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EXHIBIT 1.1
EXECUTION COPY
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UNIVERSAL HEALTH SERVICES, INC.
(a Delaware corporation)
$525,000,000
Convertible Debentures due 2020
PURCHASE AGREEMENT
Dated: June 19, 2000
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TABLE OF CONTENTS
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Page
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SECTION 1. Representations and Warranties by the Company.................... 3
(a) Representations and Warranties.................................. 3
(b) Officer's Certificates.......................................... 15
SECTION 2. Sale and Delivery to Initial Purchasers; Closing................. 15
(a) Initial Securities.............................................. 16
(b) Option Securities............................................... 16
(c) Payment......................................................... 16
(d) Qualified Institutional Buyer................................... 17
(e) Denominations; Registration..................................... 17
SECTION 3. Covenants of the Company......................................... 18
(a) Offering Memorandum............................................. 18
(b) Notice and Effect of Material Events............................ 18
(c) Amendment to Offering Memorandum and Supplements................ 18
(d) Qualification of Securities for Offer and Sale.................. 18
(e) Rating of Securities............................................ 19
(f) DTC............................................................. 19
(g) Use of Proceeds................................................. 19
(h) Restriction on Sale of Securities............................... 19
(i) PORTAL Designation.............................................. 19
(j) Reservation of Common Stock..................................... 20
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(k) Listing of Class B Commom Stock................................. 20
(l) Reporting Requirements.......................................... 20
SECTION 4. Payment of Expenses.............................................. 20
(a) Expenses........................................................ 20
(b) Termination of Agreement........................................ 21
SECTION 5. Conditions of Initial Purchaser's Obligations.................... 21
(a) Opinion of Counsel for the Company.............................. 21
(b) Opinion of General Counsel for the Company...................... 21
(c) Opinion of Counsel for Initial Purchasers....................... 21
(d) Officers' Certificates.......................................... 22
(e) Accountants' Comfort Letters.................................... 22
(f) Bring-down Comfort Letter....................................... 22
(g) Maintenance of Rating........................................... 22
(h) Registration Rights Agreement................................... 22
(i) PORTAL.......................................................... 22
(j) Lock-up Agreement............................................... 23
(k) Conditions to Purchase of Option Securities..................... 23
(l) Termination of Agreement........................................ 24
SECTION 6. Subsequent Offers and Resales of the Securities.................. 24
(a) Offer and Sale Procedures....................................... 24
(b) Covenants of the Company........................................ 25
SECTION 7. Indemnification.................................................. 26
(a) Indemnification of Initial Purchasers........................... 26
(b) Indemnification of Company, Directors and Officers.............. 27
(c) Actions Against Parties; Notification........................... 27
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(d) Settlement Without Consent if Failure to Reimburse.............. 27
SECTION 8. Contribution.................................................... 28
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.. 29
SECTION 10. Termination of Agreement........................................ 29
(a) Termination; General............................................ 29
(b) Liabilities..................................................... 30
SECTION 11. Default by One or More of the Initial Purchasers................ 30
SECTION 12. Notices......................................................... 30
SECTION 13. Parties......................................................... 30
SECTION 14. GOVERNING LAW................................................... 31
SECTION 15. Effect of Headings.............................................. 31
SECTION 16. Entire Agreement................................................ 31
SCHEDULES
Schedule A --- List of Initial Purchasers............................. Sch A-1
Schedule B --- Pricing Information.................................... Sch B-1
Schedule C --- List of Subsidiaries................................... Sch C-1
EXHIBITS
Exhibit A --- Form of Registration Rights Agreement...................... A-1
Exhibit B --- Form of Opinion of Counsel to the Company.................. B-1
Exhibit C --- Form of Opinion of General Counsel to the Company.......... C-1
Exhibit D --- Form of Lock-up Letter Agreement........................... D-1
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UNIVERSAL HEALTH SERVICES, INC.
(a Delaware corporation)
$525,000,000
Convertible Debentures due 2020
PURCHASE AGREEMENT
June 19, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
UBS Warburg LLC
Banc of America Securities LLC
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Universal Health Services, Inc., a Delaware corporation (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Initial Purchasers named in Schedule A hereto (collectively, the "Initial
Purchasers", which term shall also include any initial purchaser substituted as
hereinafter provided in Section 11 hereof), for whom Merrill Lynch, J.P. Morgan
Securities Inc., UBS Warburg LLC and Banc of America Securities LLC are acting
as representatives (in such capacity, the "Representatives"), with respect to
the issue and sale by the Company and the purchase by the Initial Purchasers,
acting severally and not jointly, of the respective principal amounts at
maturity set forth in said Schedule A of $525,000,000 aggregate principal amount
at maturity of the Company's Convertible Debentures due 2020 (the "Initial
Securities") and the grant by the Company to the Initial Purchasers of the
option described in Section 2(b) to purchase all or any part of an additional
$61,992,000 aggregate principal amount at maturity of the Company's Convertible
Debentures due 2020 to cover over-allotments, if any (the "Option Securities").
The Initial Securities, together with the Option Securities, are collectively
referred to herein as the "Securities". The Securities are to be issued
pursuant to an
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indenture dated as of June 23, 2000 (the "Indenture") between the
Company and Bank One Trust Company, N.A., as trustee (the "Trustee"). The
Securities issued in book-entry form will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Company, the Trustee and DTC.
The Securities will be convertible into shares of class B common
stock, par value $0.01 per share, of the Company (the "Class B Common Stock") in
accordance with the terms of the Securities and the Indenture, at the initial
conversion rate specified in Schedule B hereto. Upon the sixth, tenth and
fifteenth anniversaries of the initial issuance date of the Securities, each
holder of Securities may require the Company to purchase such Securities for a
price to be paid, at the Company's option, in cash or (subject to certain
limitations) shares of Class B Common Stock, or any combination thereof, at a
purchase price equal to the issue price of the Securities plus the accrued
original issue discount and the accrued cash interest thereon to the date of
such purchase. If prior to such date of purchase the Securities have been
converted to semiannual coupon debentures following the occurrence of a Tax
Event (as defined in the Indenture), such purchase price will be equal to the
Restated Principal Amount (as defined in the Indenture) plus accrued and unpaid
interest from the date of such conversion to, but excluding, such date of
purchase. Upon each Change in Control (as defined in the Indenture) occurring
prior to the sixth anniversary of the initial issuance date of the Securities,
each holder of Securities may require the Company to purchase for cash such
holder's Securities (subject to certain restrictions described below) at a
purchase price equal to the issue price of the Securities plus the accrued
original issue discount and accrued cash interest thereon to the date of such
purchase. If prior to such date of purchase the Securities have been converted
to semiannual coupon debentures following the occurrence of a Tax Event, the
Company will be required to purchase such Securities at a cash price equal to
the Restated Principal Amount plus accrued and unpaid interest from the date of
such conversion to, but excluding, such date of purchase.
The holders of Securities will be entitled to the benefits of a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit A with such changes as shall be agreed to by the parties hereto (the
"Registration Rights Agreement"), pursuant to which the Company will file a
registration statement with the Securities and Exchange Commission (the
"Commission") registering resales of the Securities and the shares of Class B
Common Stock issuable upon conversion thereof, as referred to in the
Registration Rights Agreement under the Securities Act of 1933, as amended (the
"1933 Act").
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are to
be offered and sold through the Initial Purchasers without being registered
under the 1933 Act, in reliance upon exemptions therefrom. Pursuant to the terms
of the Securities and the Indenture, investors that acquire Securities may only
resell or otherwise transfer such Securities if such Securities are hereafter
registered under the 1933 Act or if an exemption from the registration
requirements of the 1933 Act is available (including the exemption afforded by
Rule 144A ("Rule 144A") of the rules and regulations promulgated under the 1933
Act (the "1933 Act Regulations") by the Commission).
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The Company has prepared and delivered to each Initial Purchaser
copies of a preliminary offering memorandum dated June 13, 2000 (the
"Preliminary Offering Memorandum") and has prepared and will deliver to each
Initial Purchaser on the date hereof or the next succeeding day, copies of a
final offering memorandum dated June 19, 2000 (the "Final Offering Memorandum")
each for use by such Initial Purchaser in connection with its solicitation of
purchases of, or offering of, the Securities. "Offering Memorandum" means, with
respect to any date or time referred to in this Agreement, the most recent
offering memorandum (whether the Preliminary Offering Memorandum or the Final
Offering Memorandum, or any amendment or supplement to either such document),
including exhibits thereto and any documents incorporated therein by reference,
which has been prepared and delivered by the Company to the Initial Purchasers
in connection with their solicitation of purchases of, or offering of, the
Securities.
