive Officer" means an employee of either
UHS or an affiliate of UHS to manage, supervise and administer the day-to-day
operations of the Partnership.
1.12. "Code" means the Internal Revenue Code of 1986, as
amended, or corresponding provisions of any successor statute.
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<PAGE> 5
1.13. "Depreciation" means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Fiscal Year bears to
such beginning adjusted tax basis; provided, however, that if the adjusted basis
for federal income tax purposes of an asset at the beginning of such Fiscal Year
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
1.14. "Director" means a Person appointed to serve on the
Partnership Board.
1.15. "Distribution" means the aggregate of the money or the
fair market value of any property distributed to Partners with respect to their
Interests in the Partnership (net of any liability secured by such property that
the Partner assumes or takes subject to as primary obligor), other than payments
to Partners for services or as repayment of loans or advances.
1.16. "Fiscal Year" means the period defined in Section 6.1.
1.17. "General Partner" means initially UHS and includes any
successor, substitute or additional Person admitted to the Partnership as a
General Partner as provided in Section 13 of this Agreement.
1.18. "Gross Asset Value" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except the initial
Gross Asset Value of any asset contributed by a Partner to the Partnership shall
be the gross fair market value of such asset, as determined by the contributing
Partner and the General Partner, and the Gross Asset Value of any asset
distributed to any Partner shall be adjusted to equal its gross fair market
value as of the date of distribution, as determined by the General Partner and
the distributee partner, provided that the initial Gross Asset Values of the
assets contributed to the Partnership pursuant to Sections 3.1(b) and 3.1(c)
shall be as set forth in such Sections.
1.19. "Hospital" means the acute care hospital inpatient
facility located at 901 23rd Street, N.W., Washington, D.C., or as renovated or
relocated as described in Section 3.7.2.
1.20. "Initial Capital Loan" means the initial capital loan of
UHS to the Partnership described in Section 3.1(c).
1.21. "Interest" means the entire ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to
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<PAGE> 6
which a Partner may be entitled as provided in this Agreement, subject to the
obligations of such Partner to comply with all of the terms and conditions of
this Agreement.
1.22. "Letter of Credit" means the irrevocable bank letter of
credit in the amount of Forty Million Dollars ($40,000,000) described in Section
3.9, as the same may be renewed or modified.
1.23. "Limited Partner" means initially UHS and the
University, and includes any successor, substitute or additional Person admitted
to the Partnership as a limited partner as provided in Section 13 of this
Agreement.
1.24. "Major Decisions" means any of the actions of the
Partnership requiring approval of a majority of the Directors appointed by UHS
and a majority of the Directors appointed by the University, as set forth in
Section 7.3.
1.25. "Management Agreement" means the agreement between UHS
or an affiliate of UHS and the Partnership for the provision of management
services to the Hospital which the Partners intend to execute as of the Transfer
Date.
1.26. "Nonrecourse Deductions" has the meaning set forth in
Section 1.704- 2(b)(1) and 1.704-2(c) of the Treasury Regulations.
1.27. "Nonrecourse Liability" has the meaning set forth in
Section 1.704- 2(b)(3) of the Treasury Regulations.
1.28. "Partner" means any General Partner or Limited Partner
of the Partnership.
1.29. "Partner Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the
Treasury Regulations.
1.30. "Partner Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
1.31. "Partner Nonrecourse Deductions" has the same meaning as
the term "partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1)
and 1.704-2(i)(2) of the Treasury Regulations.
1.32. "Partnership" means District Hospital Partners, L.P.,
the limited partnership organized pursuant to this Agreement.
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<PAGE> 7
1.33. "Partnership Board" means the board of directors of the
Partnership which board shall serve in an advisory capacity to the Partnership
and the Partners, except for those Major Decisions requiring a vote of the
Partnership Board under Section 7.3 hereof.
1.34. "Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
1.35. "Percentage Interest" means, for purposes of allocating
all items of Profits and Losses among the Partners, a ratio, expressed in
percentages, reflecting a Partner's Interest in the Partnership relative to the
Interests of other Partners. The initial Percentage Interests of the Partners
are as set forth on Exhibit 1.35 hereto.
1.36. "Person" means any natural person, partnership,
corporation, association, trust, governmental agency or other legal entity.
1.37. "Profits" and "Losses" means, for each Fiscal Year or
other period, the Partnership's taxable income or loss for such year or period,
determined in accordance with Section 703(a) of the Code (including in such
taxable income or loss all items of income, gain, loss or deduction required to
be stated separately), increased by any income of the Partnership that is exempt
from federal income tax, and decreased by expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv) of the Treasury Regulations.
Profits and Losses, depreciation, depletion, amortization, gain, and loss with
respect to any property (including intangibles) that under Sections
1.704-1(b)(2)(iv)(d) and (b)(2)(iv)(f) of the Treasury Regulations is properly
reflected on the books of the Partnership at a book value that differs from the
adjusted tax basis of such property shall be determined based on the book value
of such property, in accordance with the principles of Section
1.704-1(b)(2)(iv)(g) of the Treasury Regulations. Any items which are specially
allocated pursuant to the provisions of Sections 5.4 and 5.5 shall not be taken
into account in computing Profits and Losses.
1.38. "Project Fund" means the account established for the
purposes set forth in Section 3.7.2.
1.39. "Purposes" means the business and purposes of the
Partnership as described in Section 2.4.
1.40. "Service Area" of the Partnership means the area
described in Exhibit 1.40 to be attached hereto.
1.41. "Substitute Partner" means an Assignee admitted as a
Partner as set forth in Section 13.1.
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1.42. "UHS Contribution" means the initial Capital
Contribution of UHS as set forth in Section 3.1(c).
1.43. "Transfer" means any voluntary or involuntary sale,
assignment, transfer, exchange, lease, mortgage, charge, hypothecation, pledge
or other conveyance or encumbrance, including any transfer by operation of law
or otherwise.
1.44. "Transfer Date" means the Closing Date set forth in the
Contribution Agreement between the University and the Partnership.
1.45. "Transferred Interest" means an Interest that is subject
to a Transfer as set forth in Section 13.1.
1.46. "Treasury Regulation" means those regulations
promulgated pursuant to the Code.
1.47. "University Contribution" means the University's initial
Capital Contribution as set forth in Section 3.1(b).
1.48. "University Contribution Agreement" means the
Contribution Agreement between the University and the Partnership to be executed
as of the Transfer Date.
2. Organization of Partnership.
2.1. Formation.
(a) The Partners hereby form the Partnership
pursuant to the provisions of the Act, which shall govern the relationship of
the Partners except as expressly provided to the contrary herein;
(b) The Partners shall take any and all actions as
may from time to time be required under the laws of the District of Columbia to
give effect to the Partnership and to maintain it in good standing; and
(c) Except as provided herein, the Partnership shall
be managed by the General Partner of the Partnership, having the powers
specified in Section 7.1 hereof and subject to the limitations set forth in this
Agreement.
2.2. Name. The name of the Partnership shall be District
Hospital Partners, L.P.
2.3. Principal Place of Business. The principal place of
business of the Partnership shall be at the Hospital, which as of the date
hereof is located at 901 23rd Street,
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N.W., Washington, D.C. The Partnership shall continuously maintain a principal
office in the District of Columbia, which office shall be located at its
principal place of business. The Partnership may also have such other offices or
places of business as the Partners may from time to time determine.
2.4. Purposes. The Purposes of the Partnership shall be (a) to
own and operate an acute care hospital in the District of Columbia known as The
George Washington University Hospital, (b) to provide or arrange for the
provision of health care services or related services, (c) to furnish
uncompensated and charity health care, (d) to develop and maintain an integrated
delivery system, (e) to develop Centers of Emphasis, (f) to support the academic
programs of the School of Medicine and the Medical Faculty Associates including
research and teaching and (g) to engage in any other business and do any and all
other acts and things agreed upon by the Partners and consistent with the
foregoing.
2.5. Term. The term of the Partnership shall commence as of
the Effective Date and shall continue for fifty (50) years (the "Term"), unless
dissolved, liquidated and terminated sooner pursuant to the provisions of
Section 14 hereof. At the end of the fifty (50) year term, UHS shall have right
to extend the Term for an additional five (5) year renewal term and four (4)
separate additional five (5) year renewal terms thereafter, provided that UHS
provides the University with eighteen (18) months written notice prior to the
end of the Term and each applicable renewal term thereafter.
2.6. Compliance With Securities Laws. Each Partner represents
and warrants that it has acquired or is acquiring its Interest for its own
account, and not with a view toward the resale thereof. Each of the parties
hereto is fully aware and acknowledges that the offer and sale of the Interest
which it has acquired or is acquiring has not been registered under the
Securities Act of 1933, as amended, nor registered or qualified under the
securities laws of any state or the District of Columbia. Each Partner
acknowledges and agrees that its Interest may not be sold, transferred, pledged,
or hypothecated without registration under such acts or an opinion of legal
counsel that such transfer may be legally effected without such registration.
Additional restrictions on Transfers of Interests are set forth in this
Agreement.
2.7. Resident Agent. The name and address of the Partnership's
resident agent in the District of Columbia shall be C T Corporation System, 1025
Vermont Avenue, N.W., Washington, D.C. 20005, until changed by the General
Partner.
3. Capitalization of Partnership.
3.1. Description, Timing and Value of Initial Capital
Contributions.
(a) Provided the conditions set forth in Subsection
(e) below are satisfied, each Partner shall make its initial Capital
Contribution to the Partnership on the Transfer Date unless otherwise mutually
extended by the Partners.
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(b) The University shall transfer and assign to the
Partnership, as its initial Capital Contribution (the "University
Contribution"), all of its rights, title and interest in and to the Assets as
defined in the University Contribution Agreement, subject to the obligations and
liabilities described in the University Contribution Agreement.
(c) UHS shall provide to the Partnership's Project
Fund, as its initial capital commitment, Eighty Million Dollars ($80,000,00).
Seventy-two Million Dollars ($72,000,000) of such initial capital commitment
shall be in the form of a Capital Contribution (the"UHS Contribution") and the
remaining eight million dollars ($8,000,000) shall be in the form of an initial
capital loan (the "Initial Capital Loan"). The UHS Contribution shall be
allocated between UHS's Interests as General Partner and as a Limited Partner in
accordance with the Percentage Interests of UHS set forth in Exhibit 1.35. Forty
Million Dollars ($40,000,000) shall be delivered by wire transfer of immediately
available funds to the Partnership's account as of the Transfer Date. The
remaining Forty Million Dollars ($40,000,000) of UHS' capital commitment will be
provided from time to time as required to fund capital expenditures in
accordance with the Capital Plan and shall be secured by the Letter of Credit.
The UHS Contribution and Initial Capital Loan shall be used only for the Project
Fund.
(d) UHS shall enter into a loan agreement with the
Partnership whereby UHS shall make the Initial Capital Loan. The Initial Capital
Loan amount shall be Eight Million Dollars ($8,000,000) and shall be added to
the Project Fund. The Initial Capital Loan shall be on a long term basis and
shall bear interest at a rate of twelve percent (12%) per annum to be paid by
the Partnership only to the extent that the Partnership has Profits.
(e) On or before the Transfer Date, the Partners
shall take the following actions and/or ensure that the following events occur
and such actions and events shall be conditions precedent to either Partner's
obligation to contribute its initial Capital Contribution:
(i) The University and the Partnership shall have executed and
performed all of the terms, covenants, representations and warranties set forth
in the University Contribution Agreement, as well as the terms, covenants,
representations and warranties set forth in this Agreement and the exhibits and
schedules attached hereto.
(ii) All parties shall have executed and delivered the
Ancillary Agreements.
(iii) UHS shall have delivered to the Partnership the Loan
Agreement.
(iv) The Partnership shall have executed and/or delivered or
caused to be delivered to each Partner the following:
a. A certificate of the General Partner certifying
that all consents and approvals that are required from any person, entity,
governmental body or regulatory agency
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in connection with the consummation of the transactions contemplated by this
Agreement by the Partnership have been obtained;
b. A certificate of the corporate secretary of the
General Partner certifying (i) the incumbency of the officers of the General
Partner from the Effective Date to the Transfer Date and bearing the authentic
signatures of all such officers who shall execute this Agreement and any
additional documents contemplated by this Agreement; and (ii) the minutes of the
meeting of the shareholders of UHS and the resolutions of the Board of Directors
of the General Partner authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, including the
transfer of the UHS Contribution, and that such minutes and resolutions have not
been amended or rescinded and remain in full force and effect;
c. A favorable original certificate of good standing
of the Partnership issued by the District of Columbia Department of Consumer and
Regulatory Affairs; and
d. Such other instruments, certificates, consents or
other documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
(v) UHS shall have executed and/or delivered or caused to be
delivered to the Partnership the following:
a. A favorable original certificate of good standing
issued by the Delaware Secretary of State;
b. A certificate of the President or any Vice
President of UHS certifying to the Partnership (i) the accuracy of the
representations and warranties set forth in Section 4 hereof and (ii) that all
consents and approvals that are required from any person, entity, governmental
body or regulatory agency in connection with (a) the transfer of the UHS
Contribution to the Partnership's Project Fund and (b) the execution, delivery
and performance of the Management Agreement;
c. A certificate of the corporate Secretary of UHS
certifying to the Partnership (i) the incumbency of the officers of UHS from the
Effective Date to the Transfer Date and bearing the authentic signatures of all
such officers who shall execute this Agreement and any additional documents
contemplated by this Agreement; (ii) as to the resolutions of the Board of
Directors of UHS authorizing (a) the transfer of the UHS Contribution by UHS to
the Partnership, (b) the execution, delivery and performance of this Agreement
and the Ancillary Agreements by UHS, and (c) the execution, delivery and
performance of the Ancillary Agreements; (iii) that such resolutions have not
been amended or rescinded and remain in full force and effect; and (iv) the
current Articles of Incorporation and Bylaws of UHS;
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d. Copies of the documents executed and/or delivered
in connection with the transfer of the UHS Contribution by UHS to the
Partnership which are identified in Exhibit 3.1(d)(v)d attached hereto, and
e. Such other certificates, consents, endorsements,
assignments, assumptions, evidences, and other documents or instruments as may
be reasonably requested by the Partnership in order to transfer the UHS
Contribution to the Partnership's Project Fund, to carry out the transaction
contemplated by this Agreement and to comply with the terms hereof.
(vi) The University shall have executed and/or delivered or
caused to be delivered to the Partnership and UHS the following:
a. A certificate of the corporate secretary of the
University certifying (i) the incumbency of the officers of the University from
the Effective Date to the Transfer Date and bearing the authentic signatures of
all such officers who shall execute this Agreement and any additional documents
contemplated by this Agreement; (ii) the minutes of the meeting of the Trustees
of the University and the resolutions of the Board of Trustees of the University
authorizing the execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby,
including the transfer of the University Contribution; (iii) that such minutes
and resolutions have not been amended or rescinded and remain in full force and
effect; and (iv) the current Charter and Bylaws of the University;
b. A favorable original certificate of good standing
of the University issued by the District of Columbia Department of Consumer and
Regulatory Affairs or an applicable alternative certificate;
c. Such other instruments, certificates, consents or
other documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof; and
d. Copies of the documents executed and/or delivered
in connection with the transfer of the University Contribution to the
Partnership, which are identified in the University Contribution Agreement.
(vii) On the Transfer Date, no action or proceeding shall be
pending or threatened wherein an unfavorable judgment, decree or order would, in
the reasonable opinion of legal counsel for either Partner, prevent or make
materially unfavorable the carrying out of this Agreement, or would cause the
transactions contemplated by this Agreement to be rescinded. In the event of the
receipt of any communication from any department or agency of government or any
other notice (a copy of which communication or notice shall be promptly
delivered to the Partnership and each Partner) prior to the closing with regard
to the
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transactions contemplated by this Agreement, which communication or notice
shall, in the reasonable opinion of legal counsel, threaten such an action or
proceeding, either Partner may terminate this Agreement by giving thirty (30)
days advance written notice to the other Partner. During such thirty (30) day
period, UHS and the University shall meet and confer in good faith to attempt to
resolve the issue which is the subject of the action or proceeding. In the event
the parties are unable to do so, or fail to agree to extend the thirty (30) day
period, either Partner may terminate this Agreement by giving written notice to
the other Partner and all parties shall thereupon be released from any and all
liability related to this Agreement.
(f) In the event that each of the conditions
precedent set forth in Subsection (e) above shall not have been satisfied by the
Transfer Date, the Partners shall not be required to make the University
Contribution or the UHS Contribution and the Partnership shall be dissolved,
pursuant to the provisions of Section 14.
3.2. Additional Limited Partners. Subject to the provisions of
Section 7.3 and Section 13, the Partnership may from time to time elect to offer
limited partnership interests to other Persons, as permitted by law. Any Limited
Partner admitted to the Partnership after the execution of this Agreement shall
make an initial Capital Contribution in an amount and at a time as determined by
the Partnership in exchange for its Limited Partnership Interest. A new Limited
Partner's initial Capital Contribution under this Section 3.2 shall, unless
otherwise determined by the Partnership, equal the following amount:
(i) the Percentage Interest of the new Partner,
multiplied by
(ii) the fair market value of all the Partnership's
assets (including any new Limited Partner's initial Capital Contribution) as of
the effective date of admission.
3.3. Additional Capital Requirements. It shall be the general
policy of the Partnership that all monies necessary to carry on the activities
of the Partnership shall be obtained first through funds derived from the
operation of the Partnership. To the extent funds derived from the Partnership
are not sufficient, it is the intent of the Partners that the Partners will
contribute an additional Forty-Five Million Dollars ($45,000,000) to the
Partnership in excess of the University Contribution, the UHS Contribution and
the Initial Capital Loan for Hospital operations over a ten (10) year period
following the Transfer Date. Additional capital including such Forty-five
Million Dollars ($45,000,000) will, at the election of the General Partner, be,
in whole or in part, in the form of additional Capital Contributions or capital
loans as described in Section 3.4 hereof or loans from non-Partners. No Partner
shall be required to provide additional capital to the Partnership for the
Capital Plan until the Project Fund is fully depleted.
3.4. Capital Contributions and Capital Loans. Partners may be
required to make additional Capital Contributions to the Partnership in the
amounts and at the times determined by the General Partner. No Partner may make
a voluntary Capital Contribution
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<PAGE> 14
without the consent of the General Partner. All additional Capital Contributions
shall be made in accordance with each Partner's Percentage Interest in the
Partnership, unless the Partners agree otherwise. In the event a Partner fails
to make an additional Capital Contribution, the General Partner shall make the
Capital Contribution in accordance with Sections 3.4 and 3.6. The Partnership
may borrow funds from any of the Partners on reasonable terms and conditions
approved by the Partners at the time such loan or advance is obtained, subject
to Section 7.3. Such loans or advances shall not increase or otherwise affect
the Capital Accounts of any of the parties hereto. Funds loaned by a Partner to
the Partnership for purposes of satisfying the need for an additional Capital
Contribution shall accrue interest at the prime rate as determined from time to
time (as published in the Wall Street Journal) plus two percent (2%) per annum
and shall be repaid prior to any Distribution.
3.5. No Withdrawals from Capital Accounts. No Partner shall be
entitled to withdraw funds from its Capital Account, except pursuant to a
Distribution made in accordance with Section 5 or the liquidation of the
Partnership in accordance with Section 14, unless the Partners consent thereto.
3.6. Failure to Make Capital Contributions. The Interest of a
Partner who fails to make any required Capital Contribution or other payment to
the Partnership (subsequent to its initial Capital Contribution) shall be
reduced upon failure to make such Capital Contribution or payment, and each
Partner's Percentage Interest thereafter shall be recalculated.
3.7. Project Fund.
3.7.1. On the Transfer Date, the Partnership shall
establish the Project Fund, which the Partnership shall use to implement the
Capital Plan described in Section 3.7.2. The Project Fund shall consist of the
proceeds of the UHS Contribution and of the Loan Agreement and any additional
Capital Contributions as determined by the General Partner pursuant to Section
3.3 together with income on such funds.
3.7.2. The parties to this Agreement shall work
diligently to develop, approve, and implement a Capital Plan to be prepared by
the General Partner to substantially reconstruct, renovate and equip the
existing Hospital facility, using the Project Fund. Only after the Capital Plan
has been fully implemented and construction is complete, any funds remaining in
the Project Fund shall be used to develop an integrated delivery system
including, without limitation, linkage with the Medical Faculty Associates (as
that term is defined in the Academic Affiliation Agreement attached hereto as
Exhibit 3.7.2), development of a regional healthcare delivery infrastructure
(including expansion of an ambulatory care network) and continued development of
a primary care physician network.
3.7.3. The Project Fund shall not be used to pay
management fees under the Management Agreement, offset deficits in budget pools
under the HMO Hospital
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Service Agreement, make academic support payments under the Academic Affiliation
Agreement, or in any way fund operating deficits of the Partnership.
3.8. Centers of Emphasis. The parties to this Agreement intend
that within two (2) years following the Transfer Date, the General Partner shall
develop strategic, capital and operating plans for each of the Centers of
Emphasis to provide capital, marketing and faculty support for the Centers of
Emphasis, each of which shall be subject to the approval of the University under
Section 7.3 hereof. "Centers of Emphasis" are the following six (6) clinical
programs at the Hospital that have been identified by the University as areas of
special emphasis: (1) cardiovascular disease, (2) cancer treatment and research,
(3) emergency medicine, (4) minimally invasive surgery, (5) neurologic disease
and (6) women's health.
3.9. Letter of Credit. The Letter of Credit shall be issued in
favor of the Partnership, effective as of the Transfer Date. The Letter of
Credit may be drawn by the Partnership in the event UHS fails to contribute to
the Partnership the deferred portion of the UHS Contribution or fails to make
available the Initial Capital Loan as the same are required from time to time to
fund continuing capital expenditures in accordance with the Capital Plan. From
and after such time as UHS contributes any of the deferred portion of the UHS
Contribution and makes any portion or all of the Initial Capital Loan to the
Partnership, UHS shall have the right to reduce the stated amount of the Letter
of Credit such that the sum of contributions actually made to the Project Fund
from the UHS Contribution and the Initial Capital Loan and the stated amount of
the Letter of Credit equals Eighty Million Dollars ($80,000,000). The Letter of
Credit shall be in a form, and issued by a financial institution, reasonably
acceptable to the University. The University will review in good faith the need
for the continued existence of the Letter of Credit to secure the ongoing
obligation of UHS to complete the UHS Contribution, taking into consideration
the progress of construction under the Capital Plan, the credit rating of UHS,
and other factors.
UHS shall bear the cost of the Letter of Credit, except that
the University shall reimburse UHS on an annual basis for its cost of the Letter
of Credit plus fifty (50) basis points up to a maximum of 1.75% of the stated
amount of the Letter of Credit not to exceed eight million dollars ($8,000,000)
stated amount; provided that for each dollar of reduction in the amount of the
face amount of the Letter of Credit other than as a result of the cash funding
of UHS Contribution, the amount of the Letter of Credit with respect to which
the University is obligated to pay UHS its cost shall be reduced
correspondingly.
3.10 Initial Capital Loan. Only after UHS contributes all of
the deferred portion of the UHS Contribution, the Initial Capital Loan may be
drawn upon from time to time to fund continuing capital expenditures in
accordance with the Capital Plan or after completion of the Capital Plan
otherwise in accordance with Section 3.7.2.
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<PAGE> 16
4. Representations and Warranties of UHS. UHS hereby represents and
warrants to the Partnership, which representations and warranties shall be true
and correct on the Effective Date, as follows:
4.1. Organization; Good Standing. UHS is a Delaware
corporation, duly organized, validly existing and in good standing under the
laws of Delaware with full corporate power and authority to carry on its
businesses. UHS is also duly qualified to carry on its businesses in the
District of Columbia.
4.2. Authority; Validity; No Breach. UHS has the full right,
power, legal capacity and authority, to execute, deliver and carry out the terms
of this Agreement and all documents and agreements necessary to give effect to
the provisions of this Agreement and to consummate the transactions contemplated
hereby. All corporate and other actions required to be taken by UHS to authorize
the execution, delivery and performance of this Agreement, all documents
executed by it necessary to give effect to this Agreement, and all transactions
contemplated hereby have been duly and properly taken or obtained or will be
duly and properly taken or obtained by UHS prior to the Transfer Date. No other
corporate or other action on the part of UHS is necessary to authorize the
execution, delivery and performance of this Agreement, all documents necessary
to give effect to this Agreement and all transactions contemplated hereby. Any
consent which has not been obtained would not have an adverse effect on the
transactions contemplated hereby.
This Agreement is, and the documents to be delivered at closing will
be, the lawful, valid and legally binding obligations of UHS in accordance with
their respective terms. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not, with or without
the giving of notice and/or the passage of time: (a) violate the Articles of
Incorporation or Bylaws of UHS, or any provision of law, statute, rule or
regulation to which UHS is subject; or (b) violate or conflict with any
judgment, order, writ or decree of any court applicable to UHS; which violation
or conflict would have a material adverse effect on the transactions
contemplated hereby.
4.3. Consents and Approvals. UHS has obtained each consent,
approval, permit, waiver, authorization or other action of or by any court,
governmental or nongovernmental person or entity, that is required in connection
with the execution, delivery or performance of this Agreement by UHS.