All references in this Agreement to financial statements and schedules
and other information which is "contained", "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
which are incorporated by reference in the Offering Memorandum; and all
references in this Agreement to amendments or supplements to the Offering
Memorandum shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by
reference in the Offering Memorandum.
SECTION 1. Representations and Warranties by the Company.
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(a) Representations and Warranties. The Company represents and
warrants to the Initial Purchasers as of the date hereof and as of the Closing
Time referred to in Section 2(c) hereof, and as of the Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with the Initial Purchasers, as
follows:
(i) Similar Offerings. Neither the Company nor any of its
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affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an
"Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or
offered to sell or otherwise negotiated in respect of, or will solicit any offer
to buy or offer to sell or otherwise negotiate in respect of any security which
is or would be integrated with the sale of the Securities in a manner that would
require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Final Offering Memorandum does not, and
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at the Closing Time (as defined herein) (and, if any Option Securities are
purchased, at the Date of Delivery (as defined herein)) will not, include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that this representation,
warranty and agreement shall not apply to statements in or omissions from the
Offering Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through Merrill
Lynch expressly for use in the Offering Memorandum.
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(iii) Incorporated Documents. The Offering Memorandum as delivered
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from time to time shall incorporate by reference the most recent Annual Report
of the Company on Form 10-K filed with the Commission and each Quarterly Report
of the Company on Form 10-Q and each Current Report of the Company on Form 8-K
filed with the Commission since the end of the fiscal year to which such Annual
Report relates. The documents incorporated or deemed to be incorporated by
reference in the Offering Memorandum at the time they were or hereafter are
filed with the Commission complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the Commission
thereunder (the "1934 Act Regulations"), and, when read together with the other
information in the Offering Memorandum, at the time the Offering Memorandum was
issued and at the Closing Time (and, if any Option Securities are purchased, at
the Date of Delivery), do not and will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(iv) Independent Accountants. The accountants who certified the
----------------------------
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants with respect to the Company and
its subsidiaries within the meaning of Regulation S-X under the 1933 Act.
(v) Financial Statements. The financial statements, together with
------------------------
the related schedules and notes, included in the Offering Memorandum present
fairly the financial position of the Company and its consolidated subsidiaries
at the dates indicated and the statements of operations, stockholders' equity
and cash flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any, included in
the Offering Memorandum present fairly in accordance with GAAP the information
required to be stated therein. The selected financial data and the summary
financial information included in the Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with that
of the audited financial statements included in the Offering Memorandum.
(vi) No Material Adverse Change in Business. Since the respective
-------------------------------------------
dates as of which information is given in the Offering Memorandum, except as
otherwise stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the ordinary course
of business, which are material with respect to the Company and its subsidiaries
considered as one enterprise, and (C) there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its capital
stock.
(vii) Good Standing of the Company. The Company has been duly
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organized and is validly existing as a corporation in good standing under the
laws of the State of
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Delaware and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and to enter into and perform its obligations under this Agreement, the
Indenture and the Registration Rights Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(viii) Capitalization. The authorized, issued and outstanding capital
---------------------
stock and the debt of the Company is as set forth in the Offering Memorandum in
the column entitled "Actual" under the caption "Capitalization" (except for
subsequent repurchases pursuant to the Company's stock repurchase program or
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements, employee benefit plans referred to in the Offering
Memorandum or pursuant to the exercise of convertible securities or options
referred to in the Offering Memorandum). The shares of issued and outstanding
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
Upon issuance and delivery of the Securities in accordance with
this Agreement and the Indenture, the Securities will be convertible at the
option of the holder thereof into shares of Class B Common Stock, subject to the
Company's right to elect instead to pay such holder in cash the market value of
such shares of Class B Common Stock, in accordance with the terms of the
Securities and the Indenture; the shares of Class B Common Stock issuable upon
such conversion of the Securities have been duly authorized and reserved for
issuance upon such conversion by all necessary corporate action and such shares,
when issued upon such conversion, will be validly issued and will be fully paid
and non-assessable; the shares of Class B Common Stock issuable at the Company's
option upon purchase of the Securities at the option of the holder thereof will
have been, prior to the issuance thereof, duly authorized by all necessary
corporate action, and such shares, if and when issued in accordance with the
terms of the Securities and the Indenture, will be validly issued, fully paid
and non-assessable; no holder of Class B Common Stock will be subject to
personal liability by reason of being such a holder and the issuance of such
shares upon such conversion or purchases will not be subject to the preemptive
or other similar rights of any securityholder of the Company.
(ix) Corporate Subsidiaries. All of the consolidated corporations,
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partnerships (including, without limitation, general, limited and limited
liability partnerships) and limited liability companies in which the Company has
a direct or indirect ownership interest are listed in Schedule C to this
Agreement (collectively, the "Subsidiaries"). Each Subsidiary that is a
corporation (a "Corporate Subsidiary") has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum. Each Corporate Subsidiary is duly qualified and in good standing as
a foreign corporation
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authorized to do business in each other jurisdiction in which the nature of its
business or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect. All of the outstanding shares of capital stock of each Corporate
Subsidiary have been duly authorized and validly issued, are fully paid and non-
assessable, were not issued in violation of or subject to any preemptive or
similar rights, and, except as disclosed in the Offering Memorandum, are owned
by the Company directly, or indirectly through one of the other Subsidiaries,
free and clear of any perfected security interests, and, to the Company's
knowledge, any liens, encumbrances and equities and adverse claims; and no
options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligations into shares of capital stock
or ownership interests in any Corporate Subsidiary are outstanding.
(x) Partnerships. Each Subsidiary that is a partnership (a
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"Partnership") has been duly organized, is validly existing as a partnership in
good standing under the laws of its jurisdiction of organization and has the
partnership power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum. Each Partnership
is duly qualified and in good standing as a foreign partnership authorized to do
business in each other jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect. Except as
disclosed in the Offering Memorandum, the general and limited partnership
interests therein held directly or indirectly by the Company are owned free and
clear of any perfected security interests, and, to the Company's knowledge, any
liens, encumbrances and equities and adverse claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into ownership interests in any Partnership
are outstanding. Each partnership agreement pursuant to which the Company or a
Subsidiary holds an interest in a Partnership is in full force and effect and
constitutes the legal, valid and binding agreement of the parties thereto,
enforceable against such parties in accordance with the terms thereof, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally. There has been no
material breach of or default under, and no event which with notice or lapse of
time would constitute a material breach of or default under, such partnership
agreements by the Company or any Subsidiary or, to the Company's knowledge, any
other party to such agreements.
(xi) Limited Liability Companies. Each Subsidiary that is a limited
--------------------------------
liability company (an "LLC") has been duly organized, is validly existing as a
limited liability company in good standing under the laws of its jurisdiction of
organization and has the power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum.
Each LLC is duly qualified and in good standing as a foreign limited liability
company authorized to do business in each other jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. All outstanding membership interests in the LLCs were
issued and sold in compliance with the applicable operating agreements of such
LLCs and all
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applicable federal and state securities laws, and, except as disclosed in the
Offering Memorandum, the membership interests therein held directly or
indirectly by the Company are owned free and clear of any perfected security
interests, and, to the Company's knowledge, any liens, encumbrances and equities
and adverse claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into ownership interests in any LLC are outstanding. Each operating
agreement pursuant to which the Company or a Subsidiary holds a membership
interest in an LLC is in full force and effect and constitutes the legal, valid
and binding agreement of the parties thereto, enforceable against such parties
in accordance with the terms thereof, except as enforcement thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally. There has been no material breach of
or default under, and no event which with notice or lapse of time would
constitute a material breach of or default under, such operating agreements by
the Company or any Subsidiary or, to the Company's knowledge, any other party to
such agreements.
(xii) Actions of Subsidiaries. Except to the extent disclosed in the
-----------------------------
Offering Memorandum, each of the hospitals described in the Offering Memorandum
as owned or leased by the Company is owned or leased and operated by a
Subsidiary in which the Company directly or indirectly owns at least 50% of the
outstanding ownership interests. Except as disclosed in the Offering Memorandum,
there are no consensual encumbrances or restrictions on the ability of any
Subsidiary (i) to pay any dividends or make any distributions on such Corporate
Subsidiary's capital stock, such Partnership's partnership interests or such
LLC's membership interests or to pay any indebtedness owed to the Company or any
other Subsidiary, (ii) to make any loans or advances to, or investments in, the
Company or any other Subsidiary, or (iii) to transfer any of its property or
assets to the Company or any other Subsidiary.