4.4. Solvency. UHS is not insolvent and will not be rendered
insolvent as a result of any of the transactions contemplated by this Agreement.
For purposes hereof, the term "solvency" means that: (a) the fair salable value
of UHS's tangible assets is in excess of the total amount of its liabilities
(including for purposes of this definition all liabilities, whether or not
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, and whether direct or indirect, fixed or contingent,
secured or unsecured, and disputed or undisputed); (b) UHS is able to pay its
debts or obligations in the
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ordinary course as they mature; and (c) UHS has capital sufficient to carry on
its businesses and all businesses in which it is about to engage.
4.5. Guaranty. UHS Parent will execute a guaranty agreement
with UHS (the "Guaranty Agreement"), a copy of which is attached hereto as
Exhibit 4.5.
4.6. Community Service. UHS recognizes the significant
contribution the University has made to the local community through its support
of uncompensated and indigent care at the Hospital. For at least two (2) years
from the Transfer Date, the Partnership shall maintain the Hospitals policies
for the treatment of indigent patients as such policies exist as of the Transfer
Date. Moreover, UHS recognizes as a member of the community the Partnership's
responsibilities for the treatment of indigent patients. Notwithstanding
anything in this Agreement or any Ancillary Agreement to the contrary, the
Partnership shall comply with all applicable laws and regulations relating to
uncompensated care and community service, including but not limited to the
requirements of any applicable Certificate of Need law.
5. Distributions and Allocations.
5.1. Distributions. Subject to Section 14 below, the General
Partner may make Distributions to the Partners of cash or other property of the
Partnership. No Distribution under this Section 5.1 shall be made, however,
unless the cash or property to be distributed is determined by the General
Partner, in accordance with sound business practices, to be in excess of the
Partnership's business needs, including for this purpose any and all reasonable
reserves for working capital or liabilities of the Partnership, such as the
Partnership's repayment obligations with respect to any Capital Loans, or other
reasonably foreseeable contingencies. All Distributions shall be in proportion
to the Partners' respective Percentage Interests.
5.2. Record Date for Distributions. Each Distribution to the
Partners pursuant to this Agreement shall be made to the Partners who are
holders of record of Interests as of the date such Distribution is approved.
5.3. Allocations of Profits and Losses. Except as otherwise
provided in Sections 5.4 and 5.5, Profits and Losses shall be allocated among
the Partners annually at the close of each Fiscal Year of the Partnership
according to their respective Percentage Interests.
5.4. Special Allocations. The following special allocations
shall be made in the following order:
5.4.1. Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(f) of the Treasury Regulations, notwithstanding any
other provision of this Section 5, if there is a net decrease in Partnership
Minimum Gain during any Fiscal Year, each
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Partner shall be specially allocated items of Partnership income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704- 2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section 5.4.1
is intended to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Treasury Regulations and shall be interpreted consistently
therewith.
5.4.2. Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Treasury Regulations,
notwithstanding any other provision of this Section 5, if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Fiscal Year, each Partner who has a share of the
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5) of the Treasury
Regulations, shall be specially allocated items of Partnership income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Partner's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Treasury Regulations. This Section 5.4.2 is intended to
comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of
the Treasury Regulations and shall be interpreted consistently therewith.
5.4.3. Qualified Income Offset. In the event any
Partner unexpectedly receives any adjustments, allocations, or distributions
described in Section 1.704- 1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5),
or Section 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, items of
Partnership income and gain shall be specially allocated to each such Partner in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible, provided that an allocation pursuant to this Section 5.4.3
shall be made only if and to the extent that such Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Section
5 have been tentatively made as if this Section 5.4.3 were not in the Agreement.
5.4.4. Gross Income Allocation. In the event any
Partner has a deficit Capital Account at the end of any Fiscal Year which is in
excess of the sum of (i) the amount such Partner is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, each such
Partner
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shall be specially allocated items of Partnership income and gain in the amount
of such excess as quickly as possible, provided that an allocation pursuant to
this Section 5.4.4 shall be made only if and to the extent that such Partner
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Section 5 have been made as if this Section
5.4.4 were not in the Agreement.
5.4.5. Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulations Section 1.704-2(i)(1).
5.4.6. Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year shall be specially allocated among the Partners in
proportion to their Percentage Interests.
5.5. Curative Allocations. The allocations set forth in
Sections 5.4.1, 5.4.2, 5.4.3, 5.4.4, 5.4.5 and 5.4.6 (the "Regulatory
Allocations") are intended to comply with certain requirements of the Treasury
Regulations. It is the intent of the Partners that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Partnership income, gain, loss, or
deduction pursuant to this Section 5.5. Therefore, notwithstanding any other
provision of this Section 5 (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of Partnership income,
gain, loss, or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement. In exercising its discretion under this Section 5.5, the General
Partner shall take into account future Regulatory Allocations under Section
5.4.1 and 5.4.2 that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 5.4.5 and 5.4.6.
5.6. Book Value/Tax Basis Differentials. In accordance with
Section 704(b) and 704(c) of the Code and the Treasury Regulations promulgated
thereunder, income, gain, loss, deductions and credit with respect to (i) any
property contributed to the capital of the Partnership, and (ii) any property
revalued on the Partnership's books in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(f), shall, solely for tax purposes, be allocated among
the Partners so as to take into account any variation between the adjusted basis
of such property to the Partnership for federal tax purposes and its value on
the books of the Partnership. The General Partner shall make such allocations
using the "remedial allocation method," as specified in Treasury Regulation
Section 1.704-3(d).
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5.7. Allocation in Respect of Interests Held for Partial Year.
In the event of a change in the Partners' Percentage Interests during any Fiscal
Year, Profits and Losses, if any, for such Fiscal Year shall be divided equally
among the months of such year, and each Partner shall participate in the
allocation for each month on the basis of its Percentage Interest as of the last
day of that month. Notwithstanding the foregoing, the Partnership shall in all
events utilize an accounting method for determining the allocable shares of the
above items to which the Partners are entitled that complies with Code Section
706(d) and the Treasury Regulations thereunder.
6. Reports, Books and Records.
6.1. Maintenance. The Partnership shall maintain complete and
accurate books and records, as required by the Act, at its principal office or
such other place or places as the General Partner may from time to time
determine. The Partnership shall adopt the same fiscal year as UHS uses in its
business, or such other fiscal year as is required to be adopted by the
Partnership for federal income tax purposes under Section 706 of the Code (a
"Fiscal Year").
6.2. Financial Statements and Income Tax Returns. The General
Partner shall cause to be prepared and delivered to each Partner, within one
hundred twenty (120) days after the expiration of each Fiscal Year, a balance
sheet and a profit and loss statement of the Partnership, a statement showing
the Capital Accounts, the Distributions and the share in the Profits and Losses
of each of the Partners for such Fiscal Year, and copies of all income tax
informational returns filed by or on behalf of the Partnership, together with
such additional tax information with respect to the Partnership's operations as
shall be necessary for the preparation by the Partners of their federal or state
income tax returns. Each of the Partners shall be entitled to request such
additional reports on the operations or financial condition of the Partnership
as they reasonably believe is appropriate.
6.3. Inspections. Each Partner of record shall have the right
to examine, at any reasonable time or times for all purposes, the books and
records of account, and the minutes and records of the Partnership, and to make
copies thereof at such Partner's expense. Such inspection may be made by any
agent or attorney of the Partner.
6.4. Tax Elections; Adjustment of Basis of Partnership. Upon
the Transfer of any Interest in the Partnership in the manner provided in
Section 743 of the Code, or a Distribution of property made in the manner
provided in Section 734 of the Code, in the reasonable discretion of the General
Partner, the Partnership may file an election under Section 754 of the Code to
adjust the basis of the assets of the Partnership under the circumstances and in
the manner provided in Sections 734 and 743. In the event of such election, the
General Partner shall take any and all necessary steps to consummate such
adjustment, including, without limitation, the filing of the election with the
income tax return of the Partnership for the first Fiscal Year to which the
election applies.
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The General Partner may (but need not), in its sole and absolute
discretion, make any other elections under the Code or the Treasury Regulations,
and the General Partner shall be absolved from all liability for any and all
consequences to any previously admitted or subsequently admitted partners
resulting from the making or failing to make any tax election.
6.5 Tax Matters Partner. The General Partner is hereby
designated as the "tax matters partners" in accordance with Section 6231(a)(7)
of the Code, and, in connection therewith and in addition to all other powers
given thereto, shall have all powers necessary and appropriate to perform such
role and to expend Partnership funds for professional services and costs
associated therewith.
7. Management of the Partnership.
7.1. Responsibilities and Authority of the General Partner.
The overall management and control of the Partnership and all of its affairs
shall be in the General Partner, except as otherwise set forth herein or in the
Management Agreement. The General Partner shall oversee the implementation of
the decisions of the Partners and the day-to-day management of the Partnership
by the Chief Executive Officer. The General Partner shall devote such attention
and business capacity to the affairs of the Partnership as may be reasonably
necessary to fully perform its duties as General Partner.
7.2. Partnership Board of Directors.
7.2.1. The board of directors of the Partnership
(the "Partnership Board") shall consist of six (6) Directors. Three (3)
Directors shall be appointed by the University and shall be University
Directors, and three (3) Directors shall be appointed by UHS and shall be UHS
Directors.
7.2.2. The University shall elect the initial
Chairman of the Partnership Board after consultation with UHS. Thereafter, the
Chairman shall be elected by the Partnership Board of Directors on the basis of
the Partners' Partnership Interests.
7.2.3. The initial Directors shall be as set forth
in Exhibit 7.2.3 attached hereto. The term of each of the initial Directors
shall be from the inception of the Partnership until the first meeting of the
Partners, at which time their successors shall be elected and qualified by the
University and UHS, respectively. The University and UHS shall retain the
discretion to replace any of their respective elected Directors during their
term as Directors. After the first meeting of the Partners, all Directors shall
serve for terms of one (1) year, or until their successors shall have been
elected and qualified or until the earlier of their death, removal, resignation
or disqualification. After the first meeting, each Partner shall annually elect
its class of Directors. Directors elected by a Partner shall be automatically
disqualified as Directors in the event that the Partner ceases to be a Partner.
There shall be no limitation on the number of terms a Director may serve.
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7.2.4. In all events, a Director shall hold office
until his successor has been elected and qualified.
7.2.5. An annual meeting of the Partnership Board
shall be held at the date, time and place determined by the Partnership Board.
Special meetings of the Partnership Board may be called by the Chairman, the
Partnership Board or any two (2) Directors by giving at least five (5) days
written notice to the Directors, except in the case of an emergency, which shall
require at least forty-eight (48) hours written notice, of the date, time, place
and purpose of the special meeting. Participation at any meeting may be by any
means of communication pursuant to which all Directors participating may
simultaneously hear each other.
7.2.6. Any Director may waive notice of any meeting.
Except as set forth in the following sentence, the waiver must be in writing,
signed by the Director entitled to the notice and filed with the minutes or
other records of the Partnership. A Director's attendance at or participation in
a meeting shall constitute a waiver of notice of that meeting unless the
Director is attending for the sole purpose of objecting to the notice. Neither
the business to be transacted at, nor the purpose of, any meeting of the
Directors (other than for special meetings) need be specified in the notice or
waiver of notice of the meeting.
7.2.7. The presence at a meeting of Directors
representing a majority of the total voting power of the Partnership Board shall
constitute a quorum for such meeting. If less than a quorum of the Directors is
present at a meeting, the Directors present shall adjourn the meeting to a
different time.
7.2.8. Except as otherwise provided in this
Agreement, the Directors appointed by a particular Partner shall, as a group,
have voting rights equivalent to that Partner's Percentage Interest. With the
exception of the Major Decisions described in Section 7.3, the affirmative vote
of a majority of the Percentage Interests represented at a meeting at which a
quorum is present shall be required for an action of the Directors.
7.2.9. The Partner which elected a Director may
remove the same Director with or without cause. A Director may resign at any
time by giving written notice to the Directors or to the Chairman. A resignation
is effective when the notice is given unless the notice specifies a future date.
The pending vacancy may be filled before the effective date, but the successor
shall not take office until the effective date.
7.2.10. A vacancy created by removal, death,
incapacity, resignation or an increase in the number of Directors or by any
other reason may be filled only by election by the Partner which elected such
Director or, in the case of an increase in the number of Directors, by the
Partner entitled to elect the new Directors. The individual elected to fill a
vacancy shall serve until the next annual appointment of Directors by the
Partners.
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7.2.11. A Director who is present at a meeting of the
Directors at which any official action is taken shall be conclusively presumed
to have assented to the action unless he announces his dissent at the meeting,
or his dissent is entered in the minutes of the meeting, or he files his written
dissent with the secretary of the meeting before the meeting is adjourned.
7.2.12. Any action required or permitted to be taken
at a meeting of the Directors may be taken without a meeting if a written
consent setting forth the action so taken is signed by each Director and is
filed with the minutes of proceedings of the Directors.
7.2.13. No Director shall receive a salary from the
Partnership solely on account of his service as a Director, but this shall not
preclude the Partnership from reimbursing Directors for expenses reasonably
incurred in connection with their service or from paying Directors for other
services rendered to the Partnership.
7.3. Major Decisions. While the University's Percentage
Interest is twenty percent (20%) or greater or if less than twenty percent
(20%), until the Capital Plan has been fully implemented (with respect to
Section 7.3(h) only), the approval of a majority of the Directors appointed by
the University and a majority of the Directors appointed by UHS shall be
required for the following actions:
(a) Material amendments to this Agreement;
(b) Sale or transfer of more than ten percent (10%)
of the assets of the Partnership;
(c) Addition of Partners to the Partnership or sale
of any Partnership Interest, provided that approval shall not be unreasonably
withheld;
(d) Incurrence of debt by the Partnership which
results in debt as a percentage of total capitalization in excess of fifty
percent (50%);
(e) Annual capital expenditures (not including those
incurred as part of the Project Fund) in excess of fifteen percent (15%) of the
net book value of the Partnership's total assets, with any unused portion to be
carried over to future years;
(f) Distributions to the Partners by the Partnership
except in accordance with this Agreement;
(g) Agreements between the Partnership and either the
University or UHS or any affiliate of either party, unless such agreements are
on terms and conditions at least as favorable as available from third parties;
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(h) Approval of the Project Fund and plans for the
support and development of the Centers of Emphasis, and material modifications
thereto; and
(i) Acceptance of a business opportunity pursuant to
Section 12.2.
7.4. Advisory Powers. In addition to the powers expressly set
forth in this Agreement, the Partnership Board shall advise the Partnership on
other matters affecting the Partnership. The Partnership Board shall receive
advice from the Hospital Board of Trustees regarding Hospital matters.
8. Hospital Board of Trustees. The Partnership shall establish a board
of twelve (12) trustees (the "Board of Trustees"). At least seven (7) of the
trustees will be residents of the Hospital service area so as to provide local
guidance to the policy and direction of the Hospital. The University and UHS
shall each appoint six (6) Trustees, provided that no more than four (4)
trustees shall be employed by or affiliated with the University and no more than
four (4) trustees shall be employed by or affiliated with UHS. No less than four
(4) trustees shall be members of the community who are not employed by or
affiliated with UHS or the University. The responsibilities of the Board of
Trustees shall be (a) establishing and maintaining accreditation and meeting
accreditating agency requirements relating to medical staff credentialing,
quality assurance, and oversight of Hospital responsibilities, (b) amending the
Hospitals medical staff bylaws, rules and regulations, (c) promoting community
involvement and community service and (d) advising the Partnership Board
regarding Hospital matters. The Bylaws of the Board of Trustees are attached
hereto as Exhibit 8.
9. Chief Executive Officer. The General Partner shall consult with the
University with respect to the selection of the Chief Executive Officer of the
Hospital. The Chief Executive Officer shall be appointed by, and shall serve at
the pleasure of, The Partnership Board. The Chief Executive Officer shall be
responsible for managing, supervising and administering the day-to-day
operations of the Partnership.
10. Reserve Powers. Notwithstanding anything in this Agreement or any
Ancillary Agreement to the contrary, and regardless of the Partnership Interest,
if any, held by the University, the following actions of the Partnership shall
require the approval of the University, which actions shall not affect the
University's status as a Limited Partner or provide the University with any
power to bind the Partnership:
10.1. Any material discontinuance, addition, or transfer
outside of the Washington Circle area of the District of Columbia of any
significant medical services provided at the Hospital as of the Transfer Date;
provided that the University's approval shall not be unreasonably withheld. For
purposes of this Section 10.1, the University's reasonable determination shall
take into account such factors as:
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(a) Whether the discontinuance, addition, or transfer of
services will materially adversely affect academic programs;
(b) Whether the continuation of a service would impose a
significant financial burden on the Partnership;
(c) Whether the services to be discontinued or transferred are
available in the community, subject to considerations of cost, quality, and
reasonable access by patients and physicians; and
(d) Whether the discontinuance, addition, or transfer of
services is in the financial and strategic interest of the Partnership;
10.2. Any material discontinuance, addition, or transfer
outside of the Washington Circle area of the District of Columbia of (a) any
programs of undergraduate and graduate medical education sponsored or offered by
The George Washington University at the Hospital as of the Transfer Date; (b)
clinical programs conducted by the Medical Faculty Associates at the Hospital as
of the Transfer Date; (c) Clinical Support Positions, as defined in the Academic
Affiliation Agreement; and (d) Centers of Emphasis;
10.3. Selection of Clinical Chiefs as provided in the Academic
Affiliation Agreement; and
10.4. Discontinuance of operation of an acute care hospital in
the Washington Circle area of the District of Columbia.
11. Confidential and Proprietary Information.
11.1. Confidential Information. Each Partner recognizes that
due to the nature of this Agreement, it will have access to information of a
proprietary nature owned by the Partnership, another Partner, and/or affiliates
of another Partner including but not limited to documents and programs (whether
or not completed or in use), operating manuals or similar materials that
constitute nonmedical systems, policies and procedures, and methods of doing
business, administrative, advertising or marketing techniques, financial
affairs, and other proprietary information (collectively, the "Confidential
Information"). Consequently, each Partner acknowledges and agrees that the
Partnership, the other Partner(s) and the affiliates of the other Partner(s)
respectively, have a proprietary interest in such Confidential Information and
that all such information constitutes confidential and proprietary information
and/or trade secret property of the respective party or parties. Each Partner
hereby expressly and knowingly waives any and all right, title and interest in
and to other parties' Confidential Information and agrees to return all copies
of Confidential Information to the provider(s) of such information at the
Partner's expense upon the expiration or earlier termination of this Agreement;
provided, however, that any Confidential Information developed and owned by
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the Partnership shall continue to be available for use by the Partners and their
affiliates following the expiration or termination of this Agreement.
Notwithstanding the foregoing, any Confidential Information used by the Partners
after the expiration or termination of this Agreement shall remain confidential
and proprietary and shall not be shown or disclosed to Persons other than the
Partner's affiliates without the prior written consent of the party or parties
furnishing the Confidential Information or except: (1) as required in
governmental filings or judicial, administrative or arbitration proceedings, or
(2) as otherwise required by law (including but not limited to in response to a
subpoena from a court or authorized governmental agency) (hereinafter the
"Confidentiality Exception"). All provider cost and rate information and other
comparable data deemed by a party to be proprietary shall only be furnished to
the other party or parties and their representatives (or, if deemed by counsel
to be appropriate in connection with compliance with applicable antitrust or
similar laws, to a neutral party), who shall not release it to any other Person
without a consent of the party or parties owning such data or unless a
Confidentiality Exception applies.
Each Partner further acknowledges and agrees that the Partnership,
other Partner(s), and other Partner(s)' affiliates, respectively, are entitled
to prevent their respective competitors from obtaining and utilizing the
Confidential Information. Therefore, each Partner agrees to hold the
Confidential Information in strictest confidence and to not disclose such
information or allow such information to be disclosed, directly or indirectly,
during and after the Term of this Agreement to any Person or entity other than
those Persons or entities who are legal and financial advisors or employees of
or are otherwise affiliated with the Partnership, a Partner or an affiliate of a
Partner, or the Partnership's affiliates (collectively, the "Partnership
Representatives") on a need to know basis, without the prior written consent of
the party or parties furnishing Confidential Information unless a
Confidentiality Exception applies. Further, each Partner shall require its
Partnership Representatives that receive the Confidential Information to abide
by the terms of this Section 11.1. Neither the Partnership, a Partner nor any of
the Partnership Representatives shall use Confidential Information other than in
connection with the business of the Partnership or a Partner's performance of
its obligations under this Agreement until expiration or earlier termination of
this Agreement. In addition, after the expiration or earlier termination of this
Agreement, no Partner shall disclose to anyone any Confidential Information
obtained by the Partner from the Partnership, a Partner or an affiliate of a
Partner, other than upon the prior written consent of the party or parties
providing the Confidential Information unless a Confidentiality Exception
applies.
11.2. The restrictions set forth in Section 11.1 above shall
not apply to any information which becomes publicly known through no fault of
the Partners and their affiliates which received or was given access to such
information by the other party or parties.
12. Rights and Duties of the Partners.
12.1. Indemnification.
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12.1.1. Actions by Third Persons. To the extent and
in the manner permitted by the laws of the District of Columbia, the Partnership
shall indemnify, defend and hold harmless any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by, or in the right of the Partnership, by reason of the
fact that such Person is or was a Director, trustee, officer, employee or agent
of the Partnership, or is or was a Partner (including the General Partner in its
role as Tax Matters Partner), or an officer, director, trustee, employee or
agent of such Partner, or is or was serving at the request of the Partnership as
a director, officer, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise against
expenses (including but not limited to attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Person in
connection with such action, suit or proceeding (i) if such Person acted in good
faith and in a manner such Person reasonably believed to be in, or not opposed
to, the best interests of the Partnership, (ii) if the acts or omissions forming
the basis for such allegation were appropriately authorized by the Partnership,
and (iii) if, with respect to any criminal action or proceeding, such Person had
no reasonable cause to believe the conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the Person did not act in good faith and in a manner which such
Person reasonably believed to be in or not opposed to, the best interests of the
Partnership and, with respect to any criminal action or proceeding, had
reasonable cause to believe that conduct was unlawful. Indemnification shall not
be permitted if a Partner has been adjudged liable for personal benefits
improperly received, willful misconduct, recklessness, or gross negligence with
respect to the business of the Partnership.
12.1.2. Determination. Any indemnification under the
provisions of Section 12.1.1 of this Agreement, unless ordered by a court, shall
be made available to the Director, trustee, Partnership only as authorized in
the specific case following a specific determination that indemnification of the
Director, trustee, Partner, officer, employee or agent is proper under the
circumstances because such Person has met the applicable standard of conduct set
forth in Section 12.1.1 of this Agreement. Such determination shall be made:
(a) by the Partners by the vote of a
majority in Percentage Interest consisting of Partners who were not parties to
such action, suit or proceeding; or
(b) if the disinterested Partners so
direct, by independent legal counsel in a written opinion.
12.1.3. Expense Advances. Expenses incurred by an
officer of the Partnership or Parties in defending a civil or criminal action,
suit or proceeding may be paid by the Partnership in advance of the final
disposition of such action, suit or proceeding, determined on a case-by-case
basis, if the action, suit or proceeding arises from the performance by such
officer or Partner of Partnership duties; and upon receipt of an
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undertaking by or on behalf of such officer or Partner to repay such amount if
it shall ultimately be determined that such officer or Partner is not entitled
to be indemnified by the Partnership as authorized by the provisions of this
Section 12. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Partners deem appropriate.
12.1.4. Insurance. The Partnership may, to the full
extent permitted by the laws of the District of Columbia, but only to such
extent as may be determined by the Partners, purchase and maintain insurance on
behalf of any Person who is or was a Director, trustee, officer, employee or
agent of the Partnership, or is or was a Partner or an officer, director,
employee or agent of such Partner, or is or was serving at the request of the
Partnership as a partner, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against and incurred by such Person in
any such capacity or arising out of such Person's status as such, whether or not
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Section 12.
12.1.5. Continuation of Indemnification. The
indemnification and advancement of expenses provided by or granted pursuant to
this Section 12 shall continue as to a Person who has ceased to be a Director,
trustee, Partner, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a Person.
12.2. Partnership Business Opportunities.
12.2.1. New Business Opportunities. The Partnership
shall have the first right to acquire, manage or operate any opportunity of a
Partner to engage in any healthcare or related activity within the Partnership's
Service Area which is not conducted by a Partner immediately after the Transfer
Date. Accordingly, if a Partner is presented such an opportunity, such Partner
shall offer the Partnership the first right to acquire, manage or operate such
activity. An offer under this Section 12.2.1 shall be based on a summary term
sheet prepared in good faith by the presenting Partner, or by the General
Partner if the opportunity was first made available to the Partnership. Such
term sheet shall describe the nature of the opportunity, its relationship to the
activities of the Partnership, and any other material terms and conditions of
the opportunity relevant to its consideration by the Partnership. The Partners
intend that a business opportunity of the Partnership may be pursued in whatever
manner best accomplishes the purposes of the Partnership including, but not
limited to, having ownership of assets used in the business in the name of one
or more Partners. The Partnership shall determine whether to act on the business
opportunity in accordance with Section 7.3(i). If the Partnership does not state
in writing to the proposing Partner that it is willing to acquire, manage or
operate the business opportunity within thirty (30) days after the Partnership's
receipt of the offer, or if the Partnership does not proceed with all due
diligence to consummate the transaction, either Partner may negotiate for and
acquire, manage or operate such business opportunity.
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12.2.2. Remedies. In the event of an actual or
threatened breach by the Partnership or a Partner of this Section 12.2 the
nonbreaching Partner or its affected affiliate shall be entitled to an
injunction restraining the breaching party from the prohibited conduct.
Notwithstanding any other provision of this Agreement, if a court of competent
jurisdiction should hold that the scope (geographic or otherwise) of the
foregoing covenants is unreasonable, then, to the extent permitted by law, the
court may prescribe a scope (geographic or otherwise) that is reasonable and
judicially enforceable. Nothing herein stated shall be construed as prohibiting
a nonbreaching Partner or any affiliate thereof from pursuing any other remedies
available to it for such breach or threatened breach, including, the recovery of
damages from any breaching party.
12.3. Covenant Not to Compete. As of the Transfer Date, the
Partners and their affiliates shall not, without the prior written consent of
the Partnership, own or operate, directly or indirectly, any healthcare related
business which may be competitive with the activities of the Partnership within
the Partnership's Service Area; provided, however, that this Section 12.3 shall
not apply to (i) the operations of the Partners and their respective affiliates
in place as of the Effective Date of this Agreement that are listed on Exhibit
12.3 hereto or (ii) the particular opportunities presented to the Partnership
under Section 12.2.1, which the Partnership has chosen not to pursue. To the
extent that any portion of the provisions of this Section 12.3 shall be deemed
by a court of competent jurisdiction to exceed the time or geographic limits or
any other limitations permitted by applicable law, then this Section 12.3 shall
be deemed reformed to the maximum extent permitted by applicable law.
12.4. Partnership Assets. The credit and assets of the
Partnership shall be used solely for the benefit of the Partnership and shall
not otherwise be used to further the personal gain of any of the Partners. Title
to and ownership of all of the assets of the Partnership shall at all times be
vested in and stand in the name of the Partnership. The General Partner shall
execute, file and record such documents which may become necessary to reflect
the Partnership's ownership of such property in such public offices as may be
required.
12.5 MFA Activities. The provisions of Sections 12.2 and 12.3
shall not apply to activities of the Medical Faculty Associates relating to the
type of health care services provided by the members of the Medical Faculty
Associates in their respective offices as of the Effective Date.
13. Transfer of Partnership Interests.
13.1. Restrictions on Transfer.
13.1.1. Restrictions on Transfers by UHS and the
University. Neither UHS nor the University may Transfer their respective
Interests in the Partnership unless the Partner desiring to Transfer its
Interest under this Section 13.1 obtains the prior written approval of the
nontransferring Partner, which approval shall not be unreasonably withheld.
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13.1.2. Limitations on Rights of Assignees. Transfers
of interests in the Partnership under this Section 13.1 shall be, and any
Person(s) acquiring a Transferred Interest (an "Assignee") shall acquire such
Transferred Interest in the Partnership, subject to all of the terms and
conditions of this Agreement. A Transfer of an Interest in the Partnership shall
not relieve the transferring Partner of its duties and obligations to the
Partnership unless the General Partner agrees in writing to release the
transferring Partner. An Assignee shall not be admitted as a Partner (a
"Substitute Partner") unless all the requirements of Section 13.3 of this
Agreement are satisfied. Absent admission as a Substitute Partner, Assignees
shall be permitted to receive only the share of the Partnership's income, gain,
deductions, credits and losses to which the transferring Partner was previously
entitled.
13.2. New Partners. New Partners may be admitted to the
Partnership upon satisfaction of the requirements of Sections 3.2 and 13.3 of
this Agreement and subject to the provisions of Section 7.3. As new Partners are
admitted, any adjustment in the Percentage Interests of existing Partners shall
be made as mutually agreed.
13.3. Substitution of Assignees and Admission of New Partners.
Subject to Section 13.1 hereof relating to Transfers of Interests and Section
13.2 hereof relating to the admission of new Partners, an Assignee may become a
Substitute Partner with all the rights and liabilities of any Partner under this
Agreement, and new Partners may be admitted to Partnership, if and only if (i)
the Assignee or new Partner executes and agrees to be bound by this Agreement in
the place of the transferring Partner or as a new Partner, as applicable; (ii)
in the event such Assignee is a corporation, partnership (general or limited),
trust or limited liability company, such Assignee or new Partner provides the
General Partner with evidence satisfactory to counsel for the Partnership of
such Assignee's or new Partner's authority to become a Partner under the terms
and conditions of this Agreement; (iii) the assignment or admission instruments,
documents or statements, if any, are prepared, executed, acknowledged, filed,
published and delivered as required by the Act or otherwise; (iv) the Assignee
or new Partner pays or obligates itself to pay any and all reasonable costs and
expenses, including attorneys' fees, incurred by the Partnership in connection
with such substitution or admission; and (v) the Partners and the Partnership
Board approve the admission of the new Partner, or the Assignee as a Substitute
Partner, under Section 7.3(c) of this Agreement, which approval shall not be
unreasonably withheld. The admission of such Assignee or new Partner shall not
cause a dissolution of the Partnership. In addition, this Agreement and Exhibit
1.34 hereto shall be amended to reflect the admission of new Partners and
reflect the reallocation of the existing Partners' respective Percentage
Interests in the Partnership without the necessity of any existing Partner's
signature.
13.4. Effective Date of Assignment or Admission. For the
purpose of allocating Partnership income, gains, deductions, credits and losses,
an Assignee or new Partner shall be treated as a Partner on such date as consent
of the nontransferring Partners to such Transfer as is required under this
Section 13 is obtained.
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14. Dissolution, Liquidation and Termination of the Partnership.
14.1. Limitations. The Partnership may be dissolved,
liquidated and terminated only pursuant to the provisions of this Section 14.
The Partners hereby irrevocably waive any and all other rights they may have to
cause a dissolution of the Partnership or a sale or partition of any or all of
its assets.
14.2. Exclusive Causes. The following events, and only the
following events, shall cause the Partnership to be dissolved, liquidated and
terminated pursuant to the provisions of this Section 14.2:
14.2.1. Expiration. The expiration of the Term of the
Partnership.
14.2.2. Consent. The consent of all Partners to
dissolve the Partnership.
14.2.3. Unlawful Event. The occurrence of any event
which makes it unlawful for the business of the Partnership to be carried on,
whether by the Partners or the Partnership.
14.2.4. Sale of All or Substantially All of
Partnership Assets. The sale of all or substantially all of the assets of the
Partnership and the receipt of all cash proceeds from such sale.
14.2.5. Failure to Execute and Close. The failure of
any of the parties to this Agreement to execute any of the Ancillary Agreements
or to close the transactions contemplated by Section 3 of this Agreement by
December 31, 1997 or by such later date mutually agreed to by the parties.
14.2.6. Expiration or Termination of Ground Lease.
The termination of the Ground Lease between the University and the Partnership
due to expiration or a breach by the University, unless otherwise approved by
the Partners.
14.2.7. Bankruptcy of a Partner. The Bankruptcy of
any Partner unless the Partnership is continued by the consent of the other
Partner(s).
14.2.8. Bankruptcy of the Partnership. The Bankruptcy
of the Partnership.
14.2.9. Judicial Dissolution. A decree of dissolution
rendered by a court of competent jurisdiction pursuant to District of Columbia
Code Section 41-482.
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14.2.10. Breach by a Partner. A material breach of
this Agreement by any Partner; provided, however, that the Partner alleged to
have breached this Agreement shall have twenty (20) business days to cure such
alleged breach to the satisfaction of a majority in Percentage Interest of the
nonbreaching Partners.
14.3. Liquidating Trustee; Continuation of Business. Upon the
dissolution of the Partnership, the General Partner shall act as the
"Liquidating Trustee" of the Partnership. During the period of the dissolution,
liquidation and termination of the Partnership pursuant to the provisions of
this Section 14, the business of the Partnership may be continued by the
Liquidating Trustee to the extent necessary to allow an orderly winding up of
the Partnership's affairs, including without limitation, the liquidation of the
Partnership pursuant to the provisions of Section 14.4 below.
14.4. Liquidation of Partnership. Upon the dissolution of the
Partnership pursuant to the provisions of Section 14.2 and within a reasonable
time thereafter, the . Liquidating Trustee shall wind up the Partnership's
business and affairs in the following manner.
14.4.1. The Liquidating Trustee shall obtain and
furnish an accounting with respect to all Partnership accounts and the Capital
Accounts of each Partner and with respect to the Partnership's assets and
liabilities and its operations from the date of the last financial statements of
the Partnership to the date of its liquidation.
14.4.2. To the extent the Liquidating Trustee deems
appropriate, all material, equipment, and real and personal property of the
Partnership of any kind or nature may be sold.
14.4.3. The Liquidating Trustee shall pay the
expenses of liquidation and the debts of the Partnership from the Partnership's
assets, including debts owing to the Partners in the order of priority provided
by law, except the claims of secured creditors whose obligations will be assumed
or otherwise transferred upon the liquidation or Distribution of the
Partnership's assets.
14.4.4. The Liquidating Trustee shall ascertain the
fair market value by appraisal or other reasonable means of all assets of the
Partnership not sold and intended to be distributed to the Partners in
connection with the liquidation, and each Partner's Capital Account shall be
charged or credited, as the case may be, as if such properly had been sold at
such fair market value and the gain or loss realized thereby had been allocated
to and among the Partners.
14.4.5. Remaining proceeds shall be paid to the
Partners who have net positive balances in their Capital Accounts, as determined
after taking into account all Capital
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Account adjustments for the Partnership's Fiscal Year, until all such balances
have been reduced to zero or, in the event proceeds are insufficient, pro rata
on account thereof.
14.4.6. In the event any proceeds remain after
Distributions pursuant to Sections 14.4.1 through 14.4.5 above, such proceeds
shall be distributed to the Partners according to their respective Percentage
Interests.
15. Miscellaneous.
15.1. Notices. Any and all notices or demands in connection
with this Agreement shall be in writing and served either personally, by
certified mail, return receipt requested, or by Federal Express or other
reputable overnight courier, at the respective addresses set forth opposite the
signatures of the Partners, or to such other addresses as any of them shall from
time to time designate. If served personally, service shall be conclusively
deemed made at the time of such service. If served by certified mail, service
shall be conclusively deemed made on the fourth business day after the deposit
thereof in the United States mail, postage prepaid, addressed pursuant to the
provisions of this Section 15.1. If served by Federal Express or other overnight
reputable courier, service shall be conclusively deemed made on the day after
transmittal thereof.
15.2. Hospital Name. Pursuant to the Trademark License
Agreement between the University and the Partnership, the Partnership shall
continue to use the name "The George Washington University Hospital" in
connection with the Hospital so long as it continues to operate the Hospital in
the Washington Circle area of the District of Columbia unless such name is
required to be changed to comply with applicable law. The University agrees that
it shall not license the name "The George Washington University Hospital" to, or
use the name in connection with, any entity, facility, or service without the
consent of the Partnership.
15.3. Attorneys' Fees. Should any party retain counsel to
enforce any of the provisions herein or protect its interest in any matter
arising under this Agreement, or to recover damages by reason of any alleged
breach of any provision of this Agreement, the losing party in any action
pursued in a court of competent jurisdiction (the formality of which is not
legally contested) shall pay to the prevailing party all costs, damages, and
expenses incurred by the prevailing party, including, without limitation,
attorneys' fees and costs incurred in connection therewith.
15.4. Interpretation. No provision of this Agreement is to be
interpreted for or against any party because that party or that party's legal
representative drafted such provision.
15.5. Waiver. No breach of any provision of this Agreement may
be, waived except in writing. Waiver of any one breach of any provision of this
Agreement shall not be
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deemed to be a waiver of any other breach of the same or any other provision of
this Agreement.
15.6. Severability. In the event that any covenant, condition
or other provision contained in this Agreement is held to be invalid, void or
illegal by any court of competent jurisdiction, the same shall be deemed
severable from the remainder of this Agreement and shall in no way affect,
impair or invalidate any other covenant, condition or other provision contained
in this Agreement so long as severance of the invalid provision does not
materially alter the rights and obligations of the parties. If such condition,
covenant or other provision shall be deemed invalid due to its scope or breadth,
such covenant, condition or other provision shall be deemed valid to the extent
of the scope or breadth permitted by law.
15.7. Additional Documents. In addition to the documents and
instruments to be delivered as provided in this Agreement, each of the parties
shall, from time to time at the request of the other parties, execute and
deliver to the other parties or the Partnership such other documents and shall
take such other action as may be reasonably required to carry out more
effectively the terms of this Agreement.
15.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the District of Columbia.
15.9. Headings. Paragraph titles or captions contained in this
Agreement are inserted as a matter of convenience and for reference purposes
only, and in no way define, limit, interpret, extend or describe the scope of
this Agreement or any provision of this Agreement.
15.10. Survival of Obligations. All indemnities, and
continuing agreements and covenants contained or referred to in this Agreement
shall survive the execution and delivery of this Agreement, and it shall not be
a condition precedent to any indemnity set forth herein that the indemnified
party shall have made any payment on account of any claim, loss, damage,
obligation, liability, deficiency, penalty, cost or expense indemnified against
herein.
15.11. Amendment. The Partners acknowledge that the exhibits
to this Agreement will be finalized subsequent to the execution of this
Agreement. Subject to the provisions of Section 7.3, this Agreement may be
amended by the Partnership Board.
15.12. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
representatives, successors and permitted assigns.
15.13. Third Party Beneficiaries. Nothing in this Agreement
shall be for the benefit of anyone not a party to this Agreement.
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15.14. Incorporation. All exhibits attached to this Agreement
are incorporated herein by this reference.
15.15. Execution in Counterparts. This Agreement may be
executed in two (2) or more counterparts, each of which shall be an original
instrument, but all of which shall constitute one and the same agreement.
15.16. Entire Agreement. This Agreement, including any
exhibits, supersedes all previous written or oral agreements between the parties
hereto with respect to the subject matter hereof. Furthermore, upon the
attachment of the last exhibit to be attached to this Agreement, the Letter of
Intent, dated March 25, 1997, between the University and Universal Health
Services, Inc., shall be terminated and the parties thereto shall have no
further rights or obligations thereunder.
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<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
UHS of D.C., INC
367 South Gulph Road By: ________________________
P.O. Box 61558 Richard C. Wright
King of Prussia, PA 19046-0958 Its: ________________________
Vice President
THE GEORGE WASHINGTON UNIVERSITY
2121 I Street, N.W. By: ________________________
Suite 701, Rice Hall Louis H. Katz
Washington, DC 20052 Its: Vice President and Treasurer
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<PAGE> 37
EXHIBIT 1.35
PERCENTAGE INTERESTS OF THE PARTNERS
GENERAL PARTNER
- ---------------
Name Interest
---- --------
UHS 1%
LIMITED PARTNERS
- ----------------
Name Interest
---- --------
UHS 79%
The University 20%
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EXHIBIT 7.2.3
-------------
INITIAL BOARD OF DIRECTORS
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<PAGE> 1
EXHIBIT 10.3
Execution
Copy
CONTRIBUTION AGREEMENT
BETWEEN
THE GEORGE WASHINGTON UNIVERSITY
(A CONGRESSIONALLY CHARTERED INSTITUTION
IN THE DISTRICT OF COLUMBIA)
AND
DISTRICT HOSPITAL PARTNERS, L.P.
(A DISTRICT OF COLUMBIA LIMITED PARTNERSHIP)
DATED AS OF MAY 5, 1997
<PAGE> 2
TABLE OF CONTENTS
RECITALS: ................................................................ 1
ARTICLE I TRANSFER OF TRANSFEROR ASSETS ................................ 1
1.1. Transfer of Transferor Business ........................ 1
1.2. Consideration .......................................... 5
1.3. Adjustments ............................................ 6
1.4. Closing Date ........................................... 6
1.5. Action of the Parties .................................. 6
1.6. Items to be Delivered at the Closing ................... 7
1.7. Prorations ............................................. 10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TRANSFEROR ................. 10
2.1. Organization and Good Standing ......................... 10
2.2. Authority; Validity; No Breach ......................... 10
2.3. Extent of Assets ....................................... 11
2.4. Consents and Approvals ................................. 11
2.5. Financial Statements ................................... 11
2.6. Absence of Undisclosed Liabilities ..................... 12
2.7. Absence of Adverse Changes ............................. 12
2.8. Title to and Condition of Premises ..................... 12
2.9. Title to and Condition of Personal Property ............ 16
2.10. Intellectual Property .................................. 16
2.11. Contracts, Obligations and Commitments ................. 17
2.12. Inventory .............................................. 17
2.13. Employees .............................................. 17
2.14. Taxes .................................................. 19
2.15. Litigation or Claims ................................... 19
2.16. Insurance .............................................. 19
2.17. Licenses and Permits ................................... 20
2.18. Accreditation; Medicare and Medicaid; Third Party Payors 20
2.19. Medical Staff .......................................... 21
2.20. Hill-Burton Obligations ................................ 21
2.21. Motor Vehicles ......................................... 22
2.22. Compliance with Law .................................... 22
2.23. Brokers ................................................ 22
2.24. Accounts Receivable .................................... 22
2.25. Business and Transactions with Affiliates .............. 22
2.26. Solvency ............................................... 23
2.27. No Untrue or Inaccurate Representations or Warranties .. 23
2.28. Acts or Omissions of the Manager ....................... 24
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PARTNERSHIP AND THE GENERAL PARTNER ......................... 24
3.1. Organization; Good Standing ........................... 24
3.2. Authority, Validity; No Breach ........................ 24
3.3. Consents and Approvals ................................ 25
3.4. No Untrue or Inaccurate Representations or Warranties . 25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE GENERAL
PARTNER ..................................................... 25
4.1. Organization and Good Standing ........................ 26
4.2. Authority, Validity; No Breach ........................ 26
4.3. Consents and Approval ................................. 26
4.4. Affiliates ............................................ 26
4.5. Litigation ............................................ 26
4.6. No Untrue or Inaccurate Representations or Warranties . 27
ARTICLE V COVENANTS OF TRANSFEROR ..................................... 27
5.1. Access and Information; Inspections ................... 27
5.2. Notices ............................................... 27
5.3. Preserve Accuracy of Representations and Warranties ... 27
5.4. Conduct of Business ................................... 27
5.5. No Merger or Consolidation ............................ 28
5.6. WARN .................................................. 29
5.7. Benefit Plans of Transferor Employees ................. 29
5.8. Termination Cost Reports .............................. 29
5.9. Transferor's Efforts to Close ......................... 29
5.10. Notices to Lessees .................................... 29
5.11. Additional Insurance .................................. 30
5.12. Third Party Reimbursement/Recoveries .................. 30
5.13. Access Codes and Combinations ......................... 31
ARTICLE VI COVENANTS OF THE PARTNERSHIP ................................ 31
6.1. Assumption of Transferor Obligations .................. 31
6.2. Performance Under Agreements .......................... 31
6.3. Commitment to Charitable Mission ...................... 31
6.4. The Partnership's Efforts to Close .................... 32
6.5. Governmental Approvals ................................ 32
ARTICLE VII COVENANTS OF GENERAL PARTNER ................................ 32
7.1. Performance Under Agreements .......................... 32
7.2. Guaranty .............................................. 32
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ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
TRANSFEROR .................................................. 33
8.1. Warranties True and Correct ........................... 33
8.2. Signing of Instruments ................................ 33
8.3. Insurance ............................................. 33
8.4. Opinion of Counsel .................................... 33
8.5. [Intentionally Omitted] ............................... 33
8.6. Extraordinary Liabilities/Obligations ................. 33
8.7. No Action or Proceeding ............................... 33
8.8. Performance of Covenants .............................. 34
8.9. Consents, Approvals and Authorizations ................ 34
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
PARTNERSHIP ................................................. 34
9.1. Warranties True ....................................... 34
9.2. Corporate Approval .................................... 34
9.3. Consents, Approvals and Authorizations ................ 34
9.4. Signing of Instruments ................................ 35
9.5. Performance of Covenants .............................. 35
9.6. No Action or Proceeding ............................... 35
9.7. Due Diligence ......................................... 35
9.8. Opinions of Counsel ................................... 36
9.9. Exhibits .............................................. 36
9.10. ALTA Policies and Surveys ............................. 36
9.11. Bond Indebtedness ..................................... 36
ARTICLE X DESTRUCTION OF ASSETS; TERMINATION .......................... 36
10.1. Destruction of Assets ................................. 36
10.2. Termination ........................................... 37
10.3. Costs ................................................. 37
ARTICLE XI POST-CLOSING MATTERS ........................................ 37
11.1. Post-Closing Matters .................................. 37
11.2. Access to Books and Records ........................... 38
11.3. University Services ................................... 38
ARTICLE XII SURVIVAL AND INDEMNIFICATION ................................ 38
12.1. Survival of Representations; Indemnity Periods ........ 38
12.2. Transferor Indemnification ............................ 39
12.3. Partnership Indemnification ........................... 40
12.4. General Partner Indemnification ....................... 40
12.5. Indemnification Threshold ............................. 41
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<PAGE> 5
ARTICLE XIII EMPLOYEES ................................................... 41
ARTICLE XIV MISCELLANEOUS PROVISIONS .................................... 42
14.1. Further Assurances ................................... 42
14.2. Successors and Assigns ............................... 42
14.3. Governing Law ........................................ 42
14.4. Amendments ........................................... 42
14.5. Exhibits ............................................. 42
14.6. Notices .............................................. 42
14.7. Headings ............................................. 43
14.8. Confidentiality and Publicity ........................ 43
14.9. Fair Meaning ......................................... 43
14.10. Gender and Number .................................... 43
14.11. Third Party Beneficiary .............................. 44
14.12. Expenses and Attorney Fees ........................... 44
14.13. Counterparts ......................................... 44
14.14. Entire Agreement ..................................... 44
14.15. No Waiver ............................................ 44
14.16. Severability ......................................... 45
14.17. Arbitration .......................................... 45
14.18. Time is of the Essence ............................... 46
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<PAGE> 6
CONTRIBUTION AGREEMENT
This Contribution Agreement (the "Agreement") is made and entered into
as of the 5th day of May, 1997 (the "Effective Date"), by and among The George
Washington University, a congressionally chartered institution in the District
of Columbia ("Transferor"), District Hospital Partners, L.P., a District of
Columbia limited partnership (the "Partnership"), and UHS of D.C., Inc., a
Delaware corporation that is general partner of the Partnership (the "General
Partner.")
RECITALS:
A. Transferor engages in the business of delivering health care
services to the public through a variety of health care providers, facilities,
and systems. One of Transferor's health care providers is the acute care
hospital facility commonly known as The George Washington University Hospital
located at 901 23rd Street, N.W. in Washington, D.C. (the "Hospital" or the
"Transferor Business").
B. Transferor desires to contribute and transfer substantially all of
the non-cash assets and current liabilities used in the operation of the
Transferor Business, other than certain assets and liabilities specifically
excluded from the Transferor Business which shall be retained by Transferor, to
the Partnership in exchange for an interest as a limited partner in the
Partnership.