(xiii) Authorization of Agreement. This Agreement has been duly
---------------------------------
authorized, executed and delivered by the Company.
(xiv) Authorization of the Indenture. The Indenture has been duly
-----------------------------------
authorized by the Company and, when executed and delivered by the Company and
the Trustee, will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(xv) Authorization of the Registration Rights Agreement. The
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Registration Rights Agreement has been duly authorized by the Company and, when
executed and delivered by the Company and the Initial Purchasers, will
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization,
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moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(xvi) Authorization of the Securities. The Securities have been duly
-------------------------------------
authorized and, at the Closing Time, will have been duly executed by the Company
and, when authenticated, issued and delivered in the manner provided for in the
Indenture and delivered against payment of the purchas price therefor as
provided in this Agreement, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and will be in the form contemplated by, and entitled to the benefits of,
the Indenture and the Registration Rights Agreement.
(xvii) Description of the Securities, the Indenture and the Registration
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Rights Agreement. The Securities, the Indenture and the Registration Rights
----------------
Agreement will conform in all material respects to the respective statements
relating thereto contained in the Offering Memorandum and will be in
substantially the respective forms last delivered to the Initial Purchasers
prior to the date of this Agreement.
(xviii) Absence of Defaults and Conflicts. Neither the Company nor any of
-----------------------------------------
its subsidiaries is in violation of its charter, by-laws or other organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it may be bound or to which any of the property or assets of the Company
or any of its subsidiaries may be subject (collectively, "Agreements and
Instruments"), except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement and the Securities and any
other agreement or instrument entered into or issued or to be entered into or
issued by the Company in connection with the transactions contemplated hereby or
thereby or in the Offering Memorandum and the consummation of the transactions
contemplated herein the Offering Memorandum (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or a Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, the Agreements and Instruments except for such
conflicts, breaches or defaults or liens, charges or encumbrances that,
individually or in the aggregate, would not result in a Material Adverse Effect,
nor will such action result in any violation of the
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provisions of the charter or by-laws of the Company or any of its subsidiaries
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or any
of their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any of its subsidiaries.
(xix) Absence of Labor Dispute. No labor dispute with the employees of
------------------------------
the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent, which may reasonably be expected to result in a Material
Adverse Effect.
(xx) Absence of Proceedings. Except as disclosed in the Offering
---------------------------
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets of the
Company or any of its subsidiaries or the consummation of the transactions
contemplated by this Agreement or the performance by the Company of its
obligations hereunder. The aggregate of all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their respective property or assets is the subject which are not
described in the Offering Memorandum, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
Material Adverse Effect.
(xxi) Possession of Intellectual Property. The Company and its
-----------------------------------------
subsidiaries own or possess, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would result in a Material Adverse Effect.
(xxii) Absence of Further Requirements. No filing with, or
--------------------------------------
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities hereunder or
the consummation of the transactions contemplated by this
9
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Agreement or for the due execution, delivery or performance of this Agreement
and the Indenture by the Company, except such as have been already obtained.
(xxiii) Possession of Licenses and Permits. The Company and its
------------------------------------------
subsidiaries have operated and currently operate their business in conformity
with all applicable laws, rules and regulations of each jurisdiction in which
they are conducting business, except where the failure to so be in compliance
would not, individually or in the aggregate, have a Material Adverse Effect. The
Company and each of its subsidiaries hold all certificates, consents,
exemptions, orders, licenses, authorizations, accreditations, permits or other
approvals or rights from all governmental authorities, all self-regulatory
organizations, all governmental and private accrediting bodies and all courts
and other tribunals (collectively, "Permits") which are necessary to own their
properties and to conduct their businesses, including, without limitation, such
Permits as are required (i) under such federal and state healthcare laws as are
applicable to the Company and such subsidiary and (ii) with respect to those
facilities operated by the Company or any of its subsidiaries that participates
in Medicare and/or Medicaid, to receive reimbursement thereunder, except for
such failures to have Permits which would not, individually or in the aggregate,
result in a Material Adverse Effect. The Company and each of its subsidiaries
have fulfilled and performed all of their material obligations with respect to
such Permits, and no event or change in condition has occurred which allows, or
after notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
Permit, except as to such qualifications as may be set forth in the Offering
Memorandum and except for such failures which would not, individually or in the
aggregate, result in a Material Adverse Effect. During the period for which
financial statements are included in the Offering Memorandum, denials by third
party payors of claims for reimbursement for services rendered by the Company
have not had a Material Adverse Effect.
(xxiv) Accounts Receivable. The accounts receivable of the Company and
--------------------------
its subsidiaries have been and will continue to be adjusted to reflect
reimbursement policies of third party payors such as Medicare, Medicaid, private
insurance companies, health maintenance organizations, preferred provider
organizations, managed care systems and other third party payors. The accounts
receivable relating to such third party payors do not and shall not exceed
amounts the Company and its subsidiaries are entitled to receive, subject to
adjustments to reflect reimbursement policies of third party payors and normal
discounts in the ordinary course of business.
(xxv) Actions with Respect to Medicare and Medicaid. None of the
---------------------------------------------------
Company, its subsidiaries nor any of their respective officers, directors or
stockholders, or, to the knowledge of the Company, any employee or other agent
of the Company or any of its subsidiaries, has engaged on behalf of the Company
or such subsidiary in any of the following: (A) knowingly and willfully making
or causing to be made a false statement or representation of a material fact in
any applications for any benefit or payment under the Medicare or Medicaid
program or from any third party (where applicable federal or state law prohibits
such payments to third parties); (B) knowingly and willfully making or causing
to be made any false statement or representation of a material fact for use in
determining rights to any benefit or payment under the Medicare or Medicaid
program or
10
<PAGE>
from any third party (where applicable federal or state law prohibits such
payments to third parties); (C) failing to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment under the Medicare or Medicaid program or from any third
party (where applicable federal or state law prohibits such payments to third
parties) on its own behalf or on behalf of another, with intent to secure such
benefit or payment fraudulently; (D) knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind (1) in
return for referring an individual to a person for the furnishing or arranging
for the furnishing of any item or service for which payment may be made in whole
or in part by Medicare or Medicaid or any third party (where applicable federal
or state law prohibits such payments to third parties), or (2) in return for
purchasing, leasing or ordering or arranging for or recommending the purchasing,
leasing or ordering of any good, facility, service, or item for which payment
may be made in whole or in part by Medicare or Medicaid or any third party
(where applicable federal or state law prohibits such payments to third
parties); provided, however, that it is agreed and understood that (x) from time
to time the Company settles claims made by governmental authorities which allege
conduct which may be deemed to violate clause (A) or (B) above and (y) such
settlements have not been, individually or in the aggregate, had a Material
Adverse Effect.
(xxvi) Regulatory Filings. Neither the Company nor any of its
---------------------------
subsidiaries has failed to file with applicable regulatory authorities any
statement, report, information or form required by any applicable law,
regulation or order, except where the failure to be so in compliance would not,
individually or in the aggregate, have a Material Adverse Effect, all such
filings or submissions were in material compliance with applicable laws when
filed and no material deficiencies have been asserted by any regulatory
commission, agency or authority with respect to any such filings or submissions.
(xxvii) Title to Property. The Company and each of its subsidiaries
--------------------------
have good and marketable title to all real property owned by the Company and
such subsidiary and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum or (b) do not, individually or in the
aggregate, materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or
such subsidiary; and all of the leases and subleases material to the business of
the Company and its subsidiaries, considered as one enterprise, and under which
the Company or any of its subsidiaries holds properties described in the
Offering Memorandum, are in full force and effect, and neither the Company nor
any of its subsidiaries has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any of its
subsidiaries under any of the leases or subleases mentioned above, or affecting
or questioning the rights of such the Company or any of its subsidiaries to the
continued possession of the leased or subleased premises under any such lease or
sublease.