C. Other than certain assets and liabilities specifically excluded from
the Transferor Business, the Partnership desires to acquire the Transferor
Business from Transferor, upon the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for their mutual reliance, the parties hereto
agree as follows:
ARTICLE I
TRANSFER OF TRANSFEROR ASSETS
1.1. Transfer of Transferor Business. On the basis of the
representations and warranties of the parties and subject to the terms and
conditions set forth in this Agreement,
(a) On the Closing Date (as defined in Section 1.4),
Transferor shall assign, transfer, convey and deliver to the Partnership, and
the Partnership shall acquire, all of the assets, properties and businesses
owned by Transferor that are associated with or used in the operation of the
Transferor Business, as a going concern, of every kind and description, wherever
located, whether tangible or intangible, real, personal or mixed, as such assets
shall exist on the Closing Date, excluding the Excluded Assets (as defined in
Section 1.1(b) below),
<PAGE> 7
such transfer being deemed to be effective at the Effective Time (as defined in
Section 1.4), including, without limitation, the following assets, properties
and businesses (collectively, the "Assets"):
1. the following real estate:
a. a leasehold interest in the real property
comprising the Hospital site (the "Leased Real Estate") pursuant to that certain
Ground Lease between Transferor and the Partnership in the form of Exhibit
1.6(a)(9) attached hereto (the "Ground Lease);
b. a leasehold interest in all buildings,
improvements, other constructions, construction-in-progress and fixtures
(including the Hospital building) (collectively, the "Improvements") now or
hereafter located on the Leased Real Estate (the Leased Real Estate and
Improvements are hereinafter collectively referred to as the "Premises" and more
particularly described in Exhibit 1.1(a)(1)(b) attached hereto) pursuant to the
Ground Lease;
c. all of Transferor's rights as landlord, tenant or
subtenant under the leases described in Exhibits 2.8(b) (the "Real Estate
Leases");
2. all tangible personal property (collectively, the "Personal
Property") of every kind and nature, including without limitation, all
furniture, machinery, vehicles, owned or licensed computer systems, and
equipment, including, without limitation, the Personal Property listed in
Exhibit 1.1(a)(2) hereto;
3. all inventories of Transferor that are used in the
Transferor Business and other disposables which are existing as of the Closing
Date, with inventories recorded in the Transferor's inventory records designated
on Exhibit 1.1(a)(3) (the "Purchased Inventory");
4. all accounts receivable relating to the Transferor Business
except as set forth in Exhibit 1.1(a)(4);
5. all intangible property (collectively, the "Intangible
Property") of every kind and nature, including, without limitation, the
following:
a. all telephone numbers;
b. to the extent transferable, all licenses, permits,
certificates, franchises, registrations, authorizations, filings, consents,
accreditations, approvals and other indicia of authority issued to Transferor
relating to the operation of the Transferor Business as presently conducted by
Transferor, and relating to any renovation or construction on the Premises
(collectively, the "Licenses and Permits"), which Licenses and Permits are
listed in Exhibit 1.1(a)(5)(b) attached hereto;
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<PAGE> 8
c. all pending claims, proceeds or any other amounts
payable under any policy of insurance maintained by Transferor with respect to
destruction of, damage to or loss of use of any of the Assets;
d. only those advance payments, prepayments, prepaid
expenses, deposits and the like (the "Prepaids") which are existing as of the
Closing Date, including Utilities (subject to the prorations provided in Section
1.7 of this Agreement), which were made by Transferor solely with respect to
Transferor's operation of the Transferor Business and, with respect to which,
the General Partner determines that the assets created thereby are usable by and
transferable to the Partnership (the "Purchased Prepaids"), the current
categories and amounts of which are set forth in Exhibit 1.1(a)(5)(d);
e. Transferor's rights pursuant to the Personal
Property Leases (as defined in Section 2.9(b)), the Participation Agreements (as
defined in Section 1.1(c)(3), and the Contracts (as defined in Section 2.11
below);
f. Transferor's goodwill and general intangibles
associated with the Transferor Business;
g. to the extent assignable, all warranties,
guarantees and covenants not to compete with respect to any of the Transferor
Business as identified in Exhibit 1.1(a)(5)(g).
6. to the extent assignable, the original or true and correct
copies of all documents, books, records, forms and files relating to the Assets,
including, without limitation, the following:
a. patient and medical records and all other medical
and financial information regarding patients at the Transferor Business;
b. patient lists;
c. employment and personnel records relating to
Transferor Employees;
d. personnel policies and manuals, electronic data
processing materials, books of account, accounting books, financial records,
cost reports, journals and ledgers relating to the Transferor Business and
Transferor Employees;
e. all material, documents, and information relating
to the Premises, the Leased Personal Property, the Personal Property, the
Participation Agreements, and the Contracts, including, without limitation, the
originals of all of the leases, the Participation
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<PAGE> 9
Agreements, and Contracts, and copies of all title information (including but
not limited to all title insurance policies, commitments, acts of sale,
covenants, conditions, restrictions, leases, licenses, occupancy agreements,
easements, servitudes, and other items of record), all environmental studies,
reports and information, all property use and operational material, plans and
specifications, contracts, site plans, plats, surveys, zoning material,
correspondence, and governmental material (i.e., licenses, permits, notices, and
other matters with respect to governmental authorities), information and
notices.
7. all licenses or other rights to use patents, trademarks,
service marks, trade names or copyrights necessary to conduct or to continue the
Transferor Business as heretofore conducted, but excluding the names "The George
Washington University Hospital," "The George Washington University," "The George
Washington University Medical Center," and "The George Washington University
Medical Faculty Associates" except as set forth in Exhibit 2.11; and
8. other current non-cash assets reflected on the Final
Balance Sheet of the Transferor Business.
(b) Notwithstanding the foregoing, the Transferor assets
identified on Exhibit 1.1(b) (the "Excluded Assets") are not included in the
definition of "Assets" and shall not be transferred by Transferor to the
Partnership.
(c) On the Closing Date, Transferor shall assign, and the
Partnership shall assume and agree to discharge, the following liabilities and
obligations of Transferor and only the following liabilities and obligations
(collectively, the "Assumed Obligations"):
1. the obligations arising on or after the Closing
Date under the Personal Property Leases, as indicated on Exhibit 2.9(b) attached
hereto;
2. the obligations arising on or after the Closing
Date under the Contracts, as indicated on Exhibit 2.11 attached hereto;
3. the obligations arising on or after the Closing
Date under the participation agreements and provider agreements with third party
payers, listed on Exhibit 2.18(c) attached hereto (the "Participation
Agreements");
4. those open purchase orders which were entered into
by Transferor in the ordinary course of business with respect to the Transferor
Business before the Closing Date, committed purchases under which do not exceed
$25,000 for any one purchase order or $1,000,000 for all purchase orders and
which provide an obligation to purchase goods and services to be delivered
subsequent to the Closing Date, or any open purchase orders entered into by UHS
of Delaware, Inc. or its affiliate acting as manager of the Transferor
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<PAGE> 10
Business prior to the Closing Date pursuant to the Management Services Agreement
dated as of April 2, 1997 and attached hereto as Exhibit 1.1(c)(4) (the
"Manager");
5. all unpaid state, city and county personal and
real property taxes, if any, that are directly attributable to the Assets or the
Premises (the "Property Taxes") for periods on or after the Closing Date,
subject to the prorations provided in Section 1.7 of this Agreement;
6. all utilities being furnished to the Transferor
Business (the "Utilities") arising on or after the Closing Date, subject to the
prorations provided in Section 1.7 of this Agreement;
7. all liabilities and obligations arising from acts
or omissions on or after the Closing Date with respect to the Transferor
Employees, including, without limitation, costs associated with employee
severance and reductions in force and liability under collective bargaining
agreements;
8. all general and professional liability for claims
arising out of acts or omissions on or after the Closing Date;
9. all liability associated with the breach of any
contract or commitment by the Partnership; and
10. any other obligations and liabilities identified
in Exhibit 1.1(c)(10) attached hereto; and
11. other current liabilities reflected on the Final
Balance Sheet of the Transferor Business except as set forth on Exhibit
1.1(c)(11) attached hereto.
(d) Notwithstanding the foregoing provisions of Section 1.1(c)
above, Transferor shall retain and not assign and the Partnership shall not
assume and shall not be liable for any other liability or obligation of
Transferor other than the Assumed Obligations ("Excluded Liabilities").
1.2. Consideration.
The aggregate consideration to the Transferor for the Assets
shall consist of:
(a) the Assumed Obligations;
(b) a twenty percent (20%) limited partnership interest in the
Partnership, subject to the adjustments in Section 1.3, and which interest in
the Partnership provides Transferor with the additional rights and obligations
set forth in the Agreement of Limited
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<PAGE> 11
Partnership of District Hospital Partners, L.P. (the "Partnership Agreement"),
in substantially the form attached as Exhibit 1.2(b) hereto; and
(c) additional rights and obligations under the Ancillary
Agreements (as defined in Section 1.6(a), including academic support under the
Academic Affiliation Agreement.
1.3. Adjustments. The Net Working Capital associated with the Assets
shall be adjusted at Closing to the extent that Net Working Capital, as
reflected in the final balance sheet of Transferor with respect to the
Transferor Business prepared as of the Closing Date (the "Final Balance Sheet"),
is greater than $21,000,000 or less than $19,000,000. The Partnership shall
engage an independent accountant to perform an audit of Net Working Capital. If
Net Working Capital, as reflected in the Final Balance Sheet, is less than
$21,000,000 and greater than $19,000,000, there shall be no adjustment. If Net
Working Capital, as reflected in the Final Balance Sheet, is less than
$19,000,000, then Transferor shall pay to the Partnership the difference in
cash. If Net Working Capital, as reflected in the Final Balance Sheet, is
greater than $21,000,000, then Partnership shall pay to Transferor the
difference in cash. For purposes of this Section 1.3, "Net Working Capital"
shall mean the difference between current assets of the Transferor Business to
be contributed to Partnership (which consists of (i) accounts receivable (but
not accounts receivable under medical training program affiliation agreements
which as of January 31, 1997 were $2,166,030), (ii) other, and (iii) inventory))
and the current liabilities of the Transferor Business to be assumed by the
Partnership (which consists of (i) accounts payable and (ii) accrued expenses
(but not accrued salary and benefits under medical training program affiliation
agreements which as of January 31, 1997 were $303,115)).
1.4. Closing Date. The consummation of the transaction contemplated by
this Agreement (the "Closing") shall take place at 9:00 a.m. on the fifth (5th)
business day after the date on which the District of Columbia Certificate of
Need is granted, at the offices of Ropes & Gray in the District of Columbia or
such other date, time and place as the parties shall mutually agree (the
"Closing Date"); provided that all conditions precedent and other matters
required to be completed as of the Closing Date have been or will be completed
on such date. The closing of the transaction shall be deemed to be effective as
between the parties as of 12:01 a.m. Eastern Time on the Closing Date (the
"Effective Time").
1.5. Action of the Parties. At the Closing, Transferor shall make the
contribution to, and Parties shall execute and deliver such documents,
agreements, instruments and certificates as may be necessary or reasonably
requested to effect the contribution and to evidence the satisfaction of the
conditions precedent to the obligations of the parties hereto (except to the
extent waived in writing by the appropriate party) including each of the
Ancillary Agreements. In addition, the General Partner shall cause the
Partnership to take all actions contemplated by this Agreement and shall execute
and deliver such other documents,
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<PAGE> 12
agreements, certificates and instruments as the parties hereto shall deem
reasonably necessary to consummate the transactions described herein.
1.6. Items to be Delivered at the Closing.
(a) Transferor. At or before the Closing, Transferor shall
execute and/or deliver or cause to be delivered to the Partnership the
following:
1. a favorable original certificate of good standing
issued by the District of Columbia Department of Consumer and Regulatory
Affairs;
2. copies of certificates of insurance or evidence of
self-insurance evidencing insurance coverage up to Closing as described in
Exhibit 2.16 attached hereto;
3. copies of certificates of insurance evidencing the
"tail" coverage (or self-insurance program) required to be maintained pursuant
to Section 5.11, as applicable;
4. an opinion of Transferor's counsel in
substantially the form attached hereto as Exhibit 9.8;
5. UCC-3 termination statements for any and all
financing statements filed with respect to the Assets;
6. the Partnership Agreement in substantially the
form attached hereto as Exhibit 1.2(b).
7. the Trademark License Agreement in substantially
the form attached hereto as Exhibit 1.6(a)(7) (the "Trademark License
Agreement")
8. the Parking Rental Agreement in substantially the
form attached hereto as Exhibit 1.6(a)(8) (the "Parking Rental Agreement");
9. the Ground Lease in substantially the form
attached hereto as Exhibit 1.6(a)(9) (the "Ground Lease") which lease shall
provide the Partnership with certain real property at a rental rate of One
Dollar ($1) per year for a term not to exceed fifty (50) years;
10. The University Services Agreement in
substantially the form attached hereto as Exhibit 1.6 (a)(10) (the "University
Services Agreement");
11. the GWUHP Hospital Provider Agreement in
substantially the form attached hereto as Exhibit 1.6(a)(11) (the "Provider
Agreement");
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12. the Academic Affiliation Agreement in
substantially the form attached hereto as Exhibit 1.6(a)(12) (the "Affiliation
Agreement");
13. a certificate of the President or the Vice
President and Treasurer of Transferor certifying to the Partnership, to the best
of the officer's knowledge, (i) the accuracy of the representations and
warranties set forth in Article II hereof and compliance with Transferor's
covenants set forth in this Agreement and (ii) that all consents and approvals
that Transferor is required to obtain from any person, entity, governmental body
or regulatory agency in connection with (a) the transfer of the Assets by
Transferor to the Partnership, and (b) the execution, delivery and performance
of the Trademark License Agreement, Ground Lease, Parking Rental Agreement,
University Services Agreement, Provider Agreement, and Affiliation Agreement
(collectively, the "Ancillary Agreements") or that are required in order to
prevent a breach or default under or termination of any material agreement which
is included as part of the Assets, have been obtained;
14. a certificate of the corporate Secretary of
Transferor certifying to the Partnership (i) the incumbency of the officers of
Transferor from the Effective Date to the Closing Date and bearing the authentic
signatures of all such officers who shall execute this Agreement and any
additional documents contemplated by this Agreement; (ii) as to the resolutions
of the Board of Trustees of Transferor authorizing (a) the transfer of the
Assets by Transferor to the Partnership, (b) the execution, delivery and
performance of this Agreement by Transferor, and (c) the execution, delivery and
performance of the Ancillary Agreements; (iii) that such resolutions have not
been amended or rescinded and remain in full force and effect; and (iv) the
current Charter and Bylaws of Transferor;
15. copies of all third party consents obtained in
connection with (i) the transfer of the Assets to the Partnership and (ii) the
execution, delivery and performance of the Ancillary Agreements, and a
certificate that any consents not obtained are not material or could not be
obtained through reasonable efforts;
16. copies of the documents executed and/or delivered
in connection with the transfer of the Assets by Transferor to the Partnership
which are identified in Exhibit 1.6(a)(16) attached hereto;
17. such other bills of sale, instruments of title,
certificates, consents, endorsements, assignments, assumptions and other
documents or instruments, in a form reasonably satisfactory to the Partnership,
as may be reasonably requested by the Partnership in order to transfer the
Assets of Transferor to the Partnership, to carry out the transaction
contemplated by this Agreement and to comply with the terms hereof.
(b) The Partnership. At or before the Closing, the Partnership
shall execute and/or deliver or cause to be delivered to Transferor the
following:
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1. a certificate of the General Partner acknowledging
receipt of the Assets and conferring an interest as a limited partner;
2. a certificate of the General Partner certifying to
the Transferor (i) the accuracy of the representations and warranties set forth
in Article III hereof and compliance with the Partnership's covenants set forth
in this Agreement and (ii) that all consents and approvals that are required
from any person, entity, governmental body or regulatory agency in connection
with the execution of their Agreement, the Ancillary Agreements, and the
Guaranty Agreement, and the consummation of the transaction contemplated by this
Agreement by the Partnership have been obtained;
3. a certificate of the corporate secretary of the
General Partner certifying to Transferor on behalf of the General Partner (i)
the incumbency of the officers of the General Partner from the Effective Date to
the Closing Date and bearing the authentic signatures of all such officers who
shall execute this Agreement and any additional documents contemplated by this
Agreement; and (ii) as to the resolutions of the Board of Directors of the
General Partner authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and that such minutes and
resolutions have not been amended or rescinded and remain in full force and
effect;
4. a favorable original certificate of status of the
Partnership issued by the District of Columbia Department of Consumer and
Regulatory Affairs;
5. the Management Services Agreement in the form of
Exhibit 1.1(c)(4) attached hereto (the "Management Services Agreement");
6. copies of certificates of insurance or evidence of
self-insurance evidencing insurance coverage from Closing of the types and in
amounts adequate to cover the properties and operations of the Transferor
Business, the Transferor, the Partnership, and the Assets and their respective
financial conditions against the risks involved in the Transferor Business and
the ownership of the Assets;
7. the Guaranty Agreement described in Section 7.2
hereof;
8. certificates of federal and all applicable state
or local tax good standing of the General Partner;
9. certificates of District of Columbia and federal
tax good standing of the Partnership;
10. Certificate of Incorporation and Bylaws of the
General Partner, in the form of Exhibit 1.6(b)(10) attached hereto;
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<PAGE> 15
11. such other instruments, certificates, consents or
other documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.7. Prorations. The parties shall prorate as of the Closing date the
rent, utilities and property taxes and other amounts payable pursuant to the
Personal Property Leases and contracts, so that the Partnership shall pay only
such obligations arising with respect to the period after the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRANSFEROR
The truth, accuracy and material completeness of Transferor's
representations, warranties and covenants contained in this Agreement, to the
best of Transferor's knowledge, shall be conditions precedent to the
Partnership's obligation to close under this Agreement; provided, however, that
as an inducement to the Partnership to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Transferor hereby
represents, warrants and covenants to the Partnership as to the following
matters, and, except as otherwise provided herein, shall be deemed to remake all
of the following representations, warranties and covenants as of the Closing
Date.
2.1. Organization and Good Standing Transferor is a congressionally
chartered corporation, duly organized, validly existing and in good standing
under the laws of the United States. Transferor has the full corporate power and
authority to own, lease and operate its properties and assets as presently
owned, leased and operated, to carry on its businesses as such businesses are
now being conducted and is duly qualified to transact business in each
jurisdiction in which the failure to so qualify would adversely affect its
businesses.
2.2. Authority; Validity; No Breach.
(a) Except as provided in Exhibit 2.2(a), Transferor has the
full right, power and authority, without the consent of any other person or
governmental entity, to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated
hereby. All corporate and other actions required to be taken by Transferor to
authorize the execution, delivery and performance of this Agreement, the
Ancillary Agreements, and all documents executed by it which are necessary to
give effect to this Agreement, the Ancillary Agreements, and all material
transactions contemplated hereby or therein have been duly and properly taken or
obtained or will be duly and properly taken or obtained by Transferor prior to
the Closing Date. No other corporate or other action on the part of the
Transferor is necessary to authorize the execution, delivery and performance of
this Agreement, the Ancillary Agreements, all documents necessary to give effect
to this Agreement, the Ancillary Agreements, and all material transactions
contemplated hereby.
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<PAGE> 16
(b) This Agreement is, and the Ancillary Agreements and other
documents to be delivered at Closing will be, the lawful, valid and legally
binding obligations of Transferor enforceable in accordance with their
respective terms. Except as set forth in Exhibit 2.2(b) attached hereto, the
execution and delivery of this Agreement and the Ancillary Agreements, and the
consummation of the transactions contemplated will not, with or without the
giving of notice and/or the passage of time: (a) violate or conflict in any
material respect with the Charter or Bylaws of Transferor or any provision of
law, statute, rule or regulation to which Transferor is subject; (b) violate or
conflict in any material respect with any judgment, order, writ or decree of any
court applicable to Transferor; (c) violate or conflict in any material respect
with any law or regulation applicable to Transferor; or (d) result in the
material breach or termination of any provision of, or create rights of
acceleration or constitute a default under, the terms of any indenture,
mortgage, deed of trust, contract, agreement or other instrument to which
Transferor is a party which result in the creation or imposition of any material
lien, privilege, charge or encumbrance upon any of the Assets.
2.3. Extent of Assets. The Assets include, without limitation, all of
the real (immovable) and personal (movable) property, intangible (incorporeal)
property, rights and other assets of every kind and nature whatsoever owned,
leased or used by Transferor in connection with the operation of the Transferor
Business prior to the Closing Date, excluding the Excluded Assets.
2.4. Consents and Approvals. Except as set forth in Exhibit 2.4 hereto,
no consent, approval, permit, waiver, authorization or other action of or by any
court, governmental or nongovernmental person or entity, is required in
connection with (a) the transfer of the Assets to the Partnership, or (b) the
execution, delivery or performance of this Agreement or the Ancillary Agreements
by Transferor.
2.5. Financial Statements. Attached hereto as Exhibit 2.5 are true and
complete copies of audited financial statements of Transferor, with respect to
the operation of The George Washington University Medical Center for the years
ended June 30, 1994, June 30, 1995 and June 30, 1996 (the "Audited Financial
Statements"), the unaudited balance sheets of Transferor, with respect to the
operation of the Transferor Business as of June 30, 1996 and January 31, 1997,
respectively, the unaudited income statements of Transferor, with respect to the
operation of the Transferor Business for the periods ended June 30, 1996 and
January 31, 1997, respectively and the unaudited cash flow statements with
respect to the operation of the Transferor Business for the periods ended June
30, 1996 and January 31, 1997, respectively (collectively the "Interim Financial
Reports"). In addition, Transferor shall provide to the Partnership, as promptly
as each becomes available prior to the Closing Date, all other Interim Financial
Reports with respect to the operation of the Transferor Business. The Audited
Financial Statements referred to in this Section 2.5 are and will be true,
complete and correct in all material respects and will present fairly and
accurately the financial condition of the Transferor Business and the results of
its operations at the dates and for the periods indicated
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<PAGE> 17
and will have been prepared in material conformity with generally accepted
accounting principles, applied consistently for the periods specified, at the
dates and for the periods indicated. Further, the Interim Financial Reports for
the periods ended June 30, 1996 and January 31, 1997 respectively accurately
reflect in all material respects the financial condition of the Transferor
Business as of their respective dates and the results of operations of the
Transferor Business for the periods indicated with reasonable reserves and
allowances. From and after the date of the Audited Financial Statements,
Transferor has not (and at Closing shall not have) made any changes in its
accounting methods or practices.
2.6. Absence of Undisclosed Liabilities. Except as set forth in Exhibit
2.6 attached hereto, the Assets are not subject to any material liens,
privileges, pledges, security interests, rights of first refusal, options,
encumbrances, liabilities or defects in title of any material nature, whether
absolute, accrued, contingent, asserted or, to Transferor's knowledge,
unasserted, or otherwise prior to the Closing Date.
2.7. Absence of Adverse Changes. Except as set forth in Exhibit 2.7
attached hereto, since January 31, 1997, there has not been any material adverse
change, and there is no fact, circumstance, event, occurrence, contingency or
condition that might reasonably be expected to result in a material adverse
change, whether or not in the ordinary course of business and whether or not
covered by insurance, in the working capital, financial condition, assets,
liabilities, reserves, business, operations or prospects of the Transferor
Business.
2.8. Title to and Condition of Premises.
(a) Exhibit 1.1(a)(1)(b) attached hereto sets forth a legal
description and the address of all real (immovable) property that constitutes a
part of the Premises and which is subject to the Ground Lease. Except as set
forth in a commitment for title insurance as revised on April 28, 1997 (the
"Title Report"), Transferor has good, clear, indefeasible, insurable and
marketable title in fee simple to (and full, undivided ownership interest in)
the Premises, which ownership, as of the Closing Date, will be free and clear of
any and all mortgages, deeds of trust, security interests, mechanics liens, or
encumbrances except as set forth in the Title Report. Except as provided in
Exhibit 1.1(a)(1)(b) attached hereto, there are no purchase contracts, options
or other material agreements of any kind whereby any person or entity will have
acquired or will have any basis to assert any material right, title or interest
in, or right to the possession, use, enjoyment or proceeds of any part or all of
the Premises.
(b) Exhibit 2.8(b) attached hereto sets forth an accurate and
complete list of all real property leases, subleases, options or commitments,
oral or written, pursuant to which Transferor is a lessor, lessee or sublessee
connected with the Transferor Business, including, without limitation, all
retail and office space leases connected with the Transferor Business
(collectively referred to as "The Real Estate Leases"). Exhibit 2.8(b) includes
the rent and security deposit, if any for each Real Estate Lease. Transferor has
provided the Partnership with complete and correct copies of all Real Estate
Leases. Except for the Real Estate Leases
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<PAGE> 18
listed in Exhibit 2.8 (b), there are no other leases of space within real
(immovable) property owned or leased by Transferor connected with the Transferor
Business.
Except as set forth in Exhibit 2.8(b): (i) the Real Estate
Leases have not been materially modified, amended or assigned, are legally
valid, binding and enforceable in accordance with their respective terms and are
in full force and effect; (ii) there are no material monetary defaults and no
material nonmonetary defaults by Transferor or, to the knowledge of Transferor,
any other party to the Real Estate Leases; (iii) Transferor has not received
notice of any material default, offset, counterclaim or defense under any of the
Real Estate Leases; (iv) no Real Estate Lease or any right granted in connection
therewith is subordinate to any mortgage, lien, privilege, or other material
encumbrance; and (v) no condition or event has occurred which with the passage
of time or the giving of notice or both would constitute a default or breach by
Transferor of the material terms of any of the Real Estate Leases.
(c) Except as set forth in Exhibit 2.8(c) and to the knowledge
of the Vice President and Treasurer, the Vice President of Medical Affairs, and
the Vice President and General Counsel of Transferor, Transferor has received no
unresolved, pending notice from any governmental agency of non-compliance with
applicable building, zoning, and other land use and similar laws, codes,
ordinances, rules, regulations and orders, including without limitation, the
Americans With Disabilities Act (other than environmental laws, which are more
particularly described below) (collectively, "Real Property Laws"), except for
any noncompliance that would not have a material adverse effect upon the Assets
or the use of the Assets for their current use.
(d) Transferor has all easements, servitudes, and rights of
way necessary for access to the Premises, and there exists reasonably
unrestricted access to a public street from each parcel of the Premises at and
over existing passageways, driveways, and access ways. All utilities serving the
Premises are, and shall be at Closing, adequate to operate any buildings
presently on the Premises, including the Improvements in the manner they are
currently operated. Except as described in Exhibit 2.8(d), no Improvements
forming part of the Premises: (i) encroach onto adjacent property; (ii) violate
set-back, building or side-lines; or (iii) encroach onto any easements or
servitudes located on the Premises.
(e) Neither the whole nor any portion of the Premises owned,
leased, occupied or used by Transferor has been condemned, requisitioned or
otherwise taken by any public authority (a "Public Taking"), and no notice of
any Public Taking has been received by Transferor with regard to the Premises.
To the knowledge of Transferor, no such Public Taking is threatened or
contemplated. No material public improvements have been ordered to be made
and/or which have not heretofore been assessed, and no special, general or other
assessments are pending or, to Transferor's knowledge, threatened against or
affecting the Premises.
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(f) All materials, documents, and information delivered by or
on behalf of Transferor relating or pertaining in any way to the Premises,
including but not limited to all material or information as to the ownership,
rights, use, or occupancy thereof, all title information thereto (including but
not limited to, all title insurance policies, commitments, deeds, covenants,
conditions, restrictions, leases, licenses, occupancy agreements, easements and
other items of record), all environmental studies, reports and information, all
property use and operational material, plans and specifications, contracts, site
plans, plats, surveys, zoning material, correspondence with landlords or
governmental authorities, and governmental material, information and notices
regarding or relating in any way to any of such Premises are in all material
respects accurate and complete copies of such information and documents.
(g) [intentionally omitted]
(h) (1) Except as identified in Exhibit 2.8(h):
(i) Transferor has previously complied, and
is currently complying, in all material respects with all federal, state and
local environmental statutes, laws, ordinances, orders, rules, regulations and
moratoria, including, without limitation, the Clean Air Act, as amended ("CAA");
the Safe Drinking Water Act, as amended ("SDWA"); the Resource Conservation and
Recovery Act, as amended ("RCRA"); the Hazardous Material Transportation Act, as
amended ("HMTA"); the Occupational Safety and Health Act of 1970, as amended
("OSHA"); the Toxic Substances Control Act ("TSCA"); the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act of 1986, as amended ("CERCLA");
analogous statutes of the District of Columbia, as amended; and all other
similar and applicable laws, ordinances, orders, rules, regulations or moratoria
(collectively "Environmental Laws") as they apply to the Premises. Transferor
has not received any notice alleging any material noncompliance with or
potential liability pursuant to any of such Environmental Laws or any
environmental permits issued to Transferor with respect to the Premises.
(ii) No medical wastes or hazardous wastes,
as defined in Subtitle C of RCRA or under applicable District of Columbia or
state law, and no hazardous substances, as defined in CERCLA or under applicable
District of Columbia or state law, and no hazardous materials, as defined by
HMTA or under applicable District of Columbia or state law, and no toxic or
hazardous air or water pollutants, as defined in CAA, CWA, SDWA, TSCA or any
other toxic, infectious or noxious substances and/or any waste or recycled
products thereof (as such substances are defined by Environmental Laws
(collectively "Hazardous Substances")) have ever been transported, generated,
treated, used, stored, spilled, leaked, or disposed of by Transferor in
connection with the Transferor Business or, any prior owners, operators or
lessees of the Premises, on the Premises (which for purposes of this Section
shall include, without limitation, the air above and all surface and subsurface
soil and water) or at any location in the immediate area of the Premises, except
as in compliance with law or as would not have a material adverse environmental
effect.
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<PAGE> 20
(iii) There has not been in the past, nor is
there now occurring on the Premises any release or threatened release, as those
terms are defined in Environmental Laws, of any Hazardous Substances from any
source, except as in compliance with law or as would not have a material adverse
environmental effect. Further, there are no Hazardous Substances,
polychlorinated biphenyls ("PCBs"), asbestos, radon, chemicals, or other
conditions or uses of the Premises or property in its vicinity, whether natural
or man-made, which pose a present or potential threat of damage to the health of
persons, to property, to natural resources or to the environment, except as in
compliance with law or as would not have a material adverse environmental
effect. No underground storage tanks, as defined in Environmental Laws, are
present on or under the Premises, and no such tanks were previously situated on
or under, or abandoned or removed on or from, the Premises.
(iv) Transferor does not have any material
liability, responsibility or obligation, whether fixed, unliquidated, absolute,
contingent or otherwise, under or pursuant to any Environmental Laws or pursuant
to any common law rights relating to Hazardous Substances in connection with the
Premises including, without limitation, any material liability, responsibility
or obligation to any person, entity or governmental authority for fines,
violations, penalties, personal injury, damages or awards, or for investigation,
expense, removal, or remedial action to effect compliance with or discharge any
duty, obligation or claim under any such laws or regulations ("Environmental
Claims"), and Transferor has no reason to believe that any such Environmental
Claims exist or may be brought or threatened in connection with the Premises,
except as would not have a material adverse effect.
(v) Neither Transferor nor any prior owners
or operators or lessees of the Premises, has handled or disposed of, transported
or arranged for the transportation or disposal of any Hazardous Substances, in
any manner, which may form the basis for any present or future claim, demand or
action seeking investigation, response, removal, remedial actions or material
expense on the Premises or any body of water (including surface or subsurface
waters) at, under or in the vicinity of the Premises, except as in compliance
with law or as would not have a material adverse environmental effect. Neither
Transferor nor any prior owners or operators or lessees of the Premises has ever
sent, arranged for disposal or treatment, arranged with a transporter for
transport for disposal or treatment, transported, or accepted for transport any
Hazardous Substances from the Premises to a facility, site or location, which,
pursuant to CERCLA or any Environmental Law, (a) has been placed or is proposed
to be placed, on the National Priorities List (as such term is defined in
CERCLA), or any analogous state cleanup list, or (b) which is subject to a
claim, administrative order or other demand or request to take removal or
remedial action by any person, entity or governmental authority.
(2) To the extent that they contain findings material
to the Transferor Business, Exhibit 2.8(h) identifies all environmental audits,
investigations or assessments with respect to the Premises or occupational
health studies undertaken by or on behalf of the
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<PAGE> 21
Transferor Business or at the request or order of any governmental agencies with
respect to the Transferor Business, or the results of groundwater, surface
water, air and soil testing, underground storage tank tests, building material
or paint testing, and known written communications with federal, state or local
governments regarding Environmental Laws and/or OSHA matters relating to the
Premises, their operations or the individuals employed at or by Transferor in
connection with the Premises.
2.9. Title to and Condition of Personal Property.
(a) Transferor has, and on the Closing Date, will have, good,
clear, indefeasible, insurable and marketable title to and ownership of all the
Personal Property, including, without limitation, the Personal Property
identified in Exhibit 1.1(a)(2) attached hereto. Except as set forth on Exhibit
2.9(a) attached hereto, none of the Personal Property is subject to, as of the
Closing Date, any material security interest, mortgage, pledge, lien, privilege,
right of first refusal, option, liability, covenant, charge or encumbrance of a
material nature.
(b) Exhibit 2.9(b) attached to this Agreement sets forth an
accurate and complete list of all leases of personal property to which
Transferor is a party (the "Personal Property Leases"). Transferor has provided
the Partnership with complete and correct copies of all Personal Property
Leases. Except as set forth in Exhibit 2.9(b) attached hereto: (i) the Personal
Property Leases have not been modified, amended or assigned, are legally valid,
binding and enforceable in accordance with their respective terms and are in
full force and effect; (ii) there are no monetary defaults and no material
nonmonetary defaults by Transferor or, to Transferor's knowledge, any other
party to the Personal Property Leases; (iii) Transferor has not received notice
of any material default, offset, counterclaim or defense under any Personal
Property Leases; and (iv) no condition or event has occurred which with the
passage of time or the giving of notice or both would constitute a default or
breach by Transferor of the terms of any Personal Property Leases.
(c) There are no material defects in or materially unsafe
conditions with respect to the Personal Property and Transferor has no knowledge
of any facts which would make the Personal Property unsuitable for the uses for
which the respective items of Personal Property are intended.
2.10. Intellectual Property. A true and complete list of all
intellectual property is included in Exhibit 2.11 attached hereto. Transferor
owns or possesses adequate licenses or other rights to use all such intellectual
property, and no rights thereto have been granted to others by Transferor.
Except as set forth in Exhibit 2.11 attached hereto, no patents, trademarks,
service marks, trade names or copyrights are necessary to conduct or to continue
the Transferor Business as heretofore conducted (except the name "The George
Washington University Hospital," the use of which is subject to the Trademark
License Agreement). Subject to the Trademark License Agreement, Transferor's use
of the Assets does not infringe
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<PAGE> 22
upon or otherwise violate the rights of others, and none of the intellectual
property is being infringed upon by others.
2.11. Contracts, Obligations and Commitments. Exhibit 2.11 attached
hereto sets forth an accurate and complete list of all of the contracts which
are currently in effect with respect to the construction, renovation, ownership,
servicing, maintenance, occupancy and/or operation of the Assets (collectively,
the "Contracts"). (Notwithstanding the foregoing sentence, the Partnership
acknowledges that some of the Contracts also relate to businesses which are not
part of the Transferor Business (e.g. the Medical Faculty Associates) and that
Transferor and the Partnership will have to revise such Contracts accordingly.)
Transferor has provided the Partnership with complete and correct copies of all
such contracts. Except for the Contracts listed in Exhibit 2.11, the Personal
Property Leases listed in Exhibit 2.9(b), the Participation Agreements listed in
Exhibit 2.18(c) and the purchase orders described in Section 1.1(c)(4), there
are no other material contracts or other arrangements to which Transferor is a
party or under which goods, equipment or services are provided, leased or
rendered, in any material degree, to the Premises (or any part thereof) or the
Assets. Except as set forth in Exhibit 2.11: (i) none of the Contracts has been
materially modified, pledged, assigned or amended, and all of the Contracts are
legally valid, binding and enforceable in accordance with their respective terms
and are in full force and effect; (ii) there are no defaults by Transferor, or
to the knowledge of Transferor, any other party to the Contracts, (iii)
Transferor has not received notice of any default, offset, counterclaim or
defense under any Contract; and (iv) no condition or event has occurred which
with the passage of time or the giving of notice or both would constitute a
default or breach by Transferor of the terms of any Contract.
2.12. Inventory. Except as provided in Exhibit 2.12, all Purchased
Inventory, as set forth in Exhibit 1.1(a)(3), is valued on Transferor's books at
the lower of cost or market value, on a first-in first-out basis, and contains
no material amounts that are not salable, of good and merchantable quality, and
not obsolete and usable for the purposes intended in the ordinary course of
business. All Purchased Inventory disposed of subsequent to January 31, 1997
have been disposed of only in the ordinary course of business and at prices and
under terms that are normal and consistent with past practice. All of the
Purchased Inventory and supplies are, and at the Closing will be, maintained in
such quantities as are appropriate for hospitals of the size of and with the
services offered by the Transferor Business, and at the Closing, shall be
approximately in the quantities that exist as of the Effective Date.
2.13. Employees.
(a) Exhibit 2.13(a) attached to this Agreement contains a
current, correct and complete list of the names and current hourly wage, monthly
salary and other compensation of all employees of Transferor working in the
Transferor Business (i.e., only Hospital employees) (collectively, the
"Transferor Employees"). Except as set forth in Exhibit 2.13(a), Transferor is
not a party to any oral (express or implied) or written: (i)
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<PAGE> 23
employment agreement, (ii) consulting agreement, (iii) independent contractor
agreement with any individual or entity with respect to the Transferor Business
or (iv) agreement that contains any severance or termination pay obligations
with respect to Transferor Employees.
(b) Except as set forth in Exhibit 2.13(b), as of the Closing
Date, all vacation pay, holiday pay, short or long-term disability,
reimbursement of expenses, tuition reimbursement, commissions, compensation for
absences due to jury duty and funeral leave, paid time off, wages, salaries,
bonuses, sick pay, extended sick leave, insurance benefits, or other employee
benefits or reimbursements with regard to any current or former Transferor
Employee to which such Employee is legally entitled will have been paid by
Transferor.
(c) Exhibit 2.13(c) sets forth each of Transferor's pension
and retirement plans (except for Social Security), medical, hospitalization,
vision, dental, life, disability and other similar benefit plans, deferred
compensation plan, other similar plan, severance plan or policy, and each other
similar performance, bonus, incentive or benefit plan, trust, fund, arrangement,
policy, agreement or understanding, policy manual or employment handbook with
respect to the Transferor Employees (collectively, the "Benefits Plans"). Except
as set forth in Exhibit 2.13(c), Transferor is not in default under any Benefit
Plan, and each has been administered in accordance with its terms.
(d) Exhibit 2.13(d), attached hereto, sets forth each of
Transferor's collective bargaining agreements with respect to Transferor
Employees. Except as set forth in Exhibit 2.13(d), no Transferor Employee or
group of employees is represented by any significant labor union or organization
and there has not been any significant labor union organizing activity at the
Transferor Business. Except as set forth in Exhibit 2.13(d), there is no labor
dispute, work stoppage, strike, investigation, written grievance report,
arbitration, claim or other labor relations problem (collectively, "Labor
Proceeding") pending or, to Transferor's knowledge, threatened, between
Transferor and any Transferor Employee, nor have any discharges, terminations,
or, to Transferor's knowledge, incidents occurred which would form the basis for
any material claim of discrimination against Transferor with respect to the
Transferor Business.
(e) None of the management personnel of the Transferor
Business nor any group of Transferor Employees has given notice of intent to
terminate his, her or its employment with Transferor.
(f) In conducting the Transferor Business, Transferor has
materially complied with and is currently complying in all material respects
with, and Transferor has not received any notice of noncompliance with, any and
all applicable laws relating to the employment of labor including, without
limitation, those laws relating to wages, hours, equal employment, occupational
safety and health, workers' compensation, unemployment insurance, collective
bargaining, affirmative action and the payment and withholding of social
security and other taxes, except as set forth in Exhibit 2.13(f) attached
hereto. Except as set
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forth in Exhibit 2.13(f), Transferor has withheld all amounts required by law or
agreement to be withheld from the wages or salaries of Transferor Employees, and
Transferor is not liable for any material arrears of any tax or penalties for
failure to comply with the foregoing. Transferor has, as of the Closing, made
all filings required under the foregoing laws with respect to Transferor
Employees.
(g) Except as set forth in Exhibit 2.13(g) attached hereto,
Transferor has fulfilled all of its obligations under the minimum funding
standards of the Employee Retirement Income Security Act, as amended ("ERISA"),
and the Code, with respect to each Employee Pension Benefit Plan (as defined in
Section 3(2) of ERISA ("Plan")) applicable to Transferor Employees and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code with respect thereto.
2.14. Taxes. Except as set forth in Exhibit 2.14 attached hereto, all
federal, state, county and other tax returns and payments (including unclaimed
property returns) required to be filed or paid by or on behalf of, or with
respect to Transferor and the Assets have been duly and timely filed and paid,
or will be filed and paid (within the time periods required by law) by
Transferor on or before the Closing Date. There are no tax liens on any of the
Assets and no basis exists for the imposition of any such liens. The accrual for
taxes reflected in the Balance Sheets is in the aggregate adequate to cover any
and all federal, state, local or foreign tax liabilities (whether or not
disputed) of Transferor for the period ended on the date thereof and all prior
periods. Except as set forth in Exhibit 2.14 attached hereto, Transferor has not
had, and does not currently have, any dispute with any taxing authority as to
taxes of any nature which affects the subject matter of this Agreement.
2.15. Litigation or Claims. Except as set forth in Exhibit 2.15
attached hereto (said matters set forth in Exhibit 2.15 being collectively
referred to herein as "Pending Litigation"), Transferor is not engaged in, or a
party to or, to Transferor's knowledge, threatened with any suit, action,
proceeding, inquiry, enforcement action, investigation, material claim or demand
or legal, administrative arbitration or other method of settling disputes or
disagreements relating to the Transferor Business or the Assets, and Transferor
does not know, anticipate or have notice of any basis for any such action
relating to the Transferor Business or the Assets in any material degree.
Transferor has not received notice of any investigation, threatened or
contemplated, by any federal or state governmental authority or agency, that
remains unresolved, involving the Assets or operation of the Transferor
Business. None of the Pending Litigation has created a lien, privilege, or a
claim therefor against the Assets. Set forth in Exhibit 2.15 is a complete and
accurate description of each outstanding order, writ, injunction or decree of
any court, arbitrator, government or governmental agency against or affecting
the Assets.
2.16. Insurance. The properties and operations of the Transferor
Business, including the Assets, that are of an insurable nature and are of a
character usually insured by similar businesses, have been continuously insured
by Transferor since the date of their acquisition by
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Transferor, with the types and amounts of insurance that are adequate to protect
Transferor, the Assets and their respective financial conditions against the
risks involved in the Transferor Business and ownership of the Assets, either
through the purchase of insurance from a third party insurance company or
through a self-insurance trust established by Transferor. Exhibit 2.16 attached
hereto sets forth a complete and accurate list of all insurance policies
currently held by Transferor with respect to the Assets and any self-insurance
trust. Except as set forth on Exhibit 2.16, such insurance policies are in full
force and effect. Transferor is not delinquent with respect to any premium
payments thereon nor is Transferor in default or breach with respect to any
material provision contained in any such insurance policies. Transferor has not
received, and Transferor has no knowledge of, any notice or request, formal or
informal, from any insurance company identifying any material defects in the
Assets that would adversely affect the insurability of the Assets. Transferor
has not been refused any insurance, nor has its coverage been limited by an
insurance carrier to which it has applied for insurance.
2.17. Licenses and Permits. Exhibit 1.1(a)(5)(b) attached hereto sets
forth a current, materially complete and materially accurate list of all
current, unexpired Licenses and Permits issued to Transferor in connection with
the Transferor Business, including the expiration dates thereof, if any. True
and correct copies of the Licenses and Permits have previously been delivered to
the Partnership by Transferor. Except as set forth in Exhibit 2.17, Transferor
has all licenses, permits and franchises required by law or governmental
regulations from all applicable federal, state and local authorities and any
other regulatory agencies necessary or proper in order to own and/or lease the
Assets and to conduct and operate the Transferor Business as they are now being
conducted. No notice from any authority in respect to the threatened or pending
revocation, termination, suspension or material limitation of any of the
Licenses or Permits has been received by Transferor, nor is Transferor aware of
the proposed or threatened issuance of any such notice. There is no basis known
to Transferor for any such action that would have a material adverse effect upon
the Assets or upon Transferor's right to conduct and operate the Assets as they
are presently conducted and operated. The Transferor Business is licensed for an
aggregate of five hundred one (501) beds. Transferor has previously delivered to
the Partnership, true, correct and complete copies of any state licensing survey
reports received by the Transferor Business in the two (2) year period prior to
the Closing Date, as well as any statements of deficiencies and plans of
correction in connection with such reports. Transferor has taken reasonable
steps to correct any such deficiencies and a description of any uncorrected
deficiency is set forth in Exhibit 2.17 attached hereto.
2.18. Accreditation; Medicare and Medicaid; Third Party Payors.
(a) The Transferor Business is currently accredited by the
Joint Commission on Accreditation of Healthcare Organizations (the "JCAHO").
Transferor has previously delivered to the Partnership true, correct and
complete copies of the Transferor Business's most recent JCAHO accreditation
survey report and deficiency list, if any. Transferor has
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taken reasonable steps to correct any such deficiencies and a description of any
uncorrected deficiency is set forth in Exhibit 2.18(a) attached hereto.
(b) The Transferor Business is certified for participation in
the Medicare and Medicaid programs, and is a party to valid Participation
Agreements for payment by Medicare and Medicaid, which agreements are in full
force and effect. Without limiting the generality of the foregoing, the
facilities, equipment, staffing and operations of the Transferor Business
materially satisfy all conditions of Medicare and Medicaid participation.
Transferor has previously delivered to the Partnership, true, correct and
complete copies of the Transferor Business's most recent Medicare and Medicaid
certification survey reports, including any statements of deficiencies and plans
of correction. Transferor has taken reasonable steps to correct any such
deficiencies and a description of any uncorrected deficiency is set forth in
Exhibit 2.18(b) attached hereto. A true and correct copy of each of such
agreements has been previously delivered to the Partnership by Transferor. The
Transferor has not received notice of pending, threatened or possible
investigation by, or loss of participation in, the Medicare and Medicaid
programs, except as set forth in Exhibit 2.18(b).
(c) Exhibit 2.18(c) sets forth an accurate, complete and
current list of all Participation Agreements with health maintenance
organizations, insurance programs, any other Participation Agreements with third
party payors and all agreements with preferred provider organization with
respect to the Transferor Business. Transferor has previously delivered to the
Partnership true and correct copies of all such agreements listed in Exhibit
2.18(c).
(d) Except as set forth in Exhibit 2.18(d) attached to this
Agreement, Transferor has timely filed or caused to be timely filed, and as to
reports due after the Closing shall timely file, all cost reports and other
material reports of every kind whatsoever required by law or by written
contracts to have been filed or made with respect to the purchase of services of
the Transferor Businesses by third party payors prior to the Closing.
2.19. Medical Staff. Except as set forth in Exhibit 2.19 attached
hereto, there are no pending or, to Transferor's knowledge, threatened appeals,
challenges, disciplinary or corrective actions, or disputes involving applicants
to the medical staff of the Transferor Business, current members of the medical
staff or affiliated health professionals.
2.20. Hill-Burton Obligations. Except as set forth in Exhibit 2.20
attached hereto, Transferor has not received any loans, grants or loan
guarantees pursuant to the Hospital Survey and Construction Act of 1946 (the
"Hill-Burton Act") or any similar statute or program, and the transactions
contemplated hereby will not result in any obligation on the Partnership to
repay any such loans, grants or loan guarantees or provide uncompensated care in
consideration thereof.
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2.21. Motor Vehicles. Exhibit 2.21 attached hereto, lists all motor
vehicles owned or leased by Transferor in connection with the Transferor
Business. As of the Closing Date, all action shall have been taken by Transferor
which is necessary to transfer title to such vehicles which are owned by
Transferor to the Partnership free and clear of all liens, privileges, security
interests, and encumbrances, except for filing the original certificate of title
and other required documents, if any, with the District of Columbia Department
of Motor Vehicles, Title Division. To Transferor's knowledge, all such vehicles
are properly licensed, registered and insured in accordance with applicable law.
2.22. Compliance with Law. To Transferor's knowledge and except as set
forth in Exhibit 2.22 attached hereto, as of the Closing Date, Transferor is in
compliance in all material respects relating to the Transferor Business with all
applicable laws, rules, regulations (including, without limitation, applicable
health care laws, rules and regulations, including those relating to the payment
or receipt of illegal remuneration, including 42 U.S.C. Section 1320a- 7b(b)
(the Medicare/Medicaid anti-kickback statute), 42 U.S.C. 1395nn (the Stark
Statute), 42 U.S.C. Section 1320a-7a, 42 U.S.C. Section 1320a-7b(a)-7b(c) and
any applicable District of Columbia law governing kickbacks and matters similar
to such federal statutes (collectively, the "Fraud and Abuse Laws")), ordinances
or orders of any court or federal, state, county, municipal or other
governmental department commission, board, bureau, agency or instrumentality,
and Transferor has not received any notice, written or otherwise, of
noncompliance with respect thereto, except where noncompliance would not have a
material adverse effect on the Transferor Business.
2.23. Brokers. Except as set forth in Exhibit 2.23, Transferor has not
entered into any contracts, agreements, arrangements or understandings with any
person or firm that could give rise to any claim for a broker's, finder's or
agent's fee or commission or any similar payment in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated by this Agreement.
2.24. Accounts Receivable. The Audited Financial Statements, Interim
Financial Reports and underlying schedules and other records provided by
Transferor to the Partnership regarding Transferor's accounts receivable with
respect to the Transferor Business, accurately reflect the amount due to
Transferor as of the date indicated on such schedules and records with
reasonable reserves and allowances. All outstanding accounts receivable arose in
the normal course of business. Transferor has no reason to believe such accounts
will not be collectible consistent with Transferor's past collection history.
2.25. Business and Transactions with Affiliates.
(a) Except as described in Exhibit 2.25 attached to this
Agreement and in Section 2.11 of this Agreement, no Affiliate (as defined in
Section 2.25(b) below) of Transferor, directly or indirectly:
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1. provides any services to Transferor, or is a
lessor, lessee or supplier to Transferor with respect to the Transferor
Business;
2. has any cause of action or other claim whatsoever
against or owes any amount to, or is owed any amount by, Transferor with respect
to the Transferor Business;
3. has any interest in or owns property or rights
used in the operation of the Transferor Business;
4. is a party to any Contract, Real Estate Lease or
other agreement, arrangement or commitment relating to the Assets or the
operation of the Transferor Business; or
5. received from or furnished to Transferor any goods
or services without adequate consideration with respect to the Transferor
Business.
(b) An "Affiliate" shall mean any person directly or
indirectly controlling, controlled by or under common control with a second
Person. For purposes of Section 2.25 (a), an "Affiliate" shall also specifically
include members of the Board of Trustees of Transferor, directors of Transferor
and officers of Transferor. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise. A "Person" shall mean any natural person, partnership, corporation,
limited liability company, association, trust or other legal entity.
2.26. Solvency. Transferor is not insolvent and will not be rendered
insolvent as a result of the transfer of the Assets from Transferor to the
Partnership or as a result of any of the transactions contemplated by this
Agreement. For purposes hereof, the term "solvency" means that: (i) the fair
salable value of Transferor's tangible assets, as applicable, is in excess of
the total amount of its liabilities (including for purposes of this definition
all liabilities, whether or not reflected on a balance sheet prepared in
accordance with generally accepted accounting principles, and whether direct or
indirect, fixed or contingent, secured or unsecured, and disputed or
undisputed); (ii) Transferor is able to pay its debts and obligations in the
ordinary course as they mature; and (iii) Transferor has capital sufficient to
carry on its businesses and all businesses in which it is about to engage.