(xxviii) Tax Returns. All United States federal income tax returns
--------------------
of the Company and its subsidiaries required by law to be filed have been filed
and all taxes shown by
11
<PAGE>
such returns or otherwise assessed, which are due and payable, have been paid,
except assessments against which appeals have been or will be promptly taken and
as to which adequate reserves have been provided. The United States federal
income tax returns of the Company through the fiscal year ended December 31,
1997 have been settled and all assessments in connection therewith made against
the Company have been paid. The Company and its subsidiaries have filed all
other tax returns that are required to have been filed by them pursuant to
applicable foreign, state, local or other law except insofar as the failure to
file such returns would not result in a Material Adverse Effect, and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
the Company and its subsidiaries, except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been provided.
The charges, accruals and reserves on the books of the Company in respect of any
income and corporation tax liability for any years not finally determined are
adequate to meet any assessments or re-assessments for additional income tax for
any years not finally determined, except to the extent of any inadequacy that
would not result in a Material Adverse Effect.
(xxix) Internal Controls. The Company and its subsidiaries
---------------------------
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxx) Insurance. The Company and its subsidiaries carry or are
-------------------
entitled to the benefits of insurance, with financially sound and reputable
insurers, in such amounts and covering such risks as is generally maintained by
companies of established repute engaged in the same or similar business, and all
such insurance is in full force and effect.
(xxxi) Environmental Laws. Except as described in the Offering
----------------------------
Memorandum and except such matters as would not, individually or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor any
of its subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and
its subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative, regulatory
12
<PAGE>
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries and (D) there
are no events or circumstances that might reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or proceeding
by any private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
Environmental Laws.
(xxxii) Rule 144A Eligibility. The Securities are eligible for
-------------------------------
resale pursuant to Rule 144A and will not be, at the Closing Time, of the same
class as securities listed on a national securities exchange registered under
Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation
system.
(xxxiii) No General Solicitation. None of the Company, its
---------------------------------
Affiliates or any person acting on its or any of their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation) has engaged
or will engage, in connection with the offering of the Securities, in any form
of general solicitation or general advertising within the meaning of Rule 502(c)
under the 1933 Act.
(xxxiv) No Registration Required. Subject to compliance by the
----------------------------------
Initial Purchasers with the representations and warranties set forth in Section
2 and the procedures set forth in Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated by this
Agreement and the Offering Memorandum to register the Securities under the 1933
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "1939 Act").
(xxxv) Reporting Company. The Company is subject to the reporting
---------------------------
requirements of Section 13 or Section 15(d) of the 1934 Act.
(xxxvi) Investment Company Act. The Company is not, and upon the
--------------------------------
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Offering Memorandum will not
be, an "investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended.
(xxxvii) Similar Registration Rights. There are no persons with
-------------------------------------
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxxviii) Acquisitions. Neither the execution, delivery or
----------------------
performance of any purchase agreement in connection with the acquisitions of (1)
St. Mary's Mercy Hospital, (2) 12 behavioral health facilities and associated
real estate assets from Charter Behavioral Health Systems, LLC and Crescent Real
Estate Funding VII LP, as described in the Offering Memorandum (collectively,
the "Acquisitions"), by the Company nor the consummation by the Company of the
transactions contemplated thereby (x) conflicted, conflicts or will conflict
with or constituted, constitutes or will constitute a breach of, or a default
under the certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of its subsidiaries or (y)
conflicted, conflicts or will conflict with or constituted, constitutes or will
constitute a breach of, or a
13
<PAGE>
default under, any agreement, indenture, lease or other instrument to which
the Company or any of its subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or, subject to the
Company's receipt of all required regulatory approvals, violates or will
violate any statute, law, regulation or filing or judgment, injunction,
order or decree applicable to the Company or any of its subsidiaries or any
of their respective properties, or will result in the creation or
imposition of any lien, charge or incumbrance upon any property or assets
of the Company or any of its subsidiaries pursuant to the terms of an
agreement or instrument to which any of them is a party or by which any of
them may be bound or to which any of the property or assets of any of them
is subject. The Company reasonably believes that all closing conditions for
the Acquisitions will be satisfied prior to their respective closings and
anticipates that the Acquisitions will be consummated in accordance with
the terms of the respective purchase agreements.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or any of the Subsidiaries delivered to the Representatives or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Company to each Initial Purchaser as to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
-----------------------------------------------------------
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Initial Purchaser, severally and not
jointly, and each Initial Purchaser, severally and not jointly, agrees to
purchase from the Company, at the price set forth in Schedule B, the aggregate
principal amount at maturity of Initial Securities set forth in Schedule A
opposite the name of such Initial Purchaser, plus any additional principal
amount at maturity of Initial Securities which such Initial Purchaser may become
obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the Initial
Purchasers, severally and not jointly, to purchase any or all of the Option
Securities (in multiples of $1,000 principal amount at maturity) at the price
set forth in Schedule B hereto plus accrued Original Issue Discount, if any,
from the Closing Time to the Date of Delivery. The option hereby granted will
expire 30 days after the date hereof and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments that may be
made in connection with the offering and distribution of the Initial Securities
upon notice by the Representatives to the Company setting forth the number of
Option Securities as to which the several Initial Purchasers are then exercising
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the Option Securities, each of the Initial Purchasers, acting
severally and not jointly, will purchase
14
<PAGE>
that proportion of the total number of Option Securities then being purchased
which the number of Initial Securities set forth in Schedule A opposite the name
of such Initial Purchaser bears to the total number of Initial Securities,
subject in each case to such adjustments as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the office of Shearman
& Sterling, 599 Lexington Avenue, New York, New York 10022, or at such other
place as shall be agreed upon by the Representatives and the Company, at 10:00
A.M. (New York City time) on June 23, 2000, or such other time not later than
ten business days after such date as shall be agreed upon by the Representatives
and the Company (such time and date of payment and delivery being herein called
the "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Initial Purchasers, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the above-
mentioned offices, or at such other place as shall be agreed upon by the
Representatives and the Company, on each Date of Delivery as specified in the
notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and not
as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such Initial Purchaser from its obligations hereunder.
(d) Qualified Institutional Buyer. Each Initial Purchaser
represents and warrants to, and agrees with, the Company that it is a "qualified
institutional buyer" within the meaning of Rule 144A under the 1933 Act (a
"Qualified Institutional Buyer") and an "accredited investor" within the meaning
of Rule 501(a) under the 1933 Act (an "Accredited Investor").
(e) Denominations; Registration. Certificates for the Securities
shall be in such denominations ($1,000 or integral multiples thereof) and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates representing the Securities shall be
registered in the name of Cede & Co. pursuant to the DTC Agreement and shall be
made available for examination and packaging by the Initial Purchasers in The
City of New York not later than 10:00 A.M. on the last business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
15
<PAGE>
SECTION 3. Covenants of the Company. The Company covenants with the
-----------------------------------
Initial Purchasers as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Company will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (x) any filing made by the Company of information relating to the offering of
the Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries, considered as
one enterprise, which (i) make any statement in the Offering Memorandum false or
misleading or (ii) are not disclosed in the Offering Memorandum. In such event
or if during such time any event shall occur as a result of which it is
necessary, in the reasonable opinion of any of the Company, its counsel, the
Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement
the Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company
will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect such amendment or
supplement without the consent of the Initial Purchasers. Neither the consent of
the Initial Purchasers, nor the Initial Purchaser' delivery of any such
amendment or supplement, shall constitute a waiver of any of the conditions set
forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company
will use its best efforts, in cooperation with the Initial Purchasers, to
qualify the Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions as the Representatives may designate
and will maintain such qualifications in effect as long as required for the sale
of the Securities; provided, however, that the Company shall not be obligated to
-------- -------
file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in
16
<PAGE>
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
(e) Rating of Securities. The Company shall take all reasonable
action necessary to enable Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to
provide their respective credit ratings of the Securities.
(f) DTC. The Company will cooperate with the Representatives and
use its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds".
(h) Restriction of Sale of Securities. During a period of 75 days
from the date of the Final Offering Memorandum, the Company will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or lend or otherwise dispose of or transfer any shares of the
Company's Class B Common Stock or any securities convertible into or
exchangeable or exercisable for Class B Common Stock, whether now owned or
hereafter acquired by the Company or with respect to which the Company has or
hereafter acquires the power of disposition, or it being expressly understood
that the filing of any registration statement under the 1933 Act with respect to
any of the foregoing shall not constitute an "offer" for purposes of this
Section 3(h)or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of Class B Common Stock or any securities
convertible into or exchangeable for Class B Common Stock, whether any such swap
or transaction is to be settled by delivery of Class B Common Stock or other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or upon the conversion of
a security outstanding on the date hereof and referred to in the Offering
Memorandum or the conversion of the Securities or (C) any shares of Common Stock
issued or options to purchase Common Stock granted pursuant to existing employee
benefit plans of the Company.
(i) PORTAL Designation. The Company will use its best efforts to
permit the Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities Dealers,
Inc.("NASD") relating to trading in the PORTAL Market.
(j) Reservation of Common Stock. The Company will reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Class B Common Stock for the purpose of enabling the Company to satisfy any
obligations to issue Class B Common Stock upon conversion of the Securities.
17
<PAGE>
(k) Listing of Class B Common Stock. The Company will use its best
efforts to cause all shares of Class B Common Stock issuable upon conversion of
the Securities to be listed on the New York Stock Exchange.
(l) Reporting Requirements. The Company, during the period when the
Offering Memorandum is required to be delivered pursuant to Section 6(a)(vii)
hereof, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the 1934 Act Regulations.
SECTION 4. Payment of Expenses.
------------------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, the Securities, the
Indenture and the Registration Rights Agreement, including, but not limited to,
(i) the preparation, printing, delivery to the Initial Purchasers and any filing
of the Offering Memorandum (including financial statements and any schedules or
exhibits and any document incorporated therein by reference) and of each
amendment or supplement thereto, (ii) the preparation, printing and delivery to
the Initial Purchasers of this Agreement, the Indenture, the Registration Rights
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Initial Purchasers, including any charges of DTC in connection therewith, (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Initial Purchasers in
connection therewith and in connection with the preparation of the Blue Sky
Survey, any supplement thereto and any Legal Investment Survey, (vi) the fees
and expenses of the Trustee, including the reasonable fees and disbursements of
counsel for the Trustee in connection with the Indenture and the Securities,
(vii) any fees payable in connection with the rating of the Securities and
(viii) any fees and expenses payable in connection with the initial and
continued designation of the Securities as PORTAL securities under the PORTAL
Market Rules pursuant to NASD Rule 5322. The Company shall not pay the fees and
disbursements of counsel to the Initial Purchasers with respect to any of the
foregoing, except with respect to clause (v) above.
(b) Termination of Agreement. If this Agreement is terminated by
the Representatives in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchaser's Obligations. The
--------------------------------------------------------
obligations of the Initial Purchasers hereunder are subject to the accuracy of
the representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
18
<PAGE>
(a) Opinion of Counsel for the Company. At the Closing Time, the
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Fulbright & Jaworski L.L.P., counsel for the Company in form
and substance satisfactory to counsel for the Initial Purchasers, to the effect
set forth in Exhibit B hereto.
(b) Opinion of General Counsel for the Company. At the Closing
Time, the Initial Purchasers shall have received the opinion, dated as of the
Closing Time, of Bruce R. Gilbert, General Counsel of the Company, in form and
substance reasonably satisfactory to counsel for the Initial Purchasers, to the
effect set forth in Exhibit C hereto and to such further effect as counsel to
the Initial Purchasers may reasonably request.
(c) Opinion of Counsel for Initial Purchasers. At the Closing Time,
the Representatives shall have received the opinion, dated as of the Closing
Time, of Shearman & Sterling, counsel for the Initial Purchasers, in form and
substance satisfactory to the Initial Purchasers. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the Representatives. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(d) Officers' Certificates. At the Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Senior
Vice President of the Company and of the chief financial or chief accounting
officer of the Company, dated as of the Closing Time, to the effect that (i)
there has been no such material adverse change, (ii) the representations and
warranties in Section 1 hereof are true and correct with the same force and
effect as though expressly made at and as of the Closing Time, and (iii) the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Closing Time.
(e) Accountants' Comfort Letters. At the time of the execution of
this Agreement, the Representatives shall have received from Arthur Andersen LLP
("Arthur Andersen"), a letter dated such date, in form and substance reasonably
satisfactory to the Representatives, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(f) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from Arthur Andersen a letter, dated as of
the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
19
<PAGE>
(g) Maintenance of Rating. Since the date of this Agreement, there
shall not have occurred a downgrading in the rating assigned to the Securities
or any of the Company's other debt securities by any "nationally recognized
statistical rating agency", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating
agency shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of the
Company's other debt securities.
(h) Registration Rights Agreement. At the Closing Time, the
Registration Rights Agreement, in form and substance reasonably satisfactory to
the Representatives, shall have been duly executed and delivered by the Company
and (assuming due execution, delivery and performance by the Initial Purchasers)
be in full force and effect.
(i) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(j) Lock-up Agreement. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit D hereto signed by the executive officers and directors of the Company.
(k) Conditions to Purchase of Option Securities. In the event that
the Initial Purchasers exercise their option provided in Section 2(b) to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company and any subsidiary of the Company
hereunder shall be true and correct as of the Date of Delivery and, at the Date
of Delivery, the Representatives shall have received:
(i) Officers' Certificates. Certificates, dated the Date of
-----------------------------
Delivery, of the President or a Senior Vice President of the Company and of the
chief financial or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(d) remains true
and correct as of the Date of Delivery.
(ii) Opinions of Counsel. The opinions of Fulbright & Jaworski
--------------------------
L.L.P., counsel for the Company, and Bruce R. Gilbert, General Counsel of the
Company, each in form and substance satisfactory to counsel for the Initial
Purchasers, dated the Date of Delivery, relating to the Option Securities to be
purchased on the Date of Delivery and otherwise to substantially the same effect
as the opinions provided in Sections 5(a) and 5(b).
(iii) Opinion of Counsel for the Initial Purchasers. The opinion of
----------------------------------------------------
Shearman & Sterling, counsel for the Initial Purchasers, dated the Date of
Delivery, relating to the Option Securities to be purchased on the Date of
Delivery and otherwise to the same effect as the opinion provided in Section
5(c).
(iv) Bring-down Comfort Letters. Letter from Arthur Andersen in form
---------------------------------
and substance reasonably satisfactory to the Representatives and dated the Date
of Delivery, substantially in the same form and substance as the letters
furnished to the Initial Purchasers pursuant to Section 5(e), except that the
"specified date" in the letters
20
<PAGE>
furnished pursuant to this paragraph shall be a date not more than three
business days prior to the Date of Delivery.
(v) Additional Documents. At the Closing Time and at each Date of
---------------------------
Delivery counsel for the Initial Purchasers shall have been furnished with
such documents as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be reasonably satisfactory in form and substance to the Representatives and
counsel for the Initial Purchasers.
(1) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
Initial Purchasers to purchase the Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to the Closing
Time or such Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1, 7, 8 and 9 shall survive any such termination and
remain in full force and effect.
SECTION 6. Subsequent Offers and Resales of the Securities.
----------------------------------------------------------
(a) Offer and Sale Procedures. Each of the Initial Purchasers and
the Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales Only to Qualified Institutional Buyers. Offers
--------------------------------------------------------------
and sales of the Securities shall only be made to persons whom the offeror
or seller reasonably believes to be qualified institutional buyers (as
defined in Rule 144A under the Securities Act).
(ii) No General Solicitation. No general solicitation or general
------------------------------
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the
Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
----------------------------------------
Subsequent Purchaser of a Security acting as a fiduciary for one or more
third parties, each third party shall, in the judgment of the applicable
Initial Purchasers, be a Qualified Institutional Buyer.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will
---------------------------------
take reasonable steps to inform, and cause each of its U.S. Affiliates to
take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have registered under the 1933 Act, (B) are being
sold to them without registration under the 1933 Act in reliance on Rule
144A or in accordance with another exemption from
21
<PAGE>
registration under the 1933 Act, as the case may be, and (C) may not be
offered, sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Regulation S or (3) inside the
United States in accordance with (x) Rule 144A to a person whom the seller
reasonably believes is a Qualified Institutional Buyer that is purchasing
such Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the 1933 Act.
(v) Restrictions on Transfer. The transfer restrictions and the
-------------------------------
other provisions set forth in the Offering Memorandum under the heading
"Notice to Investors", including the legend required thereby, shall apply
to the Securities except as otherwise agreed by the Company and the Initial
Purchasers.
(b) Covenants of the Company. The Company covenants with the
Initial Purchasers as follows:
(i) Integration. The Company agrees that it will not and will cause
------------------
its Affiliates not to, directly or indirectly, solicit any offer to buy or
make any offer or sale of, or otherwise negotiate in respect of, securities
of the Company of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer or
sale would render invalid (for the purpose of (i) the sale of the
Securities by the Company to the Initial Purchasers, (ii) the resale of the
Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the
resale of the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act provided by
Section 4(2) thereof or by Rule 144A thereunder or otherwise.