2.27. No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of Transferor contained in this Agreement and the
Ancillary Agreements, and each exhibit, schedule, certificate or other written
statement delivered pursuant to this Agreement and the Ancillary Agreements, or
in connection with the transactions contemplated thereby, are materially
accurate, correct and complete, and do not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
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statements and information contained therein not misleading. There is no fact
that has a material adverse effect on the Transferor Business or the ability of
Transferor fully to perform this Agreement, the Ancillary Agreements and the
transactions contemplated thereby, that has not been set forth and described in
this Agreement, the Ancillary Agreements or in a certificate, exhibit or other
written statement furnished to the Partnership pursuant to this Agreement or the
Ancillary Agreements. Certain of the representations contained in this Agreement
require Transferor's "knowledge." For purposes of this Agreement, "knowledge"
shall mean the knowledge of Transferor after reasonable inquiry by a person in a
position of responsibility and with the authority to make such inquiry, and
Transferor shall be responsible for all facts which Transferor should have known
as a result of such reasonable inquiry.
2.28. Acts or Omissions of the Manager. In connection with its
representations and warranties herein, Transferor shall be entitled in all
instances, whether or not Transferor's "knowledge" is required, to exclude from
its representations and warranties any act or omission of the Manager up to the
Closing Date that results in such representation or warranty being inaccurate or
incomplete; provided, that "omission" shall include the failure of the Manager
to advise the Transferor of any fact, circumstance or condition arising before
or after the effective date of the Management Services Agreement of which the
Manager learns in its capacity as manager of the Transferor Business; provided
further, that the Manager is under no obligation to investigate or learn of any
fact, circumstance or condition for purposes of assuring the accuracy or
completeness of the Transferor's representations and warranties herein, there
being no effect on the Manager's obligations under the Management Services
Agreement by reason of the foregoing. For purposes of this Section 2.28, the
Manager's "learning" of a fact, circumstance or condition shall mean actual
knowledge of the fact, circumstance or condition brought to the attention of an
officer, employee, or agent of the Manager.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
AND THE GENERAL PARTNER
The Partnership hereby represents and warrants to Transferor, which
representations and warranties shall be true and correct on the Effective Date
and through and including the Closing Date, as follows:
3.1. Organization; Good Standing. The Partnership is a District of
Columbia limited partnership duly constituted and validly existing as a limited
partnership under the laws of the District of Columbia with requisite power and
authority to carry on its businesses.
3.2. Authority, Validity; No Breach. The Partnership has the full
right, power and legal authority, without the consent of any other person, to
execute, deliver and carry out the terms of this Agreement, the Ancillary
Agreements, and all documents and agreements necessary to give effect to the
provisions of this Agreement, and the Ancillary Agreements,
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and to consummate the transactions contemplated thereby. All actions required to
be taken by the Partnership to authorize the execution, delivery and performance
of this Agreement and the Ancillary Agreements, all documents executed by it
necessary to give effect to this Agreement and the Ancillary Agreements and all
transactions contemplated thereby have been duly and properly taken or obtained
or will be duly and properly taken or obtained by the Partnership prior to the
Closing. No other action on the part of the Partnership is necessary to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements, all documents necessary to give effect to this Agreement
and the Ancillary Agreements, and all transactions contemplated thereby.
This Agreement is, and the documents to be delivered at the Closing
will be, the lawful, valid and legally binding obligations of the Partnership
enforceable in accordance with their respective terms. The execution and
delivery of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated thereby will not, with or without the giving of
notice and/or the passage of time: (a) violate the Partnership Agreement, or any
provision of law, statute, rule or regulation to which the Partnership is
subject; (b) violate or conflict with any judgment, order, writ or decree of any
court applicable to the Partnership; or (c) violate or conflict in any material
respect with any law or regulation applicable to the Partnership.
3.3. Consents and Approvals. Except as set forth in Exhibit 3.3, no
consent, approval, permit, waiver, authorization or other action of or by any
court, governmental or nongovernmental person or entity, is required in
connection with the execution, delivery or performance of this Agreement or the
Ancillary Agreements by the Partnership.
3.4. No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of the Partnership contained in this Agreement
and the Ancillary Agreements, and each exhibit, schedule, certificate or other
written statement delivered pursuant to this Agreement and the Ancillary
Agreements, or in connection with the transactions contemplated thereby, are
accurate, correct and complete, and do not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements and information contained therein no misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER
The General Partner hereby represents and warrants to Transferor and
the Partnership, which representation and warranties shall be true and correct
on the Effective Date and through and including the Closing Date, as follows:
4.1. Organization and Good Standing. The General Partner is a Delaware
business corporation duly constituted and validly existing as a corporation
under the laws of the state of Delaware with requisite power and authority to
carry on its business.
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4.2. Authority, Validity; No Breach. The General Partner has the full
right, power and legal authority, without the consent of any other person, to
execute, deliver and carry out the terms of this Agreement, the Partnership
Agreement, the Management Agreement, and all documents and agreements necessary
to give effect to the provisions of this Agreement, the Partnership Agreement,
and the Management Agreement and to consummate the transactions contemplated
thereby. All actions required to be taken by the General Partner to authorize
the execution, deliver and performance of this Agreement, the Partnership
Agreement, and the Management Agreement, all documents executed by it necessary
to give effect to this Agreement, the Partnership Agreement and the Management
Agreement, and all transactions contemplated thereby have been duly and properly
taken or obtained or will be duly and properly taken or obtained by the General
Partner prior to the Closing. No other action on the part of the General Partner
is necessary to authorize the execution, deliver and performance of this
Agreement, all documents necessary to give effect to this Agreement, and all
transactions contemplated thereby.
This Agreement is, and the documents to be delivered by the General
Partner or its affiliate at the Closing will be, the lawful, valid and legally
binding obligations of the General Partner enforceable in accordance with their
respective terms. The execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby will not, with or without
the giving of notice and/or the passage of time: (a) violate the Partnership
Agreement, or any provision of law, statute, rule or regulation to which the
General Partner is subject; (b) violate or conflict with any judgment, order,
writ or decree or of any court applicable to the General Partner; or (c) violate
or conflict in any material respect with any law or regulation applicable to
General Partner.
4.3. Consents and Approval. No consent, approval, permit, waiver,
authorization or other action of or by any court, governmental or
nongovernmental person or entity, is required in connection with the execution ,
delivery or performance of this Agreement, the Partnership Agreement, or the
Management Agreement by the General Partnership.
4.4. Affiliates. The General Partner does not have any subsidiaries or
any investment constituting more than ten percent (10%) of the equity interests
in any other entity, nor is the General Partner a general or limited partner in
any partnership other than the Partnership.
4.5. Litigation. Except as set forth in Exhibit 4.5 attached hereto,
there is no pending or threatened litigation against the General Partner
affecting or which could reasonably be expected to affect the transactions
contemplated hereby.
4.6. No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of the General Partner contained in this
Agreement, the Partnership Agreement, and the Management Agreement, and each
exhibit, schedule, certificate or other written statement delivered pursuant to
this Agreement, the Partnership Agreement or the Management
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<PAGE> 32
Agreement, or in connection with the transactions contemplated thereby, are
accurate, correct and complete, and do not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements and information contained therein not misleading.
ARTICLE V
COVENANTS OF TRANSFEROR
5.1. Access and Information; Inspections. From the Effective Date until
the Closing, Transferor shall give to the General Partner and its
representatives access during normal business hours to Transferor's books,
accounts and records and all other relevant documents and information with
respect to the Assets as representatives of the General Partner may from time to
time request, all in such manner as to not unduly disrupt Transferor's normal
business activities. Such access may include consultations with the personnel of
Transferor. From the Effective Date until the Closing, Transferor shall make the
Premises, Real Estate, Leased Personal Property and the Personal Property
available for inspection by the General Partner and its representatives during
normal business hours. Further, the General Partner may, at its sole cost and
expense, unless otherwise agreed in writing, undertake environmental, mechanical
and structural surveys of the Premises and may examine all documents related to
Environmental Laws or related to any private or governmental agency which
licenses or certifies any operations or procedures at the Premises.
5.2. Notices. Prior to the Closing, Transferor shall notify the General
Partner in writing of (a) any material adverse change in the financial position,
earnings or prospects of the Transferor Business, (b) any governmental
complaints, investigations or hearings with respect to the Transferor Business
to which Transferor or any Contributing Affiliate is a party, and (c) any
material pending court actions to which Transferor or any Contributing Affiliate
is a party. For purposes of this Section 5.2 only, "material adverse change"
shall mean a change the adverse financial effect of which could be reasonably
construed to exceed one percent (1%) of net revenues of Transferor for its most
recent fiscal year.
5.3. Preserve Accuracy of Representations and Warranties. Transferor
shall refrain from any action or inaction that would render any representation
or warranty contained in Article II of this Agreement inaccurate as of the
Closing Date.
5.4. Conduct of Business. Prior to the Closing, except as otherwise
approved by the Partnership in writing, Transferor shall:
(a) operate the Transferor Business as presently operated and
only in the ordinary course of business, and consistent with such operation,
comply in all material respects with all applicable legal and contractual
obligations of Transferor;
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(b) preserve the Transferor Business materially intact and
preserve the goodwill of Transferor's suppliers, patients, physicians and others
with whom Transferor has business relationships with respect to the Transferor
Business;
(c) make and continue to make or cause to be made all repairs,
restoration, replacements and maintenance that may be reasonably necessary to
maintain the Assets in as good a condition as they exist as of the Effective
Date;
(d) not materially amend its Charter or Bylaws (and provide
notice of any such amendment to the Partnership);
(e) not renew, extend or materially amend the Real Estate
Leases, Participation Agreements, or Contracts which will be assigned to the
Partnership, other than on commercially reasonable terms, or do any act or omit
to do an act that would cause a material breach of or violation or default under
such Real Estate Leases, Participation Agreements, or Contracts;
(f) not enter into or extend beyond one (1) year any agreement
for employment in the Transferor Business with any Transferor Employee or
materially increase the compensation of any Transferor Employee in the
Transferor Business, other than increases in accordance with Transferor's
prevailing plans and procedures that do not cause compensation payable to such
Transferor Employee to exceed market rates; provided that Transferor Employees
may, prior to the Closing, seek employment with Transferor outside the
Transferor Business and Transferor may extend offers of employment or enter into
employment agreements with Transferor Employees for positions outside the
Transferor Business;
(g) not agree, whether in writing or otherwise, to do any of
the foregoing actions specified in items (d) through (f) above; and
(h) not change in any material respect any operating policies
or procedures, including those policies and procedures regarding uncompensated
care.
5.5. No Merger or Consolidation. Except as provided in Exhibit 5.5,
from the Effective Date until the Closing, Transferor shall not: (i) merge or
consolidate the Transferor Business with, or acquire (except in the ordinary
course of business) any of the assets of any other hospital-related corporation,
business or person, or dispose of (except in the ordinary course of business)
any of the Assets; and (ii) negotiate with any corporation, business or person
regarding any inquiries, proposals or offers relating to the acquisition of
assets of any other corporation, business or person, the disposition of the
Assets, or the merger or consolidation of Transferor with any corporation,
business or person. Transferor shall promptly notify the General Partner orally,
and confirm in writing, all relevant details relating
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to bona fide inquiries or proposals which Transferor may receive relating to any
of the matters referred to in this Section 5.5.
5.6. WARN. Transferor shall take any and all action which may be
necessary to comply with the terms and provisions of the Workers Adjustment and
Retraining Notification Act ("WARN") as a result of the transactions
contemplated by this Agreement and the Ancillary Agreements. All notices sent to
any Transferor Employee by Transferor regarding or in connection with such
transactions, including, without limitation, any notices sent to Transferor
Employees pursuant to the provisions of WARN, shall be subject to the prior
written approval of the Partnership which consent shall not be unreasonably
withheld, conditioned, or delayed.
5.7. Benefit Plans of Transferor Employees. Except as provided in
Exhibit 5.7 attached hereto, Transferor shall terminate effective as of the
Closing the active participation of all Transferor Employees in all of the
Benefit Plans covering such employees, and shall cause each Benefit Plan to
comply with all applicable laws, including but not limited to, the applicable
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the Health Insurance Portability and Accountability Act of 1996 in
connection with such termination.
5.8. Termination Cost Reports. Transferor shall file all Medicare,
Medicaid and any other termination cost reports required to be filed as a result
of the consummation of (i) the transfer of the Assets to the Partnership and
(ii) the transactions contemplated by this Agreement and the Ancillary
Agreements. All such termination cost reports shall be submitted to the
Partnership fifteen (15) days prior to filing for review by the Partnership and
shall be filed by Transferor in a manner that is materially consistent with (i)
prior cost reports filed by Transferor with respect to the Transferor Business,
and (ii) current laws, rules and regulations. Transferor shall bear all
liability for payment due, and shall retain in full all reimbursement received,
under such termination cost reports as described in Section 5.12.
5.9. Transferor's Efforts to Close. Transferor shall use its reasonable
commercial efforts to satisfy all of the conditions precedent set forth in
Articles VIII and IX to its or the Partnership's obligations under this
Agreement to the extent that Transferor's action or inaction can control or
influence the satisfaction of such conditions.
5.10. Notices to Lessees. Transferor shall prepare notice letters on
its letterhead in form(s) reasonably acceptable to the General Partner and shall
send such notice letters on the Closing Date to all lessees under the respective
Real Estate Leases in which Transferor is the lessor and which will be assigned
to the Partnership.
5.11. Additional Insurance. Prior to the Closing Date, Transferor shall
purchase "tail" insurance (or shall maintain a self-insurance plan satisfactory
to the General Partner in form and substance) for professional and general
liability so that the professional and general
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liability coverages of Transferor described in Exhibit 2.16 shall be (or
effectively be converted into) occurrence coverage to the reasonable
satisfaction of the General Partner; provided, however, in the event that the
professional and general liability coverages of Transferor described in said
Exhibit 2.16 are occurrence coverages that will provide the same coverage to
Transferor regardless of whether a claim against Transferor is made prior to or
after the Closing, thereby resulting in any such "tail" insurance to be
completely duplicative of already existing coverage, then Transferor shall have
no obligation to purchase such "tail" insurance. As applicable, a certificate of
insurance evidencing such "tail" coverage, self-insurance program or occurrence
coverage, as the case may be, shall be delivered to the General Partner at or
prior to the Closing.
5.12. Third Party Reimbursement/Recoveries.
(a) Transferor shall be responsible for every liability of
every kind or nature, known or unknown, to Medicare, Medicaid or other federal,
state or private health care program resulting, arising from or relating to
services rendered by the Transferor Business prior to the Closing, regardless of
when any such claim is made, including, without limitation, any Medicare
recapture and amounts for any claims for reimbursement to Transferor under
Medicare and Medicaid for which it is determined that Transferor is not
entitled, and for which the Partnership incurs liability or expense. Transferor,
in its own right, shall pay the full amount owed to the Partnership pursuant to
this Section 5.12 within ten (10) days of receipt from the General Partner of
reasonably satisfactory evidence of such liabilities upon final disposition
after all appeals have been exhausted. Transferor shall have the right to
control appeals or defense regarding the underlying Medicare, Medicaid or other
claims provided that Transferor, in its own right, timely reimburses the
Partnership pursuant to this Section 5.12. Transferor shall have the right, but
not the obligation, to control appeals or defense of the underlying claims and
the General Partner shall not compromise or settle any such claim without the
consent of Transferor; provided, however, that if Transferor delegates control
of an appeal or defense to the General Partner, Transferor shall retain the
obligation to indemnify the Partnership for any losses arising out of any such
claim including any losses resulting from a good faith settlement or compromise
of any such claim by the General Partner in the Transferor's consent. If it
shall later be determined that Transferor has reimbursed the Partnership for
liabilities pursuant to this Section 5.12 that are subsequently credited or
refunded to the Partnership by Medicare or Medicaid, the Partnership shall pay
to Transferor, in its own right, such excess amounts within ten (10) days of the
Partnership's receipt of reasonably satisfactory evidence of such credits or
refunds.
(b) Transferor shall promptly pay over to the Partnership all
cash receipts, if any, received by Transferor from Medicare, Medicaid or other
federal, state or private health care program with respect to services performed
by the Partnership on or after the Closing.
(c) Transferor shall be entitled to receive and retain all
receipts, reimbursements, or settlements of any amount or kind whatsoever,
including loss on
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depreciation, from or under Medicare, Medicaid, or any federal, state, or
private health care program, in connection with services rendered before the
Closing Date.
5.13. Access Codes and Combinations. Immediately following the Closing,
Transferor shall cooperate with and notify the Partnership with regard to all
source and access codes to computers which are in the possessions of Transferor
and which Transferor is licensed and authorized to divulge, combinations to
safe(s) and the location of keys to safe deposit boxes, if any, concerning the
Transferor Business.
ARTICLE VI
COVENANTS OF THE PARTNERSHIP
6.1. Assumption of Transferor Obligations. The Partnership acknowledges
and agrees that it shall assume as of the Closing Date the Assumed Obligations
described in Section 1.1(c), except for those Contracts, Leases and other
obligations identified in Exhibit 6.1(a) as Excluded Liabilities. The Assumed
Obligations shall be assumed by the Partnership pursuant to the terms of a
General Assignment, Bill of Sale and Assumption of Liabilities, in the form of
Exhibit 6.1(b) attached hereto, which has been approved as to form by the
General Partner.
6.2. Performance Under Agreements. After the Closing Date, the
Partnership shall in all respects perform, meet every obligation and make every
payment required under, the terms of the Academic Affiliation Agreement, the
University Services Agreement, the Ground Lease, the Trademark License
Agreement, the Parking Rental Agreement, and the Provider Agreement, as each has
been defined herein.
6.3. Commitment to Charitable Mission. The Partnership recognizes the
significant contribution Transferor has made to the local community through its
support of uncompensated and indigent care at the Hospital. Moreover, the
Partnership recognizes the Partnership's responsibilities as a Member of the
community to provide for the treatment of indigent patients. Without limiting
the foregoing, after the Closing Date, the Partnership shall operate the
Transferor Business in the following manner:
(a) for at least two (2) years following the Closing, the
Partnership shall maintain policies for uncompensated care consistent with
Transferor's uncompensated care policies that were in effect for the Transferor
Business for the two (2) fiscal years immediately preceding the Closing. The
provision of uncompensated care shall be in compliance with all local, state and
federal laws (including any "anti-dumping regulations"); and
(b) the Partnership will be a provider to the federal
Medicare/Medicaid programs and any similar program operated by the District of
Columbia.
6.4. The Partnership's Efforts to Close. The General Partner (on the
Partnership's behalf) shall use its reasonable commercial efforts to satisfy all
of the conditions precedent set
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forth in Articles VIII and IX to the Partnership's or Transferor's obligations
under this Agreement to the extent that the Partnership's action or inaction can
control or influence the satisfaction of such conditions.
6.5. Governmental Approvals. The Partnership shall timely file all
filings and notices required to be made by the Partnership pursuant to any
applicable federal or District of Columbia laws as a result of the transactions
contemplated by this Agreement. All filing fees imposed in connection with the
filing of such notices shall be borne by the Partnership. If the District of
Columbia Corporation Counsel or any other governmental entity denies, prohibits,
or enjoins any consents or approvals required for the consummation of the
transactions contemplated by this Agreement, the Partnership may elect to oppose
such objection, prohibition or injunction and Transferor shall assist the
General Partner with such opposition. In that event, the Closing shall be
extended for so long as such opposition is proceeding (but in no event later
than December 31, 1997, unless a later date is agreed to by the parties),
notwithstanding any other provision of the Agreement to the contrary. In the
event of a final, nonappealable adjudication by a court of competent
jurisdiction enjoining the transactions contemplated by this Agreement under the
laws of the United States or the District of Columbia or, in the event the
Partnership elects not to appeal such injunction or other governmental objection
or prohibition, then this Agreement may be cancelled by Transferor or the
Partnership by giving written notice to the other party and all parties shall
thereupon be released from any and all obligations and liabilities pursuant to
this Agreement.
ARTICLE VII
COVENANTS OF GENERAL PARTNER
7.1. Performance Under Agreements. After the Closing Date, the General
Partner shall in all respects perform, meet every obligation and make every
payment required under, the terms of the Partnership Agreement, and the
Management Agreement, as each has been defined herein. The General Partner
shall, within its authority under the terms of the Partnership Agreement, cause
the Partnership to fulfill each of its obligations under this Agreement and the
terms of the Academic Affiliation Agreement, the University Services Agreement,
the Ground Lease, the Trademark License Agreement, the Parking Rental Agreement,
and the Provider Agreement, as each has been defined herein.
7.2. Guaranty. The General Partner has obtained from Universal Health
Services, Inc., a guaranty agreement (the "Guaranty Agreement"), in the form
attached hereto as Exhibit 7.2, setting forth the unconditional guaranty of each
of the General Partner's obligations under the Partnership Agreement, and naming
the Transferor as a third party beneficiary.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRANSFEROR
Transferor's obligation to contribute the Assets to close the
transactions contemplated by this Agreement shall be, at the option of
Transferor, subject to the satisfaction of each of the following conditions
(which may be waived specifically in writing by Transferor in whole or in part)
at or prior to the Closing:
8.1. Warranties True and Correct. Each of the representations and
warranties made by the Partnership and set forth in this Agreement and in the
exhibits and schedules attached hereto shall be true and correct in all material
respects at and as of the Closing Date.
8.2. Signing of Instruments. The Partnership shall have executed all
documents and instruments required to be executed pursuant to the provisions of
this Agreement.
8.3. Insurance. The Partnership shall have obtained adequate insurance,
including but not limited to general liability, property and casualty,
automobile, malpractice, unemployment insurance, and workers' compensation, to
be in effect at Closing. The Partnership shall have furnished certificates of
insurance to Transferor.
8.4. Opinion of Counsel. Transferor shall have received the favorable
opinion of the General Partner's counsel dated the Closing Date, in
substantially the form attached hereto as Exhibit 8.4.
8.5. [Intentionally Omitted]
8.6. Extraordinary Liabilities/Obligations. The General Partner shall
not (i) be in receivership or dissolution, (ii) have made any assignment for the
benefit of creditors, (iii) have admitted in writing its inability to pay its
debts as they mature, (iv) have been adjudicated a bankrupt, or (v) have filed a
petition in voluntary bankruptcy, a petition or answer seeking reorganization,
or an arrangement with creditors under the federal bankruptcy law or any other
similar law or statute of the United States or any state, nor shall any such
petition have been filed against the General Partner.
8.7. No Action or Proceeding. On the Closing Date, no action or
proceeding shall be pending or threatened wherein an unfavorable judgment,
decree or order would, in Transferor's reasonable opinion, prevent or make
unfavorable the carrying out of this Agreement, or would cause the transactions
contemplated by this Agreement to be rescinded. In the event of the receipt of
any communication from any department or agency of government or any other
notice (a copy of which communication or notice shall be promptly delivered to
the Partnership) prior to the Closing with regard to the transactions
contemplated by this Agreement, which communication or notice shall in the
reasonable opinion of
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Transferor threaten such an action or proceeding, Transferor may terminate this
Agreement by giving thirty (30) days advance written notice to the General
Partner. During such thirty (30) day period, Transferor and the Partnership
shall meet and confer in good faith to attempt to resolve the issue which is the
subject of the action or proceeding. In the event the parties are unable to do
so, or fail to agree to extend the thirty (30) day period, Transferor may
terminate this Agreement by giving written notice to the General Partner and all
parties shall thereupon be released from any and all liability related to this
Agreement.
8.8. Performance of Covenants. The Partnership shall have performed all
of the obligations and complied with all of the covenants, agreements and
conditions required to be performed or complied with by it on or prior to the
Closing.
8.9. Consents, Approvals and Authorizations. The Partnership shall have
obtained all consents, approvals and authorizations of third parties necessary
or required for completion of the transactions contemplated by this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP
The Partnership's obligation to receive the contribution of the Assets,
to close the transactions contemplated by this Agreement shall be, at the option
of the General Partner, subject to the satisfaction of each of the following
conditions (which may be waived specifically in writing by the General Partner
in whole or in part) at or prior to the Closing:
9.1. Warranties True. Each of the representations and warranties made
by Transferor and set forth in this Agreement and in the exhibits and schedules
attached hereto shall be true and correct in all material respects at and as of
the Closing date.
9.2. Corporate Approval. The governing bodies of Transferor and General
Partner shall have approved the transactions contemplated by this Agreement.
9.3. Consents, Approvals and Authorizations. The parties shall have
obtained all consents, approvals and authorizations of third parties necessary
or required for completion of the transactions contemplated by this Agreement
including, without limitation, the certificate of need for change of ownership
and other approvals required by the District of Columbia and all necessary
consents to assignment of material contracts, leases or other rights and
obligations of Transferor with respect to the Transferor Business. The
Partnership shall have obtained assurances from all of the necessary
governmental authorities, in form and substance reasonably satisfactory to the
General Partner, that the Partnership will be granted all governmental
approvals, licenses, clearances, provider numbers and/or contracts necessary or
appropriate for the operation of the Transferor Business as previously operated
following the Closing. Further, the Partnership shall have received approvals,
consents or commitments
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from Medicare, Medicaid and the appropriate fiscal intermediary for its
continued participation in each and providing that there shall be no material
interruptions in program payments.