(ii) Rule 144A Information. The Company agrees that, in order to
----------------------------
render the Securities eligible for resale pursuant to Rule 144A under the
1933 Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to
Section 13 or 15(d) of the 1934 Act (such information, whether made
available to holders or prospective purchasers or furnished to the
Commission, is herein referred to as "Additional Information").
(iii) Restriction on Repurchases. Until the expiration of two years
---------------------------------
after the original issuance of the Securities, the Company will not, and
will cause its Affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions).
SECTION 7. Indemnification.
--------------------------
22
<PAGE>
(a) Indemnification of Initial Purchasers. The Company agrees to
indemnify and hold armless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Final Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
-------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto).
(b) Indemnification of Company, Directors and Officers. Each
Initial Purchaser agrees to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Offering
Memorandum in reliance upon and in conformity with written information furnished
to the Company by such Initial Purchaser through Merrill Lynch expressly for use
in the Offering Memorandum.
(c) Actions Against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so
23
<PAGE>
notify an indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a result
thereof and in any event shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 7(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 7(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
-------- -------
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Settlement Without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into, and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in
-----------------------
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
24
<PAGE>
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties? relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Initial Purchasers' respective
obligations to contribute pursuant to this Section are several in proportion to
the principal amount at maturity of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
----------------------------------------------------------------
Delivery. All representations, warranties and agreements contained in
--------
this Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto shall remain
25
<PAGE>
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Initial Purchaser or controlling person, or by or on behalf
of the Company, and shall survive delivery of the Securities to the Initial
Purchasers.
SECTION 10. Termination of Agreement.
------------------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority or (iv) if a banking moratorium has been declared by either Federal or
New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 9 shall survive such termination and remain in full force and
effect.
SECTION 11. Default by One or More of the Initial Purchasers. If one
------------------------------------------------------------
or more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representatives shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other Initial Purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then this Agreement shall terminate without liability on the part of any
non-defaulting Initial Purchaser.
No action pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone the
26
<PAGE>
Closing Time for a period not exceeding seven days in order to effect any
required changes in the Offering Memorandum or in any other documents or
arrangements.
SECTION 12. Notices. All notices and other communications hereunder
-------------------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281, attention of James D. Forbes
(telecopier no. 212-449-7171); notices to the Company shall be directed to it at
Universal Corporate Center, 367 South Gulph Road, P. O. Box 61558, King of
Prussia, Pennsylvania 19406-0958, attention of General Counsel.
SECTION 13. Parties. This Agreement shall inure to the benefit of and
-------------------
be binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
hereof and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. Governing Law. This Agreement shall be governed by and
-------------------------
construed in accordance with the laws of the State of New York. Specified times
of day refer to New York City time.
SECTION 15. Effect of Headings. The Section headings herein and the
------------------------------
Table of Contents are for convenience only and shall not affect the construction
hereof.
SECTION 16. Entire Agreement. This Agreement is intended by the
----------------------------
parties as a final expression of their agreement, and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
UNIVERSAL HEALTH SERVICES, INC.
By:___________________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
J.P. MORGAN SECURITIES INC.
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
By: MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_________________________________
Name:
Title:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
at Maturity
Name of Initial Purchaser of Securities
------------------------- -------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. $243,075,000
J.P. Morgan Securities Inc................................................ 158,550,000
UBS Warburg LLC........................................................... 74,025,000
Banc of America Securities LLC............................................ 49,350,000
Total............................................................. $525,000,000
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
UNIVERSAL HEALTH SERVICES, INC.
$525,000,000 Convertible Debentures due 2020
1. The initial offering price per $1,000 principal amount at
maturity of the Securities shall be $425.90, which, together with the 0.426%
cash interest thereon, represents a yield to maturity of 5.0% per annum
(computed on a semiannual bond equivalent basis).
2. The Securities shall be convertible into shares of class B common
stock, par value $0.01 per share, of the Company (the ?Class B Common Stock?) at
an initial rate of 5.6024 shares of Class B Common Stock per $1,000 principal
amount at maturity of Securities.
3. The purchase price to be paid by the Initial Purchasers for the
Securities shall be $414.19, being an amount equal to the initial offering price
per $1,000 principal amount at maturity of Securities set forth above, less
$11.71 per $1,000 principal amount at maturity of Securities.
4. Prior to June 23, 2006, the Securities will not be redeemable.
5. The redemption prices to be supplied on page 27 of the Offering
Memorandum (and correspondingly in the Indenture) shall be:
<TABLE>
<CAPTION>
(1) (2) (3)
Debenture Accrued Original Redemption Price
Redemption Date Issue Price Issue Discount (1) + (2)
-------------------------------- --------------- -------------------- ------------------
<S> <C> <C> <C>
June 23, 2006................... $425.90 $117.51 $ 543.41
June 23, 2007................... $425.90 $140.70 $ 566.60
June 23, 2008................... $425.90 $165.07 $ 590.97
June 23, 2009................... $425.90 $190.68 $ 616.58
June 23, 2010................... $425.90 $217.58 $ 643.48
June 23, 2011................... $425.90 $245.84 $ 671.74
June 23, 2012................... $425.90 $275.53 $ 701.43
June 23, 2013................... $425.90 $306.73 $ 732.63
June 23, 2014................... $425.90 $339.51 $ 765.41
June 23, 2015................... $425.90 $373.94 $ 799.84
June 23, 2016................... $425.90 $410.12 $ 836.02
June 23, 2017................... $425.90 $448.13 $ 874.03
June 23, 2018................... $425.90 $488.06 $ 913.96
June 23, 2019................... $425.90 $530.02 $ 955.92
At stated maturity.............. $425.90 $574.10 $1,000.00
</TABLE>
Sch B-1
<PAGE>
6. The Purchase Dates and Purchase Prices to be supplied on page 28
of the Offering Memorandum and correspondingly in the Indenture shall be:
Purchase Date Purchase Price
------------- --------------
June 23, 2006 $543.41
June 23, 2010 $643.48
June 23, 2015 $799.84
7. The prices referred to in paragraphs 5 and 6 above are subject to
adjustment upon the occurrence of a Tax Event, and the subsequent conversion of
the Securities to semiannual coupon notes in the manner specified in the
Offering Memorandum.
Sch B-2
<PAGE>
SCHEDULE C
List of Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
ASC of Corona, Inc. California
ASC of Las Vegas, Inc. Nevada
ASC of Littleton, Inc. Colorado
ASC of Midwest City, Inc. Oklahoma
ASC of New Albany, Inc. Indiana
ASC of Palm Springs, Inc. California
ASC of Ponca City, Inc. Oklahoma
ASC of Springfield, Inc. Missouri
ASC of St. George, Inc. Utah
Aiken Regional Medical Centers, Inc. South Carolina
Arbour Elder Services, Inc. Massachusetts
Arkansas Surgery Center of Fayetteville, L.P. Arkansas
Auburn Regional Medical Center, Inc. Washington
Bluegrass Regional Cancer Center, L.L.P. Kentucky
Capitol Radiation Therapy, L.L.P. Kentucky
Chalmette Medical Center, Inc. Louisiana
Children's Reach, L.L.C. Pennsylvania
Choate Health Management, Inc. Massachusetts
Comprehensive Occupational and Clinical Delaware
Health, Inc.
Danville Radiation Therapy, L.L.P. Kentucky
Del Amo Hospital, Inc. California
District Hospital Partners, L.P. District of Columbia
Doctors' Hospital of Shreveport, Inc. Louisiana
Eye West Laser Vision, L.P. Delaware
C-1
<PAGE>
Forest View Psychiatric Hospital, Inc. Michigan
Fort Duncan Medical Center, L.P. Delaware
Fort Duncan Medical Center, Inc. Delaware
Glen Oaks Hospital, Inc. Texas
HRI Clinics, Inc. Massachusetts
HRI Hospital, Inc. Massachusetts
Health Care Finance & Construction Corp. Delaware
Hope Square Surgical Center, L.P. Delaware
Inland Valley Regional Medical Center, Inc. California
Internal Medicine Associates of Doctors' Louisiana
Hospital, Inc.