9.4. Signing of Instruments. Transferor shall have executed all
documents and instruments required to be executed pursuant to all of the
provisions of this Agreement.
9.5. Performance of Covenants. Transferor shall have performed all of
the obligations and complied with all of the covenants, agreements and
conditions required to be performed or complied with by Transferor on or prior
to the Closing.
9.6. No Action or Proceeding. On the Closing Date, no action or
proceeding shall be pending or threatened wherein an unfavorable judgment,
decree or order would, in the reasonable opinion of the General Partner, prevent
or make grossly unfavorable the carrying out of this Agreement, or would cause
the transactions contemplated by this Agreement to be rescinded, or would
materially and adversely affect the operation of the Transferor Business by the
Partnership following the Closing Date. In the event of the receipt of any
communication from any department or agency of government or any other notice (a
copy of which communication or notice shall be promptly delivered to the
Transferor) prior to the Closing with regard to the transactions contemplated by
this Agreement, which communication or notice shall in the reasonable opinion of
the General Partner threaten such an action or proceeding, the General Partner
may terminate this Agreement by giving thirty (30) days advance written notice
to Transferor. During such thirty (30) days period, Transferor and the
Partnership shall meet and confer in good faith to attempt to resolve the issue
which is the subject of the action or proceeding. In the event the parties are
unable to do so, or fail to agree to extend the thirty (30) day period, the
Partnership may terminate this Agreement by giving written notice to the
Transferor and all parties shall thereupon be released from any and all
liability related to this Agreement.
9.7. Due Diligence.
(a) The General Partner shall have performed due diligence
review of Transferor, the Assets and the Assumed Obligations, for the purpose of
determining, in its reasonable discretion, that the Assets, the Transferor
Business which are among the Assets, and the Assumed Obligations are acceptable
to the General Partner.
(b) The General Partner shall have completed its review of the
Premises and the Real Estate subject to Real Estate Leases (collectively the
"Real Estate") to determine: (i) whether the Real Estate is zoned to permit the
likes for which it is presently used; (ii) whether the continued use, occupancy
and operation of the Real Estate as currently used, occupied and operated
constitutes a nonconforming use under any Real Property Law and the continued
existence, use, occupancy and operation of the Real Estate, and whether the
right and ability to repair and/or rebuild any unit of the Premises in the event
of casualty, is dependent on any special permit, exception, approval or
variance; and (iii) whether the Premises constitutes
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valid, subdivided parcels in accordance with all applicable subdivisions laws,
statutes, ordinances and codes presently in effect. The General Partner shall
have received in final form structural, mechanical and environmental survey
results with respect to the Assets acceptable to the General Partner, to the
extent obtained by the General Partner pursuant to Section 5.1 above. A negative
determination by the General Partner with respect to the Real Estate above shall
only be a failure to meet a condition of closing under this Article IX to the
extent that such negative determination would have a material adverse effect
upon the Real Estate or upon the use of the Real Estate for their current use.
The General Partner's review shall be completed prior to May 31, 1997 (the "Due
Diligence Period"), and this condition shall be deemed satisfied or waived if
the General Partner does not request an extension of the Due Diligence Period.
9.8. Opinions of Counsel. The Partnership shall have received the
favorable opinions of Transferor's and of the General Partner's counsel dated
the Closing Date, in substantially the forms attached hereto as Exhibit 9.8 and
8.4, respectively.
9.9. Exhibits. Except as otherwise provided in Section 14.5 of this
Agreement. exhibits to this Agreement that have been added or updated after the
Effective Date, shall be acceptable to the General Partner or the Transferor, as
the case may be, in their reasonable discretion.
9.10. ALTA Policies and Surveys. The Partnership shall have obtained
the most current form of ALTA policy for the Partnership's leasehold interest in
the Premises and the Transferor's ownership interest in the Premises, together
with current surveys.
9.11. Bond Indebtedness. Transferor shall have canceled or defeased all
outstanding tax exempt debt issued in connection with the Assets or otherwise
encumbering the Assets.
ARTICLE X
DESTRUCTION OF ASSETS; TERMINATION
10.1. Destruction of Assets. If prior to or as of the Closing Date, the
Assets or properties relating to Transferor Business have suffered loss or
damage on account of fire, flood, wind, hurricane, earthquake, accident, act of
war, civil commotion, strike or other cause or event beyond the reasonable power
and control of Transferor (whether or not similar to the foregoing) to an extent
which adversely affects the value of the Assets, the Partnership shall have the
right to:
(a) terminate this Agreement by giving written notice to
Transferor with ten (10) calendar days after the date the General Partner
acquires knowledge of such loss or damage, provided that this Section 10.1(a)
shall only be available to the Partnership if the
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cumulative amount of such loss or damage, considered together with any previous
loss or damage, exceeds ten percent (10%) of Transferor's Initial Capital
Account Balance; or
(b) complete the acquisition of the Assets and receive from
the Transferor all insurance proceeds applicable to such occurrence.
10.2. Termination. This Agreement may be terminated:
(a) by the mutual written consent of the parties;
(b) by either party upon failure to obtain any material
regulatory approval required for the transactions contemplated herein after
exhausting petitions and appeals (but in no event later than December 31, 1997,
unless a later date is agreed to by the parties);
(c) by Transferor or the Partnership, as applicable, if any
material condition set forth in Articles VIII or IX hereof, respectively, has
not been satisfied or waived as of the Closing Date;
(d) by Transferor or the Partnership on or before the
termination of the Due Diligence Period should the results of the inspection be
inadequate in any material respect in such Transferor's or Partnership's
reasonable discretion; and
(e) pursuant to Section 10.1 above.
10.3. Costs. In the event of a termination of this Agreement pursuant
to Section 10.2 hereof, each party shall pay the costs and expenses incurred by
it in connection with this Agreement, and no party shall be liable to any other
party for any costs, expenses, damage or loss of anticipated profits hereunder.
ARTICLE XI
POST-CLOSING MATTERS
11.1. Post-Closing Matters. Any asset (including patient receivables,
all other remittances and all mail and other communications) that is determined
by the parties' agreement, or, absent such agreement, determined by litigation,
to be or otherwise related to an Excluded Asset and that is or comes into the
possession, custody or control of the Partnership (or its successors in interest
or assigns, or its respective Affiliates) shall forthwith be transferred,
assigned or conveyed by the Partnership (or its respective successors in
interest or assigns and its respective Affiliates) to Transferor, and until such
transfer, assignment and conveyance, the Partnership (and its respective
successors in interest and assigns and its respective Affiliates) shall not have
any right, title or interest in such asset but instead shall hold such asset in
trust for the benefit of Transferor. Any asset (including all remittances and
mail and other communications) that is determined by the parties' agreement or,
absent such
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agreement, determined by litigation, to be or otherwise relate to an Asset and
that is or comes into the possession, custody or control of Transferor (or its
respective successors in interest or assigns) shall forthwith be transferred ,
assigned and conveyed by Transferor (or its respective successors in interest or
assigns) to the Partnership, and until such transfer, assignment and conveyance,
Transferor (and its respective successors in interest and assigns) shall not
have any right, title or interest in such Asset, but instead shall hold such
asset in trust for the benefit of the Partnership.
11.2. Access to Books and Records. Following the Closing, the
Partnership shall provide Transferor and its officers, agents, and employees
with reasonable access during regular business hours to all books and records
described in Section 1.1(a)(6) above, in order that Transferor may meet its
obligations with respect to Transferor Employees, file claims and cost reports,
pursue appeals, meet its obligations in connection with the Excluded Liabilities
and its other obligations hereunder, and fulfill other lawful purposes. The
Partnership shall permit Transferor to copy any such records reasonably required
by Transferor, at Transferor's expense.
11.3. University Services. Following the Closing, Transferor shall
provide certain utilities, parking and other services (collectively, the
"University Services") to the Partnership pursuant to the University Services
Agreement attached hereto as Exhibit 1.6(a)(10).
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1. Survival of Representations; Indemnity Periods. Notwithstanding
any right of the Partnership (whether or not exercised) to investigate the
affairs of Transferor or any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Transferor has, on the one hand, and the
Partnership has, on the other hand, the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. The representations, warranties, covenants and agreements
respectively made by Transferor, on the one hand, and the Partnership, on the
other hand, in this Agreement or in any certificate respectively delivered by
Transferor or the Partnership pursuant to Article I will survive the Closing
until the eighteen (18) month anniversary of the Closing Date, except that
(a) in the event of intentional misrepresentation or fraud in
the making of any representation or warranty, or intentional, willful or
reckless nonfulfillment or breach of any covenant in this Agreement, all
representation, warranties, covenants and agreements that are the subject of the
intentional misrepresentation, fraud, willful or reckless nonfulfillment or
breach, shall survive until sixty (60) calendar days after the expiration of all
applicable statutes of limitations (including all periods of extension, whether
automatic or permissive) with respect to matters covered thereby;
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(b) covenants and agreement to be performed after the Closing
Date will survive the Closing for the term or until waived by the party
benefiting from performance specified therein, or, if no term is specified,
indefinitely; and
(c) rights to indemnification under this Article XII will
survive until any claims brought hereunder within eighteen (18) months from
Closing shall have been satisfied or otherwise resolved as provided herein
except as provided in 12.1(d) below.
(d) representations, warranties, covenants, agreements, and
indemnification by Transferor in connection with the Excluded Liabilities and by
the Partnership in connection with the Assumed Obligations shall continue
indefinitely.
12.2. Transferor Indemnification.
(a) For a period of eighteen (18) months from Closing,
Transferor shall keep and save the Partnership harmless from and shall indemnify
and defend the Partnership against any and all obligations, judgments,
liabilities, penalties, violations, fees, fines, claims, losses, costs, demands,
damages, liens, encumbrances and expenses including reasonable attorneys' fees
(collectively, "Damages"), whether direct or consequential and no matter how
arising, in any way related to, connected with or arising or resulting from (i)
any material breach of any representation or warranty of Transferor under this
Agreement, (ii) any material breach or default by Transferor of any covenant or
agreement of Transferor under this Agreement; and (iii) the Excluded Assets.
Transferor shall forever hold the Partnership harmless with respect to the
Excluded Liabilities. If any lien, claim, charge or order for the payment of
money shall be filed against the Assets or any portion thereof, or against the
Partnership or its respective assigns, based on any act or omission or alleged
act or omission of Transferor, or its agents, representatives or employees, and
whether or not such lien, claim, charge or order shall be valid or enforceable,
within ten (10) days after notice to Transferor of the filing thereof,
Transferor shall take any and all actions, by bonding, deposit, payment or
otherwise, as it deems reasonably necessary to remove and satisfy such lien,
claim, charge or order.
(b) The Partnership shall promptly notify Transferor in the
event that any claim is made against the Partnership or the Assets for which
Transferor has agreed to indemnify the Partnership as set forth in this
Agreement, and Transferor shall thereupon undertake to defend promptly and hold
the Partnership free and harmless therefrom, using counsel reasonably
satisfactory to the Partnership; but the Partnership's failure to so notify
shall not relieve Transferor of its obligations hereunder except to the extent
that it is actually prejudiced or damaged thereby. Once the defense thereof is
assumed by Transferor, Transferor shall keep the Partnership advised of all
developments in the defense thereof and in any related litigation, and the
Partnership shall be entitled at all times to participate in the defense thereof
at its own expense. If Transferor fails to discharge or represent in writing
that it will undertake to defend against any such liability within ten (10) days
after notice thereof,
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and thereafter diligently pursue such defense, then the Partnership may settle
the same and shall provide notice of the terms thereof to Transferor within ten
(10) days after settlement. Transferor's liability shall be conclusively
established by such settlement (the amount of such liability shall include, but
shall not be limited to, the settlement consideration and the reasonable
attorneys' fees, costs and expenses incurred by the Partnership in effecting
such settlement). This indemnity shall not foreclose any other rights or
remedies of the Partnership or its assigns that it may have under law or under
this Agreement to enforce the provisions of this Agreement.
12.3. Partnership Indemnification.
(a) For a period of eighteen (18) months from Closing, the
Partnership shall keep and save Transferor harmless from and shall indemnify and
defend Transferor against any and all Damages, whether direct or consequential
and no matter how arising, in any way related to, connected with or arising or
resulting from (i) any breach of any representation or warranty of the
Partnership under this Agreement; and (ii) any breach or default by the
Partnership under any covenant or agreement of the Partnership under this
Agreement. The Partnership shall forever hold Transferor harmless with respect
to the Assumed Obligations.
(b) Transferor shall promptly notify the Partnership in the
event that any claim is made against it for which the Partnership has agreed to
indemnify Transferor as set forth in this Agreement, and the Partnership shall
thereupon undertake to defend and hold Transferor free and harmless therefrom,
using counsel reasonably satisfactory to Transferor; but Transferor's failure to
so notify shall not relieve the Partnership of its obligations hereunder except
to the extent it is actually prejudiced or damaged thereby. If the Partnership
fails to discharge or undertake to defend against any such liability within ten
(10) days after notice thereof, then Transferor may settle the same and shall
provide notice of the terms thereof to the Partnership within ten (10) days
after settlement. The Partnership's liability shall be conclusively established
by such settlement (the amount of such liability shall include both the
settlement consideration and the reasonable attorneys' fees, costs and expenses
necessarily incurred by Transferor in effecting such settlement). This indemnity
shall not foreclose any other rights or remedies that Transferor may have under
law or under this Agreement to enforce the provisions of this Agreement.
12.4. General Partner Indemnification. For a period of eighteen (18)
months from Closing, the General Partner shall keep and save Transferor and the
Partnership harmless from and shall indemnify and defend Transferor and the
Partnership against any and all Damages, whether direct or consequential and no
matter how arising, in any way related to, connected with or arising or
resulting from (i) any breach of any representation or warranty of the General
Partner under this Agreement, or (ii) any breach or default by the General
Partner under any covenant or agreement of the General Partner under this
Agreement or the Partnership Agreement.
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12.5. Indemnification Threshold. Notwithstanding anything to the
contrary contained in this Section 12, no indemnification hereunder shall be
available to the party alleging a claim (the "Indemnitee") against the other
party (the "Indemnitor") unless one of the following criteria are satisfied:
(a) with respect to each individual claim, the amount of
Damages with respect to such claim exceeds Fifty Thousand Dollars ($50,000.00)
(the "Threshold"); provided that, in such instance, the Indemnitor shall be
responsible to the Indemnitee for the entire amount of Damages relating to such
claim without regard to the Threshold; or
(b) when the cumulative amount of Damages with respect to
individual claims that do not satisfy the criteria set forth in Section 12.5(a)
or other claims exceeds Two Hundred Thousand Dollars ($200,000) (the "Aggregate
Threshold"); provided that, in such instance, the Indemnitor shall be
responsible to the Indemnitee only for the amount of Damages relating to such
claims which exceed the Aggregate Threshold.
The provisions of this Section 12.5 shall not apply to any claim based
upon the Excluded Liabilities or the Assumed Liabilities.
ARTICLE XIII
EMPLOYEES
The Partnership acknowledges and agrees that it shall make offers of
employment to all Transferor Employees (as defined herein) as of the Closing
Date.
The parties acknowledge that continuity in the provision of hospital
services will be key to the Partnership's ultimate success and the success of
the Transferor Business. Transferor shall use reasonable best efforts to assist
the Partnership in its employment of the Transferor Employees.
Transferor shall not, from the Effective Date until the Closing,
directly or indirectly, solicit any Transferor Employee for employment by
Transferor or any of its Affiliates after the Closing Date except for those
individuals listed on Exhibit 5.7 who shall either remain employed by Transferor
after the Closing Date or shall work for Transferor and the Partnership after
the Closing Date. Further, neither Transferor nor the Partnership shall, for a
period of twelve (12) months after the Closing Date, directly or indirectly,
hire, employ, manage, consult with, seek services from or in any manner engage
(all of the foregoing hereinafter collectively referred to as "Employ") any
employee of the other party except (i) with the prior written consent of the
other party, (ii) in the event that the employee's employment has been
terminated by the other party, or (iii) in the case of joint
Partnership/University appointments approved by the parties.
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<PAGE> 47
In the event Transferor or Partnership employs an employee of the other
party prior to the expiration of twelve (12) months following the Closing Date
without meeting one of the exceptions set forth in the preceding paragraph,
Transferor shall pay the Partnership as liquidated damages, and not as a
penalty, a sum equal to one (1) year's current salary of such employee. This
represents the reasonable endeavor by the parties hereto to estimate a fair
compensation for the foreseeable and unforeseeable losses that might result from
any such violation of this Article XIII.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1. Further Assurances. Transferor shall execute, acknowledge and
deliver to the Partnership any and all other assignments, consents, approvals,
conveyances, assurances, documents and instruments reasonably requested by the
General Partner at any time and shall take any and all other actions reasonably
requested by the General Partner at any time for the purpose of more effectively
assigning, transferring, granting, conveying and confirming to the Partnership,
the Assets.
14.2. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto. No
party hereto may assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the other parties.
14.3. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the District of Columbia.
14.4. Amendments. This Agreement may not be amended other than by
written instrument signed by the parties hereto.
14.5. Exhibits. All exhibits and schedules referred to in this
Agreement shall be attached hereto and are incorporated by reference herein.
From the Effective Date until the Closing, the parties agree that either party
may update the exhibits as necessary, subject to the terms of Section 5.1 and
9.9 of this Agreement. Notwithstanding any other provision in this Agreement,
the Partnership acknowledges and agrees that any written disclosure made to the
Partnership by the Transferor with respect to a representation or warranty shall
thereby automatically update the exhibit related to such representation or
warranty whether or not the exhibit itself is actually updated in writing.
14.6. Notices. Any and all notices or other communications required or
permitted by this Agreement or by law to be served on or given to any party
hereto by another party to this Agreement shall be in writing and shall be
deemed duly served when personally delivered to the party to whom they are
directed, or in lieu of such personal service when deposited in the
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<PAGE> 48
United States mail, first-class postage prepaid, or reasonable overnight
delivery service, such as Federal Express, addressed as follows:
If to the Partnership District Hospital Partners, L.P.
901 23rd Street, N.W.
Washington, DC 20052
Attn: Chief Executive officer
If to Transferor: Vice President and General Counsel
The George Washington University
2100 Pennsylvania Avenue, N.W., Suite 690
Washington, DC 20052
If to the General Universal Health Services, Inc.
Partner: 367 South Gulph Road
King of Prussia, PA 19406
Attn: President
or at such other address as one party may designate by notice hereunder to the
other parties.
14.7. Headings. The section and other headings contained in this
Agreement and in the exhibits and schedules to this Agreement are included for
the purpose of convenient reference only and shall not restrict, amplify, modify
or otherwise affect in any way the meaning or interpretation of this Agreement
or the exhibits and schedules hereto.
14.8. Confidentiality and Publicity. The parties hereto shall hold in
confidence the information contained in this Agreement, and all information
related to this Agreement, which is not otherwise known to the public, shall be
held by each party hereto as confidential and proprietary information and shall
not be disclosed without the prior written consent of the other parties.
Accordingly, the Partnership and Transferor shall not discuss with, or provide
nonpublic information to, any third party (except for such party's attorneys and
consultants) concerning this transaction prior to the Closing, except: (i) as
required in governmental filings or judicial, administrative or arbitration
proceedings; or (ii) pursuant to public announcements made with the prior
written approval of Transferor and the Partnership.
14.9. Fair Meaning. This Agreement shall be construed according to its
fair meaning and as if prepared by all parties hereto.
14.10. Gender and Number. All references to the neuter gender shall
include the feminine or masculine gender and vice versa, where applicable, and
all references to the singular shall include the plural and vice versa, where
applicable.
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14.11. Third Party Beneficiary. None of the provisions herein contained
are intended by the parties, nor shall they be deemed, to confer any benefit on
any person not a party to this Agreement.
14.12. Expenses and Attorney Fees. Except as otherwise expressly
provided herein to the contrary, each party to this Agreement shall pay its own
costs and expenses in connection with the transactions contemplated hereby,
including without limitation, the disbursements and fees of their respective
attorneys, accountants, advisors, agents and other representatives, incidental
to the preparation and carrying out of this Agreement, whether or not the
transactions contemplated hereby are consummated. The parties acknowledge and
agree that the Partnership has not had and will not have separate counsel,
accountants, advisors, agents or other representatives in connection with this
Agreement and no such expenses will be charged to the Partnership and all said
expenses will be deemed incurred by each Member of the Partnership in its
individual capacity. If any action is brought by any party or parties to enforce
any provision of this Agreement, the prevailing party or parties shall be
entitled to recover its court costs, arbitration expenses and reasonable
attorneys' fees. In the event that the prevailing party is other than the
Partnership, the expenses charged to the Partnership pursuant to the preceding
sentence shall be paid by those Members of the Partnership who did not prevail
in the matter in accordance with their relative percentage interests in the
Partnership.
14.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement, binding on all of the
parties hereto.
14.14. Entire Agreement. This Agreement, the exhibits and schedules,
and the documents referred to herein contain the entire understanding between
the parties with respect to the transactions contemplated hereby and supersede
all prior contemporaneous agreements, understandings, representations and
statements, oral or written between the parties on the subject matter hereof,
and shall be of no further force or effect.
14.15. No Waiver. Any term, covenant or condition of this Agreement may
be waived at any time by the party which is entitled to the benefit thereof but
only by a written notice signed by the party waiving such term or condition. The
course of practice or the subsequent acceptance of performance hereunder by a
party shall not be deemed to be a waiver of any preceding breach by another
party of any term, covenant or condition of this Agreement, other than the
failure of such party to perform the particular duties so accepted, regardless
of such party's knowledge of such preceding breach at the time of acceptance of
such performance. The waiver of any term, covenant or condition shall not be
construed as a waiver of any other term, covenant or condition of this
Agreement. The rights and remedies set forth in this Agreement shall be in
addition to any other rights or remedies that may be granted by law.
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<PAGE> 50
14.16. Severability. If any term, provision, condition or covenant of
this Agreement or the application thereof to any party or circumstance shall be
held to be invalid or unenforceable to any extent in any jurisdiction, then the
remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to persons or circumstances
other than those as to whom or which it is held to be invalid or unenforceable,
shall not be affected thereby, and each term, provision, condition and covenant
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law consistent with the purposes of this Agreement.
14.17. Arbitration. Any disagreement, dispute or claim arising out of
or relating to this Agreement which cannot be settled by the parties hereto
shall be settled by arbitration in accordance with the following provisions:
(a) Forum. Forum for arbitration shall be the District of
Columbia.
(b) Law. Governing law shall be the law of the District of
Columbia.
(c) Selection. The number of arbitrators shall be three (3),
unless the parties hereto are able to agree on a single arbitrator. In the
absence of such agreement within ten (10) days after the initiation of an
arbitration proceeding, Transferor shall select one (1) arbitrator and the
General Partner shall select one (1) arbitrator, and those two arbitrators shall
then select within ten (10) days a third arbitrator. If those two (2)
arbitrators are unable to select a third arbitrator within such ten (10) day
period, a third arbitrator shall be appointed by the commercial panel of the
American Arbitration Association. The decision in writing of at least two (2) of
the three (3) arbitrators shall be final and binding upon the parties.
(d) Administration. Arbitration shall be administered by the
American Arbitration Association.
(e) Rules. Rules of arbitration shall be the Commercial
Arbitration Rules of the American Arbitration Association, as modified by any
other instructions that the parties hereto may agree upon at the time, except
that each party hereto shall have the right to conduct discovery in any manner
and to the extent authorized by the Federal Rules of Civil Procedure as
interpreted by the federal courts. The arbitrators shall not modify the terms of
this Agreement.
(f) Award. The award rendered by arbitration shall be final
and binding upon the parties hereto, and judgment upon the award may be entered
in any court of competent jurisdiction in the United States.
[CONTINUED ON NEXT PAGE]
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[CONTINUED FROM PREVIOUS PAGE]
14.18. Time is of the Essence. Time is of the essence for each
provision of this Agreement and each performance called for in this Agreement.
IN WITNESS WHEREOF, this Agreement has been entered into as of the
Effective Date.
PARTNERSHIP:
DISTRICT HOSPITAL PARTNERS, L.P.,
a District of Columbia limited
partnership
By: UHS of D.C., Inc.
Its: General Partner
By:________________________________
Its:____________________________
TRANSFEROR:
THE GEORGE WASHINGTON UNIVERSITY, a
congressionally chartered institution in the
District of Columbia
By:________________________________
LOUIS H. KATZ
Its Vice President and Treasurer
GENERAL PARTNER:
UHS of D.C., Inc.
a Delaware Corporation
By:________________________________
Its:____________________________
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<PAGE> 52
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "UNIVERSAL HEALTH SERVICES, INC.", FILED IN THIS OFFICE ON THE TWENTY-THIRD
DAY OF JUNE, A.D. 1997, AT 1:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
0865562 8100 AUTHENTICATION: 8525190
971206284 DATE: 06-24-97
<PAGE> 53
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION OF
UNIVERSAL HEALTH SERVICES, INC.