La Amistad Residential Treatment Center, Inc. Florida
Laredo Holdings, Inc. Delaware
Laredo Regional Medical Center, L.P. Delaware
Laredo Regional, Inc. Delaware
Madison Radiation Oncology Associates, L.L.C. Indiana
Manatee Memorial Hospital, L.P. Delaware
McAllen Holdings, Inc. Delaware
McAllen Medical Center Physicians Texas
Group, Inc.
McAllen Medical Center, Inc. Texas
McAllen Medical Center, L.P. Delaware
Meridell Achievement Center, Inc. Texas
Merion Building Management, Inc. Delaware
Nevada Radiation Oncology Center-West, L.L.C. Nevada
New Albany Outpatient Surgery, L.P. Delaware
Northern Nevada Medical Center, L.P. Delaware
Northwest Texas Healthcare System, Inc. Texas
Northwest Texas Surgical Hospital, L.L.C. Texas
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Oasis Health Systems, L.L.C. Nevada
Professional Probation Services, Inc. Georgia
Professional Surgery Corporation of Arkansas Arkansas
Pueblo Medical Center, Inc. Nevada
RCW of Edmond, Inc. Oklahoma
Radiation Therapy Associates of California
California, L.L.C.
Relational Therapy Clinic, Inc. Louisiana
Renaissance Women's Center of Austin, L.L.C. Texas
Renaissance Women's Center of Edmond, L.L.C. Oklahoma
River Crest Hospital, Inc. Texas
River Oaks, Inc. Louisiana
River Parishes Internal Medicine, Inc. Louisiana
SOSC, Inc. New Hampshire
Southern Indiana Radiation Oncology Indiana
Associates, L.L.C.
Sparks Family Hospital, Inc. Nevada
St. George Surgical Center, L.P. Delaware
St. Louis Behavioral Medicine Institute, Inc. Missouri
Summerlin Hospital Medical Center, L.L.C. Delaware
Summerlin Hospital Medical Center, L.P. Delaware
Surgery Center of Littleton, L.P. Delaware
Surgery Center of Midwest City, L.P. Delaware
Surgery Center of Ponca City, L.P. Delaware
Surgery Center of Springfield, L.P. Delaware
Surgery Center of Waltham, Massachusetts
Limited Partnership
The Alliance for Creative Development, Inc. Pennsylvania
The Arbour, Inc. Massachusetts
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The Bridgeway, Inc. Arkansas
The Pavilion Foundation Illinois
Tonopah Health Services, Inc. Nevada
Trenton Street Corporation Texas
Turning Point Care Center, Inc. Georgia
Two Rivers Psychiatric Hospital, Inc. Delaware
UHS Advisory, Inc. Delaware
UHS Holding Company, Inc. Nevada
UHS Las Vegas Properties, Inc. Nevada
UHS Managed Care Operations, L.L.C. Pennsylvania
UHS Midwest Center for Youth and Indiana
Families, Inc.
UHS Receivables Corp. Delaware
UHS Recovery Foundation, Inc. Pennsylvania
UHS of Anchor, L.P. Delaware
UHS of Belmont, Inc. Delaware
UHS of Bethesda, Inc. Delaware
UHS of D.C., Inc. Delaware
UHS of Delaware, Inc. Delaware
UHS of Eagle Pass, Inc. Delaware
UHS of Fairmount, Inc. Delaware
UHS of Fayetteville, Inc. Arkansas
UHS of Florida, Inc. Florida
UHS of Fuller, Inc. Massachusetts
UHS of Georgia, Inc. Delaware
UHS of Georgia Holdings, Inc. Delaware
UHS of Greenville, Inc. Delaware
UHS of Hampton Learning Center, Inc. New Jersey
UHS of Hampton, Inc. New Jersey
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UHS of Hartgrove, Inc. Illinois
UHS of Hidalgo, Inc. Delaware
UHS of Hidalgo Holdings, Inc. Delaware
UHS of Lakeside, Inc. Delaware
UHS of Laurel Heights, L.P. Delaware
UHS of Manatee, Inc. Florida
UHS of New Orleans, Inc. Louisiana
UHS of Odessa, Inc. Texas
UHS of Palms, L.P. Delaware
UHS of Parkwood, Inc. Delaware
UHS of Peachford, L.P. Delaware
UHS of Pennsylvania, Inc. Pennsylvania
UHS of Provo Canyon, Inc. Delaware
UHS of Puerto Rico, Inc. Delaware
UHS of Ridge, Inc. Delaware
UHS of River Parishes, Inc. Louisiana
UHS of Rockford, Inc. Delaware
UHS of Talbot, L.P. Delaware
UHS of Timberlawn, Inc. Texas
UHS of Waltham, Inc. Massachusetts
UHSMS, Inc. Delaware
UHSR Corporation Delaware
Universal Community Behavioral Health, Inc. Pennsylvania
Universal Health Network, Inc. Nevada
Universal Health Pennsylvania Properties, Inc. Pennsylvania
Universal Health Recovery Centers, Inc. Pennsylvania
Universal Health Services of Cedar Hill, Inc. Texas
Universal Health Services of Concord, Inc. California
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Universal Probation Services, Inc. Georgia
Universal Treatment Centers, Inc. Delaware
Valley Health System, L.L.C. Delaware
Valley Hospital Medical Center, Inc. Nevada
Valley Surgery Center, L.P. Delaware
Victoria Regional Medical Center, Inc. Texas
Wellington Physician Alliances, Inc. Florida
Wellington Regional Medical Center Florida
Incorporated
Westlake Medical Center, Inc. California
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<PAGE>
Exhibit A
FORM OF REGISTRATION RIGHTS AGREEMENT
[Filed separately]
<PAGE>
Exhibit B
FORM OF OPINION OF COUNSEL TO THE COMPANY
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware;
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement;
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect;
(iv) The authorized capital stock of the Company is as set forth in the
Offering Memorandum in the column entitled "Actual" under the caption
"Capitalization"; the shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and non-
assessable; and free of statutory and contractual preemptive rights;
(v) The Purchase Agreement and the Registration Rights Agreement have
each been duly authorized, executed and delivered by the Company;
(vi) The Indenture has been duly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and delivery thereof by
the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law);
(vii) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, when executed and authenticated in
accordance with the provisions of the Indenture and issued and delivered against
payment of the purchase price therefor will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms , except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium (including, without limitation, all laws
relating to fraudulent transfers), or other similar laws relating to or
affecting enforcement of creditor's rights generally, or by general principles
of equity (regardless of whether enforcement is considered in a proceeding in
equity or at law), and will be entitled to the benefits of the Indenture;
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(viii) Upon issuance and delivery of the Securities in accordance with the
Purchase Agreement and the Indenture, the Securities will be convertible at the
option of the holder thereof for shares of Class B Common Stock in accordance
with the terms of the Securities and the Indenture; the shares of Class B Common
Stock issuable upon conversion of the Securities have been duly authorized and
reserved for issuance upon such conversion by all necessary corporate action;
such shares, when issued upon such conversion, will be validly issued and will
be fully paid and non-assessable and no holder of Class B Common Stock will be
subject to personal liability by reason of being such a holder;
(ix) The issuance of the shares of Class B Common Stock upon conversion
of the Securities is not subject to (a) any preemptive rights under the
Certificate of Incorporation or By-Laws of the Company or (b) to our knowledge,
other similar rights of any securityholder of the Company;
(x) The Securities, the Indenture and the Registration Rights Agreement
conform in all material respects to the descriptions thereof contained in the
Offering Memorandum;
(xi) The documents incorporated by reference in the Offering Memorandum
(other than the financial statements and supporting schedules therein, as to
which we express no opinion), when they were filed with the Commission (or, if
an amendment with respect to any such document was filed, when such amendment
was filed) complied as to form in all material respects with the requirements of
the 1934 Act and the rules and regulations of the Commission thereunder;
(xii) To our knowledge, there is not pending or threatened any action,
suit or proceeding, to which the Company or any subsidiary of the Company is a
party, or to which the property of the Company or any subsidiary of the Company
is subject, before or brought by any court or governmental agency or body, which
would be required to be described in the Offering Memorandum if the Offering
Memorandum were a prospectus, but is not so described;
(xiii) The statements in the Offering Memorandum, including the information
under the captions "Description of Debentures," "Description of Capital Stock,"
"Federal Income Tax Considerations" and "Plan of Distribution," to the extent
that they are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all material
respects and present fairly the information required to be shown;
(xiv) To our knowledge, neither the Company nor any of its subsidiaries is
in violation of its charter or by-laws or other organizational documents and no
default by the Company or any of its subsidiaries exists in the due performance
or observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the Offering
Memorandum or filed or incorporated by reference therein or known to us;
(xv) Except with respect to matters covered in opinion (xvi) below, no
filing with, or authorization, approval, consent, license, order, registration,
qualification or decree of,
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any court or governmental authority or agency, domestic or foreign (other than
such as may be required under the applicable securities or Blue Sky laws of the
various jurisdictions in which the Securities will be offered or sold, as to
which we express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture by the Company or for the
offering, issuance, sale or delivery of the Securities to the Initial Purchasers
or the resale by the Initial Purchasers in accordance with the terms of the
Purchase Agreement or the issuance of shares of Class B Common Stock upon
conversion of the Securities;
(xvi) Assuming the accuracy of the representations and warranties of the
Company and the Initial Purchasers contained in the Purchase Agreement and
compliance with the agreements of the Company and the Initial Purchasers
contained in the Purchase Agreement, no registration of the Securities under the
1933 Act is required, and no qualification of the Indenture under the 1939 Act
is necessary, for the offer and sale of the Securities to the Initial Purchasers
as contemplated by the Purchase Agreement or in connection with the initial
resale of the Securities by the Initial Purchasers in accordance with Section 6
of the Purchase Agreement;
(xvii) The execution, delivery and performance of the Purchase Agreement,
the Indenture, the Registration Rights Agreement and the Securities and the
consummation of the transactions contemplated in the Purchase Agreement and the
Offering Memorandum (including the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption "Use Of
Proceeds" and the issuance of the shares of Class B Common Stock issuable upon
conversion of the Securities) and compliance by the Company with its obligations
under the Purchase Agreement, the Registration Rights Agreement, the Indenture
and the Securities do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined in Section 1(a)(xviii) of the Purchase
Agreement) under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary of the
Company pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to us,
to which the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any subsidiary of the Company is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any of its subsidiaries, or any
applicable law, statute, rule regulation (assuming compliance with all
applicable state securities and Blue Sky laws), judgment order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties, assets or operations; and
(xviii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
We have participated in conferences with officers and other representatives
of the Company, representatives of the independent public accountants of the
Company and representatives of the Initial Purchasers at which the contents of
the Offering Memorandum were discussed and, although we are not passing upon and
do not assume responsibility for the
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<PAGE>
accuracy, completeness or fairness of the statements contained in the Offering
Memorandum (except and to the extent stated in paragraphs (iv) (except with
respect to the shares of issued and outstanding capital stock of the Company
being fully paid and non-assessable), (x) and (xiii) above), or the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company), nothing has come to our
attention that would lead us to believe that the Offering Memorandum or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted thereof, as to which we make no statement), at the time the Offering
Memorandum was issued, at the time any such amended or supplemented Offering
Memorandum was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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<PAGE>
Exhibit C
FORM OF OPINION OF GENERAL
COUNSEL OF THE COMPANY
(i) Each of the Company and each of its subsidiaries is duly qualified as
a foreign corporation, partnership or limited liability company, as applicable,
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries listed on Schedule C to
the Purchase Agreement (each, a "Subsidiary," and, collectively, the
"Subsidiaries") considered as one enterprise, whether or not arising in the
ordinary course of business ("Material Adverse Effect");
(ii) Each Subsidiary that is a corporation (a "Corporate Subsidiary") has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum. Each Corporate Subsidiary is
duly qualified and in good standing as a foreign corporation authorized to do
business in each other jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect. All of the
outstanding shares of capital stock of each Corporate Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable, and, except as
disclosed in the Offering Memorandum, are owned of record by the Company
directly, or indirectly through one of the other Subsidiaries, free and clear of
any perfected security interests, or to my knowledge, any other liens,
encumbrances and equities and adverse claims.
(iii) Each Subsidiary that is a partnership (a "Partnership") has been
duly organized, is validly existing as a partnership in good standing under the
laws of its jurisdiction of organization and has the partnership power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum. Each Partnership is duly qualified and
in good standing as a foreign partnership authorized to do business in each
other jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have a Material Adverse Effect. Except as disclosed in
the Offering Memorandum, the general and limited partnership interests therein
owned of record directly or indirectly by the Company are owned free and clear
of any perfected security interests, or, to my knowledge, any other liens,
encumbrances and equities and adverse claims.
(iv) Each Subsidiary that is a limited liability company (an "LLC") has
been duly organized, is validly existing as a limited liability company in good
standing under the laws of its jurisdiction of organization and has the power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum. Each LLC is duly qualified and
in good standing as a foreign limited liability company authorized to do
business in each other jurisdiction in which the nature of its business or its
ownership or leasing
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<PAGE>
of property requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. Except as disclosed in the
Offering Memorandum, the membership interests therein owned of record directly
or indirectly by the Company are owned free and clear of any perfected security
interests, or, to my knowledge, any other liens, encumbrances and equities and
adverse claims.
(v) To the best of my knowledge, none of the Subsidiaries is in
violation of its certificate or articles of incorporation or bylaws, or
partnership or operating agreement, or is in breach of, or in default under (nor
has any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under), any license, indenture, mortgage,
deed of trust, bank loan or credit agreement or any other agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
them or their respective properties may be bound or affected or under any law,
regulation or rule or any decree, judgment or order applicable to the Company or
any Subsidiary.
(vi) There is not pending or, to the best of my knowledge, threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to which the property of the Company or any Subsidiary
is subject, before or brought by any court or governmental agency or body, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Company of its obligations
thereunder or transactions contemplated by the Offering Memorandum.
(vii) To the best of my knowledge, neither the Company nor any Subsidiary
is in violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any such Subsidiary, the violation of
which would have a Material Adverse Effect, or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
Subsidiary.
(viii) The Company and each Subsidiary have all necessary Permits (except
where the failure to have such Permits, individually or in the aggregate, would
not have a Material Adverse Effect), to own their respective properties and to
conduct their respective businesses as now being conducted, and as described in
the Offering Memorandum, including, without limitation, such Permits as are
required (a) under such federal and state health care laws as are applicable to
the Company and the Subsidiaries and their respective businesses and (b) under
such HMO or similar licensure laws and such insurance laws and regulations as
are applicable to the Company and the Subsidiaries, except where the failure to
have such Permits would not have a Material Adverse Effect.
Nothing has come to my attention that would lead me to believe that the
Offering Memorandum or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted thereof, as to which we need to make no statement),
at the time the Offering Memorandum was issued, at the time any such amended or
supplemented Offering Memorandum was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits
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<PAGE>
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
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<PAGE>
Exhibit D
FORM OF LOCK-UP LETTER AGREEMENT
June , 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
UBS Warburg LLC
Banc of America Securities LLC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Offering by Universal Health Services, Inc. of
Convertible Debentures due 2020
Dear Sirs:
The undersigned, a stockholder and an executive officer and/or
director of Universal Health Services, Inc., a Delaware corporation (the
"Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), J.P. Morgan Securities Inc., UBS Warburg
LLC and Banc of America Securities LLC (collectively, the "Initial Purchasers")
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company providing for the offering of the Company"s Convertible Debentures due
2020 (the "Initial Securities") and the grant by the Company to the Initial
Purchasers of the option to purchase additional Securities to cover over-
allotments, if any (the "Option Securities"). The Initial Securities, together
with the Option Securities, are collectively the "Securities." In recognition of
the benefit that such an offering will confer upon the undersigned as a
stockholder and an executive officer and/or director of the Company, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned agrees with the Initial Purchasers that,
during a period of 75 days from the date of the Final Offering Memorandum (as
defined in the Purchase Agreement), the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
or lend or otherwise dispose of or transfer any shares of the Company's class B
common stock, par value $0.01 per share (the "Common Stock"), or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or file any
registration
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<PAGE>
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of Common Stock or any securities convertible
into or exchangeable for Common Stock, whether any such swap or transaction is
to be settled by delivery of Common Stock or other securities, in cash or
otherwise.
The foregoing sentence shall not apply to (i) transfers of shares of Common
Stock or options to purchase the Common Stock made as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound by the restrictions
set forth herein and (ii) transfers of shares of Common Stock or options to
purchase the Common Stock made to any trust for the direct or indirect benefit
of the undersigned or the immediate family of the undersigned, provided that the
trustee of the trust agrees to be bound by the restrictions set forth herein,
and provided further that any such transfer shall not involve a disposition for
value.
Very truly yours,
Signature:_________________
Print Name:
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