Universal Health Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"),
does, hereby certify:
FIRST: That at a meeting held on March 26,1997, the Board of Directors of
the Company adopted a resolution proposing and declaring advisable the following
amendment to the Restated Certificate of Incorporation of said corporation:
RESOLVED, that the Restated Certificate of Incorporation be amended
by revising Article Fourth, Paragraph 1, to read in full as follows:
"FOURTH, The total number of shares of all classes of stock which
the Company shall have authority to issue is 93,200,000 shares, consisting
of 12,000,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), 75,000,000 shares of Class B Common Stock
par value $.01 per share (the "Class B Common Stock"), 1,200,000 shares of
Class C Common Stock, par value $.01 per share (the "Class C Common
Stock"), and 5,000,000 shares of Class D Common Stock, par value $.01 per
share (the "Class D Common Stock"). As used in this Restated Certificate
of Incorporation the term "Common Stock" means collectively the Class A,
Class B, Class C and Class D Common Stock."
SECOND: That thereafter, pursuant to a vote taken at the Annual Meeting of
the Stockholders of the Company, voting as a single class, and a majority of the
outstanding shares of Class B Common Stock, voting as a class, held on May 21,
1997, a majority of the common stock votes of the Company ratified the amendment
referenced herein.
<PAGE> 54
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provision of Sections 211 and 242 of the General Corporation Law
of Delaware, as amended.
FOURTH: That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, Universal Health Services, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by Steve
Filton, its Vice President, and Bruce R. Gilbert, its Secretary, this 20th day
of June, 1997.
By: /s/ Steve Filton
-------------------------------
Steve Filton
Vice President
CORPORATE SEAL
ATTEST:
By: /s/ Bruce R. Gilbert
---------------------------
Bruce R. Gilbert
Secretary
<PAGE> 55
RESTATED CERTIFICATE OF INCORPORATION
OF
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL HEALTH SERVICES, INC., a corporation incorporated under
the General Corporation Law of Delaware (the "Company"), hereby amends and
restates its Certificate of Incorporation, which was originally filed by the
Secretary of State on January 8, 1979, amended and restated by a Restated
Certificate of Incorporation filed March 28, 1979, further amended by
Certificates of Amendment filed August 2, 1979, September 28, 1979, April 22,
1980, August 20, 1980 and May 11, 1981, restated by a Restated Certificate of
Incorporation filed June 8, 1981 and amended and restated by a Restated
Certificate of Incorporation filed July 16, 1981, so that the same shall read,
in its entirety, as follows:
FIRST: The name of the Company is Universal Health Services, Inc.
SECOND: The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the "City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Company has authority to issue is 62,000,000 shares, consisting of 12,000,000
shares of Class A Common Stock, par value S.01 per share (the "Class A Common
Stock"), and 50,000,000 shares of Class B Common Stock, par value $.01 per share
(the "Class B Common Stock"). As used in this Restated Certificate of
Incorporation, the term 'Common Stock' means collectively the Class A Common
Stock and the Class B Common Stock.
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class; of stock of the Company:
Except as otherwise expressly provided herein, all shares of Class A
Common Stock and Class B Common Stock will
<PAGE> 56
be identical and will entitle the holders thereof to the same rights and
privileges.
Part 1. Dividends.
When and as dividends or distributions are declared thereon, whether
payable in cash, in property or in securities of the Company, or in
subscription or other rights to acquire securities of the Company, the holders
of Class A Common Stock and the holders of Class B Common Stock will be entitled
to share equally, share for share, in such dividends or distributions: provided
that if dividends or distributions are declared which are payable in shares of,
or in subscription or other rights to acquire shares of, Class A Common Stock or
Class B Common Stock, dividends or distributions will be declared which are
payable at the same rate on both classes of Common Stock, and the dividends or
distributions payable in shares of, or in subscription or other rights to
acquire shares of, Class A Common Stock will be payable to holders of that class
of stock and the dividends or distributions payable in shares of, or in
subscription or other rights to acquire shares of, Class B Common Stock will be
payable to holders of that class of stock.
Part 2. Conversions.
(i) Subject to and upon compliance with the provisions of this part
2, each record holder of Class A Common Stock will be entitled at any time and
from time to time to convert any or all of the shares of Class A Common Stock
held by such holder into the same number of shares of Class B Common Stock.
(ii) Each conversion of shares of Class A Common Stock into Class B
Common Stock will be effected by (and the Company will be obligated to issue
such Class B Common Stock upon) the surrender of the certificate or
certificates representing such shares of Class A Common Stock to be converted
at the principal office of the Company (or such other office or agency of the
Company as the Company may designate by notice in writing to the holders of
Class A Common Stock) at any time during its usual business hours, together with
written notice by the holder of such Class A Common Stock stating that such
holder desires to convert the shares, or a stated number of the shares of Class
A Common Stock, represented by such certificate or certificates into Class B
Common Stock. Such notice will also state the name or names (with addresses) and
denominations in which the certificate or certificates for Class B Common Stock
are to be issued and will include instructions for delivery thereof.
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Promptly after such surrender and the receipt of such written notice, the
Company will issue and deliver in accordance with such instructions the
certificate or certificates for the Class B Common Stock issuable under such
conversion, and the Company will deliver to the converting holder a certificate
representing any shares of Class A Common Stock which were represented by the
certificate or certificates surrendered to the Company in connection with such
conversion but which were not converted. Such conversion to the extent permitted
by law will be deemed to have been affected as of the close of business on the
date on which such certificate or certificates have been surrendered and such
notice has been received, and at such time the rights of the holder of such
Class A Common Stock (or specified portion thereof) as such holder will cease
and the Person or Persons in whose name or names the certificate or certificates
for shares of Class B Common Stock are to be issued upon such conversion will be
deemed to have become the holder or holders of record of the shares of Class B
Common Stock represented thereby.
(iii) If the Company in any manner subdivides (by stock split or
otherwise) or combines (by reverse stock split or otherwise) the outstanding
shares of one class of Common Stock, the outstanding shares of the other class
of Common Stock will be proportionately subdivided or combined.
(iv) The Company will at all times reserve and keep available out of
its authorized but unissued shares of Class B Common Stock or its treasury
shares, solely for the purpose of issuance upon the conversion of Class A Common
Stock as provided in this part 2, such number of shares of Class B Common Stock
as are then issuable upon the conversion of all then outstanding shares of Class
A Common Stock. The Company covenants that all shares of Class B Common Stock
which are issuable upon conversion will, when issued, be duly and validly
issued, fully paid and non-assessable and free from all taxes, liens and
charges. The Company will take all such action as may be necessary to assure
that all such shares of Class B Common Stock may be so issued without violation
of any law or regulation applicable to the Company or any requirements of any
domestic securities exchange upon which shares of Class B Common Stock may be
listed.
(v) If any shares of Class B Common Stock required to be reserved
for purposes of conversions hereunder require registration with or approval of
any governmental authority under any federal or state law (other than any
registration under the Securities Act of 1933, as then in effect, or any
similar federal statute then in force, or
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<PAGE> 58
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved for listing or listed on such domestic securities
exchange, as the case may be.
(vi) The issuance of certificates for shares of Class B Common Stock
upon conversion of shares of Class A Common Stock will be made without charge to
the holders of such shares of Class A Common Stock for any issuance tax in
respect thereof, or other cost incurred by the Company in connection with such
conversion and the related issuance of shares of Class B Common Stock; provided
that the Company will not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the holder of the Class A Common Stock converted.
(vii) As used in this part 2, the term "Person" means an individual,
a partnership, a corporation, a trust, a joint venture, an unincorporated
organization or a government or any department or agency thereof.
Part 3. Registration of Transfer.
The Company will keep at its principal office (or such other place
as the Company reasonably designates) a register for the registration of shares
of Common Stock. Upon the surrender of any certificate representing shares of
any class of Common Stock at such place, the Company will, at the request of the
record holder of such certificate, execute and deliver (at the Company's
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares of such class represented by the surrendered
certificate (and the Company forthwith will cancel such surrendered
certificate). Each such new certificate will be registered in such name and will
represent such number of shares of such class as is requested by the holder of
the surrendered certificate and will be substantially identical in form to the
surrendered certificate.
Part 4. Replacement.
(i) Upon receipt of evidence reasonably satisfactory to the Company
(an affidavit of the registered holder, without bond, will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any
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<PAGE> 59
certificate evidencing one or more shares of any class of Common Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the holder is a
financial institution, with net assets in excess of $5 million, its own
agreement of indemnity will be satisfactory), or, in the case of any such
mutilation, upon surrender of such certificate, the Company will (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
(ii) The term "outstanding" when used in this Article FOURTH with
reference to the shares of any class of Common Stock as of any particular time
will not include any such shares represented by any certificate in lieu of which
a new certificate has been executed and delivered by the Company in accordance
with part 3 or this part 4, but will include only those shares represented by
such new certificate.
Part 5. Voting Rights.
The holders of Class A Common Stock shall have exclusive voting
power except as specified herein with respect to the Class B Common Stock.
(i) With respect to the election of directors, the holders of Class
B Common Stock voting as a separate class shall be entitled to elect that number
of directors which constitutes 20% of the total membership of the Company's
board of directors and if such 20% is not a whole number, then the holders of
Class B Common Stock will be entitled to elect the nearest whole number of
directors which constitutes 20% of such membership, provided, that, except as
contemplated by subparagraph (vi) hereof, in no event shall such number be less
than one. Holders of Class A Common Stock voting as a separate class will be
entitled to elect the remaining directors.
(a) Nominations for the election of directors, may be made by the
Board of Directors or by any stockholder entitled to vote for the election
of directors. Nominations made by stockholders shall be made by notice in
writing, delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Company not less than 20 days prior to
any meeting of the stockholders called for the election of directors;
provided, however, that if less than 30
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<PAGE> 60
days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Company not later than the close of the tenth day following the day on
which notice of the meeting was mailed to stockholders.
(b) Each notice under subsection (a) shall set forth (i) the name,
age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
each such nominee and (iii) the number of shares of stock of the Company
which are beneficially owned by each such nominee.
(c) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(ii) The holders of Class B Common Stock will be entitled to vote as
a separate class on the removal, with cause (as defined in Article SIXTH, part
2, subparagraph (v)) of any director elected by the holders of Class B Common
Stock and the holders of Class A Common Stock will be entitled to vote as a
separate class on the removal with cause of any director elected by the holders
of Class A Common Stock.
(iii) The holders of Class B Common Stock shall be entitled to vote
as a separate class on such other matters as may be required by law to be
submitted to such holders.
(iv) The holders of Class B Common Stock shall in all matters not
referred to in (i), (ii) and (iii) above vote together with the holders of Class
A Common Stock as a single class, provided that the holders of Class B Common
Stock will have one-tenth of a vote for each share and the holders of Class A
Common Stock shall have one vote for each share.
(v) Any vacancy in the office of a director may be filled by a vote
of holders of the class entitled to elect said director voting as a separate
class and, in the absence of stockholder vote, in the case of a vacancy in the
office of a director elected by either class, such vacancy may be filled by the
remaining directors. Any directors elected by the board of directors to fill a
vacancy shall serve until the expiration of the term of the director whose
position was filled and until his successor has been chosen and has
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qualified. The board of directors may increase the number of directors and any
vacancy so created may be filled by the board of directors, provided that unless
the conditions set forth in (vi) exist in respect of the next previous Annual
Meeting of Stockholders, the board of directors may be so enlarged by the board
of directors only to the extent that 20% of the enlarged board of directors,
rounded to the nearest whole number of directors which constitutes 20% of such
membership, consists of directors elected by the holders of the Class B Common
Stock or by persons appointed to fill vacancies created by the death,
resignation or removal of persons elected by the holders of the Class B Common
Stock.
(vi) The Class B Common Stock will not have the rights to elect
directors set forth in (i) or (v) above, if on the date for taking a record for
any stockholder meeting at which directors are to be elected, the number of
issued and outstanding shares of Class B Common Stock (exclusive of any shares
held in the Company's treasury) is less than 10% of the aggregate number of
issued and outstanding shares of both Class B Common Stock and Class A Common
Stock (exclusive of shares held in the Company's treasury). In such case all
directors to be elected at such meeting shall be elected by holders of Class B
Common Stock and Class A Common Stock voting together as a single class,
provided that with respect to said election the holders of Class B Common Stock
shall have one-tenth of a vote for each share and the holders of Class A Common
Stock shall have one vote for each share.
Part 6. Business Combinations.
6A. Definitions.
(i) The term "business combination" as used in Part 6 shall mean:
(a) any merger or consolidation of the Company with or into
any other individual, corporation, partnership or other person or entity, other
than a merger or consolidation pursuant to which the Company is the continuing
corporation and the result of which is not a sale, transfer or other disposition
of, or a modification of the form of, ownership of the Company;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or any other security device, of all or
any substantial part of the assets of the Company (including without limitation
any voting securities of a Subsidiary) or of a Subsidiary
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<PAGE> 62
(which assets of the Subsidiary constitute a substantial part of the assets of
the Company) to any other individual, corporation, partnership or other person
or entity; or
(c) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of business combination.
(ii) The term "related person business combination" as used in
this part 6 shall mean:
(a) any merger or consolidation of the Company with or into a
related person;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or any other security device, of all or
any substantial part, of the assets of the Company (including without limitation
any voting securities of a Subsidiary) or of a Subsidiary, to a related person;
(c) any merger or consolidation of a related person with or
into the company or a Subsidiary of the Company;
(d) any sale, lease, exchange, transfer or other disposition
of all or any substantial part of the assets of a related person to the Company
or a Subsidiary of the Company;
(e) the issuance of any securities of the Company or a
Subsidiary of the Company to a related person (other than to full time employees
of the Company);
(f) acquisition by the Company or a Subsidiary of the
Company of any securities of a related person;
(g) any reclassification of Common Stock of the Company, or
any recapitalization involving Common Stock of the Company, consummated within
five years after a related person becomes a related person; or
(h) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of related person business
combination.
(iii) The term "related person" as used in this Part 6 shall mean
and include any individual, corporation, partnership or other person or entity
which, together with their "affiliates" and "associates" (defined below)
"beneficially" owns (as this term is defined in Rule 13d-3 of the
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<PAGE> 63
General Rules and Regulations under the Securities Exchange Act of 1934), in the
aggregate, five percent (5%) or more of, the outstanding shares of any class of
Common Stock of the Company, and any "affiliate" or "associate" (as those terms
are defined in Rule 12b-2 under the Securities Exchange Act of 1934) of any such
individual, corporation, partnership or other person or entity and shall include
all persons or entities acting in concert with such related person.
Notwithstanding the foregoing, for the purposes of this definition, any shares
of Common Stock of the Company which any related person has the right to acquire
at any time pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise, shall be deemed beneficially owned by such
related person.
(iv) The term "substantial part" shall mean more than ten percent
(10%) of the total assets of the company in question, taken as a whole including
any subsidiaries, as of the end of its most recent fiscal year ended prior to
the time the determination is being made.
(v) The term "Subsidiary" as used in this Part 6 means any
corporation a majority of the voting stock of which is, at the time as of which
any determination is being made, owned by the Company either directly or through
one or more Subsidiaries.
6B. Stockholders' Vote.
A proposed business combination or related person business
combination shall be approved in the manner contemplated by law, but no such
business combination or related person business combination shall be approved if
any two or more directors of the Company then in office shall have not voted in
favor of such proposed business combination or related person business
combination unless such business or related person business combination after
having been approved by the Board of Directors in the manner contemplated by law
shall have been approved by the affirmative vote of not less than 85% of the
outstanding Common Stock votes of the Company.
6C. Board of Directors' Vote.
It shall be a proper corporate purpose reasonably calculated to
benefit stockholders for the board of directors to base the response of the
Company to any proposal for a business combination or related person business
combination on the board of directors' evaluation of what is in the best
interests of the Company; and the board of directors, in evaluating what is in
the best interests of the Company may consider:
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<PAGE> 64
(i) The best interest of the stockholders: for this purpose the
board of directors shall consider, among other factors, not only the
consideration being offered in the business combination or related person
business combination proposal in relation to the then current market price, but
also in relation to the then current value of the Company in a freely
negotiated transaction and in relation to the board of directors' then estimate
of the future value of the Company as an independent entity; and
(ii) Such other factors as the board of directors determines to be
relevant, including, among other factors, the social, legal and economic effects
upon the employees, patients and business of the Company or any of its
Subsidiaries, and the community in which the Company, or any of its
Subsidiaries, is located or operates.
FIFTH: The corporation is to have perpetual existence.
SIXTH: Directors
Part 1. Powers.
All the powers of the Company, insofar as the same may be lawfully
vested by this Restated Certificate of Incorporation in the Board of Directors,
are hereby conferred upon the Board of Directors of the Company. In furtherance
and not in limitation of that power, the Board of Directors shall have the power
to make, adopt, alter, amend and repeal from time to time by-laws of the
Company, subject to the right of the stockholders entitled to vote with respect
thereto to adopt, alter, amend and repeal by-laws made by the Board of
Directors; provided, however, that by-laws shall not be adopted, altered,
amended or repealed by the Board of Directors of the Company if any two or more
directors of the Company then in office shall have not voted in favor or such
adoption, alteration, amendment or repeal nor by the stockholders of the Company
except by the vote of not less than 85% of the outstanding Common Stock votes.
Part 2. Number; Election; Removal.
(i) The number of directors of the Company shall be no less than
three nor more than nine, the exact number to be fixed by resolution of the
Board of Directors.
(ii) The Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III. Each director shall serve for a term
ending on the date of the third annual meeting following the annual
-10-
<PAGE> 65
meeting at which such director was elected; provided, however, that each initial
director in Class I shall hold office until the annual meeting of stockholders
in 1982, each initial director in Class II shall hold office until the annual
meeting of stockholders in 1983, and each initial director in Class III shall
hold office until the annual meeting of stockholders in 1984. So long as the
holders of Class B Common Stock are entitled to elect one director of the
Company pursuant to part 5 of Article FOURTH, the holders of Class B Common
Stock will be entitled to elect one director in Class III. In the event the
holders of Class B Common Stock become entitled to elect a second director, the
additional director shall be a member of Class II.
(iii) In all elections of directors of the Company,, each holder of
Class A Common Stock shall be entitled to as many votes as shall equal the
number of votes that, except for this subsection, he would be entitled to cast
for the election of directors with respect to his shares, multiplied by the
number of directors to be elected by the holders of Class A Common Stock, and he
may cast all such votes for a single director or may distribute them among the
number to be voted for by the holders of Class A Common Stock, or any two or
more of them, as he may see fit. In the event the holders of Class B Common
Stock vote with the holders of Class A Common Stock as a single class for the
election of directors under the circumstances provided in subparagraph (vi) of
part 5 of Article FOURTH, the holders of Class B Common Stock shall be entitled
to cumulate their votes in the manner described in the immediately preceding
sentence. On all other matters submitted to a vote at a meeting of stockholders,
each share of Class A Common Stock shall be entitled to one vote on each matter
submitted.
(iv) In the event of any increase or decrease in the authorized
number of directors, (a) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the expiration
of his term, or his prior death, retirement, resignation, or removal, and (b)
newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned among the three classes of directors so as to
maintain such classes as nearly equal as possible.
(v) A director may be removed only by the affirmative vote of the
holders of a majority of the shares then entitled to vote for that director at
an election of directors, but only for cause. Cause for removal shall be
construed to exist only if the director whose removal is proposed is convicted
of a felony by a court of competent jurisdiction and such conviction is no
longer subject to direct appeal, or
-11-
<PAGE> 66
has been adjudged by a court of competent jurisdiction to be liable for
negligence, or misconduct in the performance of his duty to the Company in a
matter of substantial importance to the Company, and such adjudication is no
longer subject to court appeal.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Company may he
kept (subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the Company. Elections of directors need
not be by written ballot unless the by-laws of the Company so provide. No action
required to be taken or which may be taken at any annual or special meeting of
stockholders may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Company and its creditors or any class of them and/or between the Company and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may on the application in a summary way of the
Company or of any creditor or stockholder thereof or on the application or any
receiver or receivers appointed for the Company under the provisions of section
291 of the General Corporation Law of Delaware or on the application of trustees
in dissolution or of any receiver or receivers appointed for this corporation
under the provisions of section 279 of the General Corporation Law of Delaware
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Company, as the case may be, to be
summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Company, as the case
may be, agree to any compromise or arrangement and to any reorganization of the
Company as consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
the Company, as the case may be, and also on the Company.
NINTH: Except as expressly set forth in this Article NINTH, the
Company reserves the right to amend, alter, change or repeal any provisions
contained in this Restated
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<PAGE> 67
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation; provided, however, that the provisions of this Restated
Certificate of Incorporation may not be amended, altered, changed or repealed in
any respect, unless (i) the Board of Directors shall have first adopted a
resolution recommending such amendment, alteration, change or repeal for
submission to the stockholders and, (ii) if two or more directors of the Company
then in office shall have not voted in favor of such resolution, approval by the
affirmative vote of not less than 85% of the outstanding Common Stock votes of
the Company is obtained.
TENTH: This Restated Certificate of Incorporation has been duly
adopted by the stockholders in accordance with the provisions of sections 245
and 242 of the General Corporation Law of Delaware, as amended.
IN WITNESS WHEREOF, Universal Health Services, Inc. has caused its
seal to be hereunto affixed and this certificate to be signed by its President
and its corporate seal attested to by its Secretary as of this 17th day of
June, 1983.
UNIVERSAL HEALTH SERVICES, INC.
By /s/ Alan B. Miller
-------------------------------------
Alan B. Miller
President
[SEAL]
CORPORATE SEAL
ATTEST
By /s/ Sidney Miller
---------------------------------
Sidney Miller
Secretary
-13-
<PAGE> 68
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION OF
UNIVERSAL HEALTH SERVICES, INC.
Universal Health Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"), does
hereby certify:
FIRST: That the board of directors of the Company. acting by written
consent without a meeting pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, adopted a resolution proposing and declaring
advisable the following amendment to the Restated Certificate of Incorporation
of said corporation:
RESOLVED, that the Restated Certificate of Incorporation be amended by
adding to Article Sixth, Part 3 as follows;
To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or may hereafter be amended, a director of this Company
shall not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Any repeal or modification of this Part
3 by the stockholders or the Company shall be prospective only and shall not
affect any limitation on the personal liability of a director of the Company at
the time of such repeal or modification.
SECOND: That thereafter, pursuant to a vote taken at a meeting of the
stockholders of the Company held on May 20, 1987, a majority of the common stock
votes of the Company ratified the amendment referenced herein.
<PAGE> 69
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provision of Sections 211 and 242 of the General Corporation Law
of Delaware, as amended,
FOURTH: That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, Universal Health Services, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Sidney Miller, its Executive Vice President, and Robert M. Dubbs, its Secretary,
this 21st day of May. 1987.
By: /s/ Sidney Miller
----------------------------------
Sidney Miller
Executive Vice President
CORPORATE SEAL
ATTEST:
By: /s/ Robert M. Dubbs
-----------------------------------
Robert M. Dubbs
Secretary
<PAGE> 70
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
UHS OF COLORADO, INC.
INTO
UNIVERSAL HEALTH SERVICES, INC.
Universal Health Services, Inc., a corporation organized and existing
under the laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 8th day of January,
1979, pursuant to Title 8 of the Delaware General Corporation Law.
SECOND. That this corporation owns all of the outstanding shares of the
stock of UHS of Colorado, Inc., a corporation incorporated on the 22nd day of
December 1983, pursuant to the Colorado Revised Statutes, 1973, as amended.
THIRD: That this corporation, by the following resolutions of its Board of
Directors, duly adopted by Unanimous Written Consent of its members, filed with
the minutes of the board (December 8, 1986) determined to and did merge into
itself said UHS of Colorado, Inc.:
RESOLVED, that Universal Health Services, Inc. merge, and it
hereby does merge into itself said UHS of Colorado, Inc., and
assumes all of its obligations; and it is
FURTHER RESOLVED, that the merger shall be effective upon the
date of filing with the Secretary of state of Delaware; and it is
FURTHER RESOLVED, that the proper officers of this corporation
be and they hereby are directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to
merge said UHS of Colorado, Inc. and assume its liabilities and
obligations, and the date of adoption thereof, and to cause the same
to be filed with the Secretary of State and a certified copy
recorded in the office of the Recorder of Deeds of New Castle County
and to do all acts and things whatsoever, whether within or without
the State of Delaware, which may be in anywise necessary or proper
to effect said merger.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding this
merger may be amended or terminated and abandoned by the Board of Directors of
Universal Health Services, Inc. at any time prior to the date of filing the
merger with the Secretary of State.
<PAGE> 71
IN WITNESS WHEREOF, said Universal Health Services, Inc. has caused this
certificate to be signed by Sidney Miller, its Vice President and attested by
Robert M. Dubbs, its Secretary, this 17th day of December, 1986.
UNIVERSAL HEALTH SERVICES, INC.
BY: /s/ Sidney Miller
---------------------------------
SIDNEY MILLER
Vice President
ATTEST:
BY: /s/ Robert M. Dubbs
-----------------------------------
ROBERT M. DUBBS
Secretary
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